THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of 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 Maxx Bioscience Holdings Limited, you should at once hand this circular to the purchaser or transferee 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 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.

This circular sets out the information with respect to the very substantial acquisition and is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for any securities.

MAXX BIOSCIENCE HOLDINGS LIMITED 曼盛生物科技集團有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 512)

(1) VERY SUBSTANTIAL ACQUISITION

WHICH ALSO CONSTITUTES CONNECTED TRANSACTION

AGREEMENT RELATING TO THE CONDITIONAL SALE AND PURCHASE OF THE ENTIRE ISSUED SHARE CAPITAL IN BEST FORWARD GROUP LIMITED

(2) ISSUANCE OF CONVERTIBLE BOND IN THE PRINCIPAL AMOUNT OF HK$50,000,000

(3) VERY SUBSTANTIAL DISPOSAL

AGREEMENT RELATING TO THE CONDITIONAL SALE AND PURCHASE OF THE ENTIRE ISSUED SHARE CAPITAL IN BRIGHT STRONG PROFITS LIMITED

(4) CHANGE OF NAME OF THE COMPANY

AND

(5) PROPOSED AMENDMENTS TO THE BYE-LAWS OF THE COMPANY

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

==> picture [106 x 41] intentionally omitted <==

A letter from the board of directors of Maxx Bioscience Holdings Limited is set out on pages 6 to 29 of this circular.

A notice convening the special general meeting of Maxx Bioscience Holdings Limited to be held at 11:30 a.m. on 15 July 2008 at 16th Floor, United Centre, 95 Queensway, Hong Kong, is set out on pages 299 to 301of this circular. If you are unable to attend the special general meeting in person, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon. In order to be valid, the proxy form must be deposited by hand or by post to the Company’s Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, not less than 48 hours before the time appointed for holding the special general meeting or adjourned meeting or not less than 24 hours before the time appointed for taking the poll subsequent to the date of the special general meeting or adjourned meeting thereof (as the case may be). If the proxy form is signed by a person under a power of attorney or other authority, a notarially certified copy of that power of attorney or authority shall be deposited at the same time as mentioned in the proxy form. Completion and return of the proxy form will not preclude you from subsequently attending and voting at the special general meeting or any adjournment thereof should you so wish.

23 June 2008

For identification purpose only

	Pages
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . .	30
Letter from the Independent Financial Adviser. . . . . . . . . . . . . . . . . . . . . . . . . . . . .	31
Appendix I — Financial Information of the Group. . . . . . . . . . . . . . . . . . . . . . .	54
Appendix IIA — Accountants’ Report of the Acquisition Target Company. . . . . .	129
Appendix IIB — Accountants’ Report of the HK Co. . . . . . . . . . . . . . . . . . . . . . . .	141
Appendix III — Accountants’ Report of the PRC Co. . . . . . . . . . . . . . . . . . . . . . .	155
Appendix IV — Unaudited Pro Forma Financial Information. . . . . . . . . . . . . . . .	204
Appendix V — Valuation Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	232
Appendix VI — General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	293
Notice of Special General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	299

— i —

DEFINITIONS

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

“Acquisition”
the acquisition of the Acquisition Shares by the Company in accordance with the terms of the Acquisition Agreement;

“Acquisition Agreement” the agreement dated 28 April 2008 entered into between the Vendor and the Company relating to the sale and purchase of the Acquisition Shares;

“Acquisition Completion” completion of the Acquisition Agreement;
“Acquisition Conditions Precedent” the conditions precedent to the completion of the Acquisition Agreement;
“Acquisition Consideration”
the total consideration for the sale and purchase of the Acquisition Shares in the sum of HK$200,000,000;
“Acquisition Long Stop Date” 31 December 2008 or such other day as the parties may agree in writing;
“Acquisition Shares” all the issued shares in the capital of the Acquisition Target Company, which is sold and purchased under the Acquisition Agreement;
“Acquisition Target Company” Best Forward Group Limited, a company incorporated in the British Virgin Islands with limited liability;
“Announcement” the announcement relating to, inter alia, the Acquisition and the Disposal dated 9 May 2008 issued by the Company;
“Board” the board of Directors; “Bye-laws” the Bye-laws of the Company; “CCASS” the Central Clearing and Settlement System established and operated by Hong Kong Securities Clearing Company Limited;

— 1 —

DEFINITIONS

“China Grand HK”	China Grand Enterprises (HK) Limited, a subsidiary
	company of China Grand PRC, the original owner of 25%
	of the equity interests in the PRC Co;
“China Grand PRC”	China Grand Enterprises Incorporation（中國遠大集團有
	限責任公司）, the original owner of 45.98% of the equity
	interests in the PRC Co;
“Company”	Maxx Bioscience Holdings Limited, a company
	incorporated in Bermuda with limited liability, the issued
	shares of which are listed on the main board of the Stock
	Exchange;
“Conversion Shares”	the Shares to be issued by the Company upon conversion
	of the Convertible Bond;
“Convertible Bond”	the convertible bond issued in accordance with the
	Acquisition Agreement;
“Director”	a director of the Company and “Directors” include all
	directors of the Company;
“Disposal”	the disposal of the Disposal Shares by the Company in
	accordance with the terms of the Disposal Agreement;
“Disposal Agreement”	the agreement dated 28 April 2008 entered into between
	the Company and the Purchaser relating to the sale and
	purchase of the Disposal Shares;
“Disposal Completion”	completion of the Disposal Agreement;
“Disposal Conditions Precedent”	the conditions precedent to the completion of the Disposal
	Agreement;
“Disposal Consideration”	the total consideration for the sale and purchase of the
	Disposal Shares in the sum of HK$1,000,000;
“Disposal Deposit”	the deposit for the Disposal Consideration in the sum
	of HK$100,000 payable pursuant to the Disposal
	Agreement;

— 2 —

DEFINITIONS

“Disposal Group”	the Disposal Subsidiary and its subsidiaries;
“Disposal Long Stop Date”	31 December 2008 or such other day as the parties may
	agree in writing;
“Disposal Shares”	all the issued shares in the capital of the Disposal
	Subsidiary, which is sold and purchased under the Disposal
	Agreement;
“Disposal Subsidiary”	Bright Strong Profits Limited, a company incorporated in
	the British Virgin Islands with limited liability;
“Enlarged Group”	the Company and its subsidiaries after completion of the
	Acquisition but before the completion of the Disposal;
“Group”	the Company and its subsidiaries;
“HK Co”	United Chance Holdings Limited, a limited liability
	company incorporated in Hong Kong, which is a wholly
	owned subsidiary of the Acquisition Target Company;
“Hong Kong”	the Hong Kong Special Administrative Region of the
	PRC;
“Independent Shareholders”	Shareholders other than Outwit;
“Independent Third Party”	a third party who is, and whose ultimate beneficial owners
	are, independent of the Company and connected persons
	(as defined in the Listing Rules) of the Company;
“Latest Practicable Date”	18 June 2008 being the latest practicable date prior
	to the printing of this circular for ascertaining certain
	information contained in this circular;
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange;
“Mr. Hu”	Mr. Hu Kaijun, the ultimate beneficial owner of the
	Vendor and who wholly owned Outwit, which is the
	majority Shareholder;
“Outwit”	Outwit Investments Limited, the holding company of the
	Vendor and the majority Shareholder;

— 3 —

DEFINITIONS

“PRC”	the People’s Republic of China and for the purpose of
	this circular, excludes Hong Kong, the Macau Special
	Administrative Region of the PRC and Taiwan;
“PRC Co”	Wuhan Grand Pharmaceutical Group Company Limited
	(武漢遠大制藥集團有限公司), a limited liability company
	incorporated in the PRC, the legal title of 70.98% of the
	equity interests in which is currently owned by the HK
	Co;
“PRC Co Transfer Interests”	45.98% equity interests in the PRC Co, the legal title of
	which having been transferred to the HK Co;
“PRC Co Transfer Long Stop Date”	31 December 2008 or such other day as the parties may
	agree in writing;
“Promissory Note”	the HK$150,000,000 promissory note to be issued by the
	Company to the Vendor or its nominee pursuant to the
	Acquisition Agreement;
“Purchaser”	Richinvest International Limited, a company incorporated
	in the British Virgin Islands with limited liability;
“Resulting Group”	the Company and its subsidiaries after completion of the
	Acquisition and the Disposal;
“RMB”	renminbi yuan, the lawful currency of the PRC;
“SFO”	the Securities and Futures Ordinance, Chapter 571 of the
	laws of Hong Kong;
“SGM”	a special general meeting of the Company to be convened
	for approving, inter alia, the Acquisition Agreement and
	the transactions contemplated thereunder, the Disposal
	Agreement and the transactions contemplated thereunder,
	the change of name of the Company and proposed
	amendments to the Bye-laws;
“Shareholders”	holders of Shares;
“Shares”	ordinary share(s) of HK$0.01 each in the share capital of
	the Company;

— 4 —

DEFINITIONS

“Stock Exchange” The Stock Exchange of Hong Kong Limited; “Supplemental Letter” a supplemental letter dated 9 May 2008 supplemental to the Disposal Agreement entered into between the Company and the Purchaser; and “Vendor” Long Smart Investments Limited, a company incorporated in the British Virgin Islands with limited liability.

— 5 —

LETTER FROM THE BOARD

MAXX BIOSCIENCE HOLDINGS LIMITED 曼盛生物科技集團有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 512)

Executive Directors:

Ms. He Jin Hong (Deputy Chairman) Mr. Ha Sze Tung Sharp Stone

Independent Non-executive Directors: Ms. So Tosi Wan, Winnie Mr. Wei Dong

Registered office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

Principal place of business in Hong Kong: Room 2501A Hopewell Centre 183 Queen’s Road East Hong Kong

23 June 2008

To the Shareholders

Dear Sir or Madam,

(1) VERY SUBSTANTIAL ACQUISITION

WHICH ALSO CONSTITUTES CONNECTED TRANSACTION

AGREEMENT RELATING TO THE CONDITIONAL SALE AND PURCHASE OF THE ENTIRE ISSUED SHARE CAPITAL IN BEST FORWARD GROUP LIMITED

(2) ISSUANCE OF CONVERTIBLE BOND IN THE PRINCIPAL AMOUNT OF HK$50,000,000

(3) VERY SUBSTANTIAL DISPOSAL

AGREEMENT RELATING TO THE CONDITIONAL SALE AND PURCHASE OF THE ENTIRE ISSUED SHARE CAPITAL IN BRIGHT STRONG PROFITS LIMITED

(4) CHANGE OF NAME OF THE COMPANY

AND

(5) PROPOSED AMENDMENTS TO THE BYE-LAWS OF THE COMPANY

INTRODUCTION

In the Announcement, the Board announced that:

(1) The Company entered into the Acquisition Agreement with the Vendor on 28 April 2008. Pursuant to the Acquisition Agreement, the Vendor has agreed to sell and the Company has agreed to purchase, subject to fulfillment of the Acquisition Conditions Precedent, the Acquisition Shares, representing the entire issued share capital of the Acquisition Target
For identification purpose only

— 6 —

LETTER FROM THE BOARD

Company. The Acquisition Consideration is to be satisfied partly by the issuance of the Promissory Note and partly by the issuance of the Convertible Bond in accordance with the terms of the Acquisition Agreement.

(2) The transactions under the Acquisition Agreement constitute a very substantial acquisition of the Company under the Listing Rules. As the Vendor is a wholly owned subsidiary of Outwit, which is the majority Shareholder, the Acquisition Agreement and the transactions contemplated thereunder (including the issuance of the Convertible Bond and the Promissory Note) constitute a connected transaction under the Listing Rules. Therefore, the Acquisition Agreement and the transactions contemplated thereunder (including the issuance of the Convertible Bond and the Promissory Note) are subject to the approval of the Independent Shareholders in the SGM.
(3) Pursuant to the Acquisition Agreement, the Company has agreed to issue a convertible bond in the principal amount of HK$50,000,000 to the Vendor or its nominee for partial settlement of the Acquisition Consideration in accordance with the terms and conditions thereof.
(4) The Company entered into the Disposal Agreement with the Purchaser on 28 April 2008. Pursuant to the Disposal Agreement, the Company has agreed to sell and the Purchaser has agreed to purchase, subject to fulfillment of the Disposal Conditions Precedent, the Disposal Shares, representing the entire issued share capital of the Disposal Subsidiary.
(5) As the transactions under the Disposal Agreement constitute a very substantial disposal of the Company under the Listing Rules, the Disposal Agreement and the transactions contemplated thereunder are subject to the approval of the Shareholders in the SGM.
(6) It is proposed that the English name of the Company be changed to China Grand Pharmaceutical and Healthcare Holdings Limited and the Chinese name of the Company be changed to 遠大醫藥健康控股有限公司 for identification purpose only. The change of name shall be approved by the Shareholders at the SGM by a special resolution.

The purpose of this circular is to provide you with further details of (i) the Acquisition Agreement and the transactions contemplated thereunder (including the issuance of the Convertible Bond and the Promissory Note), and (ii) the Disposal Agreement and the transactions contemplated thereunder and other information in compliance with the requirements of the Listing Rules.

— 7 —

LETTER FROM THE BOARD

VERY SUBSTANTIAL ACQUISITION WHICH ALSO CONSTITUTES CONNECTED TRANSACTION

The Acquisition Agreement

Date

The Acquisition Agreement – 28 April 2008

Parties to the Acquisition Agreement

(i) the Vendor, Long Smart Investments Limited, a company incorporated in the British Virgin Islands, as the vendor; and
(ii) the Company, as the purchaser.

The ultimate beneficial owner of the Vendor is Mr. Hu. The Vendor is wholly owned by Outwit which is wholly owned by Mr. Hu. Outwit is the majority Shareholder which owns 746,979,654 Shares representing approximately 69.56% of the total issued share capital in the Company.

The Vendor is an investment holding company.

Purchase of Acquisition Shares

Pursuant to the Acquisition Agreement, the Vendor has agreed to sell and the Company has agreed to purchase, subject to fulfillment of the Acquisition Conditions Precedent, the Acquisition Shares, representing the entire issued share capital of the Acquisition Target Company.

Acquisition Consideration

The consideration of sale and purchase of the Acquisition Shares was agreed at HK$200,000,000.

The Acquisition Consideration is to be satisfied in the following manners in accordance with the terms of the Acquisition Agreement:

as to HK$150,000,000, by the issuance by the Company of the Promissory Note to the Vendor or its nominee. Details of the Promissory Note are stated under the section “Issuance of the Promissory Note”;
as to HK$50,000,000, by the issuance by the Company of the Convertible Bond to the Vendor or its nominee. Details of the Convertible Bond are stated under the section “Issuance of the Convertible Bond”.

— 8 —

LETTER FROM THE BOARD

The Acquisition Consideration was determined after arm’s length negotiations between the parties to the Acquisition Agreement after taking into consideration of various factors, including but not limited to the prospect in pharmaceutical business in the PRC. As disclosed in the PRC audited accounts, the PRC Co has net profit of approximately RMB20,000,000 for the year ended 31 December 2007. According to a forecast of the IMS Health on 27 February 2008, the pharmaceutical markets in the emerging markets including the PRC are expected to grow at a rate of 12-13% annually, which would result in good prospect of development of pharmaceutical business in the PRC market.

The Acquisition Consideration represents a price earning multiple of approximately thirteen (13) times of the 2007 net profit. Compared with the price earning ratio of 30 of Shandong Xinhua Pharmaceutical Company Limited (Stock Code: 719), whose shares are listed on the Stock Exchange, which is engaged in similar business, the Directors consider that the price earning ratio in respect of the Acquisition Consideration is fair and reasonable. As the major product of the PRC Co and Shandong Xinhua Pharmaceutical Company Limited is the same and both companies have similar businesses, the Directors consider that one comparable is sufficient for consideration of an appropriate price earning ratio.

Taking into consideration of the belief of the Directors that the Acquisition will provide stable income source for the Group and the prospect in pharmaceutical business in the PRC, the Directors (including the independent non-executive Directors) therefore consider that the terms and conditions of the Acquisition to be fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

Acquisition Conditions Precedent

Completion of the sale and purchase of the Acquisition Shares is subject to the following conditions:

approval by the Stock Exchange of the issuance by the Company of a circular to the Shareholders in respect of the Acquisition Agreement and the transactions contemplated hereunder;
the passing by the Independent Shareholders in accordance with the Listing Rules and all applicable laws at a special general meeting of resolutions approving:
(i) the Acquisition Agreement and the transaction contemplated hereunder;
(ii) the issuance of the Convertible Bond to the Vendor pursuant to the terms provided herein;

— 9 —

LETTER FROM THE BOARD

(iii) the allotment and issue of the Conversion Shares upon the exercise of the conversion rights attaching to the Convertible Bond; and
(iv) the issue of the certificate in respect of the Convertible Bond upon the terms and subject to the conditions contained therein;
the Listing Committee of the Stock Exchange having granted the approval for the listing of and permission to deal in the Conversion Shares to be issued upon conversion of the Convertible Bond;
compliance by the Company of any applicable laws of Bermuda including any consent from the Monetary Authority of Bermuda;
completion of transfer of the legal title of the PRC Co Transfer Interests to the HK Co and the approval, registration and all other necessary procedures thereof by the relevant authorities such that the HK Co shall own in aggregate 70.98% equity interests in the PRC Co; and
the representations, warranties and undertakings contained in the Acquisition Agreement remaining true and accurate and not misleading at Acquisition Completion as if repeated at Acquisition Completion and at all times between the date of the Acquisition Agreement and the date of Acquisition Completion.

Under the Acquisition Agreement, the Vendor may waive Acquisition Condition Precedent (3) and the Company may waive Acquisition Condition Precedent (6). The Vendor has agreed not to waive Acquisition Condition Precedent (3). If any of the Conditions Precedent has not been fulfilled (or waived) on or before the Acquisition Long Stop Date, the Acquisition Agreement shall automatically terminate and no party shall have any claim of any nature whatsoever against the other party under the Acquisition Agreement.

Acquisition Completion

Completion of the Acquisition Agreement shall take place within 3 business days upon the Acquisition Conditions Precedent being satisfied, fulfilled and/or waived.

The Directors consider that the likelihood of completion of the Acquisition Agreement is high and expect no significant difficulties in the fulfilment of the Acquisition Conditions Precedent. In particular, in respect of Acquisition Condition Precedent (5), the Vendor has been taking steps to procure the transfer of the legal title of the PRC Co Transfer Interests to the HK Co and to complete the approval, registration and all other necessary procedures thereof by the relevant authorities. The updated business licence (營業執照) reflecting the transfer of the legal title of the PRC Co Transfer Interests to the HK Co issued on 21 May 2008 has been produced by the Vendor.

— 10 —

LETTER FROM THE BOARD

Issuance of the Promissory Note

Provided that the capital inspection report (驗資報告) and the updated business licence (營業執照) to be issued upon the capital contribution in respect of the PRC Co Transfer Interests has not been produced by the Vendor and satisfied by the Company at the Acquisition Completion, the Vendor covenants that it shall use its best endeavours to procure that capital contribution in respect of the PRC Co Transfer Interests (which amounts to HK$66,768,300) be made at its own fund and expenses as soon as practicable after the Acquisition Completion.

The Promissory Note shall bear an interest of 5% per annum, mature 2 years after the date of issuance and be repayable before the maturity date upon mutual agreement. The issuance of the Promissory Note is conditional upon the capital inspection report (驗資報告) and the updated business licence (營業執照) to be issued upon the capital contribution in respect of the PRC Co Transfer Interests having been produced by the Vender and satisfied by the Company.

In the event that the conditions for issuance of the Promissory Note (i.e. the capital inspection report (驗資報告) and the updated business licence (營業執照) to be issued upon the capital contribution in respect of the PRC Co Transfer Interests having been produced by the Vender and satisfied by the Company) shall not have been fulfilled by the PRC Co Transfer Long Stop Date, then the Acquisition Agreement shall be rescinded upon which the Acquisition Shares shall be transferred back to the Vendor, the Convertible Bond shall be cancelled and the Promissory Note shall not be issued.

Despite the net liability position of the Company, the Directors consider that the Company may raise funds by various methods (including equity financing) for repaying of the Promissory Note when it matures and the Convertible Bond (assuming no conversion when due), though there is no specific plan to do so currently. Otherwise, the Company may negotiate with the Vendor for extension of repayment date of or renewal of the Promissory Note and the Convertible Bond. As the Company will dispose off the Disposal Group which is loss making and acquire the Acquisition Target Company which is expected to be profit making, the Directors consider that financial position of the Group would improve which would strengthen the Group’s ability to operate as a going concern. As at the Latest Practicable Date, the outstanding bank loans of the Group amount to approximately HK$71,087,000 which were secured by certain properties in the PRC, the total net book value of which is HK$84,274,000 as at 30 April 2008. The Directors are confident that the Group is able to roll over these loans on maturity because these loans are fully secured and the Group has maintained long term relationship with the PRC banks. The outstanding sum due to Outwit amounts to approximately HK$17,592,000 which is unsecured, interest free and has no fixed payment terms, and the Directors are confident that the Group will have the continued support from Outwit as Outwit has undertaken on 16 June 2008 not to demand repayment unless the Company is able to repay the outstanding sum. The Directors consider that the Group will be able to operate as a going concern.

— 11 —

LETTER FROM THE BOARD

The following diagram set out the shareholding structure involving the Acquisition Target Company before and after the Acquisition Completion:

Before Acquisition Completion

==> picture [368 x 570] intentionally omitted <==

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

Outwit
100% 69.56%
The Vendor The Company
100%
Acquisition Target
Company
100%
Independent Third China Grand PRC HK Co
Parties
29.02% 45.98% 25%
PRC Co
Outwit
100% 69.56%
The Vendor The Company
100%
Acquisition Target
Company
100%
Independent Third Parties
HK Co
29.02% 70.98%
PRC Co
----- End of picture text -----

After Acquisition Completion

— 12 —

LETTER FROM THE BOARD

Information on the Acquisition Target Company

The Acquisition Target Company is an investment holding company, which is wholly owned by the Vendor. It owns the entire issued share capital of the HK Co, which in turn owns 25% of the entire issued share capital of the PRC Co, the other 75% of which are owned by Independent Third Parties, save as disclosed below. Except as disclosed, the Acquisition Target Company and the HK Co have no other subsidiary and are not carrying on any other business.

The PRC Co Transfer Interests represent 45.98% of the entire issued share capital of the PRC Co which were originally owned by China Grand PRC. Except that Mr. Hu is the legal representative and the chairman of the board of directors of China Grand PRC, China Grand PRC and its shareholders are Independent Third Party. The PRC Co Transfer Interests are to be transferred to the HK Co prior to the Acquisition Completion and the legal title of which has been transferred to HK Co. Upon the Acquisition Completion, the HK Co will own 70.98% of the entire issued share capital of the PRC Co.

The PRC Co is principally engaged in the business of manufacturing and supplying of pharmaceutical products in the PRC market.

Details of the subsidiaries directly or indirectly owned by the PRC Co are set out as follows:

	Percentage of nominal	Percentage of nominal
	value of registered capital
Name	held by the PRC Co		Principal Activities
	Direct	Indirect
武漢諾佳經濟發展有限	100%	—	Installation of chemical equipments,
公司			clothing washing, park
(Wuhan Nuojia			greenification, wholesale and retail
Economic			of building materials, hardware and
Development Co.,			electric apparatus and daily general
Ltd.)			merchandise
武漢武葯制葯有限公司	97.10%	1.61%	Production and sale of pharmaceutical
(Wuhan Wuyao			raw material and chemicals
Pharmaceutical Co.,			(excluding dangerous goods) and
Ltd.)			export of self-made products and
			related technologies
武漢天天明葯業有限責	97.3%	2.7%	R&D of biological technologies,
任公司			medical technologies and related
(Wuhan Daily Clear			products and provision of technical
Medicine Trade Co.,			service, production of eye-drops
Ltd.)

— 13 —

LETTER FROM THE BOARD

Percentage of nominal value of registered capital Name held by the PRC Co Principal Activities Direct Indirect 武漢武葯科技有限公司 94% 6% Technology development, transfer, (Wuhan Wuyao service and consulting related to Science & Technology medicine, chemicals and medical Co., Ltd.) apparatus and products 武漢捷越能源有限公司 99.09% 0.91% Production of low-pressure saturated (Wuhan Jieyue steam and low-temperature water, Energy Co., Ltd.) metal structure processing, building repair, machinery repair and electric automation project

The following are the audited consolidated turnover and profit before and after taxation of the PRC Co prepared in accordance with HKFRS for the two years ended 31 December 2007:

	For the year ended 2006	For the year ended 2007
	(RMB)	(RMB)
Turnover	352,193,000	394,228,000
Profit before taxation	19,732,000	21,104,000
Profit after taxation	19,647,000	19,931,000

According to the audited consolidated accounts, the audited net asset value of the PRC Co was approximately RMB151,804,000 as at 31 December 2007. According to the valuation made by the valuer of the Company, LCH (Asia-Pacific) Surveyors Limited (which is an Independent Third Party), the land and buildings of the PRC Co are valued at approximately RMB230 million as at 30 April 2008 on the market value basis, which represents an appreciation of approximately RMB100 million when compared with the value as at 31 December 2007. Please refer to its valuation report set out in Appendix V.

China Grand PRC and China Grand HK are the original owners of the 45.98% and 25% interests respectively in the entire issued share capital of the PRC Co. The Acquisition Target Company acquired the HK Co in March 2008 at a consideration of HK$25 million from China Grand HK, at which time the HK Co has already owned 25% of the entire issued share capital of the PRC Co. The Vendor then procured the acquisition of the PRC Co Transfer Interests by the HK Co at a consideration of HK$66,768,300 from China Grand PRC.

— 14 —

LETTER FROM THE BOARD

As disclosed above, Mr. Hu, the ultimate beneficial owner of the Vendor, is the legal representative and the chairman of the board of directors of China Grand PRC, and also the sole director of China Grand HK. China Grand PRC and China Grand HK only agreed to sell the total 70.98% interests in the PRC Co held by them respectively at the above favourable terms to the Vendor as stated above because Mr. Hu has good relationship with and is influential to China Grand PRC and China Grand HK and has involved in the management of the PRC Co. China Grand PRC and China Grand HK would not agree to sell such interests to the Company directly in any event. Thus, although a premium would be paid to the Vendor for acquisition of the Acquisition Target Company, the Directors consider the Acquisition Consideration fair and reasonable, given the prospect in pharmaceutical business in the PRC, the favourable price earning ratio and the stable income source provided by the PRC Co.

Reasons for and Benefits of the Acquisition

By the Acquisition, the Group can enter the PRC pharmaceutical market which provides a constant growth and the PRC market with substantial growth in the coming years. The Group can leverage the management expertise of the PRC Co to further expand into the PRC market. It is expected that Group’s results and cash flow can be improved as a result thereof.

The Directors, including the independent non-executive Directors, consider that the terms of the Acquisition Agreement, including the issuance of the Convertible Bond and the Promissory Note, are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

The Acquisition Target Company is an investment holding company. The PRC Co was established since 1939 and is principally engaged in the development, production and sales of pharmaceutical preparations, raw materials and intermediate products. These products are mainly focused in cardiovascular, ophthalmology, liver protection and antibiotics areas. Mainland China is the major market of the PRC Co, and due to the increase in living standard of the people, demand for these products has shown a constant growth during the past years.

The Disposal Group is principally engaged in the production and sales of health care products, mainly tonic drinks. The market for tonic drinks has been sluggish and competitive. The Disposal Group recorded increase in net loss, the details of which are provided for in the section “Information on the Disposal Subsidiary”.

Given the above, the Directors believe that the acquisition of the Acquisition Target Company and the disposal of the Disposal Subsidiary (as detailed in the section “Very Substantial Disposal” below) are viable for the future development of the Company.

— 15 —

LETTER FROM THE BOARD

Risk Factors of the Acquisition

The following are the major risk factors in relation to the Acquisition:

Economic, political and social conditions in the PRC

As the major market and operations of the PRC Co is in the PRC, its business prospects, results of operations and financial performances are, to a great extent, subject to the economic, political and legal developments in the PRC.

While the PRC has been one of the world’s fastest growing economies, in recent years, there is always a possibility that the PRC may not be able to sustain such a growth rate. In addition, any future calamities, including natural disasters, outbreaks of contagious diseases and political or social unrest may cause a decrease in the level of economic activity and adversely affect the economic growth in the PRC and thus the development of the PRC Co.

Product liability

Under the current PRC laws, manufacturers and vendors of defective products in the PRC may incur liability for loss and injury caused by such products. Accordingly, a defective product which causes property damage or physical injury to any person may subject the manufacturer or vendor of such product to legal liability for such damage or injury.

Price control

The prices of certain pharmaceutical products in the PRC are subject to the control of the relevant state and provincial price administration authorities. The actual price for any given price-controlled product set by manufacturers, wholesalers and retailers cannot exceed the price ceiling imposed in accordance with the applicable government price control rules.

Hence, the PRC Co may not able to increase, at its discretion, the prices of its products above the controlled price ceiling without prior governmental approval and does not have unfettered freedom to maximise its profits.

Environmental issues

The PRC Co’s production processes may produce sewage, industrial waste and toxic chemicals. Such chemicals may, if not properly handled, endanger the health of the PRC Co’s production personnel and the environment surrounding the production premises.

— 16 —

LETTER FROM THE BOARD

The PRC Co’s operation is subject to environmental laws and regulations of the PRC. There is no assurance that changes, if any, in the relevant environmental laws and regulations may not result in the PRC Co having to incur substantial capital expenditure to replace, upgrade or supplement its existing facilities. If any such change occurs, there may be an adverse impact on its business and profitability.

Connected Transaction

As the Vendor is a wholly owned subsidiary of Outwit, which is the majority Shareholder, the Acquisition Agreement and the transactions contemplated thereunder (including the issuance of the Convertible Bond and the Promissory Note) constitute a connected transaction under the Listing Rules. Therefore, the Acquisition Agreement and the transactions contemplated thereunder (including the issuance of the Convertible Bond and the Promissory Note) are subject to the approval of the Independent Shareholders by voting by poll.

The Directors confirm that, after due and reasonable enquiries, except Outwit (which at the Latest Practicable Date owns 746,979,654 Shares, representing approximately 69.56% of the entire issued share capital of the Company) who has a material interest in the Acquisition Agreement and is therefore required to abstain from voting in respect of the Acquisition Agreement, no other Shareholder is known to the Directors to have a material interest in the Acquisition Agreement and is required to abstain from voting in the SGM.

ISSUANCE OF THE CONVERTIBLE BOND

Pursuant to the Acquisition Agreement, the Company has agreed to issue a convertible bond in the principal amount of HK$50,000,000 to the Vendor or its nominee for partial settlement of the Acquisition Consideration in accordance with the terms and conditions thereof.

The Convertible Bond is convertible into Shares. The Conversion Shares will be issuable upon conversion of the Convertible Bond and will rank pari passu in all respects with the existing Shares. Application will be made to the Stock Exchange for the listing of, and permission to deal in, the Conversion Shares.

Principal Terms of the Convertible Bond

The principal terms of the Convertible Bond are summarized as follows:

Subscription Price and HK$50,000,000 Principal Amount:

Completion:

The parties has agreed that the Convertible Bond shall be issued upon the Acquisition Completion

— 17 —

LETTER FROM THE BOARD

Maturity:

Redemption:

2 years from the date of issue of the Convertible Bond

Unless previously redeemed, the Convertible Bond will be redeemed by the Company at its principal amount together with accrued interest thereon on the maturity date.

On the occurrence of an event of default as set out in the conditions of the Convertible Bond (which includes: default in performance or observance by the Company of obligations under the Convertible Bond, any encumbrancer taking possession or receiver being appointed of assets or undertaking of the Company, the Company ceasing or threatening to cease to carry on its business or substantial part thereof which adversely affect its financial or business position, any conditions of the Convertible Bond becoming void, illegal or ceasing to be in full force or effect, petition for winding-up being filed, receiver or trustee for winding-up being appointed, entry of windingup order or any corporate action taken to give such effect in respect of the Company, moratorium agreed in respect of the indebtedness of the Company, governmental agency or authority seizing all or material part of assets of the Company, any representation, warranty or undertaking by the Company proved to have been incorrect, unlawful or illegal for the Company to perform its obligations under the Convertible Bond, distress, execution or seizure is levied or enforced upon the properties of the Company which remains un-discharged or Shares ceasing to be listed on the Stock Exchange), the holders of the Convertible Bond may demand immediate redemption of the Convertible Bond at an amount equal to the outstanding principal amount of the Convertible Bond plus interest accrued thereon up to the actual date of redemption.

Conversion Period:

On any business day after the date of issue of the Convertible Bonds and before 14 days period ending on the above maturity date, provided that the Convertible Bond or any part(s) thereof may not be converted in Shares and no conversion right herein may be exercisable before the capital inspection report (驗資報告) and the updated business licence (營業執照) to be issued upon the capital contribution in respect of the PRC Co Transfer Interests having been produced by the Vendor and satisfied by the Company.

— 18 —

LETTER FROM THE BOARD

Conversion Price:

HK$0.30 per Share (subject to adjustments in accordance with the terms of the Convertible Bond (which include: consolidation or subdivision of the Shares, issue of Shares by way of capitalization of profits or reserves to Shareholders, capital distribution to Shareholders, right issues of shares or rights to acquire Shares to Shareholders, right issues of other securities to Shareholders, issue at less than the then current market price of the Shares, issue of convertible securities, modification of rights of conversion, exchange or subscription of the securities issued as mentioned above, other offers of securities to the Shareholders), which are normal anti-dilution adjustments), representing (i) a discount of 18.92% to the closing price of HK$0.37 per Share as quoted on the Stock Exchange on 28 April 2008, the day immediately preceding the suspension of trading in the Shares, and (ii) a discount of 14.04% to the 5 days average closing price per Share of HK$0.349 before suspension. The Directors consider that the conversion price is fair and reasonable when compared with the net liability position of the Company.
Interest: The Convertible Bond will bear interest from the date of its issue at 5% per annum on the principal amount of the Convertible Bond outstanding from time to time, which will be payable on the above maturity date.
Ranking: The Conversion Shares will rank pari passu in all respects with all other existing Shares outstanding at the date of conversion of the Convertible Bond.

Transferability: Provided that the Convertible Bond or any part(s) thereof may not be assigned or transferred to any third party before the capital inspection report (驗資報告) and the updated business licence (營業執照) to be issued upon the capital contribution in respect of the PRC Co Transfer Interests having been produced by the Vendor and satisfied by the Company, the Convertible Bond or any part(s) thereof may be assigned or transferred to any third party which is not a connected person of the Company, subject to compliance with the conditions thereof and the conditions, approvals, requirements and any other provisions of or under the Stock Exchange and its rules and regulations, the approval for listing in respect of the Conversion Shares and all applicable laws and regulations.

— 19 —

LETTER FROM THE BOARD

Voting:

The holders of the Convertible Bond will not be entitled to receive notice of, attend or vote at any meetings of the Company by reason only of their being the holders of the Convertible Bond.

If the capital inspection report (驗資報告) and the updated business licence (營業執照) to be issued upon the capital contribution in respect of the PRC Co Transfer Interests have not been produced by the Vender and satisfied by the Company, and thus the conditions for issuance of the Promissory Note have not been fulfilled by the PRC Co Transfer Long Stop Date, the Convertible Bond will be cancelled.

Assuming full conversion of the Convertible Bond at the above conversion price, the Convertible Bond will be convertible into 166,666,667 fully-paid Shares, representing approximately 15.5% of the issued share capital of the Company as at the Latest Practicable Date and approximately 13.4% of the issued share capital of the Company as enlarged by the issue of the Conversion Shares.

The Directors including the independent non-executive Directors consider that the issuance of the Convertible Bond is fair and reasonable and in the interest of the Company and the Shareholders as a whole.

There will be no change of control of the Company assuming the issuance of all the Conversion Shares.

Approval from Shareholders for Issuance of the Conversion Shares

The Directors will seek to obtain approval from Shareholders at the SGM for issuance of the Conversion Shares.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, no Shareholder, except Outwit which is the holding company of the Vendor, has a material interest in the Acquisition Agreement and therefore no Shareholder except Outwit is required to abstain from voting at the SGM.

— 20 —

LETTER FROM THE BOARD

Effects on the Share Capital

The following table summarizes the shareholding structure of the Company as at the Latest Practicable Date, and assuming the issuance of all Conversion Shares:

Name of Shareholder Outwit Investments Limited_(Note)_ Public Shareholders Total	Existing (as at the Latest Practicable Date) No. of Shares Approx. % to the issued share capital of the Company 746,979,654 69.56 326,954,346 30.44 1,073,934,000 100	Assuming issuance of all Conversion Shares No. of Shares Approx. % to the enlarged issued share capital of the Company 913,646,321 73.65 326,954,346 26.35 1,240,600,667 100	Assuming issuance of all Conversion Shares No. of Shares Approx. % to the enlarged issued share capital of the Company 913,646,321 73.65 326,954,346 26.35 1,240,600,667 100
			100

Note:

The entire issued share capital of Outwit Investments Limited is owned by Mr. Hu Kaijun.

Rule 8.08(1)(a) of the Listing Rules requires that there must be at least a 25% public float. The Company has undertaken to the Stock Exchange that no Conversion Shares will be issued which will result in insufficient public float upon such issuance. The Vendor is aware of and agrees to such undertaking by the Company.

Fund Raising Activities of the Company During the Past 12 Months

There has not been any fund raised on any issue of equity securities in the 12 months immediately preceding the date of the Announcement.

VERY SUBSTANTIAL DISPOSAL

The Disposal Agreement

Date

The Disposal Agreement — 28 April 2008

— 21 —

LETTER FROM THE BOARD

Parties to the Disposal Agreement

(i) the Company, as the vendor; and
(ii) the Purchaser, Richinvest International Limited, a company incorporated in the British Virgin Islands, as the purchaser.

The ultimate beneficial owners of the Purchaser are Mr. Huang Wei Min (黃為民) and Mr. Gao Yan (高焰). To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, the Purchaser and its ultimate beneficial owners are Independent Third Parties and none of them holds any Shares.

The Purchaser is an investment holding company. To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, the Purchaser and its ultimate beneficial owners had never had any transaction with the Company before. The Purchaser is procured through the normal business contact of a director of a subsidiary of the Company. As far as the Directors understand, Mr. Huang and Mr. Gao have investment in the businesses of healthcare products and fast moving consumer goods in the market of the PRC.

Sale of Disposal Shares

Pursuant to the Disposal Agreement, the Company has agreed to sell and the Purchaser has agreed to purchase, subject to fulfillment of the Disposal Conditions Precedent, the Disposal Shares, representing the entire issued share capital of the Disposal Subsidiary.

Disposal Consideration

The consideration of the sale and purchase of the Disposal Shares was agreed at HK$1,000,000.

Pursuant to the Disposal Agreement, the Purchaser shall pay a deposit in the sum of HK$100,000 to the Company within 7 days upon signing of the Disposal Agreement. The balance of the Disposal Consideration in the sum of the HK$900,000 shall be paid in cash to the Company upon the Disposal Completion.

The Disposal Deposit was paid by the Purchaser to the Company on 5 May 2008.

The Disposal Consideration was determined after arm’s length negotiations between the parties to the Disposal Agreement after taking into consideration of various factors, including but not limited to the net liability position of the Disposal Group, the fair values of its assets and liabilities, the losses incurred in the past years and the future prospect of the Disposal Group.

— 22 —

LETTER FROM THE BOARD

Disposal Conditions Precedent

Completion of the sale and purchase of the Disposal Shares is subject to the following conditions:

the passing by the Shareholders in accordance with the Listing Rules and all applicable laws at a special general meeting of resolution approving the Disposal Agreement and the transactions contemplated hereunder;
completion of the sale of the Disposal Shares by the Company will not result in prolonged suspension of trading of its shares on the Stock Exchange; and
the representations, warranties and undertakings contained in the Disposal Agreement remaining true and accurate and not misleading at Disposal Completion as if repeated at Disposal Completion and at all times between the date of the Disposal Agreement and the date of Disposal Completion.

Reason for the Supplemental Letter

If the Acquisition is not completed before the completion of the Disposal, and/or the Company will have difficulties to comply with Rule 13.24 given the Disposal Group represents 100% of the turnover of the Group, and/or the Company fails to comply with the requirements under Rule 13.24, trading of the Shares on the Stock Exchange will be suspended until the Company can satisfy the Stock Exchange that it has a sufficient level of operations or have tangible assets of sufficient value and/or intangible assets for which a sufficient potential value can be demonstrated to the Stock Exchange to warrant the continued listing of the Shares.

The Company and the Purchaser therefore entered into the Supplemental Letter which provides an additional Disposal Condition Precedent that completion of the sale and purchase of the Disposal Shares is subject to completion of sale and purchase of the Acquisition Shares. Accordingly completion of the Disposal is conditional upon completion of the Acquisition.

If any of the Disposal Conditions Precedent has not been fulfilled (or waived) on or before the Disposal Long Stop Date, the Disposal Agreement shall automatically terminate and no party shall have any claim of any nature whatsoever against the other party under the Disposal Agreement and the Company shall repay the Disposal Deposit to the Purchaser within 7 days.

Disposal Completion

Completion of the Disposal Agreement shall take place within 3 business days upon the Disposal Conditions Precedent being satisfied, fulfilled and/or waived.

— 23 —

LETTER FROM THE BOARD

Information on the Disposal Subsidiary

The Disposal Subsidiary is an investment holding company, which is wholly owned by the Company.

The Disposal Group is principally engaged in the manufacture and sales of pharmaceutical and health products and properties investments.

The following are the consolidated audited turnover and loss before and after taxation of the Disposal Group for the two years ended 31 December 2007:

	For the year ended	For the year ended
	31 December 2006	31 December 2007
	(HK$)	(HK$)
Turnover	42,408,000	49,045,000
Loss before taxation	6,686,000	38,806,000
Loss after taxation	6,686,000	38,806,000

The main reasons for the increase in net loss of the Disposal Group by approximately HK$32 million in the year ended 31 December 2007 were:

(i) a reversal of impairment loss on leasehold land of HK$13,624,000 recorded in 2006;
(ii) expenditures of approximately HK$9,000,000 on marketing and promotion, research and development of the mineral water product line in 2007;
(iii) increase in finance cost by approximately HK$3,500,000 in 2007; and
(iv) increase in other general and administrative expenses by approximately HK$6 million in 2007.

As at 31 December 2007, the audited net liability of the Disposal Group was approximately HK$26,929,000.

— 24 —

LETTER FROM THE BOARD

The net liability position of the Disposal Group was mainly due to the losses incurred during the past years. Below are the major assets and liabilities of the Disposal Group as at 31 December 2007:

Properties Other non-current assets Current assets Total assets Current liabilities Land appreciation tax and other costs Non-current liabilities Net liabilities	Book Value (HK$’000) 100,528 14,503 83,317 198,348 (157,885) — (66,392) (25,929)	Market Value (HK$’000) 156,073 14,503 83,317 253,893 (157,885) (37,458) (66,392) (7,842)

Currently, the Disposal Group is a very significant part of the Group, as the Disposal Group represents 100% of the Group’s turnover and nearly 100% of the Group’s total assets. The Disposal Subsidiary will cease to be a subsidiary of the Company upon the Disposal Completion.

Reasons for and Benefits of the Disposal

The Disposal Group has been making loss for the past years and had net liability of approximately HK$25,929,000 as at 31 December 2007. To continue its operations would require further financial resources from the Company.

By entering into the Disposal Agreement, the Group is able to dispose of a loss making business and to improve the Group cash flow and results instantly.

The Directors, including the independent non-executive Directors, consider that the terms of the Disposal Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

If the Disposal Group were sold on 1 January 2008, by comparing its net liability value as at 31 December 2007 which is approximately HK$25,929,000 with the Disposal Consideration of HK$1,000,000, the Group is expected to make a profit of approximately HK$26,929,000.

The Group intends to use the proceeds as general working capital.

— 25 —

LETTER FROM THE BOARD

Financial Effects of the Acquisition and the Disposal

Upon completion of the Acquisition, the financial results of the Acquisition Target Company will be consolidated with those of the Group. Upon completion of the Disposal, the Disposal Group will cease to be the subsidiaries of the Group.

Based on the unaudited pro forma financial information of the Resulting Group as set out in Appendix IV to this circular, the pro forma net assets of the Resulting Group would increase by approximately HK$46,898,000, comprising of an increase of total assets and total liabilities of approximately HK$285,772,000 and HK$238,874,000 respectively. The unaudited pro forma net loss of the Resulting Group would decrease by approximately HK$7,046,000. Given the prospects of the pharmaceutical market, the Directors consider that the Acquisition will have positive effects on the revenue and earnings of the Resulting Group but the extent of such impact will depend on the pharmaceutical market and future performance of the Acquisition Target Company.

Property Interests

Property interests held by the Enlarged Group as at 30 April 2008 are set forth in Appendix V to this circular. The table below shows the reconciliation of property interests of the Enlarged Group as at 31 December 2007 to 30 April 2008:

		Property interests	Property interests
		of the Acquisition
	Property interests		Target Company
	of the Group	and its subsidiaries
	(100% interest)		(100% interest)
Net Book Value as at 31 December 2007	HK$100,528,000		RMB123,241,000
Depreciation for the period from 1 January 2008
to 30 April 2008	(HK$2,082,000)		(RMB1,605,000)
Net Book Value as at 30 April 2008 (unaudited)	HK$98,446,000		RMB121,636,000
Equivalent to	RMB92,786,000
Valuation surplus	RMB54,314,000		RMB108,364,000
Valuation as at 30 April 2008	RMB147,100,000		RMB230,000,000

— 26 —

LETTER FROM THE BOARD

The SGM

As the transactions under the Disposal Agreement constitute a very substantial disposal of the Company under the Listing Rules, the Disposal Agreement and the transactions contemplated thereunder are subject to the approval of the Shareholders in the SGM. To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, no Shareholder has a material interest in the Disposal Agreement and the transactions contemplated thereunder and therefore no Shareholder is required to abstain from voting at the SGM.

Financial and Trading Prospect of the Resulting Group

The PRC Co is principally engaged in the development, production and sales of pharmaceutical preparations, raw materials and intermediate products in the PRC market. These products are mainly used in cardiovascular, ophthalmology, liver protection and antibiotics areas. With the increase in living standard of the people in the PRC, demand for these products has shown a constant growth during the past years.

The Board believes that, by the Acquisition, the Resulting Group can enter the PRC pharmaceutical market which provides a constant growth in the coming years. The Acquisition will also provide stable income source for the Resulting Group. The Resulting Group can also leverage the management expertise of the PRC Co to further expand into the PRC market. It is expected that Group’s results and cash flow can be improved as a result thereof.

CHANGE OF NAME OF THE COMPANY

It is proposed that the English name of the Company be changed to China Grand Pharmaceutical and Healthcare Holdings Limited and the Chinese name of the Company be changed to 遠大醫藥健康控股有限公司 for identification purpose only. The change of name shall be approved by the Shareholders at the SGM by a special resolution.

The change of name of the Company is to reflect the Group’s focus in the pharmaceutical and health care market in the PRC. Upon change of the name of the Company, the stock short name of the Company is proposed to be changed accordingly.

PROPOSED AMENDMENTS TO THE BYE-LAWS OF THE COMPANY

To cater for the increasing demand from investors holding securities in the Company through CCASS for attending general meetings of the Company in person or appointing proxies to vote on their behalf, and pursuant to the requirements for continuous admission into CCASS, it is proposed that a special resolution be passed at the SGM to amend the Bye-laws in order to allow the clearing house to appoint multiple proxies or corporate representatives to vote in the general meeting.

— 27 —

LETTER FROM THE BOARD

It is proposed to amend Bye-law 84(2) such that a clearing house may authorize person or persons as proxy or proxies at any meeting of the Company and such persons shall be deemed to have been duly authorized without the need of producing supporting evidence or documents.

The existing Bye-law 84(2) provides that:—

“If a clearing house or a nominee of a clearing house is a Member, it may authorise such person or persons as it thinks fit to act as its representative or representatives at any meeting of the Company or at any meeting of any class of Members provided that, if more than one person is so authorised, the authorisation shall specify the number and class of shares in respect of which each such person is so authorised. A person so authorised under the provisions of this Bye-law shall be entitled to exercise the same powers on behalf of the clearing house (or its nominee) which he represents as that clearing house (or its nominee) could exercise if it were an individual Member.”

It is proposed that the above existing Bye-law 84(2) be deleted in its entirety and substituted therefor the following:—

“If a clearing house or nominee(s) of a clearing house (being a corporation) is a Member, it may authorise such person or persons as it thinks fit to act as its representative or representatives or proxy or proxies at any meeting of the Company or at any meeting of any class of Members provided that, if more than one person is so authorised, the authorisation shall specify the number and class of shares in respect of which each such person is so authorised. The person so authorised shall be deemed to have been duly authorised without the need of producing any documents of title, notarised authorisation and/or further evidence for substantiating the facts that it is duly authorised and shall be entitled to exercise the same rights and powers on behalf of the clearing house (or its nominee(s)) which he represents in respect of the number and class of shares specified in the relevant authorisation including the right to vote individually on a show of hand as that clearing house (or its nominee(s)) could exercise if it were an individual Member.”

The full text of the amendments to the Bye-laws that are to be proposed at the SGM is set out in the notice of SGM on pages 299 to 301 of this circular.

General

The Group is principally engaged in the business of manufacture and sales of pharmaceutical and health products.

The Special General Meeting

A notice of the SGM to be convened and held at 16th Floor, United Centre, 95 Queensway, Hong Kong on 15 July 2008 at 11:30 a.m. for the purpose of considering the Acquisition Agreement, the Disposal Agreement, the change of the name of the Company and the proposed amendments to the Bye-laws is set out on pages 299 to 301 of this circular.

— 28 —

LETTER FROM THE BOARD

Pursuant to the Listing Rules, the Company will procure that the chairman of the SGM will demand the vote for the resolutions relating to the Acquisition Agreement to be taken by a poll. Please refer to Appendix VI for the procedure by which you may demand a poll pursuant to the Bye-laws of the Company. If you are unable to attend the SGM in person, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon. In order to be valid, the proxy form must be deposited by hand or post to the Company’s Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, not less than 48 hours before the time for holding the SGM or adjourned meeting or not less than 24 hours before the time appointed for taking the poll subsequent to the date of the SGM or adjourned meeting thereof (as the case may be). If the proxy form is signed by a person under a power of attorney or other authority, a notarially certified copy of that power of attorney or authority shall be deposited at the same time as mentioned in the proxy form. Completion and return of the proxy form will not preclude you from subsequently attending and voting at the SGM.

Recommendation

Your attention is drawn to the letter of advice from the Independent Board Committee set out on page 30 of this circular containing its advice to the Independent Shareholders, and the letter of advice from the Independent Financial Adviser set out on pages 31 to 53 of this circular containing its advice to the Independent Board Committee and the Independent Shareholders, in relation to the Acquisition Agreement which also constitutes a connected transaction.

Having taken into account of the information set out above, the Board considers that the terms of the Acquisition Agreement and the transactions contemplated thereunder and the Disposal Agreement and the transactions contemplated thereunder are fair and reasonable, on normal commercial terms and in the interests of the Company and the Shareholders as a whole and so recommends the Shareholders to vote in favour of the resolutions relating to the aforesaid matters at the SGM.

Additional Information

Your attention is drawn to the information set out in the appendices to and the notice of the SGM set out in this circular.

Yours faithfully, For and on behalf of the Board

Maxx Bioscience Holdings Limited Ha Sze Tung Sharp Stone Executive Director

— 29 —

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

MAXX BIOSCIENCE HOLDINGS LIMITED 曼盛生物科技集團有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 512)

23 June 2008

To the Independent Shareholders

Dear Sir or Madam,

(1) VERY SUBSTANTIAL ACQUISITION

WHICH ALSO CONSTITUTES CONNECTED TRANSACTION

AGREEMENT RELATING TO THE CONDITIONAL SALE AND PURCHASE OF THE ENTIRE ISSUED SHARE CAPITAL IN BEST FORWARD GROUP LIMITED AND

(2) ISSUANCE OF CONVERTIBLE BOND IN THE PRINCIPAL AMOUNT OF HK$50,000,000

We refer to the circular of the Company dated 23 June 2008 (the “Circular”) of which this letter forms part. Unless the context requires otherwise, capitalized terms used herein shall have the same meanings as defined in the Circular.

We have been appointed by the Board to advise the Independent Shareholders as to whether the terms of the Acquisition Agreement and the transactions contemplated therein (including the issuance of the Convertible Bond) are fair and reasonable so far as the Independent Shareholders are concerned. Ample Capital Limited has been appointed as the independent financial adviser to advise us in this respect.

Having considered the principal reasons and factors considered by, and the advice of, the Independent Financial Adviser, as set out in its letter of advice to us on pages 31 to 53 of the Circular, we are of the opinion that the terms of the Acquisition Agreement and the transactions contemplated therein (including the issuance of the Convertible Bond) are in the interests of the Company and the Shareholders as a whole and the terms of which are fair and reasonable so far as the Company and the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM to approve the Acquisition Agreement and the transactions contemplated therein (including the issuance of the Convertible Bond).

Yours faithfully, Independent Board Committee Ms. So Tosi Wan, Winnie Mr. Wei Dong

For identification purpose only

— 30 —

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of the letter from Ample Capital Limited setting out its advice to the Independent Board Committee and the Independent Shareholders for inclusion in this circular.

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Ample Capital Limited Unit A, 14th Floor Two Chinachem Plaza 135 Des Voeux Road Central Hong Kong

23 June 2008

To the Independent Board Committee and the Independent Shareholders of Maxx Bioscience Holdings Limited

Dear Sirs,

VERY SUBSTANTIAL ACQUISITION WHICH ALSO CONSTITUTES CONNECTED TRANSACTION TO ACQUIRE THE ENTIRE ISSUED SHARE CAPITAL IN BEST FORWARD GROUP LIMITED FROM A CONTROLLING SHAREHOLDER SETTLED BY ISSUING CONVERTIBLE BOND AND PROMISSORY NOTE

INTRODUCTION

We refer to our engagement as the independent financial adviser to the Independent Board Committee and the Independent Shareholders on the Agreement, details of which are contained in the Letter from the Board (the “Letter from the Board”) set out in the circular (the “Circular”) of the Company to the Shareholders dated 23 June 2008, of which this letter forms part. Terms used in this letter have the same meanings as defined in the Circular unless the context otherwise requires.

In the Announcement, the Board announced that the Company entered into the Acquisition Agreement with the Vendor on 28 April 2008. Pursuant to the Acquisition Agreement, the Vendor has agreed to sell and the Company has agreed to purchase, subject to fulfillment of the Acquisition Conditions Precedent, the Acquisition Shares, representing the entire issued share capital of the Acquisition Target Company. The Acquisition Consideration is to be satisfied partly by the issuance of the Promissory Note and partly by the issuance of the Convertible Bond in accordance with the terms of the Acquisition Agreement.

— 31 —

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The transactions under the Acquisition Agreement constitute a very substantial acquisition of the Company under the Listing Rules. As the Vendor is a wholly owned subsidiary of Outwit, which is the majority Shareholder, the Acquisition Agreement and the transactions contemplated thereunder (including the issuance of the Convertible Bond and the Promissory Note) constitute a connected transaction under the Listing Rules. Therefore, the Acquisition Agreement and the transactions contemplated thereunder (including the issuance of the Convertible Bond and the Promissory Note) are subject to the approval of the Independent Shareholders by voting by poll.

Pursuant to the Acquisition Agreement, the Vendor has agreed to subscribe for and the Company has agreed to issue a convertible bond in the principal amount of HK$50,000,000 in accordance with the terms and conditions thereof.

The Independent Board Committee, comprising two independent non-executive Directors, namely Ms. So Tosi Wan, Winnie and Mr. Wei Dong, has been established to advise the Independent Shareholders in respect of the Acquisition Agreement. In our capacity as the independent financial adviser to the Independent Board Committee and the Independent Shareholders with an independent opinion and recommendation as to whether the terms of the Acquisition Agreement are fair and reasonable so far as the Independent Shareholders are concerned, the Acquisition is on normal commercial terms and the entering into of the Acquisition Agreement are in the interests of the Company and the Independent Shareholders as a whole.

BASIS OF OUR ADVICE

In arriving at our recommendation, we have relied on the statements, information and representations contained in the Circular and the information and representations provided to us by the Directors and the management of the Company. We have assumed that all information and representations contained or referred to in the Circular and all information and representations which have been provided by the Directors and the management of the Company for which they are solely responsible, are true and accurate at the time they were made and will continue to be accurate at the date of the despatch of the Circular. We have no reason to doubt the truth, accuracy and completeness of the information and presentation provided to us by the Directors.

We consider that we have been provided with sufficient information on which to form a reasonable basis for our opinion. We have no reason to suspect that any relevant information has been withheld, nor are we aware of any fact or circumstance which would render the information provided and representations made to us untrue, inaccurate or misleading. We consider that we have performed all the necessary steps as required under rule 13.80 of the Listing Rules to enable us to reach an informed view and to justify our reliance on the information provided so as to provide a reasonable basis for our opinion. Having made all reasonable enquiries, the Directors have further confirmed that, to the best of

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

their knowledge, they believe there are no other facts or representations the omission of which would make any statement in the Circular, including this letter, misleading. We have not, however, carried out any independent verification of the information provided by the Directors and the management of the Company, nor have we conducted an independent investigation into the business and affairs of the Group.

PRINCIPAL FACTORS TAKEN INTO ACCOUNT

The principal factors and reasons that we have taken into consideration in assessing the Acquisition Agreement and the terms thereof and arriving at our opinion are set out as follows:

1. Background

(a) Business overview of the Group

The Group is principally engaged in business of manufacture and sales of pharmaceutical and health products.

Set out below are the operating results of the Group for the two years ended 31 December 2007 as extracted from the Company’s audited annual report for the year ended 31 December 2007 (the “2007 Annual Report”).

	For the	For the
	year ended	year ended
	31 December	31 December
	2006	2007
	HK$’000	HK$’000
	(audited)	(audited)
Turnover	42,408	49,045
Gross profit	18,970	22,654
Net loss attributable to shareholders	(10,650)	(52,030)

As set out in the 2007 Annual Report, for the year ended 31 December 2007, the Group’s pharmaceutical and health products business recorded a turnover of approximately HK$49,045,000 which represents an increase 16% as compared with last year. Such increase was mainly due to the increase in sales of the mineral water product line and the appreciation of Renminbi during the year.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Gross profit of the Group’s pharmaceutical and health products business for the year was HK$22,654,000. The Group reported a consolidated loss attributable to equity holders of the Company of HK$52,030,000 as compared with a loss of HK$10,650,000 for last year. Such increase was mainly attributable to the increase in impairment loss on intangible asset by HK$10,200,000, the expenditures of approximately HK$9,000,000 on marketing and promotion, research and development of the mineral product line and the reversal of impairment loss on leasehold land of HK$13,624,000 in 2006.

The Directors also indicated that the Group will continue to streamline its operation by cutting cost and down-sizing unprofitable business and at the same time looking for profitable business opportunities to maximize the interest of the shareholders of the Company.

(b) Background on the Acquisition Target Company

The Acquisition Target Company is an investment holding company, which is wholly owned by the Vendor. It owns the entire issued share capital of the HK Co, which turn owns 25% of the entire issued share capital of the PRC Co, the other 75% of which are owned by Independent Third Parties, save as disclosed below. Except as disclosed, the Acquisition Target Company and the HK Co have no other subsidiary and are not carrying on any other business.

The PRC Co Transfer Interests represent 45.98% of the entire issued share capital of the PRC Co which were orginally owned by China Grand PRC. Except that Mr. Hu is the legal representative and the chairman of the board of directors of China Grand PRC, China Grand PRC and its shareholders are Independent Third Parties. The PRC Co Transfer Interests are to be transferred to the HK Co prior to the Acquisition Completion and the legal title of which has been transferred. Upon the Acquisition Completion, the HK Co will own 70.98% of the entire issued share capital of the PRC Co.

The PRC Co is principally engaged in the development, production and sales of pharmaceutical preparations, raw materials and intermediate products in the PRC market. These products are mainly used in cardiovascular, ophthalmology, liver protection and antibiotics areas. With the improvement in living standard of the people in the PRC, demand for these products has shown a constant growth during the past years.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Details of the subsidiaries directly or indirectly owned by the PRC Co are set out as follows:

Name

Percentage of nominal value of registered capital held by the PRC Co Principal Activities Direct Indirect

武漢諾佳經濟發展 100% — Installation of chemical 有限公司 equipments, clothing washing, (Wuhan Nuojia park greenification, wholesale Economic and retail of building materials, Development Co., hardware and electric apparatus Ltd.) and daily general merchandise 武漢武葯制葯有限 97.10% 1.61% Production and sale of 公司 pharmaceutical raw material (Wuhan Wuyao and chemicals (excluding Pharmaceutical dangerous goods) and export of Co., Ltd.) self-made products and related technologies 武漢天天明葯業有 97.3% 2.7% R&D of biological technologies, 限責任公司 medical technologies and related (Wuhan Daily products and provision of Clear Medicine technical service, production of Trade Co., Ltd.) eye-drops 武漢武葯科技有限 94% 6% Technology development, transfer, 公司 service and consulting related (Wuhan Wuyao to medicine, chemicals and Science & medical apparatus and products Technology Co., Ltd.) 武漢捷越能源有限 99.09% 0.91% Production of low-pressure 公司 saturated steam and low(Wuhan Jieyue temperature water, metal Energy Co., Ltd.) structure processing, building repair, machinery repair and electric automation project

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following are the audited consolidated turnover and profit before and after taxation of the PRC Co prepared in accordance with HKFRS for the two years ended 31 December 2007:

	For the	For the
	year ended	year ended
	31 December	31 December
	2006	2007
	RMB’000	RMB’000
	(audited)	(audited)
Turnover	352,193	394,228
Profit before taxation	19,732	21,104
Profit after taxation	19,647	19,931

According to the audited consolidated accounts, the net asset value of the PRC Co. was approximately RMB151,804,000 as at 31 December 2007. According to a valuation report made by LCH (Asia-Pacific) Surveyors Limited (an independent valuer), the land and buildings of the PRC Co are valued at approximately RMB230 million as at 30 April 2008 on the market value basis, which represents an appreciation of approximately RMB100 million when compared the value as at 31 December 2007.

As disclosed above, Mr. Hu, the ultimate beneficial owner of the Vendor, is the legal representative and the chairman of the board of directors of China Grand PRC, and also the sole director of China Grand HK. China Grand PRC and China Grand HK only agreed to sell the total 70.98% interests in the PRC Co held by them respectively at the above favourable terms to Vendor as stated above because Mr. Hu has good relationship with and is influential to China Grand PRC and China Grand HK and has involved in the management of the PRC Co. China Grand PRC and China Grand HK would not agree to sell such interests to the Company directly in any event. Thus, although a premium would be paid to the Vendor for acquisition of the Acquisition Target Company, the Directors consider the Acquisition Consideration is fair and reasonable, given the prospect in pharmaceutical business in the PRC, the favourable price earnings ratio and the stable income source provided by the PRC Co.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(c) Business prospects of the Group

As disclosed in the Announcement, according to a forecast of the IMS Health on 27 February 2008, the pharmaceutical markets in the emerging markets including the PRC are expected to grow at a rate of 12-13% annually, which would result in good prospect of development of pharmaceutical business in the PRC market.

In addition, according to the China Statistical Yearbook 2007 issued by National Bureau of Statistics of China, the PRC’s gross domestic products increased from approximately RMB9,924.5 billion in 2000 to approximately RMB21,087.1 billion in 2006, representing a compound annual growth rate (“CAGR”) of approximately 13.4%, which signified the rapid growth of the PRC economy. The average annual disposable income of urban residents per capita increased from approximately RMB6,280.0 in 2000 to approximately RMB11,759.5 in 2006, representing a CAGR of approximately 11.0% and the average annual disposable income of rural residents per capita increased from approximately RMB2,253.4 in 2000 to approximately RMB3,587.0 in 2006, representing a CAGR of approximately 8.1%. The sustained growth of PRC economy and increase in annual disposable income of both urban and rural residents per capita will lead to increase in health awareness in the PRC, as evidenced by the increase in medical and healthcare expenditure for urban and rural households, representing a CAGR of approximately 12.4% (from approximately RMB414.0 billion in 2004 to approximately RMB523.4 billion in 2006) and approximately 16.9% (from approximately RMB101.0 billion in 2004 to approximately RMB138.0 billion in 2006) respectively. Hence, it is expected that public awareness of health consciousness and demand for the pharmaceutical products in the PRC will be growing.

2. Reasons for and benefits of the Acquisition

As stated in the Letter from the Board, by the Acquisition, the Resulting Group can enter the PRC pharmaceutical market which provides a constant growth and the PRC market with substantial growth in the coming years. The Acquisition will provide also stable income source for the Resulting Group. The Resulting Group can leverage the management expertise of the PRC Co to further expand into the PRC market. It is expected that the Group’s results and cash flow can be improved as a result thererof.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Moreover, the Acquisition Target Company will become the wholly-owned subsidiary of the Company after the Acquisition, which the Company will have full control in the operation and strategic planning of the Acquisition Target Company and its financial results will be fully consolidated into the financial statement of the Group. From the promising financial performance of the Acquisition Target Company as shown above, we concur with the view of the Directors that the Acquisition is in the interest of the Company and Independent Shareholders as a whole.

3. Key terms of the Acquisition Agreement

(a) Consideration for the Acquisition

As set out in the Letter from the Board, the consideration for the Acquisition is HK$200,000,000, which was determined after arm’s length negotiations between the Vendor and the Company after taking into consideration of various factors, including but not limited to the prospect in pharmaceutical business in the PRC. As disclosed in the audited accounts in accordance with the Hong Kong Financial Reporting Standards, the PRC Co has net profit of approximately RMB20 million (equivalent to approximately HK$21.5 million) for the year ended 31 December 2007.

According to a foreacast of the IMS Health on 27 February 2008, the pharmaceutical markets in the emerging markets including the PRC are expected to grow at a rate of 12-13% annually, which would result in good prospect of development of pharmaceutical business in the PRC market. The Acquisition Consideration represents a price-earnings multiple (the “P/E ratio”) of approximately thirteen (13) times of the 2007 net profit. The calculation of the PE ratio is based on the Acquisition Consideration of HK$200 million divided by the net profit of attributable interest of 70.98% of the PRC Co of approximately HK$15.3 million.

Comparable transactions

In order to assess the fairness and reasonableness of the valuation of the pharmaceutical industry, we have referred to standard valuation references commonly used by the market and we are of the view that P/E ratio is a suitable valuation benchmark on which we have made comparison and conducted analysis with the comparable companies that are listed on the main board of the Stock Exchange (“Comparable Companies”). As the P/E ratios of some listed companies were not available because of their respective loss-making record for the latest financial year, they were excluded from the calculation of P/E ratio of the Comparable Companies.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Accordingly, we set out in the following table the relevant P/E ratio calculated based on the respective share prices of the Comparable Companies as at 28 April 2008.

			Market	Latest earnings
			capitalization	per share
Company Name (Stock			as at	published prior	Price-earnings
Code)	Year ended	Principal activities	28 April 2008	to 28 April 2008	multiple
			(HK$ million)	(HK$)	(times)
Broad Intelligence	31 March 2007	Manufacture, sale, research and	394.3	0.2049	4.1
International		development of injection solution
Pharmaceutical		pharmaceutical products under
Holdings Ltd. (1149)		the Nan Shaolin brandname in
		the PRC
China Pharmaceutical	31 December 2007	Manufacture and sale of	4,183.7	0.3104	8.8
Group Ltd. (1093)		pharmaceutical products
China Shineway	31 December 2007	Research and development,	4,217.7	0.6643	7.7
Pharmaceutical Group		manufacture and trading of
(2877)		Chinese pharmaceutical products.
Dawnrays Pharmaceutical	31 December 2007	Development, manufacture	650.9	0.1411	5.8
(Holdings) Ltd. (2348)		and sale of non-patented
		chemical medicines including
		cephalosporins in sterile bulk
		medicine and powder of injection
		forms, their intermediate
		pharmaceuticals and system
		specific medicines
Guangzhou	31 December 2007	Manufacturing and sale of Chinese	1,460.1	0.4423	15.0
Pharmaceutical Co.		patent medicine, trading of
Ltd. (874)		western pharmaceutical products,
		Chinese patent medicine, Chinese
		raw medicine and medical
		apparatus
Hua Han Bio-	30 June 2007	Research, development, manufacture	1,541.3	0.1483	11.8
Pharmaceutical		and sale of gynecological
Holdings Ltd. (587)		medicine and medicinal
		healthcare products of women.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

			Market	Latest earnings
			capitalization	per share
Company Name (Stock			as at	published prior	Price-earnings
Code)	Year ended	Principal activities	28 April 2008	to 28 April 2008	multiple
			(HK$ million)	(HK$)	(times)
Jiwa Bio-Pharm Holdings	31 March 2007	Research, development, manufacture	303 .3	0.014	13.5
Ltd. (2327)		and sale of pharmaceutical
		products including new medicine
		and generic pharmaceutical
		products and to a lesser extent,
		health-care products
Pak Fah Yeow	31 December 2007	Manufacture and sale of Hoe Hin	491.4	0.1385	13.6
International Ltd.		Brand of products, treasury and
(239)		property investment, distribution
		of healthcare and household
		products
Shandong Xinhua	31 December 2007	Development, manufacture and	309.0	0.0779	26.4
Pharmaceutical Co.		sales of bulk pharmaceuticals,
Ltd. (719)		preparations (such as injections
		and tablets) and chemical
		products
Sino Biopharmaceutical	31 December 2007	Research and development,	3,419	0.0991	15.2
Ltd. (1177)		production and sale of a series
		of biopharmaceutical products,
		modernised Chinese medicines,
		chemical medicines and modern
		health-care products for medical
		treatment
Uni-Bio Science Group	31 March 2007	Bio-science related business	3,537.9	0.0106	41.5
Ltd. (690)		(with focus on the
		research, development
		and commercialization of
		biopharmaceuticals through
		recombinant DNA and other
		technologies)
Vital Pharmaceutical	31 December 2007	Research, development, manufacture,	380.0	0.0327	7.5
Holdings Ltd. (1164)		sale and distribution of
		biopharmaceutical and
		conventional pharmaceutical
		products

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

				Market	Latest earnings
				capitalization	per share
Company Name (Stock				as at	published prior	Price-earnings
Code)	Year ended	Principal activities		28 April 2008	to 28 April 2008	multiple
				(HK$ million)	(HK$)	(times)
Wai Yuen Tong Medicine	31 March 2007	Production and sale of Chinese and		301.6	0.0071	25.4
Holdings Ltd. (897)			western pharmaceutical and
			health food products, bottled
			birds’ nest drinks and herbal
			essence products and property
			investments and property holding
Wuyi International	31 December 2007	Manufacturing, marketing and		2,034.6	0.1822	6.5
Pharmaceutical co.			selling western pharmaceuticals
Ltd. (1889)			and modern Chinese medicine
			products, including Chinese
			medicine injectibles, for the
			Chinese market
For the Comparable Companies
Minimum						4.1
Maximum						41.5
Average						14.5
Acquisition Target Company*						12.8
Source: www.hkex.com.hk

The calculation of the P/E ratio of Acquisition Target Company is based on the aggregate consideration for the Acquisition Agreement of HK$200 million and the respective attributable net profit after taxation and extraordinary items attributable to the equity holders of the Acquisition Target Company for the year ended 31 December 2007.

The P/E ratios of the Comparable Companies range from approximately 4.1 to 41.5, with an average P/E ratio of approximately 14.5. Therefore, the P/E ratio of the Acquisition Target Company of approximately 12.8 falls within the range of the P/E ratio of the Comparable Companies and is approximately 11.7% lower than the average P/E ratio of the Comparable Companies.

Taking into account that the P/E ratio of Acquisition Target Company falls within the range of the Comparable Companies and is approximately 11.7% lower than the average of the Comparable Companies and the Acquisition represent a suitable opportunity for the Group to gain full control of Acquisition Target Company which had promising financial performance in the pharmaceutical business, we are of the view that the consideration for the Acquisition Agreement is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

According to a valuation report made by LCH (Asia-Pacific) Surveyors Limited (an independent valuer), the land and buildings of the PRC Co is valued at approximately RMB230 million (equivalent to approximately HK$258 million) as at 30 April 2008 on the market value basis. As such, the market value of attributable interest of 70.98% of the land and buildings of the PRC Co is approximately HK$183 million which already represents 91.5% of the Acquisition Consideration.

In addition, as advised by the management of the Company, Mr. Hu has good relationship with and is influential to China Grand PRC and China Grand HK has involved in the management of the PRC Co. China Grand PRC and China Grand HK would not agree to sell such interests to the Company directly in any event.

We note that the Consideration for the Acquisition of an aggregate 70.98% equity interest of PRC Co is higher than that paid for in the prior acquisition by the Vendor in 2008. Having considered the future prospects of the Acquisition Target Company, the P/E ratio of Acquisition Target Company and the estimated value of the land and buildings of the PRC Co, though the Acquisition Consideration represents a premium compared to the original cost of the Vendor for the Acquisition, we concur with the view of the Directors that the Acquisition Consideration is fair and reasonable so far as the Independent Shareholders are concerned.

(b) Form of payment of the Consideration

Pursuant to the Acquisition Agreement, the total consideration for the Acquisition is HK$200,000,000 and shall be satisfied as follows:

(i) as to HK$150,000,000, by issuance by the Company of the Promissory Note to the Vendor or its nominee; and
(ii) as to HK$50,000,000 by the issuance by the Company of the Convertible Bond to the Vendor or its nominee upon the Acquisition Completion.

Convertible Bond

As part of the Acquisition Consideration, Convertible Bond of a principal amount of HK$50,000,000 million is to be issued upon the Acquisition Completion. The Convertible Bond bears interest rate of 5% per annum, and shall be repayable at 100% of the outstanding principal amount together with accrued interest two years after the issue of the Convertible Bond.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Conversion price

HK$0.30 per Share (subject to adjustments in accordance with the terms of the Convertible Bond (which include: consolidation or subdivision of the Shares, issue of Shares by way of capitalization of profits or reserves to Shareholders, capital distribution to Shareholders, right issues of shares or rights to acquire Shares to Shareholders, right issues of other securities to Shareholders, issue at less than the then current market price of the Shares, issue of convertible securities, modification of rights of conversion, exchange or subscription of the securities issued as mentioned above, other offers of securities to the Shareholders), which are normal anti-dilution adjustments), represents:

(i) a discount of 18.92% to the closing price of HK$0.37 per Share as quoted on the Stock Exchange on 28 April 2008, the day immediately preceding the suspension of trading in the Shares (the “Last Trading Day”), and
(ii) a discount of 14.04% to the 5 days average closing price per Share of HK$0.349 before suspension.
(iii) a premium of 1.69% to the closing price of HK$0.295 as at the Latest Practicable Date.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Comparison with other issues of convertible bond

In order to assess the fairness and reasonableness of the terms of the Convertible Bond, we have identified and reviewed, on a best effort basis, the transactions involving issue of convertible note/bond to satisfy all or part of the consideration for the acquisition of assets or equity interests in target companies announced by companies listed on the Stock Exchange (the “CB Comparables”) from 1 February 2008 to 28 April 2008, being the date of the Acquisition Agreement, as summarized below:

						Premium/
					Premium/	(Discount)
					(Discount)	represented
					represented by	by conversion
					conversion price	price over/to
					over/to closing	closing price of
					price of shares	shares on last
					on last trading	five trading
		Principal		Maturity	day prior to	day prior to
Date of	Company	amount	Interest	(approximate	the relevant	the relevant
announcement	(Stock code)	(HK$ million)	(per annum)	in years)	announcement	announcement
					(%)	(%)
4 February 2008	Sungreen International	756.9	3.00%	7	5.77%	2.23%
	Holdings Limited
	(8306)
5 February 2008	Sunny Global Holdings	16.2	0.00%	3	(86.72%)	(84.94%)
	Limited (1094)
6 February 2008	Mandarin Entertainment	70.0	0.00%	3.5	(27.27%)	(24.81%)
	(Holdings) Limited (9)
12 February 2008	Wah Nam International	406.5	0.00%	5	(45.45%)	(43.40%)
	Holdings Limited (159)
18 February 2008	Challenger Group Holdings	920.0	1.00%	5	85.71%	109.68%
	Limited (8203)
4 March 2008	Riche Multi-media	144.0	5.00%	10	3.23%	7.38%
	Holdings Limited (764)
4 March 2008	China HealthCare Holdings	20.0	2.00%	3	110.91%	127.45%
	Limited (673)
5 March 2008	Smart Rich Energy Finance	117.0	1.00%	3	12.32%	9.62%
	(Holdings) Limited
	(1051)

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

						Premium/
					Premium/	(Discount)
					(Discount)	represented
					represented by	by conversion
					conversion price	price over/to
					over/to closing	closing price of
					price of shares	shares on last
					on last trading	five trading
		Principal		Maturity	day prior to	day prior to
Date of	Company	amount	Interest	(approximate	the relevant	the relevant
announcement	(Stock code)	(HK$ million)	(per annum)	in years)	announcement	announcement
					(%)	(%)
25 March 2008	Wang Sing International	195.5	0.00%	2	(8.00%)	(6.12%)
	Holdings Group
	Limited (2389)
8 April 2008	Long Success International	10.7	3.00%	1	(11.29%)	(11.58%)
	(Holdings) Limited
	(8017)
10 April 2008	Global Solution	99.0	0.00%	5	(13.79%)	(3.85%)
	Engineering Limited
	(8192)
15 April 2008	eCyberChina Holdings	40.0	0.00%	5	234.73%	236.98%
	Limited (254)
18 April 2008	Xian Yuen Titanium	960.8	0.00%	5	(1.96%)	0.40%
	Resources Holdings
	Limited (353)
Highest discount			0.00%	1.0	(86.72%)	(84.94%)
Highest premium			5.00%	10.0	234.73%	236.98%
Average			1.15%	4.4	19.86%	24.54%
Median			0.00%	5.0	(1.96%)	0.40%
Convertible	Bond	50.0	5.00%	2	(18.92%)	(14.04%)

Source: www.hkex.com.hk

The conversion prices of the CB Comparables as set out above ranged from a discount of approximately 86.72% to a premium of approximately 234.73% to the respective closing prices of their shares as at the last trading day prior to the release of the relevant announcement. The Conversion Price represents a discount of 18.92% to the closing price of the Shares on the Last Trading Day, which is higher than the average but falls within the said market range.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In addition, the Group had net liabilities of HK$42.8 million (HK$0.03987 per Share) as at 31 December 2007. The Conversion Price of HK$0.30 represents an excess over the net liability per Share.

Historical share price performance

Set out below charts of historical closing prices of the Shares on the Stock Exchange for the period of twelve full calendar months prior to 28 April 2008, being the date of the Acquisition Agreement (the “Relevant Period”).

Closing price per Share on the Stock Exchange

==> picture [369 x 213] intentionally omitted <==

Source: Bloomberg

During the Relevant Period, the lowest closing price of the Shares of HK$0.144 was recorded on 14 May 2007 and the highest closing price of the Shares of HK$0.49 was recorded on 6 December 2007, and the Conversion Price represents a premium of approximately 108.3% over such lowest price and a discount of approximately 38.8% to such highest price respectively. We note that the average closing price per Share was approximately HK$0.31 per Share during the Relevant Period. The Conversion Price represents an approximately 3.2% discount over the approximate average closing price per Share during the Relevant Period, which falls within the said market range.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As at the Latest Practicable Date, a premium of 1.69% to the closing price of HK$0.295 as compared to a discount of approximately 18.92% to the closing price of the Last Trading Day. Besides, the Conversion Price was fixed at the time of signing of the Acquisition Agreement, and, as illustrated above with reference to CB Comparables, the basis of fixing the Conversion Price is fair and reasonable. The reasonableness of the basis of determining the Conversion Price should not be based on future unforeseeable factors such as increase/decrease of future share price of the Company. Any increase or decrease in market price after the Announcement should not be regarded as a yard-stick in assessing the fairness and reasonableness of the basis of the Conversion Price and thus affecting the fairness and reasonableness of the basis of the Conversion Price. In view of the above, we consider that the Conversion Price is reasonable.

Having considered (i) the conversion price is at premium over audited consolidated net liabilities of the Group per Share as at 31 December 2007 and fall within the prevailing market range, (ii) the closing prices per Share in the Relevant Period, we consider the conversion price of Convertible Bond is fair and reasonable so far as the Independent Shareholders are concerned

In addition, the Convertible Bond bears interest rate of 5% per annum for its entire period falls within the range of the CB Comparables which carry interest rates ranging from 0% to 5%. Having considered the interest rate of the Group’s short term loan of 6.44% to 7.34% as stated in the 2007 Annual Report, we are of the view that the interest rate of the Convertible Bond of 5% represents a favourable borrowing rate to the Company. We consider that the issue of Convertible Bond could lower the financial cost of borrowing for the Company.

The Convertible Bond has a maturity of two years from the date of issue, which is at the relatively low end of the range of maturity of the CB Comparables from one to ten years.

Having considered the above, we consider that the principal terms of the Convertible Bond are fair and reasonable so far as the Independent Shareholders are concerned.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Promissory Note

The Promissory Note shall bear an interest of 5% per annum, mature 2 years after the date of issuance and be repayable before the maturity date upon mutual agreement. The issuance of the Promissory Note is conditional upon the capital inspection report（驗資報告）and the updated business licence（營業執照）to be issued upon the capital contribution in respect of the PRC Co Transfer Interests having been produced by the Vendor and satisfied by the Company.

For comparison purposes, we have reviewed the Hong Kong dollar prime rate offered by three major banks in Hong Kong (the “Prime Rate”). Brief details are set out as below:

	Hong Kong dollar
Bank name	prime rate
The Hongkong and Shanghai Banking
Corporation Limited	5.25%
Bank of China (Hong Kong) Limited	5.25%
Standard Chartered Bank	5.50%
Average	5.33%

As depicted above, we note that the interest rate of the Promissory Note is lower than the average Prime Rate of approximately 5.33% as at the Latest Practicable Date. As the Promissory Note will carry an interest lower than the Prime Rate, the Company will have saving in the interest payment when compared with debt financing from outside source.

In addition, the Promissory Note will carry an interest lower than the interest rate of the Group’s short term loan of 6.44% to 7.34% as stated in the 2007 Annual Report.

Further, the Promissory Note is of a term which is due for maturity on the second anniversary of its issue date. Accordingly, the Group would be relieved of any imminent cashflow pressure to redeem the principal amount of HK$150,000,000 until two years from the issue date of the Promissory Note, which we consider is in the interests of the Company and the Independent Shareholders as a whole

Having taken into account the above, we consider the principal terms of the Promissory Note are fair and reasonable so far as the Independent Shareholders are concerned.

— 48 —

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

4. Effect on the shareholding structure

The following table summarizes the shareholding structure of the Company as at the Latest Practicable Date, and assuming the issuance of all Conversion Shares:

Name of Shareholder Existing (as at the Latest Practicable Date) No. of Shares Approx. % to the issued share capital of the Company Outwit Investments Limited (Note) 746,979,654 69.56 Public Shareholders 326,954,346 30.44 Total 1,073,934,000 100.00	Assuming issuance of all Conversion Shares No. of Shares Approx. % to the enlarged issued share capital of the Company 913,646,321 73.65 326,954,346 26.35 1,240,600,667 100.00	Assuming issuance of all Conversion Shares No. of Shares Approx. % to the enlarged issued share capital of the Company 913,646,321 73.65 326,954,346 26.35 1,240,600,667 100.00
		100.00

Note: The entire issued share capital of Outwit Investments Limited is owned by Mr. Hu Kaijun.

As illustrated above, the shareholding interests of the existing public Shareholders will be reduced from approximately 30.44% to approximately 26.35% upon conversion of the Convertible Bond in full, representing a dilution effect of 13.44%.

Taking into account (i) the reasons for and benefits of the Acquisition as referred to above; (ii) the terms of the Acquisition Agreement are fair and reasonable as discussed above; (iii) the issue of the Conversion Shares will strengthen profitability of the Company and the terms of Promissory Note are fair and reasonable, we consider that the aforementioned dilution effect is acceptable.

— 49 —

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

5. Financial effects of the Acquisition on the Group

The Acquisition Target Company will become the wholly-owned subsidiary of the Company after the Acquisition, and hence, their results will be fully consolidated into the financial statement of the Group.

We have considered the potential financial effects of the Acquisition on the Company based on the financial information of the Group as set out in Appendix I to the Circular and the unaudited pro forma financial information of Enlarged Group as set out in Appendix IV to the Circular. The Directors have prepared the unaudited proforma financial information of the Enlarged Group to illustrate the effects of the Acquisition (but before the Disposal) might have on the results of the operations, financial position and cash flows of the Group immediately after the completion of Acquisition (but before the Disposal). The pro forma financial information is prepared based on a number of bases and assumptions set out in Appendix IV, and solely for illustrative purposes. Independent Shareholders are advised to read the bases and assumptions carefully.

Earnings

As set out in the section headed “Background on the Acquisition Target Company” above, The Acquisition Target Company has been recording an increasing turnover and the net profit for the financial year ended 31 December 2007 was approximately RMB19,931,000.

Based on the unaudited pro forma income statement of the Resulting Group as set out in Appendix IV to the Circular, the unaudited pro forma net loss of the Enlarged Group for the year ended 31 December 2007 would amount to approximately HK$43.0 million, assuming that completion of the Acquisition had been taken place on 1 January 2007, as compared to the actual net loss of the Group of approximately HK$53.9 million.

Since there would be improvement on the net profit assuming the Acquisition had been completed on 1 January 2007, we consider the Acquisition is in the interests of the Company and the Shareholders as a whole.

— 50 —

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Cashflow and Gearing ratio

The Acquisition Consideration will be settled by way of the issuance of the Convertible Bond and the Promissory Note and no cash is payable by the Group under the Acquisition Agreement, there will not be any immediate effect on the net cash flow position. As referred to the 2007 Annual Report, the Group’s cash and cash equivalents as at 31 December 2007 amounted to approximately HK$67.3 million and the Directors do not anticipate any difficulty in re-financing of the payment of the Promissory Note if necessary upon its maturity. Besides, the Company may negotiate with the Vendor for extension of repayment date of or renewal of the Promissory Note. Based on the unaudited pro forma cash flow statement of the Resulting Group as set out in Appendix IV to the Circular, the unaudited pro forma cash and cash equivalents of the Enlarged Group for the year ended 31 December 2007 would amount to approximately HK$116.1 million. Since there would have been improvement on the cash flow assuming the Acquisition had been completed on 1 January 2007, we consider the Acquisition is in the interests of the Company and the Shareholders as a whole.

Based on the unaudited pro forma balance sheet of the Enlarged Group as set out in Appendix IV to the Circular, had the Acquisition been completed on 31 December 2007, the total interest bearing bank and other borrowings of the Enlarged Group would have been approximately HK$362 million as compared to the actual total interest bearing bank and other borrowings of the Group of approximately of approximately HK$107 million. Based on the 2007 Annual Report, the Group had a gearing ratio of 53.7%. The gearing ratio (calculated by dividing the total interest bearing bank and other borrowings by total assets) would be reduced to 52.9% as a result of the Acquisition based on the unaudited pro forma balance sheet of the Enlarged Group as set out in Appendix IV to the Circular. Since there would be improvement on the gearing ratio, we consider the Acquisition is in the interests of the Company and the Independent Shareholders as a whole.

Net assets value

Based on the unaudited pro forma balance sheet of the Resulting Group as set out in Appendix IV to the Circular, the unaudited pro forma adjusted net liabilities of the Enlarged Group would have been approximately HK$20.1 million had the completion of the Acquisition been taken place on 31 December 2007, representing an increase of approximately HK$22.7 million as compared to the net liabilities value of approximately HK$42.8 million of the Group as at 31 December 2007.

Since there would be improvement on the net asset value, net profit and assuming the Acquisition had been completed on 1 January 2007, we consider the Acquisition is in the interests of the Company and the Independent Shareholders as a whole.

— 51 —

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Going concern problem

We note from the 2007 Annual Report prepared by ShineWing (HK) CPA Limited stated that, it indicates that the Group had net liabilities position of approximately HK$41,843,000 as at 31 December 2007 and the existence of a significant uncertainty which may cast a significant doubt about ability of the Group to continue as a going concern. Pursuant to the Agreement, the total consideration for the Acquisition is HK$200,000,000 and shall be satisfied as follows:

(i) as to HK$150,000,000, by issuance by the Company of the Promissory Note to the Vendor or its nominee; and
(ii) as to HK$50,000,000 by the issuance by the Company of the Convertible Bond to the Vendor or its nominee upon the Acquisition Completion.

As stated in the Letter from the Board, despite the net liability position of the Company, the Directors consider that the Company may raise funds by various methods (including equity financing) for repaying of the Promissory Note when it matures and the Convertible Bond (assuming no conversion when due), though there is no specific plan to do so currently. Otherwise, the Company may negotiate with the Vendor for extension of repayment date of or renewal of the Promissory Note and the Convertible Bond. As the Company will dispose off the Disposal Group which is loss making and acquire the Acquisition Target Company which is expected to be profit making, the Directors consider that financial position of the Group would improve which would strengthen the Group’s ability to operate as a going concern. As at the Latest Practicable Date, the outstanding bank loans of the Group amount to approximately HK$71,087,000 which were secured by certain properties in the PRC, the total net book value of which is HK$84,274,000 as at 30 April 2008. The Directors are confident that the Group is able to roll over these loans on maturity because these loans are fully secured and the Group has maintained long term relationship with the PRC banks. The outstanding sum due to Outwit amounts to approximately HK$17,592,000 which is unsecured, interest free and has no fixed payment terms, and the Directors are confident that the Group will have the continued support from Outwit as Outwit has undertaken not to demand repayment unless the Company is able to repay the outstanding sum pursuant to a written undertaking given by Outwit dated 16 June 2008. Based on the above, we agree with the Directors that the Group will be able to operate as a going concern and that the exposure of the Group to such liquidity risks will be minimal.

Based on the figures as set out in Appendix IV to the Circular, the unaudited pro forma adjusted net liabilities of the Enlarged Group would have been approximately HK$20.1 million had the completion of the Acquisition been taken place on 31 December 2007, representing an increase of approximately HK$22.7 million as compared to the net liabilities value of approximately HK$42.8 million of the Group as at 31 December 2007.

— 52 —

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Based on the above analysis, we concur with the view of the Directors that the Acquisition will help strengthening the Group’s financial position.

As disclosed above, The Acquisition Consideration will be settled by way of the issuance of the Convertible Bond and the Promissory Note and no cash is payable by the Group under the Acquisition Agreement. As advised by the management of the Company, the Company may negotiate with the Vendor for extension of repayment date of or renewal of the Promissory Note and the Convertible Bond. We consider that, by a combination of issue of Convertible Bond and the Promissory for the payment of the consideration of the Acquisition, the Company could acquire the Acquisition Target Company with no immediate cash outlay. In addition, we note that there is a premium of the share price of the Company over the Conversion Price as at the date of the Announcement of the Company, which is an incentive for the Vendor to convert part or whole of the Convertible Bond into the Shares, therefore we are of the opinion that there is reasonable possibility that the Vendor will convert part or whole of the Convertible Bond into Shares during the 2-year period, and the capital base of the Group will be strengthened as a result of such conversion.

Although the Company may raise funds by various methods (including equity financing) for repaying of the Promissory Note when it matures and the Convertible Bond (assuming no conversion when due), we are of the view that the Group may still be subject to going concern uncertainty. Independent Shareholders should be cautioned that the analysis on the financial effects of the Acquisition on the Group set out above is based on the assumption that the Group’s business is operating as a going concern.

RECOMMENDATION

Having taken into account the principal factors and reasons referred to the above, we are of the opinion that the terms of the Acquisition Agreement are fair and reasonable so far as the Independent Shareholders are concerned and the Acquisition Agreement is in the interest of the Company and the Independent Shareholders as a whole. We therefore advise the Independent Shareholders, and also advise the Independent Board Committee to recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the SGM to approve the Agreement and the transactions contemplated thereunder.

Yours faithfully, For and on behalf of Ample Capital Limited H. W. Tang President

— 53 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

A. FINANCIAL SUMMARY OF THE GROUP

Set out below is a summary of the financial information of the Group for the three years ended 31 December 2007 as extracted from the relevant annual reports of the Company.

Consolidated Income Statement

Turnover
Cost of sales
Gross profit
Other income
Reversal of impairment loss on interests
in leasehold land
Loss on disposal of investment at fair
value through profit or loss
Distribution costs
Administrative expenses
Other operating expenses
Share of results of associates
Finance costs
Loss before tax
Income tax
Loss for the year
Attributable to:
— Equity holders of the Company
— Minority interests
Loss per share
Basic
Diluted

For the year ended 31 December
2007
2006
2005
HK$’000
HK$’000
HK$’000
49,045
42,408
46,384
(26,391)
(23,438)
(26,296)
22,654
18,970
20,088
16,883
14,604
12,599
—
13,624
—
(827)
—
—
(26,347)
(17,319)
(13,808)
(48,285)
(34,957)
(49,609)
(11,600)
(1,700)
(71,555)
660
338
(2,594)
(9,228)
(5,746)
(3,925)
(56,090)
(12,186)
(108,804)
2,205
245
—
(53,885)
(11,941)
(108,804)
(52,030)
(10,650)
(97,214)
(1,855)
(1,291)
(11,590)
(53,885)
(11,941)
(108,804)
(HK$0.05)
(HK$0.01)
(HK$0.10)
N/A
N/A
N/A

— 54 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Balance Sheet

Non-current assets Property, plant and equipment Interests in leasehold land held for own use under operating leases Investment properties Interests in associates Goodwill Intangible assets Current assets Inventories Trade and other receivables Interests in leasehold land held for own use under operating leases — current portion Investments at fair value through profit or loss Cash and cash equivalents Assets classified as held for sale Current liabilities Trade and other payables Short-term bank loans — secured Other loan — secured Amounts due to directors Amounts due to related companies Net current liabilities Total assets less current liabilities	As at 31 December 2007 2006 HK$’000 HK$’000 35,441 32,569 4,435 4,278 70,696 70,848 4,340 3,680 — 1,050 — 11,600 114,912 124,025 8,078 4,077 8,308 8,109 119 115 — 10,519 67,282 59,407 83,787 82,227 — 13,624 83,787 95,851 52,515 54,503 92,307 54,022 14,423 22,397 — — — — 159,245 130,922 (75,458) (35,071) 39,454 88,954	2005 HK$’000 33,382 4,235 71,804 4,311 2,450 13,300 129,482 4,447 7,773 115 7,933 47,650 67,918 — 67,918 48,544 43,462 10,063 7,206 636 109,911 (41,993) 87,489

— 55 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Non-current liabilities Deferred taxation Amount due to holding company Provision for staff welfare and bonus Net (liabilities) assets Capital and reserves Share capital Reserves Equity attributable to equity holders of the Company Minority interests Net (liabilities) assets	As at 31 December 2007 2006 HK$’000 HK$’000 — 2,205 13,408 11,008 67,889 63,821 81,297 77,034 (41,843) 11,920 10,739 10,739 (53,562) (1,648) (42,823) 9,091 980 2,829 (41,843) 11,920	2005 HK$’000 2,450 800 61,534
		64,784
		22,705

		10,739 8,564
		19,303 3,402
		22,705

— 56 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Changes in Equity

Share capital HK$’000 At 1 January 2005 3,580 Exchange differences arising on conversion of foreign operations — Loss for the year — Total recognised income and expense for the year — Issue of new shares upon an open offer 7,159 Transaction costs attributable to issue of new shares — Acquisition of a subsidiary — At 31 December 2005 and 1 January 2006 10,739 Exchange differences arising on conversion of foreign operations — Loss for the year — Total recognised income and expense for the year — Capital contributions from minority shareholders of subsidiaries — Partial disposal of a subsidiary — At 31 December 2006 and 1 January 2007 10,739 Exchange differences arising on conversion of foreign operations — Loss for the year — Total recognised income and expense for the year — At 31 December 2007 10,739	Share premium HK$’000 24,507 — — — 71,596 (1,646) — 94,457 — — — — — 94,457 — — — 94,457	Statutory reserves Translation reserve Accumulated losses Equity attributable to equity holders of the Company HK$’000 HK$’000 HK$’000 HK$’000 (note) 148,158 (69,654) (67,729) 38,862 — 546 — 546 — — (97,214) (97,214) — 546 (97,214) (96,668) — — — 78,755 — — — (1,646) — — — — 148,158 (69,108) (164,943) 19,303 — 438 — 438 — — (10,650) (10,650) — 438 (10,650) (10,212) — — — — — — — — 148,158 (68,670) (175,593) 9,091 — 116 — 116 — — (52,030) (52,030) — 116 (52,030) (51,914) 148,158 (68,554) (227,623) (42,823)	Minority interests HK$’000 12,844 60 (11,590) (11,530) — — 2,088 3,402 303 (1,291) (988) 1,296 (881) 2,829 6 (1,855) (1,849) 980	Total HK$’000 51,706 606 (108,804)
				(108,198) 78,755 (1,646) 2,088
				22,705 741 (11,941)
				(11,200) 1,296 (881)
				11,920 122 (53,885)
				(53,763)
				(41,843)

— 57 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Cash Flow Statement

	For the year	ended 31 December	ended 31 December
	2007	2006	2005
	HK$’000	HK$’000	HK$’000
Operating activities
Loss before tax	(56,090)	(12,186)	(108,804)
Adjustments for:
Amortisation of intangible assets	1,400	1,400	15,110
Amortisation of interests in leasehold
land held for own use under
operating leases	119	115	111
Change in fair value of investments at
fair value through profit or loss	—	(2,296)	(470)
Loss on disposal of investments at fair
value through profit or loss	827	—	—
Depreciation of investment properties	4,722	3,583	3,537
Depreciation of property, plant and
equipment	3,832	5,327	5,082
Finance costs	9,228	5,746	3,925
(Gain) loss on disposal of property,
plant and equipment	(818)	766	(1,041)
Gain on disposal of an associate	—	—	(3,716)
Gain on disposal of subsidiaries	—	(1,845)	(102)
Gain on partial disposal of a
subsidiary	—	(881)	—
Impairment loss on goodwill arising
from acquisitions of subsidiaries	1,050	1,938	240
Impairment loss on intangible assets	10,200	300	56,445
Impairment loss on interests in
associates	—	—	3,181
Impairment on goodwill arising from
acquisition of an associate	—	—	2,689
Impairment loss on properties, plant
and equipment	1,107	—	—
Interest income	(561)	(906)	(534)
Gain on disposal of assets classified as
held for sale	(7,622)	—	—
Reversal of impairment loss on
interest in leasehold land held for
sale	—	(13,624)	—
Reversal of impairment loss on trade
and other receivables	(2,567)	(2,390)	(1,542)
Share of results of associates	(660)	(338)	2,594

— 58 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Operating cash flows before
movements in working capital
(Increase) decrease in inventories
Decrease in trade and other
receivables
Increase in trade and other payables
Decrease in provision for staff welfare
and bonus
Net cash used in operating activities
Investing activities
Proceeds from disposal of investments
at fair value through profit or loss
Proceeds from disposal of property,
plant and equipment
Interest income received
Purchase of property, plant and
equipment
Net cash inflow from disposal of
subsidiaries
Acquisition of an associate
Dividend received from an associate
Proceeds from disposal of an associate
Net cash inflow from acquisition of
subsidiaries
Net cash from investing activities

For the year ended 31 December
2007
2006
2005
HK$’000
HK$’000
HK$’000
(35,833)
(15,291)
(23,295)
(4,001)
370
(619)
2,369
2,661
2,936
20,392
6,559
15,145
(11)
—
(96)
(17,084)
(5,701)
(5,929)
9,692
—
—
2,165
256
1,836
561
906
534
(7,078)
(1,686)
(1,760)
—
—
102
—
—
(7,000)
—
969
—
—
—
5,693
—
2
(12,911)
5,340
447
(13,506)

— 59 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Financing activities
New short-term bank loans borrowed
Advance from holding company
Repayments of short-term bank loans
Interest paid
Repayment of other loans
New other loans borrowed
Net proceeds from issue of shares
Repayments of convertible notes and
promissory notes
Capital contributions from minority
shareholders of subsidiaries
Decrease in amounts due to directors
Decrease in amounts due to related
companies
Net cash from financing activities
Net increase in cash and cash
equivalents
Cash and cash equivalents at
beginning of year
Effect of foreign exchange rate
changes
Cash and cash equivalents at end of
year, representing
Bank balances and cash

For the year ended 31 December
2007
2006
2005
HK$’000
HK$’000
HK$’000
92,307
54,022
71,347
2,400
10,208
800
(57,506)
(43,462)
(80,000)
(9,228)
(5,746)
(3,925)
(8,488)
(10,063)
—
—
22,397
10,063
—
—
77,109
—
—
(70,200)
—
1,296
—
—
(7,206)
4,105
—
(636)
636
19,485
20,810
9,935
7,741
15,556
(9,500)
59,407
47,650
56,272
134
(3,799)
878
67,282
59,407
47,650

— 60 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

B. CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP

Set out below is the financial information of the Group extracted from the Annual Report of the Group for the year ended 31 December 2007.

Consolidated Income Statement

For the year ended 31 December 2007

Notes Turnover 8 Cost of sales Gross profit Other income 9 Reversal of impairment loss on interests in leasehold land 18 Loss on disposal of investment at fair value through profit or loss Distribution costs Administrative expenses Other operating expenses 10 Share of results of associates Finance costs 11 Loss before tax 12 Income tax 13 Loss for the year Attributable to: — Equity holders of the Company — Minority interests Loss per share 15 Basic Diluted	2007 HK$’000 49,045 (26,391) 22,654 16,883 — (827) (26,347) (48,285) (11,600) 660 (9,228) (56,090) 2,205 (53,885) (52,030) (1,855) (53,885) (HK$0.05) N/A	2006 HK$’000 42,408 (23,438) 18,970 14,604 13,624 — (17,319) (34,957) (1,700) 338 (5,746) (12,186) 245 (11,941) (10,650) (1,291) (11,941) (HK$0.01) N/A

— 61 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Balance Sheet

As at 31 December 2007

Notes Non-current assets Property, plant and equipment 17 Interests in leasehold land held for own use under operating leases 18 Investment properties 19 Interests in associates 20 Goodwill 21 Intangible assets 22 Current assets Inventories 24 Trade and other receivables 25 Interests in leasehold land held for own use under operating leases — current portion 18 Investments at fair value through profit or loss 26 Cash and cash equivalents 27 Assets classified as held for sale 23 Current liabilities Trade and other payables 28 Short-term bank loans — secured 29 Other loan — secured 30 Net current liabilities Total assets less current liabilities	2007 HK$’000 35,441 4,435 70,696 4,340 — — 114,912 8,078 8,308 119 — 67,282 83,787 — 83,787 52,515 92,307 14,423 159,245 (75,458) 39,454	2006 HK$’000 32,569 4,278 70,848 3,680 1,050 11,600 124,025 4,077 8,109 115 10,519 59,407 82,227 13,624 95,851 54,503 54,022 22,397 130,922 (35,071) 88,954

— 62 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes Non-current liabilities Deferred taxation 31 Amount due to holding company 32 Provision for staff welfare and bonus 33 Net (liabilities) assets Capital and reserves Share capital 34 Reserves Equity attributable to equity holders of the Company Minority interests	2007 HK$’000 — 13,408 67,889 81,297 (41,843) 10,739 (53,562) (42,823) 980 (41,843)	2006 HK$’000 2,205 11,008 63,821 77,034 11,920 10,739 (1,648) 9,091 2,829 11,920

— 63 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Changes in Equity

For the year ended 31 December 2007

Share capital HK$’000 At 1 January 2006 10,739 Exchange differences arising on conversion of foreign operations — Loss for the year — Total recognised income and expense for the year — Capital contributions from minority shareholders of subsidiaries — Partial disposal of a subsidiary — At 31 December 2006 and 1 January 2007 10,739 Exchange differences arising on conversion of foreign operations — Loss for the year — Total recognised income and expense for the year — At 31 December 2007 10,739	Share premium HK$’000 94,457 — — — — — 94,457 — — — 94,457	Statutory reserves Translation reserve Accumulated losses Equity attributable to equity holders of the Company HK$’000 HK$’000 HK$’000 HK$’000 (note) 148,158 (69,108) (164,943) 19,303 — 438 — 438 — — (10,650) (10,650) — 438 (10,650) (10,212) — — — — — — — — 148,158 (68,670) (175,593) 9,091 — 116 — 116 — — (52,030) (52,030) — 116 (52,030) (51,914) 148,158 (68,554) (227,623) (42,823)	Minority interests HK$’000 3,402 303 (1,291) (988) 1,296 (881) 2,829 6 (1,855) (1,849) 980	Total HK$’000 22,705 741 (11,941)
				(11,200) 1,296 (881)
				11,920 122 (53,885)
				(53,763)
				(41,843)

Note:

As stipulated in the relevant laws and regulations, certain subsidiaries operating in the People’s Republic of China (the “PRC”) are required to maintain certain statutory reserves which include the general reserve fund and staff welfare and bonus fund. Appropriations to the general reserve fund and the staff welfare and bonus fund are made out of net profit as reported in the PRC statutory financial statements. The amounts of appropriations are determined by the respective board of directors. All statutory reserves are for specific purposes and are not distributable in the form of dividends. Starting from 1 January 2006, the Group is not required to transfer any net profit to statutory welfare fund in accordance with the amendment in the PRC Companies Ordinance.

— 64 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Cash Flow Statement

For the year ended 31 December 2007

Note Operating activities Loss before tax Adjustments for: Amortisation of intangible assets Amortisation of interests in leasehold land held for own use under operating leases Change in fair value of investments at fair value through profit or loss Loss on disposal of investments at fair value through profit or loss Depreciation of investment properties Depreciation of property, plant and equipment Finance costs (Gain) loss on disposal of property, plant and equipment Gain on disposal of subsidiaries Gain on partial disposal of a subsidiary Impairment loss on goodwill arising from acquisitions of subsidiaries Impairment loss on intangible assets Impairment loss on properties, plant and equipment Interest income Gain on disposal of assets classified as held for sale Reversal of impairment loss on interests in leasehold land Reversal of impairment loss on trade and other receivables Share of results of associates Operating cash flows before movements in working capital (Increase) decrease in inventories Decrease in trade and other receivables Increase in trade and other payables Decrease in provision for staff welfare and bonus Net cash used in operating activities	2007 HK$’000 (56,090) 1,400 119 — 827 4,722 3,832 9,228 (818) — — 1,050 10,200 1,107 (561) (7,622) — (2,567) (660) (35,833) (4,001) 2,369 20,392 (11) (17,084)	2006 HK$’000 (12,186) 1,400 115 (2,296) — 3,583 5,327 5,746 766 (1,845) (881) 1,938 300 — (906) — (13,624) (2,390) (338) (15,291) 370 2,661 6,559 — (5,701)

— 65 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Note Investing activities Proceeds from disposal of investments at fair value through profit or loss Proceeds from disposal of property, plant and equipment Interest income received Purchase of property, plant and equipment Dividend received from an associate Net cash inflow from acquisition of subsidiaries 41 Net cash from investing activities Financing activities New short-term bank loans borrowed Advance from holding company Repayments of short-term bank loans Interest paid Repayment of other loans New other loans borrowed Capital contributions from minority shareholders of subsidiaries Decrease in amounts due to directors Decrease in amounts due to related companies Net cash from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Effect of foreign exchange rate changes Cash and cash equivalents at end of year, representing Bank balances and cash	2007 HK$’000 9,692 2,165 561 (7,078) — — 5,340 92,307 2,400 (57,506) (9,228) (8,488) — — — — 19,485 7,741 59,407 134 67,282	2006 HK$’000 — 256 906 (1,686) 969 2 447 54,022 10,208 (43,462) (5,746) (10,063) 22,397 1,296 (7,206) (636) 20,810 15,556 47,650 (3,799) 59,407

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes to the Consolidated Financial Statements

For the year ended 31 December 2007

1. GENERAL INFORMATION

MAXX Bioscience Holdings Limited (the “Company”) is incorporated in Bermuda on 18 October 1995 as an exempted company under the Companies Act 1981 of Bermuda with its shares listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) since 19 December 1995. The addresses of the registered office and principal place of business of the Company are disclosed in “Corporate information” section to the annual report.

The Company and its subsidiaries (hereinafter collectively referred to as the “Group”) are principally engaged in the manufacturing and sales of pharmaceutical and health products, properties investment and trading of securities.

The directors consider that Outwit Investments Limited (“Outwit”) is the parent and ultimate holding company of the Company.

The consolidated financial statements are presented in Hong Kong dollars (“HK$”), and the functional currency of the Group is Renminbi (“RMB”). The board of directors considered that it is more appropriate to present the consolidated financial statements in HK$ as the shares of the Company are listed on the Stock Exchange. The consolidated financial statements are presented in thousands of units of HK$ (HK$’000), unless otherwise stated.

2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

In the current year, the Group has applied, for the first time, the following new standard, amendment and interpretations (“New INTs”) (herein collectively referred to as “new HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), which are effective for the Group’s financial year beginning 1 January 2007. The adoption of the new HKFRSs had no material effect on how the results and financial position for the current or prior accounting periods have been prepared and presented. Accordingly, no prior period adjustment has been required.

Hong Kong Accounting Standard Capital Disclosures (“HKAS”) 1 (Amendment) HKFRS 7 Financial Instruments: Disclosures HK(IFRIC) — INT 7 Applying the Restatement Approach under HKAS 29 Financial Reporting in Hyperinflationary Economies HK(IFRIC) — INT 8 Scope of HKFRS 2 HK(IFRIC) — INT 9 Reassessment of Embedded Derivatives HK(IFRIC) — INT 10 Interim Financial Reporting and Impairment

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group has not early applied the following new and revised standards or interpretations that have been issued but are not yet effective.

HKAS 1 (Revised)	Presentation of Financial Statements 1
HKAS 23 (Revised)	Borrowing Costs 1
HKAS 27 (Revised)	Consolidated and Separate Financial Statements	2
HKFRS 2 (Amendment)	Share-based Payment — Vesting Conditions and
	Cancellations 1
HKFRS 3 (Revised)	Business Combinations 2
HKFRS 8	Operating Segments 1
HK(IFRIC)-INT 11	HKFRS 2 — Group and Treasury Share Transactions		3
HK(IFRIC)-INT 12	Service Concession Arrangements 4
HK(IFRIC)-INT 13	Customer Loyalty Programmes 5
HK(IFRIC)-INT 14	HKAS 19 — The Limit on a Defined Benefit Asset,
	Minimum Funding Requirements and their Interaction			4

1 Effective for annual periods beginning on or after 1 January 2009.

2 Effective for annual periods beginning on or after 1 July 2009.

3 Effective for annual periods beginning on or after 1 March 2007.

4 Effective for annual periods beginning on or after 1 January 2008.

5 Effective for annual periods beginning on or after 1 July 2008.

The directors of the Company anticipate that the application of these standards, amendment or interpretations will have no material impact on the results and the financial position of the Group.

3. BASIS OF PREPARATION

As at 31 December 2007, the Group had net current liabilities of approximately HK$75,458,000 and had net liabilities of approximately HK$41,843,000. Further, the Group incurred a loss of approximately HK$53,885,000 (2006: HK$11,941,000) for the year ended 31 December 2007. Nevertheless, the consolidated financial statements have been prepared on a going concern basis.

In the opinion of the directors, the Group should be able to maintain itself as a going concern in the coming year by taking into consideration the proposed arrangements which include, but are not limited to, the following:

the directors anticipate that the Group will generate positive cash flows from its businesses; and
the directors have implemented measures to tighten cost controls over various distribution costs and administrative expenses and to improve the Group’s cashflow position and operating results.

On the basis that the Group obtained the continuing availability of the banking facilities provided by its banks and the Group’s ultimate holding company and the implementation of other measures with a view to improve its working capital position and net financial position, the directors consider that the Group will have sufficient working capital to meet its financial obligations as and when they fall due for the next twelve months from 31 December 2007. Accordingly, the directors are satisfied that it is appropriate to prepare these consolidated financial statements on a going concern basis. The consolidated financial statements do not include any adjustments that might be necessary should the Group be unable to continue as a going concern.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. PRINCIPAL ACCOUNTING POLICIES

The measurement basis used in the preparation of the consolidated financial statements is the historical cost basis, except for certain financial instruments, which are measured at fair values as explained in the accounting policies set out below.

The consolidated financial statements have been prepared in accordance with all applicable HKFRSs issued by the HKICPA. In addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange and by the Hong Kong Companies Ordinances.

Basis of consolidation and business combination

Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the results of the Company and its subsidiaries as if they formed a single entity. Inter-company transactions and balances between group companies are therefore eliminated in full.

The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values at the date of exchange of assets given, liabilities incurred or assumed and equity instruments issued by the Group in exchange for control of the acquiree plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under HKFRS 3 “Business Combinations” are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with HKFRS 5 “Non-Current Assets Held for Sale and Discontinued Operations”, which are recognised and measured at fair value less costs to sell.

The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective dates of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the consolidated financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

Minority interests in the net assets of consolidated subsidiaries are presented separately from the Group’s equity therein. Minority interests in the net assets consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Goodwill

Goodwill represents the excess of the cost of a business combination over the Group’s interest in the fair value of identifiable assets, liabilities and contingent liabilities of the relevant subsidiaries at the date of acquisition. Cost comprises the fair values of assets given, liabilities assumed and equity instruments issued, plus any direct costs of acquisition. Such goodwill is carried at cost less any accumulated impairment losses.

Capitalised goodwill arising on an acquisition of a business is presented separately in the consolidated balance sheet.

For the purpose of impairment testing, goodwill arising from an acquisition is allocated to each of the relevant cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the acquisition. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, and whenever there is an indication that the unit may be impaired. For goodwill arising on an acquisition in a financial year, the cash-generating unit to which goodwill has been allocated is tested for impairment before the end of that financial year. When the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated to reduce the carrying amount of any goodwill allocated to the unit first, and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in the consolidated income statement. An impairment loss for goodwill is not reversed in subsequent periods.

On subsequent disposal of the relevant cash — generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Investments in associates

An associate is an entity over which the investor has significant influence and that is neither a subsidiary nor an interest in a joint venture.

The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting. Under the equity method, investments in associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the associates, less any identified impairment loss. When the Group’s share of losses of an associate equals or exceeds its interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognising its share of further losses. An additional share of losses is provided for and a liability is recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of that associate.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets and liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the investment.

Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

Where a group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group’s interest in the relevant associate.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Foreign currencies

In preparing the consolidated financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recorded in the respective functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in profit or loss in the period in which they arise, except for exchange differences arising on a monetary item that forms part of the Group’s net investment in a foreign operation, in which case, such exchange differences are recognised in equity in the consolidated financial statements. Exchange differences arising on the retranslation of nonmonetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity, in which cases, the exchange differences are also recognised directly in equity.

For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into the presentation currency of the Group (i.e. HK$) at the rate of exchange prevailing at the balance sheet date, and their income and expenses are translated at the average exchange rates for the year, unless exchange rates fluctuate significantly during the year, in which case, the exchange rates prevailing at the dates of transactions are used. Exchange differences arising, if any, are recognised as a separate component of equity (the translation reserve). Such exchange differences are recognised in profit or loss in the period in which the foreign operation is disposed of.

Goodwill and fair value adjustments on identifiable assets acquired arising on an acquisition of a foreign operation are treated as assets and liabilities of that foreign operation and translated at the rate of exchange prevailing at the balance sheet date. Exchange differences arising are recognised in the translation reserve.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Financial instruments

Financial assets and financial liabilities are recognised on the consolidated balance sheet when a group entity becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

(i) Financial assets

The Group classifies its financial assets into one of the following categories, depending on the purpose for which the asset was acquired. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the market place. The Group’s accounting policies for each category are as follows:

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss (“FVTPL”) represent investment held for trading. At each balance sheet date subsequent to initial recognition, financial assets at FVTPL are measured at fair value, which changes in fair value recognised directly in profit or loss in the period in which they arise. The net gain or loss recognised in profit or loss excludes any dividend or interest earned on the financial assets.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. At each balance sheet date subsequent to initial recognition, loans and receivables (including trade and other receivables, bank balances and cash) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment loss on financial assets below).

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or where appropriate, a shorter period. Income is recognised on an effective basis for debt instruments.

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been impacted.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For all other financial assets, objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty; or
default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial reorganisation.

For certain categories of financial asset, such as trade and other receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 90 days, observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, an impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate.

For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade and other receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a trade and other receivable is considered uncollectible, it is written off against the allowance account. Trade and other receivable recoveries of amounts previously written off are credited to profit or loss.

For financial assets measured at amortised cost, if, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment losses was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

(ii) Financial liabilities and equity

Financial liabilities and equity instruments issued by a group entity are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities. The Group’s financial liabilities are generally classified as other financial liabilities.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

Interest expense is recognised on an effective interest basis.

Other financial liabilities

Other financial liabilities (including trade and other payables, bank and other loans and amount due to holding company) are subsequently measured at amortised cost, using the effective interest method.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

(iii) Derecognition

Financial assets are derecognised when the rights to receive cash flows from the assets expire or, the financial assets are transferred and the Group has transferred substantially all the risks and rewards of ownership of the financial assets. On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised directly in equity is recognised in profit or loss.

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit and loss.

Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.

Borrowing costs

All borrowing costs are recognised as and included in finance costs in the consolidated income statement in the period in which they are incurred.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Employee benefits

(i) Employee entitlements

Employee entitlements to annual leave and long service payment are recognised when they accrue to the employees. A provision is made for the estimated liability for annual leave and long service payment as a result of services rendered by employees up to the balance sheet date.

Employee entitlements to sick leave and maternity leave are not recognised until the time of leave.

(ii) Retirement benefits scheme contribution

Payments to state-managed retirement benefit schemes and the Mandatory Provident Fund Scheme are charged as an expense when employees have rendered service entitling them to the contributions.

Share based payments

Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the consolidated income statement over the vesting period, with a corresponding increase in equity (share option reserve). Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.

Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the consolidated income statement over the resulting vesting period, with a corresponding adjustment to share option reserve.

Where equity instruments are granted to persons other than employees, the consolidated income statement is charged with the fair value of goods and services received.

At the time when the share options are exercised, the amount previously recognised in share option reserve will be transferred to share premium. When the share options are forfeited after the vesting date or are still not exercised at the expire date, the amount previously recognised in share option reserve will be transferred to retained profits.

Leasing

The Group as lessor

Rental income from operating leases is recognised in the consolidated income statement on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised as an expense on a straight-line basis over the lease term.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group as lessee

Rentals payable under operating leases are charged to the consolidated income statement on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are recognised as a reduction of rental expense over the lease term on a straight-line basis.

Investment properties

On initial recognition, investment properties are measured at cost, including any directly attributable expenditure. Subsequent to initial recognition, investment properties are stated at cost less subsequent accumulated depreciation and any accumulated impairment losses. Depreciation is charged so as to write off the cost of investment properties using the straight-line method over 20 years.

Intangible assets

Intangible assets acquired separately

Intangible assets acquired separately and with finite useful lives are carried at costs less accumulated amortisation and any accumulated impairment losses. Amortisation for intangible assets with finite useful lives is provided on a straight-line basis over their estimated useful lives. Alternatively, intangible assets with indefinite useful lives are carried at cost less any subsequent accumulated impairment losses (see the accounting policy in respect of impairment losses on tangible and intangible assets below).

Gains or losses arising from derecognition of an intangible asset are measured at the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the consolidated income statement when the asset is derecognised.

Research and development expenditures

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

An internally-generated intangible asset arising from development expenditure is recognised only if it is anticipated that the development costs incurred on a clearly-defined project will be recovered through future commercial activity. The resultant asset is amortised on a straight-line basis over its useful life, and carried at cost less subsequent accumulated amortisation and any accumulated impairment losses.

The amount initially recognised for internally-generated intangible asset is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria. Where no internally-generated intangible asset can be recognised, development expenditure is charged to profit or loss in the period in which it is incurred.

Subsequent to initial recognition, internally-generated intangible asset is reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets acquired separately.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Intangible assets acquired in a business combination

Intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the definition of an intangible asset and their fair values can be measured reliably. The cost of such intangible assets is their fair value at the acquisition date.

Subsequent to initial recognition, intangible assets with finite useful lives are carried at costs less accumulated amortisation and any accumulated impairment losses. Amortisation for intangible assets with finite useful lives is provided on a straight-line basis over their estimated useful lives. Alternatively, intangible assets with indefinite useful lives are carried at cost less any subsequent accumulated impairment losses (see the accounting policy in respect of impairment losses on tangible and intangible assets below).

Property, plant and equipment

Property, plant and equipment including buildings held for use in the production or for administrative purposes are stated at cost less subsequent accumulated depreciation and accumulated impairment losses.

Depreciation is provided to write off the cost of items of property plant and equipment over their estimated useful lives and after taking into account of their estimated residual value, using the straight-line method.

An item of property, plant and equipment is derecognized upon disposal of when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the consolidated income statement in the year in which the item is derecognised.

Interests in leasehold land held for own use under operating leases

Interests in leasehold land held for own use under operating leases represent up-front payments to acquire long-term interests in lessee-occupied properties. These payments are stated at cost and are amortised over the period of the lease on a straight-line basis to the consolidated income statement.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Weighted average cost method is used to determine the cost of ordinarily interchangeable items.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods sold in the normal course of business, net of discounts and sales related taxes.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue and costs, if applicable, can be measured reliably, on the following bases:

Revenue from goods sold is recognised when title of goods sold has passed to the customer, which is at the time of delivery.

Rental income under operating leases is recognised on a straight-line basis over the term of the relevant lease.

Interest income from a financial asset excluding investments at FVTPL is accrued on a time proportion basis, taking into account the principal amounts outstanding and the effective interest rates applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

Revenue from trading of investments at fair value through profit or loss are recognised when the related brought and sold notes are executed.

Income taxes

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on the profit for the year. Taxable profit differs from profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax base used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Provisions and contingent liabilities

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, the existence of which will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

Impairment losses on tangible and intangible assets other than goodwill (see the accounting policy in respect of goodwill)

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. In addition, intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is an indication that they may be impaired. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.

5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies which are described in note 4, the directors of the Company are required to make the following key assumptions that have significant effect on the amounts recognised in the consolidated financial statements. The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year.

Estimated useful lives of property, plant and equipment and intangible assets (other than goodwill)

The Group has significant property, plant and equipment and intangible assets (other than goodwill). The Group is required to estimate the useful lives of property, plant and equipment and intangible assets (other than goodwill) in order to ascertain the amount of depreciation and amortisation charges for each reporting period. A significant amount of these assets have estimated useful lives that extend beyond 10 years.

The useful lives are estimated at the time of purchase of these assets after considering future technology changes, business developments and the Group’s strategies. The Group performs annual reviews to assess the appropriateness of the estimated useful lives. Such review takes into account any unexpected adverse changes in circumstances or events, including declines in projected operating results, negative industry or economic trends, rapid advancement in technology and significant downturns in the Company’s stock price. The Group extends or shortens the useful lives and/or makes impairment provisions according to the results of the review.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Estimated PRC land appreciation tax

Determining the land appreciation tax liability on the disposal of the assets classified as held for sale requires an estimation of the assessable amount that is taxable for tax purpose. The Group is required to estimate the assessable portion of the total consideration received and had considered a land appreciation tax liability of approximately HK$6,637,000 will be payable on the transaction.

Impairment loss on trade and other receivables

The policy for impairment of trade and receivables of the Group is based on the evaluation of collectability and aging analysis of the loans and receivables and on management’s judgment. A considerable amount of judgement is required in assessing the ultimate realisation of these loans and receivables, including the current creditworthiness and the past collection history of each customer. If the financial conditions of customers of the Group were to deteriorate, resulting in an impairment of their ability to make payments, additional impairment may be required.

Estimated impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cashgenerating units to which goodwill has been allocated. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. Where the actual future cash flows are less than expected, a material impairment loss may arise. During the year ended 31 December 2007, an impairment loss of approximately HK$1,050,000 (2006: HK$1,938,000) has been provided.

Estimated impairment of assets (other than goodwill)

At each balance sheet date, the Group reviews internal and external sources of information to identify indications that the following assets may be impaired or, except in the case of goodwill, an impairment loss previously recognised no longer exists or may have decreased:

property, plant and equipment;
interests in leasehold land held for own use under operating leases;
intangible assets; and
— investments in subsidiaries and associates

If any such indication exists, the asset’s recoverable amount is estimated. In addition, for intangible assets that are not yet available for use and intangible assets that have indefinite useful lives, the recoverable amount is estimated annually whether or not there is any indication of impairment. An impairment loss is recognised in the consolidated income statement whenever the carrying amount of an asset exceeds its recoverable amounts.

The sources utilised to identify indications of impairment are often subjective in nature and the Group is required to use judgement in applying such information to its business. The Group’s interpretation of this information has a direct impact on whether an impairment assessment is performed as at any given balance sheet date.

— 80 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

If an indication of impairment is identified, such information is further subject to an exercise that requires the Group to estimate the recoverable value, representing the greater of the asset’s fair value less cost to sell or its value in use. Depending on the Group’s assessment of the overall materiality of the asset under review and complexity of deriving reasonable estimates of the recoverable value, the Group may perform such assessment utilising internal resources or the Group may engage external advisors to counsel the Group in making this assessment. Regardless of the resources utilised, the Group is required to make many assumptions to make this assessment, including the utilisation of such asset, the cash flows to be generated, appropriate market discount rates and the projected market and regulatory conditions. Changes in any of these assumptions could result in a material change to future estimates of the recoverable value of any asset.

During the year ended 31 December 2007, the directors of the Company had made assessment on the expected return and future cash flows from the intangible asset of exclusive distribution right held, and had considered that there would be no future economic benefit generated from the asset. Accordingly, an impairment of HK$10,200,000 had been provided in the consolidated income statement.

Land appreciation taxes

PRC land appreciation taxes was levied at progressive rates ranging from 30% to 60% on the appreciation of land value, being the proceeds of sales of leasehold land less development expenditures.

During the year ended 31 December 2007, the Group is subject to land appreciation taxes in the PRC which has been included in administrative expenses of the Group due to disposal of a leasehold land. The Group has not finalised its land appreciation tax returns with the tax authorities. Accordingly, significant judgment is required in determining the amount of land appreciation and its related taxes. The ultimate tax determination is uncertain. The Group recognises the liability based on management’s best estimates. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the consolidated financial statements in the periods in which such determination is made.

6. CAPITAL RISK MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from prior year.

The capital structure of the Group consists of debt, which includes the bank and other loans disclosed in note 29 and 30, cash and cash equivalents and equity attributable to equity holders of the Company, comprising issued share capital, reserves and retained earnings.

The directors of the Company review the capital structure regularly. As part of this review, the directors of the Company consider the cost of capital and the risks associates with each class of capital. The Group will balance its overall capital structure through raise of new loans or repayment of existing loans.

— 81 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

7. FINANCIAL INSTRUMENTS

7a. Categories of financial instruments

Financial assets Loan and receivables (including cash and cash equivalents) Trade and other receivables Investments at fair value through profit or loss Bank deposits, bank balances and cash Financial liabilities Other financial liabilities Trade and other payables Short-term bank loans — secured Other loan — secured Amount due to holding company	2007 HK$’000 6,435 — 67,282 45,309 92,307 14,423 13,408	2006 HK$’000 6,033 10,519 59,407

		49,280 54,022 22,397 11,008

7b. Financial Risk Management Objectives and Policies

The Group’s major financial instruments include equity, bank and other loans, trade and other receivables, bank balances and cash, trade and other payables and amount due to holding company. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

i. Fair value of financial assets and financial liabilities

The directors consider the fair values of trade and other receivables, bank balances and cash, trade and other payables, bank and other loans reported in the consolidated balance sheet approximate their carrying amounts due to their immediate or short-term maturities.

The directors consider the fair value of amount due to holding company equal to its carrying amount as the impact of discounting is not significant.

ii. Foreign currency risk

The Group’s presentation currency is HK$, however, the Group’s functional currency is RMB in which most of the transactions are denominated. Certain bank balances, trade and other receivables and trade and other payables are denominated in the functional currency as at 31 December 2007. The functional currency is also used to settle expenses for PRC operations.

The Group currently does not have any RMB hedging policy but the management monitors RMB exchange exposure and will consider hedging significant RMB exposure should the need arise.

— 82 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

iii. Sensitivity analysis

The following table details the Group’s sensitivity to a reasonably possible change of 5% in exchange rate of HK$ against RMB while all other variables are held constant. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at each balance sheet date for a 5% change in foreign currency rates.

	2007	2006
	HK$’000	HK$’000
Increase (decrease) in profit for the year
— if HK$ weakens against RMB	710	760
— if HK$ strengthens against RMB	(710)	(760)

A change of 5% in exchange rate of HK$ against RMB does not affect other components of equity.

iv. Liquidity risk

The Group is exposed to liquidity risk as at 31 December 2007 as its financial assets due within one year was less than its financial liabilities due within one year. At 31 December 2007, maximum banking facilities in an aggregate amount of approximately HK$92 million (2006: approximately HK$64 million) were available from the Group’s principal bankers, of which approximately HK$92 million (2006: HK$62 million) has been utilised.

The Group had net current liabilities of approximately HK$75,458,000 as at 31 December 2007 (2006: HK$35,071,000). The liquidity of the Group is primarily dependent on bank borrowings and the continuing financial supports from its holding company as the significant sources of liquidity.

— 83 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The following table details the contractual maturities at the balance sheet date of the Group’s non-derivative financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on rates current at the balance sheet date) and the earliest date the Group can be required to pay:

As at 31 December 2007

Trade and other payables Short-term bank loans — secured Other loan — secured Amount due to holding company As at 31 December 2006 Trade and other payables Short-term bank loans — secured Other loans — secured Amount due to holding company	Total contractual undiscounted cash flow Within one year or on demand More than one year less than two years HK$’000 HK$’000 HK$’000 52,515 52,515 — 95,725 95,725 — 16,803 16,803 — 13,408 — 13,408 178,451 165,043 13,408 Total contractual undiscounted cash flow Within one year or on demand More than one year less than two years HK$’000 HK$’000 HK$’000 54,503 54,503 — 56,223 56,223 — 23,854 23,854 — 11,008 — 11,008 145,588 134,580 11,008	Total contractual undiscounted cash flow Within one year or on demand More than one year less than two years HK$’000 HK$’000 HK$’000 52,515 52,515 — 95,725 95,725 — 16,803 16,803 — 13,408 — 13,408 178,451 165,043 13,408 Total contractual undiscounted cash flow Within one year or on demand More than one year less than two years HK$’000 HK$’000 HK$’000 54,503 54,503 — 56,223 56,223 — 23,854 23,854 — 11,008 — 11,008 145,588 134,580 11,008
		11,008

v. Credit risk

Credit risk refers to the risk that debtors will default on their obligations to repay the amounts owing to the Group, resulting in a loss to the Group. The Group has adopted procedures in extending credit terms to customers and in monitoring its credit risk.

The Group’s current credit practices include assessment and valuation of customer’s credit reliability and periodic review of their financial status to determine credit limits to be granted.

— 84 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The maximum exposure to credit risk in the event that the counterparties fail to perform their obligations as end of the financial year in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the consolidated balance sheet.

Significant concentration of credit risk

As at 31 December 2007, the Group has certain concentration of credit risk as 74% (2006: 71%) of the Group’s total trade and other receivables balance is due from the Group’s largest customer.

In order to minimise the credit risk, the management of the Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual debt at each balance sheet date to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group’s credit risk is significantly reduced.

The credit risk on liquid funds, including balances with non-bank financial institutions is limited because the counterparties are banks and financial institutions with high credit ratings and good reputation.

vi.

Interest rate risk

Risk profile

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 fair value interest-rate risk mainly arises from bank and other loans as detailed in notes 29 and 30. Bank and other loans were issued at fixed rates expose the Group to fair value interest-rate risk. The Group has no cash flow interest-rate risk as there are no loans which bear floating interest rates. The Group historically has not used any financial instruments to hedge potential fluctuations in interest rates.

Sensitivity analysis

At 31 December 2007, it is estimated that a general increase or decrease of one percentage in interest rates, with all other variables held constant, would decrease or increase the Group’s profit for the year and retained profits by approximately HK$92,000 (2006: HK$57,000).

The above sensitivity analysis has been determined assuming that a change in interest rates had occurred at the balance sheet date and had been applied to the exposure to interest rate risk for financial instruments in existence at that date. The one percentage point increase or decrease represents management’s assessment of a reasonably possible change in interest rates over the period until the next annual balance sheet date. The analysis was performed on the same basis for 2006.

— 85 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

8. TURNOVER AND SEGMENT INFORMATION

Turnover represents the net proceeds from trading of securities and net amounts received and receivable for goods sold.

In accordance with the Group’s internal financial reporting, the Group has determined that business segments be presented as the primary reporting format and geographical segments as the secondary reporting format.

(a) Business segments

For management purpose, the Group is currently organised into three divisions, manufacturing and sales of pharmaceutical and health products, properties holding for earning rental income and trading of securities.

Segment information about these businesses is presented below:

	Manufacturing and	Manufacturing and	Manufacturing and
	sales of pharmaceutical			Properties holding for
	and health products			earning rental income			Trading of securities			Consolidated
	2007		2006		2007	2006	2007		2006	2007		2006
Group	HK$’000	HK$’000		HK$’000		HK$’000	HK$’000	HK$’000		HK$’000	HK$’000
Assets
Segment assets	52,564		57,908		70,696	70,848	—		10,519	123,260		139,275
Interests in
associates	4,340		3,680		—	—	—		—	4,340		3,680
Unallocated
corporate assets	—		—		—	—	—		—	71,099		76,921
Consolidated total
assets	56,904		61,588		70,696	70,848	—		10,519	198,699		219,876

Liabilities
Segment liabilities	207,039		165,953		—	—	—		—	207,039		165,953
Unallocated
corporate
liabilities	—		—		—	—	—		—	33,503		42,003
Total liabilities	207,039		165,953		—	—	—		—	240,542		207,956

Segment Revenue
Turnover	49,045		42,408		—	—	—		—	49,045		42,408
Other income	—		—		4,744	4,924	—		2,296	4,744		7,220
	49,045		42,408		4,744	4,924	—		2,296	53,789		49,628

Segment Result	(30,271)		(23,008)		22	1,228	(827)		2,296	(31,076)		(19,484)

Reversal of
impairment loss
on interests in
leasehold land										—		13,624
Other unallocated
income										12,139		7,384
Unallocated
corporate
expenses										(28,585)		(8,302)
Finance costs										(9,228)		(5,746)
Share of results of
associates	660		338							660		338
Loss before tax										(56,090)		(12,186)
Income tax										2,205		245
Loss for the year										(53,885)		(11,941)

— 86 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Segment information about these businesses is presented below:

	Manufacturing and	Manufacturing and
	sales of pharmaceutical		Properties holding for
	and health	products	earning rental income		Trading of	securities	Consolidated
	2007	2006	2007	2006	2007	2006	2007	2006
Group	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
OTHER
INFORMATION
Capital expenditure	7,078	1,686	—	—	—	—	7,078	1,686
Depreciation and
amortisation	5,351	6,842	4,722	3,583	—	—	10,073	10,425
Impairment loss
recognised for the
year	12,357	2,238	—	—	—	—	12,357	2,238
Gain on disposal
of subsidiaries/
partial disposal of
a subsidiary	—	2,726	—	—	—	—	—	2,726
Gain (loss) on
disposal of
property, plant
and equipment	818	(766)	—	—	—	—	818	(766)
Gain on disposal of
assets classified
as held for sale	7,622	—	—	—	—	—	7,622	—
Reversal of
impairment losses
on trade and other
receivables	2,567	2,390	—	—	—	—	2,567	2,390
Change in fair value
of investments at
fair value through
profit or loss	—	—	—	—	—	2,296	—	2,296
Loss on disposal
of investments at
fair value through
profit or loss	—	—	—	—	(827)	—	(827)	—

— 87 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Geographical segments

In determining the Group’s geographical segments, revenues are attributed to the segments based on the location of operations, and assets are attributed to the segments based on the location of the assets.

	The PRC except	The PRC except
	Hong Kong		Hong Kong		Consolidated
	2007	2006	2007	2006	2007	2006
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Segment revenue
Turnover	49,045	42,408	—	—	49,045	42,408
Other income	16,883	28,228	—	—	16,883	28,228
	65,928	70,636	—	—	65,928	70,636
Segment assets	190,996	207,672	7,703	12,204	198,699	219,876
Capital
expenditure	7,078	1,686	—	—	7,078	1,686

9. OTHER INCOME

Rental income Less:_direct operating expenses that generated rental income during the year Gain on disposal of subsidiaries(Note 42)_ Gain on partial disposal of a subsidiary Gain on disposal of assets classified as held for sale Reversal of impairment loss on trade and other receivables Gain on disposal of property, plant and equipment Change in fair value of investments at fair value through profit or loss Exchange gain Interest income Others	2007 HK$’000 7,790 (3,046) 4,744 — — 7,622 2,567 818 — — 561 571 16,883	2006 HK$’000 8,001 (3,077)
		4,924 1,845 881 — 2,390 — 2,296 63 906 1,299
		14,604

— 88 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

10. OTHER OPERATING EXPENSES

Amortisation of intangible assets Impairment loss on intangible assets 11. FINANCE COSTS Interests wholly repayable within five years: — on bank loans — on other loans 12. LOSS BEFORE TAX Loss before tax is stated after charging (crediting): Staff costs (excluding directors’ emoluments) comprises: — Wages and salaries — Contributions to retirement scheme Auditors’ remuneration Share of tax of an associate Amortisation of intangible assets (included in other operating expenses) Cost of inventories recognised as an expense Depreciation of property, plant and equipment Depreciation of investment properties Research and development expenses Operating lease rentals in respect of land and buildings Amortisation of interests in leasehold land held for own use under operating leases Impairment loss on intangible assets (included in other operating expenses) Impairment loss on goodwill arising from acquisitions of subsidiaries (included in administrative expenses) Impairment loss on Property, plant and equipment (included in administrative expenses) (Gain) loss on disposal of property, plant and equipment	2007 HK$’000 1,400 10,200 11,600 2007 HK$’000 4,970 4,258 9,228 2007 HK$’000 13,473 565 14,038 530 127 1,400 26,391 3,832 4,722 3,118 566 119 10,200 1,050 1,107 (818)	2006 HK$’000 1,400 300
		1,700

		2006 HK$’000 3,911 1,835
		5,746

		2006 HK$’000 9,474 93
		9,567

		420 130 1,400 23,438 5,327 3,583 519 1,037 115 300 1,938 — 766

— 89 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

13. INCOME TAX

		2007	2006
		HK$’000	HK$’000
Deferred taxation — credited for the year_(Note_	31)	(2,205)	(245)

No provision for Hong Kong profits tax has been made in the consolidated financial statements as the Company and its subsidiaries which operate in Hong Kong have no assessable profits for both years.

The subsidiaries operate in the PRC during the year are subject to PRC enterprise income tax at rates of 15%. No provision for PRC enterprise income tax has been made as these subsidiaries incurred losses during both years.

During the 5th Session of the 10th National People’s Congress, which was concluded on 16 March 2007, the PRC Corporate Income Tax Law (“the New Corporate Income Tax Law”) was approved and will become effective on 1 January 2008. The New Corporate Income Tax Law introduces a wide range of changes which include, but are not limited to, the unification of the income tax rate for domestic-invested and foreign-invested enterprises to 25%. The tax rate of certain subsidiaries will change from 33% to 25% from 1 January 2008.

The income tax for the year is reconciled to the loss before tax per the consolidated income statement as follows:

Loss before tax Tax calculated at the domestic income tax rate of 15% (2006: 15%) Tax effect of expenses that are not deductible in determining taxable profit Tax effect of income that is not taxable in determining taxation profit Tax effect of deductible temporary differences not recognised Tax effect of tax losses not recognised Effect of different tax rates of subsidiaries operating in other jurisdictions Tax credit for the year	2007 HK$’000 (56,090) (8,414) 203 (222) 1,696 4,704 (172) (2,205)	2006 HK$’000 (12,186) (1,828) 625 (480) 255 1,700 (517) (245)

The applicable tax rate of 15% (2006: 15%) is used as operations of the Group are substantially carried out by the subsidiaries in the PRC.

14. DIVIDEND

No dividend was paid or proposed during the year, nor has any dividend been proposed since the balance sheet date (2006: Nil).

— 90 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

15. LOSS PER SHARE

(a) Basic loss per share

The calculation of basic loss per share is based on the loss attributable to equity holders of the Company of approximately HK$52,030,000 (2006: approximately HK$10,650,000) and on the weighted average of 1,073,934,000 ordinary shares in issue during both years ended 31 December 2007 and 2006.

(b) Diluted loss per share

Diluted loss per share for both years ended 31 December 2007 and 2006 has not been presented as there were no dilutive shares outstanding during both years ended 31 December 2007 and 2006.

16. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

(a) Directors’ emoluments

Details of directors’ emoluments are as follows: Fees: Executive directors Independent non-executive directors Other emoluments Salaries and allowances Retirement benefits scheme contributions	2007 HK$’000 154 300 454 — — 454	2006 HK$’000 183 240
		423 — —
		423

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 for both years ended 31 December 2007 and 2006.

— 91 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The emoluments paid or payable to each of the five (2006: nine) directors were as follows:

Executive directors: Ms. He Jin Hong Mr. Ha Sze Tung Sharp Stone Independent non-executive directors: Ms. So Tosi Wan, Winnie Mr. Wei Dong Mr. Yang Yue (resigned on 28 March 2008) Total	Fees HK$’000 154 — 180 60 60 454	Salaries and allowances Retirement benefits schemes contributions HK$’000 HK$’000 — — — — — — — — — — — —	Total HK$’000 154 — 180 60 60
			454

— 92 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Details of directors’ emoluments for the year ended 31 December 2006 are as follows:

Executive directors: Ms. He Jin Hong Mr. Ha Sze Tung Sharp Stone Ms. Lo Yuk Yee (resigned on 29 June 2006) Mr. Siu Siu Ling, Robert (resigned on 29 June 2006) Independent non-executive directors: Ms. So Tosi Wan, Winnie Mr. Wei Dong (appointed on 20 September 2006) Mr. Yang Yue (appointed on 20 September 2006) Mr. Wong Wai Kin (resigned on 29 June 2006) Mr. Ma Shiu Kin (resigned on 29 June 2006) Total	Fees HK$’000 153 — — 30 180 15 15 15 15 423	Salaries and allowances Retirement benefits schemes contributions HK$’000 HK$’000 — — — — — — — — — — — — — — — — — — — —	Total HK$’000 153 — — 30 180 15 15 15 15
			423

During both years ended 31 December 2007 and 2006, no directors of the Company waived any emoluments.

— 93 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) The five highest paid individuals do not include any directors for both years ended 31 December 2007 and 2006. The emoluments of the five (2006: five) highest paid individuals were as follows:

Employees Salaries and allowances Retirement benefits scheme contributions	2007 HK$’000 3,466 152 3,618	2006 HK$’000 3,385 205
		3,590

The emoluments of the five highest paid individuals are fell within the following bands:

Nil — HK$1,000,000 HK$1,500,001 — HK$2,000,000	2007 HK$’000 4 1 5	2006 HK$’000 4 1
		5

During both years ended 31 December 2007 and 2006, no emoluments were paid by the Group to the five highest paid individuals as an inducement to join or upon joining the Group as compensation for loss of office.

— 94 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

17. PROPERTY, PLANT AND EQUIPMENT

Cost At 1 January 2006 Exchange realignment Additions Acquired through acquisition of a subsidiary Disposals At 31 December 2006 and at 1 January 2007 Exchange realignment Additions Disposals At 31 December 2007 Accumulated depreciation and impairment At 1 January 2006 Exchange realignment Depreciation provided for the year Eliminated on disposal At 31 December 2006 and at 1 January 2007 Exchange realignment Impairment loss recognised for the year Depreciation provided for the year Eliminated on disposals At 31 December 2007 Carrying values At 31 December 2007 At 31 December 2006	Buildings Plant and machinery Equipment HK$’000 HK$’000 HK$’000 112,689 31,264 8,128 4,643 2,477 270 — 373 1,049 — — 98 (522) (1,432) (1,289) 116,810 32,682 8,256 7,534 2,108 488 1,056 5,095 872 (3,270) (670) (1,301) 122,130 39,215 8,315 86,145 28,371 6,381 2,171 1,322 224 3,765 531 654 (229) (1,232) (966) 91,852 28,992 6,293 5,925 1,870 363 — 1,107 — 1,492 1,542 432 (2,417) (603) (1,150) 96,852 32,908 5,938 25,278 6,307 2,377 24,958 3,690 1,963	Motor vehicles HK$’000 6,864 236 152 — (2,208) 5,044 325 21 (116) 5,274 5,458 184 201 (2,032) 3,811 244 — 216 (49) 4,222 1,052 1,233	Others HK$’000 5,432 189 112 — (224) 5,509 307 34 (421) 5,429 4,640 162 176 (194) 4,784 280 — 150 (212) 5,002 427 725	Total HK$’000 164,377 7,815 1,686 98 (5,675) 168,301 10,762 7,078 (5,778) 180,363 130,995 4,063 5,327 (4,653) 135,732 8,682 1,107 3,832 (4,431) 144,922 35,441 32,569

— 95 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Property, plant and equipment are depreciated to write off their cost net of expected residual value over their estimated useful lives on a straight-line basis. The useful lives and residual value are reviewed, and adjusted if appropriate, at each balance sheet date. The principal annual rates are as follows:

Buildings	4.5% — 5%
Plant and machinery	9% — 10%
Equipment	18% — 20%
Motor vehicles	18% — 20%
Others	18% — 20%

The Group’s interests in buildings are held under the following lease terms:

Held in the PRC with unspecified lease terms Held in the PRC under medium-term leases	2007 HK$’000 3,542 21,736 25,278	2006 HK$’000 2,664 22,294
		24,958

Certain buildings in the Group have been pledged to banks to secure general bank loans granted to the Group as detailed in note 38.

18. INTERESTS IN LEASEHOLD LAND HELD FOR OWN USE UNDER OPERATING LEASES

The Group’s interests in leasehold land held for own use under operating leases are held under the medium lease terms in the PRC:

At beginning of year Reversal of impairment loss Transfer to assets classified as held for sale Transfer of impairment loss to assets classified as held for sale Amortisation for the year Exchange realignment At end of year	2007 HK$’000 4,393 — (21,220) 21,220 (119) 280 4,554	2006 HK$’000 4,350 13,624 (13,624) — (115) 158
		4,393

— 96 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Certain leasehold land in the Group has been pledged to banks to secure general bank loans granted to the Group as detailed in note 38.

Analysed for reporting purposes as: Current assets Non-current assets	2007 HK$’000 119 4,435 4,554	2006 HK$’000 115 4,278
		4,393

19. INVESTMENT PROPERTIES

Cost At beginning of year Exchange realignment At end of year Accumulated depreciation and impairment At beginning of year Provided for the year Exchange realignment At end of year Carrying values At 31 December	2007 HK$’000 78,132 5,040 83,172 7,284 4,722 470 12,476 70,696	2006 HK$’000 75,375 2,757
		78,132
		3,571 3,583 130
		7,284
		70,848

The fair value of the Group’s investment properties at 31 December 2007 was approximately HK$108,556,000 (2006: HK$107,765,000) which have been arrived at on the basis of a valuation carried out on that date by LCH (Asia-Pacific) Surveyors Limited, independent qualified professional valuers not connected with the Group, by reference to market evidence of transaction prices for similar properties.

The above investment properties are depreciated on a straight-line basis over 20 years.

— 97 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Analysis of carrying value of investment properties is as follows:

Held in the PRC under medium-term leases Held in the PRC under long leases Held in the PRC with unspecified lease terms	2007 HK$’000 44,618 9,183 16,895 70,696	2006 HK$’000 45,902 8,759 16,187
		70,848

Certain investment properties of the Group have been pledged to bank and financial institutions to secure the general bank loans granted to the Group as detailed in note 38.

20. INTERESTS IN ASSOCIATES

Share of net assets of associates Impairment loss recognised	2007 HK$’000 12,891 (8,551) 4,340	2006 HK$’000 12,231 (8,551)
		3,680

The amount of goodwill arising on acquisitions of associates is set out below:

Cost At 1 January 2006, 31 December 2006 and 31 December 2007 Accumulated impairment loss At 1 January 2006, 31 December 2006 and 31 December 2007 Carrying values At 31 December 2007 and 2006	HK$’000 2,689 2,689
	—

The directors reviewed certain associates’ operations and financial positions as at 31 December 2005 based on value in use calculation. Due to unsatisfactory performance, an impairment loss of approximately HK$2,689,000 was made against the goodwill arising on acquisitions of associates during the year ended 31 December 2006.

— 98 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The summarised unaudited financial information in respect of the Group’s associates is set out below:

Total assets Total liabilities Net assets Group’s share of net assets of associates Revenue Loss for the year Group’s share of results of associates for the year Unrecognised share of losses of associates arising during the year Accumulated unrecognised share of losses of associates	2007 HK$’000 76,600 (25,158) (51,442) (17,241) (82,766) (600) 660 (1,780) (2,935)	2006 HK$’000 66,808 (17,504)
		49,304

		15,871

		69,802

		(2,913)

		338

		(1,155)

		(1,155)

Details of the principal associates at 31 December 2007 are as follows:

			Percentage
			of effective
	Place of		equity interest
	incorporation/	Form of business	attributable to	Particulars of issued/
Name	operation	structure	the Group	paid-up capital	Principal activities
Beijing Metrolink	PRC/PRC	Sino-foreign	38%	Registered capital	Biotech research and
Embryo Biotech		equity joint		RMB10,000,000	development of
Company Limited		venture			related technical
					know-how
Guangzhou Apollo	PRC/PRC	Limited liability	23.75%	Registered capital	Sale of chemical, health
Enterprise Company		company		RMB3,800,000	and electronic
Limited					products
Shandong Hongyi Co.,	PRC/PRC	Limited liability	38%	Registered capital	Investment holding
Limited		company		RMB50,000,000
山東天地健生物工程	PRC/PRC	Limited liability	56%	Registered capital	Sales of chemical and
有限公司（「山東		company		RMB5,000,000	health products
天地健」）(Note)

Note: Despite the Group has 56% indirect effective interest in 山東天地健, the Group has no control in the Company. The directors of the Company consider that the Group does exercise significant influence over 山東天地建 and it is therefore classified as an associate of the Group.

— 99 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The above table lists the associates of the Company, which, in the opinion of the directors, principally affected the results for the year. To give details of other associates would, in the opinion of the directors, result in particular of excessive length.

21. GOODWILL

Cost At beginning of year Arising on acquisition of subsidiaries_(Note 41) Adjustments to measurement of consideration for acquisition of a subsidiary in prior year(Note)_ At end of year Accumulated impairment loss At beginning of year Impairment loss recognised for the year At end of year Carrying values At 31 December	2007 HK$’000 3,228 — — 3,228 2,178 1,050 3,228 —	2006 HK$’000 2,690 1,938 (1,400) 3,228 240 1,938 2,178 1,050

Note: During the year of 2006, an adjustment was made to the cost of acquisition of a subsidiary, Seapearl Trading Limited (“Seapearl”), on 26 August 2006 (the “Acquisition”). Pursuant to the sale and purchase agreement of the Acquisition, the vendor, a former sole shareholder of Seapearl, has guaranteed that the audited profit after tax (before any extraordinary items) of Seapearl for the year ended 30 June 2007 will not be less than HK$1,400,000 (the “Guaranteed Profit”). The Group will be compensated in cash by the vendor for the shortfall on the Guaranteed Profit up to HK$1,400,000. During the year ended 31 December 2006, Seapearl received a sum of HK$1,400,000 on completion of the Acquisition for the purpose of securing the Guaranteed Profit. As Seapearl has not commenced business as of 30 June 2006, the said sum of HK$1,400,000 held by the Group has been applied to compensate the Group for the shortfall during the year ended 31 December 2006. Accordingly, an adjustment to the cost of acquisition of Seapearl has been made during the year ended 31 December 2006, resulted in a decrease in amount of goodwill recognised of HK$1,400,000.

For the year ended 31 December 2006, the Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. The recoverable amount of goodwill was determined based on value-in-use calculation, which use cash flow forecast (the “Forecast”) based on financial budgets approved by management covering a period of ten-year with a discount rate and growth rate of 14% and 8% respectively. Cash flow beyond the five-years period are extrapolated using a steady 4% per annum growth rate. The discount rate used reflects specific risks relating to the business and the growth rate is in line with the Forecast adopted by the industry.

— 100 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the year ended 31 December 2007, the directors of the Company decided not to further invest in the business of distribution of Lei Yun Shan products outside of the PRC. The decision had been made after taking into consideration that the existing laws in force and other regulatory requirements in the development of the distribution business. The directors had considered the time and costs involved outweigh the benefits that the business will bring about and expect that the business will not bring about any positive future cash flow. Accordingly, an impairment loss of HK$1,050,000 has been recognised in the consolidated income statement during the year ended 31 December 2007 (2006: HK$1,938,000).

The management believes that any reasonably possible change in the key assumptions on which recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the goodwill.

22. INTANGIBLE ASSETS

Group Cost As at 1 January 2006 Disposed on disposal of a subsidiary As at 31 December 2006, 1 January 2007 and 31 December 2007 Accumulated amortisation and impairment loss At 1 January 2006 Provided for the year Impairment loss recognised Disposed on disposal of a subsidiary At 31 December 2006 and 1 January 2007 Provided for the year Impairment loss recognised As at 31 December 2007 Carrying values As at 31 December 2007 As at 31 December 2006	Acquired proprietary rights of diagnostic technology HK$’000 (note (a)) 86,466 (86,466) — 86,466 — — (86,466) — — — — — —	Acquired exclusive distribution right HK$’000 (note (b)) 14,000 — 14,000 700 1,400 300 — 2,400 1,400 10,200 14,000 — 11,600	Total HK$’000 100,466 (86,466) 14,000 87,166 1,400 300 (86,466) 2,400 1,400 10,200 14,000 — 11,600

— 101 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The economic useful lives of recognised intangible assets are as follows:

Intangible asset Useful economic life Acquired proprietary rights of diagnostic technology 6 years Acquired exclusive distribution right 10 years

Notes:

(a) In the year ended 31 December 2003, the Group acquired from Payton Place Limited (“Payton Place”), a company beneficially owned by Ms. Lo Yuk Yee, a former director of the Company, a company which owns the proprietary rights of a genomic diagnostic platform technology called QuProbe. QuProbe, based on macroarray technology aims to provide a rapid and cost-effective test for the detection of T-cell autoimmune diseases.

The total consideration of the acquisition of HK$78,000,000 was satisfied by the issue of the convertible notes of HK$50,000,000 (the “Convertible Notes”) and promissory notes of HK$28,000,000 (the “Promissory Notes”). The Convertible Notes and Promissory Notes have been early redeemed during the year ended 31 December 2005. The cost of the acquired proprietary rights of QuProbe is amortised, on the straight-line basis over 6 years.

However, in view of the additional resources required to invest in QuProbe in order to make it technically and commercially successful, the Group decided to suspend the development of QuProbe during the year ended 31 December 2006. Due to the cessation of development of QuProbe, the directors considered that there would be no economic benefit generated from QuProbe in the future. Impairment loss of approximately HK$56,445,000 had been made on the carrying value and charged to consolidated income statement during the year ended 31 December 2005.

QuProbe has been disposed during the year ended 31 December 2006 through the disposal of a subsidiary by the Group.

(b) In August 2005, the Group entered into an agreement with a third party to acquire a subsidiary at a consideration of HK$14,000,000. Such subsidiary has an exclusive licence for the sale, distribution and marketing of all kinds of Chinese medicine or health products manufactured and supplied by an independent third party in any parts of the world other than the PRC. The value of the acquired distribution rights is amortised on the straight-line basis over 10 years.

Impairment testing on intangible assets

The directors of the Company had reviewed the carrying value of the Group’s intangible assets as at 31 December 2007 with reference to the current results from the business and consideration on the ability to generate future cash flows. The directors considered that there would be no economic benefit generated from the distribution right and determined the recoverable amount of the intangible assets is nil. Accordingly, an impairment loss of HK$10,200,000 has been recognised in the consolidated income statement during the year ended 31 December 2007 (2006: HK$300,000).

— 102 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

23. ASSETS CLASSIFIED AS HELD FOR SALE

Net carrying amounts At beginning of year Disposals Transfer from interests in leasehold land during the year Transfer of impairment loss from interests in leasehold land during the year At end of year	2007 HK$’000 13,624 (13,624) 21,220 (21,220) —	2006 HK$’000 — — 13,624 —
		13,624

Notes:

(1) As at 31 December 2006, the assets classified as held for sale represented the interests in leasehold land held for own use under operating leases which are expected to be disposed in 2007. The net proceeds of disposal were expected to exceed the net carrying amount of the relevant assets and a deposit has been received for the sale of the relevant assets. The deposit received is included in other payables. Since the leasehold land was fully impaired in previous year, a reversal of approximately HK$13,624,000 impairment loss recognised had been credited to the consolidated income statement in 2006.

The transaction for disposal was completed during the year ended 31 December 2007. The leasehold land was disposed for a consideration of approximately HK$22,370,000, resulting in a net gain on disposal of approximately HK$7,622,000 after consideration for exchange realignment. According to a supplementary agreement dated 18 October 2007, the Group is subject to land appreciation taxes in the PRC of approximately HK$6,637,000 which has been included in other payables of the Group. PRC land appreciation rates was levied from 30% to 60% on the appreciation of land value.

(2) During the year ended 31 December 2007, the Group has agreed to dispose another parcel of leasehold land to a third party at a consideration of approximately HK$10,610,000. This leasehold land with an original cost of approximately HK$21,200,000 was fully impaired in previous years. The total consideration was received during the year and included in other payables.

However as stipulated in the sales and purchase agreement, the Group had an obligation for a full refund of the consideration received for the transaction should there be any difficulties in the completion of the transaction and the due transfer of the title and ownership on the land. At the balance sheet date and up to the date of this report, the transfer of the title and ownership had not yet been completed.

— 103 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

24. INVENTORIES

Raw materials Work-in-progress Finished goods	2007 HK$’000 3,515 282 4,281 8,078	2006 HK$’000 2,655 51 1,371
		4,077

25. TRADE AND OTHER RECEIVABLES

Trade receivables — from third parties — from an associate Total trade receivables Deposits and prepayments Other receivables _Less:_impairment loss	2007 HK$’000 270 6,165 6,435 1,873 19,666 (19,666) — 8,308	2006 HK$’000 51 5,791
		5,842 2,076
		22,106 (21,915) 191
		8,109

The balance with an associate is unsecured, interest-free and on normal commercial terms.

The aging analysis of trade receivable is set out below:

Within 90 days 91 — 180 days 181 — 365 days Over 365 days _Less:_accumulated impairment	2007 HK$’000 6,439 141 97 3,137 9,814 (3,379) 6,435	2006 HK$’000 6,603 605 293 2,521
		10,022 (4,180)
		5,842

The normal credit period granted by the Group is on an average of 90 days.

Impairment losses in respect of trade and other receivables are recorded using an allowance account unless the Group is satisfied that recovery of the amount is remote, in which case the impairment loss is written off against trade receivable balance directly.

— 104 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(a) The movement in the impairment loss of trade receivables is as follows:

Balance at beginning of the year Impairment loss reversed Exchange realignment Balance at end of the year	2007 HK$’000 4,180 (1,038) 237 3,379	2006 HK$’000 6,522 (2,580) 238
		4,180

At each of the balance sheet date, the Group’s trade debtors were individually determined to be impaired. The individually impaired receivables are recognised based on the credit history of its customers, such as financial difficulties or default in payments, and current market conditions. Consequently, specific impairment loss was recognised. The Group does not hold any collateral over these balances.

(b) The movement in the impairment loss of other receivables is as follows:

Balance at beginning of the year Impairment loss recognised in profit or loss Impairment loss reversed Amount written off as uncollectible Exchange realignment Balance at end of the year	2007 HK$’000 21,915 — (1,529) (2,018) 1,298 19,666	2006 HK$’000 42,137 190 — (22,167) 1,755
		21,915

Trade receivables amounted to approximately HK$6,435,000 as at 31 December 2007 (2006: HK$5,842,000) that were neither past due nor impaired related to a wide range of customers for whom there was no recent history of default.

26. INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

	2007	2006
	HK$’000	HK$’000
Equity securities quoted in the PRC, at fair value	—	10,519

— 105 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

27. CASH AND CASH EQUIVALENTS

The Group’s bank deposit, bank balances and cash that are denominated in currencies other than the functional currencies of the relevant group entities are set out below:

As at 31 December 2007 As at 31 December 2006	HK$’000 1,702 2,873	United States Dollars $’000 28

		28

Included in the cash and cash equivalents is bank deposit of approximately HK$21,220,000 (2006: HK$2,000,000) carries interest at a fixed rate at 3.4% (2006: 3.4%). All other bank balances carries interest at the prevailing market interest rates.

28. TRADE AND OTHER PAYABLES

Trade payables Accrued charges and other creditors	2007 HK$’000 2,846 49,669 52,515	2006 HK$’000 3,108 51,395
		54,503

All trade payables were aged less than one year.

29. SHORT-TERM BANK LOANS — SECURED

All short-term bank loans are secured by buildings, interests in leasehold land held for own use under operating lease and investment properties of the Group in the PRC as detailed in note 38, which are denominated in RMB and granted by banks in the PRC. These short-term bank loans bear fixed interest rates from 6.44% to 7.34% (2006: 6.14% to 7.02%) per annum and are wholly repayable within one year.

30. OTHER LOAN — SECURED

For both years ended 31 December 2007 and 2006, other loans represented an amount of approximately HK$14,423,000 which was secured by the entire issued share capital of a Company’s subsidiary, interest bearing from 1.5% to 3% (2006: 1.5%) per month and repayable on 12 June 2007. During the year, the Group entered into a supplementary agreement and the repayment of the loan was extended for one year till 12 June 2008. For the year ended 31 December 2006, it also represented an amount of approximately RMB8,000,000 (equivalent to approximately HK$7,974,000) which was secured by certain investment properties of the Group, interest bearing at the prevailing market rates and was already repaid on 31 May 2007.

— 106 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

31. DEFERRED TAXATION

The followings are the major deferred tax liabilities recognised and movements thereof during the current and prior years:

Movement of taxable temporary differences arising from the exclusive distribution right At beginning of the year Credited to consolidated income statement At end of the year	2007 HK$’000 2,205 (2,205) —	2006 HK$’000 2,450 (245)
		2,205

At the balance sheet date, the following tax losses and temporary differences of the Group have not been recognised:

Tax losses Deductible temporary differences	2007 HK$’000 608,768 13,007 621,775	2006 HK$’000 577,408 1,700
		579,108

32. AMOUNT DUE TO HOLDING COMPANY

The amount is unsecured, interest-free and not repayable within the next twelve months from the balance sheet date.

33. PROVISION FOR STAFF WELFARE AND BONUS

At the beginning of year Utilisation of provision Exchange realignment At the end of year	2007 HK$’000 63,821 (11) 4,079 67,889	2006 HK$’000 61,534 — 2,287
		63,821

Provisions for staff welfare and bonus represents staff welfare and bonus provided in prior years for a subsidiary operated in the PRC under the relevant laws and regulations.

The total cost charged to income of HK$565,000 (2006: HK$93,000) represents contributions payable to these schemes by the Group in respect of the current accounting period.

— 107 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

34. SHARE CAPITAL

Authorised At beginning of year/at end of year Issued and fully paid At beginning of year/at end of year	2007 Ordinary shares of HK$0.01 each Number of shares Amount ’000 HK$’000 100,000,000 1,000,000 1,073,934 10,739	2006 Ordinary shares of HK$0.01 each Number of shares Amount ’000 HK$’000 100,000,000 1,000,000 1,073,934 10,739	2006 Ordinary shares of HK$0.01 each Number of shares Amount ’000 HK$’000 100,000,000 1,000,000 1,073,934 10,739

			10,739

35. SHARE OPTIONS

The Company adopted in 2002 a share option scheme (the “Share Option Scheme”) of which the eligible participants include the Company’s directors, employees of the Group and any advisors (professional or otherwise) or consultants, distributors, suppliers, agents, customers, joint venture partners, service providers to the Group who the board of directors considers, at its sole discretion have contributed or will contribute to the Group. Unless otherwise terminated or amended, the Share Option Scheme remains in force to 16 May 2012.

Pursuant to the Share Option Scheme, the overall limit of the number of shares which may be issued upon exercise of all options granted and yet to be exercised under the Share Option Scheme and other share option schemes of the Company, if any, must not exceed 10% of the shares in issue from time to time.

The total number of shares issued and to be issued upon exercise of the options granted and to be granted to each participant or grantee (including both exercised and outstanding options) in any 12-month period must not exceed 1% of the shares in issue.

The offer of a grant of share options may be accepted within 14 days from the date of the offer upon payment of a nominal consideration of HK$1 in total by the grantee. The exercise period of the share options granted is determinable by the directors, and commences on a specified date and ends on a date which is not later than 10 years from the date of offer of the share options. The subscription price for the shares in respect of which options are granted is determinable by the directors, but shall not be less than the highest of (i) the average of the closing price of the Company’s shares on the Stock Exchange for the five trading days immediately preceding the date of the offer; (ii) closing price of the Company’s shares on the date of offer; and (iii) the nominal value of the Company’s share.

No share options had been granted to directors or employees during years ended 31 December 2007 and 2006.

— 108 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

36. CONNECTED AND RELATED PARTY TRANSACTIONS

(a) Except as disclosed elsewhere in these consolidated financial statements, the Group has the following significant related party transactions during the year:

	2007	2006
	HK$’000	HK$’000
Sales to Guangzhou Apollo Enterprise Company
Limited, an associate	32,430	30,541

In the opinion of the directors of the Company, the above transactions were entered into by the Group in the ordinary course of its business and on normal commercial terms mutually agreed by both parties.

(b) Compensation of key management personnel

The remuneration of directors and other members of key management during the year was as follows:

Short-term benefits Post-employment benefits	2007 HK$’000 1,361 96 1,457	2006 HK$’000 1,283 45
		1,328

The remuneration of directors and key management is determined by the Board of Directors having regard to the performance of individuals and market trends.

37. COMMITMENTS

The Group had future minimum lease payments under non-cancellable operating leases in respect of land and buildings as follows:

Within one year In the second to fifth years inclusive	2007 HK$’000 602 109 711	2006 HK$’000 980 420
		1,400

Operating lease payments represent rentals payable by the Group for certain of its office properties. Leases are negotiated for an average term of one to two years and rentals are fixed for an average of one to two years.

— 109 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

At the same time, the Group also leases out its investment properties, the rental income earned during the year was approximately HK$7,790,000 (2006: approximately HK$8,001,000). These investment properties are expected to generate rental yields of 11% on an ongoing basis (2006: 11%). All of the properties held have committed tenant for the next two to six years. The future minimum rental receivable under non-cancellable operating leases are as follows:

Within one year In the second to fifth years inclusive Over five years	2007 HK$’000 5,962 8,161 510 14,633	2006 HK$’000 6,929 13,025 1,142
		21,096

38. PLEDGE OF ASSETS

The Group has pledged the following assets to secure the bank and other loans granted to the Group:

Interests in leasehold land held for own use under operating leases Buildings Investment properties	2007 HK$’000 2,716 21,418 64,198 88,332	2006 HK$’000 2,621 15,546 67,258
		85,425

39. CONTINGENT LIABILITIES

According to the summons received by the Company on 4 August 2005, a claimant (the “Claimant”) alleged that there was an unpaid balance of payment amounted to approximately HK$2,000,000 against the former director, Ms. Lo Yuk Yee and a related company beneficially owned by Ms. Lo in relation to an agreement dated 14 April 2004 made amongst Ms. Lo, the related company and the Claimant, and alleged the Company made misrepresentation and made a claim against the Company for damages.

The Company has not received any further notice in respect of the claim against the Company as at and for the year ended 31 December 2006, the directors believed that the alleged claim against the Company is unsubstantiated and there would be no significant impact to the operation and financial position of the Group. Accordingly, no provision has been made in these consolidated financial statements.

As at year ended 31 December 2007 and up to the date of this report, there had been no further progress in respect of the above claim.

— 110 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

40. BALANCE SHEET INFORMATION OF THE COMPANY

Balance sheet information of the Company at the balance sheet date is as follows:

Notes Non-current assets Property, plant and equipment Interests in subsidiaries (a) Current assets Trade and other receivables Amounts due from subsidiaries Cash and cash equivalents Current liabilities Trade and other payables Amounts due to subsidiaries Net current (liabilities) assets Total assets less current liabilities Non-current liability Amount due to holding company Capital and reserves Share capital Reserves (b)	2007 HK$’000 — — — 344 — 8 352 1,430 2,408 3,838 (3,486) (3,486) 13,408 (16,894) 10,739 (27,633) (16,894)	2006 HK$’000 78 12,600 12,678 303 4,070 224 4,597 1,305 — 1,305 3,292 15,970 11,008 4,962 10,739 (5,777) 4,962

— 111 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(a) Interests in subsidiaries

Unlisted shares, at cost Impairment loss recognised Amounts due from subsidiaries Impairment losses recognised Amounts due to subsidiaries	Company 2007 2006 HK$’000 HK$’000 25,902 25,902 (25,902) (13,302) — 12,600 6,478 4,070 (6,478) — — 4,070 2,408 —	Company 2007 2006 HK$’000 HK$’000 25,902 25,902 (25,902) (13,302) — 12,600 6,478 4,070 (6,478) — — 4,070 2,408 —
		12,600

		4,070 —
		4,070

		—

The balances with subsidiaries are unsecured, interest-free and repayable on demand.

The following is a list of principal subsidiaries of the Company as at 31 December 2007:

			Percentage
	Place of	Form of	of effective	Particulars of
	incorporation/	business	equity	issued/paid-up	Principal
Name	operation	structure	interest held	capital	activities
China Apollo	British Virgin	Limited	100%	Ordinary shares	Investment
(BVI)	Islands/Hong	liability		US$10	holding
Limited	Kong	company
Seapearl	Samoa/	Limited	100%	Ordinary shares	Distribution of
Trading	Hong Kong	liability		US$1	health and
Limited		company			pharmaceutical
					products
China Apollo	Hong Kong/	Limited	100%	Ordinary shares	Investment
Enterprises	Hong Kong	liability		HK$20,000	holding
(Hong Kong)		company		and non-voting
Limited				deferred shares
(note)				HK$10,000
Guangdong	PRC/PRC	Sino-foreign	95%	Registered capital	Manufacture and
Apollo		equity joint		RMB194,983,457	sale of health
Group Co.,		venture			products in the
Limited					PRC
(“Guangdong
Apollo”)
深圳太陽神銷售	PRC/PRC	Limited	48.83%	Registered capital	Supply and
有限公司		liability		RMB5,000,000	marketing
		company			of domestic
					commodities
					and materials

— 112 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Note:

The non-voting deferred shares have no voting rights and are not entitled to dividends or any distribution upon winding up unless a sum of HK$500,000,000,000 has first been distributed to the holders of ordinary shares.

During the year ended 31 December 2006, the Group disposed MAXX Management Services Limited and Biometrics Technology Limited and their respective subsidiaries. Details of the assets and liabilities disposed of during the year are set out in note 42 to the consolidated financial statements.

The above table lists the subsidiaries of the Company, which, in the opinion of the directors, principally affected the results for the year or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

None of the subsidiaries had any debt securities outstanding at the end of the year or at any time during the year.

(b) Reserve of the company

At 1 January 2006 Loss for the year At 31 December 2006 and at 1 January 2007 Loss for the year At 31 December 2007	Share premium HK$’000 94,457 — 94,457 — 94,457	Contributed surplus Accumulated Losses HK$’000 HK$’000 141,783 (224,360) — (17,657) 141,783 (242,017) — (21,856) 141,783 (263,873)	Total HK$’000 11,880 (17,657) (5,777) (21,856) (27,633)

Note: Under the Companies Act 1981 of Bermuda (as amended), no dividend shall be paid or distribution made out of contributed surplus if to do so would render the Company unable to pay its liabilities as they become due or the realisable value of its assets would thereby become less than the aggregate of its liabilities and its issued share capital and share premium account.

Loss attributable to shareholders includes an amount of approximately HK$21,856,000 (2006: HK$17,657,000) which has been dealt with in the consolidated financial statements of the Company.

41. ACQUISITION OF SUBSIDIARIES

On 21 October 2006, the Group acquired the entire issued share capital of 廣東太陽神飲用水有限公司 at a cash consideration of HK$1. The transaction has been accounted for using the purchase method of accounting.

— 113 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The fair values of the identificable assets and liabilities of 廣東太陽神飲用水有限公司 acquired during the year ended 31 December 2006 have no significant differences from their respective carrying amounts.

The assets and liabilities of the 廣東太陽神飲用水有限公司 arising from the acquisition are as follows:

Property, plant and equipment Trade and other receivables Cash and cash equivalents Trade and other payables Net liabilities acquired Goodwill_(Note 21)_ Total consideration Satisfied by: Cash	Acquiree’s carrying amounts and fair values 2006 HK$’000 98 607 2 (2,645)
	(1,938) 1,938
	—

	—

An analysis of the net inflow of cash and cash equivalents in respect of the acquisition is as follows:

Cash consideration paid Cash and cash equivalents acquired Net cash inflow	2006 HK$’000 — 2
	2

The subsidiary acquired during the year ended 31 December 2006 had no significant contribution to the Group’s revenue and loss before tax for the period from 26 October 2007 to 31 December 2006.

If the acquisition had been completed on 1 January 2006, there had no significant effect on the Group’s revenue and loss for the year ended 31 December 2006. The proforma information is for illustrative purposes only and is not necessarily an indication of revenue and results of operations of the Group that actually would have been achieved had the acquisition been completed on 1 January 2006, nor is it intended to be a projection of future results.

There was no acquisition of subsidiaries during the year ended 31 December 2007.

— 114 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

42. DISPOSAL OF SUBSIDIARIES

During the year ended 31 December 2006, the net assets of the subsidiaries at the respective dates of disposals were as follows:

Net assets disposed of: Bank balances and cash Other payables Gain on disposal of subsidiaries Total consideration Satisfied by: Cash Net cash inflow arising on disposal: Cash consideration Bank balances and cash disposed of	2006 HK$’000 — (1,845) (1,845) 1,845 — — — — —

The subsidiaries disposed of during the year ended 31 December 2006 had no contribution to the Group’s turnover and to the Group’s loss from operations for the year ended 31 December 2006.

There was no disposal of subsidiaries during the year ended 31 December 2007.

— 115 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

C. MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP FOR EACH OF THE LAST 3 FINANCIAL YEARS ENDED 31 DECEMBER 2007

Financial year ended 31 December 2007

Business review

For the year ended 31 December 2007, the Group’s pharmaceutical and health products business recorded a turnover of approximately HK$49,045,000 (2006: HK$42,408,000) which represents an increase of 16% as compared with last year. Such increase was mainly due to the increase in sales of the mineral water product line and the appreciation of Renminbi during the year.

Gross profit of the Group’s pharmaceutical and health products business for the year under review was HK$22,654,000 (2006: HK$18,970,000). The gross margin achieved during the year was about 46% (2006: 45%).

The Group reported a consolidated loss attributable to equity holders of the Company of HK$52,030,000 as compared with a loss of HK$10,650,000 for last year. Such increase was mainly attributable to the increase in impairment loss on intangible asset by HK$10,200,000, the expenditures of approximately HK$9,000,000 on marketing and promotion, research and development of the mineral water product line and the reversal of impairment loss on leasehold land of HK$13,624,000 recorded in 2006.

Prospects

The Group will continue to streamline its operation by cutting cost and down-sizing unprofitable business and at the same time looking for profitable business opportunities to maximise the interest of shareholders.

Following the change in the controlling shareholder of the Company in December 2005 and the completion of the mandatory unconditional cash offer by Outwit Investments Limited (“Outwit”) in March 2006, Outwit is currently conducting a review on the Group’s business activities and assets and is formulating business plans and strategies for the future business development of the Group.

Financial resources and liquidity

As at 31 December 2007, the Group had current assets of HK$83,787,000 (31 December 2006: HK$95,851,000) and current liabilities of HK$159,245,000 (31 December 2006: HK$130,922,000). The current ratio was 0.53 at 31 December 2007 as compared with 0.73 at 31 December 2006.

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The Group’s cash and bank balances as at 31 December 2007 amounted to HK$67,282,000 (31 December 2006: HK$59,407,000), of which 3% were denominated in Hong Kong and United States Dollars and 97% in Renminbi.

As at 31 December 2007, the Group had outstanding short term bank loans of HK$92,307,000 (31 December 2006: HK$54,022,000), all of which were in Renminbi and granted by banks in the PRC. The interest rates charged by banks ranged from 6.44% to 7.34% (for the year ended 31 December 2006: 6.14% to 7.02%) per annum. These bank loans were pledged by properties of the Group with a net book value of HK$88,332,000 (31 December 2006: HK$85,425,000). The gearing ratio of the Group, measured by bank borrowings and other short term loans as a percentage of issued share capital, was 994% at 31 December 2007 as compared with 712% at 31 December 2006.

Since the Group’s principal activities are in the PRC and the financial resources available, including cash on hand and bank borrowings, are mainly in Renminbi and Hong Kong Dollars, the exposure to foreign exchange fluctuation is relatively low.

Significant Investment

During the year, the Group had no significant investments. The Group also had no future plans for material investments.

Material Acquisitions and Disposals

During the year, the Group had no significant acquisitions and disposals.

Employees and remuneration policy

As at 31 December 2007, the Group employed about 300 staff and workers in Hong Kong and the PRC. The Group remunerates its employees based on their performance and experience and their remuneration package will be reviewed periodically by the management. Other employee benefits include medical insurance, retirement scheme, appropriate training program and share option scheme. Total staff remuneration for the year ended 31 December 2005 was approximately HK$14,038,000.

Contingent liabilities

Details of the Group’s contingent liabilities at 31 December 2007 are set out in Note 39 to the consolidated financial statements.

Financial year ended 31 December 2006

Business review

Due to keen competition in the health drink market in China and the fact that many of the Group’s existing products (including Houtou Mushroom tonic drink and

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APPENDIX I

Chrysanthemum tonic drink) have reached the consolidation stage of their product life cycles, sales continued to drop during the year. For the year ended 31 December 2006, the Group’s pharmaceutical and health products business recorded a turnover of approximately HK$42,408,000 (2005: HK$46,384,000) which represents a decrease of 5% as compared with last year.

Gross profit of the Group’s pharmaceutical and health products business for the year under review was HK$18,970,000 (2005: HK$20,088,000). The gross margin achieved during the year was about 45% (2005: 43%).

The Group reported a consolidated loss attributable to equity holders of the Company of HK$10,650,000 as compared with a loss of HK$97,214,000 for last year. Such improvement was mainly attributable to the decrease in impairment loss on intangible assets by HK$56,145,000, the decrease in amortisation of intangible assets by HK$13,710,000 and the reversal of impairment loss on leasehold land of HK$13,624,000.

Prospects

The Group will continue to streamline operation by cutting cost and down-sizing unprofitable business and at the same time looking for profitable business opportunities to maximise the interest of shareholders.

Following the change in the controlling shareholder of the Company in December 2005 and the completion of the mandatory unconditional cash offer by Outwit Investments Limited (“Outwit”) in March 2006, Outwit is currently conducting a review of the Group’s business activities and assets and is formulating business plans and strategies for the future business development of the Group.

Financial resources and liquidity

As at 31 December 2006, the Group had current assets of HK$95,851,000 (31 December 2005: HK$67,918,000) and current liabilities of HK$130,922,000, (31 December 2005: HK$109,911,000). The current ratio was 0.73 at 31 December 2006 as compared with 0.62 at 31 December 2005.

The Group’s cash and bank balances as at 31 December 2006 amounted to HK$59,407,000 (31 December 2005: HK$47,650,000), of which 5% were denominated in Hong Kong and United States Dollars and 95% in Renminbi.

As at 31 December 2006, the Group had outstanding short term bank loans of HK$54,022,000 (31 December 2005: HK$ 43,462,000), all of which were in Renminbi and granted by banks in PRC. The interest rates charged by banks ranged from 6.14% to 7.02% (for the year ended 31 December 2005: 6.14% to 6.79%) per annum. These bank loans were pledged by properties of the Group with a net book value of HK$72,372,000 (31 December 2005: HK$55,085,000). The gearing ratio of the Group, measured by

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

bank borrowings and other short term loans as a percentage of shareholders’ equity, was 841% at 31 December 2006 as compared with 277% at 31 December 2005.

Significant Investment

During the year, the Group had no significant investments. The Group also had no future plans for material investments.

Material Acquisitions and Disposals

During the year, the Group had no significant acquisitions and disposals.

Employees and remuneration policy

As at 31 December 2006, the Group employed about 250 staff and workers in Hong Kong and the PRC. The Group remunerates its employees based on their performance and experience and their remuneration package will be reviewed periodically by the management. Other employee benefits include medical insurance, retirement scheme, appropriate training program and share option scheme. Total staff remuneration for the year ended 31 December 2006 was approximately HK$9,567,000.

Contingent liabilities

Details of the Group’s contingent liabilities at 31 December 2006 are set out in Note 44 to the financial statements.

Financial year ended 31 December 2005

Business Review

For the year ended 31 December 2005, the Group recorded a turnover of approximately HK$46,384,000 (2004: HK$63,162,000) which represents a decrease of 27% as compared with last year. This is mainly due to the drop in the trading of securities business during the year from HK$20,634,000 in 2004 to HK$1,767,000 in 2005.

During the year under review, the Group’s pharmaceutical and health products business recorded a turnover of HK$46,384,000 (2004: HK$42,528,000) and achieved a gross profit of HK$20,088,000 (2004: HK$19,757,000). The gross margin achieved during the year was about 43% (2004: 46%). Sales of the Group’s existing tonic drink products (including Houtou Mushroom tonic drink and Chrysanthemum tonic drink) remained fairly stable because of keen competition in tonic drink market in China and the fact that these products have reached the consolidation stage of their product life cycles.

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APPENDIX I

The Group reported a consolidated loss attributable to equity holders of the Company of HK$97,214,000 as compared with a loss of HK$137,485,000 for last year. Such improvement was mainly attributable to the drop in provision for impairment losses on property, plant and equipment by HK$40,939,000.

Prospects

The Group will continue to streamline the operation by cutting cost and downsizing unprofitable businesses and at the same time looking for profitable business opportunities to maximise the interest of the shareholders.

Following the change in control of shareholding in December 2005 and the completion of the mandatory unconditional cash offer by Outwit Investments Limited (“Outwit”) in March 2006, Outwit will conduct a review on the Group’s business activities and assets and formulate business plans and strategies for the future business development of the Group.

Financial Resources and Liquidity

As at 31 December 2005, the Group’s total assets amounted to HK$197,400,000, representing a decrease of HK$71,865,000 as compared with that of the last financial year end date.

As at 31 December 2005, the Group had current assets of HK$67,918,000 (2004: HK$102,887,000) and current liabilities of HK$109,911,000 (2004: HK$217,559,000). The current ratio was 0.62 at 31 December 2005 as compare with 0.47 at 31 December 2004.

The Group’s cash and bank balances as at 31 December 2005 amounted to HK$47,650,000 (2004: HK$56,272,000), of which 7% were denominated in Hong Kong Dollars and 93% in Renminbi.

As at 31 December 2005, the Group had outstanding short term bank loans of HK$43,462,000 (2004: HK$51,103,000), all of which were denominated in Renminbi and granted by banks in PRC. The interest rates charged by banks ranged from 6.138% to 6.786% (2004: 5.04% to 6.786%) per annum. These bank loans were pledged by properties of the Group with a net book value of HK$55,085,000 (2004: HK$51,816,000). The gearing ratio of the Group, measured by bank borrowings and other loan as a percentage of shareholders’ equity, was 277% at 31 December 2005 as compare with 131% at 31 December 2004.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

During the year under review, the Company carried out an open offer of 715,956,000 shares of HK$0.01 each at the subscription price of HK$0.11 per share on the basis of 2 open offer shares for every share in issue on 22 February 2005. Net proceeds of approximately HK$77 million was raised of which HK$70.2 million were used for the early redemption of convertible notes and promissory notes issued by the Company. The resulting balance of approximately HK$6.8 million was retained as general working capital of the Group.

Significant Investment

During the year, the Group had no significant investments. The Group also had no future plans for material investments.

Material Acquisitions and Disposals

During the year, the Group had no significant acquisitions and disposals.

Employees and Remuneration Policy

As at 31 December 2005, the Group employed about 250 staff and workers in Hong Kong and the PRC. Total staff remuneration for the year ended 31 December 2005 was approximately HK$13,471,000.

The Group remunerates its employees based on their performance and experience and their remuneration package will be reviewed periodically by the management. Other employee benefits include medical insurance, retirement scheme, appropriate training program and a share option scheme.

Contingent Liabilities

The Group has no significant contingent liabilities at 31 December 2005.

D. MANAGEMENT DISCUSSION AND ANALYSIS OF THE ACQUISITION TARGET COMPANY

FOR THE PERIOD FROM 18 DECEMBER 2007 TO 31 MARCH 2008

Business review

Best Forward Group Limited (“Best Forward”) was incorporated on 18 December 2007. One ordinary share of US$1 each was issued at par to Long Smart Investments Limited on 3 March 2008. Best Forward has not conducted any business transactions during the period from 18 December 2007 to 3 March 2008. On 5 March 2008, Best Forward acquired 100% interest in the HK Co, at which time, HK Co had already owned 25% of the entire issued share capital of the PRC Co.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Prospects

On 6 March 2008, the HK Co acquired 45.98% interest in the PRC Co. As a result, Best Forward effectively and indirectly holds 70.98% interest in the PRC Co. Detailed financial information and the management discussion and analysis of the PRC Co are set out in Appendix III.

Financial resources and liquidity

As at 31 March 2008, Best Forward had current assets of HK$25,000,000 and current liabilities of HK$25,000,000. The current ratio was 1 at 31 March 2008.

Best Forward’s cash and bank balances as at 31 March 2008 amounted to HK$8 all of which were denominated in HK dollars.

Since the Best Forward’s principal activities are in Hong Kong and the financial resources available, including cash on hand and bank borrowings, are mainly in HK Dollars, the exposure to foreign exchange fluctuation is relatively low.

Significant Investment

Save as disclosed above, during the period, Best Forward had no significant investments. Best Forward also had no future plans for material investments.

Material Acquisitions and Disposals

Other than the acquisition of the 100% interest in the HK Co as stated above, during the period, Best Forward had no significant acquisitions and disposals.

Employees and remuneration policy

As at 31 March 2008, Best Forward employed 1 staff. Best Forward remunerates its employees based on performance and experience and the remuneration package will be reviewed periodically. Other employee benefits include medical insurance, retirement scheme and appropriate training program.

Contingent liabilities

Best Forward has no significant contingent liabilities at 31 March 2008.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

E. MANAGEMENT DISCUSSION AND ANALYSIS OF THE PRC CO FOR EACH OF THE LAST THREE FINANCIAL YEARS ENDED 31 DECEMBER 2007

2007 Management Discussion and Analysis

Business review

For the year ended 31 December 2007, the Target Group recorded a turnover of approximately RMB394,228,000 (2006: RMB352,193,000) which represents an increase of 12% as compared with last year.

Gross profit for the year under review was RMB145,544,000 (2006: RMB126,163,000). The gross margin achieved during the year was about 37% (2006: 36%).

The Target Group reported a consolidated profit attributable to equity holders of the Company of RMB19,931,000 as compared with RMB19,677,000 for last year. The Target Group incurred approximately RMB5.5 million on retrenching about 250 staff in 2007.

Prospects

The Target Group is principally engaged in the development, production and sales of pharmaceutical preparations, raw materials and intermediate products in the PRC market. These products are mainly used in cardiovascular, ophthalmology, liver protection and antibiotics areas. With the increase in living standard of the people in the PRC, demand for these products is predicted to increase in the coming years.

Financial resources and liquidity

As at 31 December 2007, the Target Group had current assets of RMB138,093,000 (31 December 2006: RMB138,052,000) and current liabilities of RMB191,894,000 (31 December 2006: RMB209,613,000). The current ratio was 0.72 at 31 December 2007 as compared with 0.66 at 31 December 2006.

The Target Group’s cash and bank balances as at 31 December 2007 amounted to RMB40,065,000 (31 December 2006: RMB45,659,000), of which 98% were denominated in Renminbi and 2% were in US dollars.

As at 31 December 2007, the Target Group had outstanding short term bank loans of RMB73,000,000 (31 December 2006: RMB86,600,000), all of which were in Renminbi and granted by banks in the PRC. The interest rates charged by banks ranged from 5.85% to 7.23% (for the year ended 31 December 2006: 5.74% to 6.43%) per annum. These bank loans were pledged by properties of the Target Group with a net book value

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

of RMB123,241,000 (31 December 2006: RMB127,178,000). The gearing ratio of the Target Group, measured by bank borrowings and other short term loans as a percentage of shareholders’ equity, was 48% at 31 December 2007 as compared with 66% at 31 December 2006.

Since the Target Group’s principal activities are in the PRC and the financial resources available, including cash on hand and bank borrowings, are mainly in Renminbi, the exposure to foreign exchange fluctuation is relatively low.

Employees and remuneration policy

As at 31 December 2007, the Target Group employed about 2,000 staff and workers in the PRC. The Target Group remunerates its employees based on their performance and experience and their remuneration package will be reviewed periodically by the management. Other employee benefits include medical insurance, retirement scheme and appropriate training program. Total staff remuneration for the year ended 31 December 2007 was approximately RMB22,521,000.

Contingent liabilities

The Target Group has no significant contingent liabilities at 31 December 2007.

2006 Management Discussion and Analysis

Business review

For the year ended 31 December 2006, the Target Group recorded a turnover of approximately RMB352,193,000 (2005: RMB339,571,000) which represents an increase of 4% as compared with last year.

Gross profit for the year under review was RMB126,163,000 (2005: RMB120,319,000). The gross margin achieved during the year was about 36% (2005: 35%).

The Target Group reported a consolidated profit attributable to equity holders of the Company of RMB19,677,000 as compared with RMB14,205,000 for last year.

Prospects

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Financial resources and liquidity

As at 31 December 2006, the Target Group had current assets of RMB138,052,000 (31 December 2005: RMB155,299,000) and current liabilities of RMB209,613,000 (31 December 2005: RMB229,618,000). The current ratio was 0.66 at 31 December 2006 as compared with 0.68 at 31 December 2005.

The Target Group’s cash and bank balances as at 31 December 2006 amounted to RMB45,659,000 (31 December 2005: RMB53,236,000), of which 99% were denominated in Renminbi and 1% in US dollars.

As at 31 December 2006, the Target Group had outstanding short term bank loans of RMB86,600,000 (31 December 2005: RMB98,600,000), all of which were in Renminbi and granted by banks in the PRC. The interest rates charged by banks ranged from 5.74% to 6.43% (for the year ended 31 December 2005: 5.31% to 6.25%) per annum. These bank loans were pledged by properties of the Target Group with a net book value of RMB127,178,000 (31 December 2005: RMB108,116,000). The gearing ratio of the Target Group, measured by bank borrowings and other short term loans as a percentage of shareholders’ equity, was 66% at 31 December 2006 as compared with 88% at 31 December 2005.

Employees and remuneration policy

As at 31 December 2006, the Target Group employed about 2,300 staff and workers in the PRC. The Target Group remunerates its employees based on their performance and experience and their remuneration package will be reviewed periodically by the management. Other employee benefits include medical insurance, retirement scheme and appropriate training program. Total staff remuneration for the year ended 31 December 2006 was approximately RMB15,778,000.

Contingent liabilities

The Target Group has no significant contingent liabilities at 31 December 2006.

2005 Management Discussion and Analysis

Business review

For the year ended 31 December 2005, the Target Group recorded a turnover of approximately RMB339,571,000. Gross profit for the year under review was

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

RMB120,319,000. The gross margin achieved during the year was about 35%. The Target Group reported a consolidated profit attributable to equity holders of the Company of RMB14,205,000.

Prospects

Financial resources and liquidity

As at 31 December 2005, the Target Group had current assets of RMB155,299,000 and current liabilities of RMB229,618,000. The current ratio was 0.68 at 31 December 2005.

The Target Group’s cash and bank balances as at 31 December 2005 amounted to RMB53,236,000, of which 99% were denominated in Renminbi and 1% in US dollars.

As at 31 December 2005, the Target Group had outstanding short term bank loans of RMB98,600,000, all of which were in Renminbi and granted by banks in the PRC. The interest rates charged by banks ranged from 5.31% to 6.25% per annum. These bank loans were pledged by properties of the Target Group with a net book value of RMB108,116,000. The gearing ratio of the Target Group, measured by bank borrowings and other short term loans as a percentage of shareholders’ equity, was 88% at 31 December 2005.

Since the Wuhan Group’s principal activities are in the PRC and the financial resources available, including cash on hand and bank borrowings, are mainly in Renminbi, the exposure to foreign exchange fluctuation is relatively low.

Employees and Remuneration Policy

As at 31 December 2005, the Target Group employed about 2,400 staff and workers in the PRC. The Target Group remunerates its employees based on their performance and experience and their remuneration package will be reviewed periodically by the management. Other employee benefits include medical insurance, retirement scheme and appropriate training program. Total staff remuneration for the year ended 31 December 2005 was approximately RMB15,931,000.

Contingent Liabilities

The Target Group has no significant contingent liabilities at 31 December 2005.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

F. INDEBTEDNESS STATEMENT

Borrowings

As at 30 April 2008, being the latest practicable date for the purpose of this indebtedness statement, the Enlarged Group had total outstanding borrowings of approximately HK$187,505,000, comprising bank loans of approximately HK$148,541,000, bank overdraft of approximately HK$949,000 and other loans of approximately HK$38,015,000, all falling due within one year.

Securities

As at 30 April 2008, (i) the Enlarged Group’s bank loans of approximately HK$148,541,000 in aggregate were secured by the Group’s buildings, investment properties and prepaid lease payments in respect of interests in leasehold land with net carrying value of approximately HK$200,223,000 in aggregate; (ii) the Enlarged Group’s other loans of approximately HK$14,423,000 were secured by the entire issued share capital of HK$78 of the Company’s subsidiary, China Apollo (BVI) Limited; (iii) the balance of the Enlarged Group’s bank loans of approximately HK$6,000,000 were unsecured; and (iv) the amount due to the Company’s ultimate holding company Outwit, of approximately HK$17,592,000 were unsecured.

Commitments, guarantees and contingent liabilities

As at 30 April 2008, the Enlarged Group did not have contingent liability and had total future minimum lease payments under non-cancelable operating leases in respect of rented premises which fall due within one year amounting to approximately HK$209,000.

Save as aforesaid and apart from intra-group liabilities and normal trade payables, as at the close of business on 30 April 2008, being the latest practicable date for ascertaining certain information relating to this indebtedness statement prior to printing of this Circular, the Enlarged Group did not have any debt securities issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptance (other than normal trade bills) or acceptable credits, debentures, mortgages, charges, hire purchase commitments, guarantees or other material contingent liabilities.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

G. WORKING CAPITAL

Subject to the successful renewal of all the PRC bank loans of the Enlarged Group which amount to HK$148,541,000 and based on the Directors’ view that such bank loans can be renewed as they are fully secured and the Enlarged Group has maintained long term relationship with the PRC banks, the Directors are of the opinion that, taking into account its internal resources and the existing available credit facilities of the Enlarged Group, the Enlarged Group has sufficient working capital for its present requirements, that is for at least the next twelve months from the date of this Circular upon the completion of the Acquisition only.

The Directors are of the opinion that, taking into account its internal resources and, the existing available credit facilities of the Resulting Group and the net proceeds from the Disposal and upon the completion of the Acquisition and the Disposal, the Resulting Group has sufficient working capital for its present requirements, that is for at least the next twelve months from the date of this Circular.

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ACCOUNTANTS’ REPORT OF THE ACQUISITION TARGET COMPANY

APPENDIX IIA

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23 June 2008

The Directors

Maxx Bioscience Holdings Limited

Dear Sirs,

We set out below our report on the financial information of Best Forward Group Limited (the “Target”) for the period from 18 December 2007 (date of incorporation) to 31 March 2008 (the “Relevant Period”) for inclusion in a circular dated 23 June 2008 (the “Circular”) of Maxx Bioscience Holdings Limited (“Maxx”) in connection with the proposed acquisition of the entire issued share capital of the Target, details of which is set out in the Circular.

The Target was incorporated under the British Virgin Islands Business Companies Act 2004 with limited liability on 18 December 2007. The Target acted as an investment holding company.

The Target has adopted 31 December as its financial year end date. No statutory audited financial statements have been prepared since its incorporation.

For the purpose of this report, the directors of the Target have prepared the financial statement of the Target which include the statement of changes in equity and cash flow statement of the Target for the Relevant Period and the balance sheet of the Target as at 31 March 2008 together with the notes thereto (the “Financial Information”) in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) (the “Underlying Financial Statements”). We have undertaken an independent audit on the underlying Financial Statements in accordance with Hong Kong 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.

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ACCOUNTANTS’ REPORT OF THE ACQUISITION TARGET COMPANY

APPENDIX IIA

The directors of the Target are responsible for the preparation of the Underlying Financial Statements and the Financial Information which gives a true and fair view. In preparing the Financial Information, it is fundamental that appropriate accounting policies are selected and applied consistently, that the judgments and estimates made are prudent and reasonable and that the reasons for any significant departure from applicable accounting standards are stated.

The directors of Maxx 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, based on examination, on the Financial Information and to report our opinion to you.

In our opinion, the Financial Information, for the purpose of this report, gives a true and fair view of the state of affairs of the Target as at 31 March 2008 and of the cash flow of the Target for the Relevant Period.

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ACCOUNTANTS’ REPORT OF THE ACQUISITION TARGET COMPANY

APPENDIX IIA

I. FINANCIAL INFORMATION

Balance Sheet

Notes NON-CURRENT ASSET Investment in a subsidiary 10 CURRENT ASSET Cash on hand CURRENT LIABILITY Loan from a shareholder 11 Net current liability Net assets EQUITY Share capital 12 Statement of Changes in Equity At date of incorporation Issue of share to the subscriber on 3 March 2008 At 31 March 2008	31.3.2008 HK$ 25,000,000 8 25,000,000 (24,999,992) 8 8 Share capital HK$ — 8 8

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ACCOUNTANTS’ REPORT OF THE ACQUISITION TARGET COMPANY

APPENDIX IIA

Cash Flow Statements

18.12.2007 to 31.3.2008 HK$

NET CASH FROM FINANCING ACTIVITIES Issue of share NET INCREASE IN CASH AND CASH EQUIVALENTS AND CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD, represented by cash on hand	8
	8

Notes to the Financial Information

1. GENERAL INFORMATION

The Target is a company incorporated under the British Virgin Islands Business Companies Act 2004 with limited liability on 18 December 2007. The address of the registered office of the Target is at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands (“BVI”), and the principal place of business of the Target is at Rooms 2101-2103 Yardley Commercial Building, 3 Connaught Road West, Hong Kong.

At the date of this report, the directors of the Target consider Outwit Investments Limited (“Outwit”), a limited company incorporated in BVI, is ultimate holding company of the Target.

The Financial Information is presented in Hong Kong dollars (“HK$”) which is the same as the functional currency of the Target.

The principal activity of the Target is investment holding.

No income statement has been prepared as no revenue or cost was generated or incurred during the Relevant Period. All the administrative costs including preliminary expenses incurred for the Relevant Period were borne by its ultimate holding company.

2. BASIS OF PREPARATION

As at 31 March 2008, the Target had net current liability of approximately HK$24,999,992. The Financial Information has been prepared on the going concern basis as the Target has obtained the letter of support from the existing ultimate holding company, Outwit and in the opinion of the directors of the Target, Outwit has sufficient funding to repay its financial obligations of the Target as they fall due for the foreseeable future.

In additions, the ultimate beneficial owners of Outwit will ensure Outwit to have sufficient funding to repay in full its financial obligations as they fall due for the foreseeable future upon the completion of the acquisition of the entire share capital of the Target.

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ACCOUNTANTS’ REPORT OF THE ACQUISITION TARGET COMPANY

APPENDIX IIA

3. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRS”)

At the date of this report, the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) issued the following new and revised HKFRSs, Hong Kong Accounting Standards (“HKAS”) and interpretations (hereinafter collectively referred to as “new HKFRSs”) that have been effective. However, the Target has not early applied these new and revised standards or interpretations (“HK(IFRIC)-INTs”) that have been issued but are not yet effective as at the date of this report. The directors of Maxx anticipate that the application of these new HKFRSs will have no material impact on the results and the financial position of the Target.

HKAS 1 (Revised) Presentation of Financial Statements1 HKAS 23 (Revised) Borrowing Cost1 HKAS 27 (Revised) Consolidated and Separate Consolidated Financial Statements2 HKAS 32 and HKAS 1 Puttable Financial Instruments and obligations Arising on Liquidation1 (Amendments) HKFRS 2 (Amendment) Share-based Payment — Vesting Conditions and Cancellations1 HKFRS 3 (Revised) Business Conbinations2 HKFRS 8 Operating Segments1 HK(IFRIC)-INT 11 HKFRS 2: Group and Treasury Share Transactions3 HK(IFRIC)-INT 12 Service Concession Arrangements4 HK(IFRIC)-INT 13 Customer Loyalty Programmes5 HK(IFRIC)-INT 14 HKAS 19 — The Limit on a Defined Benefit Asset, Minimum Funding Requirements and Their Interaction4

1 Effective for annual periods beginning on or after 1 January 2009. 2 Effective for annual periods beginning on or after 1 July 2009. 3 Effective for annual periods beginning on or after 1 March 2007. 4 Effective for annual periods beginning on or after 1 January 2008. 5 Effective for annual periods beginning on or after 1 July 2008.

4. SIGNIFICANT ACCOUNTING POLICIES

The Financial Information has been prepared in accordance with HKFRSs issued by the HKICPA. In addition, the Financial Information include applicable disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited and by the Hong Kong Companies Ordinance. These policies have been consistently applied to the Relevant Period and are materially consistent with the accounting policies adopted by the Maxx.

The Financial Information have been prepared on the historical cost convention. The principal accounting policies adopted are set out below:

Investment in a subsidiary

A subsidiary is an entity that is controlled by the Target, where the Target has the power to govern the financial and operating policies of such entity so as to obtain benefits from its activities.

In the Target’s balance sheet, the investment in a subsidiary is stated at cost less impairment loss. The result of the subsidiary is accounted for by the Company on the basis of dividends received and receivable.

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ACCOUNTANTS’ REPORT OF THE ACQUISITION TARGET COMPANY

APPENDIX IIA

Taxation

Income tax expense represents the sum of current tax and deferred tax.

The current tax payable is based on the results for the Relevant Period. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Target’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the Financial Information and the corresponding tax base used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are generally recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in associates, except where the Target is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Foreign currencies

In preparing the Financial Information, transactions in currencies other than the Target’s functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in profit or loss in the period in which they arise. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity, in which cases, the exchange differences are also recognised directly in equity.

Impairment losses on tangible assets

At each balance sheet date, the Target reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

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ACCOUNTANTS’ REPORT OF THE ACQUISITION TARGET COMPANY

APPENDIX IIA

Financial instruments

Financial assets and financial assets and financial liabilities are recognised on the Target’s balance sheet when the Target become a party to the contractual provisions of the instrument. Financial assets and financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial assets or financial liabilities, as appropriate, on initial recognition, transaction costs directly attributable to the acquisition of financial assets or financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets

The Target’s financial assets are mainly loans and receivables.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. At each balance sheet date subsequent to initial recognition, loans and receivables (including cash on hand) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment loss on financial assets below).

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the Relevant Period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period.

Income is recognised on an effective basis for debt instruments.

Impairment loss of financial assets

Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been impacted.

For financial assets, objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty; or
default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

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ACCOUNTANTS’ REPORT OF THE ACQUISITION TARGET COMPANY

APPENDIX IIA

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets. Changes in the carrying amount of the allowance account are recognised in profit or loss.

Financial liabilities and equity

Financial liabilities and equity instruments issued by the Target are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

An equity instrument is any contract that evidences a residual interest in the assets of the Target after deducting all of its liabilities. Equity instruments issued by the Target are recorded at the proceeds received, net of direct issue costs.

Financial liabilities

Other financial liabilities

Other financial liabilities including loan from a shareholder are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the Relevant Period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

Interest expense is recognised on an effective interest basis.

Equity instruments

Equity instruments issued by the Target are recorded at the proceeds received, net of direct issue costs.

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the assets expire or, the financial assets are transferred and the Target has transferred substantially all the risks and rewards of ownership of the financial assets. On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received or receivable and the cumulative gain or loss that had been recognised directly in equity is recognised in profit or loss. If the Target retains substantially all the risks and rewards of ownership of a transferred assets, the Target continues to recognise the financial asset and recognise a collateralised borrowing for proceeds received.

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ACCOUNTANTS’ REPORT OF THE ACQUISITION TARGET COMPANY

APPENDIX IIA

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires. The difference between the carrying amount of the financial liability derecognised and the consideration paid or payable is recognised in profit and loss.

5. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Target’s major financial instruments include equity investment and loan from a shareholder. Detail of the financial instrument is disclosed in respective notes. The risks associated with the financial instruments and the policies on how to mitigate these risks are set out below. The management manages and monitors the exposure to ensure appropriate measures are implemented on a timely and effective manner.

Foreign currency risk

The Target’s monetary asset is denominated in Hong Kong dollar and therefore the exchange rate risk to the Target is not significant.

Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and the availability of financing from shareholders which is provided on an on-going basis.

Fair values of financial liabilities

The fair values of financial assets and liabilities reported at the balance sheets date of the Relevant Period approximate to their carrying amounts due to their immediate or short-term maturities.

6. CAPITAL RISK MANAGEMENT

The Target manages its capital to ensure it will be able to continue as a going concern while maximising the return to registered owners through the optimisation of the debt and equity balance.

The capital structure of the Target consists of cash and cash equivalents and equity attributable to registered owners of the Target, represented by the paid-up capital.

The management reviews the capital structure by considering the cost of capital and the risks associated with each class of capital. In view of this, the Target will balance its overall capital structure through the payment of dividends, new capital as well as raise of new borrowings. The Target’s approach to capital management remains unchanged throughout the Relevant Period.

7. TURNOVER AND SEGMENT INFORMATION

The Target did not generate any turnover during the Relevant Period.

According to HKAS 14 “Segment Reporting”, no business analysis and segment reporting information such as segment revenue, results, assets, liabilities and other information are shown as substantively the Target only engages in investing holding. It is therefore not considered appropriate to disclose segment information.

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ACCOUNTANTS’ REPORT OF THE ACQUISITION TARGET COMPANY

APPENDIX IIA

8. EMPLOYEE BENEFITS EXPENSES

(a) Directors’ emoluments

During the Relevant Period, no emoluments and no retirement benefit scheme contributions were paid or payable to the directors of the Target. There was no arrangement under which a director waived or agreed to waive any remuneration during the Relevant Period.

(b) Employee’s emolument

No staff was employed by the Target during the Relevant Period.

(c) During the Relevant Period, no emoluments were paid by the Target to the directors or employee as an inducement to join or upon joining the Target or as compensation for loss of office.
(d) No remuneration was paid to key management personnel during the Relevant Period.

9. TAXATION

No provision for Hong Kong Profits Tax had been provided for the Relevant Period as the Target has no assessable profits for the Relevant Period.

No provision for deferred taxation has been recognised in the Financial Information.

10. INVESTMENT IN A SUBSIDIARY

	2008
	HK$
Investments at cost, unlisted shares	25,000,000

As at 31 March 2008, the Target had direct interests in the entire issued share capital of United Chance Holdings Limited. The particulars of the subsidiary are set out below:

		Proportion
		of equity	Class of
	Place of	interests	equity	Registered
	registration/	held by the	interests	and paid-	Principal
Name	operations	Target	held	up capital	activity
United Chance Holdings	Hong Kong	100%	Issued	HK$1	Investment
Limited (“United			share		holding
Chance”)			capital

Post-acquisition profits of the subsidiary attributable to the Company are as follows:

18.12.2007 to 31.3.2008 HK$

Amounts not dealt with in the Financial Information of the Target

4,139,554

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ACCOUNTANTS’ REPORT OF THE ACQUISITION TARGET COMPANY

APPENDIX IIA

11. LOAN FROM A SHAREHOLDER

The amount is unsecured, non-interest bearing and repayable on demand.

12. SHARE CAPITAL

Ordinary shares of US$1 each Authorised: 50,000 ordinary shares of US$1 each Issued and fully paid: Issued at par to subscriber on 3 March 2008 and at 31 March 2008 Shown in the Financial Information as at 31 March 2008	Number of Shares 50,000 1	Amount US$ 50,000

		1

		HK$8

The Company was incorporated on 18 December 2007 with an authorised share capital of US$50,000. On 3 March 2008, 1 ordinary share of US$1 each was issued at par to the subscriber to provide the initial share capital of the Target.

13. RELATED PARTY TRANSACTIONS

(a) There are no other transactions with related parties during the Relevant Period.
(b) Compensation of key management personnel

The directors consider they are the only key management personnel of the Target and no remuneration has been paid to them during the Relevant Period.

II. POST BALANCE SHEET EVENTS

On 28 April 2008, the immediate holding company of the Target, Long Smart Investments Limited (“Long Smart”, as vendor, a company incorporated in British Virgin Islands with limited liability) and Maxx as purchaser, a company incorporated in Bermuda with limited liability, the issued shares of which are listed on the main board of The Stock Exchange of Hong Kong Limited) entered into a sale and purchase agreement. Pursuant to the agreement, Long Smart agreed to dispose of the entire issued share capital in the Target for a consideration of HK$200,000,000 to Maxx.

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ACCOUNTANTS’ REPORT OF THE ACQUISITION TARGET COMPANY

APPENDIX IIA

Upon the completion of the agreement, Long Smart shall cease to be the immediate holding company of the Target, and Maxx shall become the immediate holding company of the Target.

Details of which are set out in the announcement of Maxx dated 9 May 2008.

III. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Target in respect of any period subsequent to 31 March 2008.

SHINEWING (HK) CPA Limited

Certified Public Accountants

Ip Yu Chak

Practising Certificate Number: P04798

Hong Kong

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ACCOUNTANTS’ REPORT OF THE HK CO

APPENDIX IIB

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23 June 2008

The Directors

Maxx Bioscience Holdings Limited

Dear Sirs,

We set out below our report on the financial information of United Chance Holdings Limited (the “Target”) for the period from 5 March 2005 (date of incorporation) to 31 December 2005, and the two years ended 31 December 2006 and 2007 (the “Relevant Period”) for inclusion in a circular dated 23 June 2008 (the “Circular”) of Maxx Bioscience Holdings Limited (“Maxx”) in connection with the proposed acquisition of the entire issued share capital of Best Forward Group Limited, details of which is set out in the Circular.

The Target was incorporated in Hong Kong with limited liability on 5 March 2005 with an authorised share capital of HK$10,000 and issued and paid up share capital of HK$1. The Target acted as an investment holding company.

The Target has adopted 31 December as its financial year end date. We have acted as the auditors of the Target for the Relevant Period. The financial statements of the Target for the Relevant Period were prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) (the “Underlying Financial Statements”).

We have undertaken an independent audit on the Underlying Financial Statements in accordance with Hong Kong Standards on Auditing issued by the HKICPA.

The Financial Information of the Target for the Relevant Period set out in this report has been prepared from the Underlying Financial Statements for the purpose of preparing our report for inclusion in the Circular. No adjustment was deemed necessary to the Underlying Financial Statements in preparing our report for inclusion in the Circular.

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

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ACCOUNTANTS’ REPORT OF THE HK CO

APPENDIX IIB

In our opinion, the Financial Information, for the purpose of this report, gives a true and fair view of the state of affairs of the Target as at 31 December 2005, 2006 and 2007 and of the results and cash flows of the Target for the Relevant Period.

I. FINANCIAL INFORMATION

Income Statements

Notes Turnover 7 Share of results of an associate Profit for the period/year 10	5.3.2005 to 31.12.2005 RMB’000 — 1,804 1,804	1.1.2006 to 31.12.2006 RMB’000 — 4,919 4,919	1.1.2007 to 31.12.2007 RMB’000 — 4,983
			4,983

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ACCOUNTANTS’ REPORT OF THE HK CO

APPENDIX IIB

Balance Sheets

As at 31 December 2005 2006 Notes RMB’000 RMB’000 NON-CURRENT ASSET Investment in an associate 11 27,869 32,788 CURRENT LIABILITY Loan from a shareholder 12 26,022 25,087 NET CURRENT LIABILITY (26,022) (25,087) 1,847 7,701 CAPITAL AND RESERVES Share capital 13 — — Reserves 1,847 7,701 1,847 7,701 Statements of Changes in Equity Share capital Exchange reserve Accumulated profits RMB’000 RMB’000 RMB’000 At date of incorporation — — — Exchange difference arising on retranslation of investment in an associate — 43 — Profit for the period — — 1,804 At 31 December 2005 and 1 January 2006 — 43 1,804 Exchange difference arising on retranslation of investment in an associate — 935 — Profit for the year — — 4,919 At 31 December 2006 and 1 January 2007 — 978 6,723 Exchange difference arising on retranslation of investment in an associate 1,702 — Profit for the year — — 4,983 At 31 December 2007 — 2,680 11,706		2007 RMB’000 37,771 23,385 (23,385) 14,386 — 14,386 14,386 Total RMB’000 — 43 1,804 1,847 935 4,919 7,701 1,702 4,983 14,386

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ACCOUNTANTS’ REPORT OF THE HK CO

APPENDIX IIB

Notes to the Financial Information

1. GENERAL INFORMATION

The Target is a company incorporated in Hong Kong with limited liability under the Hong Kong Companies Ordinance on 5 March 2005. The address of the registered office and principal place of business of the Target is at Rooms 2101-2103 Yardley Commercial Building, 3 Connaught Road West, Hong Kong.

At the date of this report, the directors of the Target consider Best Forward Group Limited and Outwit Investments Limited (“Outwit”), both companies are limited company incorporated in British Virgin Islands (“BVI”) are the immediate holding company and ultimate holding company of the Target.

The Financial Information is presented in Renminbi (“RMB”) and the functional currency of the Target is Hong Kong dollars (“HK$”). The board of directors considered that it is more appropriate to present the Financial Information in RMB as the investment which represented a significant portion of the Target’s operation in situated in the People’s Republic of China (the “PRC”).

The principal activity of the Target is investment holding.

The Target has no cash transaction during the Relevant Period. Accordingly, no cash flow statement has been prepared.

2. BASIS OF PREPARATION

As at 31 December 2005, 2006 and 2007, the Target had net current liability of approximately RMB26,022,000, RMB25,087,000 and RMB23,385,000, respectively. The Financial Information has been prepared on the going concern basis as the Target has obtained the letter of support from the existing ultimate holding company, Outwit, and in the opinion of the directors of the Target, Outwit has sufficient funding to repay its financial obligations of the Target as they fall due for the foreseeable future.

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ACCOUNTANTS’ REPORT OF THE HK CO

APPENDIX IIB

3. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”)

HKAS 1 (Revised) Presentation of Financial Statements1 HKAS 23 (Revised) Borrowing Cost1 HKAS 27 (Revised) Consolidated and Separate Consolidated Financial Statements2 HKAS 32 and HKAS 1 Puttable Financial Instruments and Obligations Arising on (Amendments) Liquidation1 HKFRS 2 (Amendment) Share-based Payment — Vesting Conditions and Cancellations1 HKFRS 3 (Revised) Business Conbinations2 HKFRS 8 Operating Segments1 HK(IFRIC)-INT 11 HKFRS 2: Group and Treasury Share Transactions3 HK(IFRIC)-INT 12 Service Concession Arrangements4 HK(IFRIC)-INT 13 Customer Loyalty Programmes5 HK(IFRIC)-INT 14 HKAS 19 — The Limit on a Defined Benefit Asset, Minimum Funding Requirements and Their Interaction4

1 Effective for annual periods beginning on or after 1 January 2009.

2 Effective for annual periods beginning on or after 1 July 2009.

3 Effective for annual periods beginning on or after 1 March 2007.

4 Effective for annual periods beginning on or after 1 January 2008.

5 Effective for annual periods beginning on or after 1 July 2008.

4. SIGNIFICANT ACCOUNTING POLICIES

The Financial Information have been prepared on the historical cost basis, except for certain financial instruments, which are measured at fair values, as explained in the accounting policies set out below.

Investment in an associate

An associate is an entity over which the Target has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

The results and assets and liabilities of an associate are incorporated in the Financial Information using the equity method of accounting. Under the equity method, investment in an associate is carried in the balance sheet at cost as adjusted for post-acquisition changes in the Target’s share of the net assets of the associate, less any identified impairment loss. When the Target’s share of

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ACCOUNTANTS’ REPORT OF THE HK CO

APPENDIX IIB

losses of an associate equals or exceeds its interest in that associate (which includes any long-term interests that, in substance, form part of the Target’s net investment in the associate), the Target discontinues recognising its share of further losses. An additional share of losses is provided for and a liability is recognised only to the extent that the Target has incurred legal or constructive obligations or made payments on behalf of the associate.

Any excess of the cost of acquisition over the Target’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the investment.

Any excess of the Target’s shares of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

Where a group entity transacts with an associate of the Target, profits and losses are eliminated to the extent of the Target’s interest in the relevant associate.

Foreign currencies

For the purposes of presenting the Financial Information, the assets and liabilities of the Target are translated into the presentation currency of the Target’s foreign investment (i.e. RMB) at the rate of exchange prevailing at the balance sheet date, and their income and expenses are translated at the average exchange rates for the year. Exchange differences arising, if any, are recognised as a separate component of equity (the translation reserve). Such exchange differences are recognised in profit or loss in the period in which the foreign operation is disposed of.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the Relevant Period. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items of income and expense that are never taxable or deductible. The Target’s liability is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

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ACCOUNTANTS’ REPORT OF THE HK CO

APPENDIX IIB

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the Financial Information and the corresponding tax base used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are generally recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investment in an associate, except where the Target is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Impairment losses on tangible assets

Financial instruments

The Target did not have any financial assets as at each of the Relevant Period.

Financial liabilities are recognised on the Target’s balance sheet when the Target becomes a party to the contractual provisions of the instrument. Financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial liabilities (other than financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial liabilities, as appropriate, on initial recognition, transaction costs directly attributable to the acquisition of financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial liabilities and equity

An equity instrument is any contract that evidences a residual interest in the assets of the Target after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below.

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ACCOUNTANTS’ REPORT OF THE HK CO

APPENDIX IIB

Financial liabilities

Other financial liabilities

Other financial liability mainly including loan from a shareholder are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.

Effective interest method

Interest expenses is recognised on an effective interest basis.

Equity instruments

Equity instruments issued by the Target are recorded at the proceeds received, net of direct issue costs.

Derecognition

5. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Target has other financial instruments including loan from a shareholder.

The main risks arising from the Target’s financial instruments are foreign currency risk and liquidity risk. The directors review and agree policies for managing each of these risks and they are summarised below.

Foreign currency risk

Foreign currency risk refers to the risk that movement in foreign currency exchange rate which will affect the Target’s financial results and its cashflows. The loan from a shareholder is denominated in HK$ and is exposed to fluctuations in the value of RMB against HK$. Such HK$ denominated balance is exposed to fluctuations in the value of RMB against HK$ in which the loan from a shareholder is denominated. Any significant appreciation/depreciation of the RMB against the foreign currency may result in significant exchange gain/loss which would be recorded in the income statement.

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ACCOUNTANTS’ REPORT OF THE HK CO

APPENDIX IIB

Sensitivity analysis

The following table details the Target’s sensitivity to 5% increase and decrease in RMB against HK$ with all other variables were held constant. The Target’s profit the year for the Relevant Period would decrease/increase by approximately:

	5.3.2005 to	1.1.2006 to	1.1.2007 to
	31.12.2005	31.12.2006	31.12.2007
	RMB’000	RMB’000	RMB’000
Profit for the year	1,301	2,327	1,359

Liquidity risk

In the opinion of the directors, the Target is able to roll over the loan from shareholder on an annual basis and the Target expects to have adequate source of funding to finance the Target and manage the liquidity position.

Fair values of financial liabilities

The fair values of financial liabilities reported in the balance sheets approximate their carrying amounts due to their immediate or short-term maturities.

6. CAPITAL RISK MANAGEMENT

The Target manages its capital to ensure it will be able to continue as a going concern while maximising the return to registered owners through the optimisation of the debt and equity balance.

The capital structure of the Target consists of equity attributable to registered owners of the Target, comprising share capital, reserves and accumulated profits.

7. TURNOVER AND SEGMENT INFORMATION

The Target did not generate any turnover during the Relevant Period.

8. EMPLOYEE BENEFITS EXPENSES

(a) Directors’ emoluments

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ACCOUNTANTS’ REPORT OF THE HK CO

APPENDIX IIB

(b) Employee’s emolument

No staff was employed by the Target during the Relevant Period.

(c) During the Relevant Period, no emoluments were paid by the Target to the directors or employee as an inducement to join or upon joining the Target or as compensation for loss of office.
(d) No remuneration was paid to key management personnel during the Relevant Period.

9. TAXATION

No provision for Hong Kong Profits Tax had been provided for the Relevant Period as the Target has no assessable profits for the Relevant Period.

The tax charge for the Relevant Period can be reconciled to the profit per the income statements as follows:

Profit before tax Tax at the domestic income tax rate of 17.5% Tax effect of income not taxable for tax purposes Tax charge for the Relevant Period	5.3.2005 to 31.12.2005 RMB’000 1,804 316 (316) —	1.1.2006 to 31.12.2006 RMB’000 4,919 861 (861) —	1.1.2007 to 31.12.2007 RMB’000 4,983 872 (872) —

There are no material deferred taxation as at each of the balance sheet dates of the Relevant Period.

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ACCOUNTANTS’ REPORT OF THE HK CO

APPENDIX IIB

10. PROFIT FOR THE PERIOD/YEAR

Profit for the Relevant Period has been arrived at after charging:

Directors remuneration Auditors’ remuneration Share of tax of an associate (included in share of result of an associate) INVESTMENT IN AN ASSOCIATE Cost of investment in associate Share of post-acquisition profits	5.3.2005 to 31.12.2005 RMB’000 — — 210 As 2005 RMB’000 26,065 1,804 27,869	1.1.2006 to 31.12.2006 RMB’000 — — 21 at 31 December 2006 RMB’000 26,065 6,723 32,788	1.1.2007 to 31.12.2007 RMB’000 — — 293

			2007 RMB’000 26,065 11,706
			37,771

11. INVESTMENT IN AN ASSOCIATE

During the period ended 31 December 2005, the Target acquired 25% equity interests in Wuhan Grand Pharmaceutical Group Company Limited at a consideration of RMB26,065,000 and a discount on acquisition of approximately RMB679,000 has been resulted and included in the share of profit of an associate of the Target.

As at 31 December 2007, the Target had interests in the following associate:

		Proportion of
	Place of	equity interests
	registration/	held by the	Class of equity	Registered and	Principal
Name	operations	Target	interests held	paid-up capital	activities
Wuhan Grand	The PRC	25%	Contributed	RMB85,000,000	Manufacturing
Pharmaceutical			capital		and
Group Company					supplying
Limited					pharmaceutical
武漢遠大制藥					products in the
集團有限公司					PRC
(“Wuhan
Grand”)

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ACCOUNTANTS’ REPORT OF THE HK CO

APPENDIX IIB

Wuhan Grand was acquired by the Target in July 2005 from its registered owner. The results of Wuhan Grand after acquisition have been accounted for into the Target’s Financial Information by equity method of accounting.

The summarised audited financial information in respect of the Wuhan Grand’s associate is set out below:

Total assets Total liabilities Net assets Share of net assets of an associate Revenue Post acquisition profit for the Relevant Period Share of result of an associate for the Relevant Period	As 2005 RMB’000 342,105 (230,629) 111,476 27,869 5.3.2005 to 31.12.2005 RMB’000 339,571 4,499 1,125	at 31 December 2006 RMB’000 341,492 (210,339) 131,153 32,788 1.1.2006 to 31.12.2006 RMB’000 352,193 19,677 4,919	2007 RMB’000 343,697 (192,613)
			151,084

			37,771

			1.1.2007 to 31.12.2007 RMB’000 394,228

			19,931

			4,983

12. LOAN FROM A SHAREHOLDER

The amount is unsecured, non-interest bearing and repayable on demand.

The directors of the Target consider that the fair value of the amount at the respective balance sheet dates of the Relevant Period approximated to the carrying amount.

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ACCOUNTANTS’ REPORT OF THE HK CO

APPENDIX IIB

13. SHARE CAPITAL

Ordinary shares of HK$1 each Authorised: 10,000 ordinary shares of HK$1 each Issued and fully paid: Issued on date of incorporation, at 31 December 2005, 2006 and 2007 Shown in the Financial Information as at 31 December 2005, 2006 and 2007	Number of Shares 10,000 1	Amount HK$ 10,000

		1

		RMB 1

The Company was incorporated on 5 March 2005 with an authorised share capital of HK$10,000. On 5 March 2005, 1 ordinary share of HK$1 each was issued at par to the subscriber to provide the initial share capital of the Target.

14. RELATED PARTY TRANSACTIONS

(a) Except for the details disclosed elsewhere in the Financial Information, there are no other transactions with related parties during the Relevant Period.
(b) Compensation of key management personnel

The directors consider they are the only key management personnel of the Target and no remuneration has been paid to them during the Relevant Period.

II POST BALANCE SHEET EVENTS

On 6 March 2008, China Grand Enterprises Incorporation (“China Grand PRC”) (中國遠大集團有限責任公司) (as vendor, a company established in the PRC with limited liability) and the Target (as purchaser) entered into a sale and purchase agreement. Pursuant to the agreement, the Target agreed to acquire a further of 39,086,352 registered shares (the “Sale Shares”) from China Grand PRC in Wuhan Grand for a consideration of HK$66,768,300. The Sale Shares represented approximately 45.98% of the entire issued share capital of Wuhan Grand.

Upon the completion of the agreement, the Target’s equity interest in Wuhan Grand would be increased from the existing of 25% shareholdings to an aggregate of 70.98% shareholdings. Accordingly, Wuhan Grand will become a non-wholly owned subsidiary of the Target.

Details of which are set out in the announcement of Maxx dated 9 May 2008.

— 153 —

ACCOUNTANTS’ REPORT OF THE HK CO

APPENDIX IIB

III SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Target in respect of any period subsequent to 31 December 2007.

SHINEWING (HK) CPA Limited

Certified Public Accountants

Ip Yu Chak

Practising Certificate Number: P04798

Hong Kong

— 154 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

==> picture [232 x 61] intentionally omitted <==

23 June 2008

The Directors

Maxx Bioscience Holdings Limited

Dear Sirs,

We set out below our report on the financial information regarding Wuhan Grand Pharmaceutical Group Company Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Target Group”) for each of the three years ended 31 December 2005, 2006 and 2007 (the “Relevant Period”) (the “Financial Information”) for inclusion in a circular (the “Circular”) of Maxx Bioscience Holdings Limited (“Maxx”) dated 23 June 2008 (the “Circular”) in connection with the proposed acquisition of the entire issued share capital of Best Forward Group Limited and the proposed disposal of the entire equity interest of Bright Strong Profits Limited (the “Proposed Transactions”), details of which is set out in the Circular.

The Company was established in the People’s Republic of China (the “PRC”) with limited liability on 24 February 1990 with a registered share capital of RMB85,000,000. The principal activity of the Company and its subsidiaries are principally engaged in the manufacturing and supplying of pharmaceutical products in the PRC.

Particulars of the Company’s subsidiaries which are directly and indirectly owned by the Company, as at 31 December 2007 and the date of this report are as follows:

		Registered		Percentage of nominal	Percentage of nominal
		and	Class of	value of registered
	Place and date	paid-up	equity	capital held by the
Name	of incorporation	capital	interest held	Company		Principal activity
				Directly	Indirectly
武漢諾佳經濟	PRC	RMB1,050,000	Contributed	100%	—	Installation
發展有限公司	6 February 2001		capital			of chemical
(Wuhan Nuojia						equipments,
Economic						clothing
Development						washing, park
Co., Ltd.)						greenification,
						wholesale and
						retail of building
						materials,
						hardware and
						electric apparatus
						and daily general
						merchandise

— 155 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

		Registered		Percentage of nominal	Percentage of nominal	Percentage of nominal
		and	Class of	value of registered
	Place and date	paid-up	equity	capital held by the
Name	of incorporation	capital	interest held	Company			Principal activity
				Directly	Indirectly
武漢武葯制葯	PRC	RMB31,000,000	Contributed	97.10%	1.61%		Production and sale
有限公司	28 July 2002		capital				of pharmaceutical
(Wuhan Wuyao							raw material
Pharmaceutical							and chemicals
Co., Ltd.)							(excluding
							dangerous
							goods) and
							export of self-
							made products
							and related
							technologies
武漢天天明葯業有	PRC	RMB10,000,000	Contributed	97.3%		2.7%	R&D of biological
限責任公司	6 June 1996		capital				technologies,
(Wuhan Daily							medical
Clear Medicine							technologies and
Trade Co., Ltd.)							related products
							and provision of
							technical service,
							production of
							eye-drops
武漢武葯科技	PRC	RMB5,000,000	Contributed	94%		6%	Technology
有限公司	10 June 2003		capital				development,
(Wuhan Wuyao							transfer, service
Science &							and consulting
Technology Co.,							related to
Ltd.)							medicine,
							chemicals and
							medical apparatus
							and products
武漢捷越能源	PRC	RMB5,500,000	Contributed	99.09%	0.91%		Production of low-
有限公司	31 July 2002		capital				pressure saturated
(Wuhan Jieyue							steam and low-
Energy Co., Ltd.)							temperature
							water, metal
							structure
							processing,
							building repair,
							machinery repair
							and electric
							automation
							project

— 156 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

		Registered		Percentage of nominal	Percentage of nominal
		and	Class of	value of registered
	Place and date	paid-up	equity	capital held by the
Name	of incorporation	capital	interest held	Company		Principal activity
				Directly	Indirectly
武漢諾佳葯業	PRC	RMB3,000,000	Contributed	—	—	Deregistered on 31
設備安裝工程	6 March 2000		capital			December 2007
有限責任公司
武漢遠大化工	PRC	RMB2,000,000	Contributed	—	—	Deregistered on 31
水洗有限責任	24 September 2003		capital			July 2006
公司

The financial year end date of the companies now comprising the Target Group is 31 December.

The statutory financial statements of the Company and the companies now comprising the Target Group were prepared in accordance with the relevant accounting principles and financial regulations applicable to enterprises established in the PRC (“PRC GAAP”). For each of the years ended 31 December 2005 and 2007, the statutory financial statements of the Company and the companies now comprising the Target Group were audited by 武漢眾環會計師事務所有限責任公司 (Zhong Huan Certified Public Accountants), a Certified Public Accountants registered in the PRC, and for the year ended 31 December 2006, the statutory financial statements of the Company and the companies now comprising the Target Group were audited by 深圳市鵬城會計師事務所有限公司 (Shenzhen Pengcheng Certified Public Accountants), a Certified Public Accountants registered in the PRC.

For the purpose of this report, the directors of the Company have prepared the consolidated financial statements of the Target Group in accordance with the Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) for the Relevant Period (the “Underlying Financial Statements”).

We have undertaken an independent audit of the Underlying Financial Statements in accordance with the Hong Kong Standards on Auditing issued by the HKICPA.

The Financial Information of the Target Group for the Relevant Period set out in this report has been prepared from the Underlying Financial Statements for the purpose of preparing our report for inclusion in the Circular. No adjustment was deemed necessary to the Underlying Financial Statements in preparing our report for inclusion in the Circular.

— 157 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

We have examined the Underlying Financial Statements for the Relevant Period in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” as recommended by the HKICPA.

The directors of the Company are responsible for the preparation of the Underlying Financial Statements and the Financial Information of the Target Group which gives a true and fair view. In preparing the Financial Information, it is fundamental that appropriate accounting policies are selected and applied consistently, that the judgments and estimates made are prudent and reasonable and that the reasons for any significant departure from applicable accounting standards are stated.

In our opinion, the Financial Information, for the purpose of this report, gives a true and fair view of the state of affairs of the Company and the Target Group as at 31 December 2005, 2006 and 2007 and of the consolidated results and consolidated cash flows of the Target Group for the Relevant Period.

— 158 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

I. FINANCIAL INFORMATION

Consolidated Income Statement

Notes
Turnover
8
Cost of sales
Gross profit
Other income
12
Distribution costs
Administrative expenses
Other operating expenses
Finance costs
14
Gain on deregistration of a subsidiary
34
Profit before taxation
Taxation
15
Profit for the year
16
Attributable to:
Equity holders of the Company
Minority interests
Dividend
17

Year ended 31 December
2005
2006
2007
RMB’000
RMB’000
RMB’000
339,571
352,193
394,228
(219,252)
(226,030)
(248,684)
120,319
126,163
145,544
4,173
5,626
5,721
(61,130)
(53,265)
(62,936)
(40,680)
(51,389)
(60,682)
(970)
(699)
(645)
(6,301)
(6,704)
(5,905)
—
—
7
15,411
19,732
21,104
(1,136)
(85)
(1,173)
14,275
19,647
19,931
14,205
19,677
19,931
70
(30)
—
14,275
19,647
19,931
14,875
—
—

— 159 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

Consolidated Balance Sheet

Notes
NON-CURRENT ASSETS
Property, plant and equipment
18
Prepaid lease payments
— non-current portion
19
Intangible assets
20
Available-for-sale investments
22
CURRENT ASSETS
Inventories
23
Trade and bills receivables
24
Deposits, prepayments and other
receivables
25
Prepaid lease payments
— current portion
19
Tax recoverable
Amount due from a shareholder
27
Bank balances and cash
28
CURRENT LIABILITIES
Trade and bills payables
29
Other payables and accruals
Tax payable
Short-term bank borrowings
30
NET CURRENT LIABILITIES
NET ASSETS
CAPITAL AND RESERVES
Registered capital
31
Reserves
Equity attributable to equity holders
of the Company
Minority interests
TOTAL EQUITY

As at 31 December
2005
2006
2007
RMB’000
RMB’000
RMB’000
112,820
107,115
106,165
53,634
74,657
73,840
1,120
2,632
1,844
19,232
19,036
23,755
186,806
203,440
205,604
45,906
43,608
44,123
43,769
40,586
43,116
11,113
6,283
9,041
1,234
1,689
1,707
—
186
—
41
41
41
53,236
45,659
40,065
155,299
138,052
138,093
81,740
72,941
62,068
48,938
50,072
55,988
340
—
838
98,600
86,600
73,000
229,618
209,613
191,894
(74,319)
(71,561)
(53,801)
112,487
131,879
151,803
85,000
85,000
85,000
26,476
46,153
66,084
111,476
131,153
151,084
1,011
726
719
112,487
131,879
151,803

— 160 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

Balance Sheet of the Company

Notes NON-CURRENT ASSETS Property, plant and equipment 18 Prepaid lease payments — non-current portion 19 Investments in subsidiaries 21 Available-for-sale investments 22 CURRENT ASSETS Inventories 23 Trade and bills receivables 24 Deposits, prepayments and other receivables 25 Prepaid lease payments — current portion 19 Amounts due from subsidiaries 26 Amount due from a shareholder 27 Bank balances and cash 28 CURRENT LIABILITIES Trade and bills payables 29 Other payables and accruals Tax payable Amounts due to subsidiaries 26 Short-term bank borrowings 30 NET CURRENT LIABILITIES NET ASSETS CAPITAL AND RESERVES Registered capital 31 Reserves 32 TOTAL EQUITY	2005 RMB’000 75,038 53,634 53,550 1,809 184,031 16,461 28,461 6,057 1,234 25,759 41 50,606 128,619 55,408 36,526 6 19,470 98,600 210,010 (81,391) 102,640 85,000 17,640 102,640	2006 RMB’000 71,300 74,657 53,550 1,613 201,120 13,123 35,140 2,364 1,689 32,560 41 32,182 117,099 51,799 39,911 6 14,074 86,600 192,390 (75,291) 125,829 85,000 40,829 125,829	2007 RMB’000 69,346 73,840 50,973 1,416 195,575 16,192 38,078 5,776 1,707 18,091 41 39,356 119,241 42,656 45,128 1,031 4,486 73,000 166,301 (47,060) 148,515 85,000 63,515 148,515

— 161 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

Consolidated Statement of Changes in Equity

Attributable to equity holders of the Company	Attributable to equity holders of the Company	Attributable to equity holders of the Company	Attributable to equity holders of the Company	Minority interests Total equity RMB’000 RMB’000 1,101 113,247 — — - (14,875) (160) (160) 70 14,275 1,011 112,487 — — (255) (255) (30) 19,647 726 131,879 — — (7) (7) — 19,931 719 151,803
Paid-up capital RMB’000 85,000 — — — — 85,000 — — — 85,000 — — — 85,000	Capital reserve RMB’000 4,571 — — — — 4,571 — — — 4,571 — — — 4,571	Statutory surplus reserve RMB’000 4,244 2,335 — — — 6,579 2,237 — — 8,816 2,174 — — 10,990	Acc- umulated profits RMB’000 18,331 (2,335) (14,875) — 14,205 15,326 (2,237) — 19,677 32,766 (2,174) — 19,931 50,523
				112,487 — (255) 19,647
				131,879 — (7) 19,931
				151,803

— 162 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

Consolidated Cash Flow Statement

OPERATING ACTIVITIES
Profit before taxation
Adjustments for:
Bank interest income
Interest income received from debt
security
Interest expenses
Depreciation on property, plant and
equipment
Gain on deregistration of a subsidiary
Allowances on inventories
Write-back allowance on inventories
Impairment loss on trade and other
receivables
Write-back of impairment loss on trade
and other receivables
Loss on disposal of plant and equipment,
net
Amortisation of prepaid lease payments
Amortisation of intangible assets
Impairment loss recognised on plant and
equipment
Operating cash flows before movements in
working capital
(Increase) decrease in inventories
Increase in trade and bills receivables
(Increase) decrease in deposits, prepayment
and other receivables
Increase (decrease) in trade and bills
payables
(Decrease) increase in other payables and
accruals
Cash from operations
Income tax paid
NET CASH FROM OPERATING
ACTIVITIES

Year ended 31 December
2005
2006
2007
RMB’000
RMB’000
RMB’000
15,411
19,732
21,104
(399)
(353)
(381)
(95)
(62)
(39)
6,301
6,704
5,905
9,252
11,289
10,001
—
—
(7)
98
519
378
(4)
—
(79)
4,552
4,903
5,094
(24)
(243)
(484)
194
97
264
1,234
1,272
1,709
548
788
788
24
—
—
37,092
44,646
44,253
(6,957)
1,779
(814)
(3,048)
(1,003)
(7,498)
(2,366)
4,356
(2,400)
5,063
(8,799)
(10,866)
(4,308)
1,134
5,916
25,476
42,113
28,591
(427)
(611)
(149)
25,049
41,502
28,442

— 163 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

INVESTING ACTIVITIES
Purchase of property, plant and equipment
Purchases of prepaid lease payments
Purchases of intangible assets
Acquisition of available-for-sale investments
Acquisition of additional interest in
subsidiaries
Repayment of amount due from holding
company
Proceeds from disposal of property, plant
and equipment
Proceeds from disposal of available-for-sale
investments
Interest received
NET CASH (USED IN) INVESTING
ACTIVITIES
FINANCING ACTIVITIES
New short-term bank borrowings raised
Repayment of short-term bank borrowings
Dividend paid
Interest paid
NET CASH FROM (USED IN)
FINANCING ACTIVITIES
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT
THE BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS AT
THE END OF YEAR,
represented by bank balances and cash

Year ended 31 December
2005
2006
2007
RMB’000
RMB’000
RMB’000
(11,509)
(8,416)
(10,037)
—
(22,750)
(910)
—
(2,300)
—
—
—
(4,719)
(160)
(255)
(7)
(3,000)
—
—
3,696
2,735
722
381
196
—
494
415
420
(10,098)
(30,375)
(14,531)
145,040
86,600
73,000
(133,040)
(98,600)
(86,600)
(4,316)
—
—
(6,301)
(6,704)
(5,905)
1,383
(18,704)
(19,505)
16,334
(7,577)
(5,594)
36,902
53,236
45,659
53,236
45,659
40,065

— 164 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

Notes to the Financial Information

1. GENERAL INFORMATION

The Company was established in the PRC with limited liability on 24 February 1990. The address of the registered office and principal place of business of the Company is located at No. 5 Gutian Road, Qiaokou District, Wuhan, Hubei Province, the PRC.

The Financial Information of the Relevant Period is presented in Renminbi (“RMB”), which is the same as the functional currency of the Target Group.

The principal activity of the Company and its subsidiaries are mainly engaged in the manufacturing and supplying of pharmaceutical products in the PRC.

The directors consider that China Grand Enterprises Incorporation, a state-owned enterprise established in the PRC, to be the Company’s holding company.

2. BASIS OF PREPARATION

As at 31 December 2005, 2006 and 2007, the Target Group had net current liabilities of approximately RMB74,319,000, RMB71,561,000 and RMB53,801,000, respectively. The Financial Information has been prepared on the going concern basis as the Target Group has obtained the letter of support from Outwit Investments Limited (“Outwit”) the new ultimate holding company upon the completion of the Proposed Transactions of the Company and in the opinion of the directors of the Company, Outwit has sufficient funding to repay its financial obligations of the Company as they fall due for the foreseeable future.

In additions, the ultimate beneficial owner of Outwit will ensure Outwit to have sufficient funding to repay in full its financial obligations as they fall due for the foreseeable future upon the completion of the acquisition of the entire share capital of Best Forward Group Limited.

— 165 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

3. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”)

At the date of this report, the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) issued the following new and revised HKFRSs, Hong Kong Accounting Standards (“HKAS”) and interpretations (hereinafter collectively referred to as “new HKFRSs”) that have been effective. However, the Target Group has not early applied these new and revised standards or interpretations (“HK(IFRIC)-INTs”) that have been issued but are not yet effective as at the date of this report. The directors of the Company anticipate that the application of these new HKFRSs will have no material impact on the results and the financial position of the Target Group.

HKAS 1 (Revised) Presentation of Financial Statements1 HKAS 23 (Revised) Borrowing Cost1 HKAS 27 (Revised) Consolidated and Separate Consolidated Financial Statements2 HKAS 32 and HKAS 1 Puttable Financial Instruments and Obligations Arising on (Amendments) Liquidation1 HKFRS 2 (Amendment) Share-based Payment — Vesting Conditions and Cancellations1 HKFRS 3 (Revised) Business Conbinations2 HKFRS 8 Operating Segments1 HK(IFRIC)-INT 11 HKFRS 2: Group and Treasury Share Transactions3 HK(IFRIC)-INT 12 Service Concession Arrangements4 HK(IFRIC)-INT 13 Customer Loyalty Programmes5 HK(IFRIC)-INT 14 HKAS 19 — The Limit on a Defined Benefit Asset, Minimum Funding Requirements and Their Interaction4

1 Effective for annual periods beginning on or after 1 January 2009.
2 Effective for annual periods beginning on or after 1 July 2009.
3 Effective for annual periods beginning on or after 1 March 2007.
4 Effective for annual periods beginning on or after 1 January 2008.
5 Effective for annual periods beginning on or after 1 July 2008.

4. SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidation

The Financial Information incorporates the financial statements of the Company and entities controlled by the Company (“its subsidiaries”). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

— 166 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

The results of subsidiaries acquired or disposed of during the Relevant Period are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Target Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Minority interests in the net assets of consolidated subsidiaries are presented separately from the Target Group’s equity therein. Minority interests in the net assets consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the Target Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses. The Target Group applies a policy of treating transactions with minority interests as transactions with equity owners of the Target Group.

Investments in subsidiaries

A subsidiary is an entity that is controlled by the Company, where the Company has the power to govern the financial and operating policies of such entity so as to obtain benefits from its activities.

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

Borrowings costs

All borrowing costs are recognised as and included in finance costs in the consolidated income statement in the period in which they are incurred.

Revenue recognition

Revenue is measured at the fair value of the consideration received and receivable.

Revenue from sale of goods is recognised when the goods are delivered and title has passed.

Rental income is recognised on a straight-line basis over the term of the leases.

Interest income from a financial asset is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

— 167 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the Relevant Period. Taxable profit differs from profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other periods, and it further excludes items of income or expense that are never taxable or deductible. The Target Group’s liability is calculated using tax rates that have been enacted or substantially enacted by the balance sheet date.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the Financial Information and the corresponding tax base used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associate, except where the Target Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Property, plant and equipment

Property, plant and equipment are stated at cost less subsequent accumulated depreciation and any accumulated impairment losses.

Depreciation is provided to write off the cost of items of property, plant and equipment over their estimated useful lives and after taking into account their estimated residual value, using the straight-line method.

Construction in progress includes property, plant and equipment in the course of construction for production or for its own use purposes. Construction in progress is carried at cost less any recognised impairment loss. Construction in progress is classified to the appropriate category of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the consolidated income statement in the period in which the item is derecognised.

— 168 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

Intangible assets

Intangible assets acquired separately

Intangible asset acquired separately and with finite useful lives are carried at costs less accumulated amortisation and any accumulated impairment losses. Amortisation for intangible assets with finite useful lives is provided on a straight-line basis over their estimated useful lives. Alternatively, intangible assets with indefinite useful lives are carried at cost less any subsequent accumulated impairment losses (see the accounting policy in respect of impairment losses on tangible and intangible assets below).

Gains or losses arising from dereocognition of an intangible asset are measured at the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the consolidated income statement when the asset is derecognised.

Research and development expenditure

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

An internally-generated intangible asset from development expenditure is recognised only if it is anticipated that the development costs incurred on a clearly-defined project will be recovered through future commercial activity. The resultant asset is amortised on a straight-line basis over its useful life, and carried at cost less subsequent accumulated amortisation and any accumulated impairment losses.

Land use rights

Payment for obtaining land use rights is considered as operating lease payment. Land use rights are stated at cost less accumulated amortisation and accumulated impairment losses, amortisation is charged to consolidated income statement over the period of the rights using the straight-line method.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average method.

— 169 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

Financial instruments

Financial assets and financial liabilities are recognised on the balance sheet when a target group entity becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets

The Target Group’s financial assets are mainly financial assets at loans and receivables and available-for-sale financial assets. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. The accounting policies adopted in respect of each category of financial assets are set out below.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. At each balance sheet date subsequent to initial recognition, loans and receivables (including trade and bills receivables, deposits, prepayments and other receivables, amount due from a shareholder and bank balances) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment loss on financial assets below).

Effective interest method

Income is recognised on an effective basis for debt instruments.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated or not classified as financial assets at fair value through profit or loss, loans and receivables or held-to-maturity investments. At each balance sheet date subsequent to initial recognition, available-for-sale financial assets are measured at fair value. Changes in fair value are recognised in equity, until the financial asset is disposed of or is determined to be impaired, at which time, the cumulative gain or loss previously recognised in equity is removed from equity and recognised in profit or loss (see accounting policy on impairment loss on financial assets below).

For available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity instruments, they are measured at cost less any identified impairment losses at each balance sheet date subsequent to initial recognition (see accounting policy on impairment loss on financial assets below).

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APPENDIX III

Impairment loss of financial assets

For an available-for-sale equity investment, a significant or prolonged decline in the fair value of that investment below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty; or
default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

For certain categories of financial asset, such as trade and bills receivables, and other receivables, assets that are not assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Target Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with default on trade and bills receivables, and other receivables.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade and bills receivables and other receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a trade and bills receivables and other receivables, is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

Impairment losses on available-for-sale equity investments will not be reversed in profit or loss in subsequent periods. Any increase in fair value subsequent to impairment loss is recognised directly in equity.

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APPENDIX III

Financial liabilities and equity

Financial liabilities and equity instruments issued by a target group entity are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

An equity instrument is any contract that evidences a residual interest in the assets of the Target Group after deducting all of its liabilities. The Target Group’s financial liabilities are mainly other financial liabilities. The accounting policies adopted in respect of other financial liabilities and equity instruments are set out below:

Financial liabilities

Other financial liabilities

Other financial liabilities including trade and bills payable, other payables and accruals, and short-term bank borrowings are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.

Effective interest method

Interest expense is recognised on an effective interest basis.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the assets expire or, the financial assets are transferred and the Target Group has transferred substantially all the risks and rewards of ownership of the financial assets. On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received or receivable and the cumulative gain or loss that had been recognised directly in equity is recognised in profit or loss. If the Target Group retains substantially all the risks and rewards of ownership of a transferred assets, the Target Group continues to recognise the financial asset and recognise a collateralised borrowing for proceeds received.

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APPENDIX III

Impairment losses on tangible and intangible assets

At each balance sheet date, the Target Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. In addition, intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is an indication that they may be impaired. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Foreign currencies

In preparing the Financial Information of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recorded in its functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in profit or loss in the period in which they arise, except for exchange differences arising on a monetary item that forms part of the Company’s net investment in a foreign operation, in which case, such exchange differences are recognised in equity in the consolidated financial statements. Exchange differences arising on the retranslation of nonmonetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity, in which cases, the exchange differences are also recognised directly in equity.

For the purposes of presenting the Financial Information, the assets and liabilities of the Target Group’s foreign operations are translated into the presentation currency of the Target Group (i.e. RMB) at the rate of exchange prevailing at the balance sheet date, and their income and expenses are translated at the average exchange rates for the year. Exchange differences arising, if any, are recognised as a separate component of equity (the translation reserve). Such exchange differences are recognised in profit or loss in the period in which the foreign operation is disposed of.

Operating leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

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ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

The Target Group as lessor

The Target Group as lessee

Government grants

Government grants are not recognised until there is reasonable assurance that the Company will comply with the conditions attaching to them and the grants will be received.

The Company’s government grants are recognised as income over the periods necessary to match them with the costs for which they are intended to compensate, on a systematic basis. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related costs are recognised in profit or loss in the period in which they become receivable.

Retirement benefits costs

Payments to the defined state-managed retirement benefits schemes are charged as an expense when employees have rendered service entitling them to the contributions.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Target Group’s accounting policies, which are described in note 4, the directors of the Company are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Allowance for inventories

The management of the Target Group reviews an aging analysis at each balance sheet date, and makes allowance for obsolete and slow-moving inventory items. The management estimates the net realisable value for such items based primarily on the latest invoice prices and current market conditions. The Company carries out an inventory review on a product-by-product basis at each balance sheet date and makes allowance for obsolete items.

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APPENDIX III

Income taxes

Determining income tax provisions involves judgment on the future tax treatment of certain transactions. The Target Group carefully evaluates tax implications of transactions and tax provisions are set up accordingly. The tax treatment of such transactions is reconsidered periodically to take into account all changes in tax legislations. Where the final tax outcome of these transactions is different from the amounts that were initially recorded, such differences will affect the income tax and deferred tax provisions in the period in which such determination is made.

Depreciation of property, plant and equipment

The Target Group’s net carrying values of property, plant and equipment as at 31 December 2005, 2006 and 2007 are approximately RMB112,820,000, RMB107,115,000 and RMB106,165,000 respectively. The Target Group depreciates the property, plant and equipment over the estimated useful lives and after taking into account of their estimated residual values, using the straight-line method, depreciating at the rate of 8 to 40 years, commencing from the date the property, plant and equipment when they are available for use. The estimated useful lives that the Target Group places the property, plant and equipment into productive use reflects the directors’ estimate of the periods that the Target Group intend to derive future economic benefits from the use of the Target Group’s property, plant and equipment.

Impairment of property, plant and equipment

The impairment loss for property, plant and equipment is recognised for the amounts by which the carrying amounts exceed its recoverable amount, in accordance with the Target Group’s accounting policy. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. The Target Group has assessed and reviewed annually for impairment loss whenever events or change in circumstances indicate that the carrying amount may not be recoverable. During the year ended 31 December 2005, impairment loss of approximately RMB24,000 was recognised in the consolidated income statement. No impairment loss was provided during the two years ended 31 December 2006 and 2007.

Impairment of trade receivables

The policy for impairment of trade receivables of the Target Group is based on the evaluation of collectability and ageing analysis of the trade receivables and on management’s judgment. A considerable amount of judgment is required in assessing the ultimate realisation of these trade receivables, including the current creditworthiness and the past collection history of each customer. If the financial conditions of customers of the Target Group were to deteriorate, resulting in impairment of their ability to make payments, additional impairment may be required.

Estimate of fair value of other intangible assets

Determining whether other intangible assets are impaired requires an estimation of the value-inuse of cash-generating units to which other intangible assets have been allocated. The value-in-use calculation requires the Target Group to estimate the future cash flows expected to arise from the cash-generating units and a suitable discount rate in order to calculate the present value. When the actual future cash flows are less than expected, a material impairment loss may arise.

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ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

6. CAPITAL RISK MANAGEMENT

The Target Group manages its capital to ensure that entities in the Target Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance.

The capital structure of the Target Group consists of equity attributable to equity holders of the Company, comprising share capital and reserves.

The directors of the Company review the capital structure periodically. As part of this review, the directors of the Company consider the cost of capital and risks associated with each class of capital. The Target Group will balance its over capital structure through raise of new loans or repayment of existing loans. No changes were made in the objectives, policies or processes during the Relevant Period.

7. FINANCIAL INSTRUMENTS

7a. Financial risk management objectives and policies

The Target Group’s major financial instruments include equity investments, bank borrowings, trade and bills receivables, other receivables, amount due from a shareholder, bank balances, trade and bills payables and other payables. Details of the financial instruments are disclosed in respective notes. The risks associated with these financial instruments include market risk (foreign currency risk and interest rate risk), credit risk and liquidity risk. The policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Credit risk

As at 31 December 2007, the Target Group’s maximum exposures to credit risk which will cause a financial loss to the Target Group due to failure to discharge an obligation by the counterparties is arising from the carrying amount of the respective recognised financial assets as stated in the consolidated balance sheet.

The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies.

The Target Group’s concentration of credit risk by geographical locations is mainly in the PRC, which accounted for approximately 70% (2005: 91%, 2006: 91%) of the total trade receivables as at 31 December 2007.

Other than concentration of credit risk on liquid funds which are deposited with several banks with high credit ratings, the Target Group does not have any other significant concentration of credit risk. Trade receivables consist of a large number customers, spread across diverse industries and geographical areas.

The Target Group has policies in place to ensure that sale of products are made to customers with an appropriate credit history. The Target Group also performs periodic credit evaluations of its customers and believes that adequate impairment loss or trade receivables have been made in the consolidated financial statements.

The bank balances were deposited in banks with high crediting, thus the credit risk on these balances is limited.

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ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

Market risk

Foreign Currency risk

The Target Group mainly operates in the PRC. Revenue and majority of its operating costs and cost of sales are denominated in RMB. Certain bank balances and trade receivables are denominated in the United States dollars (“USD”). Such USD denominated balances are exposed to fluctuations in the value of RMB against USD in which these bank balances and trade receivables are denominated. Any significant appreciation/depreciation of the RMB against the foreign currency may result in significant exchange gain/loss which would be recorded in the consolidated income statement.

Sensitivity analysis

The following table details the Target Group’s sensitivity to 5% increase and decrease in RMB against USD with all other variables were held constant. The Target Group’s profit the year for the Relevant Period would decrease/increase by approximately:

	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Profit for the year	330	401	886

Interest rate risk

The Target Group has interest-bearing assets mainly in the form of bank balances, but the Target Group’s income and operating cash flows are substantially independent of changes in market interest rates.

The interest rate risk arises from bank borrowings. The short-term bank borrowings are interest bearing at fixed rates between 5.85% — 7.23% (2005: 5.31% — 6.25%, 2006: 5.74% — 6.43%) and are repayable according to the contract terms.

Liquidity risk

In the management of the liquidity risk, the Target Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Target Group’s operations and to maintain a balance between continuity of funding and flexibility through the use of bank borrowings.

In the opinion of the directors, most of the borrowings that mature within one year are able to renew on an annual basis at the discretion of the Target Group within limit approved by banks and the Target Group expects to have adequate source of funding to finance the Target Group and manage the liquidity position.

The following table details the Target Group’s resulting contractual maturity for its financial liabilities. For non-derivative financial liabilities, the table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Target Group can be required to pay.

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ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

At 31 December 2005

Trade and bills payables Other payables Short-term bank borrowings At 31 December 2006 Trade and bills payables Other payables Short-term bank borrowings At 31 December 2007 Trade and bills payables Other payables Short-term bank borrowings	Within 1 year Total undiscounted cash flows Carrying amount at 31 December 2005 RMB’000 RMB’000 RMB’000 81,740 81,740 81,740 41,923 41,923 41,923 101,851 101,851 98,600 225,514 225,514 222,263 Within 1 year Total undiscounted cash flows Carrying amount at 31 December 2006 RMB’000 RMB’000 RMB’000 72,941 72,941 72,941 44,122 44,122 44,122 88,991 88,991 86,600 206,054 206,054 203,663 Within 1 year Total undiscounted cash flows Carrying amount at 31 December 2007 RMB’000 RMB’000 RMB’000 62,068 62,068 62,068 37,240 37,240 37,240 74,875 74,875 73,000 174,183 174,183 172,308	Within 1 year Total undiscounted cash flows Carrying amount at 31 December 2005 RMB’000 RMB’000 RMB’000 81,740 81,740 81,740 41,923 41,923 41,923 101,851 101,851 98,600 225,514 225,514 222,263 Within 1 year Total undiscounted cash flows Carrying amount at 31 December 2006 RMB’000 RMB’000 RMB’000 72,941 72,941 72,941 44,122 44,122 44,122 88,991 88,991 86,600 206,054 206,054 203,663 Within 1 year Total undiscounted cash flows Carrying amount at 31 December 2007 RMB’000 RMB’000 RMB’000 62,068 62,068 62,068 37,240 37,240 37,240 74,875 74,875 73,000 174,183 174,183 172,308
		172,308

7b. Fair value

The fair value of financial assets and financial liabilities are determined as follows:

The fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market bid prices and ask prices respectively; and
The fair value of other financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices or rates from observable current market transactions as input.

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ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

The directors of the Company consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the Financial Information approximate their fair values.

The directors of the Company consider the fair values of other receivables, other payables and amount due to a shareholder reported in the Financial Information approximate their carrying amounts due to their immediate or short-term maturities.

The directors of the Company consider that the carrying amounts of bank and other borrowings approximate their fair values because of the borrowing rate currently available for bank and other borrowings with similar terms and maturities.

7c. Categories of financial instruments

Financial assets Loans and receivables (including cash and cash equivalents) Trade and bills receivables Other receivables and deposits Amount due from a shareholder Bank balances and cash Available-for-sale financial assets Financial liabilities Financial liabilities measured at amortised cost Trade and bills payables Other payables Short-term bank borrowings	2005 RMB’000 43,769 11,031 41 53,236 108,077 19,232 81,740 41,923 98,600 222,263	2006 RMB’000 40,586 6,174 41 45,659 92,460 19,036 72,941 44,122 86,600 203,663	2007 RMB’000 43,116 8,966 41 40,065
			92,188

			23,755

			62,068 37,240 73,000
			172,308

8. TURNOVER

The Target Group is principally engaged in the manufacturing and supplying of pharmaceutical products.

	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Sales of pharmaceutical products	339,571	352,193	394,228

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ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

9. SEGMENT INFORMATION

Business segments

The Target Group’s revenues, expenses, assets, liabilities and capital expenditures are primarily attributable to the manufacturing and supplying of pharmaceutical products. The directors consider that there is only one business segment for the Target Group, accordingly, no business segment information is presented.

Geographical segments

During the Relevant Period, all of the Target Group’s assets are located in the PRC.

The following table provides analysis of the Target Group’s turnover by the geographical area:

For the year ended 31 December 2005: Segment revenue As at 31 December 2005: Segment assets For the year ended 31 December 2005: Capital expenditure For the year ended 31 December 2006: Segment revenue As at 31 December 2006: Segment assets For the year ended 31 December 2006: Capital expenditure	The PRC RMB’000 278,221 339,003 11,509 The PRC RMB’000 278,764 337,955 33,466	Asia other than the PRC RMB’000 26,099 156 — Asia other than the PRC RMB’000 24,989 299 —	America RMB’000 14,066 — — America RMB’000 20,301 1,310 —	Europe RMB’000 18,620 899 — Europe RMB’000 23,652 1,848 —	Other RMB’000 2,565 2,095 — Other RMB’000 4,487 80 —	Total RMB’000 339,571

						342,153

						11,509

						Total RMB’000 352,193

						341,492

						33,466

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ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

For the year ended 31 December 2007: Segment revenue As at 31 December 2007: Segment assets For the year ended 31 December 2007: Capital expenditure	The PRC RMB’000 311,794 329,590 10,947	Asia other than the PRC RMB’000 26,183 2,223 —	America RMB’000 35,859 6,849 —	Europe RMB’000 12,689 936 —	Other RMB’000 7,703 4,099 —	Total RMB’000 394,228

						343,697

						10,947

10. DIRECTORS’ EMOLUMENTS

The details of directors’ remuneration of each of the directors during the Relevant Period are set out below:

For the year ended 31 December 2005:

Name of Director Xieguofan Zhoujianzhong Shixiaofeng Chenbin_(note) Liuchengwei WangKe Zhongming(note) Wenzhaowen(note) Yangaisheng(note) Wangxianbin Zhangpeiyuan Total for 2005 _Note:	Fees RMB’000 — — — — — — — — — — — —	Salaries and other benefits RMB’000 198 200 214 201 — — — — — — — 813	Retirement benefit scheme contributions RMB’000 3 — — 6 — — — — — — — 9	Total RMB’000 201 200 214 207 — — — — — — —
				822

Resigned on 17 March 2006.

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ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

For the year ended 31 December 2006:

Name of Director Fees RMB’000 Xieguofan — Zhoujianzhong — Shixiaofeng — Liuchengwei — WangKe — Wangxianbin — Zhangpeiyuan — Total for 2006 — For the year ended 31 December 2007: Name of Director Fees RMB’000 Xieguofan — Zhoujianzhong — Shixiaofeng — Liuchengwei — WangKe — Wangxianbin — Zhangpeiyuan — Total for 2007 —	Salaries and other benefits Retirement benefit scheme contributions RMB’000 RMB’000 180 4 219 — 169 — — — — — — — — — 568 4 Salaries and other benefits Retirement benefit scheme contributions RMB’000 RMB’000 290 4 298 — 266 — — — — — — — — — 854 4	Total RMB’000 184 219 169 — — — —
		572

		Total RMB’000 294 298 266 — — — —
		858

No directors waived or agreed to waive any emolument paid by the Company during the Relevant Period. No emolument were paid by the Target Group to any directors as an incentive payment for joining the Company or as compensation for loss of office during the Relevant Period.

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ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

11. DIRECTORS’ REMUNERATIONS AND FIVE HIGHEST PAID EMPLOYEES

Five highest paid employees

Of the five individuals with the highest emoluments in the Group, one (2005: three, 2006: three) were directors of the Company whose emoluments are set out above. The emoluments of the resulting four (2005: two, 2006: two) highest paid individuals were as follows:

Salaries and other benefits Contributions to retirement benefit scheme	2005 RMB’000 326 — 326	2006 RMB’000 344 5 349	2007 RMB’000 1,311 11
			1,322

The emoluments of the four (2005: two, 2006: two) highest paid employees fall in the following bands:

	2005	2006	2007
	Number of	Number of	Number of
	employees	employees	employees
Nil to RMB1,000,000	2	2	4

No emoluments have been paid by the Group to any directors of the Company or the five highest paid individuals as an inducement to join or upon joining the Group, or as compensation for loss of office in any of the three years ended 31 December 2005, 2006 and 2007.

12. OTHER INCOME

Sales of raw materials, scraps and other materials Bank interest income Interest income received from debt security Compensation income received Subsidies from PRC government (Note 39) Gain on disposal of property, plant and equipment Write-back allowance on inventories Write-back of impairment loss on trade and other receivables Others	2005 RMB’000 1,879 399 95 330 1,223 90 4 24 129 4,173	2006 RMB’000 306 353 62 372 4,182 68 — 243 40 5,626	2007 RMB’000 456 381 39 283 3,163 7 79 484 829
			5,721

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ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

13. STAFF COSTS (INCLUDING DIRECTORS’ EMOLUMENTS)

Salaries and allowances Contributions to retirement benefits scheme 14. FINANCE COSTS Interest expense on short-term bank borrowings 15. TAXATION Current tax PRC Underprovision in prior years	2005 RMB’000 13,737 2,194 15,931 2005 RMB’000 6,301 2005 RMB’000 148 988 1,136	2006 RMB’000 13,609 2,169 15,778 2006 RMB’000 6,704 2006 RMB’000 85 — 85	2007 RMB’000 20,094 2,427
			22,521

			2007 RMB’000 5,905

			2007 RMB’000 1,173 —
			1,173

No provision for Hong Kong Profits Tax has been made as the Target Group’s income neither arises in, nor is derived from, Hong Kong for the Relevant Period.

The provision for PRC current enterprise income tax (“EIT”) is calculated based on the statutory income tax rate of 33% (2005: 33%, 2006: 33%) of the assessable income of the Target Group as determined in accordance with the relevant PRC income tax rules and regulations for the year except for the Company established in the PRC which had changed its legal status from a domestic enterprise to a foreign investment enterprise in the middle of 2005. In light of the above, the Company subject to foreign enterprise income tax (“FEIT”) from August 2005 onwards. In addition, the Company was exempted from FEIT for the two years starting from 2005 and is entitled to a 50% reduction on the FEIT for the following three years in accordance with Article 8 of Income Tax Law of the People’s Republic of China for enterprises with Foreign Investment and Foreign Enterprises. All corresponding EIT relating to the taxable profit during the Relevant Period have been recognised in the consolidated income statement.

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ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

The taxation for the Relevant Period can be reconciled to the profit per the consolidated income statement as follows:

2005 RMB’000 Profit before taxation 15,411 Tax at the domestic income tax rate of 33% 5,086 Tax effect of expenses not deductible for tax purpose 2,438 Tax effect of income not taxable for tax purpose (2,208) Tax effect on preferential tax rate (5,214) Tax effect of tax losses not recognised 46 Underprovision in previous years 988 Taxation for the Relevant Period 1,136 Details of deferred taxation are set out in note 33.	2006 RMB’000 19,732 6,512 2,957 (1,440) (7,962) 18 — 85	2007 RMB’000 21,104
		6,964 3,355 (1,537) (7,781) 172 —
		1,173

During the 5th Session of the 10th National People’s Congress, which was concluded on 16 March 2007, the PRC Corporate Income Tax Law (the “New Corporate Income Tax Law”) was approved and will become effective on 1 January 2008. The New Corporate Income Tax Law introduces a wide range of changes which include, but are not limited to, the unification of the income tax rate for domestic-invested and foreign-invested enterprises at 25%. The subsidiaries which are enjoying the tax holiday will continue until expiry while the preferential tax rates disclosed above will continue after the New Corporate Income Tax Law. The tax rate of the subsidiaries of which are now subjected to tax rate of 33% will change to 25% from 1 January 2008.

16. PROFIT FOR THE YEAR

Profit for the year is arrived at after charging:

	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Profit for the year has been arrived at
after charging:
Auditor remuneration	104	91	71
Cost of inventories recognised as an
expense	219,252	226,030	248,684
Depreciation of property, plant and
equipment	9,252	11,289	10,001
Amortisation of prepaid lease payments	1,234	1,272	1,709
Amortisation of intangible assets	548	788	788
Loss on disposal of property, plant and
equipment	284	165	271
Research and development expenses	2,395	1,565	1,080
Impairment loss recognised on trade and
other receivables	4,552	4,903	5,094
Impairment loss recognised on property,
plant and equipment	24	—	—
Allowances for inventories	98	519	378
Net exchange loss	190	564	3,276
Operating lease charges in respect of
rented premises	207	291	302

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

17. DIVIDEND

A dividend of RMB14,875,000 for the year ended 31 December 2005 has been declared and paid to the registered owners of the Company during the year ended 31 December 2005. No dividend was paid or proposed during the two years ended 31 December 2006 and 2007.

18. PROPERTY, PLANT AND EQUIPMENT

The Group COST At 1 January 2005 Additions Disposals Transfer from construction-in-progress At 31 December 2005 and at 1 January 2006 Additions Disposals Transfer from construction-in-progress At 31 December 2006 and at 1 January 2007 Additions Disposals Transfer from construction-in-progress At 31 December 2007 ACCUMULATED DEPRECIATION AND IMPAIRMENT At 1 January 2005 Provided for the year Impairment loss recognised in the consolidated income statement Eliminated on disposals At 31 December 2005 and at 1 January 2006 Provided for the year Eliminated on disposals At 31 December 2006 and at 1 January 2007 Provided for the year Eliminated on disposal At 31 December 2007 CARRYING AMOUNT At 31 December 2005 At 31 December 2006 At 31 December 2007	Buildings Plant & machinery Office equipment RMB’000 RMB’000 RMB’000 118,630 109,669 5,252 1,953 4,113 922 (256) (3,942) (169) — 2,329 — 120,327 112,169 6,005 564 6,201 577 — (5,041) (121) 310 579 — 121,201 113,908 6,461 — 5,295 543 — (1,200) (156) — 567 — 121,201 118,570 6,848 63,910 56,446 2,513 3,169 4,922 547 — 24 — — (1,315) (108) 67,079 60,077 2,952 3,290 6,748 511 — (2,684) (59) 70,369 64,141 3,404 3,138 5,440 855 — (987) (100) 73,507 68,594 4,159 53,248 52,092 3,053 50,832 49,767 3,057 47,694 49,976 2,689	Motor vehicles Con- struction- in-progress RMB’000 RMB’000 5,155 323 1,691 2,830 (1,099) - — (2,329) 5,747 824 883 191 (686) — — (889) 5,944 126 1,976 2,223 (1,688) — — (567) 6,232 1,782 1,683 — 614 — — — (153) — 2,144 — 740 — (273) — 2,611 — 568 — (971) — 2,208 — 3,603 824 3,333 126 4,024 1,782	Total RMB’000 239,029 11,509 (5,466) —
			245,072 8,416 (5,848) —
			247,640 10,037 (3,044) —
			254,633
			124,552 9,252 24 (1,576)
			132,252 11,289 (3,016)
			140,525 10,001 (2,058)
			148,468
			112,820

			107,115

			106,165

— 186 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

The Company COST At 1 January 2005 Additions Disposals At 31 December 2005 and at 1 January 2006 Additions Disposals Transfer from construction-in-progress At 31 December 2006 and at 1 January 2007 Additions Disposals At 31 December 2007 ACCUMULATED DEPRECIATION AND IMPAIRMENT At 1 January 2005 Provided for the year Impairment loss recognised in the income statement Eliminated on disposals At 31 December 2005 and at 1 January 2006 Provided for the year Eliminated on disposals At 31 December 2006 and at 1 January 2007 Provided for the year Eliminated on disposal At 31 December 2007 CARRYING AMOUNT At 31 December 2005 At 31 December 2006 At 31 December 2007	Buildings Plant & machinery Office equipment RMB’000 RMB’000 RMB’000 118,313 28,747 3,842 1,954 1,437 380 — (284) (34) 120,267 29,900 4,188 564 1,098 294 — (110) (13) 310 1 — 121,141 30,889 4,469 — 2,124 453 — (70) (36) 121,141 32,943 4,886 63,891 11,076 1,837 3,167 1,807 358 — (24) — — (166) (12) 67,058 12,693 2,183 3,288 1,840 390 — (2) (8) 70,346 14,531 2,565 3,137 2,521 461 — (1) (23) 73,483 17,051 3,003 53,209 17,207 2,005 50,795 16,358 1,904 47,658 15,892 1,883	Motor vehicles Con- struction- in-progress RMB’000 RMB’000 3,624 — 820 311 (509) — 3,935 311 224 — — — — (311) 4,159 — 1,901 391 (767) — 5,293 391 1,351 — 352 — — — (74) — 1,629 — 287 — — — 1,916 — 379 — (524) — 1,771 — 2,306 311 2,243 — 3,522 391	Total RMB’000 154,526 4,902 (827)
			158,601 2,180 (123) —
			160,658 4,869 (873)
			164,654
			78,155 5,684 (24) (252)
			83,563 5,805 (10)
			89,358 6,498 (548)
			95,308
			75,038

			71,300

			69,346

— 187 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

The above property, plant and equipment are depreciated over their estimated useful lives on a straight-line basis, taking into account their estimated residual values, at the following rates:

Buildings 20 — 40 years Plant & machinery 10 — 20 years Office equipment 8 — 20 years Motor vehicles 12 years

All buildings are situated in the PRC.

As at 31 December 2007, short-term bank borrowings of the Target Group amounting to approximately RMB73,000,000 (2005: RMB98,600,000, 2006: RMB86,600,000) are secured by the Target Group’s buildings with the carrying amount of approximately RMB47,694,000 (2005: RMB53,248,000, 2006: RMB50,832,000).

During the year ended 31 December 2005, the directors conducted a review of the Group’ s manufacturing assets and determined that a number of those assets were impaired, due to technical obsolescence. Accordingly, impairment losses of approximately RMB24,000 has been recognised in respect of plant and machinery. During the year ended 31 December 2006 and 2007, the directors had conducted a review of the Group’s manufacturing assets and determined that the value-in-use of the manufacturing assets approximate their carrying amounts. Accordingly, no additional impairment loss was recognised during the two years ended 31 December 2006 and 2007.

19. PREPAID LEASE PAYMENTS

The Target Group and the Company

Balance at beginning of the year Additions Charged for the year Balance at end of the year Analysed for reporting purposes as: Current asset Non-current asset	2005 RMB’000 56,102 — (1,234) 54,868 1,234 53,634 54,868	2006 RMB’000 54,868 22,750 (1,272) 76,346 1,689 74,657 76,346	2007 RMB’000 76,346 910 (1,709) 75,547 1,707 73,840 75,547

The Target Group’s prepaid lease payments represented medium-term land use rights situated in the PRC. The land use rights are amortised in 50 years.

As at 31 December 2007, prepaid lease payments with carrying value of RMB75,547,000 (2005: RMB54,868,000, 2006: RMB76,346,000) has been pledged to banks to secure the Group’s bank borrowings.

— 188 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

20. INTANGIBLE ASSET

COST At 1 January 2005, 31 December 2005 and 1 January 2006 Additions At 31 December 2006, 1 January 2007 and 31 December 2007 AMORTISATION At 1 January 2005 Charge for the year At 31 December 2005 and at 1 January 2006 Charge for the year At 31 December 2006 and at 1 January 2007 Charge for the year At 31 December 2007 CARRYING AMOUNT At 31 December 2005 At 31 December 2006 At 31 December 2007	RMB’000 1,710 2,300
	4,010
	42 548
	590 788
	1,378 788
	2,166
	1,120

	2,632

	1,844

The above intangible assets represented patent rights acquired from independent third parties. The intangible assets have definite useful lives and are amortised on a straight-line basis over 3.5 years to 8 years.

21. INVESTMENTS IN SUBSIDIARIES

The Company

Unlisted shares, at cost Amounts due from subsidiaries Amounts due to subsidiaries	2005 RMB’000 53,550 25,759 19,470	2006 RMB’000 53,550 32,560 14,074	2007 RMB’000 50,973
			18,091
			4,486

— 189 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

Particulars of the Company’s subsidiaries which are directly and indirectly owned by the Company, as at 31 December 2007 and the date of this report are as follows:

				Percentage of nominal	Percentage of nominal
				value of registered
	Place and date of	Registered and	Class of equity	capital held by the
Name	incorporation	paid-up capital	interest held	Company		Principal activity
				Directly	Indirectly
武漢諾佳經濟發展	PRC	RMB1,050,000	Contributed	100%	—	Installation of chemical
有限公司	6 February 2001		capital			equipments, clothing
(Wuhan Nuojia						washing, park
Economic						greenification,
Development						wholesale and retail
Co., Ltd.)						of building materials,
						hardware and electric
						apparatus and daily
						general merchandise
武漢武葯制葯有限	PRC	RMB31,000,000	Contributed	97.10%	1.61%	Production and sale of
公司	28 July 2002		capital			pharmaceutical raw
(Wuhan Wuyao						material and chemicals
Pharmaceutical						(excluding dangerous
Co., Ltd.)						goods) and export of
						self-made products and
						related technologies
武漢天天明葯業	PRC	RMB10,000,000	Contributed	97.3%	2.7%	R&D of biological
有限責任公司	6 June 1996		capital			technologies, medical
(Wuhan Daily Clear						technologies and related
Medicine Trade						products and provision
Co., Ltd.)						of technical service,
						production of eye-drops
武漢武葯科技	PRC	RMB5,000,000	Contributed	94%	6%	Technology development,
有限公司	10 June 2003		capital			transfer, service and
(Wuhan Wuyao						consulting related to
Science &						medicine, chemicals
Technology Co.,						and medical apparatus
Ltd.)						and products

— 190 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

				Percentage of nominal	Percentage of nominal
				value of registered
	Place and date of	Registered and	Class of equity	capital held by the
Name	incorporation	paid-up capital	interest held	Company		Principal activity
				Directly	Indirectly
武漢捷越能源	PRC	RMB5,500,000	Contributed	99.09%	0.91%	Production of low-pressure
有限公司	31 July 2002		capital			saturated steam and
(Wuhan Jieyue						low-temperature
Energy Co., Ltd.)						water, metal structure
						processing, building
						repair, machinery
						repair and electric
						automation project
武漢諾佳葯業	PRC	RMB3,000,000	Contributed	—	—	Deregistered on 31
設備安裝工程	6 March 2000		capital			December 2007
有限責任公司
武漢遠大化工水洗	PRC	RMB2,000,000	Contributed	—	—	Deregistered on 31 July
有限責任公司	24 September		capital			2006
	2003

22. AVAILABLE-FOR-SALE INVESTMENTS The Target Group

Unlisted debt securities_(Note a) Unlisted equity securities(Note b) _Less:_impairment loss(Note c) The Company Unlisted debt securities(Note a) Unlisted equity securities(Note b) _Less:_impairment loss(Note c)_	2005 RMB’000 895 20,298 21,193 (1,961) 19,232 2005 RMB’000 895 2,875 3,770 (1,961) 1,809	2006 RMB’000 699 20,298 20,997 (1,961) 19,036 2006 RMB’000 699 2,875 3,574 (1,961) 1,613	2007 RMB’000 502 25,214
			25,716 (1,961)
			23,755

			2007 RMB’000 502 2,875
			3,377 (1,961)
			1,416

— 191 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

Notes:

(a) The above debt securities represents debt securities with fixed interest ranging from 7.8% to 10.1% and maturity dates between 2007 and 2009.
(b) The above unlisted equity securities represent investments in unlisted equity securities issued by private entities incorporated in the PRC. They are measured at cost less impairment at each balance sheet date because the range of reasonable fair value estimates is so significant that the directors of the Company are of the opinion that their fair values cannot be measured reliably.
(c) The directors of the Company have reviewed the carrying values of the unlisted equity securities at each balance sheet date and consider that in light of the recurring operating losses of these investments, impairment losses of approximately RMB1,961,000 had been made in prior years. The directors of the Company are of the opinion that the impairment was made based on their best estimation with reference to the market situation and circumstances of the equity securities.

23. INVENTORIES

The Target Group

Raw materials Work in progress Finished goods _Less:_Allowances for inventories	2005 RMB’000 7,226 10,103 29,160 46,489 (583) 45,906	2006 RMB’000 9,645 11,377 23,688 44,710 (1,102) 43,608	2007 RMB’000 11,228 10,263 24,033 45,524 (1,401) 44,123

During the year ended 31 December 2007, there was a significant increase in the net realisable value of raw materials due to market shortage in raw materials. As a result, a reversal of writedown of raw materials of approximately RMB79,000 (2005: RMB4,000, 2006: Nil) have been recognised and included in other income.

The Company

Raw materials Work in progress Finished goods _Less:_Allowances for inventories	2005 RMB’000 2,665 4,311 9,963 16,939 (478) 16,461	2006 RMB’000 4,201 3,603 5,835 13,639 (516) 13,123	2007 RMB’000 5,022 2,480 9,172 16,674 (482) 16,192

— 192 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

24. TRADE AND BILLS RECEIVABLES

The Target Group

Trade receivables _Less:_impairment losses Trade receivables — net Trade bills receivables The Company Trade receivables _Less:_impairment losses Trade receivables — net Trade bills receivables	2005 RMB’000 49,738 (22,171) 27,567 16,202 43,769 2005 RMB’000 35,327 (13,336) 21,991 6,470 28,461	2006 RMB’000 54,419 (26,275) 28,144 12,442 40,586 2006 RMB’000 40,964 (16,324) 24,640 10,500 35,140	2007 RMB’000 59,528 (31,242)
			28,286 14,830
			43,116

			2007 RMB’000 47,052 (20,180)
			26,872 11,206
			38,078

As at 31 December 2005, 2006 and 2007, all bills receivables are denominated in RMB and the ageing of trade bills receivables are all within 180 days.

The Target Group allows an average credit period of 90 days to its trade customers. The following is an aged analysis of trade receivables net of impairment loss at the reporting date:

The Target Group

0 — 90 days 91 — 180 days 181 — 365 days Over 365 days	2005 RMB’000 10,946 4,138 3,169 9,314 27,567	2006 RMB’000 18,692 1,974 840 6,638 28,144	2007 RMB’000 22,711 2,755 1,100 1,720
			28,286

— 193 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

The Company

0 — 90 days 91 — 180 days 181 — 365 days Over 365 days	2005 RMB’000 10,243 3,650 2,514 5,584 21,991	2006 RMB’000 17,990 1,605 839 4,206 24,640	2007 RMB’000 22,590 2,661 1,083 538
			26,872

Ageing of trade receivables which are past due but not impaired:

The Target Group

91 — 180 days 181 — 365 days Over 365 days The Company 91 — 180 days 181 — 365 days Over 365 days	2005 RMB’000 4,138 3,169 9,314 16,621 2005 RMB’000 3,650 2,514 5,584 11,748	2006 RMB’000 1,974 840 6,638 9,452 2006 RMB’000 1,605 839 4,206 6,650	2007 RMB’000 2,755 1,100 1,720
			5,575

			2007 RMB’000 2,661 1,083 538
			4,282

Receivables that were past due but not impaired relate to a number of independent customers that have a good track record with the Target Group. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balance are still considered fully recoverable. The Target Group does not hold any collateral over these balances.

— 194 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

Movements in the provision for impairment of trade receivables is as follows:

The Target Group

Balance at beginning of the year Impairment losses recognised Amounts recovered during the year Amount written-off Balance at end of the year The Company Balance at beginning of the year Impairment losses recognised Balance at end of the year	2005 RMB’000 18,663 3,570 (4) (58) 22,171 2005 RMB’000 10,538 2,798 13,336	2006 RMB’000 22,171 4,215 (29) (82) 26,275 2006 RMB’000 13,336 2,988 16,324	2007 RMB’000 26,275 4,989 (21) (1) 31,242 2007 RMB’000 16,324 3,856 20,180

All the trade receivables are denominated in RMB, except for the equivalent amounts of approximately RMB6,593,000, RMB8,020,000 and RMB17,723,000 at the respective balance sheet dates which are denominated in the USD.

25. DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES

The Target Group

Other receivables Deposits and prepayments _Less:_impairment loss The Company Other receivables Deposits and prepayments _Less:_impairment loss	2005 RMB’000 6,909 7,786 (3,582) 11,113 2005 RMB’000 6,285 4,008 (4,236) 6,057	2006 RMB’000 4,182 6,157 (4,056) 6,283 2006 RMB’000 3,407 3,369 (4,412) 2,364	2007 RMB’000 4,102 8,637 (3,698) 9,041 2007 RMB’000 3,738 4,808 (2,770) 5,776

— 195 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

Movement in the impairment loss of other receivables:

The Target Group

Balance at beginning of the year Impairment losses recognized Amounts written-off during the year Amounts recovered during the year Balance at end of the year The Company Balance at beginning of the year Impairment losses recognised Amounts written-off during the year Amounts recovered during the year Balance at end of the year	2005 RMB’000 2,621 982 (1) (20) 3,582 2005 RMB’000 3,957 279 — — 4,236	2006 RMB’000 3,582 688 — (214) 4,056 2006 RMB’000 4,236 — 390 (214) 4,412	2007 RMB’000 4,056 105 — (463) 3,698 2007 RMB’000 4,412 34 — (1,676) 2,770

26. AMOUNT DUE FROM/TO SUBSIDIARIES

The Company

The amount is unsecured, non-interest bearing and repayable on demand.

The directors of the Company consider that the fair value of the amount at the balance sheet date approximated to the carrying amount.

27. AMOUNT DUE FROM A SHAREHOLDER

The Target Group and the Company

The amount is unsecured, non-interest bearing and repayable on demand.

28. BANK BALANCES AND CASH

The Target Group and the Company

All the bank balances and cash are denominated in RMB and deposited with banks in the PRC except for the equivalent amounts of approximately RMB618,000, RMB469,000 RMB230,000 at the respective balance sheet dates of the Relevant Period which is denominated in the USD. The conversion of these RMB denominated balances into foreign currencies is subject to the rules and regulations of foreign exchange control promulgated by the PRC government.

Bank balances carry interest at average market rates of 0.72%, 0.72% and 1.15% per annum during the Relevant Period.

— 196 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

29. TRADE AND BILLS PAYABLES

The Target Group

Trade payables Trade bills payables The Company Trade payables Trade bills payables	2005 RMB’000 49,548 32,192 81,740 2005 RMB’000 23,236 32,172 55,408	2006 RMB’000 41,445 31,496 72,941 2006 RMB’000 20,304 31,495 51,799	2007 RMB’000 35,802 26,266
			62,068

			2007 RMB’000 16,390 26,266
			42,656

At 31 December 2005, 2006 and 2007, the ageing analysis of trade payables are as follows:

The Target Group

0 — 90 days 91 — 180 days 181 — 365 days Over 365 days The Company 0 — 90 days 91 — 180 days 181 — 365 days Over 365 days	2005 RMB’000 12,948 10,278 14,491 11,831 49,548 2005 RMB’000 7,487 8,109 1,544 6,096 23,236	2006 RMB’000 21,272 3,885 3,977 12,311 41,445 2006 RMB’000 12,383 1,249 223 6,449 20,304	2007 RMB’000 18,314 3,451 2,747 11,290
			35,802

			2007 RMB’000 7,812 2,167 761 5,650
			16,390

— 197 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

30. SHORT-TERM BANK BORROWINGS

The Target Group and the Company

		2005		2006	2007
		RMB’000		RMB’000	RMB’000
	Bank loans within one year:
	Secured bank loans	98,600		66,600	73,000
	Unsecured and guaranteed by the
	holding company_(note 38(b))_	—		20,000	—
		98,600		86,600	73,000

	As at the respective balance sheet date, all borrowings were denominated in RMB.
	As at the respective balance sheet date, all bank borrowings		are	based on fixed	interest rates. The
	effective interest rates as at the respective balance sheet date		were as follows:
		2005		2006	2007
		RMB’000		RMB’000	RMB’000
	Bank borrowings, per annum	5.31%-6.25%		5,74%-6.43%	5.85%-7.23%

31.	REGISTERED CAPITAL
	The Target Group and the Company
				Number of
			ordinary shares		Amount
					RMB’000
	Registered and paid up capital:
	At 1 January 2005, 31 December 2005, 2006 and 2007			85,000,000	85,000

As at the respective balance sheet date, all bank borrowings are based on fixed interest rates. The effective interest rates as at the respective balance sheet date were as follows:

— 198 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

32. RESERVES OF THE COMPANY

The Company

At 1 January 2005 Dividend paid Profit for the year Transfer At 31 December 2005 and 1 January 2006 Transfer Profit for the year At 31 December 2006 and 1 January 2007 Transfer Profit for the year At 31 December 2007	Capital reserve RMB’000 4,571 — — — 4,571 — — 4,571 — — 4,571	Statutory surplus reserve Accumulated profits RMB’000 RMB’000 4,118 14,722 — (14,875) — 9,104 2,335 (2,335) 6,453 6,616 2,237 (2,237) — 23,189 8,690 27,568 2,174 (2,174) — 22,686 10,864 48,080	Total RMB’000 23,411 (14,875) 9,104 — 17,640 — 23,189 40,829 — 22,686 63,515

33. DEFERRED TAXATION

At the respective balance sheet dates, the Target Group has unused tax losses of approximately RMB139,000, RMB195,000 and RMB717,000 available for offset against future profits. No deferred tax asset has been recognised in respect of the tax losses due to the unpredictability of future profit streams. The estimated tax losses may be carried forward indefinitely.

— 199 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

34. DEREGISTRATION OF SUBSIDIARIES

On 31 December 2007, the subsidiary of the Target Group, 武漢諾佳藥業設備安裝工程有限責任公司, was de-registered. On the date of de-registration, the Group had 100% equity interest in武漢諾佳藥業設備安裝工程有限責任公司.

In the opinion of the directors of the Company, the subsidiary de-registered was non-profit making and was thus de-registered for simplification of the group structure.

The net assets of武漢諾佳葯業設備安裝工程有限責任公司as the date of de-registration were as follows:

Amount due from holding company Amount due from fellow subsidiaries Trade and other payables Gain on de-registration Net assets Amounts eliminated with intra-group balances Liabilities received by the Target Group	RMB’000 2,677 110 (117) 7 2,677 (2,787) (110)

The subsidiary de-registered during the year ended 31 December 2007 had no significant impact on the turnover and results of the Target Group.

On 31 July 2006, the subsidiary of the Group, 武漢遠大化工水洗有限責任公司, was de-registered. On the date of de-registration, the Group had 100% equity interest in武漢遠大化工水洗有限責任公司.

In the opinion of the directors of the Company, the subsidiary de-registered was non-profit making and was thus de-registered for simplification of the group structure.

The net assets of武漢遠大化工水洗有限責任公司 as the date of de-registration were as follows:

Property, plant and equipment Inventories Trade receivables and other receivables Trade and other payables Gain on deregistration Assets received by the Target Group	RMB’000 1,224 4 8,545 (1,675) — 8,098

The subsidiary de-registered during the year ended 31 December 2006 had no significant impact on the turnover and results of the Target Group.

— 200 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

35. OPERATING LEASES

The Target Group as lessee

At the respective balance sheet date, the Target Group had commitments for future minimum lease payments under operating leases in respect of land and buildings which fall due as follows:

Within one year In the second to fifth year inclusive	2005 RMB’000 358 5 363	2006 RMB’000 34 — 34	2007 RMB’000 20 —
			20

Operating lease payments in respect of land and buildings represent rentals payable by the Target Group for its office premises. Leases are fixed for an average of one to two years and rentals are fixed for an average of one years.

The Target Group as lessor

Property rental income earned during each of the Relevant Period was approximately RMB956,000, RMB564,000 and RMB487,000 respectively. All of the properties held have committed tenants for the next one to three years.

At the respective balance sheet date, the Target Group had contracted with tenants for the following future minimum lease payments:

Within one year In the second to fifth year inclusive	2005 RMB’000 376 1,685 2,061	2006 RMB’000 533 1,152 1,685	2007 RMB’000 1,144 1,358
			2,502

36. PLEDGE OF ASSETS

At respective balance sheet date, the Target Group had the following assets pledged to banks to secure general banking facilities granted to the Target Group:

Buildings Land use rights	2005 RMB’000 53,248 54,868 108,116	2006 RMB’000 50,832 76,346 127,178	2007 RMB’000 47,694 75,547
			123,241

— 201 —

ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

37. RETIREMENT BENEFIT SCHEMES

The employees of the Target Group in the PRC are members of the state-managed retirement benefit operated by the government of the PRC. The Target Group is required to contribute a certain percentage of the relevant portion of these employees’ basic salaries to the pension to fund the benefits. The only obligation of the Target Group in the PRC with respect to the state-managed retirement benefit is the required contributions under the state-managed retirement benefit.

The retirement benefits costs charged to consolidated income statement and the forfeited voluntary contributions credited to the consolidated income statement during the Relevant Period amounted to approximately RMB2,427,000, (2005: RMB2,194,000, 2006: RMB2,169,000) respectively. The retirement benefits costs charged to consolidated income statements represents contributions payable to the schemes by the Target Group at rates specified in the rules of the schemes.

38. RELATED PARTY TRANSACTIONS

(a) As at the balance sheet dates, the Target Group had following balances with related party:

	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Other payable
—武漢國有資產經營公司 (Note)	9,109	8,855	3,014

Note:

武漢國有資產經營公司 are the shareholders of the Company.

(b) During the year ended 31 December 2006, China Grand Enterprises Incorporation (中國遠大集團有限責任公司, “China Grand PRC”), the holding company of the Company, provided a corporate guarantee to a bank to secure a bank borrowing amounting to RMB20,000,000 granted to the Target Group.

(c) Compensation of key management personnel

The remuneration of directors are disclosed in note 10. The emoluments of the key management other than directors were as follows:

Salaries and allowance Performance related incentive payments_(Note)_ Retirement benefits scheme contributions	2005 RMB’000 817 574 32 1,423	2006 RMB’000 2,313 1,551 89 3,953	2007 RMB’000 1,227 689 48
			1,964

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ACCOUNTANTS’ REPORT OF THE PRC CO

APPENDIX III

Note:

The performance related incentive payments were decided by the holding company of the Company, China Grand PRC , through annual evaluation of the performance of the management in terms of the sales of the Target Group, internal administration efficiency and effectiveness, and number of accidents occurred in the production during the Relevant Periods.

39. GOVERNMENT GRANTS

During the year ended 31 December 2007, government grants of approximately RMB1,699,000 (2005: RMB1,131,000, 2006: RMB3,682,000) and approximately RMB1,464,000 (2005: RMB92,000, 2006: RMB500,000) have been received to subsidise for the development and industrialization of pharmaceutical products, and to encourage export sales in the PRC, respectively. The amounts have been included in the consolidated income statements in the respective years.

40. MAJOR NON-CASH TRANSACTIOINS

During the year ended 31 December 2005, the Company declared a dividend amounted to RMB14,875,000 to its shareholders. The Company paid RMB4,316,000 in cash to China Grand PRC and the resulting balance of approximately RMB10,559,000 was included in amount due to the immediate holding company of Company. As at 28 June 2005, the amount due to immediate holding company of RMB10,559,000 was set-off with the amount due from the holding company.

II POST BALANCE SHEET EVENTS

On 6 March 2008, China Grand PRC (as vendor, a company established in the PRC with limited liability) and United Chance Holdings Limited (“United Chance”, as purchaser, a company incorporated in Hong Kong with limited liability) entered into an agreement for the sale and purchase of a further of 39,086,352 shares in the Company for a consideration of HK$66,768,300. The sale of share of the Company represented approximately 45.98% of the entire issued share capital of the Company.

Upon completion of the sale and purchase agreement, United Chance’s equity interests in the Company would be increased from the currently held 25% to an aggregate of 70.98% and United Chance will become the Company’s immediate holding company.

Details of which are set out in the announcement of Maxx dated 9 May 2008.

III SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Target Group or any its subsidiaries in respect of any period subsequent to 31 December 2007.

SHINEWING (HK) CPA Limited

Certified Public Accountants

Ip Yu Chak

Practising Certificate Number: P04798 Hong Kong

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UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following is an illustrative unaudited pro forma consolidated financial information (the “Unaudited Pro Forma Financial Information”) which has been prepared in accordance with the Listing Rules for the purpose of illustrating the effect of the acquisition of the entire issued share capital of Best Forward Group Limited (“Best Forward”) (together with its subsidiaries, hereinafter collectively referred to as the “Best Forward Group”) and the disposal of the entire equity interests in Bright Strong Profits Limited (“Bright Strong”) (together with its subsidiaries, collectively referred to as the “Bright Strong Group”) (collectively referred to as the “Proposed Transactions”) as at 31 December 2007 and the results and cash flows of the Resulting Group for the year ended 31 December 2007. As it is prepared for illustrative purpose only, and because of its nature, it may not give a true picture of the financial position, results and cash flows of the Resulting Group following completion of the Proposed Transactions.

The unaudited pro forma consolidated balance sheet of the Resulting Group as at 31 December 2007 is prepared based on (i) the audited consolidated balance sheet of the Group as at 31 December 2007 as extracted from the published annual report of the Group as of 31 December 2007 as set out in Appendix I to this Circular; (ii) the audited balance sheet of Best Forward as at 31 March 2008 as set out in Appendix IIA to this Circular; and (iii) the audited balance sheet of United Chance Holdings Limited (“United Chance”) as at 31 December 2007 as set out in Appendix IIB to this Circular, as if the Proposed Transactions had been completed on 31 December 2007.

The unaudited pro forma consolidated income statement and unaudited pro forma consolidated cash flow statement of the Resulting Group are prepared based on (i) the audited consolidated income statement and audited consolidated cash flow statement of the Group for the year ended 31 December 2007 as extracted from the published annual report of the Group as of 31 December 2007 as set out in the Appendix I to this Circular; (ii) the audited income statement and audited cash flow statement of Best Forward for the period ended 31 March 2008 as set out in Appendix IIA to this Circular; and (iii) the audited income statement and audited cash flow statement of United Chance for the year ended 31 December 2007 as set out in Appendix IIB to this Circular, as if the Proposed Transactions had been completed on 1 January 2007.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX IV

The Unaudited Pro Forma Financial Information of the Resulting Group is presented in two stages. The first stage illustrates (i) the effect of the acquisition of the entire issued share capital of United Chance by Best Forward; (ii) the effect of the acquisition of an additional equity interests of approximately 45.98% in Wuhan Grand Pharmaceutical Group Company Limited (“Wuhan”) from China Grand Enterprises Limited Incorporation by United Chance; and (iii) the effect of the completion of the acquisition of the entire issued share capital in Best Forward by the Group. The second stage illustrates the effect of the completion of the disposal of the entire equity interests in Bright Strong.

The Unaudited Pro Forma Financial Information of the Group is presented in two scenarios as follows:

(1) Assume the acquisition of the entire issued share capital in Best Forward and the disposal of the entire issued share capital in Bright Strong have been completed on 31 December 2007 (the “Resulting Group”);
(2) Assume only the acquisition of the entire issued share capital in Best Forward has been completed on 31 December 2007 (the “Enlarged Group”).

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APPENDIX IV

	Resulting	Group	Consolidated	31.12.2007	HK$’000	P=M+N+O	(Unaudited)			227,667		78,939	—	1,971	—	4,316	—	25,396	338,289		47,170	56,103		1,825	44	—	41,040	146,182
Second stage		Pro forma Pro forma	adjustment adjustment	(9) & (10) (11)	HK$’000 HK$’000	N O				(35,441)		(4,435)	(70,696)				(4,340)				(8,078)	(7,964)		(119)			(66,274) (2,800)
	Enlarged	Group	Consolidated	31.12.2007	HK$’000	M=A+J+K+L	(Unaudited)			263,108		83,374	70,696	1,971	—	4,316	4,340	25,396	453,201		55,248	64,067		1,944	44	—	110,114	231,417
First stage (i) (ii) (iii)		Note (1) Pro forma Best Forward Pro forma Pro forma Pro forma Pro forma Best Forward Pro forma Pro forma	The Group Best Forward United Chance adjustment Consolidated adjustment adjustment adjustment adjustment Consolidated adjustment adjustment	31.12.2007 31.3.2008 31.12.2007 (2) 31.12.2007 (3) (4) (5) (6) 31.12.2007 (7) (7) & (8)	HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	A B C D E=B+C+D F G H I J=E+F+G+H+I K L	(Audited) (Audited) (Audited)	ASSETS AND LIABILITIES	Non-current assets	Property, plant and equipment 35,441 — — — 113,497 114,170 227,667	Interests in leasehold land held for own use under	operating leases 4,435 — — — 78,939 78,939	Investment properties 70,696 — — — — —	Intangible assets — — — — 1,971 1,971	Investment in a subsidiary — 25,000 — (25,000) — — 195,684 (195,684) — 200,000 (200,000)	Goodwill — — — 9,621 9,621 — 9,621 (5,305)	Interest in associates 4,340 — 40,379 40,379 — (40,379) —	Available-for-sale investments — — — — 25,396 25,396	114,912 25,000 40,379 50,000 219,803 343,594	Current assets	Inventories 8,078 — — — 47,170 47,170	Trade and other receivables 8,308 — — — 55,759 55,759	Interests in leasehold land held for own use under	operating leases – current portion 119 — — — 1,825 1,825	Amount due from holding company — — — — 44 44	Amount due from a subsidiary — — — — — —	Bank balances and cash 67,282 — — — 42,832 42,832	83,787 — — — 147,630 147,630

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APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION

	Resulting	Group	Consolidated		31.12.2007	HK$’000	P=M+N+O	(Unaudited)		130,047	896	—	78,041	—	208,984	(62,802)	275,487		13,408	131,131	46,100	—	190,639	84,848		10,739	(29,433)	18,869	3,900	4,075	80,773	84,848
First stage (i) (ii) (iii) Second stage	Enlarged	Note (1) Pro forma Best Forward Pro forma Pro forma Pro forma Pro forma Best Forward Pro forma Pro forma Group Pro forma Pro forma	The Group Best Forward United Chance adjustment Consolidated adjustment adjustment adjustment adjustment Consolidated adjustment adjustment Consolidated adjustment adjustment		31.12.2007 31.3.2008 31.12.2007 (2) 31.12.2007 (3) (4) (5) (6) 31.12.2007 (7) (7) & (8) 31.12.2007 (9) & (10) (11)	HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	A B C D E=B+C+D F G H I J=E+F+G+H+I K L M=A+J+K+L N O	(Audited) (Audited) (Audited) (Unaudited)	Current liabilities	Trade and other payables 52,515 — — — 126,209 126,209 178,724 (48,677)	Tax payable — — — — 896 896 896	Loan from a shareholder — 25,000 25,000 50,000 — 66,768 116,768 (116,768) — —	Short-term bank loans – secured 92,307 — — — 78,041 78,041 170,348 (92,307)	Other loan – secured 14,423 — — — — — 14,423 (14,423)	159,245 25,000 25,000 50,000 205,146 321,914 364,391	Net current (liabilities) assets (75,458) — (25,000) (50,000) (57,516) (174,284) (132,974)	Total assets less current liabilities 39,454 — 15,379 — 162,287 169,310 320,227 — —	Non-current liabilities —	Amount due to holding company 13,408 — — — — — 13,408	Promissory note — — — — — — 131,131 131,131	Convertible bonds — — — — — — 46,100 46,100	Provision for staff welfare and bonus 67,889 — — — — — 67,889 (67,889)	81,297 — — — — — 258,528	Net (liabilities) assets (41,843) — 15,379 — 162,287 169,310 61,699	Capital and reserves	Share capital 10,739 — — — 90,870 (90,870) — 10,739	Reserves (53,562) — 15,379 (15,379) — 70,648 114,170 88,537 (184,818) 88,537 (88,537) (53,562) 26,929 (2,800)	Imputed interest on promissory note — — — — — — 18,869 18,869	Equity component of convertible bonds — — — — — — 3,900 3,900	Equity attributable to equity holders of the Company (42,823) — 15,379 — 161,518 88,537 (20,054)	Minority interests 980 — — — 769 80,004 80,773 81,753 (980)	(41,843) — 15,379 — 162,287 169,310 61,699

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APPENDIX IV

	Resulting	Group	Consolidated		31.12.2007	HK$’000	P=M+N+O	(Unaudited)	421,454	(271,567)	149,887	5,621		—	(67,282)	(71,006)	(12,290)	5,327	(16,313)	—	(41,734)	(47,790)	951	(46,839)		(46,839)	—	(46,839)
Second stage		Pro forma Pro forma	adjustment adjustment		(9) & (10) (11)	HK$’000 HK$’000	N O		(49,045)	26,391		(16,883)		827	26,347	44,457 (2,800)		(660)	9,228		(41,741)					(2,934) (2,800)	1,855
First stage (i) (ii) (iii)	Enlarged	Note (1) Pro forma Best Forward Pro forma Pro forma Pro forma Pro forma Best Forward Pro forma Pro forma Group	The Group Best Forward United Chance adjustment Consolidated adjustment adjustment adjustment adjustment Consolidated adjustment adjustment Consolidated		31.12.2007 31.3.2008 31.12.2007 (2) 31.12.2007 (3) (4) (5) (6) 31.12.2007 (7) (7) & (8) 31.12.2007	HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	A B C D E=B+C+D F G H I J=E+F+G+H+I K L M=A+J+K+L	(Audited) (Audited) (Audited) (Unaudited)	Turnover 49,045 — — — 421,454 421,454 470,499	Cost of sales (26,391) — — — (265,858) (5,709) (271,567) (297,958)	Gross profit 22,654 — — — 155,596 149,887 172,541	Other income 16,883 — — — 5,621 5,621 22,504	Loss on disposal of investment at fair value through	profit or loss (827) — — — — — (827)	Distribution costs (26,347) — — — (67,282) (67,282) (93,629)	Administrative expenses (48,285) — — — (64,378) (64,378) (112,663)	Other operating expenses (11,600) — — — (690) (690) (12,290)	Share of results of associates 660 — 5,327 5,327 — 5,327 5,987	Finance costs (9,228) — — — (6,313) (6,313) (10,000) (25,541)	Discount on acquisition — — — — — 88,537 88,537 (88,537) —	Gain (loss) on disposal of a subsidiary — — — — 7 7 7	(Loss) profit before tax (56,090) — 5,327 5,327 22,561 110,716 (43,911)	Income tax 2,205 — — — (1,254) (1,254) 951	Loss for the year (53,885) — 5,327 5,327 21,307 109,462 (42,960)	Attributable to:	Equity shareholders of the Company (52,030) — 5,327 5,327 21,307 (5,709) 88,537 109,462 (10,000) (88,537) (41,105)	Minority interests (1,855) — — — — — (1,855)	(53,885) — 5,327 5,327 21,307 109,462 (42,960)

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UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX IV

	Resulting	Group	Consolidated		31.12.2007	HK$’000	P=M+N+O	(Unaudited)	(111,013)		—	1,400		119		827	4,722	9,541	19,228	(818)		1,050	10,200	1,107	(561)	(7,622)	41,741		(2,567)	(5,987)
Second stage		Pro forma Pro forma	adjustment adjustment		(9) & (10) (11)	HK$’000 HK$’000	N O		(41,741) (2,800)																		41,741
First stage (i) (ii) (iii)	Enlarged	Note (1) Pro forma Best Forward Pro forma Pro forma Pro forma Pro forma Best Forward Pro forma Pro forma Group	The Group Best Forward United Chance adjustment Consolidated adjustment adjustment adjustment adjustment Consolidated adjustment adjustment Consolidated		31.12.2007 31.3.2008 31.12.2007 (2) 31.12.2007 (3) (4) (5) (6) 31.12.2007 (7) (7) & (8) 31.12.2007	HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	A B C D E=B+C+D F G H I J=E+F+G+H+I K L M=A+J+K+L	(Audited) (Audited) (Audited) (Unaudited)	(Loss) profit before tax (56,090) — 5,327 5,327 — (5,709) 88,537 88,155 (10,000) (88,537) (66,472)	Adjustment for:	Discount on acquisition — — — — — (88,537) (88,537) 88,547 —	Amortisation of intangible assets 1,400 — — — — — 1,400	Amortisation of interests in leasehold land held for	own use under operating lease 119 — — — — — 119	Change in fair value of investments at fair value	through profit or loss 827 — — — — — 827	Depreciation of investment properties 4,722 — — — — — 4,722	Depreciation of property, plant and equipment 3,832 — — — — 5,709 5,709 9,541	Finance costs 9,228 — — — — — 10,000 19,228	Gain on disposal of property, plant and equipment (818) — — — — — (818)	Impairment loss of goodwill arising from acquistiions	of subsidiaries 1,050 — — — — — 1,050	Impairment loss on intangible assets 10,200 — — — — — 10,200	Impairment loss on property, plant and equipment 1,107 — — — — — 1,107	Interest income (561) — — — — — (561)	Gain on disposal of assets classified as held for sale (7,622) — — — — — (7,622)	Gain on disposal of subsidiaries — — — — — — —	Reversal of impairment loss on trade and other	receivables (2,567) — — — — — (2,567)	Share of results of associates (660) — (5,327) (5,327) — (5,327) (5,987)

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UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX IV

	Resulting	Group	Consolidated		31.12.2007	HK$’000	P=M+N+O	(Unaudited)		(38,633)	(4,001)	2,369	20,392	(11)	(19,884)			9,692		2,165	561	(7,078)		(9,371)	(4,031)
First stage (i) (ii) (iii) Second stage	Enlarged	Note (1) Pro forma Best Forward Pro forma Pro forma Pro forma Pro forma Best Forward Pro forma Pro forma Group Pro forma Pro forma	The Group Best Forward United Chance adjustment Consolidated adjustment adjustment adjustment adjustment Consolidated adjustment adjustment Consolidated adjustment adjustment		31.12.2007 31.3.2008 31.12.2007 (2) 31.12.2007 (3) (4) (5) (6) 31.12.2007 (7) (7) & (8) 31.12.2007 (9) & (10) (11)	HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	A B C D E=B+C+D F G H I J=E+F+G+H+I K L M=A+J+K+L N O	(Audited) (Audited) (Audited) (Unaudited)	Operating cash flows before movements in working	capital (35,833) — — — — — (35,833)	Increase in inventories (4,001) — — — — — (4,001)	Decrease in trade and other receivables 2,369 — — — — — 2,369	Increase in trade and other payables 20,392 — — — — — 20,392	Decrease in provision for staff welfare and bonus (11) — — — — — (11)	Net cash used in operating activities (17,084) — — — — — (17,084)	Investing activities	Proceeds from disposal of investments at fair value	through profit or loss 9,692 — — — — — 9,692	Proceeds from disposal of property, plant and	equipment 2,165 — — — — — 2,165	Interest income received 561 — — — — — 561	Purchase of property, plant and equipment (7,078) — — — — — (7,078)	Net cash inflow (outflow) from acquisition/disposal	of subsidiaries — — — — — — 48,812 48,812 (58,183)	Net cash from (used in) investing activities 5,340 — — — — — 54,152

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UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX IV

	Resulting Group	Consolidated		31.12.2007	HK$’000	P=M+N+O	(Unaudited)		—	92,307	2,400	(57,506)	(9,228)	(8,488)	19,485	(4,430)	59,407		134		55,111
First stage (i) (ii) (iii) Second stage	Note (1) Pro forma Best Forward Pro forma Pro forma Pro forma Pro forma Best Forward Pro forma Pro forma Enlarged Group Pro forma Pro forma	The Group Best Forward United Chance adjustment Consolidated adjustment adjustment adjustment adjustment Consolidated adjustment adjustment Consolidated adjustment adjustment		31.12.2007 31.3.2008 31.12.2007 (2) 31.12.2007 (3) (4) (5) (6) 31.12.2007 (7) (7) & (8) 31.12.2007 (9) & (10) (11)	HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	A B C D E=B+C+D F G H I J=E+F+G+H+I K L M=A+J+K+L N O	(Audited) (Audited) (Audited) (Unaudited)	Financing activities	Issue of shares on incorporation — — — — — — —	New short-term bank loans borrowed 92,307 — — — — — 92,307	Advance from holding company 2,400 — — — — — 2,400	Repayments of short-term loans (57,506) — — — — — (57,506)	Interest paid (9,228) — — — — — (9,228)	Repayment of other loans (8,488) — — — — — (8,488)	Net cash from financing activities 19,485 — — — — — 19,485	Net increase in cash and cash equivalents 7,741 — — — — — 48,812 56,553 (58,183) (2,800)	Cash and cash equivalents at beginning of the year 59,407 — — — — — 59,407	—	Effect of foreign exchange rate changes 134 — — — — — 134	Cash and cash equivalents at end of year representing	bank balances and cash 67,282 — — — — — 116,094

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APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION

NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

Notes:

(1) The balances have been extracted without adjustment from the published annual report of the Company as of 31 December 2007 as set out in Appendix I to this Circular.
(2) On 5 March 2008, China Grand Enterprises (HK) Limited (as Vendor, a company incorporated in Hong Kong with limited liability) and Best Forward (as Purchaser) entered into an agreement for the sale and purchase of the entire issued share capital of United Chance for a consideration of HK$25,000,000. Upon completion of the acquisition, United Chance and its associate, Wuhan, will be accounted for as a subsidiary and an associate of Best Forward as United Chance will be controlled by Best Forward thereafter (hereinafter, collectively referred to as “Best Forward Group”). The balance sheet, income statement and cash flow statement of United Chance will be consolidated with that of Best Forward from the date on which control is transferred to Best Forward.

Details of net identifiable assets and liabilities of the entire issued share capital of United Chance acquired and the goodwill arising on the abovementioned acquisition are as follows:

Consideration _Less:_Net identifiable assets and liabilities acquired Goodwill	HK$’000 25,000 15,379
	9,621

The net assets and liabilities acquired in the transaction are as follows:

Net assets acquired Investment in an associate Loan from a shareholder Net identified assets and liabilities acquired	RMB’000 37,771 (23,385) 14,386	HK$’000 40,379 (25,000)
		15,379

For the purpose of preparing the Unaudited Pro Forma Financial Information of the Best Forward Group, the carrying value of the net assets and liabilities of United Chance as per the Accountants’ Report as set out in Appendix II of this Circular are taken to be the fair values at 31 December 2007 assuming the acquisition was completed on 31 December 2007.

Upon completion of the acquisition, the United Chance will be accounted as a wholly-owned subsidiary of Best Forward. Under HKFRS 3 Business Combinations (“HKFRS 3”), Best Forward will apply the purchase method to account for the acquisition of the United Chance. In applying the purchase method, the identifiable assets, liabilities and contingent liabilities of United Chance are recorded in the unaudited pro forma balance sheet of the Best Forward Group at their fair values as if the acquisition was completed on 31 December 2007.

The amount of the excess of the cost of acquisition incurred by Best Forward over its interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of United Chance is recognised as goodwill in the unaudited consolidated balance sheet as if the acquisition was completed on 31 December 2007.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX IV

On completion of the acquisition of United Chance, the fair value of net identifiable assets, liabilities and contingent liabilities of United Chance will have to be reassessed. As a result of the assessment, the goodwill may be different from that estimated based on the basis stated above for the purpose of preparation of the Unaudited Pro Forma Financial Information. Accordingly, the actual goodwill at the completion of the transaction may be different from that presented above.

The adjustment represented the elimination of Best Forward’s investment in United Chance and preacquisition reserve of United Chance, and recognition of goodwill arising from the acquisition.

(3) The consolidated balance sheet, consolidated income statement and consolidated cash flow statement of Wuhan Grand Pharmaceutical Group Company Limited (“Wuhan”) and its subsidiaries (hereinafter, collectively referred to as the “Wuhan Group”) for the year ended 31 December 2007 had been extracted from Wuhan’s Accountants’ Report as set out in Appendix III to this Circular.

(4) The fair value adjustment represented an increase in fair value of the land and buildings owned by Wuhan of approximately RMB106,795,000 (equivalent to approximately HK$114,170,000) held by Wuhan, represented the excess of fair value of the properties over their carrying amounts as at 31 December 2007, as if the acquisition was completed on 31 December 2007. The fair value of the land and buildings as at 31 December 2007 were determined with reference to valuation as at 30 April 2008 carried out by LCH (Asia-Pacific) Surveyors Limited, an independent qualified professional property valuer not connected to the Group, assuming there was no significant difference in the valuation of the assets between the date of 31 December 2007 and 30 April 2008. Details of the valuation report are set out in Appendix V of the Circular.

The adjustment of approximately HK$5,709,000 reflects the additional depreciation charge on the excess of fair value of the properties over their carrying amounts, assuming that the valuation on the land and buildings owned by Wuhan had taken place on 1 January 2007. This unaudited pro forma adjustment will have continuing income statement effect to the Resulting Group.

(5) On 6 March 2008, China Grand Enterprises Incorporation（中國遠大集團有限責任公司）(as Vendor, a company established in the People’s Republic of China with limited liability) and United Chance (as Purchaser) entered into an agreement for the sale and purchase of 39,086,352 shares in Wuhan for a consideration of approximately HK$66,768,300. The acquisition of shares of Wuhan represented approximately 45.98% of the entire issued share capital of Wuhan. The consideration has not been paid up and included in loan from a shareholder.

Upon completion of the sale and purchase agreement, United Chance holds an aggregate 70.98% equity interests in the entire issued share capital of Wuhan and Wuhan will be accounted for as subsidiaries of United Chance as Wuhan and its subsidiaries will be controlled by United Chance thereafter. The consolidated balance sheet, consolidated income statement and consolidated cash flow statement of Wuhan Group will be consolidated with that of United Chance from the date on which control is transferred to United Chance.

Details of net identifiable assets and liabilities of 70.98% equity interests of Wuhan Group acquired and the discount on acquisition arising on the abovementioned acquisition are as follows:

Consideration _Add:_25% equity interests acquired previously recognised as interest in an associate _Less:_Fair value of net identifiable assets and liabilities acquired Discount on acquisition	HK$’000 66,768 40,379 (195,684) (88,537)

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UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX IV

The net assets and liabilities acquired in the transaction are as follows:

Net assets acquired Property, plant and equipment Prepaid lease payments Intangible assets Available-for-sale investments Inventories Trade and other receivables Amount due from a shareholder Bank balances and cash Trade and other payables Tax payable Secured short-term borrowings Fair value adjustment on net assets acquired_(Note 6)_ Fair value of net assets acquired Minority interests Fair value of net identified assets and liabilities acquired	RMB’000 106,165 75,547 1,844 23,755 44,123 52,157 41 40,065 (118,056) (838) (73,000) 151,803 106,795 258,598 (75,555) 183,043	HK$’000 113,497 80,764 1,971 25,396 47,170 55,759 44 42,832 (126,209) (896) (78,041) 162,287 114,170 276,457 (80,773) 195,684

Upon completion of the acquisition, the Wuhan Group will be accounted as subsidiaries of United Chance. Under HKFRS 3 Business Combinations (“HKFRS 3”), United Chance will apply the purchase method to account for the acquisition of the Wuhan Group. In applying the purchase method, the identifiable assets, liabilities and contingent liabilities of the Wuhan Group at 31 December 2007 are recorded in the unaudited pro forma consolidated balance sheet of the Best Forward Group at their fair values as if the acquisition was completed on 31 December 2007.

Any goodwill or discount arising on the acquisition will be determined as the excess of the cost of acquisition incurred by United Chance over its interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of Wuhan Group. Discount on acquisition resulting from the business combination is recognised immediately in the consolidated income statement.

On completion of the acquisition of Wuhan Group, the fair value of net identifiable assets, liabilities and contingent liabilities of Wuhan Group will have to be reassessed. As a result of the assessment, the discount on acquisition may be different from that estimated based on the basis stated above for the purpose of preparation of the Unaudited Pro Forma Financial Information. Accordingly, the actual discount on acquisition at the completion of the transaction may be different from that presented above.

(6) The adjustment represented the elimination of United Chance’s investment in Wuhan and pre-acquisition reserves of Wuhan Group, and the effect on minority interests.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX IV

(7) On 28 April 2008, Long Smart Investments Limited (“Long Smart”, as Vendor) and the Company (as Purchaser) entered into an agreement for the sale and purchase of the entire issued share capital of Best Forward for a consideration of HK$200,000,000 (the “Acquisition Agreement”). The considerable payable shall be settled by (i) issuance of promissory note of HK$150,000,000 to Long Smart (“Promissory Note”); and (ii) issuance of HK$50,000,000 convertible bond to Long Smart (“Convertible Bond”).
(a) Pursuant to the Acquisition Agreement, the Promissory Note for the principal amount of HK$150,000,000 will be issued. The Promissory Note shall bear an interest of 5% per annum, mature 2 years after the date of issuance and be repayable before the maturity date upon mutual agreement. The fair value of the Promissory note of approximately HK$131,131,000 and the imputed interest of approximately HK$18,869,000 is calculated by discounting the future cash flow stream from the bonds using an estimated effective interest rate, which equals 6.953% per annum, at which the directors of the Group believe the Company could borrow funds of similar amount, similar terms of maturity and similar schedule of repayment.

Assuming the Promissory Note were issued on 1 January 2007, the adjustment of approximately HK$7,500,000 represented the imputed interest to be expensed by the Group for the year ended 31 December 2007. This unaudited pro forma adjustment will have continuing income statement effect to the Resulting Group.

(b) Pursuant to the Acquisition Agreement, the Convertible Bond for the principal of HK$50,000,000 will be issued. The Convertible Bond shall bear interest from the date of its issue at 5% per annum on the principal amount outstanding from time to time, mature 2 years from the date of issuance and which will be payable on maturity. The conversion price has been set at HK$0.30 per share. The value of the Convertible Bond is split into a debt component of approximately HK$46,100,000 which is carried in the unaudited pro forma consolidated balance sheet as a noncurrent liability, and an equity component of approximately HK$3,900,000 which is recognised in equity. In preparing the Unaudited Pro Forma Financial Information, the fair value of the debt component of the Convertible Bond is calculated by discounting the future cash flow stream from the Convertible Bond using an estimated effective rate, which equals 5.00% per annum, at which the directors of the Group believe the Company could borrow funds of similar amount, similar terms of maturity and similar schedule of repayment without any conversion option attached. The difference between the face value and the fair value of the debt component so derived is taken as the value of the equity component of the Convertible Bond. The split of Convertible Bond between the debt and equity components are in accordance with the Hong Kong Accounting Standards 32 “Financial Instruments: Disclosure and Presentation”.

Assuming the Convertible Bond were issued on 1 January 2007, the adjustment of approximately HK$2,500,000 represented the imputed interest to be expensed by the Group for the year ended 31 December 2007. This unaudited pro forma adjustment will have continuing income statement effect to the Resulting Group, and the actual amount will vary according to the timing of the conversion and redemption of the whole or any part of the Convertible Bond and the applicable effective interest rates.

Upon completion of the sale and purchase agreement, the Best Forward Group will be accounted for as subsidiaries of the Group as Best Forward and its subsidiaries will be controlled by the Group thereafter. The consolidated balance sheet, consolidated income statement and consolidated cash flow statement of Best Forward Group will be consolidated with that of the Group from the date on which control is transferred to the Group.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX IV

Details of net identifiable assets and liabilities of the entire equity interest of Best Forward acquired and the goodwill arising on the abovementioned acquisition are as follows:

Consideration
_Less:_Fair value of net identifiable assets and liabilities acquired
Goodwill
The net assets and liabilities acquired in the transaction are as follows:
Net assets acquired
Property, plant and equipment
Prepaid lease payments
Intangible assets
Available-for-sale investments
Inventories
Trade and other receivables
Amount due from a shareholder
Bank balances and cash
Trade and other payables
Tax payable
Loan from a shareholder
Secured short-term borrowings
Minority interests
Fair value adjustment on net assets acquired
Fair value of net assets acquired
Loan from a shareholder not acquired
Fair value of net identified assets and liabilities acquired

HK$’000
200,000
(195,684)
4,316
HK$’000
113,497
80,764
1,971
25,396
47,170
55,759
44
42,832
(126,209)
(896)
(116,768)
(78,041)
(80,773)
(35,254)
114,170
78,916
116,768
195,684

Upon completion of the acquisition, the Best Forward Group will be accounted as subsidiaries of the Group. Under HKFRS 3 Business Combinations (“HKFRS 3”), the Group will apply the purchase method to account for the acquisition of the Best Forward Group. In applying the purchase method, the identifiable assets, liabilities and contingent liabilities of the Best Forward Group as at 31 December 2007 are recorded in the unaudited pro forma consolidated balance sheet of the Best Forward Group at their fair values as if the acquisition was completed on 31 December 2007.

The amount of the excess of the cost of acquisition incurred by the Group over its interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of Best Forward Group is recognised as goodwill in the unaudited consolidated balance sheet as if the acquisition was completed on 31 December 2007.

On completion of the acquisition of Best Forward Group, the fair value of net identifiable assets, liabilities and contingent liabilities of Best Forward Group will have to be reassessed. As a result of the assessment, the goodwill may be different from that estimated based on the basis stated above for the purpose of preparation of the Unaudited Pro Forma Financial Information. Accordingly, the actual goodwill at the completion of the transaction may be different from that presented above.

Assuming the acquisition of the Best Forward Group had taken place on 1 January 2007, the adjustment of approximately HK$48,812,000 represented the net cash inflow from the acquisition of Best Forward Group at 1 January 2007.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX IV

(8) The adjustment represented the elimination of the Group’s investment in Best Forward and pre-acquisition reserves of Best Forward Group, and the recognition of goodwill on acquisition.
(9) On 28 April 2008, the Company (as Vendor) and Richinvest International Limited (as Purchaser) entered into an agreement for the sale and purchase of the entire issued share capital of Bright Strong for a consideration of HK$1,000,000 (the “Disposal”). The considerable payable shall be settled by cash.
(10) The adjustment reflects the estimated loss of approximately HK$41,741,000 resulting from the Disposal, assuming that the Disposal had taken place on 1 January 2007. The estimated loss being the net difference of (i) the consideration for the Disposal of HK$1,000,000; (ii) the Group’s share of net liabilities of Bright Strong of approximately HK$25,929,000 as at 31 December 2007, as if the Disposal had completed on 31 December 2007, and (iii) releasing the translation reserve of approximately HK$68,670,000 to the consolidated income statement. The final amounts of proceeds, assets and liabilities of Bright Strong Group and the loss on the Disposal will be different from the amounts described above.

Assuming the Disposal had taken place on 1 January 2007, the adjustment of approximately HK$58,183,000 represented the net effect of the net cash outflow of approximately HK$59,183,000 of the Disposal for the year ended 31 December 2007 and the cash inflow of consideration received of HK$1,000,000 on the Disposal.

(11) The adjustment reflects the net transaction costs directly attributable to the Proposed Transactions of approximately HK$2,800,000.
(12) Basis of translation

Translation of RMB into HK$ is made in the Unaudited Pro Forma Financial Information of the Resulting Group at the average rate if HK$1 = RMB0.9354 for the preparation of the unaudited pro forma consolidated income statement and cash flow statement and the closing rate of HK$1 = RMB0.9354 for the preparation of unaudited pro forma consolidated balance sheet.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX IV

	Enlarged	Group	Consolidated	31.12.2007	HK$’000	M=A+J+K+L	(Unaudited)			263,108		83,374	70,696	1,971	—	4,316	4,340	25,396	453,201		55,248	64,067			1,944	44	—	110,114	231,417
		Pro forma	adjustment	(7) & (8)	HK$’000	L									(200,000)	(5,305)
(iii)
		Pro forma	adjustment	(7)	HK$’000	K									200,000
First stage (i) (ii)	Best	Note (1) Best Pro forma Best Forward Pro forma Pro forma Pro forma Pro forma Forward	The Group Forward United Chance adjustment Consolidated Adjustment adjustment adjustment adjustment Consolidated	31.12.2007 31.3.2008 31.12.2007 (2) 31.12.2007 (3) (4) (5) (6) 31.12.2007	HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	A B C D E=B+C+D F G H I J=E+F+G+H+I	(Audited) (Audited) (Audited)	ASSETS AND LIABILITIES	Non-current assets	Property, plant and equipment 35,441 — — — 113,497 114,170 227,667	Interests in leasehold land held for	own use under operating leases 4,435 — — — 78,939 78,939	Investment properties 70,696 — — — — —	Intangible assets — — — — 1,971 1,971	Investment in a subsidiary — 25,000 — (25,000) — — 195,684 (195,684) —	Goodwill — — — 9,621 9,621 — 9,621	Interest in associates 4,340 — 40,379 40,379 — (40,379) —	Available-for-sale investments — — — — 25,396 25,396	114,912 25,000 40,379 50,000 219,803 343,594	Current assets	Inventories 8,078 — — — 47,170 47,170	Trade and other receivables 8,308 — — — 55,759 55,759	Interests in leasehold land held for	own use under operating leases	— current portion 119 — — — 1,825 1,825	Amount due from holding company — — — — 44 44	Amount due from a subsidiary — — — — — —	Bank balances and cash 67,282 — — — 42,832 42,832	83,787 — — — 147,630 147,630

— 218 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX IV

	Enlarged Group	Consolidated	31.12.2007	HK$’000	M=A+J+K+L	(Unaudited)		178,724	896	—	170,348	14,423	364,391	(132,974)	320,227		13,408	131,131	46,100		67,889	258,528	61,699		10,739	(53,562)	18,869		3,900		(20,054)	81,753	61,699
	Pro forma	adjustment	(7) & (8)	HK$’000	L					(116,768)																(88,537)
(iii)
	Pro forma	Adjustment	(7)	HK$’000	K													131,131	46,100								18,869		3,900
	Best Forward	Consolidated	31.12.2007	HK$’000	J=E+F+G+H+I			126,209	896	116,768	78,041	—	321,914	(174,284)	169,310		—	—	—		—	—	169,310		—	88,537	—		—		88,537	80,773	169,310
	Pro forma	adjustment	(6)	HK$’000	I																				(90,870)	(184,818)						80,004
	Pro forma	adjustment	(5)	HK$’000	H					66,768																88,537
(ii)
	Pro forma	adjustment	(4)	HK$’000	G																					114,170
	Pro forma	Adjustment	(3)	HK$’000	F			126,209	896	—	78,041	—	205,146	(57,516)	162,287		—	—	—		—	—	162,287		90,870	70,648	—		—		161,518	769	162,287
	Best Forward	Consolidated	31.12.2007	HK$’000	E=B+C+D			—	—	50,000	—	—	50,000	(50,000)	—		—	—	—		—	—	—		—	—	—		—		—	—	—
(i)	Pro forma	adjustment	(2)	HK$’000	D																					(15,379)
First stage		United Chance	31.12.2007	HK$’000	C	(Audited)		—	—	25,000	—	—	25,000	(25,000)	15,379		—	—	—		—	—	15,379		—	15,379	—		—		15,379	—	15,379
		Best Forward	31.3.2008	HK$’000	B	(Audited)		—	—	25,000	—	—	25,000	—	—		—	—	—		—	—	—		—	—	—		—		—	—	—
	Note (1)	The Group	31.12.2007	HK$’000	A	(Audited)		52,515	—	—	92,307	14,423	159,245	(75,458)	39,454		13,408	—	—		67,889	81,297	(41,843)		10,739	(53,562)	—		—		(42,823)	980	(41,843)
							Current liabilities	Trade and other payables	Tax payable	Loan from a shareholder	Short-term bank loans — secured	Other loan — secured		Net current (liabilities) assets	Total assets less current liabilities	Non-current liabilities	Amount due to holding company	Promissory note	Convertible bonds	Provision for staff welfare and	bonus		Net (liabilities) assets	Capital and reserves	Share capital	Reserves	Imputed interest on promissory note	Equity component of convertible	bonds	Equity attributable to equity holders	of the Company	Minority interests

— 219 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX IV

	Group	Consolidated	31.12.2007	HK$’000	M=A+J+K+L	(Unaudited)	470,499	(297,958)	172,541	22,504			(827)	(93,629)	(112,663)	(12,290)	5,987	(25,541)	—		7	(43,911)	951	(42,960)			(41,105)	(1,855)	(42,960)
	Pro forma	adjustment	(7) & (8)	HK$’000	L														(88,537)								(88,537)
(iii)
	Pro forma	Adjustment	(7)	HK$’000	K													(10,000)									(10,000)
	Best Forward	Consolidated	31.12.2007	HK$’000	J=E+F+G+H+I		421,454	(271,567)	149,887	5,621			—	(67,282)	(64,378)	(690)	5,327	(6,313)	88,537		7	110,716	(1,254)	109,462			109,462	—	109,462
	Pro forma	adjustment	(6)	HK$’000	I
	Pro forma	adjustment	(5)	HK$’000	H														88,537								88,537
(ii)
	Pro forma	adjustment	(4)	HK$’000	G			(5,709)																			(5,709)
	Pro forma	Adjustment	(3)	HK$’000	F		421,454	(265,858)	155,596	5,621			—	(67,282)	(64,378)	(690)	—	(6,313)	—		7	22,561	(1,254)	21,307			21,307	—	21,307
	Best Forward	Consolidated	31.12.2007	HK$’000	E=B+C+D		—	—	—	—			—	—	—	—	5,327	—	—		—	5,327	—	5,327			5,327	—	5,327
(i)	Pro forma	adjustment	(2)	HK$’000	D
First stage		United Chance	31.12.2007	HK$’000	C	(Audited)	—	—	—	—			—	—	—	—	5,327	—	—		—	5,327	—	5,327			5,327	—	5,327
		Best Forward	31.3.2008	HK$’000	B	(Audited)	—	—	—	—			—	—	—	—	—	—	—		—	—	—	—			—	—	—
	Note (1)	The Group	31.12.2007	HK$’000	A	(Audited)	49,045	(26,391)	22,654	16,883			(827)	(26,347)	(48,285)	(11,600)	660	(9,228)	—		—	(56,090)	2,205	(53,885)			(52,030)	(1,855)	(53,885)
							Turnover	Cost of sales	Gross profit	Other income	Loss on disposal of investment	at fair value through profit	or loss	Distribution costs	Administrative expenses	Other operating expenses	Share of results of associates	Finance costs	Discount on acquisition	Gain on disposal of	a subsidiary	(Loss) profit before tax	Income tax	Loss for the year	Attributable to:	Equity shareholders of the	Company	Minority interests

— 220 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX IV

	Enlarged Group	Consolidated	31.12.2007	HK$’000	M=A+J+K+L	(Unaudited)	(66,472)		—	1,400			119			827		4,722		9,541	19,228		(818)		1,050		10,200		1,107	(561)		(7,622)	—		(2,567)	(5,987)
	Pro forma	adjustment	(7) & (8)	HK$’000	L		(88,537)		88,537
(iii)
	Pro forma	Adjustment	(7)	HK$’000	K		(10,000)														10,000
	Best Forward	Consolidated	31.12.2007	HK$’000	J=E+F+G+H+I		88,155		(88,537)	—			—			—		—		5,709	—		—		—		—		—	—		—	—		—	(5,327)
	Pro forma	adjustment	(6)	HK$’000	I
	Pro forma	adjustment	(5)	HK$’000	H		88,537		(88,537)
(ii)
	Pro forma	adjustment	(4)	HK$’000	G		(5,709)													5,709
	Pro forma	Adjustment	(3)	HK$’000	F		—		—	—			—			—		—		—	—		—		—		—		—	—		—	—		—	—
	Best Forward	Consolidated	31.12.2007	HK$’000	E=B+C+D		5,327		—	—			—			—		—		—	—		—		—		—		—	—		—	—		—	(5,327)
(i)	Pro forma	adjustment	(2)	HK$’000	D
First stage		United Chance	31.12.2007	HK$’000	C	(Audited)	5,327		—	—			—			—		—		—	—		—		—		—		—	—		—	—		—	(5,327)
		Best Forward	31.3.2008	HK$’000	B	(Audited)	—		—	—			—			—		—		—	—		—		—		—		—	—		—	—		—	—
	Note (1)	The Group	31.12.2007	HK$’000	A	(Audited)	(56,090)		—	1,400			119			827		4,722		3,832	9,228		(818)		1,050		10,200		1,107	(561)		(7,622)	—		(2,567)	(660)
							(Loss) profit before tax	Adjustment for:	Discount on acquisition	Amortisation of intangible assets	Amortisation of interests in	leasehold land held for own use	under operating lease	Change in fair value of investments	at fair value through profit or	loss	Depreciation of investment	properties	Depreciation of property, plant and	equipment	Finance costs	(Gain) loss on disposal of property,	plant and equipment	Impairment loss of goodwill arising	from acquistiions of subsidiaries	Impairment loss on intangible	assets	Impairment loss on property, plant	and equipment	Interest income	Gain on disposal of assets classified	as held for sale	Gain on disposal of subsidiaries	Reversal of impairment loss on	trade and other receivables	Share of results of associates

— 221 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX IV

	Enlarged group	Consolidated	31.12.2007	HK$’000	M=A+J+K+L	(Unaudited)		(35,833)	(4,001)		2,369	20,392		(11)	(17,084)				9,692		2,165	561		(7,078)			48,812	54,152
	Pro forma	adjustment	(7) & (8)	HK$’000	L
(iii)
	Pro forma	Adjustment	(7)	HK$’000	K																						48,812
	Best Forward	Consolidated	31.12.2007	HK$’000	J=E+F+G+H+I			—	—		—	—		—	—				—		—	—		—			—	—
	Pro forma	adjustment	(6)	HK$’000	I
	Pro forma	adjustment	(5)	HK$’000	H
(ii)
	Pro forma	adjustment	(4)	HK$’000	G
	Pro forma	Adjustment	(3)	HK$’000	F			—	—		—	—		—	—				—		—	—		—			—	—
	Best Forward	Consolidated	31.12.2007	HK$’000	E=B+C+D			—	—		—	—		—	—				—		—	—		—			—	—
(i)	Pro forma	adjustment	(2)	HK$’000	D			—	—		—	—		—	—				—		—	—		—			—	—
First stage		United Chance	31.12.2007	HK$’000	C	(Audited)		—	—		—	—		—	—				—		—	—		—			—	—
		Best Forward	31.3.2008	HK$’000	B	(Audited)		—	—		—	—		—	—				—		—	—		—			—	—
	Note (1)	The Group	31.12.2007	HK$’000	A	(Audited)		(35,833)	(4,001)		2,369	20,392		(11)	(17,084)				9,692		2,165	561		(7,078)			—	5,340
							Operating cash flows before	movements in working capital	Increase in inventories	Decrease in trade and other	receivables	Increase in trade and other payables	Decrease in provision for staff	welfare and bonus	Net cash used in operating activities	Investing activities	Proceeds from disposal of	investments at fair value through	profit or loss	Proceeds from disposal of property,	plant and equipment	Interest income received	Purchase of property, plant and	equipment	Net cash inflow (outflow) from	acquisition/disposal of	subsidiaries	Net cash from investing activities

— 222 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX IV

	Group	Consolidated	31.12.2007	HK$’000	M=A+J+K+L	(Unaudited)			—		92,307		2,400		(57,506)	(9,228)	(8,488)		19,485		56,553		59,407		134				106,094
	Pro forma	adjustment	(7) & (8)	HK$’000	L
(iii)
	Pro forma	Adjustment	(7)	HK$’000	K																48,812
	Best Forward	Consolidated	31.12.2007	HK$’000	J=E+F+G+H+I				—		—		—		—	—	—		—		—		—		—				—
	Pro forma	adjustment	(6)	HK$’000	I
	Pro forma	adjustment	(5)	HK$’000	H
(ii)
	Pro forma	adjustment	(4)	HK$’000	G
	Pro forma	Adjustment	(3)	HK$’000	F				—		—		—		—	—	—		—		—		—		—				—
	Best Forward	Consolidated	31.12.2007	HK$’000	E=B+C+D				—		—		—		—	—	—		—		—		—		—				—
(i)	Pro forma	adjustment	(2)	HK$’000	D
First stage		United Chance	31.12.2007	HK$’000	C	(Audited)			—		—		—		—	—	—		—		—		—		—				—
		Best Forward	31.3.2008	HK$’000	B	(Audited)			—		—		—		—	—	—		—		—		—		—		—		—
	Note (1)	The Group	31.12.2007	HK$’000	A	(Audited)			—		92,307		2,400		(57,506)	(9,228)	(8,488)		19,485		7,741		59,407		134				67,282
							Financing activities	Issue of shares on	incorporation	New short-term bank loans	borrowed	Advance from holding	company	Repayments of short-term	loans	Interest paid	Repayment of other loans	Net cash from financing	activities	Net increase in cash and cash	equivalents	Cash and cash equivalents at	beginning of the year	Effect of foreign exchange rate	changes	Cash and cash equivalents at	end of year	representing bank balances	and cash

— 223 —

APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION

NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

Notes:

(1) The balances have been extracted without adjustment from the published annual report of the Company as of 31 December 2007 as set out in Appendix I to this Circular.
(2) On 5 March 2008, China Grand Enterprises (HK) Limited (as Vendor, a company incorporated in Hong Kong with limited liability) and Best Forward (as Purchaser) entered into an agreement for the sale and purchase of the entire issued share capital of United Chance for a consideration of HK$25,000,000. Upon completion of the acquisition, United Chance and its associate, Wuhan, will be accounted for as a subsidiary and an associate of Best Forward as United Chance will be controlled by Best Forward thereafter (hereinafter, collectively referred to as “Best Forward Group”). The balance sheet, income statement and cash flow statement of United Chance will be consolidated with that of Best Forward from the date on which control is transferred to Best Forward.

Details of net identifiable assets and liabilities of the entire issued share capital of United Chance acquired and the goodwill arising on the abovementioned acquisition are as follows:

Consideration _Less:_Net identifiable assets and liabilities acquired Goodwill	HK$’000 25,000 15,379
	9,621

The net assets and liabilities acquired in the transaction are as follows:

Net assets acquired Investment in an associate Loan from a shareholder Net identified assets and liabilities acquired	RMB’000 37,771 (23,385) 14,386	HK$’000 40,379 (25,000)
		15,379

— 224 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX IV

The adjustment represented the elimination of Best Forward’s investment in United Chance and preacquisition reserve of United Chance, and recognition of goodwill arising from the acquisition.

(5) On 6 March 2008, China Grand Enterprises Incorporation (中國遠大集團有限責任公司) (as Vendor, a company established in the People’s Republic of China with limited liability) and United Chance (as Purchaser) entered into an agreement for the sale and purchase of 39,086,352 shares in Wuhan for a consideration of approximately HK$66,768,300. The acquisition of shares of Wuhan represented approximately 45.98% of the entire issued share capital of Wuhan. The consideration has not been paid up and included in loan from a shareholder.

Details of net identifiable assets and liabilities of 70.98% equity interests of Wuhan Group acquired and the discount on acquisition arising on the abovementioned acquisition are as follows:

Consideration _Add:_25% equity interests acquired previously recognised as interest in an associate _Less:_Fair value of net identifiable assets and liabilities acquired Discount on acquisition	HK$’000 66,768 40,379 (195,684) (88,537)

— 225 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX IV

The net assets and liabilities acquired in the transaction are as follows:

Net assets acquired Property, plant and equipment Prepaid lease payments Intangible assets Available-for-sale investments Inventories Trade and other receivables Amount due from a shareholder Bank balances and cash Trade and other payables Tax payable Secured short-term borrowings Fair value adjustment on net assets acquired_(Note 6)_ Fair value of net assets acquired Minority interests Fair value of net identified assets and liabilities acquired	RMB’000 106,165 75,547 1,844 23,755 44,123 52,157 41 40,065 (118,056) (838) (73,000) 151,803 106,795 258,598 (75,555) 183,043	HK$’000 113,497 80,764 1,971 25,396 47,170 55,759 44 42,832 (126,209) (896) (78,041) 162,287 114,170 276,457 (80,773) 195,684

Upon completion of the acquisition, the Wuhan Group will be accounted as subsidiaries of United Chance. Under HKFRS 3 Business Combinations (“HKFRS 3”), United Chance will apply the purchase method to account for the acquisition of the Wuhan Group. In applying the purchase method, the identifiable assets, liabilities and contingent liabilities of the Wuhan Group as at 31 December 2007 are recorded in the unaudited pro forma consolidated balance sheet of the Best Forward Group at their fair values as if the acquisition was completed on 31 December 2007.

(6) The adjustment represented the elimination of United Chance’s investment in Wuhan and pre-acquisition reserves of Wuhan Group, and the effect on minority interests.

(7) On 28 April 2008, Long Smart Investments Limited (“Long Smart”, as Vendor) and the Company (as Purchaser) entered into an agreement for the sale and purchase of the entire issued share capital of Best Forward for a consideration of HK$200,000,000 (the “Acquisition Agreement”). The considerable payable shall be settled by (i) issuance of promissory note of HK$150,000,000 to Long Smart (“Promissory Note”); and (ii) issuance of HK$50,000,000 convertible bond to Long Smart (“Convertible Bond”).

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APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION

(a) Pursuant to the Acquisition Agreement, the Promissory Note for the principal amount of HK$150,000,000 will be issued. The Promissory Note shall bear an interest of 5% per annum, mature 2 years after the date of issuance and be repayable before the maturity date upon mutual agreement. The fair value of the Promissory note of approximately HK$131,131,000 and the imputed interest of approximately HK$18,869,000 is calculated by discounting the future cash flow stream from the bonds using an estimated effective interest rate, which equals 6.953% per annum, at which the directors of the Group believe the Company could borrow funds of similar amount, similar terms of maturity and similar schedule of repayment.

(b) Pursuant to the Acquisition Agreement, the Convertible Bond for the principal of HK$50,000,000 will be issued. The Convertible Bond shall bear interest from the date of its issue at 5% per annum on the principal amount outstanding from time to time, mature 2 years from the date of issuance and which will be payable on maturity. The conversion price has been set at HK$0.30 per share. The value of the Convertible Bond is split into a debt component of approximately HK$46,100,000 which is carried in the unaudited pro forma consolidated balance sheet as a noncurrent liability, and an equity component of approximately HK$3,900,000 which is recognised in equity. In preparing the Unaudited Pro Forma Financial Information, the fair value of the debt component of the Convertible Bond is calculated by discounting the future cash flow stream from the Convertible Bond using an estimated effective rate, which equals 5.00% per annum, at which the directors of the Group believe the Company could borrow funds of similar amount, similar terms of maturity and similar schedule of repayment without any conversion option attached. The difference between the face value and the fair value of the debt component so derived is taken as the value of the equity component of the Convertible Bond. The split of Convertible Bond between the debt and equity components are in accordance with the Hong Kong Accounting Standards 32 “Financial Instruments: Disclosure and Presentation”.

Details of net identifiable assets and liabilities of the entire equity interest of Best Forward acquired and the goodwill arising on the abovementioned acquisition are as follows:

Consideration _Less:_Fair value of net identifiable assets and liabilities acquired Goodwill	HK$’000 200,000 (195,684) 4,316

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UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX IV

The net assets and liabilities acquired in the transaction are as follows:

Net assets acquired
Property, plant and equipment
Prepaid lease payments
Intangible assets
Available-for-sale investments
Inventories
Trade and other receivables
Amount due from a shareholder
Bank balances and cash
Trade and other payables
Tax payable
Loan from a shareholder
Secured short-term borrowings
Minority interests
Fair value adjustment on net assets acquired
Fair value of net assets acquired
Loan from a shareholder not acquired
Fair value of net identified assets and liabilities acquired

HK$’000
113,497
80,764
1,971
25,396
47,170
55,759
44
42,832
(126,209)
(896)
(116,768)
(78,041)
(80,773)
(35,254)
114,170
78,916
116,768
195,684

Upon completion of the acquisition, the Best Forward Group will be accounted as subsidiaries of the Group. Under HKFRS 3 Business Combinations (“HKFRS 3”), the Group will apply the purchase method to account for the acquisition of the Best Forward Group. In applying the purchase method, the identifiable assets, liabilities and contingent liabilities of the Best Forward Group as at 31 December 2007 are recorded in the unaudited pro forma consolidated balance sheet of the Group at their fair values as if the acquisition was completed on 31 December 2007.

(8) The adjustment represented the elimination of the Group’s investment in Best Forward and pre-acquisition reserves of Best Forward Group, and the recognition of goodwill on acquisition.

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APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION

ACCOUNTANTS’ REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION

The Directors

Maxx Bioscience Holdings Limited

Dear Sirs,

We report on the unaudited pro forma financial information (the “Unaudited Pro Forma Financial Information”) of Maxx Bioscience Holdings Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) which has been prepared by the directors of the Company, for illustrative purposes only, to provide information about how (i) the proposed acquisition of the entire equity interests in Best Forward Group Limited and its subsidiaries (the “Best Forward Group”) and the proposed disposal of the entire equity interests in Bright Strong Group Limited and its subsidiaries (together with the Group referred to as the “Resulting Group”); and (ii) the proposed acquisition of the entire equity interests in Best Forward Group (together with the Group referred to as the “Enlarged Group”) might have affected the Unaudited Pro Forma Financial Information of the Group presented, for the inclusion in Appendix IV of a circular of the Company dated 23 June 2008 (the “Circular”). The basis of preparation of the Unaudited Pro Forma Financial Information is set out on pages 212 to 228 to the Circular.

Respective Responsibilities of Directors of the Company and the Reporting Accountants

It is the responsibility solely of the directors of the Company to prepare the Unaudited Pro Forma Financial Information of the Resulting Group and the Enlarged Group in accordance with paragraph 29 of Chapter 4 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “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 (the “HKICPA”).

It is our responsibility to form an opinion, as required by paragraph 29(7) of Chapter 4 of the 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.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX IV

Basis of opinion

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the HKICPA. 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 paragraph 29(1) of Chapter 4 of the Listing Rules.

The Unaudited Pro Forma Financial Information is for illustration purpose only, based on the judgments and assumptions of the directors of the Company, and because of its hypothetical nature, does not give any assurance or indication that any event will take place in the future and may not be indicative of:

the financial position of the Resulting Group and the Enlarged Group as at 31 December 2007 or at any future date; or
the results and cash flows of the Resulting Group and the Enlarged Group for the year ended 31 December 2007 or for any future periods.

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APPENDIX IV

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 paragraph 29(1) of Chapter 4 of the Listing Rules.

Yours faithfully,

SHINEWING (HK) CPA Limited

Certified Public Accountants

Ip Yu Chak

Practising Certificate Number: P04798 Hong Kong

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VALUATION REPORT

APPENDIX V

(A) PROPERTY INTERESTS OF THE GROUP

The following is the text of the letter, summary of values and valuation certificate on property interests of the Group as at 30 April 2008 prepared by LCH (Asia-Pacific) Surveyors Limited for the purpose of inclusion in this circular.

==> picture [191 x 48] intentionally omitted <==

The readers are reminded that the report which follows has been prepared in accordance with the guidelines set by the International Valuation Standards, Eighth Edition, 2007 (the “IVS”) published by the International Valuation Standards Committee as well as the HKIS Valuation Standards on Properties, First Edition, 2005 (the “HKIS Standards”) published by the Hong Kong Institute of Surveyors (the “HKIS”). Both standards entitle the valuer to make assumptions which may on further investigation, for instance by the readers’ legal representative, prove to be inaccurate. Any exception is clearly stated below. Headings are inserted for convenient reference only and have no effect in limiting or extending the language of the paragraphs to which they refer. If additional documents and facts are made available, the valuer reserves the right to amend this report and its conclusions.

17th Floor Champion Building Nos. 287-291 Des Voeux Road Central Hong Kong

23 June 2008

The Directors Maxx Bioscience Holdings Limited Room 2501A, Hopewell Centre 183 Queen’s Road East Wanchai Hong Kong

Dear Sirs,

In accordance with the instructions given by the management of Maxx Bioscience Holdings Limited (hereinafter referred to as the “Company”) to us to value the properties in which the Company and its subsidiaries (hereinafter together with the Company referred to as the “Group”) have interests in the People’s Republic of China (hereinafter referred to as the “PRC” or “China”), we confirm that we have conducted physical inspections, made relevant enquiries and obtained such further information as we consider necessary to support our opinions of value of the properties as at 30 April 2008 (hereinafter referred to as the “Date of Valuation”) for the Company’s internal management reference purpose and to be incorporated into a Company’s circular for its shareholders’ reference.

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VALUATION REPORT

APPENDIX V

We understand that the management of the Company will incorporate our work product (i.e. this letter, the attached summary of values and the valuation certificate) as part of its business due diligence and we have not been engaged to make specific sale or purchase recommendations. We further understand that the use of our work product will not supplant other due diligence, which the management of the Company should conduct, in reaching its business decisions regarding the properties valued. Our work is designed solely to provide an independent valuation that will allow the management of the Company to make an informed decision.

Basis of Valuation and Assumptions

According to the IVS, which the HKIS Standards also follows, there are two valuation bases in valuing property, namely market value basis and valuation bases other than market value. Our valuation of the properties is on market value basis.

The term “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”.

There are three generally accepted approaches to value in arriving at the market value of a property on an absolute title basis, namely the Market Approach, the Cost Approach and the Income Approach. In valuing the properties in Group I (except Property 1), we have adopted the comparable sales method of the Market Approach (also called sales comparison approach) on the assumption that the properties are sold with the benefit of vacant possession as at the Date of Valuation. The comparable sales method considers the sales, listings or offering of similar or substitute properties and related market data and establishes a value of a property that a reasonable investor would have to pay for a similar property of comparable utility and with an absolute title.

In valuing the properties in Group II, we have adopted the investment method of the Income Approach (or sometimes referred to as a method of the Market Approach for the reversionary interests and the rate of return are market-derived) by taking into account the current rent receivable from the existing tenancy agreements and the reversionary potential of the property interests. Our opinion of value of each of the properties in this group was subject to the existing tenancy agreement(s), and otherwise with the benefit of vacant possession.

Having considered the general and inherent characteristics of Property 1 in Group I, we have adopted the depreciated replacement cost approach which is an application of the Cost Approach in valuing specialised properties like this property. The use of this approach requires an estimate of the market value of the land use rights for its existing use, and an estimate of the new replacement cost of the buildings and other site works from which

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VALUATION REPORT

APPENDIX V

deductions are then made to allow for age, condition, and functional obsolescence taken into account of the site formation cost and those public utilities connection charges to the subject property. The land use rights of this property has been determined from marketbased evidences by analysing similar sales or offerings of comparable properties.

The valuation of this property is on the assumption that the property is subject to the test of adequate potential profitability of the business having due regard to the values of the total assets employed and the nature of the operation.

By using this approach, the land should be assumed to have the benefit of planning permission for the replacement of the existing buildings and it is always necessary when valuing the land, to have regard to the manner in which the land is developed by the existing buildings and site works, and the extent to which these realise the full potential value of the land. When considering a notional replacement site, it should normally be regarded as having the same physical and location characteristics as the actual site, other than characteristics of the actual site which are not relevant, or are of no value, to the existing use. In considering the buildings, the gross replacement cost of the buildings should take into consideration everything which is necessary to complete the construction from a new green field site to provide buildings as they are, at the date of valuation, fit for and capable of being occupied and used for the current use. These costs to be estimated are not to erect buildings in the future but have the buildings available for occupation at the date of valuation, the work having commenced at the appropriate time.

We need to state that our opinion of value of Property 1 in Group I is not necessarily intended to represent the amount that might be realised from disposition of land use rights or various buildings of the property on piece meal basis in the open market.

Our valuations have been made on the assumption that the legally interested party (with absolute title) in each of the properties valued, sells the property on the open market in its existing state without the benefit of a deferred terms contract, leaseback, joint venture, management agreement or any other similar arrangement which would serve to increase the value of the property.

We further assumed that properties with assigned market values in this report (the “said property interests”) can be freely disposed and transferred free of all encumbrances, at the Date of Valuation, for its existing or alternative uses in the market to both local and overseas purchasers without payment of any premium to the government, and that, the Group has free and uninterrupted rights to use or assign the said property interests for the whole of the unexpired terms as granted and any premiums payable have already been fully paid.

No commercial value has been assigned to property in Group III as the Group does not possess any long-term title on the property.

Unless otherwise stated, we have not carried out a valuation on a redevelopment basis and the study of possible alternative development options and the related economics do not come within the scope of our work.

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VALUATION REPORT

APPENDIX V

Matters that might Affect the Values Reported

No allowance has been made in our valuations for any charges, mortgages or amounts owing on the properties. Unless otherwise stated, it is assumed that the properties are free from encumbrances, restrictions, and outgoings of an onerous nature which could affect their values.

As at the Latest Practicable Date of this circular, we are unable to identify any adverse news against the properties which may affect the reported values in our work product. Thus, we are not in the position to report and comment on its impact (if any) to the properties. However, should it be established subsequently that such news did exist at the Date of Valuation, we reserve the right to adjust the values reported herein.

Establishment of Titles

In the course of valuation, we have been provided with copies of the title documents and the tenancy agreements regarding the properties. In our valuation, we have assigned no commercial (market) value to property without valid State-owned Land Use Right Certificates or Realty Title Certificates or without clear information on the nature of the land use right. Due to inherent defects in the land registration system of China, we are unable to search the original documents from the relevant land registration departments to verify the existing titles of the properties or any material encumbrances that might be attached to the properties. All the title documents were provided by the management of the Company. As we are not legal professional and we are unable to ascertain the titles and to report any encumbrances (if any) that are registered against the properties. However, we have relied solely on the copy of the PRC legal opinion dated 16 June 2008 as provided by the management of the Company with regard to the Group’s titles on the properties as disclosed in the attached valuation certificate. We are given to understand that the PRC legal opinion was prepared by the Company’s PRC legal adviser, Kun Lun Law Firm (廣東東方昆侖律師事務所). No responsibility or liability is assumed.

Inspections and Investigations of the Property in Accordance with VS4 of the HKIS Standards

As part of our agreed-upon procedures with the Company, we have adopted our previous inspection records of most of the properties in respect of which we have been provided with such information as we have requested for the purpose of our valuations. We have not inspected those parts of the properties which were covered, unexposed, excluded, not being arranged or inaccessible and such parts have been assumed to be in reasonable condition. We cannot express an opinion about or advice upon the condition of the properties and the attached valuation certificate should not be taken as making any implied representation or statement about the condition of the properties. No structural survey, investigation or examination has been made, but in the course of our inspections, we did not note any

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APPENDIX V

serious defects in the properties inspected. We are not, however, able to report that the properties are free from rot, infestation or any other structural defects. No tests were carried out to the services (if any) and we are unable to identify those services covered, unexposed or inaccessible.

We have not carried out on-site measurements to verify the correctness of the area of the properties, but have assumed that the area shown on the documents and handed to us are correct. All dimensions, measurements and areas are approximations.

Our engagement and the agreed procedures to value the properties did not include an independent land survey to verify the legal boundaries of each of the properties. We need to state that we are not in the land survey profession, therefore, we are not in the position to verify or ascertain the correctness of the legal boundaries of such properties that appeared on the documents handed to us. No responsibility from our part is assumed. The management of the Company or interested party in the properties should conduct their own legal boundaries due diligence work.

We have not arranged for any investigation to be carried out to determine whether or not any deleterious or hazardous material has been used in the construction of the properties, or has since been incorporated, and we are therefore unable to report that the properties are free from risk in this respect. For the purpose of this valuation, we have assumed that such investigation would not disclose the presence of any such material to any significant extent.

We are not aware of the content of any environmental audit or other environmental investigation or soil survey which may have been carried out on the properties and which may draw attention to any contamination or the possibility of any such contamination. In undertaking our work, we have been instructed to assume that no contaminative or potentially contaminative uses have ever been carried out in the properties. We have not carried out any investigation into past or present uses, either of the properties or of any neighbouring land, to establish whether there is any contamination or potential for contamination to the properties from these uses or sites, and have therefore assumed that none exists. However, should it be established subsequently that contamination, seepage or pollution exists at the properties or on any neighbouring land, or that the premises have been or are being put to a contaminative use, this might reduce the values now reported.

Sources of Information and its Verification in Accordance with VS5 of the HKIS Standards

We have relied solely on the information provided by the management of the Company or its appointed personnel without further verification and have fully accepted advice given to us on such matters as planning approvals or statutory notices, locations, titles, easements, tenure, occupation, lettings, rental, site and floor areas and all other relevant matters.

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VALUATION REPORT

APPENDIX V

The scope of valuation has been determined by reference to the property list provided by the management of the Company. The management of the Company has confirmed to us that it has no property interests other than those specified on the list supplied to us.

Our valuations have been made only based on the advice and information made available to us. While a limited scope of general inquiries had been made to the local property market practitioners, we are not in a position to verify and ascertain the correctness of the advice given by the relevant personnel. No responsibility and liability is assumed.

Information furnished by others, upon which all or portions of our work product are based, is believed to be reliable but has not been verified in all cases. Our procedures to value or work do not constitute an audit, review, or compilation of the information provided. Thus, no warranty is made nor liability assumed for the accuracy of any data, advice, opinions, or estimates identified as being furnished by others which have been used in formulating our work product.

When we adopted the work products from other professions, external data providers and the management of the Company in our valuation, the assumptions and caveats that adopted by them in arriving at their figures also applied in our valuation. The procedures we have taken do not provide all the evidence that would be required in an audit and, as we have not performed an audit, accordingly, we do not express an audit opinion.

We are unable to accept any responsibility for the information that has not been supplied to us by the management of the Company or its appointed personnel. Also, we have sought and received confirmation from the management of the Company or its appointed personnel that no materials factors have been omitted from the information supplied. Our analysis and valuation are based upon full disclosure between us and the Company of material and latent facts that may affect the valuation.

We have had no reason to doubt the truth and accuracy of the information provided to us by the management of the Company or its appointed personnel. We consider that we have been provided with sufficient information to reach an informed view, and have had no reason to suspect that any material information has been withheld.

Unless otherwise stated, all monetary amounts are in Renminbi Yuan (“RMB”).

Limiting Conditions

Our opinions of value of the properties in this report are valid only for the stated purpose and only for the Date of Valuation, and for the sole use of the named Company. We or our personnel shall not be required to give testimony or attendance in court or to any government agency by reason of this report, and the valuer accepts no responsibility whatsoever to any other person.

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VALUATION REPORT

APPENDIX V

Our valuations have been made on the assumption that no unauthorised alteration, extension or addition has been made in the properties, and that the use of the attached valuation certificate should not be used as a building survey of the properties. If the management of the Company wants to satisfy them as to the condition of the properties, then the management of the Company should obtain a surveyor’s detailed inspection and report of their own.

No responsibility is taken for changes in market conditions and local government policy and no obligation is assumed to revise the attached valuation certificate to reflect events or conditions, which occur or make known to us subsequent to the date hereof.

Neither the whole nor any part of this report or any reference made hereto may be included in any published documents, circular or statement, or published in any way, without our written approval of the form and context in which it may appear. Nonetheless, we consent to the publication of this report in this circular to the Company’s shareholders’ reference.

Our maximum liability relating to services rendered under this engagement (regardless of form of action, whether in contract, negligence or otherwise) shall be limited to the charges paid to us for the portion of its services or work products giving rise to liability. In no event shall we be liable for consequential, special, incidental or punitive loss, damage or expense (including without limitation, lost profits, opportunity costs, etc.), even if it has been advised of their possible existence.

The Company is required to indemnify and hold us and our personnel harmless from any claims, liabilities, costs and expenses (including, without limitation, attorney’s fees and the time of our personnel involved) brought against, paid or incurred by us at a time and in any way based on the information made available in connection with our report except to the extent that any such loses, expenses, damages or liabilities are ultimately determined to be the result of gross negligence of our engagement team in conducting its work. This provision shall survive even after the termination of this engagement for any reason.

Statements

Our valuations have been prepared in line with the requirements contained in Chapter 5 and Practice Note No. 12 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited as well as the guidelines contained in both IVS and the HKIS Standards. The valuations have been undertaken by valuers, acting as external valuers, qualified for the purpose of the valuations.

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APPENDIX V

We retain a copy of this report together with the data from which it was prepared, and these data and documents will, according to the Laws of Hong Kong, keep for a period of 6 years from the date of this report and to be destroyed thereafter. We considered these records confidential, and we do not permit access to them by anyone, with the exception for law enforcement authorities or court order, without the Company’s authorisation and prior arrangement made with us. Moreover, we will add Company’s information into our client list for our future reference.

We hereby certify that the fee for this service is not contingent upon our conclusion of values and we have no significant interest in the properties, the Group or the values reported.

Our valuations are summarised below and the valuation certificate is attached.

Yours faithfully, For and on behalf of

LCH (Asia-Pacific) Surveyors Limited

Joseph Ho Chin Choi Elsa Ng Hung Mui B.Sc. RPS (GP) B.Sc. M.Sc. RPS (GP) Managing Director Associate Director

Contributed valuer

Leslie Wong Tak Chiu BSc

Notes:

Mr. Joseph Ho Chin Choi has been conducting assets valuation (including real estate properties) and advisory work in Hong Kong, Macau, Taiwan, mainland China, Japan, South East Asia, Australia, Finland, Germany, Scotland, Guyana, Canada and the United States of America for various purposes since 1988. He has more than 19 years of experience in valuing real estate properties in mainland China.
Ms. Elsa Ng Hung Mui is a Registered Professional Surveyor who has been conducting valuation of real estate properties in Hong Kong since 1994 and has more than 9 years of experience in valuing properties in mainland China.
Both Mr. Joseph Ho Chin Choi and Ms. Elsa Ng Hung Mui are valuers in the List of Property Valuers for Undertaking Valuation for Incorporation or Reference in Listing Particulars and Circulars and Valuations in Connection with Takeovers and Mergers published by the HKIS.

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VALUATION REPORT

APPENDIX V

SUMMARY OF VALUES

Group I — Properties held and occupied by the Group in the PRC and valued on market value basis

				Market Value in
		Market Value		its existing state
		in its existing	Interest	attributable to
		state as at	attributable	the Group as at
No.	Property	30 April 2008	to the Group	30 April 2008
		RMB		RMB
1.	Huang Jiang Healthy Foodstuff	17,860,000	95%	16,967,000
	Factory
	Huang Niu Pu Reservoir
	Huang Niu Pu Management
	District
	Huang Jiang Town
	Dongguan City
	Guangdong Province
	the PRC
2.	Unit Nos. 502, 503, 602, 603, 701	No Commercial	95%	No Commercial
	and 801 and Bicycle Parking Space	Value		Value
	Nos. 8 to 11, 14 and 15 of
	Ling Yun Mansion
	Unit Nos. 804 and 905 and
	Bicycle Parking Space
	Nos. 5 and 27
	Of Sheng Feng Mansion
	Unit Nos. 702 and 803 and
	Bicycle Parking Space Nos. 41 and
	58 of Dong Ming Mansion
	(Block A) and
	Unit Nos. 801 to 803 and
	Bicycle Parking Space Nos. 10,
	39 and 40 of Dong Ming Mansion
	(Block B)
	Hua Yuan Xin Cun
	Guan Cheng
	Dongguan City
	Guangdong Province
	the PRC

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VALUATION REPORT

APPENDIX V

				Market Value in
		Market Value		its existing state
		in its existing	Interest	attributable to
		state as at	attributable	the Group as at
No.	Property	30 April 2008	to the Group	30 April 2008
		RMB		RMB
3.	A house situated at	No Commercial	95%	No Commercial
	No. 7 Hua Gua Road	Value		Value
	Riverside Garden
	Pan Yu District
	Guangzhou City
	Guangdong Province
	the PRC
4.	The whole of Level 9	No Commercial	95%	No Commercial
	Duan Zhou Civil Administration	Value		Value
	Building
	No. 20 Ren Min Zhong Road
	Zhaoxing City
	Guangdong Province
	the PRC
5.	Unit No. 6-2 on Level 6 of Block 1	No Commercial	95%	No Commercial
	Building No. 41	Value		Value
	Shang Long
	Xi Li
	Dong Cheng District
	Beijing City
	the PRC
6.	The whole of Level 12	2,670,000	95%	2,537,000
	Shi Fa Building
	No. 92 Liu Yi Bei Road
	Jin An District
	Fuzhou City
	Fujian Province
	the PRC

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VALUATION REPORT

APPENDIX V

				Market Value in
		Market Value		its existing state
		in its existing	Interest	attributable to
		state as at	attributable	the Group as at
No.	Property	30 April 2008	to the Group	30 April 2008
		RMB		RMB
7.	Part of Level 8	No Commercial	95%	No Commercial
	Deng Yue Building	Value		Value
	No. 248 Xin Hua Road
	Wuhan City
	Hubei Province
	the PRC
8.	Units A, B and C on Level 15	No Commercial	95%	No Commercial
	Grand Cosmos Tower	Value		Value
	Zheng Hong Lane
	No. 18 Zheng Hong Street
	Bai Xia District
	Nanjing City
	Jiangsu Province
	the PRC
9.	The Southern Portion of Level 1	No Commercial	95%	No Commercial
	and the whole portion of	Value		Value
	Levels 2 and 3 at
	No. 237 Xi Shun Cheng Street
	Shen He District
	Shenyang City
	Liaoning Province
	the PRC
10.	Unit C3 on Level 4 of	No Commercial	95%	No Commercial
	Block No. 1 Dong Li Building	Value		Value
	No. 187 Huan Cheng Bei Road
	Xin Cheng District
	Xian City
	Shaanxi Province
	the PRC

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VALUATION REPORT

APPENDIX V

				Market Value in
		Market Value		its existing state
		in its existing	Interest	attributable to
		state as at	attributable	the Group as at
No.	Property	30 April 2008	to the Group	30 April 2008
		RMB		RMB
11.	The whole of Level 4	No Commercial	95%	No Commercial
	Lian Hua Building	Value		Value
	No. 6 Han Wei Road
	Yu Zhong District
	Chongqing City
	Sichuan Province
	the PRC
12.	The whole of Level 2	No Commercial	95%	No Commercial
	Ai Bang Building	Value		Value
	No. 585 Ling Ling Road
	Xu Hui District
	Shanghai City
	the PRC
13.	The South-western Portion of	11,600,000	95%	11,020,000
	Level 1 and the whole of
	Levels 2 and 3
	Xing Chen Building
	No. 26 Tian He Nan Er Road
	Tian He District
	Guangzhou City
	Guangdong Province
	the PRC
14.	Unit No. 1004 on Level 10	No Commercial	95%	No Commercial
	Hua Lian Building	Value		Value
	No. 269 Fu Rong Zhong Road
	Changsha City
	Hunan Province
	the PRC

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VALUATION REPORT

APPENDIX V

No. Property 15. Room C Level 26 No. 367 Guangzhou Da Dao Central Tianhe District Guangdong Province the PRC Sub-total:	Market Value in its existing state as at 30 April 2008 Interest attributable to the Group RMB 970,000 95% RMB33,100,000	Market Value in its existing state attributable to the Group as at 30 April 2008 RMB 922,000
		RMB31,446,000

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APPENDIX V

Group II — Properties held by the Group for investment in the PRC and valued on market value basis

				Market Value in
		Market Value	Interest	its existing state
		in its existing	attributable	attributable to
		state as at	to the	the Group as at
No.	Property	30 April 2008	Group	30 April 2008
		RMB		RMB
16.	The whole block of	14,200,000	95%	13,490,000
	Block C Die Cui Court
	No. 27 Hua Jing Street
	Hua Jing Garden
	Tian He District
	Guangzhou
	Guangdong Province
	the PRC
17.	15 various residential units	No Commercial	95%	No Commercial
	located at	Value		Value
	Levels 1 to 9, Block B
	No. 3 Jiang Hua Road
	Lot No. D1
	Tian He High and New
	Technology Production
	Development Zone
	Industrial Park
	Tian He District
	Guangzhou City
	Guangdong Province
	the PRC
18.	An industrial building and a	14,800,000	95%	14,060,000
	dormitory building situated at
	No. 4 Han Ji Dong Road and
	No. 7 Han Ji Da Road
	Han Ji Industrial Estate
	Shi Ji Town
	Pan Yu District
	Guangzhou City
	Guangdong Province
	the PRC

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VALUATION REPORT

APPENDIX V

				Market Value in
		Market Value	Interest	its existing state
		in its existing	attributable	attributable to
		state as at	to the	the Group as at
No.	Property	30 April 2008	Group	30 April 2008
		RMB		RMB
19.	A warehouse located at	9,100,000	95%	8,645,000
	No. 73 Luo Lang Road
	Luo Gang
	Bai Yun District
	Guangzhou City
	Guangdong Province
	the PRC
20.	Whole block located at	10,500,000	95%	9,975,000
	Nos. 40-42 Jian Zhong Road
	Tian He High and New
	Technology Production
	Development Zone
	Industrial Park
	Tian He District
	Guangzhou City
	Guangdong Province
	the PRC
21.	A building situated at	23,500,000	95%	22,325,000
	Nos. 27-29 Lin Yun Liu Street and
	Tian He Nan Er Road
	Tian He District
	Guangzhou City
	Guangdong Province
	the PRC
22.	Unit Nos. 802 at	2,600,000	95%	2,470,000
	No. 44 Ti Yu Dong Road
	Unit Nos. 301, 304, 404, 501 and
	601 at No. 58 Ti Yu Dong Road
	and Unit No. 802 at
	No. 62 Ti Yu Dong Road
	Fu Li Garden
	Tian He District
	Guangzhou City
	Guangdong Province
	the PRC

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VALUATION REPORT

APPENDIX V

No. Property 23. Basement Level 1, Unit Nos. 103, 105, 106, 107, 107-1, 111, 401 to 430, 512, 513, 515 to 523, 525 to 539, and the whole of Levels 2 and 3 No. 35 Qing Cai Dong Street Hua Le Road Risheng Building Dong Shan District Guangzhou City Guangdong Province the PRC 24. Unit No. 703 at No. 9 Dong Si Street Jian She Er Ma Road Dong Shan District Guangzhou City Guangdong Province the PRC 25 . The whole block of Da Shi Restaurant Luo Gang Men Yong Village Da Shi Town Pan Yu District Guangzhou City Guangdong Province the PRC Sub-total:	Market Value in its existing state as at 30 April 2008 Interest attributable to the Group RMB 33,000,000 95% No Commercial Value 95% 6,300,000 95% RMB114,000,000	Market Value in its existing state attributable to the Group as at 30 April 2008 RMB 31,350,000 No Commercial Value 5,985,000 RMB108,300,000

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VALUATION REPORT

APPENDIX V

Group III — Property occupied by the Group in the PRC and valued on the market value basis

No. Property 26. A manufacturing plant located at Da Lang Guangzhou City Guangdong Province the PRC Sub-total Grand-total:	Market Value in its existing state as at 30 April 2008 Interest attributable to the Group RMB No Commercial Value 95% Nil RMB147,100,000	Market Value in its existing state attributable to the Group as at 30 April 2008 RMB No Commercial Value Nil RMB139,746,000

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VALUATION REPORT

APPENDIX V

VALUATION CERTIFICATE

Group I — Properties held and occupied by the Group in the PRC and valued on the market value basis

No.	Property	Description and tenure	Particulars of	Market Value in its
			occupancy	existing state as at
				30 April 2008
				RMB
1.	Huang Jiang Healthy	The property comprises five	As confirmed by the	16,967,000
	Foodstuff Factory	consecutive parcels of land having	Group, the property is	(95% interest)
	Huang Niu Pu	a total site area of approximately	occupied by the Group
	Reservoir	46,553 sq.m. upon which an	as a healthy foodstuff
	Huang Niu Pu	industrial complex and dormitory	manufacturing factory.
	Management District	facilities area were built.	(see Note 3).
	Huang Jiang Town
	Dongguan City	The complex and the dormitory
	Guangdong Province	facilities consist of a total of 60
	the PRC	various buildings and structures
		with a total gross floor area of
		approximately 37,184 sq.m.
		The complex and the dormitory
		facilities were completed in
		between 1988 and 1995.
		The property held by the Group
		Under five various State-owned
		Land Use Rights Certificates for A
		term of 50 years commencing from
		January 1994 and April 1994 for
		industrial purpose.

Notes:

Pursuant to five various State-owned Land Use Rights Certificates all dated 10 January 1995 and issued by the People’s Government of Dongguan City, the land use rights of the property is legally owned by Guangdong Apollo (Group) Co., Ltd. a 95%-owned subsidiary of the Company, for a term of 50 years commencing from January 1994 and April 1994, respectively.
Pursuant to 61 various Building Ownership Certificates all dated 25 July 1995 and issued by the People’s Government of Dongguan City, 61 various major buildings and structures with a total gross floor area of approximately 37,184 sq.m. are legally owned by Guangdong Apollo (Group) Co., Ltd.
According to information provided by the Company, small portion of the property having a gross floor area of approximately 2,937.99 sq.m. is subject to a monthly tenancy at a monthly rental of approximately RMB26,173.35.
The property is subject to mortgage in favour of Industrial and Commercial Bank of China, Dongguan City Branch till 15 August 2010.
According to the legal opinion dated 16 June 2008 and prepared by the Company’s PRC legal adviser, Kun Lun Law Firm (廣東東方昆侖律師事務所), Guangdong Apollo (Group) Co., Ltd. is the legally interested party in the property, and can freely use and assign the property subject to existing mortgage as mentioned in Note 4 above.

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VALUATION REPORT

APPENDIX V

				Market Value in its
			Particulars of	existing state as at
No.	Property	Description and tenure	occupancy	30 April 2008
				RMB
2.	Unit Nos. 502, 503,	The property comprises 13 various	As confirmed by the	No Commercial
	602, 603, 701 and	residential units and 13 various	Group, the property is	Value
	801 and Bicycle	bicycle parking spaces scattered in	vacant.	(95% interest)
	Parking Space Nos.	four 8-storey residential buildings
	8 to 11, 14 and 15 of	which were completed between
	Ling Yun Mansion	1992 and 1993.
	Unit Nos. 804 and
	905 and Bicycle	The total gross floor area of the
	Parking Space Nos.	residential units and the bicycle
	5 and 27 of Sheng	parking spaces is approximately
	Feng Mansion	1,041.03 sq.m. and 107.08 sq.m.,
	Unit Nos. 702 and	respectively.
	803 and
	Bicycle Parking
	Space Nos. 41 and
	58 of Dong Ming
	Mansion (Block A)
	and Unit Nos. 801
	to 803 and Bicycle
	Parking Space Nos.
	10, 39 and 40 of
	Dong Ming Mansion
	(Block B)
	Hua Yuan Xin Cun
	Guan Cheng
	Dongguan City
	Guangdong Province
	the PRC

Notes:

Pursuant to thirteen various Agreements for Sale and Purchase dated 7 and 8 September 1992 and 23 July 1996, the property was purchased by Guangdong Apollo (Group) Co., Ltd., a 95%-owned subsidiary of the Company.
According to the legal opinion dated 16 June 2008 and prepared by the Company’s PRC legal adviser, Kun Lun Law Firm (廣東東方昆侖律師事務所), Guangdong Apollo (Group) Co., Ltd. only signed Agreement for Sale and Purchase for the property, but has not obtained further title document regarding the property. In the absence of further information regarding the property, Kun Lun Law Firm was unable to comment on the legality of the Agreement for Sale and Purchase.
According to the Listing Rules published by the Stock Exchange of Hong Kong Limited, property in China is required to have a transferable long term title certificate, i.e. State-owned Land Use Rights Certificate or Realty Title Certificate, prior the valuer can assign any commercial value to the property. In this instance, no commercial value has been assigned to the property as the Group did not obtain any long term title certificate, or the like, of the property as at the Date of Valuation.

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VALUATION REPORT

APPENDIX V

				Market Value in its
			Particulars of	existing state as at
No.	Property	Description and tenure	occupancy	30 April 2008
				RMB
3.	A house situated at	The property comprises a detached	As confirmed by the	No Commercial
	No. 7	garden house which was completed	Group, the property is	Value
	Hua Gua Road	in 1995.	occupied by the Group as	(95% interest)
	Riverside Garden		a staff quarter.
	Pan Yu District	The gross floor area of the property
	Guangzhou City	is approximately 299.99 sq.m.
	Guangdong Province
	the PRC

Notes:

Pursuant to an Agreement for Sale and Purchase dated 28 August 1998, the property with a gross floor area of approximately 299.99 sq.m. was purchased by Guangdong Apollo (Group) Co., Ltd., a 95%-owned subsidiary of the Company.
According to the legal opinion dated 16 June 2008 and prepared by the Company’s PRC legal adviser, Kun Lun Law Firm (廣東東方昆侖律師事務所), Guangdong Apollo (Group) Co., Ltd. only signed an Agreement for Sale and Purchase for the property, but has not obtained further title document regarding the property. In the absence of further information regarding the property, Kun Lun Law Firm was unable to comment on the legality of the Agreement for Sale and Purchase.
According to the Listing Rules published by the Stock Exchange of Hong Kong Limited, property in China is required to have a transferable long term title certificate, i.e. State-owned Land Use Rights Certificate or Realty Title Certificate, prior the valuer can assign any commercial value to the property. In this instance, no commercial value has been assigned to the property as the Group did not obtain any long term title certificate, or the like, of the property as at the Date of Valuation.

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VALUATION REPORT

APPENDIX V

				Market Value in its
			Particulars of	existing state as at
No.	Property	Description and tenure	occupancy	30 April 2008
				RMB
4.	The whole of	The property comprises the whole	As confirmed by the	No Commercial
	Level 9	of the office space on level 9 of	Group, the property is	Value
	Duan Zhou Civil	a 10-storey commercial building	occupied by the Group	(95% interest)
	Administration	which was completed in 1990’s.	for office purpose.
	Building
	No. 20 Ren Min	The gross floor area of the property
	Zhong Road	is approximately 745.04 sq.m.
	Zhaoxing City
	Guangdong Province
	the PRC

Notes:

Pursuant to an Agreement for Sale and Purchase dated 22 November 1993, the property was purchased by Guangdong Apollo (Group) Co., Ltd., a 95%-owned subsidiary of the Company.
According to the legal opinion dated 16 June 2008 and prepared by the Company’s PRC legal adviser, Kun Lun Law Firm (廣東東方昆侖律師事務所), Guangdong Apollo (Group) Co., Ltd. only signed an Agreement for Sale and Purchase for the property, but has not obtained further title document regarding the property. In the absence of further information regarding the property, Kun Lun Law Firm was unable to comment on the legality of the Agreement for Sale and Purchase.
According to the Listing Rules published by the Stock Exchange of Hong Kong Limited, property in China is required to have a transferable long term title certificate, i.e. State-owned Land Use Rights Certificate or Realty Title Certificate, prior the valuer can assign any commercial value to the property. In this instance, no commercial value has been assigned to the property as the Group did not obtain any long term title certificate, or the like, of the property as at the Date of Valuation.

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VALUATION REPORT

APPENDIX V

Market Value in its Particulars of existing state as at No. Property Description and tenure occupancy 30 April 2008 RMB 5. Unit No. 6-2 on The property comprises a As confirmed by the No Commercial Level 6 of Block 1 residential unit on Level 6 of a Group, the property is Value Building No. 41 14-storey residential building vacant. (95% interest) Shang Long Xi Li (including 2 basement levels) Dong Cheng District which was completed in 1999. Beijing City the PRC The gross floor area of the property is approximately 152.68 sq.m.

Notes:

Pursuant to a Building Ownership Certificate dated 20 November 2001 and issued by the Beijing Land Resources and Buildings Administration Bureau, the property is legally owned by Guangdong Apollo (Group) Co., Ltd., a 95%-owned subsidiary of the Company.
According to the legal opinion dated 16 June 2008 and prepared by the Company’s PRC legal adviser, Kun Lun Law Firm (廣東東方昆侖律師事務所), Guangdong Apollo (Group) Co., Ltd. is the legally interested party in the property. However, no lease term was specified in the Building Ownership Certificate and no further information regarding the nature of the land is provided, Kun Lun Law Firm was unable to comment whether Guangdong Apollo (Group) Co., Ltd. can freely assign the property or not.
According to the Listing Rules published by the Stock Exchange of Hong Kong Limited, property in China is required to have a transferable long term title certificate, i.e. State-owned Land Use Rights Certificate or Realty Title Certificate, prior the valuer can assign any commercial value to the property. In this instance, no commercial value has been assigned to the property as the Group did not obtain any long term title certificate, or the like, of the property as at the Date of Valuation.

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VALUATION REPORT

APPENDIX V

				Market Value in its
			Particulars of	existing state as at
No.	Property	Description and tenure	occupancy	30 April 2008
				RMB
6.	The whole of Level	The property comprises the whole	As confirmed by the	2,537,000
	12	of the office space on Level 12 of	Group, the property is	(95% interest)
	Shi Fa Building	a 24-storey commercial building	vacant.
	No. 92 Liu Yi Bei	(including a basement level) which
	Road	was completed in 1995.
	Jin An District
	Fuzhou City	The gross floor area of the property
	Fujian Province	is approximately 580.80 sq.m.
	the PRC

Notes:

Pursuant to a Building Ownership Certificate dated 12 December 1997, the property is legally owned by Fuzhou branch office of Guangdong Apollo (Group) Co., Ltd., a 95%-owned subsidiary of the Company.
According to the legal opinion dated 16 June 2008 and prepared by the Company’s PRC legal adviser, Kun Lun Law Firm (廣東東方昆侖律師事務所), Fuzhou branch office of Guangdong Apollo (Group) Co., Ltd. is the legally interested party in the property obtained by way of transfer, and can freely use and assign the property. The property to free from mortgage.

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VALUATION REPORT

APPENDIX V

				Market Value in its
			Particulars of	existing state as at
No.	Property	Description and tenure	occupancy	30 April 2008
				RMB
7.	Part of Level 8	The property comprises a portion	As confirmed by the	No Commercial
	Deng Yue Building	of office space on Level 8 of a 12-	Group, the property is	Value
	No. 248 Xin Hua	storey commercial building which	occupied by the Group	(95% interest)
	Road	was completed in 1994.	for office purpose.
	Wuhan City
	Hubei Province	The gross floor area of the property
	the PRC	is approximately 391.10 sq.m.

Notes:

Pursuant to a State-owned Land Use Rights Certificate dated 12 December 1995 and a Building Ownership Certificate, the legally interested party in the property is Wuhan branch office of Guangdong Apollo (Group) Co., Ltd., a 95%-owned subsidiary of the Company.
According to the legal opinion dated 16 June 2008 and prepared by the Company’s PRC legal adviser, Kun Lun Law Firm (廣東東方昆侖律師事務所) Wuhan branch office of Guangdong Apollo (Group) Co., Ltd. is the legally interested party in the property. However, no lease term was specified in the Building Ownership Certificate and no further information regarding the nature of the land is provided, Kun Lun Law Firm was unable to comment on whether Guangdong Apollo (Group) Co., Ltd. can freely assign the property or not.
According to the Listing Rules published by the Stock Exchange of Hong Kong Limited, property in China is required to have a transferable long term title certificate, i.e. State-owned Land Use Rights Certificate or Realty Title Certificate, prior the valuer can assign any commercial value to the property. In this instance, no commercial value has been assigned to the property as the Group did not obtain any long term title certificate, or the like, of the property as at the Date of Valuation.

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VALUATION REPORT

APPENDIX V

				Market Value in its	Market Value in its
			Particulars of	existing state as at
No.	Property	Description and tenure	occupancy	30 April 2008
					RMB
8.	Units A, B and C	The property comprises	As confirmed by the	No	Commercial
	on Level 15	three various office units of a 28-	Group, the property is		Value
	Grand Cosmos	storey office building which was	occupied by the Group	(95% interest)
	Tower	completed in 1996.	for office purpose.
	Zheng Hong Lane
	No. 18 Zheng Hong	The total gross floor area of the
	Street	property is approximately 500.48
	Bai Xia District	sq.m.
	Nanjing City
	Jiangsu Province
	the PRC

Notes:

Pursuant to a Building Ownership Certificate dated 4 August 1999, the property is legally owned by Guangdong Apollo (Group) Co., Ltd., a 95%-owned subsidiary of the Company
According to the legal opinion dated 16 June 2008 and prepared by the Company’s PRC legal adviser, Kun Lun Law Firm (廣東東方昆侖律師事務所), Guangdong Apollo (Group) Co., Ltd. only signed an Agreement for Sale and Purchase for the property, but has not obtained further title document regarding the property. In the absence of further information regarding the property, Kun Lun Law Firm was unable to comment on the legality of the Agreement for Sale and Purchase.
According to the Listing Rules published by the Stock Exchange of Hong Kong Limited, property in China is required to have a transferable long term title certificate, i.e. State-owned Land Use Rights Certificate or Realty Title Certificate, prior the valuer can assign any commercial value to the property. In this instance, no commercial value has been assigned to the property as the Group did not obtain any long term title certificate, or the like, of the property as at the Date of Valuation.

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VALUATION REPORT

APPENDIX V

No.	Property	Description and tenure
9.	The Southern	The property comprises various
	Portion of Level	commercial spaces of a 3-storey
	1 and the whole	commercial podium which was
	portion of	completed in 1992.
	Levels 2 and 3 at
	No. 237 Xi Shun	The total gross floor area of the
	Cheng Street	property is approximately 864.58
	Shen He District	sq.m.
	Shenyang City
	Liaoning Province	The property is held by the
	the PRC	Group under a Stated-Owned
		Land Use Rights Certificate and
		a Building Ownership Certificate
		for an unspecified term through
		administrative allocation by the
		local government.

	Market Value in its
Particulars of	existing state as at
occupancy	30 April 2008
	RMB
As confirmed by the	No Commercial
Group, the property is	Value
occupied by the Group as	(95% interest)
staff quarters.

Notes:

Pursuant to a Land Use Rights Certificate dated 15 October 1994 and a Building Ownership Certificate dated 9 June 1994, the legally interested party in the property is Shenyang branch office of Guangdong Apollo (Group) Co., Ltd., a 95%-owned subsidiary of the Company.
According to the legal opinion dated 16 June 2008 and prepared by the Company’s PRC legal adviser, Kun Lun Law Firm (廣東東方昆侖律師事務所), Shenyang branch office of Guangdong Apollo (Group) Co., Ltd. is the legally interested party in the property. However, as the land of the property is administratively allocated in nature, Shenyang branch office of Guangdong Apollo (Group) Co., Ltd. and Guangdong Apollo (Group) Co., Ltd. cannot freely transfer the property prior to payment of additional land premium.
According to the Listing Rules published by the Stock Exchange of Hong Kong Limited, property in China is required to have a transferable long term title certificate, i.e. State-owned Land Use Rights Certificate or Realty Title Certificate, prior the valuer can assign any commercial value to the property. In this instance, no commercial value has been assigned to the property as the Group did not obtain any long term title certificate, or the like, of the property as at the Date of Valuation.

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VALUATION REPORT

APPENDIX V

				Market Value in its
			Particulars of	existing state as at
No.	Property	Description and tenure	occupancy	30 April 2008
				RMB
10.	Unit C3 on Level 4	The property comprises an office	As confirmed by the	No Commercial
	of Block No. 1	unit of a 13-storey commercial	Group, the property is	Value
	Dong Li Building	building which was completed in	occupied by the Group	(95% interest)
	No. 187 Huan Cheng	1993.	for office purpose.
	Bei Road
	Xin Cheng District	The gross floor area of the property
	Xian City	is approximately 477.45 sq.m.
	Shaanxi Province
	the PRC

Notes:

Pursuant to a Building Ownership Certificate dated 12 August 1999, the property is legally owned by Xian branch office of Guangdong Apollo (Group) Co., Ltd., a 95%-owned subsidiary of the Company.
According to the legal opinion dated 16 June 2008 and prepared by the Company’s PRC legal adviser, Kun Lun Law Firm (廣東東方昆侖律師事務所), Xian branch office of Guangdong Apollo (Group) Co., Ltd. is the legally interested party in the property. However, no lease term was specified in the Building Ownership Certificate and no further information regarding the nature of the land is provided, Kun Lun Law Firm was unable to comment whether Guangdong Apollo (Group) Co., Ltd. can freely assign the property or not.
According to the Listing Rules published by the Stock Exchange of Hong Kong Limited, property in China is required to have a transferable long term title certificate, i.e. State-owned Land Use Rights Certificate or Realty Title Certificate, prior the valuer can assign any commercial value to the property. In this instance, no commercial value has been assigned to the property as the Group did not obtain any long term title certificate, or the like, of the property as at the Date of Valuation.

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VALUATION REPORT

APPENDIX V

No. Property Description and tenure 11. The whole of The property comprises the whole Level 4 of the office space on level 4 of Lian Hua Building a 26-storey commercial building No. 6 Han Wei Road which was completed in 1991. Yu Zhong District Chongqing The gross floor area of the property Sichuan Province is approximately 734.00 sq.m. the PRC

Market Value in its Particulars of existing state as at occupancy 30 April 2008 RMB As confirmed by the No Commercial Group, the property is Value occupied by the Group (95% interest) for office purpose.

Notes:

Pursuant to a Building Ownership Certificate dated 20 October 1994 and issued by the Chongqing Realty Administration Bureau, the property is legally owned by Guangdong Apollo (Group) Co., Ltd., a 95%owned subsidiary of the Company.
According to the legal opinion dated 16 June 2008 and prepared by the Company’s PRC legal adviser, Kun Lun Law Firm (廣東東方昆侖律師事務所), Guangdong Apollo (Group) Co., Ltd., is the legally interested party in the property. However, no lease term was specified in the Building Ownership Certificate and no further information regarding the nature of the land was provided, Kun Lun Law Firm was unable to comment on whether Guangdong Apollo (Group) Co., Ltd. can freely assign the property or not.
According to the Listing Rules published by the Stock Exchange of Hong Kong Limited, property in China is required to have a transferable long term title certificate, i.e. State-owned Land Use Rights Certificate or Realty Title Certificate, prior the valuer can assign any commercial value to the property. In this instance, no commercial value has been assigned to the property as the Group did not obtain any long term title certificate, or the like, of the property as at the Date of Valuation.

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APPENDIX V

Market Value in its Particulars of existing state as at No. Property Description and tenure occupancy 30 April 2008 RMB 12. The whole of The property comprises the whole As confirmed by the No Commercial Level 2 of the office space on level 2 of Group, the property is Value Ai Bang Building a 28-storey residential building occupied by the Group (95% interest) No. 585 Ling Ling which was completed in 1992. for office purpose. Road Xu Hui District The gross floor area of the property Shanghai City is approximately 569.72 sq.m. the PRC The property is held by the Group under a State-owned Land Use Rights Certificate and a Building Ownership Certificate for an unspecified term.

Notes:

Pursuant to a State-owned Land Use Rights Certificate dated 18 March 1994 and a Building Ownership Certificate dated 24 September 1993, the legally interested party in the property is Guangdong Apollo (Group) Co., Ltd., a 95%-owned subsidiary of the Company.
According to the legal opinion dated 16 June 2008 and prepared by the Company’s PRC legal adviser, Kun Lun Law Firm (廣東東方昆侖律師事務所), Guangdong Apollo (Group) Co., Ltd. is the legally interested party in the property. However, no lease term was specified in the Land Use Rights Certificate and the Building Ownership Certificate and no further information regarding the nature of the land is provided, Kun Lun Law Firm was unable to comment whether Guangdong Apollo (Group) Co., Ltd. can freely assign the property without payment of additional land premium.
According to the Listing Rules published by the Stock Exchange of Hong Kong Limited, property in China is required to have a transferable long term title certificate, i.e. State-owned Land Use Rights Certificate or Realty Title Certificate, prior the valuer can assign any commercial value to the property. In this instance, no commercial value has been assigned to the property as the Group did not obtain any long term title certificate, or the like, of the property as at the Date of Valuation.

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VALUATION REPORT

APPENDIX V

Market Value in its Particulars of existing state as at No. Property Description and tenure occupancy 30 April 2008 RMB 13. The South-western The property comprises various As confirmed by the 11,020,000 Portion of Level 1 retail/office spaces Group, the property is (95% interest) and the whole of the in an 18-storey commercial/ occupied by the Group Levels 2 and 3 residential building which for office purpose. Xing Chen Da Lou was completed in 1991. No. 26 Tian He Nan Er Road The total gross floor area of the Tian He District property is approximately 2,521.22 Guangzhou City sq.m. including ground floor retail Guangdong Province area of approximately 150.42 sq.m. the PRC The property is held by the Group under 5 various Realty Title Certificates without a specified term for commercial purpose.

Notes:

Pursuant to five various Realty Title Certificates all dated 31 January 1997 and issued by the Guangzhou Land and Buildings Administration Bureau, Guangdong Apollo (Group) Co., Ltd., a 95%-owned subsidiary of the Company, is the legally interested party in the property.
According to the legal opinion dated 16 June 2008 and prepared by the Company’s PRC legal adviser, Kun Lun Law Firm (廣東東方昆侖律師事務所), Guangdong Apollo (Group) Co., Ltd. is the legally interested party in the property, and can freely use and assign the property. The property is free from mortgage.

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VALUATION REPORT

APPENDIX V

				Market Value in its
			Particulars of	existing state as at
No.	Property	Description and tenure	occupancy	30 April 2008
				RMB
14.	Unit No.1004	The property comprises an office	According to the	No Commercial
	on Level 10	unit of a 24-storey commercial	information provided	Value
	Hua Lian Building	building which was completed in	by the Company, the	(95% interest)
	No. 269 Fu Rong	about 1997.	property is vacant.
	Zhong Road
	Changsha City	The total gross floor area of the
	Hunan Province	property is approximately 564.45
	the PRC	sq.m.

Notes:

Pursuant to a Building Ownership Certificate dated 8 August 1998, the property is legally owned by Guangdong Apollo (Group) Co., Ltd., a 95%-owned subsidiary of the Company.
According to the legal opinion dated 16 June 2008 and prepared by the Company’s PRC legal adviser, Kun Lun Law Firm (廣東東方昆侖律師事務所), Guangdong Apollo (Group) Co., Ltd., is the legally interested party in the property. However, no lease term was specified in the Building Ownership Certificate and no further information regarding the nature of the land was provided, Kun Lun Law Firm was unable to comment on whether Guangdong Apollo (Group) Co., Ltd. can freely assign the property or not.
According to the Listing Rules published by the Stock Exchange of Hong Kong Limited, property in China is required to have a transferable long term title certificate, i.e. State-owned Land Use Rights Certificate or Realty Title Certificate, prior the valuer can assign any commercial value to the property. In this instance, no commercial value has been assigned to the property as the Group did not obtain any long term title certificate, or the like, of the property as at the Date of Valuation.

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VALUATION REPORT

APPENDIX V

Market Value in its Particulars of existing state as at No. Property Description and tenure occupancy 30 April 2008 RMB 15. Room C The property comprises a As confirmed by the 922,000 Level 26 residential unit in a 26-storey Group, the property (95% interest) No. 367 Guangzhou residential building which was is occupied for staff Da Dao Central completed in around 2000. quarters purpose. Tianhe District Guangdong The gross floor area of the property Province is approximately 218.70 sq.m. the PRC The property is held under a Realty Title Certificate without specific term. According to the sale and purchase agreement, the land use term of the property is commencing from 11 October 1993 for 70 years for residential purpose.

Notes:

Pursuant to an agreement for sale and purchase dated 30 November 2007, the property was purchased by Guangdong Apollo (Group) Co., Ltd., a 95%-owned subsidiary of the Company. The gross floor area of the property is 218.70 sq.m. with land use term commencing from 11 October 1993 for 70 years for residential purpose.
Pursuant to a Realty Title Certificate issued by the Guangzhou Land Resources and Buildings Administration Bureau, the property is legally owned by Guangdong Apollo (Group) Co., Ltd., a 95%owned subsidiary of the Company.
According to the legal opinion dated 16 June 2008 and prepared by the Company’s PRC legal adviser, Kun Lun Law Firm (廣東東方昆侖律師事務所), Guangdong Apollo (Group) Co., Ltd. is the legally interested party in the property, and can freely use and assign the property. The property is free from mortgage.

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APPENDIX V

Group II — Properties held by the Group for investment in the PRC and valued on the market value basis

				Market Value in its
			Particulars of	existing state as at
No.	Property	Description and tenure	occupancy	30 April 2008
				RMB
16.	The whole block of	The property comprises 36 various	According to the	13,490,000
	Block C	residential units of a 9-storey	information provided	(95% interest)
	Die Cui Court	residential building which was	by the Company, the
	No. 27 Hua Jing	completed in 1996.	property is subject
	Road		to various tenancy
	Hua Jing Xin Cheng	The total gross floor area of the	agreements for various
	Tian He District	property is approximately 3,154.77	terms.
	Guangzhou City	sq.m.	(see Note 4)
	Guangdong
	Province	The property is held by the Group	The remaining of the
	the PRC	under thirty-six various Realty Title	property is occupied
		Certificates for a term of 70 years	by the Group as staff
		commencing on 16 November 1994	quarters.
		for residential purpose.

Notes:

Pursuant to thirty-six various Realty Title Certificates all dated 23 July 1996 and issued by the Guangzhou Land and Buildings Administration Bureau, the property is legally interested party in the property is Guangdong Apollo (Group) Co., Ltd., a 95%-owned subsidiary of the Company.
The property is subject to mortgage in favour of China Merchants Bank Guangzhou Hua Cheng Branch for a term of 1 year till 29 May 2008.
According to the legal opinion dated 16 June 2008 and prepared by the Company’s PRC legal adviser, Kun Lun Law Firm (廣東東方昆侖律師事務所), Guangdong Apollo (Group) Co., Ltd. is the legally interested party in the property, and can freely use and assign the property subject to existing mortgage as mentioned in Note 2 above.
According to the information provided by the Company, the property was subject to the following tenancy agreements as at the Date of Valuation:

Unit Nos.	Area	Lease Term	Annual Rental
	(sq.m.)		(RMB)
10 various units	852.75	1 April 2007 to 31 March 2008 and	16,032
		on monthly basis thereafter	(monthly)
201 and 202	182.00	20 November 2006 to 31 December 2009	33,600
203 and 204	168.43	1 February 2007 to 31 January 2012	36,000
802	96.35	1 December 2007 to 30 November 2008	16,800
502 and 702	193.00	1 December 2006 to 30 November 2009	33,600
102	96.35	15 November 2007 to 14 November 2009	20,400
303	85.75	25 December 2007 to 25 December 2008	19,200
503	85.75	20 December 2007 to 19 December 2009	19,200
602	96.35	1 December 2007 to 30 November 2010	16,800
703	85.75	10 November 2007 to 9 November 2009	16,800

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VALUATION REPORT

APPENDIX V

				Market Value in its
			Particulars of	existing state as at
No.	Property	Description and tenure	occupancy	30 April 2008
				RMB
17.	15 various	The property comprises 15 various	According to the	No Commercial
	residential units	residential units of a 9-storey	information provided	Value
	located at Levels 1	residential building which was	by the Company, the	(95% interest)
	to 9, Block B	completed in 1996.	property is subject to
	No. 3 Jiang Hua		a tenancy agreement
	Road	The total gross floor area of the	for a term of 1 year
	Lot No. D1	property is approximately	commencing from
	Tian He High and	2,100 sq.m.	15 August 2007 to
	New Technology		14 August 2008 at a
	Production		total annual rental of
	Development Zone		RMB448,000.
	Industrial Park
	Tian He District
	Guangzhou City
	Guangdong
	Province
	the PRC

Notes:

Pursuant to 15 various Agreement for Sale and Purchase dated 23 July 1997, the property with a total gross floor area of approximately 2,100 sq.m. was purchased by Guangdong Apollo (Group) Co., Ltd., a 95%-owned subsidiary of the Company.
According to the legal opinion dated 16 June 2008 and prepared by the Company’s PRC legal adviser, Kun Lun Law Firm (廣東東方昆侖律師事務所), Guangdong Apollo (Group) Co., Ltd. only signed an Agreement for Sale and Purchase for the property, but has not obtained further title document regarding the property. In the absence of further information regarding the property, Kun Lun Law Firm was unable to comment on the legality of the Agreement for Sale and Purchase.
According to the Listing Rules published by the Stock Exchange of Hong Kong Limited, property in China is required to have a transferable long term title certificate, i.e. State-owned Land Use Rights Certificate or Realty Title Certificate, prior the valuer can assign any commercial value to the property. In this instance, no commercial value has been assigned to the property as the Group did not obtain any long term title certificate, or the like, of the property as at the Date of Valuation.

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VALUATION REPORT

APPENDIX V

				Market Value in its
			Particulars of	existing state as at
No.	Property	Description and tenure	occupancy	30 April 2008
				RMB
18.	An industrial	The property comprises two parcels	According to the	14,060,000
	building and a	of land having a total site area of	information provided	(95% interest)
	dormitory building	approximately 8,781 sq.m. with a	by the Company, the
	situated at No. 4	4-storey industrial building and a	property is subject
	Han Ji Dong Road	7-storey dormitory building erected	to various tenancy
	and	thereon. Both buildings were	agreements for various
	No. 7 Han Ji	completed in about 1993.	terms.(see Note 5)
	Da Road Han Ji
	Industrial Estate	The gross floor area of	The remaining of the
	Shi Ji Town	the industrial building and	property is occupied by
	Pan Yu District	the dormitory building is	the Group for production
	Guangzhou	approximately 19,004.59 sq.m. and	and staff quarters
	Guangdong	2,736.51 sq.m., respectively.	purposes.
	Province
	the PRC	The property is held by the Group
		under two various
		state-owned Land Use Rights
		Certificates for a term till 24
		December 2045.

Notes:

Pursuant to two various Land Use Rights Certificates dated 17 and 18 January 1996, and issued by the People’s Government of Pan Yu City, the legally interested party in the property was Guangdong Apollo (Group) Co., Ltd., a 95%-owned subsidiary of the Company.
Pursuant to two various Building Ownership Certificates both dated 19 June 1995 and issued by the Guangzhou Land and Buildings Administration Bureau, the buildings are legally owned by Guangdong Apollo (Group) Co., Ltd.
The property is subject to mortgage in favour of Industrial and Commercial Bank of China, Dongguan City Branch till 16 June 2010.
According to the legal opinion dated 16 June 2008 and prepared by the Company’s PRC legal adviser, Kun Lun Law Firm (廣東東方昆侖律師事務所), Guangdong Apollo (Group) Co., Ltd. is the legally interested party in the property, and can freely use and assign the property subject to existing mortgage as mentioned in Note 3 above.
According to the information provided by the Company, the property was subject to the following tenancy agreements as at the Date of Valuation:

Unit Nos.	Area	Lease Term	Annual Rental
	(sq.m.)		(RMB)
Portion of Level 3	588	1 September 2006 to 31 December 2008	56,448
Portion of Level 3	1,346	1 June 2004 to 30 May 2009	39,192
Portion of Level 3	502	1 December 2005 to 30 November 2008	19,272
Portion of Level 1	412	1 September 2005 to 30 November 2008	15,816

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VALUATION REPORT

APPENDIX V

				Market Value in its
			Particulars of	existing state as at
No.	Property	Description and tenure	occupancy	30 April 2008
				RMB
19.	A warehouse located	The property comprises a	The property is subject	8,645,000
	at No. 73 Luo Lang	6-storey industrial building which	to a tenancy agreement	(95% interest)
	Road	was completed in about 1994.	expiring on 31 December
	Luo Gang		2008.(see Note 4)
	Bai Yun District	The site area of the property is
	Guangzhou City	approximately 5,677.04 sq.m.
	Guangdong	and the total gross floor area of
	Province	the building is approximately
	the PRC	13,045.85 sq.m.
		The property is held by the Group
		under a Realty Title Certificate for
		a term of 50 years commencing
		from 19 January 1996 for industrial
		purpose.

Notes:

Pursuant to a Contract for the Grant of State-owned Land Use Rights dated 12 December 1995 and its Supplementary Contract dated 26 March 1999, the land use rights of the property has been granted to Guangdong Apollo (Group) Co., Ltd., a 95%-owned subsidiary of the Company, by the Land Bureau of Guangzhou City for industrial purpose for a term of 50 years commencing from 19 January 1996.
Pursuant to a Realty Title Certificate dated 8 June 1999 and issued by the Guangzhou Land and Buildings Administration Bureau, the legally interested party in the property is Guangdong Apollo (Group) Co., Ltd.
According to the legal opinion dated 16 June 2008 and prepared by the Company’s PRC legal adviser, Kun Lun Law Firm (廣東東方昆侖律師事務所), Guangdong Apollo (Group) Co., Ltd., is the legally interested party in the property, and can freely use and assign the property. The property is free from mortgage.
According to the information provided by the Company, the property was subject to the following tenancy agreements as at the Date of Valuation:

Unit Nos.	Area	Lease Term	Annual Rental
	(sq.m.)		(RMB)
Portion of the Property 12,700.00		1 January 2008 to 31 December 2008	696,724

— 267 —

VALUATION REPORT

APPENDIX V

				Market Value in its
			Particulars of	existing state as at
No.	Property	Description and tenure	occupancy	30 April 2008
				RMB
20.	Whole block located	The property comprises a	The whole of Levels	9,975,000
	at Nos. 40-42 Jian	6-storey industrial building which	1 to 5 having a total	(95% interest)
	Zhong Road	was completed in about 1993.	gross floor area of
	Tian He High and		approximately 6,370.33
	New Technology	The total gross floor area of the	sq.m. is subject to a
	Production	property is approximately 7,741.79	tenancy and used as
	Development Zone	sq.m. The floor loading capacity of	maintenance services
	Industrial Park	Level 1 and the upper floor levels	centre for a term of
	Tian He District	are 800 and 600 kilograms per	2 years commencing
	Guangzhou City	sq.m., respectively.	from 1 January 2007
	Guangdong		expiring on 31 December
	Province	The property is held by the Group	2008 at an annual
	the PRC	under six various Realty Title	rent of approximately
		Certificates for a term of 50 years	RMB1,416,668. The
		commencing 14 June 1994 for	tenant can sublease the
		industrial purpose.	property within the lease
			term but the term of
			the agreement remains
			unchanged.
			The whole of Level 6
			of the property having a
			total gross floor area of
			approximately 1,304.17
			sq.m. is subject to a
			tenancy for a term of 5
			years commencing from
			1 October 2003 and
			expiring on 30 September
			2008 at an annual
			rental of RMB283,332
			exclusive of management
			fee and utilities charges.

Notes:

Pursuant to six various Realty Title Certificates all dated 13 August 2001 and issued by the Guangzhou Land and Buildings Administration Bureau, the legally interested party in the property is Guangdong Apollo (Group) Co., Ltd., a 95%-owned subsidiary of the Company a term of 50 years commencing 14 June 1994.
Levels 1 to 4 of the property are subject to mortgage in favour of Industrial and Commercial Bank of China, Dongguan City Branch till 26 July 2009.
According to the legal opinion dated 16 June 2008 and prepared by the Company’s PRC legal adviser, Kun Lun Law Firm (廣東東方昆侖律師事務所), Guangdong Apollo (Group) Co., Ltd. is the legally interested party in the property, and can freely use and assign the property subject to existing mortgage as mentioned in Note 2 above.

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VALUATION REPORT

APPENDIX V

				Market Value in its
			Particulars of	existing state as at
No.	Property	Description and tenure	occupancy	30 April 2008
				RMB
21.	A building situated	The property comprises an	The property is subject	22,325,000
	at Nos. 27-29	8-storey commercial/residential	to various tenancy	(95% interest)
	Lin Yun Liu Street	building which was completed in	agreements for various
	and Tian He Nan Er	about 1990.	terms with the latest term
	Road		expiring on 31 December
	Tian He District	The total gross floor area of the	2012.(see Note 4)
	Guangzhou City	property is approximately 4,858.63
	Guangdong	sq.m. including an area on Levels
	Province	1 and 2 of approximately 1,392.84
	the PRC	sq.m.
		The property is held by the
		Group under three various Realty
		Title Certificates without specified
		lease term for office and residential
		purposes.

Notes:

Pursuant to three various Realty Title Certificates all dated 26 October 1995 and issued by the Guangzhou Land and Buildings Administration Bureau, the legally interested party in the Property is Guangzhou Branch office of Guangdong Apollo (Group) Co., Ltd., a 95%-owned subsidiary of the Company.
Levels 3 to 8 of the property are subject to mortgage in favour of Industrial and Commercial Bank of China, Dongguan City Branch till 19 June 2010.
According to the legal opinion dated 16 June 2008 and prepared by the Company’s PRC legal adviser, Kun Lun Law Firm (廣東東方昆侖律師事務所), Guangdong Apollo (Group) Co., Ltd. is the legally interested party in the property, and can freely use and assign the property subject to existing mortgage.
According to the information provided by the Company, the property was subject to the following tenancy agreements as at the Date of Valuation:

Unit Nos.	Area	Lease Term	Annual Rental
	(sq.m.)		(RMB)
Level 1 to Level 3	1,970.47	1 October 2007 to 30 September 2008	891,420
		1 October 2008 to 30 September 2009	909,240
		1 October 2009 to 30 September 2010	927,432
		1 October 2010 to 30 September 2011	945,972
		1 October 2011 to 30 September 2012	964,896
Level 4 to Level 8	2,888.00	1 January 2008 to 31 December 2008	445,704
		1 January 2009 to 31 December 2009	454,620
		1 January 2010 to 31 December 2010	463,716
		1 January 2011 to 31 December 2011	472,992
		1 January 2012 to 31 December 2012	482,448

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VALUATION REPORT

APPENDIX V

				Market Value in its
			Particulars of	existing state as at
No.	Property	Description and tenure	occupancy	30 April 2008
				RMB
22.	Unit Nos. 802 at	The property comprises 7 various	According to the	2,470,000
	No. 44 Ti Yu Dong	residential units in three adjoining	information provided	(95% interest)
	Road	8-storey commercial/residential	by the Company, the
	Unit Nos. 301, 304,	building which was completed in	property is subject
	404, 501 and 601 at	about 1994.	to various tenancy
	No. 58 Ti Yu Dong		agreements for various
	Road and,	The total gross floor area of the	terms.(see Note 3)
	Unit No. 802 at	property is approximately 631.42
	No. 62 Ti Yu Dong	sq.m.	The remaining of the
	Road		property is occupied
	Fu Li Garden	The property is subject to 7 various	by the Group as staff
	Tian He District	Realty Title Certificate without	quarters.
	Guangzhou City	specified term for residential
	Guangdong	purpose.
	Province
	the PRC

Notes:

Pursuant to 6 various Realty Title Certificates all dated 22 November 1994 for Unit Nos. 802 at No. 44 Ti Yu Dong Road, Unit Nos. 301, 304, 404, 501 and 601 at No. 58 Ti Yu Dong Road and 1 Realty Title Certificate dated 12 January 1995 for Unit 802 at No. 62 Ti Yu Dong Road of the property and all issued by the Guangzhou Land and Buildings Administration Bureau, the legally interested party in the property is Guangdong Apollo (Group) Co., Ltd, a 95%-owned subsidiary of the Company.
According to the legal opinion dated 16 June 2008 and prepared by the Company’s PRC legal adviser, Kun Lun Law Firm (廣東東方昆侖律師事務所), Guangdong Apollo (Group) Co., Ltd. is the legally interest party in the property, and can freely use and assign the property. The property is free from mortgage.
According to the information provided by the Company, the property was subject to the following tenancy agreements as at the Date of Valuation:

Unit Nos.	Area	Lease Term	Annual Rental
	(sq.m.)		(RMB)
802 of No. 62
Ti Yu Dong Road	86.40	15 July 2006 to 8 August 2008	26,400
501 of No. 58
Ti Yu Dong Road	88.90	20 April 2007 to 19 April 2008 and	2,167
		on monthly basis thereafter	(monthly)
301 of No. 58
Ti Yu Dong Road	84.26	20 April 2007 to 20 April 2010	28,800

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VALUATION REPORT

APPENDIX V

				Market Value in its
			Particulars of	existing state as at
No.	Property	Description and tenure	occupancy	30 April 2008
				RMB
23.	Basement Level 1,	The property comprises the whole	The property is subject	31,350,000
	Unit Nos. 103, 105,	of basement Level 1, Levels 2	to various tenancy	(95% interest)
	106, 107,	and 3, and 62 various residential	agreements for various
	107-1, 111, 401 to	units and certain office spaces of	terms with the latest term
	430, 512, 513, 515	a 28-storey commercial/residential	expiring on 30 November
	to 523, 525 to 539,	building which was completed in	2009.
	and the whole of	about 1996.	(see Note 4)
	Levels 2 and 3
	No. 35 Qing Cai	The total gross floor area of the
	Dong Street	property is approximately 6,605.85
	Hua Le Road	sq.m.
	Risheng Building
	Dong Shan District	The property is held by the Group
	Guangzhou City	under thirty-eight various Realty
	Guangdong	Title Certificates for a term of 50
	Province	years commencing from 11 October
	the PRC	1994 for composite purpose.

Notes:

Pursuant to 31 various Realty Title Certificates dated 23 May 2000 and 21 June 2000 and all issued by the Guangzhou Land and Buildings Administration Bureau, the legally interested party in the property, Guangdong Apollo (Group) Co., Ltd, a 95%-owned subsidiary of the Company.
Portion of the property, Basement Level 1, Level 2, Units 512, 513, 515 to 523, 525 to 539 of No. 35 Qing Cai Dong Street is subject to a mortgage in favour of China Merchants Bank.
According to the legal opinion dated 16 June 2008 and prepared by the Company’s PRC legal adviser, Kun Lun Law Firm (廣東東方昆侖律師事務所), Guangdong Apollo (Group) Co., Ltd. is the legally interest party in the property, and can freely use and assign the property subject to the existing mortgage.
According to the information provided by the Company, the property was subject to the following tenancy agreements as at the Date of Valuation:

Unit Nos.	Area	Lease Term	Annual Rental
	(sq.m.)		(RMB)
Basement Level 1	1,622.21	15 February 2007 to 14 February 2009	235,536
103	26.87	1 October 2006 to 30 September 2008	9,600
105	27.63	20 November 2006 to 19 November 2008	11,604
106/107	115.00	1 January 2002 to 1 January 2009	12,000
201	181.12	1 October 2006 to 30 September 2008	65,208
205	169.48	1 December 2006 to 30 November 2009	67,116
206	106.31	5 May 2007 to 4 May 2008	46,049
207	64.54	5 May 2007 to 5 May 2008	24,780
208	87.71	20 April 2005 to 19 September 2009	34,728
209	104.00	1 August 2005 to 19 November 2009	41,184
210	104.00	1 January 2008 to 31 December 2008	37,440

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VALUATION REPORT

APPENDIX V

Unit Nos.	Area	Lease Term	Annual Rental
	(sq.m.)		(RMB)
211	60.60	15 June 2006 to 14 June 2008	22,776
213 to 215	220.94	1 October 2006 to 30 September 2008	83,508
		1 October 2008 to 30 September 2009	87,684
301 and 302	205	1 July 2006 to 30 June 2008	73,800
303	60.60	10 June 2007 to 9 June 2009	23,556
305	169.48	1 May 2006 to 30 April 2008	61,008
306	106.31	10 October 2006 to 9 October 2008	44,652
307	64.54	1 April 2007 to 31 March 2009	27,108
308	87.71	1 June 2006 to 31 May 2008	31,200
309	94.00	1 January 2008 to 31 December 2008	37,440
309A	10.00	1 January 2008 to 31 December 2008	3,600
310 and 311	164.59	1 June 2006 to 31 May 2008	59,256
312	103.99	20 April 2006 to 20 April 2008 and	3,120
		on monthly basis thereafter	(monthly)
313	182.00	10 May 2007 to 9 May 2009	72,072
315	120.46	1 June 2006 to 31 May 2008	43,368
401 to 403	344.19	1 June 2006 to 31 May 2008	129,360
405	171.00	20 March 2006 to 20 March 2009	71,820
406	106.31	1 June 2007 to 30 May 2009	38,268
407 and 408	152.25	15 January 2006 to 14 January 2008 and	4,568
		on monthly basis thereafter	(monthly)
409	104.00	1 June 2006 to 31 May 2008	37,440
410 and 411	164.60	1 December 2007 to 30 November 2009	63,204
512	26.44	20 January 2007 to 19 January 2009	10,476
513	25.81	10 October 2006 to 9 October 2008	10,836
515	25.86	10 October 2006 to 9 October 2008	10,860
517	22.48	1 March 2006 to 28 February 2008 and	281
		on monthly basis thereafter	(monthly)
518 and 519	54.72	1 September 2007 to 31 August 2009	19,704
516 and 520 to 521	167.52	1 March 2006 to 28 February 2008 and	3,770
		on monthly basis thereafter	(monthly)
522	62.39	1 July 2006 to 30 June 2008	22,464

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VALUATION REPORT

APPENDIX V

Unit Nos.	Area	Lease Term	Annual Rental
	(sq.m.)		(RMB)
523	30.87	1 December 2007 to 30 November 2008	11,387
525	30.62	1 December 2007 to 2 December 2008	11,028
527 to 529	105.74	1 August 2007 to 31 July 2009	41,868
530	81.08	1 February 2006 to 31 Janurary 2008 and	2,432
		on monthly basis thereafter	(monthly)
531 to 537	220.37	20 September 2006 to 19 September 2008	84,000
538 and 539	131.42	15 April 2006 to 14 April 2008 and	3,458
		on monthly basis thereafter	(monthly)

— 273 —

VALUATION REPORT

APPENDIX V

				Market Value in its	Market Value in its
			Particulars of	existing state as at
No.	Property	Description and tenure	occupancy	30 April 2008
					RMB
24.	Unit No. 703 at	The property comprises a	According to the	No	Commercial
	No. 9 Dong Si	residential unit of a 7-storey	information provided		Value
	Street	residential building which was	by the Company, the	(95% interest)
	Jian She Er Ma	completed in about 1990.	property is subject to
	Road		a tenancy commencing
	Dong Shan District	The gross floor area of the property	from 1 June 2007 and
	Guangzhou City	is approximately	expiring on 31 May 2009
	Guangdong	55.25 sq.m.	at an annual rental of
	Province		RMB8,400.
	the PRC

Notes:

Pursuant to an Agreement for Sale and Purchase dated 9 June 1990, the property with a gross floor area of approximately 55.25 sq.m. was purchased by Huangjiang Health Products Factory, an indirect 95%owned subsidiary of the Company.
According to the legal opinion dated 16 June 2008 and prepared by the Company’s PRC legal adviser, Kun Lun Law Firm (廣東東方昆侖律師事務所), Huangjiang Health Products Factory only signed an Agreement for Sale and Purchase for the property, but has not obtained further title document regarding the property. In the absence of further information regarding the property, Kun Lun Law Firm was unable to comment on the legality of the Agreement for Sale and Purchase.
According to the Listing Rules published by the Stock Exchange of Hong Kong Limited, property in China is required to have a transferable long term title certificate, i.e. State-owned Land Use Rights Certificate or Realty Title Certificate, prior the valuer can assign any commercial value to the property. In this instance, no commercial value has been assigned to the property as the Group did not obtain any long term title certificate, or the like, of the property as at the Date of Valuation.

— 274 —

VALUATION REPORT

APPENDIX V

				Market Value in its
			Particulars of	existing state as at
No.	Property	Description and tenure	occupancy	30 April 2008
				RMB
25.	The whole block of	The property comprises	According to the	5,985,000
	Da Shi Restaurant	a 4-storey restaurant	information provided	(95% interest)
	Luo Gang	building which was	by the Company, the
	Men Yong Village	completed in 1993.	property is subject to a
	Da Shi Town		tenancy agreement for
	Pan Yu District	The total gross floor area of	various terms.(see Note 4)
	Guangzhou City	the property is approximately
	Guangdong	5,608.70 sq.m.
	Province
	the PRC	The property is held by the Group
		under two various Realty Title
		Certificates for a land use term
		of 40 years for commencing on 5
		January 1993 and to be expired
		on 4 January 2033 for commercial
		purpose.

Notes:

Pursuant to two various Realty Title Certificates both dated 8 June 2000 and issued by the Guangzhou Land and Buildings Administration Bureau, the legally interested party in the property is Guangdong Apollo (Group) Co., Ltd., a 95%-owned subsidiary of the Company.
The property is subject to mortgage in favour of Industrial and Commercial Bank of China, Dongguan City Branch till 16 June 2010.
According to the legal opinion dated 16 June 2008 and prepared by the Company’s PRC legal adviser, Kun Lun Law Firm (廣東東方昆侖律師事務所), Guangdong Apollo (Group) Co., Ltd. is the legally interested party in the property, and can freely use and assign the property subject to existing mortgage as mentioned in Note 2 above.
According to the information provided by the Company, the property was subject to the following tenancy agreement as at the Date of Valuation:

Unit Nos.	Area	Lease Term	Annual Rental
	(sq.m.)		(RMB)
Whole of the Property	5,608.70	15 March 2008 to 14 March 2011	428,340
		15 March 2011 to 14 March 2014	471,168
		15 March 2014 to 14 March 2015	537,132

— 275 —

VALUATION REPORT

APPENDIX V

Group III — Property occupied by the Group in the PRC and valued on the market value basis

				Market Value in its
			Particulars of	existing state as at
No.	Property	Description and tenure	occupancy	30 April 2008
				RMB
26.	A manufacturing	The property comprises an	As confirmed by the	No Commercial
	plant located at	industrial complex and dormitory	Group, the property is	Value
	Da Lang	facilities erected on a parcel of	occupied by the	(95% interest)
	Guangzhou City	land.	Group for production
	Guangdong Province		purpose.
	the PRC	The complex and the dormitory
		facilities consist of a total of
		23 buildings and structures. No
		information on the total gross floor
		area of the property is available.

Notes:

As advised by the Group, the property is held by Guangdong Apollo (Group) Co., Ltd., a 95%-owned subsidiary of the Company.
We have not been provided with any title documents related to this property.
We are further advised by the management of the Company that the land use rights of the property not belonged to the Group, therefore, no title document can be obtained for the buildings and structures erected thereon and built by the Group.
According to the Listing Rules published by the Stock Exchange of Hong Kong Limited, property in China is required to have a transferable long term title certificate, i.e. State-owned Land Use Rights Certificate or Realty Title Certificate, prior the valuer can assign any commercial value to the property. In this instance, no commercial value has been assigned to the property as the Group did not obtain any long term title certificate, or the like, of the property as at the Date of Valuation to us to establish its legal interest in the property.

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(B) PROPERTY INTERESTS OF THE ACQUISITION TARGET COMPANY AND ITS SUBSIDIARIES

The following is the text of the letter, summary of values and valuation certificate on property interests of the Acquisition Target Company and its subsidiaries as at 30 April 2008 prepared by LCH (Asia-Pacific) Surveyors Limited for the purpose of inclusion in this circular.

==> picture [191 x 48] intentionally omitted <==

17th Floor Champion Building Nos. 287-291 Des Voeux Road Central Hong Kong

23 June 2008

The Directors Maxx Bioscience Holdings Limited Room 2501A, Hopewell Centre 183 Queen’s Road East Wanchai Hong Kong

Dear Sirs,

In accordance with your instructions to us to value the properties in which Maxx Bioscience Holdings Limited (hereinafter referred to as the “Company”) and its subsidiaries (collectively, hereinafter together with the Company referred to as the “Group”) have intention to acquire in the People’s Republic of China (hereinafter referred to as the

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“PRC” or “China”), we confirm that we have conducted physical inspections, made relevant enquiries and obtained such further information as we consider necessary to support our opinions of value of the properties as at 30 April 2008 (hereinafter referred to as the “Date of Valuation”) for the Company’s internal management reference purpose and to be incorporated into a Company’s circular for its shareholders’ reference. We understand that the properties to be acquired by the Group are currently held either by Best Forward Group Limited (hereinafter referred to as the “Acquisition Target Company”) and its subsidiaries and Wuhan Grand Pharmaceutical Group Company Limited and its subsidiaries (collectively, hereinafter together with the Acquisition Target Company referred to as the “Target Group”).

Basis of Valuation and Assumptions

We have valued the properties on Market Value basis. The term “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”.

For valuing property in Group I, we have adopted the Depreciated Replacement Cost (the DRC) Method which is an application of the Cost Approach. The DRC Method is a procedural value based on an estimate of the Market Value for the existing use of the land, plus the current gross replacement (reproduction) costs of the improvements erected thereon, less allowance for physical deterioration and all relevant forms of obsolescence and optimisation.

For owner occupied specialised properties where it is impracticable to identify the Market Value by sales comparison approach, the DRC Method is considered as the most appropriate method. The underlying theory of this method is the Market Value of the valued properties should, at least, be equivalent to the replacement cost of the remaining

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service potential of the valued properties i.e. the DRC of the valued properties. In our opinion, the DRC generally furnishes the most reliable indication of value for property where it is not practicable to ascertain its value on market basis.

Specialised properties are certain types of properties which are rarely, if ever, sold in the open market, except by way of a sale of the business of which they are a part (called the business in occupation), due to their uniqueness arising from their specialised nature and design of the buildings, their configuration, size, location or otherwise. Examples are: standard properties located in particular geographical areas and remote from main business centres for operational or business reasons, that are of such an abnormal size for that district, that there would be no market for such buildings there; buildings and site engineering works related directly to the business of the owner, as it is highly unlikely that they would have a value to anyone other than a company acquiring the undertaking; and properties of such construction, arrangement, size or specification that there would be no market (for a sale to a single owner occupier for the continuation of existing use) for those buildings. Having considered the inherent and general characteristics of the property in Group I, we are of the opinion that the property is specialised properties.

As the property in Group I being valued is classified as specialised properties for private sector, our valuation of the property is on the basis of the DRC of the property and being subject to the adequate potential profitability of the business having due regard to the value of the total assets employed and the nature of the operation.

By using the DRC basis, the land should be assumed to having obtained planning permission for the replacement of the existing buildings and it is always necessary when valuing the land, to have regard to the manner in which the land is developed by the existing buildings and site works, and the extent to which these realise the full potential value of the land. When considering a notional replacement site, it should normally be regarded as having the same physical and location characteristics as the actual site, other than characteristics of the actual site which are not relevant, or are of no value, to the existing use. In considering the buildings, it further stipulates that the gross replacement cost of the buildings should take into consideration everything which is necessary to complete the construction from a new green field site to provide buildings as they are at the Date of Valuation which are fit for and capable of being occupied and used for the current use. These estimated costs are not for erecting buildings in the future but for providing buildings to be available for occupation at the Date of Valuation, the work having commenced at the appropriate time.

Properties in Group II have been valued on an open market basis assuming sale with vacant possession by using sales comparison approach. The sales comparison approach considers the sales, listing or offerings of similar or substitute properties and related market data establishes a value estimate by processes involving comparison. The underlying assumption of this approach is that an investor will pay no more for a property than he or she would have to pay for a similar property of comparable utility.

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In valuing the properties in Groups I and II, we have assumed that the legally interested parties in the properties (i.e. Target Group as defined in this circular) has free and uninterrupted rights to use the property interests for the whole of the unexpired terms as granted and has the rights to freely assign, let or mortgage the properties. We have also assumed that any premiums payable have already been paid in full. Our valuations have been made on the assumption that the owner sells each of the properties on the open market in its existing states without the benefit of a deferred terms contract, leaseback, joint venture, management agreement or any other similar arrangement which would serve to increase the values of the properties.

Matters that might Affect the Values Reported

Establishment of Titles

In the course of valuation, we have been provided with copies of the title documents and the tenancy agreements regarding the properties. In our valuation, we have assigned no commercial (market) value to the properties without clear information on the nature of the land use rights. Due to inherent defects in the land registration system of China, we are unable to search the original documents from the relevant land registration departments to verify the existing titles of the properties or any material encumbrances that might be attached to the properties. All the title documents were provided by the management of the Company. As we are not legal professional and we are unable to ascertain the titles and to report any encumbrances (if any) that are registered against the properties. However, we have relied solely on the copy of the PRC legal opinion dated 16 June 2008 as provided by the management of the Company with regard to Target Group’s titles on the properties as disclosed in the attached valuation certificate. We are given to understand that the PRC legal opinion was prepared by the Company’s PRC legal adviser, Kun Lun Law Firm （廣東東方昆侖律師事務所). No responsibility or liability is assumed.

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Inspections and Investigations of the Property in Accordance with VS4 of the HKIS Standards

As part of the agreed-upon procedures, we have inspected the exterior, and where possible, the interior of the most of the properties in respect of which we have been provided with such information as we have requested for the purpose of our valuations. We have not inspected those parts of the properties which were covered, unexposed, not being arranged, excluded or inaccessible and such parts have been assumed to be in reasonable condition. We cannot express an opinion about or advice upon the condition of the properties and the attached valuation certificate should not be taken as making any implied representation or statement about the condition of the properties. No structural survey, investigation or examination has been made, but in the course of our inspections, we did not note any serious defects in the properties inspected. We are not, however, able to report that the properties are free from rot, infestation or any other structural defects. No tests were carried out to the services (if any) and we are unable to identify those services covered, unexposed or inaccessible.

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Sources of Information and its Verification in Accordance with VS5 of the HKIS Standards

The scope of valuation has been determined by reference to the property list provided by the management of the Company. The management of the Company has confirmed to us that the Target Group has no property interests other than those disclosed in the attached summary of values and valuation certificate.

Unless otherwise stated, all monetary amounts are in Renminbi Yuan (“RMB”).

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Limiting Conditions

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Statements

We hereby certify that the fee for this service is not contingent upon our conclusion of values and we have no significant interest in the properties, the Group, the Target Group or the values reported.

Our valuations are summarised below and the valuation certificate is attached.

Yours faithfully, For and on behalf of LCH (Asia-Pacific) Surveyors Limited

Joseph Ho Chin Choi B.Sc. RPS (GP) Managing Director

Elsa Ng Hung Mui B.Sc. M.Sc. RPS (GP) Associate Director

Contributed valuer

Leslie Wong Tak Chiu BSc

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Notes:

Mr. Joseph Ho Chin Choi has been conducting assets valuation (including real estate properties) and advisory work in Hong Kong, Macau, Taiwan, mainland China, Japan, South East Asia, Australia, Finland, Germany, Scotland, Guyana, Canada and the United States of America for various purposes since 1988. He has more than 19 years of experience in valuing real estate properties in mainland China.
Ms. Elsa Ng Hung Mui is a Registered Professional Surveyor who has been conducting valuation of real estate properties in Hong Kong since 1994 and has more than 9 years of experience in valuing properties in mainland China.
Both Mr. Joseph Ho Chin Choi and Ms. Elsa Ng Hung Mui are valuers in the List of Property Valuers for Undertaking Valuation for Incorporation or Reference in Listing Particulars and Circulars and Valuations in Connection with Takeovers and Mergers published by the HKIS.

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SUMMARY OF VALUES

Group I — Property held and occupied by the Target Group in the PRC and valued on market value basis

No. Property 1. A factory complex located at No. 5 Gu Tian Road Qiao Kou District Wuhan City Hubei Province The PRC Sub-total (RMB):	Amount of Valuation in existing state as at 30 April 2008 Interest attributable to the Target Group Amount of Valuation in existing state attributable to the Target Group as at 30 April 2008 RMB RMB 230,000,000 25% 57,500,000 230,000,000 57,500,000	Amount of Valuation in existing state as at 30 April 2008 Interest attributable to the Target Group Amount of Valuation in existing state attributable to the Target Group as at 30 April 2008 RMB RMB 230,000,000 25% 57,500,000 230,000,000 57,500,000
		57,500,000

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Group II — Properties held and occupied by the Target Group in the PRC and valued on market value basis

No. Property 2. An office unit located at No. 4, Unit 4, Block C, Eastern End of Tongtan Da Lu, Changyi District, Jilin City, Jilin Province The PRC 3. A residential house located at House No. 10 Third Alley, Haining Residential Minor District No. 145 Hainan Lu, Beihai City Zhuang Autonomous Region of Guangxi The PRC Sub-total (RMB): Grand-total (RMB):	Amount of Valuation in existing state as at 30 April 2008 Interest attributable to the Target Group Amount of Valuation in existing state attributable to the Target Group as at 30 April 2008 RMB RMB No Commercial Value 25% No Commercial Value No Commercial Value 25% No Commercial Value Nil Nil 230,000,000 57,500,000	Amount of Valuation in existing state as at 30 April 2008 Interest attributable to the Target Group Amount of Valuation in existing state attributable to the Target Group as at 30 April 2008 RMB RMB No Commercial Value 25% No Commercial Value No Commercial Value 25% No Commercial Value Nil Nil 230,000,000 57,500,000
		Nil
		57,500,000

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APPENDIX V

VALUATION CERTIFICATE

Group I — Property held and occupied by the Target Group in the PRC and valued on market value basis

				Amount of
				valuation
				in existing state
				attributable to
				the Target Group
				as at
	Property	Description and tenure	Particulars of occupancy	30 April 2008
				RMB
1.	A factory complex	The property comprises three parcel	The property is currently	57,500,000
	located at	of adjoining land having a total site	occupied by Wuhan	(25% interest)
	No. 5 Gu Tian Road	area of approximately 197,972.96	Grand for manufacturing,
	Qiao Kou District	sq.m. with 166 various major	storage, ancillary office,
	Wuhan City	buildings and structures erected	staff quarters and other
	Hubei Province	thereon.	supporting purposes.
	The PRC
		The buildings and structures	Portion of the property
		include workshop, office, quarters,	with a total area of
		warehouse buildings and other	approximately 6,240.33
		supporting facilities of single to 8-	sq.m. is subject to various
		storey and having a total gross floor	tenancy agreements
		area of approximately 92,892.86	for factory, office and
		sq.m. erected thereon. The buildings	ancillary purposes at
		were completed in various years	a total monthly rental
		between 1953 and 2003.	income of RMB55,391.10.
			(See Note 6 below).
		The property is subject to a right to
		use the land for various terms till
		22 September 2052 and 13 August
		2057 for industrial purpose.(See
		Note 1 below).

Notes:

The right to possess the land is held by the State and the right to use the land have been granted by the State or granted by the State and transferred to 武漢遠大制葯集團有限公司 (translated as Wuhan Grand Pharmaceutical Group Company Limited and hereinafter referred to as “Wuhan Grand”), which is indirectly 25% held by the Acquisition Target Company, through the following ways, they are:
(i) A parcel of land having a site area of approximately 162,531.75 sq.m.

According to a Contract for the Grant of State-owned Land Use Rights dated 23 September 2002, the land use rights for a parcel of land having a site area of approximately 162,531.75 sq.m. was granted to 武漢制葯集團股份有限公司 (translated as Wuhan Pharmaceutical Group Co., Ltd.), (which is currently renamed as Wuhan Grand effective 4 March 2005), for a term of 50 years for industrial usage; and

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According to a State-owned Land Use Rights Certificate known as Wu Guo Yong (2005) Di 0916 Hao issued by the People’s Government of Wuhan City and dated 14 September 2005, the legally interested party in the land having a site area of approximately 162,531.75 sq.m. is Wuhan Grand for a term till 22 September 2052 for industrial purpose.

(ii) A parcel of land having a site area of approximately 17,061.73 sq.m.

According to a Contract for the Grant of State-owned Land Use Rights dated 23 September 2002, the land use rights for a parcel of land having a site area of approximately 17,061.73 sq.m. was granted to 武漢制葯集團股份有限公司 (Wuhan Pharmaceutical Group Co., Ltd.) for a term of 50 years for industrial usage; and,

According to a State-owned Land Use Rights Certificate known as Wu Guo Yong (2005) Di 0440 Hao issued by the People’s Government of Wuhan City and dated 27 April 2005, the legally interested party in the land having a site area of approximately 17,061.73 sq.m. is Wuhan Grand for a term till 22 September 2052 for industrial purpose.

(iii.) A parcel of land having a site area of approximately 18,379.48 sq.m.

According to a Contract for the Grant of State-owned Land Use Rights dated 14 August 2007, the land use rights for a parcel of land having a site area of approximately 18,379.48 sq.m. was granted to Wuhan Grand for a term of 50 years for industrial usage at a consideration of RMB22,750,000; and

According to a State-owned Land Use Rights Certificate known as Wu Guo Yong (2007) Di 706 Hao issued by the People’s Government of Wuhan City and dated 7 September 2007, the legally interested party in the land having a site area of approximately 18,379.48 sq.m. is Wuhan Grand for a term till 13 August 2057 for industrial purpose.

According to a Building Ownership Certificates known as Wu Fang Quan Zheng Qiao Zi Di 200504139 and 200504958 Hao issued by the Building Management Bureau of Wuhan City and dated 17 May 2005 and 6 June 2005, the legally interested party in 166 various buildings and structures of the property having a total gross floor area of 92,892.86 sq.m. is Wuhan Grand.
According to the information provided by the management of the Wuhan Grand, the cost for construction in progress item was approximately RMB2,000,000 as at the Date of Valuation. In our valuation, the construction in progress items was reported at cost spent as at the Date of Valuation.
Majority of the property is subject to mortgages in favour of Wuhan Urban Commercial Bank Gutian Branch, Hua Xia Bank Wuhan Qiaokou Branch and Industrial and Commercial Bank of China Wuhan Qiaokou Branch for various terms till 31 January 2013, the latest. According to information provided by the management of the Company, the net book value of the properties as at 30 April 2008 was RMB99,493,000 (100% interest).
Wuhan Grand is a sino-foreign owned enterprise established in the PRC on 24 February 1990 with a valid Enterprise Legal Person Business License for operation from 24 February 1990 to 13 July 2020;

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APPENDIX V

According to the information provided by Wuhan Grand, portion of the property was subject to the following tenancy agreements as at the Date of Valuation:

Lessee 湖南雙匯商業投資有限公司武漢世紀正鑫醫療科技開發有限公司武漢世紀正鑫醫療科技開發有限公司廣州市益誠運輸服務有限公司廣州市益誠運輸服務有限公司武漢開啟華葯業有限公司武漢富揚實業有限公司 Total:	Area(sq.m.) Lease Term 510.33 1 March 2007 to 17 August 2009 1,565.72 1 July 2007 to 30 June 2010 1,707.6 19 June 2007 to 18 June 2010 424.39 15 July 2007 to 15 July 2008 446.69 1 January 2008 to 31 December 2008 891 1 March 2007 to 28 February 2010 694.6 1 March 2007 to 28 February 2010 6,240.33	Monthly Rental (exclusive of management fee) (RMB) 2,550 15,657.20 17,076 4,240 4,466.90 4,455 6,946
		55,391.10

According to the legal opinion dated 16 June 2008 and prepared by the Company’s PRC legal adviser, Kun Lun Law Firm (廣東東方昆侖律師事務所), Wuhan Grand is the legally interested party in the property, and can freely use and assign the property subject to existing mortgage.

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APPENDIX V

Group II — Properties held and occupied by the Target Group in the PRC and valued on market value basis

				Amount of
				valuation
				in existing state
				attributable to
				the Target Group
				as at
	Property	Description and tenure	Particulars of occupancy	30 April 2008
				RMB
2.	An office unit	The property an office unit on Level	The property is currently	No Commercial
	located at	1 of a 7-storeyed building which	occupied by the Wuhan	Value
	No. 4, Unit 4, Block	was completed in about 1998.	Grand for office purpose.
	C, Eastern End of
	Tongtan Da Lu,	The gross floor area of the property
	Changyi District,	is approximately 88.95 sq.m.
	Jilin City, Jilin
	Province	There is no specified land use
	The PRC	terms and usage in the Realty Title
		Certificate.

Notes:

Pursuant to a Realty Title Certificate known as Jilin City Fang Quan Zheng Chang Zi Di QZ20001053 Hao 吉林市房權証昌字第QZ20001053號 dated 9 December 2002 issued by the People’s Government of Jilin City, the legally interested party in the property is 武漢制葯廠 translated as Wuhan Pharmaceutical Factory, currently renamed as 武漢遠大制葯集團有限公司 (Wuhan Grand Pharmaceutical Group Company Limited and hereinafter referred to as “Wuhan Grand”), indirectly 25% held by the Acquisition Target Company. Pursuant to the certificate, there is no specified land use terms and land usage.
According to the legal opinion dated 16 June 2008 and prepared by the Company’s PRC legal adviser, Kun Lun Law Firm Kun Lun Law Firm (廣東東方昆侖律師事務所), Wuhan Grand, is the legally interested party in the property and the property is free of mortgage. However, as the land of the property is administratively allocated in nature, Wuhan Grand cannot freely transfer the property prior to payment of additional land premium.
3 According to the Listing Rules published by the Stock Exchange of Hong Kong Limited, property in China is required to have a transferable long term title certificate, i.e. State-owned Land Use Rights Certificate or Realty Title Certificate, prior the valuer can assign any commercial value to the property. In this instance, no commercial value has been assigned to the property as the Wuhan Grand did not obtain any long term title certificate, or the like, of the property as at the Date of Valuation.

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Amount of valuation in existing state attributable to the Target Group as at Property Description and tenure Particulars of occupancy 30 April 2008 RMB 3. A residential house The property is a 5-storeyed The property is currently No Commercial located at House residential house which was occupied by Wuhan Value No. 10 Third Alley, completed in about 2000. Grand for residential and Haining Residential ancillary office purpose. Minor District No. The gross floor area of the property 145 Hainan Lu, is approximately 382.95 sq.m. Beihai City Zhuang Autonomous There is no specified land use Region of Guangxi terms and usage in the Realty Title The PRC Certificate.

Notes:

Pursuant to a Realty Title Certificate known as Bei Fang Quan Zheng (2000) Zi Di 00012873 Hao 北房權証(2000)字第00012873號 dated 28 December 2000 issued by the People’s Government of Beihai City, the legally interested party in the property is 武漢諾佳葯業集團股份有限公司 (translated as Wuhan Nuojia Pharmaceutical Group Co. Ltd.), which renamed to 武漢制葯集團股份有限公司 (translated as Wuhan Pharmaceutical Group Co. Ltd.) effective 13 June 2002 and renamed to 武漢遠大制葯集團有限公司 (Wuhan Grand Pharmaceutical Group Company Limited and hereinafter referred to as “Wuhan Grand”) effective 4 March 2005, indirectly 25% held by the Acquisition Target Company. Pursuant to the certificate, there is no specified land use terms and land usage.
According to the legal opinion dated 16 June 2008 and prepared by the Company’s PRC legal adviser, Kun Lun Law Firm (廣東東方昆侖律師事務所), 武漢諾佳葯業集團股份有限公司 (translated as Wuhan Nuojia Pharmaceutical Group Co., Ltd.), is the legally interested party in the property. However, no land use term was specified in the Realty Title Certificate and no further information regarding the nature of land is provided, Kun Lun Law Firm was unable to comment on whether Wuhan Grand can freely assign the property without payment of additional land premium.
According to the Listing Rules published by the Stock Exchange of Hong Kong Limited, property in China is required to have a transferable long term title certificate, i.e. State-owned Land Use Rights Certificate or Realty Title Certificate, prior the valuer can assign any commercial value to the property. In this instance, no commercial value has been assigned to the property as the Wuhan Grand did not obtain any long term title certificate, or the like, of the property as at the Date of Valuation.

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GENERAL INFORMATION

APPENDIX VI

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

2. DISCLOSURE OF INTERESTS

(a) Directors’ Interests

As at the Latest Practicable Date, none of the Director had or was deemed to have interests or short positions in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) (i) which 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 or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules.

None of the Directors has any direct or indirect interests in any assets which have been acquired or disposed of by or leased to, or which are proposed to be acquired or disposed of by or leased to, the Resulting Group since 31 December 2007, the date to which the latest published audited consolidated financial statements of the Group were made up.

There is no contract or arrangement entered into by any member of the Resulting Group subsisting at the Latest Practicable Date in which any Director is materially interested and which is significant in relation to the business of the Resulting Group.

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APPENDIX VI

(b) Substantial Shareholders

As at the Latest Practicable Date, so far is known to the Directors, the following persons (not being a Director or a chief executive of the Company) had an interest or short position in the Shares or underlying Shares of the Company which are required to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO or, required to be entered in the register maintained by the Company pursuant to Section 336 of the SFO, or were, directly or indirectly, 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 member of the Resulting Group:

		Number of
		issued Shares held	Percentage of the
Name of		(long position (L)/	issued share capital of the
Shareholder	Capacity	short position (S))	Company
Outwit Investments Limited
(Note)	Beneficial Owner	746,979,654 (L)	69.56%

Note: The entire issued share capital of Outwit Investments Limited is owned by Mr. Hu Kaijun.

Save as disclosed above, as at the Latest Practicable Date, so far is known to the Directors, there was no person who had an interest and/or a short position in the Shares or underlying Shares which is required to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO or, who was, directly or indirectly, interested in 10% or more of the nominal value of the issued share capital carrying rights to vote in all circumstances at general meetings of any member of the Resulting Group.

3. MATERIAL CONTRACTS

The following contracts (not being contracts entered into the ordinary course of business carried on by the Resulting Group) have been entered into by the Resulting Group within the two years immediately proceeding the date of this circular and are or may be material:

(i) An agreement entered into between the PRC Co and Wuhan City Land Reserve Centre (武漢市土地整理儲備中心) on 31 December 2006 in respect of a piece of land together with all the buildings thereon for a consideration of RMB 22,750,000.

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APPENDIX VI

(ii) the Acquisition Agreement;
(iii) the Disposal Agreement; and
(iv) the Supplemental Letter.

4. DIRECTORS’ SERVICE CONTRACTS

None of the Directors had any existing or proposed service contract with any member of the Resulting Group (excluding contracts expiring or determinable by the employer within one year without payments of compensation (other than statutory compensation)).

5. COMPETING INTEREST

As at the Latest Practicable Date, so far as the Directors are aware of, no Directors or their respective associates had any interest in a business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

6. EXPERTS

The following is the qualification of the experts who have given opinions or advices which are contained in this circular:

Name	Qualification
Ample Capital Limited	A corporation licensed to carry on
	business in types 4, 6 and 9 regulated
	activities (advising on securities,
	corporate finance and asset management)
	under the SFO
Kun Lun Law Firm	PRC legal adviser
（廣東東方昆侖律師事務所）
LCH (Asia-Pacific) Surveyors Limited	Chartered Surveyors
SHINEWING (HK) CPA Limited	Certified Public Accountants

The above experts have given and have not withdrawn their written consent to the issue of this circular with the inclusion of their respective reports and references to their respective names in the form and context in which it appears.

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APPENDIX VI

As at the Latest Practicable Date, none of the above experts was beneficially interested in the share capital of any member of the Resulting Group nor did it have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Resulting Group or any interest, either direct or indirect, in any assets which have been, since 31 December 2007, the date to which the latest published audited consolidated financial statements of the Group were made up, acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the Resulting Group.

7. LITIGATION

As at the Latest Practicable Date, no member of the Resulting Group was engaged in any litigation or arbitration of material importance and no litigation, arbitration or claim of material importance was known to the Directors to be pending or threatened against any member of the Resulting Group.

8. MATERIAL ADVERSE CHANGE

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

9. RIGHT TO DEMAND A POLL

According to Bye-law 66(1) of the Bye-laws, at any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) demanded by:

(a) the chairman of the meeting; or
(b) at least three members present in person (or in the case a member being a corporation, by its duly authorized representative) or by proxy for the time being entitled to vote at the meeting; or
(c) any member or members present in person (or in the case of a member being a corporation, by its duly authorized representative) or by proxy and representing not less than one-tenth of the total voting rights of all members having the right to vote at the meeting; or

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GENERAL INFORMATION

APPENDIX VI

(d) any member or members present in person (or in the case of a member being a corporation, by its duly authorized representative) 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; or
(e) a Director or Directors, who individually or collectively hold proxies in respect of Shares representing five per cent or more of the total voting rights at the meeting.

Unless a poll be so demanded and not withdrawn, a declaration by the chairman that a resolution has on a show of hands been carried or carried unanimously, or by a particular majority, or not carried by a particular majority, or lost, and an entry to that effect made in the book containing the minutes of the proceedings of the Company shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour or against such resolution.

10. GENERAL

(a) The registered office of the Company is located at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.
(b) The branch share registrar and transfer office of the Company in Hong Kong is Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong.
(c) As at the date of this circular, the Board comprises of two executive Directors, namely, Ms. He Jin Hong (Deputy Chairman) and Mr. Ha Sze Tung Sharp Stone, and two independent non-executive Directors, namely, Ms. So Tosi Wan, Winnie and Mr. Wei Dong.
(d) The company secretary and qualified accountant of the Company is Mr. Lau Wing Yuen. He joined the Company in April 2005. Mr. Lau holds a Bachelor degree with major in Economics and Management Studies from the University of Hong Kong. He is a fellow member of the Association of Chartered Certified Accountants and the Hong Kong Institute of Certified Public Accountants.
(e) The English text of this circular shall prevail over the Chinese text.

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GENERAL INFORMATION

APPENDIX VI

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours at the Company’s principal office in Hong Kong from the date of this circular up to and including the date of the SGM:

(a) the Bye-laws;
(b) the material contracts referred to in paragraph 3 headed “Material Contracts” in this Appendix;
(c) the annual reports of the Group for each of the financial years ended 31 December 2005, 31 December 2006 and 31 December 2007;
(d) the legal opinon dated 16 June 2008 by the Company’s PRC legal adviser, Kun Lun Law Firm ( 廣東東方昆侖律師事務所) regarding the titles of the PRC properties as referred to in the valuation report set out in Appendix V; and
(e) this circular.

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NOTICE OF SPECIAL GENERAL MEETING

MAXX BIOSCIENCE HOLDINGS LIMITED 曼盛生物科技集團有限公司 *

(Incorporated in Bermuda with limited liability)

(Stock Code: 512)

NOTICE IS HEREBY GIVEN that a special general meeting (the “SGM”) of Maxx Bioscience Holdings Limited (the “Company”) will be held at 16th Floor, United Centre, 95 Queensway, Hong Kong on 15 July 2008 at 11:30 a.m. for the purpose of considering and, if thought fit, passing (with or without amendments) the following resolutions:

ORDINARY RESOLUTIONS

(1) “THAT:

(a) the agreement (the “Acquisition Agreement”) dated 28 April 2008 entered into between Long Smart Investments Limited (the “Vendor”) and the Company relating to the sale and purchase of the entire issued share capital of Best Forward Group Limited (“Acquisition Target Company”), and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;
(b) the issuance of the Convertible Bond as described under the Acquisition Agreement, the allotment and issue of the Conversion Shares as described in the Acquisition Agreement upon the exercise of the conversion rights attaching thereto be and is hereby approved;
(c) the issue of the Certificate as described in Acquisition Agreement upon the terms and subject to the conditions contained therein be and is hereby approved; and
(d) the directors of the Company (the “Directors”) be and are hereby authorised to do all acts and execute all documents they consider necessary or expedient to give effect to the transactions contemplated under the Acquisition Agreement.”

(2) “THAT:

(a) the agreement (the “Disposal Agreement”) dated 28 April 2008 entered into between the Company and Richinvest International Limited (the “Purchaser”) relating to the sale and purchase of the entire issued share capital of Bright Strong Profits Limited (the “Disposal Subsidiary”), and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;

For identification purpose only

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NOTICE OF SPECIAL GENERAL MEETING

(b) the Directors be and are hereby authorised to do all acts and execute all documents they consider necessary or expedient to give effect to the transactions contemplated under the Disposal Agreement.”

SPECIAL RESOLUTIONS

(3) “THAT , subject to the approval of the Registrar of Companies in Bermuda, the English name of the Company be changed from “Maxx Bioscience Holdings Limited” to “China Grand Pharmaceutical and Healthcare Holdings Limited” and the Chinese name of the Company be changed from “曼盛生物科技集團有限公司” to “遠大醫藥健康控股有限公司” for identification purpose only and the Directors be and are hereby authorised generally to do such acts and things and execute all documents or make such arrangements as they may consider necessary or expedient to effect the change of name.”
(4) “THAT the bye-laws of the Company (“Bye-laws”) be and are hereby amended by deleting the existing Bye-law 84(2) in its entirety and substituting therefor the following:
“84 (2) If a clearing house or nominee(s) of a clearing house (being a corporation) is a Member, it may authorise such person or persons as it thinks fit to act as its representative or representatives or proxy or proxies at any meeting of the Company or at any meeting of any class of Members provided that, if more than one person is so authorised, the authorisation shall specify the number and class of shares in respect of which each such person is so authorised. The person so authorised shall be deemed to have been duly authorised without the need of producing any documents of title, notarised authorisation and/or further evidence for substantiating the facts that it is duly authorised and shall be entitled to exercise the same rights and powers on behalf of the clearing house (or its nominee(s)) which he represents in respect of the number and class of shares specified in the relevant authorisation including the right to vote individually on a show of hand as that clearing house (or its nominee(s)) could exercise if it were an individual Member.””

By Order of the Board

Maxx Bioscience Holdings Limited Ha Sze Tung Sharp Stone Executive Director

Hong Kong, 23 June 2008

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NOTICE OF SPECIAL GENERAL MEETING

Notes:

(1) Any member entitled to attend and vote at the SGM of the Company shall be entitled to appoint another person as his proxy to attend and vote instead of him. A proxy need not be a member. A proxy or proxies representing either a member who is an individual or a member which is a corporation shall be entitled to exercise the same powers on behalf of the member which he or they represent as such member could exercise.
(2) Where there are joint holders of any share any one of such joint holder may vote, either in person or by proxy, in respect of such share as if he were solely entitled thereto, but if more than one of such joint holders be present at any meeting the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register of members in respect of the joint holding. Several executors or administrators of a deceased member in whose name any share stands shall be deemed joint holders thereof.
(3) A form of proxy for use at the SGM is enclosed herewith.
(4) The form of proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of such power of attorney must be lodged at the Company’s Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, not less than 48 hours before the time appointed for holding the SGM or adjourned meeting or not less than 24 hours before the time appointed for taking the poll subsequent to the date of the SGM or adjourned meeting thereof (as the case may be) and in default the form of proxy shall not be treated as valid. Completion and return of the form of proxy shall not preclude members from attending and voting in person at the SGM or at any adjourned meeting (as the case may be) should they so wish.

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AI assistant

Grand Pharmaceutical Group Limited — Proxy Solicitation & Information Statement 2008

49262_rns_2008-06-23_4c2acb6e-1f8a-4d56-818e-53738322b021.pdf

MAXX BIOSCIENCE HOLDINGS LIMITED 曼盛生物科技集團有限公司[*]

(1) VERY SUBSTANTIAL ACQUISITION

(3) VERY SUBSTANTIAL DISPOSAL

(4) CHANGE OF NAME OF THE COMPANY

AND

(5) PROPOSED AMENDMENTS TO THE BYE-LAWS OF THE COMPANY

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

MAXX BIOSCIENCE HOLDINGS LIMITED 曼盛生物科技集團有限公司[*]

(1) VERY SUBSTANTIAL ACQUISITION

WHICH ALSO CONSTITUTES CONNECTED TRANSACTION

(3) VERY SUBSTANTIAL DISPOSAL

(4) CHANGE OF NAME OF THE COMPANY

AND

(5) PROPOSED AMENDMENTS TO THE BYE-LAWS OF THE COMPANY

INTRODUCTION

VERY SUBSTANTIAL ACQUISITION WHICH ALSO CONSTITUTES CONNECTED TRANSACTION

The Acquisition Agreement

Date

Parties to the Acquisition Agreement

Purchase of Acquisition Shares

Acquisition Consideration

Acquisition Conditions Precedent

Acquisition Completion

Issuance of the Promissory Note

Before Acquisition Completion

After Acquisition Completion

Information on the Acquisition Target Company

LETTER FROM THE BOARD

Reasons for and Benefits of the Acquisition

Risk Factors of the Acquisition

Economic, political and social conditions in the PRC

Product liability

Price control

Environmental issues

Connected Transaction

ISSUANCE OF THE CONVERTIBLE BOND

Principal Terms of the Convertible Bond

Approval from Shareholders for Issuance of the Conversion Shares

Effects on the Share Capital

Fund Raising Activities of the Company During the Past 12 Months

VERY SUBSTANTIAL DISPOSAL

The Disposal Agreement

Date

Parties to the Disposal Agreement

Sale of Disposal Shares

Disposal Consideration

Disposal Conditions Precedent

Reason for the Supplemental Letter

Disposal Completion

Information on the Disposal Subsidiary

Reasons for and Benefits of the Disposal

Financial Effects of the Acquisition and the Disposal

Property Interests

The SGM

Financial and Trading Prospect of the Resulting Group

CHANGE OF NAME OF THE COMPANY

PROPOSED AMENDMENTS TO THE BYE-LAWS OF THE COMPANY

General

The Special General Meeting

LETTER FROM THE BOARD

Recommendation

Additional Information

MAXX BIOSCIENCE HOLDINGS LIMITED 曼盛生物科技集團有限公司[*]

(1) VERY SUBSTANTIAL ACQUISITION

WHICH ALSO CONSTITUTES CONNECTED TRANSACTION

INTRODUCTION

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR ADVICE

PRINCIPAL FACTORS TAKEN INTO ACCOUNT

1. Background

(a) Business overview of the Group

(b) Background on the Acquisition Target Company

Name

(c) Business prospects of the Group

Grand Pharmaceutical Group Limited Proxy Solicitation & Information Statement 2008