Greenheart Group Limited - Proxy Solicitation & Information Statement 2007

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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.

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

This circular appears for information purpose only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities in Omnicorp Limited.

If you have sold or transferred all your shares in Omnicorp Limited , you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

OMNICORP LIMITED 兩儀控股有限公司[*] (Incorporated in Bermuda with limited liability) (Stock code: 94)

MAJOR TRANSACTION

IN RELATION TO THE PROPOSED ACQUISITION OF 60% INTEREST IN GREENHEART AND

A CALL OPTION TO ACQUIRE THE REMAINING 39.61% INTEREST AND NOTICE OF SGM

Financial Adviser to Omnicorp Limited

Whether or not you intend to attend and vote at the SGM in person, please complete the enclosed form of proxy in accordance with the instructions printed thereon and return it to the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as practicable but in any event not later than 48 hours before the time appointed for holding the SGM. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof should you so wish.

* for identification purposes only

3 October 2007

			Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			5
Appendix I	–	Financial Information of the Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	35
Appendix II	–	Financial Information of the Greenheart Group. . . . . . . . . . . . . . . . . . . . . . .	83
Appendix III	–	Unaudited Pro forma financial information of
		the Enlarged Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	111
Appendix IV	–	Valuation Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	115
Appendix V	–	General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	153
Notice of SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			163

DEFINITIONS

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

“Acquisition”

the acquisition of the Sale Shares by the Purchaser from the Vendors and the grant of the Option by the Vendors to the Purchaser pursuant to the Agreement;

“Agreement” the conditional agreement for sale and purchase dated 20 August 2007 entered into between the Company, the Purchaser, the Vendors and the Guarantors in relation to the Acquisition;

“Announcement” the announcement of the Company dated 24 August 2007 in relation to, amongst other things, the Acquisition;
“associate” the meaning ascribed to it in the Listing Rules;
“Board” or “Directors” the board of directors of the Company;
“Bondholder(s)” holder(s) of the Convertible Bond(s) whose name(s) is/are registered in the register of Bondholders;
“Capital Reorganization” the re-classification of all Class B shares in Greenheart into ordinary shares so that the issued share capital of Greenheart prior to Completion shall consist of only ordinary shares;
“Company” Omnicorp Limited 兩儀控股有限公司*, a company incorporated in Bermuda, the shares of which are listed on the Stock Exchange;
“Completion” completion of the Acquisition pursuant to the terms of the Agreement;
“connected person” the meaning ascribed to it in the Listing Rules;
“Consideration” the consideration payable for the Sale Shares, being HK$375,000,000 in total;
“Consideration Shares” 60,000,000 new Shares to be issued and allotted to the Vendors upon Completion as part of the Consideration;
“Conversion Period” the period commencing from the date immediately following the date of issue of the Convertible Bonds up to 4:00 p.m. of the date which is one day prior to the date of maturity, being the date falling two years after the issue date;

* for identification purposes only

DEFINITIONS

“Conversion Shares”

the Shares to be issued and allotted to the Vendors upon exercise of the conversion rights attaching to the Convertible Bonds;

“Convertible Bonds”
the HK$237,000,000 four (4) per cent. per annum secured convertible bonds in registered form and convertible into Conversion Shares at the initial conversion price of HK$2.00 per Conversion Share (subject to adjustment) to be issued to the Vendors upon Completion as part of the Consideration;
“Enlarged Group”

the Group as enlarged by the Acquisition;

“Greenheart”
Greenheart Resources Holdings Limited (formerly known as Magic Mail International Limited), a company incorporated in the British Virgin Islands, which is owned as to approximately 99.61% by the Vendors and approximately 0.39% by Track Star prior to Completion;
“Greenheart Group” Greenheart and its subsidiaries;
“Group”
the Company and its subsidiaries and “ Group Company ” shall mean any of them;
“Guarantors”
Mr. Lau Tai Hang, Mr. Lei Guangyu, Mr. Chau Chi Piu, Mr. Lok Ho Ting, Ms. Ma Chun Ling, Mr. Zeng Hai Bin, Mr. Ma Ming Fai, Mr. Simon Murray, Mr. Kenneth R. James, Mr. Andy, Lai Kui Sing and Sino-Forest Corporation, who are the ultimate beneficial owners or the holding company of the corresponding corporate Vendors, being the guarantors of the corresponding Vendors in respect of their obligations under the Agreement and “ Guarantor ” shall mean any of them;
“Hong Kong”
the Hong Kong Special Administrative Region of the People’s Republic of China;
“Latest Practicable Date”
28 September 2007, being the latest practicable date prior to the printing of this circular for inclusion of certain information in this circular;
“Letter of Intent”
a letter of intent dated 25 July 2007 entered into between the Company, the Purchaser and the Vendors in relation to the then proposed acquisition of 70% of the issued share capital of Greenheart from the Vendors and the grant of a call option to acquire the remaining 29.61% of the issued share capital of Greenheart as disclosed in the Company’s announcement dated 27 July 2007;

DEFINITIONS

“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange;
“Option” the call option exercisable by the Purchaser to require the Vendors to sell the Option Shares to the Purchaser which is granted by the Vendors at no premium under the Agreement;
“Option Shares” 3,036,000,000 ordinary shares of no par value, representing the remaining approximately 39.61% of the issued share capital of Greenheart owned by the Vendors after the Capital Reorganization;
“Purchaser” Silver Mount Group Limited, a company incorporated in the British Virgin Islands, being a wholly-owned subsidiary of the Company;
“Sale Shares” 4,599,000,000 ordinary shares of no par value, representing 60% of the issued share capital of Greenheart after the Capital Reorganization;
“Security Providers” the Purchaser and any Group Company (other than the Purchaser and the Greenheart Group) which has provided or granted, or is proposing to provide or grant financing of any kind to any member of the Greenheart Group;
“SGM” the special general meeting of the Company to be held to consider the ordinary resolution(s) to be proposed to approve, amongst other things, the Acquisition, the Agreement and the issue and allotment of the Consideration Shares, the Convertible Bonds and the issue and allotment of the Conversion Shares on the exercise of the conversion rights attached to the Convertible Bonds;
“SFO” Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong);
“Shareholder(s)” the holder(s) of the Shares;
“Share(s)” the ordinary share(s) of the Company of HK$0.01 each;
“Stock Exchange” The Stock Exchange of Hong Kong Limited; “Takeovers Code” Hong Kong Code on Takeovers and Mergers;
“Track Star” Track Star Group Limited, an indirect wholly-owned subsidiary of the Company, being interested in approximately 0.39% of the issued share capital of Greenheart as at the Latest Practicable Date;

DEFINITIONS

“Valuer”	Pöyry Forest Industry Limited;
“Vendors”	Rise Jet Limited, Fortune Universe Limited, Spirit Land Limited,
	Fame Sea Profits Limited, Broad Joy Holdings Limited, Always
	Bright Group Limited, Montsford Limited, PVP Resources Limited,
	Forest Operations Limited, Nicholas Powell, David Van Oppen,
	Hwang Shiua-mei, F. Worthington-Wilmer, Graham Soutar,
	Winston K.W. Leong, Yip Ka Kay, Tse Nga Ying, Care Free
	Profits Limited, Greenheart Foundation Limited, Metrolink
	Holdings Limited and Sino-Capital Global Inc., who collectively
	own approximately 99.61% of the entire issued share capital of
	Greenheart as at the Latest Practicable Date and “Vendor” shall
	mean any of them;
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong; and
“US$”	United States dollars, the lawful currency of the United States of
	America.

For reference in this circular only, conversion of HK$ into US$ is based on the exchange rate of US$1.00 = HK$7.8.

LETTER FROM THE BOARD

**OMNICORP LIMITED 兩儀控股有限公司[*]**

(Incorporated in Bermuda with limited liability)

(Stock code: 94)

Executive Directors: Hui Tung Wah, Samuel Sung Yan Wai, Petrus

Independent non-executive Directors: Wong Kin Chi (Chairman) Wong Che Keung, Richard Tong Yee Yung, Joseph

Registered office: Canon’s Court 22 Victoria Street Hamilton HM12 Bermuda

Principal place of business:

Units 1505-7, 15th Floor Shui On Centre, 6-8 Harbour Road Wanchai Hong Kong

3 October 2007

To the Shareholders

Dear Sir/Madam,

MAJOR TRANSACTION

IN RELATION TO THE PROPOSED ACQUISITION OF 60% INTEREST IN GREENHEART AND

A CALL OPTION TO ACQUIRE THE REMAINING 39.61% INTEREST AND NOTICE OF SGM

INTRODUCTION

The Board announced in the Announcement on 24 August 2007 that since the execution of the Letter of Intent, the parties had entered into further negotiation on the terms and conditions of the transactions contemplated therein and on 20 August 2007, the Company and the Purchaser, a wholly owned subsidiary of the Company, entered into the Agreement with the Vendors and the Guarantors which superseded the Letter of Intent. Pursuant to the Agreement, (a) the Purchaser agreed to acquire from the Vendors the Sale Shares, representing 60% of the issued share capital of Greenheart after the Capital Reorganization at a total consideration of HK$375,000,000 to be satisfied partially in cash and partially by the issue of Consideration Shares and Convertible Bonds by the Company; and (b) the Vendors agreed to grant the Option to the Purchaser to acquire the Option Shares.

* for identification purposes only

LETTER FROM THE BOARD

The purpose of this circular is to provide you with further information regarding, among other things, (i) the details of the Acquisition and other disclosures in connection with the Acquisition as required under the Listing Rules; (ii) the valuation report on the Greenheart Group’s forest and standing timber and (iii) notice of the SGM.

I. The Agreement

The principal terms of the Agreement are set out below:

Date: 20 August 2007

Parties

(a) The Vendors
(b) The Guarantors
(c) The Purchaser
(d) The Company

To the best of the knowledge, information and belief of the Directors having made all reasonable enquiries, the Vendors, (in respect of those corporate Vendors other than Sino-Capital Global Inc.) their respective ultimate beneficial owners, Sino-Forest Corporation (being the holding company of SinoCapital Global Inc.) and the other Guarantors are third parties independent of and not connected with the Company and its connected persons.

Subject matter of the Acquisition

(a) The Sale Shares: 4,599,000,000 ordinary shares of no par value, representing 60% of the issued share capital of Greenheart after the Capital Reorganization; and
(b) The Option: the call option exercisable by the Purchaser to require the Vendors to sell the Option Shares, being 3,036,000,000 ordinary shares of no par value, representing the remaining approximately 39.61% of the issued share capital of Greenheart owned by the Vendors after the Capital Reorganization, to the Purchaser which is granted by the Vendors at no premium.

Please refer to the paragraph headed “Information on the Greenheart Group” below for further information on the Greenheart Group.

LETTER FROM THE BOARD

Consideration

The Consideration of HK$375,000,000 will be satisfied in the following manner:

(a) as to HK$18,000,000 in cash;
(b) as to HK$120,000,000 by the issue of the Consideration Shares at HK$2.00 per Consideration Share; and
(c) as to HK$237,000,000 by the issue of Convertible Bonds which are convertible into Conversion Shares at an initial conversion price of HK$2.00 (subject to adjustment) per Conversion Share during the Conversion Period.

Pursuant to the terms of the Letter of Intent, a refundable earnest money of HK$15,000,000 (the “ Earnest Money ”) had been paid by the Purchaser to the Vendors’ solicitors as stakeholder who had held the same in a separate interest bearing escrow account. Upon signing of the Agreement, the Earnest Money (but not the interest accrued thereon, which shall belong to the Vendors) has been treated as deposit and part payment of the Consideration (the “ Deposit ”) and the Vendors’ solicitors will hold the same as stakeholder until Completion, whereupon such deposit together with all interest accrued thereon will be released to the Vendors. The cash portion of the Consideration will be satisfied by the Group’s internal resources.

The Consideration has been determined after arm’s length negotiation taking into account (a) the size of the Concession (as hereinafter defined) and the areas where the Cutting Rights are granted and the value of the forest and standing timber contained therein owned and controlled by the Greenheart Group of not less than US$200 million as estimated by Greenheart (which has been confirmed in a valuation report by the Valuer as included in Appendix IV of this circular, in respect of which the satisfaction of the Purchaser is a condition precedent to Completion), (b) the business prospect and growth potential of the timber market which the Directors believe will be driven by strong demand from countries such as China, and diminishing supply due to deforestation in the past and stricter environmental constraints and requirements now practiced by an increasing number of countries in the world, (c) the master sale and purchase contract dated 20 July 2007 between a member of the Greenheart Group and Sino-Forest Resources Inc. (“ SFRI ”), being a subsidiary of a Guarantor (namely Sino-Forest Corporation), whereby SFRI has agreed to purchase logs from Greenheart with a total sales revenue of approximately US$6 million and (d) operating expenses and capital expenditures arising from the harvesting, processing, export and administrative related activities of the Greenheart Group which may lead to the increase in the working capital requirement of the Group.

LETTER FROM THE BOARD

The basis in respect of the issue price of HK$2.00 per Consideration Share and the initial conversion price of HK$2.00 per Conversion Share under the Convertible Bonds were determined after arm’s length negotiation with reference to the Company’s recent share price performance after the date of the Letter of Intent and before the signing of the Agreement and represents:

(a) a premium of approximately 17.65% of the closing price of HK$1.70 per Share as quoted on the Stock Exchange on 17 August 2007, being the last trading day immediately before the date of the Agreement;
(b) a discount of approximately 13.42% to the average closing price of HK$2.31 per Share based on the daily closing prices as quoted on the Stock Exchange for the 5 trading days up to and including 17 August 2007;
(c) a discount of approximately 22.48% to the average closing price of HK$2.58 per Share based on the daily closing prices as quoted on the Stock Exchange for the 10 trading days up to and including 17 August 2007;
(d) a discount of approximately 51.34% to the closing price of HK$4.11 per Share as quoted on the Stock Exchange on 25 July 2007, being the date of the Letter of Intent; and
(e) a premium of approximately 17.65% of the closing price of HK$1.70 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

The Consideration Shares, when issued on Completion, and the Conversion Shares, when issued upon exercise of the Convertible Bonds of the Bondholders, will rank pari passu in all respect among themselves and with all other Shares in issue on the date of such allotment and issue.

The number of Consideration Shares represents approximately 32.67% of the existing issued share capital of the Company and assuming no further Shares shall be issued, approximately 24.63% of the then issued share capital of the Company as enlarged by the issue of the Consideration Shares. In the event that the conversion rights attaching to the Convertible Bonds are fully exercised and assuming no further Shares shall be issued, the number of Conversion Shares represents approximately 64.53% of the existing issued share capital of the Company and approximately 32.72% of the then issued share capital of the Company as enlarged by the issue of the Consideration Shares and the Conversion Shares.

Having considered the above factors, the Directors are of the view that the Consideration is fair and reasonable and in the interest of the Company and the Shareholders as a whole.

LETTER FROM THE BOARD

Lock-up

Each Vendor has undertaken to the Company and the Purchaser that, subject to Completion, without the prior written consent of the Company and the Purchaser, it will not dispose of or enter into any agreement to dispose of or otherwise create any options, rights, interests or encumbrances in respect of:

(a) any of its Consideration Shares at any time during the period from and including the date of Completion up to but excluding the date falling 3 months after Completion;
(b) more than 50% of its Consideration Shares during the period from and including the date falling 3 months after Completion up to but excluding the date falling 6 months after Completion.

The lock-up provisions in relation to the Conversion Shares are set out in the section headed “The Convertible Bonds” below.

Pre-emption rights and Co-sale rights

Upon and subject to Completion and unless and until the Option is exercised, if any holder of the shares in Greenheart (the “ Greenheart Share(s) ” and the “ Greenheart Shareholder(s) ”) wishes to transfer any of its Greenheart Shares, the other Greenheart Shareholders shall have a first right of refusal to acquire such Greenheart Shares at the sale price at which it proposes to sell such Greenheart Shares to a third party.

In addition, any Greenheart Shareholder who is proposing to sell to a third party some or all of its Greenheart Shares shall inform all the other Greenheart Shareholders of any offer received from a third party and procure that such offer is extended to the other Greenheart Shareholders at the same price and on no less favourable terms and with the same completion date as those offered to that Greenheart Shareholder.

Conditions precedent

Completion is conditional upon all of the following conditions precedent being fulfilled (or, in respect of conditions (b), (c), (d), (i), (j) and (k) below, waived by the Purchaser):

(a) the completion of the Capital Reorganization;
(b) the Purchaser being satisfied with the results of the due diligence review to be conducted in relation to the transactions contemplated under the Agreement;
(c) the Purchaser being satisfied with a survey and valuation report by the Valuer, an independent international firm of forestry experts (or such other experts as may be agreed by such Vendors who together are owners of more than 50% of the Sale Shares and the Purchaser) on the Greenheart Group’s forest and standing timber;

LETTER FROM THE BOARD

(d) the Purchaser being satisfied with legal opinions in relation to the Vendors and the Greenheart Group, in forms satisfactory to the Purchaser, confirming, among others, the capacity and authority of the Vendors in entering into and performing the Agreement, the due execution by the Vendors and validity of the Agreement, the due incorporation and valid existence of members of the Greenheart Group and the title and rights of the Greenheart Group to the Concession and Cutting Rights;
(e) the passing by the Shareholders (other than Shareholders who are required to abstain from voting under the Listing Rules or by the Stock Exchange) of ordinary resolution(s) approving the Agreement and the transactions contemplated thereunder, including the acquisition of the Sale Shares, the issue and allotment of the Consideration Shares, the creation and issue of the Convertible Bonds and the issue and allotment of the Conversion Shares upon the exercise of the conversion rights attaching to the Convertible Bonds;
(f) the Company having obtained the approval granted by the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Consideration Shares and the Conversion Shares which may fall to be issued and allotted upon the exercise of the conversion rights attaching to the Convertible Bonds;
(g) if required, the Bermuda Monetary Authority granting its consent to the issue of the Consideration Shares, the Convertible Bonds and the Conversion Shares which may fall to be issued and allotted upon the exercise of the conversion rights attaching to the Convertible Bonds;
(h) all other necessary approvals or consents (if any) of the relevant governmental or regulatory authorities for the transactions contemplated in the Agreement having been obtained;
(i) such member(s) of the management of the Greenheart Group as specified by the Purchaser (if any) having entered into fixed term service contracts with the relevant members of the Greenheart Group on such terms and conditions to the satisfaction of the Purchaser;
(j) the Purchaser notifying the Vendors in writing prior to 6:00 p.m. on or before the fifth business day after 20 December 2007 (or such other date as the Vendors and the Purchaser may agree in writing) that it is satisfied with the contents of a disclosure letter to be issued by the Vendors to the Purchaser in relation to the warranties of the Vendors under the Agreement; and
(k) all warranties of the Vendors as set out in the Agreement remaining true and accurate and are not misleading in any material respect.

LETTER FROM THE BOARD

If the conditions above shall not have been fulfilled (or, in respect of conditions (b), (c), (d), (i) and (j) and (k) above, waived by the Purchaser) by 31 December 2007 (or such other date as agreed between the Vendors and the Purchaser), the Agreement and everything contained therein shall, subject to the liability of either party to the other in respect of any antecedent breaches, be null and void and of no effect whereupon the Deposit together with all interest thereon and all other monies (if any) paid by the Purchaser to the Vendors or the Vendors’ solicitors shall be refunded to the Purchaser.

Guarantee

Pursuant to the terms of the Agreement, each Guarantor as principal obligor guarantees full prompt and complete performance of all the obligations of the relevant Vendor of which such Guarantor is the ultimate owner or the holding company under or in connection with the Agreement on a several basis.

II. The Convertible Bonds

The terms of the Convertible Bonds have been negotiated on arm’s length basis and the principal terms of which are summarized below:

Principal Amount : HK$237,000,000. Maturity : The date falling two years after the date of issue of the Convertible Bonds (the “ Maturity Date ”). Interest rate : 4% per annum accrued on a day-to-day basis on the outstanding principal amount, payable semi-annually in arrears. Form : Registered form only. Conversion : Each Bondholder will have the right to convert during the conversion period mentioned below provided, inter alia, that at the time of conversion by any Bondholder, (a) such Bondholder and parties acting in concert (as defined in the Takeovers Code) with it will not become obliged to make a mandatory offer under Rule 26 of the Takeovers Code and (b) the allotment and issue of the Conversion Shares to such Bondholder will not cause the Company to be in breach of the minimum public float requirement stipulated under Rule 8.08 of the Listing Rules. These restrictions on conversion will apply throughout the term of the Convertible Bonds.

LETTER FROM THE BOARD

As no Bondholder can exercise the conversion rights attached to any Convertible Bonds to such extent that such Bondholder and parties acting in concert (as defined in the Takeovers Code) with it will become obliged to make a mandatory offer under Rule 26 of the Takeovers Code (the “ Control Restriction ”), any subsequent conversion of the Convertible Bonds would not result in any Bondholder and parties acting in concert with it having 30% or more shareholding in the Company and therefore would not result in a change in control of the Company. When a Bondholder exercises the conversion rights attached to any Convertible Bonds, such Bondholder will be required to confirm in the conversion notice that the Control Restriction is complied with and the Company will not proceed with the issue of any Conversion Shares if the Control Restriction is not complied with.

No rights to convert may be exercised by a Bondholder who is resident or national outside Hong Kong under the laws and regulations of which such exercise or the performance by the Company of the obligations expressed to be assumed by it thereunder or the allotment and issue and holding of the Conversion Shares cannot be carried out lawfully without the Company first having to take certain actions in such jurisdiction.

Conversion Period : Subject to the right of conversion above, each Bondholder will have the right to convert during the period commencing from the date immediately following the date of issue of the Convertible Bonds up to 4:00 p.m. of the date which is one day prior to the Maturity Date, in amounts not less than a whole multiple of HK$300,000 on such conversion, save that if at any time the outstanding principal amount of the Convertible Bond held by a Bondholder is less than HK$300,000, or if a Bondholder intends to exercise the conversion right attached to the entire principal amount of all the Convertible Bonds held by it, the Bondholder may convert the whole (but not part only) of such outstanding principal amount of the Convertible Bonds.
Conversion Price : During the Conversion Period, the Convertible Bonds are convertible into the Conversion Shares at an initial conversion price of HK$2.00 per Conversion Share subject to anti-dilutive adjustments in certain events which are customary in market transactions of this type, including without limitation: (i) share consolidation, share subdivision or reclassification; (ii) capitalisation of profits or reserves; (iii) capital distribution; (iv) rights issue of shares, options, warrants, other subscription rights

LETTER FROM THE BOARD

or other securities; (v) issue wholly for cash of shares or issue or grant of options, warrants or other rights to subscribe for or purchase Shares for a price per Share which is less than 90% of the average closing price for a Share for the 10 consecutive dealing days preceding the relevant date (the “ Prevailing Market Price ”); (vi) issue wholly for cash by the Company or its subsidiaries of securities carrying rights of conversion into or exchange or subscription for Shares or securities which may be redesignated as Shares for a price per Share which is less than 90% of the Prevailing Market Price; (vii) modification of rights of conversion, exchange, subscription or redesignation attaching to any securities mentioned in (vi) above resulting in a consideration per Share which is less than 90% of the Prevailing Market Price; and (viii) general offer to Shareholders whereby any securities may be acquired by them at a price per Share which is less than 90% of the Prevailing Market Price.

Nevertheless, no adjustment to the conversion price will be made in relation to the issue by the Company of any convertible bonds to satisfy all or part of the total consideration for the Option Shares pursuant to the terms of the Agreement and any issue of Shares for cash consideration at a placing price of not less than HK$2.00 per Share pursuant to any proposed placing(s) (whether conditional or unconditional, and whether completion of such placing(s) takes place before or after any issue of the Convertible Bonds) by or on behalf of the Company which may be announced by the Company prior to the first issue of the Convertible Bonds.

Ranking

: The Conversion Shares will rank pari passu in all respect among themselves and with all other Shares in issue on the date of such allotment and issue.
Redemption by the : The Convertible Bonds which remain outstanding shall be Company mandatorily redeemed by the Company at a redemption amount equal to the principal amount of the Convertible Bonds together with the interests accrued thereon if the same remain outstanding by 4:00 p.m. on the Maturity Date or upon the majority Bondholders giving a written notice declaring the Convertible Bonds to be immediately due and payable after the occurrence of an event of default as specified in the terms and conditions of the Convertible Bonds.

LETTER FROM THE BOARD

Transferability : The Convertible Bonds may be transferred to any person in whole multiples of HK$300,000 (or such lesser amount as may represent the entire principal amount thereof), save that any transfer to any connected person of the Company shall be subject to the requirements (if any) that the Stock Exchange may impose from time to time.
Lock-up : In respect of any exercise of conversion rights within 1 year after the issue date of the Convertible Bond, no Bondholder shall, without the prior written consent of the Company, dispose of (a) any Conversion Shares issued and allotted pursuant to such exercise (the “ Relevant Conversion Shares ”) at any time during the period from and including the conversion date up to but excluding the date falling 3 months after the conversion date; or (b) more than 50% of the Relevant Conversion Shares during the period from and including the date falling 3 months after the conversion date up to but excluding the date falling 6 months after the conversion date, provided that there is no prohibition or restriction on any disposal of any Relevant Conversion Shares at any time as from the first anniversary of the issue date of the Convertible Bonds.
Events of default : All Convertible Bonds contain an event of default provision which provides that on the occurrence of certain events of default (e.g. payment and other default, dissolution of and disposals made by the Company or the Security Providers or any principal subsidiary (as defined in the terms and conditions of the Convertible Bonds) of the Company, enforcement action against the Company or any Security Providers, insolvency of the Company, Security Providers or any principal subsidiary of the Company, cross default of other indebtedness of the Company, trading suspension for a period of 60 consecutive trading days or the delisting of the Shares on the Stock Exchange), the majority Bondholders may give written notice to the Company that the Convertible Bonds are immediately due and repayable whereupon they will become so due and payable on the business day falling 7 business days of the date of such notice.

LETTER FROM THE BOARD

Security

: The Convertible Bonds will be secured by a first mortgage over the Sale Shares incorporating an assignment of all indebtedness owing by the Greenheart Group to the Purchaser in favour of the security trustee which shall hold the benefit thereof for the Bondholders (the “ Security Trustee ”). Any advance made by any other member of the Group (other than the Greenheart Group) to the Greenheart Group from time to time will also be assigned in favour of the Security Trustee as security for the Convertible Bonds.

Listing

: No application has been or will be made for the listing of the Convertible Bonds on the Stock Exchange or any other stock exchange. An application will be made for the listing of, and permission to deal in, the Conversion Shares on the Stock Exchange.

In view of the dilution effect of the Convertible Bonds, the Company is required to disclose by way of announcement all relevant details of the conversion of the Convertible Bonds in the following manner:

(i) the Company will make a monthly announcement (“ Monthly Announcement ”) on the website of the Stock Exchange. Such announcement will be made on or before the fifth business day following the end of each calendar month and will include the following details in a table form:
a. whether there is any conversion of the Convertible Bonds during the relevant month. If there is a conversion, details thereof including the conversion date, number of new Shares issued and conversion price for each conversion. If there is no conversion during the relevant month, a negative statement to that effect;
b. the amount of outstanding Convertible Bonds after the conversion, if any;
c. the total number of Shares issued pursuant to other transactions during the relevant month, including Shares issued pursuant to exercise of options under any share option scheme(s) of the Company; and
d. the total issued share capital of the Company as at the commencement and the last day of the relevant month;
(ii) in addition to the Monthly Announcement, if the cumulative amount of the Conversion Shares issued pursuant to the conversion of the Convertible Bonds reaches 5% of the issued share capital of the Company as disclosed in the last Monthly Announcement or any subsequent announcement made by the Company in respect of the Convertible Bonds (as

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the case may be) (and thereafter in a multiple of such 5% threshold), the Company will make an announcement on the website of the Stock Exchange including details as stated in (i) above for the period commencing from the date of the last Monthly Announcement or any subsequent announcement made by the Company in respect of the Convertible Bonds (as the case may be) up to the date on which the total amount of Shares issued pursuant to the conversion amounted to 5% of the issued share capital of the Company as disclosed in the last Monthly Announcement or any subsequent announcement made by the Company in respect of the Convertible Bonds (as the case may be); and

(iii) if the Company forms the view that any issue of Conversion Shares will trigger the disclosure requirements under Rule 13.09 of the Listing Rules, then the Company is obliged to make such disclosure regardless of the issue of any announcements in relation to the Convertible Bonds as mentioned in (i) and (ii) above.

III. Option

The Option is exercisable by the Purchaser to require the Vendors to sell the Option Shares to the Purchaser during the period commencing from and including the date of Completion up to but excluding the date falling 18 months after the date of Completion.

The total consideration payable by the Purchaser to the Vendors for the Option Shares will be HK$247,562,500 (if the Option is exercised within 6 months after Completion) or HK$272,318,750 (if the Option is exercised after the sixth month but before the first anniversary of Completion) or HK$297,075,000 (if the Option is exercised on or after the first anniversary of Completion), which will be settled by either cash, new Shares to be issued by the Company at the price of HK$2.00 per Share or convertible bonds to be issued by the Company with conversion price of HK$2.00 per Share and other terms similar to those of the Convertible Bonds or any combination of the above as the Purchaser and the majority Vendors may agree. However, if there is or needs to be any adjustment to the conversion price of the Convertible Bonds prior to the completion of the sale and purchase of the Option Shares, the price of any such consideration shares and the conversion price of any such convertible bonds will be the then applicable conversion price of the Conversion Bonds instead of HK$2.00.

The Company will comply with the relevant requirements of the Listing Rules upon any exercise of the Option.

IV. Information on the Greenheart Group

The Greenheart Group is a natural forest concession owner and operator in Suriname, South America and currently holds a forest concession (identified as concession 725) for the exploitation of timber on a parcel of land in Suriname of approximately 126,825 hectares (the “ Concession ”). Further, pursuant to the contracts between the Greenheart Group and the relevant concession holder or owner of the relevant concession holder, cutting rights in respect of certain parcels of land in Suriname with a total area of approximately 51,140 hectares (the “ Cutting Rights ”) have been granted to the Greenheart Group. Its principal business activities include (i) log harvesting, (ii) lumber processing and (iii) marketing and sales of logs and lumber products.

LETTER FROM THE BOARD

The financial highlights of the Greenheart Group are set out below:

	For the 7	For the financial	For the financial
	months ended	year ended	year ended
	31 July 2007	31 December 2006	31 December 2005
	(HK$’000)	(HK$’000)	(HK$’000)
Total assets value	121,696	34,133	25,701
Net assets/(liabilities)	88,624	18,330	(26,770)
Loss before taxation	12,113	33,891	22,035
Loss after taxation	12,113	33,891	22,035

Note: Extracted from Accountant’s Report on the Greenheart Group as set out in Appendix II.

After Completion, Greenheart will be owned as to 60.39% by the Group and become an indirect non wholly-owned subsidiary of the Company. As such, the results of the Greenheart Group will be consolidated in the financial statements of the Company after Completion.

The Concession

The Concession (identified as concession 725) is situated in the district of Sipaliwini along the Road to Apoera, Suriname and is of a total area of approximately 126,825 hectares. The Concession confers the Greenheart Group a valid and legal right to exclusively carry out timber exploitation on the parcel of land under the Concession for a term of 20 years from 6 June 1997 which is renewable for another 20 years.

The Cutting Rights

(a) Pursuant to a contract between, inter alia, Octagon International N.V. (“ Octagon ”), a whollyowned subsidiary of Greenheart, and a local Surinamese (the “ Grantor ”) who is an independent third party not connected with the Company and the Greenheart Group dated 3 March 2005, Octagon was granted the exclusive right to exploit and carry out logging and timber production operations on concessions 506 and 506a (“ Nickerie Concessions ”) with a total area of 19,700 hectares, of which 12,000 hectares is situated in the District of Nickerie on both banks of the Falawatra River, Suriname and the remaining 7,700 hectares is situated in the south of the Nickerie River in the District of Sipaliwini, during the duration and validity of the concessions granted by the Government of Suriname for that purpose.

The Nickerie Concessions were granted by the Government of Suriname on 10 September 1996 for ten years and are renewable for another 10 years. The Grantor is currently applying for the renewal of the Nickerie Concessions on behalf of Octagon after the expiry of the initial term in 2006. In addition to applying for the extension of the concession period, the Greenheart Group is also applying to change the registered concession holder of the Nickerie Concessions from the Grantor to Octagon in the same application. As such, it is expected that a longer period of time is required to complete the renewal and the change of registered concession holder process. Up to the Latest Practicable Date, the renewal of the Nickerie Concessions is still in the process. In the opinion of the directors of Greenheart, the renewal process may take a further three to four months from the Latest Practicable Date. Other than

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longer time is required, the directors of Greenheart do not expect any other material difficulties in the renewal of the Nickerie Concessions.

(b) Pursuant to a lease with option to buy contract dated 22 June 2006 between an independent third party, and Beach Paradise N.V., a member of the Greenheart Group, it is agreed that Beach Paradise N.V. shall have the right to exploit concessions 551a, 550, 550b and 1040 (“ Dynasty Concessions ”) held by a company wholly owned by the independent third party for ten years starting from 1 July 2006. The Dynasty Concessions have a total area of approximately 31,440 hectares and are situated in the District of Sipaliwini, Suriname and were granted by the Government of Suriname on 29 March 2001 for ten years and are renewable for another 10 years.

INDUSTRY OVERVIEW

Over the past decade the global tropical hardwood market has been characterised by increasing demand and diminishing supply.

(a) Global Forest Coverage

According to the International Tropical Timber Organisation (“ITTO”), the forest coverage of global major producer regions (i.e. Africa, Asia and Latin America) has been declining since 1985: in Africa, from 49.3% of total land area in 1985 to 44.2% in 2005; in Asia, from 41.4% in 1985 to 35.4% in 2005; and in Latin America, from 59.4% in 1985 to 52.4% in 2005. For all ITTO producer countries as a whole, the decline was from 52.7% in 1985 to 46.4% in 2005. According to Food and Agriculture Organisation of the United Nation (“FAO”), global primary forests are lost or modified at a rate of 6 million hectares per year through deforestation or selective logging. The following illustrates the forest coverage of the above ITTO producer regions during 1985 to 2005.

Forest Area/Total Area of ITTO Producers (1985-2005)

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

65%
60%
55%
50% Africa
Asia (ITTO Producers)
45% Latin America
All ITTO Producers
40%
35%
30%
1985 1990 2000 2005
18
----- End of picture text -----

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According to FAO, up to 2005, Suriname still has more than three quarters of their total land area forested. Therefore, in the opinion of Greenheart’s directors, Suriname may possess one of the best preserved natural tropical rainforest assets in the world.

(b) Tropical Hardwood Log Markets

Log Export

Globally, the largest tropical hardwood log producing countries are Brazil (23 per cent.), Indonesia (18 per cent.), Malaysia (17 per cent.), India (10 per cent.), Thailand (6 per cent.) and Nigeria (5 per cent.). Asia Pacific accounted for approximately 64 per cent. of the global tropical hardwood log production in 2005. However, due to declining hardwood log availability and the implementation of policies to stop illegal logging, the export volume of tropical hardwood log from Asia Pacific countries has been decreasing since 2001 (Please see diagram below), and amounted to less than six million m[3] in 2005, which compares with over twelve million m[3] of import for the region in the same year.

Asia-Pacific Tropical Hardwood Log Exports

==> picture [386 x 224] intentionally omitted <==

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

Million M3
16
14
12
10
Other Asia
Pacific
8
Indonesia
6
4 Myanmar
2 Malaysia
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
----- End of picture text -----

Source: Pöyry Forest Industry Limited

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Log Consumption

In 2005, global tropical hardwood log consumption was estimated to be 136 million m[3] with the Asia Pacific region accounting for 64 per cent. of the worldwide tropical hardwood log market and Latin America being the second largest consumer accounting for 24 per cent. of the global consumption.

China, India, Japan and Thailand are the largest importers of tropical hardwood logs in the Asia Pacific region. China, for example, increased its imports from around two million m[3] in 1996 to approximately six million m[3] in 2005, representing a 300 per cent. rise. The following diagram illustrates the volume of tropical hardwood log imported to China from 1995 to 2005.

CHINA – Hardwood Log Imports (1995-2005)

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

Million m [3]
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Source: Pöyry Forest Industry Limited

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(c) Tropical Hardwood Lumber market

Lumber Export

The largest exporters of tropical hardwood lumber in the Asia Pacific region are Malaysia and Indonesia (see diagram below). Total lumber export for the region was estimated at under seven million m[3] in 2005 as compared with a total lumber import of close to eight million m[3] for the same year.

Asia-Pacific Tropical Hardwood Lumber Exports

==> picture [386 x 230] intentionally omitted <==

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

Million M3
10
9
8
Other Asia
7
Pacific
6
Taiwan
5
China
4
3
Indonesia
2
Malaysia
1
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
----- End of picture text -----

Source: ITTO

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Lumber consumption

In 2005, total global hardwood lumber consumption was estimated to be 45.4 million m[3] , with the Asia Pacific region accounting for 52 per cent. of the worldwide lumber consumption market. Latin America is the second largest consumer, accounting for 35 per cent. of global consumption in 2005.

The largest importers of tropical hardwood lumber in Asia Pacific are China, Thailand, Malaysia and Japan. China alone is estimated to import close to three million m[3] in 2005 increasing from less than one million m[3] in 1996. The following diagram illustrates the volume of tropical hardwood lumber imported to China from 1995 to 2005.

CHINA – Hardwood Lumber Imports (1996-2005)

==> picture [42 x 8] intentionally omitted <==

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

Million m [3]
----- End of picture text -----

==> picture [349 x 244] intentionally omitted <==

Source: Pöyry Forest Industry Limited

Future demand for hardwood logs and lumber is expected to be strong in Asia Pacific owing to the following combination of factors:

declining hardwood log availability;
the implementation of policies to stop illegal logging in Asia Pacific; and
growth and demand from fast growing economies led by China and India.

Greenheart Business

The Greenheart Group intends to capitalise on the supply and demand imbalance by securing further high quality concessions and operating with the objective of Sustainable Forestry Management. As at the Latest Practicable Date, the Greenheart Group has a total of 177,965 hectares of forest concessions and cutting rights in Suriname.

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The Greenheart Group aims to increase annual harvesting output by stages over the next few years to a range between 200,000 m[3] – 250,000 m[3 ] per annum, which in the opinion of the directors of Greenheart, is within the sustainable AAC (Annual Allowable Cut) under the CELOS system. The CELOS system is a sustainable forestry management system practised by the Suriname Government and allows a maximum harvest quantities up to 40 m[3] per hectare over a 20 year growth cycle, or 2 m[3] per hectare/per year (i.e 40 m[3] /20 years). Greenheart’s planned maximum harvest level of 250,000 m[3] per year over the total size of concessions and cutting rights of 177,965 hectares equals only 1.4 m[3] per hectare/per year.

The Greenheart Group is planning to process all logs harvested into lumber for sale. Processing logs into lumber adds higher economic value, simplifies the distribution logistics, lower transportation costs and gives more marketing flexibility. The Greenheart Group is planning to build two sawmills, each with an annual output capacity of 50,000 m[3] of lumber which will be capable of processing 200,000 m[3] to 250,000 m[3] of logs per annum. Based on current estimates, these two sawmills are expected to be fully operational by the end of 2008. Prior to the completion of the planned sawmills, the Greenheart Group sells harvested logs principally to the industry buyers in China. When the sawmills are fully functional, the Greenheart Group intends to sell lumber not just to China, but to other parts of Asia Pacific, such as Japan and South Korea, Europe and the U.S.A.

The Company intends to maintain the employment of the existing management of Greenheart Group which includes professional forestry managers after Completion, and through sharing the expertise and experience of the existing management of Greenheart Group, provide training in respect of this new business to the Group’s existing employees.

REASONS FOR THE ACQUISITION

The Group is currently principally engaged in manufacture and sale of electronic components and products, property holding and investment holding. The Company is indirectly holding 0.39% of the issued share capital of Greenheart as investment at present and should the Acquisition materialize, the Group will expand into the business of log harvesting, lumber processing, marketing and sales of logs and lumber products. While the Acquisition would involve diversification of the Group’s business into new areas, the Company intends to continue the existing business of the Group after Completion. As such, the Acquisition would not result in a change of business of the Group. It is not a term of the Agreement, nor is it the intention of the Company, that there will be any change in the Board or management of the Company following the Acquisition.

The Directors consider that the diversification of business into new areas of high-growth potential which also promotes environmental protection and social sustainability will be in the interest of the Company and the Shareholders as a whole. The Directors also believe that the business prospects and growth potential of the timber market, which will be driven by strong demand from countries such as China, and diminishing supply due to deforestation in the past and stricter environmental constraints and requirements now practised by an increasing number of countries in the world, will offer a very good business opportunity to the Company. Taking into account the above, the Directors consider that the Acquisition will be instrumental for the Group to tap the increasing market demand of timber and timber products and achieve full economic promises of natural forestry resources.

The Directors (including the independent non-executive Directors) are of the view that the terms of the Agreement are on normal commercial terms and are fair and reasonable to the Company and in the interests of the Company and the Shareholders as a whole.

LETTER FROM THE BOARD

MANAGEMENT DISCUSSION AND ANALYSIS ON THE GREENHEART GROUP

On 3 March 2005, Octagon, a member of the Greenheart Group, acquired a 100% equity interests in Epro N.V., a company incorporated in Suriname with limited liability, which owns the Concession, and the exclusive cutting rights of the Nickerie Concessions. In November 2005, the Greenheart Group commenced harvesting operations and has harvested approximately 37,600 m[3] of hardwood logs up to 31 July 2007. The Greenheart Group aims to increase annual harvesting output by stages over the next few years to a range between 200,000 m[3] -250,000 m[3] per annum, which, in the opinion of the directors of Greenheart, is within the sustainable AAC (Annual Allowable Cut) under the CELOS system. The CELOS system is a sustainable forestry management system practised by the Suriname Government.

The Greenheart Group’s business plan is to process all logs harvested into lumber for sale. Processing logs into lumber adds higher economic value, simplifies the distribution logistics, lowers transportation costs and gives more marketing flexibility. The Greenheart Group is planning to build two sawmills, each with an annual output capacity of 50,000 m[3] of lumber which will be capable of processing 200,000m[3] to 250,000 m[3] of logs per annum. These two sawmills are expected to be fully operational by the end of 2008. Prior to the completion of the planned sawmills, the Greenheart Group sells harvested logs principally to China. When the sawmills are fully functional, the Greenheart Group intends to sell sawn timber not just to China, but to other parts of Asia Pacific, such as Japan and South Korea, Europe and the U.S.A.

Set out in Appendix II to this circular is the accountant’s report of the Greenheart Group for the three financial years ended 31 December 2004, 2005, 2006 and seven months ended 31 July 2007 (the “Reporting Periods”). Below is the management discussion and analysis on the performance of the Greenheart Group for each of the aforesaid financial years/periods:

(i) For the year ended 31 December 2004

During the year under review, Greenheart Group recorded no turnover and a net loss of approximately US$582,000. The net loss is mainly due to the travelling expenses, staff wages, onsite visits and forest surveying expenses, office expenses and overhead incurred for the seeking of good quality forest concessions in Suriname and sourcing logging and transportation equipment overseas. The working capital of the Greenheart Group was mainly financed by its director and a company which then became a shareholder of Greenheart in 2006. As at 31 December 2004, the Greenheart Group had total loan payables of US$2,435,000 and the gearing ratio, which was calculated on the basis of total loan payables to total assets, was 1.3. All these loan payables were denominated in United States Dollars, unsecured with interest charged at fixed rates. Except for US$38,000 and US$64,000 which were fully repaid in 2005 and 2006, respectively, all these loan payables were subsequently capitalized as share capital of Greenheart Group in 2005 and 2006.

(ii) For the year ended 31 December 2005

During the year under review, Greenheart Group recorded no turnover and a net loss of approximately US$2,825,000. The Greenheart Group commenced its log harvesting in November 2005 and approximately 1,100 m[3] was harvested in these two months. The net loss is mainly due to staff wages, camp overhead, forest inventory surveying expenses, road building expenditure,

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traveling expenses, office expenses and overhead incurred for the preparation of commercial scale log harvesting operation for the forthcoming years, a loss on disposal of fixed assets of approximately US$242,000 and finance expenses of US$205,000, of which US$151,000 was interests charged by a director who continued to provide a loan facility to the Greenheart Group to support its daily operation’s financial needs. On 3 March 2005, the Greenheart Group acquired (i) 100% equity interests in Epro N.V., a company incorporated in Suriname with limited liability, which owns the Concession and (ii) the exclusive cutting rights of the Nickerie Concessions at a total cash consideration of US$1,100,000, payable by 8 installments. During the period under review, the Greenheart Group also acquired a total of US$1,354,000 fixed assets which were mainly motor vehicles, river craft, equipment and machinery used for log harvesting, delivery and related activities. As at 31 December 2005, the Greenheart Group had total loan payables of US$5,713,000 and the gearing ratio was 1.73. All these loan payables were denominated in United States Dollars, unsecured and with interests charged at fixed rates and were capitalized as share capital of Greenheart in 2006.

(iii) For the year ended 31 December 2006

During the year under review, Greenheart Group recorded a turnover of approximately US$1,091,000 and a net loss of US$4,345,000. This year signified the Greenheart Group’s first full year operation of its log harvesting business. As it was still in initial stage, only approximately 27,000 m[3] log was harvested during this year and therefore a net loss was recorded.

The Greenheart Group also commenced its sales of logs business during this year and all of them were sold to China. Though it was still at a testing stage, the market seemed to be very receptive to the Greenheart Group’s products and the average FOB selling prices of the logs reached US$175 per m[3] . Given the continuing diminishing supply of good quality hardwood logs from traditional hardwood log exporting countries, the directors of Greenheart believe that with more extensive and direct marketing and promotion efforts, the selling price of the Greenheart Group’s logs will remain strong in the forthcoming years.

On 22 June 2006, the Greenheart Group secured the right to lease together with an option to purchase the timber operations carried on by Dynasty Forestry Industry N.V. (“ Dynasty ”) a local Suriname company, located at Apura, Suriname, which include a sawmill plant on a 20 hectare of land and cutting rights of the Dynasty Concessions. The directors of Greenheart, subject to certain terms and conditions to be satisfactorily fulfilled, intend to acquire the entire issued share capital of Dynasty. The directors of Greenheart believe that the location of this sawmill and the Dynasty Concessions could be an excellent location for incremental expansion for the Greenheart Group’s log and sawn timber production. During the year under review, the Greenheart Group also acquired a total of USD837,000 fixed assets which mainly were logging equipment and river craft.

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From the financial resource perspective, during the year under review, a total of US$6,704,000 loans from directors and various parties were capitalized as share capital of Greenheart and an additional US$3,423,000 was injected by the shareholders in the form of share capital to finance the Greenheart Group’s working capital and acquisition of logging and transportation equipment. As at 31 December 2006, the Greenheart Group had a total loan payables of US$1,114,000 and the gearing ratio is 0.25. All these loan payables were denominated in United States Dollars, unsecured and with interest charged at fixed rates. Except for US$400,000 which was capitalized as share capital of Greenheart in 2007, all these loan payables were fully repaid in the seven months ended 31 July 2007.

(iv) For the seven months ended 31 July 2007

During the period under review, Greenheart Group recorded a turnover of approximately US$1,662,000 which increased by 295.7% or US$1,242,000 from US$420,000 for the seven months ended 31 July 2006 to US$ 1,662,000 for the seven months ended 31 July 2007. Such increase was primarily the result of the increase in the volume of logs sales during this period.

The net loss of the Greenheart Group amounted to US$1,553,000 for the seven months ended 31 July 2007, a decrease of US$403,000, or approximately 20.6%, from US$1,956,000 for the seven months ended 31 July 2006. As the first half year is normally affected by rainy season in Suriname, the amount of logs which can be extracted will be reduced. In addition, various measures, including mainly the reduction of redundant and non-performing expatriate logging and supporting staff, improvement of the log yard, enhancement of the working efficiency of the logging equipment and improvement of the base camp facilities etc., were taken by the Greenheart Group during the period under review to rationalize the operation of its logging activities. The directors of Greenheart believe that in the long run, such measures can substantially reduce its overall operating costs and improve both its productivity and profitability. Hence, even though the turnover increased substantially during the period under review, the net loss was not reduced proportionally as compared with the same period of last year.

In order to strengthen the Greenheart Group’s financial ability to further develop its business, the Greenheart Group has issued new shares at a total consideration of US$10,565,000 to its shareholders and other investors during the period under review. Such new funding will be used for its working capital, acquisition of logging and transportation equipment and the preparation of building two new sawmills. As at 31 July 2007, the Greenheart Group did not have any external debt financing.

LETTER FROM THE BOARD

Remuneration Policies and Employee Information

The following illustrated the number of full time employees hired by the Greenheart Group as at 31 December 2004, 2005, 2006 and 31 July 2007 and the total staff costs (including directors’ emoluments) during the Reporting Periods:

				As at
	As	at 31 December		31 July
	2004	2005	2006	2007
No. of full time employees	2	67	169	98
				For the
	For the year ended			seven months
		31 December		ended 31 July
	2004	2005	2006	2007
Staff costs (including directors’
emoluments)(US$’000)	197	510	1,363	780

All full time salaried employees are being paid on a monthly basis. Certain logging and sawmill workers are being remunerated based on basic wages plus production incentives.

In addition to salaries, the Greenheart Group provides staff benefits including medical insurance, contributions to staff’s provident fund based on the local statutory requirements.

Foreign Exchange Exposure

The Greenheart Group does not currently have any hedging activities against its foreign exchange exposure nor does it adopt any formal hedging policies. During the Reporting Periods, all of the Greenheart Group’s sales and purchases were settled in United States Dollars while its daily operating expenses and overheads were settled in United States Dollars, Hong Kong Dollars and Suriname Dollars. The directors of Greenheart consider the Greenheart Group’s risk exposure on foreign exchange as minimal.

Contingent Liabilities

As at 31 December 2004, 2005 and 2006 and 31 July 2007, the Greenheart Group did not have any material contingent liabilities.

LETTER FROM THE BOARD

BUSINESS REVIEW AND PROSPECTS OF THE ENLARGED GROUP

The principal activity of the Company is investment holding. The principal activities of its subsidiaries consist of manufacture and sale of electronic components and products, general trading, property holding and investment holding.

As mentioned in the Company’s annual report for the year ended 31 December 2006, the Directors have been actively reviewing all the Group’s business and investment activities, long term strategies, and the implications of funding, management and other resources required to achieve better returns and value for the Shareholders.

During this process, the Directors are particularly enthusiastic about the wood and wood related product market in China and globally. A number of factors have driven the significant increase in demand for wood fiber in China, including the rapid economic growth supported high activity and demand in wood end use industries, population growth and urbanization, expanding wood processing capacity, construction demand and industry growth, interior decorating demand and industry growth. In fact, other than the domestic demand, China is also increasingly becoming an important player in the traded component of global wood products markets. For example, in 2005, China has overtaken Italy and became the number one exporter of furniture in the world. There is no doubt that China will remain the main focus of global wood market in the future. The Directors also believe that the zero tariff on imported logs will further encourage log imports in China. Due to overlogging, and deforestation in the past, supply of tropical hardwood has been declining, and the Directors believe the trend of strong demand of tropical hardwood versus diminishing supply will continue.

The Greenheart Group has also signed up a master sale and purchase agreement with SFRI, being a subsidiary of a Guarantor (namely Sino-Forest Corporation), whereby SFRI has agreed to purchase logs from the Greenheart Group with a total sales revenue of approximately US$ 6 million. Sino-Forest Corporation, through its wholly-owned subsidiary, Sino-Capital Global Inc., will be interested in 7,860,000 Consideration Shares (representing approximately 3.23% of the enlarged issued share capital of the Company upon Completion and issue of the Consideration Shares but assuming that the conversion rights attaching to the Convertible Bonds are not exercised) and the Convertible Bonds in the principal amount of HK$31,047,000 upon Completion. The Directors are confident that upon completion of the Acquisition, the turnover of the Enlarged Group will significantly increase in the forthcoming years.

In order to further expand the markets and increase the profitability, the Greenheart Group is now actively planning to build two sawmills with annual production capacity of approximately 50,000 m[3] of lumber each in Suriname. The Directors believe that once these sawmills become fully operational, the Greenheart Group can further enlarge its customer base to countries in Europe, North America and other Asian markets, such as Japan etc.

Both the Directors and the directors of Greenheart also intend to differentiate the Greenheart Group from traditional forestry companies through the active development of non-timber forest products and ecosystem services such as greenhouse gas emission reduction, carbon credits and waste wood utilization.

In view of the above, the Directors believe that the Acquisition will diversify and strengthen the earning base of the Group.

LETTER FROM THE BOARD

FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS

The following fund raising activity has been carried out by the Company in the past twelve months preceding the Latest Practicable Date.

Date of			Indended use	Actual use
announcement	Event	Net proceeds	of proceeds	of proceeds
13 June 2007	Placing of new	HK$26.2 million	As general working	Not yet utilized
	Shares under		capital of the Group	(currently retained as
	general mandate			bank deposits)

EFFECTS ON SHAREHOLDING STRUCTURE

The following tables set out (i) the existing shareholding structure of the Company and the changes thereto as a result of the allotment and issue of the Consideration Shares and the Conversion Shares upon full conversion of the Convertible Bonds but before taking into account the Control Restriction; and (ii) the existing shareholding structure of the Company and the changes thereto as a result of the allotment and issue of the Consideration Shares and the Conversion Shares assuming the Convertible Bonds are exercised by the Vendors to the extent permitted under the Control Restriction.

(i) Table 1 showing the existing shareholding structure of the Company and the changes thereto as a result of the allotment and issue of the Consideration Shares and the Conversion Shares upon full conversion of the Convertible Bonds but before taking into account the Control Restriction

Hui Tung Wah, Samuel, an executive Director The Vendors_(Note 1) Mother of Tse Nga Ying, a Vendor(Note 3)_ Other public Shareholders Total	As at the Latest Practicable Date Shares % 355,000 0.193 – – 40,000 0.022 183,244,152 99.785 183,639,152 100	Immediately after completion of the Acquisition and issue of Consideration Shares but assuming no Convertible Bonds are exercised and no other Shares will be issued Shares % 355,000 0.146 60,000,000 24.627 40,000 0.016 183,244,152 75.211 243,639,152 100	Immediately after completion of the Acquisition and issue of Consideration Shares and assuming the Convertible Bonds are exercised in full into Conversion Shares but no other Shares will be issued Shares % 355,000 0.098 178,500,000 49.290 40,000 0.011 183,244,152 50.601 362,139,152 100	Immediately after completion of the Acquisition and issue of Consideration Shares and assuming the Convertible Bonds are exercised in full into Conversion Shares but no other Shares will be issued Shares % 355,000 0.098 178,500,000 49.290 40,000 0.011 183,244,152 50.601 362,139,152 100
				100

LETTER FROM THE BOARD

(ii) Table 2 showing the existing shareholding structure of the Company and the changes thereto as a result of the allotment and issue of the Consideration Shares and the Conversion Shares assuming the Convertible Bonds are exercised by the Vendors to the extent permitted under the Control Restriction

Hui Tung Wah, Samuel, an executive Director The Vendors_(Notes 1 and 2) Mother of Tse Nga Ying, a Vendor(Note 3)_ Other public Shareholders Total	As at the Latest Practicable Date Shares % 355,000 0.193 – – 40,000 0.022 183,244,152 99.785 183,639,152 100	Immediately after completion of the Acquisition and issue of Consideration Shares but assuming no Convertible Bonds are exercised Shares % 355,000 0.146 60,000,000 24.627 40,000 0.016 183,244,152 75.211 243,639,152 100	Immediately after completion of the Acquisition and issue of Consideration Shares and assuming the Convertible Bonds are exercised by the Vendors to the extent permitted under the Control Restriction Shares % 355,000 0.136 78,645,350 29.984 40,000 0.015 183,244,152 69.865 262,284,502 100	Immediately after completion of the Acquisition and issue of Consideration Shares and assuming the Convertible Bonds are exercised by the Vendors to the extent permitted under the Control Restriction Shares % 355,000 0.136 78,645,350 29.984 40,000 0.015 183,244,152 69.865 262,284,502 100
				100

Notes:

The number of Shares of the Vendors in the Company indicated in Table 1 is arrived at on the assumption that the Convertible Bonds are fully converted without taking into account the Control Restriction. However, pursuant to the terms of the Convertible Bonds, the conversion rights under the Convertible Bonds shall only be exercisable to the extent, inter alia, that (i) it is permitted under the Control Restriction and (ii) the allotment and issue of the Conversion Shares to such Bondholder will not cause the Company to be in breach of the minimum public float requirement under Rule 8.08 of the Listing Rules. The effect of the Control Restriction on the shareholding structure of the Company is shown in Table 2.
To facilitate the administration of the Control Restriction, the Company will be entitled to presume the Vendors to be parties acting in concert unless and until a ruling or confirmation from the Securities and Futures Commission of Hong Kong to the contrary (if any) is obtained by the Vendors.
The mother of Tse Nga Ying is presumed to be acting in concert with Tse Nga Ying under the Takeovers Code.

As at the Latest Practicable Date, the Company has an authorized share capital of 15,000,000,000 Shares, out of which 183,639,152 Shares are issued and are fully paid up.

As at the Latest Practicable Date, there are outstanding share options granted under the share option scheme of the Company entitling the holders to subscribe for 9,684,000 Shares.

LETTER FROM THE BOARD

In view of the percentage of the Consideration Shares in the share capital of the Company as enlarged by the issue of the Consideration Shares and the terms of the Convertible Bonds that each holder of the Convertible Bonds will only have the right to convert to the extent permitted under the Control Restriction, it is expected that the Acquisition will not result in a change in control of the Company.

FINANCIAL EFFECTS OF THE ACQUISITION ON THE GROUP

Subject to Completion, the Company will indirectly hold 60.39% of the then issued share capital of Greenheart after the Capital Reorganisation. Accordingly, Greenheart will become a non-wholly owned subsidiary of the Company and the post-Acquisition financial results of the Greenheart Group will be consolidated to the results of the Group.

Net assets value

As at 30 June 2007, the unaudited consolidated net asset value of the Group amounted to approximately HK$165,134,000. Based on the unaudited pro forma statement of adjusted combined net asset value of the Enlarged Group as set out in Appendix III to this circular, the unaudited pro forma adjusted combined net asset value of the Enlarged Group will increase by approximately 79.8% to approximately HK$296,935,000. The increase in the net asset value is primarily due to the net effect of the payment of HK$18,000,000 to the Vendors, the elimination of 0.39% interest in the Greenheart Group originally held by the Group of HK$4,156,000, the increase of attributable net assets value of HK$53,174,000 of Greenheart Group, goodwill of HK$321,826,000 and the liability component of HK$237,000,000 Convertible Bonds to be issued immediately after Completion.

Earnings

Upon Completion, the financial results of the Enlarged Group shall include 60.39% of the net earnings/loss of the Greenheart Group. In addition, the Enlarged Group will record a goodwill of an amount equivalent to the amount of premium paid by the Purchaser over the net asset value of the Greenheart Group attributable to the Enlarged Group. In accordance with the Group’s current accounting policies, such goodwill will be tested annually for impairment.

LETTER FROM THE BOARD

LISTING RULES IMPLICATIONS

The Acquisition constitutes a major transaction of the Company under the Listing Rules. The Acquisition and the issue of the Consideration Shares, the Convertible Bonds and the Conversion Shares on the exercise of the conversion rights attached to the Convertible Bonds which will be included in the resolution in respect of the Acquisition are subject to the Shareholders’ approval at the SGM. The Company will, in compliance with the Listing Rules, convene the SGM to seek the approval of the Shareholders on the Acquisition and the issue of the Consideration Shares, the Convertible Bonds and the Conversion Shares on the exercise of the conversion rights attached to the Convertible Bonds. An application will be made to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Consideration Shares and the Conversion Shares. To the best of the knowledge, information and belief of the Directors having made all reasonable enquiries, the Vendors, (in respect of those corporate Vendors other than Sino-Capital Global Inc.) their respective ultimate beneficial owners, SinoForest Corporation (being the holding company of Sino-Capital Global Inc.) and the other Guarantors are third parties independent of and not connected with the Company and its connected persons.

To the best knowledge and belief of the Company having made all reasonable enquiries, none of the Vendors and (in respect of the corporate Vendors other than Sino-Capital Global Inc.) their ultimate owners and Sino Forest Corporation (being the holding company of Sino-Capital Global Inc.) holds any Shares as at the Latest Practicable Date. Accordingly, no Shareholder would be required to abstain from voting for the approval of the Agreement and the transactions contemplated thereunder.

INFORMATION OF THE GROUP AND THE VENDORS

The Group is currently principally engaged in manufacture and sale of electronic components and products, property holding and investment holding.

Sino-Capital Global Inc. is an indirect wholly owned subsidiary of Sino-Forest Corporation, a company listed in the Toronto Stock Exchange. Sino-Forest Corporation is one of the leading, foreignowned commercial forestry operators in China. As at 30 June 2007, Sino-Forest Corporation has approximately 356,000 hectares of forestry plantation located in China.

Greenheart Foundation Limited is a company set up for the promotion of social benefits to the local community in Suriname.

Forest Operation Limited is a company incorporated in the British Virgin Islands and wholly owned by Mr. Simon Murray.

Other than Sino-Capital Global Inc. and Greenheart Foundation Limited, all corporate Vendors are special purpose vehicles set up for the investment in Greenheart.

LETTER FROM THE BOARD

SGM

The SGM will be held at Concord Rooms 2 and 3, 8th Floor, Renaissance Harbour View Hotel, No.1 Harbour Road, Wanchai, Hong Kong on Monday, 22 October 2007 at 3:00 p.m., to consider and, if thought fit, approve, among other matters, the Acquisition and the transactions contemplated thereunder.

A notice convening the SGM to be held at Concord Rooms 2 and 3, 8th Floor, Renaissance Harbour View Hotel, No.1 Harbour Road, Wanchai, Hong Kong on Monday, 22 October 2007 at 3:00 p.m. is set out on pages 163 to 164 of this circular. Whether or not you intend to attend and vote at the SGM in person, please complete the enclosed form of proxy in accordance with the instructions printed thereon and return it to the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as practicable but in any event not later than 48 hours before the time appointed for holding the SGM. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof should you so wish.

PROCEDURES TO DEMAND A POLL AT GENERAL MEETING

A poll may be demanded by:

(a) the chairman of the meeting;
(b) at least three members present in person or by proxy or representative for the time being entitled to vote at the meeting;
(c) any member or members present in person or by proxy or representative and representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting;
(d) a member or members present in person or by proxy or representative and holding Shares 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 the Shares conferring that right; or
(e) if required by the Listing Rules, by the chairman of the meeting or any Director or Directors who, individually or collectively, hold proxies in respect of Shares representing 5% or more of the total voting rights at the meeting.

LETTER FROM THE BOARD

RECOMMENDATIONS

The Directors consider that the terms of the Agreement, the Convertible Bonds and the Option are fair and reasonable and the Acquisition is in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of the resolution(s) to be proposed at the SGM to approve the Acquisition and the transactions contemplated thereunder.

ADDITIONAL INFORMATION

Your attention is drawn to certain financial information relating to the Group and the Greenheart Group and other information set out in the appendices to this circular.

By order of the Board Omnicorp Limited Sung Yan Wai Petrus Executive Director

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. THREE-YEAR FINANCIAL SUMMARY

Set out below is a summary of the audited consolidated results of the Group for each of the three financial years ended 31 December 2004, 2005 and 2006 extracted from the 2004, 2005 and 2006 annual reports of the Group. The Company’s auditors Moore Stephens have not issued any qualified or modified opinion on the Group’s financial statements for the three years ended 31 December 2004, 2005 and 2006.

Consolidated Income Statement

For the years ended 31 December 2004, 2005 and 2006

2006 HK$’000 CONTINUING OPERATIONS Turnover 198,413 Cost of sales (176,243) Gross profit 22,170 Other revenue 6,311 Distribution costs (603) Administrative expenses (28,726) Other operating expenses (29,478) (LOSS)/PROFIT FROM OPERATING ACTIVITIES (30,326) Finance costs (8,705) Share of results of associates (30) (LOSS)/PROFIT BEFORE TAXATION (39,061) Taxation (288) (Loss)/profit for the year from continuing operations (39,349) DISCONTINUED OPERATIONS (Loss)/profit for the year from discontinued operations 24,965 (LOSS)/PROFIT FOR THE YEAR (14,384)	2005 HK$’000 (restated) Note 166,750 (147,071) 19,679 4,325 (905) (25,303) (22,790) (24,994) (6,058) (391) (31,443) (272) (31,715) 25,307 (6,408)	2004 HK$’000 (restated) Note 136,043 (115,046) 20,997 31,846 (808) (27,886) (12,502) 11,647 (4,072) 1,862 9,437 (237) 9,200 (557) 8,643

Note: Figures have been restated to reflect the retrospective adjustments as required by HKFRS 5 “Non-current Assets Held for Sale and Discontinued Operations” issued by the HKICPA to reclassify and re-present prior year amounts in the income statements relating to the discontinued operations.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2006 HK$’000 ATTRIBUTABLE TO: Equity holders of the Company (30,656) Minority interests 16,272 (14,384) DIVIDEND 30,088 (LOSS)/PROFIT PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY Basic – Continuing operations (0.28) dollars – Discontinued operations 0.08 dollars (0.20) dollars Diluted – Continuing operations N/A – Discontinued operations N/A	2005 HK$’000 (restated) (19,791) 13,383 (6,408) – (0.23) dollars 0.09 dollars (0.14) dollars N/A N/A	2004 HK$’000 (restated) 7,175 1,468
		8,643

		–

		0.10 dollars (0.01) dollars
		0.09 dollars

		N/A N/A

Note: There were neither extraordinary nor exceptional items for each of the three financial years ended 31 December 2004, 2005 and 2006.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Balance Sheet

31 December 2004, 2005 and 2006

NON-CURRENT ASSETS Properties, plant and equipment Investment property Long term investments Interests in associates Goodwill CURRENT ASSETS Inventories Trade and other receivables Prepayments and deposits Current tax recoverable Listed investments Cash and bank balances CURRENT LIABILITIES Due to related parties Trade and other payables Interest bearing bank borrowings Other loan payable Deposits received Current tax payable NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Interest bearing bank borrowings Deferred tax liabilities	2006 HK$’000 12,312 9,070 10,000 59,717 – 91,099 54,872 61,987 1,324 – 15,247 35,569 168,999 – 27,721 53,880 – 1,888 270 83,759 85,240 176,339 1,385 17 1,402 174,937	2005 HK$’000 30,995 10,430 23,700 50,689 21,767 137,581 89,964 145,421 2,214 3,362 19,568 67,990 328,519 26 65,433 67,152 30,000 22,929 1,951 187,491 141,028 278,609 3,124 17 3,141 275,468	2004 HK$’000 32,077 12,000 23,700 64,828 21,767
			154,372
			76,446 99,011 6,208 1,214 24,265 55,446
			262,590
			4,130 74,498 50,032 15,000 10,709 2,040
			156,409
			106,181
			260,553 3,834 44
			3,878
			256,675

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

EQUITY ATTRIBUTABLE TO COMPANY’S SHAREHOLDERS Share capital Reserves MINORITY INTERESTS	2006 HK$’000 1,504 137,383 138,887 36,050 174,937	2005 HK$’000 1,504 199,880 201,384 74,084 275,468	2004 HK$’000 913 192,452
			193,365 63,310
			256,675

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. AUDITED FINANCIAL INFORMATION OF THE GROUP

Set out below the audited financial statements of the Group for the year ended 31 December 2006 is a reproduction of page 33 to 88 of the 2006 annual report of the Company. References to page number are the page number of such annual report of the Company.

Consolidated Income Statement

For the year ended 31 December 2006

Note CONTINUING OPERATIONS Turnover 3 Cost of sales Gross profit Other revenue Distribution costs Administrative expenses Other operating expenses LOSS FROM OPERATING ACTIVITIES 6 Finance costs 7 Share of results of associates LOSS BEFORE TAXATION Taxation 9 Loss for the year from continuing operations DISCONTINUED OPERATIONS Profit for the year from discontinued operations 10 LOSS FOR THE YEAR	2006 HK$’000 198,413 (176,243) 22,170 6,311 (603) (28,726) (29,478) (30,326) (8,705) (30) (39,061) (288) (39,349) 24,965 (14,384)	2005 HK$’000 (restated) 166,750 (147,071) 19,679 4,325 (905) (25,303) (22,790) (24,994) (6,058) (391) (31,443) (272) (31,715) 25,307 (6,408)

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Note ATTRIBUTABLE TO: Equity holders of the Company 11, 30 Minority interests DIVIDEND 12 LOSS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY 13 Basic – Continuing operations – Discontinued operations Diluted – Continuing operations – Discontinued operations	2006 HK$’000 (30,656) 16,272 (14,384) 30,088 (0.28) dollars 0.08 dollars (0.20) dollars N/A N/A	2005 HK$’000 (restated) (19,791) 13,383 (6,408) – (0.23) dollars 0.09 dollars (0.14) dollars N/A N/A

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Balance Sheet

31 December 2006

Note NON-CURRENT ASSETS Properties, plant and equipment 14 Investment property 15 Long term investments 16 Interests in associates 18 Goodwill 19 CURRENT ASSETS Inventories 20 Trade and other receivables 21 Prepayments and deposits Current tax recoverable Listed investments 22 Cash and bank balances 23 CURRENT LIABILITIES Due to related parties 24 Trade and other payables 25 Interest bearing bank borrowings 26 Other loan payable 27 Deposits received Current tax payable NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Interest bearing bank borrowings 26 Deferred tax liabilities 28	2006 HK$’000 12,312 9,070 10,000 59,717 – 91,099 54,872 61,987 1,324 – 15,247 35,569 168,999 – 27,721 53,880 – 1,888 270 83,759 85,240 176,339 1,385 17 1,402 174,937	2005 HK$’000 30,995 10,430 23,700 50,689 21,767
		137,581
		89,964 145,421 2,214 3,362 19,568 67,990
		328,519
		26 65,433 67,152 30,000 22,929 1,951
		187,491
		141,028
		278,609 3,124 17
		3,141
		275,468

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Note EQUITY ATTRIBUTABLE TO COMPANY’S SHAREHOLDERS Share capital 29 Reserves 30 MINORITY INTERESTS	2006 HK$’000 1,504 137,383 138,887 36,050 174,937	2005 HK$’000 1,504 199,880

		201,384 74,084
		275,468

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Changes in Equity

For the year ended 31 December 2006

	Attributable to equity holders of the Company	Attributable to equity holders of the Company	Attributable to equity holders of the Company	Total Equity HK$’000 256,675 (6,408) 1,176 –
Share Capital HK$’000 913 – – – – – – 591 – – – – 1,504 – – – – – – – 1,504	Share Contributed Premium Surplus HK$’000 HK$’000 90,219 83,274 – – – – – – – – – – – – 27,104 – (1,093) – – – – – – – 116,230 83,274 – – – – – – – – – – – – – – 116,230 83,274	Exchange Enterprises Fluctuation Development Reserve Fund HK$’000 HK$’000 10,269 – – – 428 – – 15 428 15 – – – (101) – – – – – – – – – – 10,697 (86) – – 507 – 507 – – – (1,972) 86 – – – – 9,232 –	Retained Employee Profits/ Reserve Compensation (Accumulated Fund Reserve Losses) HK$’000 HK$’000 HK$’000 – – 8,690 – – (19,791) – – – 16 – (31) 16 – (19,822) – 1,015 – (134) – – – – – – – – – – – – – – – – – (118) 1,015 (11,132) – – (30,656) – – – – – (30,656) 118 – – – – – – (492) – – – (30,088) – 523 (71,876)
				(5,232) 1,015 (235) 27,695 (1,093) 637 (2,357) (1,637)
				275,468 (14,384) 787
				(13,597) 118 (56,472) (492) (30,088)
				174,937

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Cash Flow Statement

For the year ended 31 December 2006

Note NET CASH USED IN OPERATIONS 31(a) Taxes paid outside Hong Kong Interest paid NET CASH USED IN OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Interest received Purchases of listed investments Purchases of properties, plant and equipment Loan to associate Repayment of loan from an associate Dividends paid to minority shareholders Proceeds from disposals of: Properties, plant and equipment Listed investments Subsidiaries 31(b) Increase in pledged time deposits and guarantee funds Net cash generated from/(used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Dividend paid Proceeds from issue of new shares Proceeds from subscriptions of share by minority shareholders Share issue expenses (Repayment of)/proceeds from other loan (Repayment of)/proceeds from interest bearing bank borrowings Net cash (used in)/generated from financing activities (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year Effect of exchange rate changes Cash and cash equivalents at end of year ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances 23 Pledged time deposits and guarantee funds Bank overdrafts 26	2006 HK$’000 (10,319) (1,001) (9,368) (20,688) 1,296 – (2,008) (9,000) – – 66 3,892 58,713 (194) 52,765 (30,088) – – – (30,000) (4,108) (64,196) (32,119) 38,314 778 6,973 35,569 (22,479) (6,117) 6,973	2005 HK$’000 (27,594) (3,194) (7,538) (38,326) 1,082 (3,523) (10,039) – 3,821 (2,357) 3,168 – – (5,997) (13,845) – 27,695 637 (1,093) 15,000 15,634 57,873 5,702 32,325 287 38,314 67,990 (22,285) (7,391) 38,314

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Balance Sheet

31 December 2006

Note NON-CURRENT ASSETS Interests in subsidiaries 17 CURRENT ASSETS Prepayments and deposits Cash and bank balances CURRENT LIABILITIES Trade and other payables NET CURRENT ASSETS / (LIABILITIES) TOTAL ASSETS LESS CURRENT LIABILITIES CAPITAL AND RESERVES Share capital 29 Reserves 30	2006 HK$’000 126,147 218 5,568 5,786 375 5,411 131,558 1,504 130,054 131,558	2005 HK$’000 220,095 218 18 236 300 (64) 220,031 1,504 218,527 220,031

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes to the Financial Statements

31 December 2006

1. CORPORATE INFORMATION

During the Year, the Group was engaged in the following activities:

Manufacture and sale of electronic components and products
Manufacture and sale of contact and contactless smart card readers and related products
Design, manufacture, sale and marketing home furniture
Trading of building materials and sundry products
Property holding
Investment holding

2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES

(a) Statement of compliance

These financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (“HKFRSs”) (which also include Hong Kong Accounting Standards (“HKASs”) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and the disclosure requirements of the Hong Kong Companies Ordinance. These financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

(b) Basis of preparation of financial statements

The measurement basis used in the preparation of the financial statements is the historical cost basis except for investment property which is stated at its fair value as explained in note 2(j).

The principal accounting policies and methods of computation used in the preparation of the financial statements for the year ended 31 December 2006 are consistent with those adopted in the financial statements for the year ended 31 December 2005, except for the adoption of the new and revised HKFRSs as explained in note 2(d) below.

(c) Judgments and estimates

The preparation of financial statements in conformity with HKFRSs requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. 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.

The Directors have considered the development, selection and disclosure of the Group’s critical accounting policies and estimates. There are no critical accounting judgments in applying the Group’s accounting policies.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(d) Adoption of new and revised Hong Kong Financial Reporting Standards

During the current year, the Group has adopted the new and revised HKFRSs which are effective for accounting periods commencing on or after 1 December 2005 or 1 January 2006. The new and revised HKFRSs which are relevant to the Group’s operations are as follows:

Effective for accounting period beginning on or after

HKAS 21 (Amendment)	The Effects of Changes in Foreign Exchange Rate	1 January 2006
HKAS 39 (Amendment)	Financial Instruments: Recognition and	1 January 2006
	Measurement
HKFRS 1 (Amendment)	First-time Adoption of Hong Kong Financial	1 January 2006
	Reporting Standards
HKFRS-Int 4	Determining whether an Arrangement contains	1 January 2006
	a Lease
HKFRS-Int 5	Rights to Interests arising from Decommissioning,	1 January 2006
	Restoration and Environmental Rehabilitation
	Funds
HK(IFRIC)-Int 6	Liabilities arising from Participating in a Specific	1 December 2005
	Market – Waste Electrical and Electronic
	Equipment

The adoption of the above new HKFRSs has had no material effect on how the results of operations and financial position of the Group are prepared and presented.

(e) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to 31 December 2006. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the Group.

A subsidiary, in accordance with the Hong Kong Companies Ordinance, is a company in which the Group, directly or indirectly, holds more than half of the issued share capital or controls more than half the voting power or controls the composition of the board of directors. Subsidiaries are considered to be controlled if the Company has the power, directly or indirectly, to govern the financial and operating policies, so as to obtain benefits from their activities.

The results of subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. All significant intercompany transactions and balances within the Group are eliminated on consolidation.

The acquisition of subsidiaries during the year has been accounted for using the purchase method of accounting. This method involves allocating the cost of the business combinations to fair values of the assets acquired, and liabilities and contingent liabilities assumed at the date of acquisition. The cost of the acquisition is measured at the aggregate of the fair values of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Minority interests at the balance sheet date, being the portion of the net assets of subsidiaries attributable to equity interests that are not owned by the Company, whether directly or indirectly through subsidiaries, are presented in the consolidated balance sheet and statement of changes in equity within equity, separately from equity attributable to the equity shareholders of the Company. Minority interests in the results of the Group are presented on the face of the consolidated income statement as an allocation of the total profit or loss for the year between minority interests and the equity shareholders of the Company.

Where losses applicable to the minority exceed the minority’s interest in the equity of a subsidiary, the excess, and any further losses applicable to the minority, are charged against the Group’s interest except to the extent that the minority has a binding obligation to, and is able to, make additional investment to cover the losses. If the subsidiary subsequently reports profits, the Group’s interest is allocated all such profits until the minority’s share of losses previously absorbed by the Group has been recovered.

(f)

Goodwill on consolidation

Goodwill represents the excess of the cost of a business combination or an investment in an associate over the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities. Goodwill is stated at cost less accumulated impairment losses. Goodwill is allocated to cashgenerating units and is tested annually for impairment. In respect of associates, the carrying amount of goodwill is included in the carrying amount of the interests in the associates.

Any excess of the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of a business combination or an investment in an associate is recognised immediately in the income statement.

On disposal of a cash generating unit or an associate during the year, any attributable amount of purchased goodwill is included in the calculation of the profit or loss on disposal.

(g) Investments in subsidiaries

Investments in subsidiaries are stated in the Company’s balance sheet at cost less any identified impairment losses. Results of the subsidiaries are accounted for by the Company on the basis of dividends received and receivable.

(h) Investments in associates

An associate is an entity in which the Group or the Company has significant influence, but not control or joint control, over its management, including participation in the financial and operating policy decisions.

An investment in an associate is accounted for in the consolidated financial statements under the equity method and is initially recorded at cost and adjusted thereafter for the post acquisition change in the Group’s share of the associate’s net assets, unless it is classified as held for sale (or included in a disposal group that is classified as held for sale). The consolidated income statement includes the Group’s share of the post-acquisition, post-tax results of the associates for the year, including any impairment loss on goodwill relating to the investments in associates recognised for the year.

When the Group’s share of losses exceeds its interest in an associate, the Group’s interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. For this purpose, the Group’s interest in the associate is the carrying amount of the investment under the equity method together with the Group’s long-term interests that in substance form part of the Group’s net investment in the associate. Unrealised profits and losses resulting from transactions between the Group and its associates are eliminated to the extent of the Group’s interests in the associates, except where unrealised losses provide evidence of an impairment of the asset transferred, in which case they are recognised immediately in the income statement.

In the Company’s balance sheet, its investments in associates are stated at cost less impairment losses, unless it is classified as held for sale (or included in a disposal group that is classified as held for sale).

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(i) Property, plant and equipment and depreciation

Property, plant and equipment, other than investment properties, are stated at cost or valuation less accumulated depreciation and any impairment.

The cost of an item of property, plant and equipment (an “Item”) comprises its purchase price and any directly attributable costs of bringing the item to its working condition and location for its intended use. Expenditure incurred after the Item has been put into operation, such as repairs and maintenance, is normally charged to the income statement in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the Item, the expenditure is capitalised as an additional cost of the Item.

When, in the opinion of the Directors, the recoverable amounts of property, plant and equipment have declined below their carrying amounts, provisions are made to write down the carrying amounts of such assets to their recoverable amounts. Reductions of the carrying value are charged to the income statement, except to the extent that they reverse previous revaluation surpluses in respect of the same items, when they are charged to the revaluation reserve.

The gain or loss on disposal or retirement of an item recognised in the income statement is the difference between the sale proceeds and the carrying amount of the relevant Item. On disposal of a revalued Item, the relevant portion of the revaluation reserve realised in respect of the previous valuations is transferred to retained profits as a movement in reserves.

Depreciation is calculated on the straight-line basis to write off the cost or valuation of each item over its estimated useful life. The principal annual rates used for this purpose are as follows:

Buildings 2% – 5% Leasehold improvements 18% – 20% or over the lease terms whichever is shorter Plant and machinery 9% – 25% Furniture and equipment 12.5% – 30% Motor vehicles 18% – 33%

(j) Investment property

Investment property is land and/or buildings which is owned or held under a leasehold interest to earn rental income and/or for capital appreciation. These include land held for a currently undetermined future use.

Investment property is stated in the balance sheet at fair value. Any gain or loss arising from a change in fair value or from the retirement or disposal of an investment property is recognised in the income statement. Rental income from investment property is accounted for as described in note 2(r).

(k) Long term investments

Long term investments are investments in equity instruments with no reliable fair value measurement and are stated at cost less any impairment as determined by the Directors.

(l) Impairment of assets

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. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Recoverable amount is the greater of net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately, unless the relevant asset is land or buildings other than investment property carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) 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 (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

(m)

Inventories

Inventories are valued at the lower of cost, on the weighted average basis, and net realisable value after making due allowance for any obsolete or slow moving items. In the case of finished goods and work in progress, cost includes direct materials, direct labour, sub-contracting charges and, where applicable, production overheads. Net realisable value is determined by reference to estimated selling prices less all further costs to be incurred in selling and distribution.

When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

(n) Listed investments

Listed investments are investments in equity securities and are classified as financial assets measured at fair value through profit and loss. They are stated at their fair values on the basis of their quoted market prices at the balance sheet date, on an individual investments basis. The gains or losses arising from changes in the fair value of a security are credited or charged to the income statement in the period in which they arise.

(o) Trade and other receivables

Trade and other receivables are initially recognised at fair value and thereafter stated at cost less allowance for bad and doubtful debts, estimated by the Group management based on prior experience and the current economic environment.

(p) Trade and other payables

Trade and other payables are initially recognised at fair value and thereafter stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

(q) Provisions

Provisions are recognised for liabilities of uncertain timing or amount when the Group or the Company has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation, and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditures expected to settle the obligation.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(r) Revenue

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

sale of goods, when the significant risks and rewards of ownership have been transferred to the buyer, provided that the Group maintains neither managerial involvement associated with ownership, nor effective control over the goods sold;
proceeds on disposals of investments, including interests in subsidiaries, associates, investments in listed and unlisted shares and disposals of investment properties and properties, plant and equipment, when all conditions for disposal have been met and the risks and rewards of ownership have been transferred to the buyer;
rental income, on the straight-line basis over the lease terms;
interest, on a time proportion basis taking into account the principal outstanding and the effective interest rate applicable; and
dividends, when the shareholders’ right to receive payment is established.

(s) Segment reporting

For reporting purposes, segment assets include those operating assets that are employed by a segment and segment liabilities include those operating liabilities that result from the operating activities by a segment, excluding tax assets and liabilities. Capital expenditure comprises additions to properties, plant and equipment. Business segments have been used as the primary reporting format.

(t) Borrowing costs

Borrowing costs are interest and other costs incurred in connection with the borrowing of funds. All borrowing costs are charged to the income statement in the year in which they are incurred.

(u) Operating leases

Leases which do not transfer substantially all the risks and rewards of ownership to the Group are classified as operating leases.

Where the Group has the use of assets held under operating leases, payments made under the leases are charged to income statement in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased assets. Lease incentives received are recognised in income statement as an integral part of the aggregate net lease payments made. Contingent rentals, if any, are charged to income statement in the accounting period in which they are incurred.

(v) Employee benefits

Short term employee benefits and contributions to defined contribution retirement plans

Salaries, annual bonuses, paid annual leave, contributions to defined contribution plans and the cost of non-monetary benefits are accrued in the year in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Share based payments

The fair value of share options granted to employees is recognised as an employee cost with a corresponding increase in a capital reserve within equity. The fair value is measured at grant date using the BlackScholes Model, taking into account the terms and conditions upon which the options were granted. Where the employees have to meet vesting conditions before becoming unconditionally entitled to the share options, the total estimated fair value of the share options is spread over the vesting period, taking into account the probability that the options will vest.

During the vesting period, the number of share options that is expected to vest is reviewed. Any adjustment to the cumulative fair value recognised in prior years is charged/credited to the income statement for the year of the review, unless the original employee expenses qualify for recognition as an asset, with a corresponding adjustment to the capital reserve. On vesting date, the amount recognised as an expense is adjusted to reflect the actual number of share options that vest (with a corresponding adjustment to the capital reserve) except where forfeiture is only due to not achieving vesting conditions that relate to the market price of the Company’s shares. The equity amount is recognised in the capital reserve until either the option is exercised (when it is transferred to the share premium account) or the option expires (when it is released directly to retained profits).

Termination benefits

Termination benefits are recognised when, and only when, the Group demonstrably commits itself to terminate employment or to provide benefits as a result of voluntary redundancy by having a detailed formal plan which is without realistic possibility of withdrawal.

(w) Foreign currency translation

Items included in the financial statements of each of Group’s entities are measured using the currency of the primary economic environment in which the entities operate (“the functional currency”). The financial statements are presented in Hong Kong dollars, which reflects the economic substance of the underlying events and circumstances relevant to the Group.

Transactions in foreign currencies are translated into functional currency at the appropriate rates ruling on the dates of the individual transactions. Monetary assets and liabilities denominated in other currencies are translated at the approximate rates ruling on the balance sheet date. Gains and losses arising on exchange are dealt with in the income statement.

On consolidation, monetary assets and liabilities of the subsidiaries are translated at the appropriate rates of exchange ruling at the balance sheet date. Non-monetary assets and liabilities are translated at the approximate rates ruling on the dates of transactions. Income statement items are translated at the average rate of exchange during the year. All exchange differences arising on transaction are dealt with in the income statement.

(x) 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 year. Taxable profit differs from net 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.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the assets to be recovered.

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 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.

(y) Cash and cash equivalents

For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short term highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition, less advances from banks repayable within three months from the date of the advance. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are also included as a component of cash and cash equivalents.

(z) Related parties

A party is considered to be related to the Group if:

i) the party has the ability, directly or indirectly through one or more intermediaries, to control the Group or exercise significant influence over the Group in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common significant influence;
ii) the party is an associate;
iii) the party is a member of the key management personnel of the Group;
iv) the party is a close member of the family of any individual referred to in i) or iii);
v) the party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in iii) or iv); or
vi) the party is a post-employment benefit plan for the benefit of employees of the Group, or of any entity that is a related party of the Group.

3. TURNOVER

Turnover represents the aggregate of the net invoiced value of goods and service sold and rental income, but excludes intra-group transactions.

Sales of electronic components and products Rental income Trading of building materials and sundry products	Group 2006 2005 HK$’000 HK$’000 (restated) 194,667 162,077 1,577 1,577 2,169 3,096 198,413 166,750	Group 2006 2005 HK$’000 HK$’000 (restated) 194,667 162,077 1,577 1,577 2,169 3,096 198,413 166,750
		166,750

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. SEGMENT INFORMATION

An analysis of the Group’s revenue, results, assets, liabilities and capital expenditure for the Year by business and geographical segments, as compared to the previous year, is as follows:

(a) Business segments

For the year ended 31 December 2006

Continuing operations Building Electronic Materials Components Property and Sundry and Products Investments Products HK$’000 HK$’000 HK$’000 REVENUE 194,667 1,577 2,169 SEGMENT PROFIT/(LOSS) 10,106 (245) (9,307) Interest income Other income Profit on disposal of subsidiaries Profit on disposal of listed investments Revaluation deficit on listed investments Impairment on long term investments Unallocated administrative and other operating expenses Finance costs Share of results of associates LOSS BEFORE TAXATION TAXATION (LOSS)/PROFIT FOR THE YEAR	Continuing operations	Continuing operations	Discontinued operations Smart Card Home Sub-total Technology Furniture Sub-total Consolidated HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 198,413 2,896 182,447 185,343 383,756 554 (3,458) 29,122 25,664 26,218 1,354 – – – 1,354 790 – – – 790 4,131 – – – 4,131 36 – – – 36 (466) – – – (466) (17,700) – – – (17,700) (19,025) – – – (19,025) (8,705) – (663) (663) (9,368) (30) – – – (30) (39,061) (3,458) 28,459 25,001 (14,060) (288) – (36) (36) (324) (39,349) (3,458) 28,423 24,965 (14,384)	Discontinued operations Smart Card Home Sub-total Technology Furniture Sub-total Consolidated HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 198,413 2,896 182,447 185,343 383,756 554 (3,458) 29,122 25,664 26,218 1,354 – – – 1,354 790 – – – 790 4,131 – – – 4,131 36 – – – 36 (466) – – – (466) (17,700) – – – (17,700) (19,025) – – – (19,025) (8,705) – (663) (663) (9,368) (30) – – – (30) (39,061) (3,458) 28,459 25,001 (14,060) (288) – (36) (36) (324) (39,349) (3,458) 28,423 24,965 (14,384)
		Building Materials and Sundry Products HK$’000 2,169 (9,307)
				26,218 1,354 790 4,131 36 (466) (17,700) (19,025) (9,368) (30)
				(14,060) (324)
				(14,384)

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the year ended 31 December 2005

Continuing operations Building Electronic Materials Components Property and Sundry and Products Investments Products HK$’000 HK$’000 HK$’000 REVENUE 162,077 1,577 3,096 SEGMENT PROFIT/(LOSS) 8,137 1,048 (42) Interest income Other income Write back of share of loss of an associate Negative goodwill Revaluation deficit on listed investments Impairment on investment property Amortisation and impairment on goodwill of associates Write off of amounts due from associates Write off of rental deposits Bad and doubtful debts Unallocated administrative and other operating expenses Finance costs Share of results of associates LOSS BEFORE TAXATION TAXATION (LOSS)/PROFIT FOR THE YEAR	Continuing operations	Continuing operations	Discontinued operations Smart Card Home Sub-total Technology Furniture Sub-total Consolidated HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 166,750 2,865 223,658 226,523 393,273 9,143 (6,055) 33,428 27,373 36,516 1,083 – 111 111 1,194 2,287 – – – 2,287 1,545 – – – 1,545 1,505 – – – 1,505 (8,206) – – – (8,206) (1,570) – – – (1,570) (9,608) – – – (9,608) (1,864) – – – (1,864) (239) – – – (239) (698) – – – (698) (18,372) – – – (18,372) (6,058) (30) (1,450) (1,480) (7,538) (391) – – – (391) (31,443) (6,085) 32,089 26,004 (5,439) (272) – (697) (697) (969) (31,715) (6,085) 31,392 25,307 (6,408)	Discontinued operations Smart Card Home Sub-total Technology Furniture Sub-total Consolidated HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 166,750 2,865 223,658 226,523 393,273 9,143 (6,055) 33,428 27,373 36,516 1,083 – 111 111 1,194 2,287 – – – 2,287 1,545 – – – 1,545 1,505 – – – 1,505 (8,206) – – – (8,206) (1,570) – – – (1,570) (9,608) – – – (9,608) (1,864) – – – (1,864) (239) – – – (239) (698) – – – (698) (18,372) – – – (18,372) (6,058) (30) (1,450) (1,480) (7,538) (391) – – – (391) (31,443) (6,085) 32,089 26,004 (5,439) (272) – (697) (697) (969) (31,715) (6,085) 31,392 25,307 (6,408)
		Building Materials and Sundry Products HK$’000 3,096 (42)
				36,516 1,194 2,287 1,545 1,505 (8,206) (1,570) (9,608) (1,864) (239) (698) (18,372) (7,538) (391)
				(5,439) (969)
				(6,408)

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Continuing operations Electronic Components and Property Building Materials Products Investments and Sundry Products 2006 2005 2006 2005 2006 2005 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 ASSETS Segment assets 152,105 138,650 12,172 13,281 3,634 13,308 Unallocated assets LIABILITIES Segment liabilities 34,912 20,021 273 263 1,709 2,012 Unallocated liabilities CAPITAL EXPENDITURE Segment 1,886 6,681 – – – – Other DEPRECIATION AND AMORTISATION Segment 4,743 3,519 – – – – Other IMPAIRMENT LOSS Segment – – 1,360 1,570 9,485 – Other	Discontinued operations Smart Card Technology Home Furniture 2006 2005 2006 2005 HK$’000 HK$’000 HK$’000 HK$’000 – 24,371 – 183,355 – 23,718 – 80,464 – 6 – 2,970 98 148 2,051 2,970 – – – –	Consolidated 2006 2005 HK$’000 HK$’000 167,911 372,965 92,187 93,135 260,098 466,100 36,894 126,478 48,250 64,137 85,144 190,615 1,886 9,657 122 381 2,008 10,038 6,892 6,637 231 279 7,123 6,916 10,845 1,570 17,700 – 28,545 1,570	Consolidated 2006 2005 HK$’000 HK$’000 167,911 372,965 92,187 93,135 260,098 466,100 36,894 126,478 48,250 64,137 85,144 190,615 1,886 9,657 122 381 2,008 10,038 6,892 6,637 231 279 7,123 6,916 10,845 1,570 17,700 – 28,545 1,570
			466,100
			126,478 64,137
			190,615
			9,657 381
			10,038
			6,637 279
			6,916
			1,570 –
			1,570

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Geographical area

Asia 2006 2005 HK$’000 HK$’000 REVENUE – Continuing operations 194,088 162,422 – Discontinued operations 185,343 194,975 379,431 357,397 SEGMENT PROFIT/(LOSS) – Continuing operations 9,749 9,123 – Discontinued operations 25,664 22,658 35,413 31,781 Interest income – Continuing operations – Discontinued operations Other income – Continuing operations – Discontinued operations Profit on disposal of subsidiaries Profit on disposal of listed investments Write back of share of loss of an associate Negative goodwill Revaluation deficit on listed investments Impairment on investment property Impairment on long term investments Amortisation and impairment on goodwill of associates Write off of amounts due from associates Write off of rental deposits Bad and doubtful debts Unallocated administrative and other operating expenses Finance costs – Continuing operations – Discontinued operations Share of results of associates Taxation – Continuing operations – Discontinued operations LOSS FOR THE YEAR	Europe 2006 2005 HK$’000 HK$’000 178 – – 21,078 178 21,078 9 – – 3,150 9 3,150	United States 2006 HK$’000 4,147 – 4,147 (9,204) – (9,204)	of America 2005 HK$’000 4,328 10,470 14,798 20 1,565 1,585	Consolidated 2006 2005 HK$’000 HK$’000 198,413 166,750 185,343 226,523 383,756 393,273 554 9,143 25,664 27,373 26,218 36,516 1,354 1,083 – 111 790 2,287 – – 4,131 – 36 – – 1,545 – 1,505 (466) (8,206) – (1,570) (17,700) – – (9,608) – (1,864) – (239) – (698) (19,025) (18,372) (8,705) (6,058) (663) (1,480) (30) (391) (288) (272) (36) (697) (14,384) (6,408)	Consolidated 2006 2005 HK$’000 HK$’000 198,413 166,750 185,343 226,523 383,756 393,273 554 9,143 25,664 27,373 26,218 36,516 1,354 1,083 – 111 790 2,287 – – 4,131 – 36 – – 1,545 – 1,505 (466) (8,206) – (1,570) (17,700) – – (9,608) – (1,864) – (239) – (698) (19,025) (18,372) (8,705) (6,058) (663) (1,480) (30) (391) (288) (272) (36) (697) (14,384) (6,408)
					393,273

					9,143 27,373
					36,516 1,083 111 2,287 – – – 1,545 1,505 (8,206) (1,570) – (9,608) (1,864) (239) (698) (18,372) (6,058) (1,480) (391) (272) (697)
					(6,408)

The Group’s assets and liabilities are principally located in Asia. Accordingly, segment assets, segment liabilities and other information by geographical area are not separately shown.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5. RELATED PARTY TRANSACTIONS

(i) In addition to the related party transactions detailed elsewhere in the financial statements, the Group had the following material transactions with related parties during the Year:

		Group
		2006	2005
	Notes	HK$’000	HK$’000
Consultancy fee paid by the Group to
Princeton Venture Partners Limited	(a)	(3,950)	(150)
Interest income charged to
Princeton Venture Partners Limited	(b)	58	288
Rental income received from
Princeton Venture Partners Limited	(a)	–	315
Consultancy fee received from
Bizipoint Company Limited	(a)	–	360
Interest income charged to
Bizipoint Company Limited	(b)	–	75
Rental income received from
Bizipoint Company Limited	(a)	–	30

Notes:

(a) The considerations were determined through negotiations between the respective parties.
(b) Interest income was calculated at prime rate + 2% per annum (2005: 5%).
(ii) Details of the Group’s loan to its associate as at the balance sheet date are included in note 18 to the financial statements.
(iii) Remuneration for key management personnel, including amounts paid to the Company’s Directors and highest paid employees as disclosed in note 8, is as follows:

Short-term employee benefits Post-employment benefits Equity compensation benefits	Group 2006 2005 HK$’000 HK$’000 8,547 7,971 62 52 – 484 8,609 8,507	Group 2006 2005 HK$’000 HK$’000 8,547 7,971 62 52 – 484 8,609 8,507
		8,507

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

6. LOSS FROM OPERATING ACTIVITIES

Arrived at after crediting: Gross rental income Less: outgoings Net rental income Interest income Profit on disposal of subsidiaries Profit on disposal of listed investments Write back of provisions Negative goodwill Exchange gains, net and after charging: Impairment on goodwill of subsidiaries Amortisation and impairment on goodwill of associates Revaluation loss on listed investments Auditors’ remuneration Bad and doubtful debts Write off of amount due from associates Cost of inventories sold Depreciation on properties, plant and equipment Impairment on investment property Impairment on long term investments Loss on disposal of properties, plant and equipment Operating lease rentals for land and buildings Staff costs: Wages and salaries (including Directors’ emoluments) Retirement fund contributions Employee share options 7. FINANCE COSTS	Group 2006 2005 HK$’000 HK$’000 (restated) 1,577 1,577 (529) (529 1,048 1,048 1,354 1,083 4,131 – 36 – 67 303 – 1,505 69 175 9,485 – – 9,608 466 8,206 1,031 1,152 241 698 – 1,864 176,243 147,071 4,974 3,798 1,360 1,570 17,700 – 225 481 3,094 3,196 24,124 23,110 260 299 – 1,015	Group 2006 2005 HK$’000 HK$’000 (restated) 1,577 1,577 (529) (529 1,048 1,048 1,354 1,083 4,131 – 36 – 67 303 – 1,505 69 175 9,485 – – 9,608 466 8,206 1,031 1,152 241 698 – 1,864 176,243 147,071 4,974 3,798 1,360 1,570 17,700 – 225 481 3,094 3,196 24,124 23,110 260 299 – 1,015
		1,048 1,083 – – 303 1,505 175 – 9,608 8,206 1,152 698 1,864 147,071 3,798 1,570 – 481 3,196 23,110 299 1,015

Interest and similar charges on: Bank loans and overdrafts wholly repayable within five years Other loan	Group 2006 2005 HK$’000 HK$’000 (restated) 5,817 3,438 2,888 2,620 8,705 6,058	Group 2006 2005 HK$’000 HK$’000 (restated) 5,817 3,438 2,888 2,620 8,705 6,058
		6,058

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

8. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

(a) Directors’ emoluments

The emoluments paid or payable to each of the eight (2005: ten) directors were as follows:

Shaw Wen Fei Sung Kai Hing, Simon Au Hoi Tsun, Peter Hui Tung Wah, Samuel Sung Yan Wai, Petrus Wong Che Keung, Richard Tong Yee Yung, Joseph Wong Kin Chi Total for 2006 Shaw Wen Fei Lui Chun Bing, Tommy Sung Kai Hing, Simon Au Hoi Tsun, Peter Hui Tung Wah, Samuel Sung Yan Wai, Petrus Chim Chun Kwan, Sandy Wong Che Keung, Richard Tong Yee Yung, Joseph Wong Kin Chi Total for 2005	Fees HK$’000 – – 663 – – 100 100 180 1,043 Fees HK$’000 – 1,100 – 120 – – – 100 100 100 1,520	Other emoluments Salaries Contributions and other to retirement Share-based benefits schemes payment HK$’000 HK$’000 HK$’000 – – – 585 7 – 1,417 12 – 1,575 7 – 1,690 12 – – – – – – – – – – 5,267 38 – Other emoluments Salaries Contributions and other to retirement Share-based benefits schemes payment HK$’000 HK$’000 HK$’000 – – 98 1,708 7 98 190 5 98 1,548 12 37 1,005 6 98 1,690 12 31 310 10 – – – 8 – – 8 – – 8 6,451 52 484	Total HK$’000 – 592 2,092 1,582 1,702 100 100 180
			6,348

			Total HK$’000 98 2,913 293 1,717 1,109 1,733 320 108 108 108
			8,507

Emoluments paid to Independent non-executive Directors during the Year were HK$380,000 (2005: HK$324,000).

There were no arrangements under which a Director waived or agreed to waived any emolument during the Year.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Employees’ emoluments

During the Year, the five highest paid individuals included three directors (2005: four directors), details of those emoluments are set out above. The emoluments of the remaining two (2005: one) highest paid individuals were as follows:

Salaries and other benefits Contributions to retirement schemes Share-based payment	2006 HK$’000 2,237 24 – 2,261	2005 HK$’000 991 12 6
		1,009

The emoluments of the two (2005: one) individuals with the highest emoluments were within the following bands:

	2006	2005
	Number of	Number of
	employees	employees
HK$500,001 to HK$1,000,000	1	–
HK$1,000,001 to HK$1,500,000	1	1

9. TAXATION

Provision for Hong Kong profits tax has been made at the current rate of taxation of 17.5% on the estimated assessable profit for the year (2005: 17.5%). Taxes on income earned outside Hong Kong have been calculated at the rates of taxation prevailing in the countries in which the Group operates, based on existing law, practice and interpretation thereof.

Current year provision: Hong Kong Outside Hong Kong Deferred tax – note 28 Taxation	Group 2006 2005 HK$’000 HK$’000 (restated) 265 276 23 23 288 299 – (27 288 272	Group 2006 2005 HK$’000 HK$’000 (restated) 265 276 23 23 288 299 – (27 288 272
		299 (27
		272

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Taxation is reconciled to the loss before taxation per consolidated income statement as follows:

Loss before taxation Tax at the domestic income tax rate of 17.5% (2005: 17.5%) Tax effect of different tax rates of subsidiaries operating in other jurisdictions Tax effect of expenses that are not deductible in determining taxable profit Tax effect of temporary differences not recognised Tax effect of tax depreciation not recognised Tax effect of income that are not taxable in determining taxable profit Tax effect of unused tax losses not recognised Prior year overprovision Taxation	2006 HK$’000 (39,061) (6,835) 2,784 12,855 12 72 (11,321) 2,726 (5) 288	2005 HK$’000 (restated) (31,443) (5,502) 2,865 623 (303) 2,078 (995) 1,506 – 272

10. DISCONTINUED OPERATIONS

On 26 May 2006, the Company announced the decision of its board of Directors to dispose of Windsor Treasure Group Holdings Limited (“WTG”). WTG engages in home furniture business and is a separate business segment. The disposal of WTG was completed in July 2006.

On 29 December 2006, the Company announced OHL, an indirect non-wholly owned subsidiary, disposed of VFJ Technology Holdings Limited (“VFJ”). VFJ engages in smart card technology business and is a separate business segment. The disposal of VFJ was completed on 29 December 2006.

The results of VFJ and WTG for the period/year are presented below:

Turnover Interest income Other revenue Expenses Finance costs (Loss)/profit before tax from discontinued operations Taxation (Loss)/profit for the period/year from discontinued operations	VFJ 2,896 – 178 (6,532) – (3,458) – (3,458)	2006 HK$’000 WTG 182,447 – 1,058 (154,383) (663) 28,459 (36) 28,423	Total 185,343 – 1,236 (160,915) (663) 25,001 (36) 24,965	VFJ 2,865 – 38 (8,958) (30) (6,085) – (6,085)	2005 HK$’000 WTG 223,658 111 714 (190,944) (1,450) 32,089 (697) 31,392	Total 226,523 111 752 (199,902) (1,480) 26,004 (697) 25,307

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The net cash flows incurred by VFJ and WTG are as follows:

Net cash (used in)/generated from operating activities Net cash (used in)/generated from investing activities Net cash generated from/ (used in) financing activities Total net cash inflow from discontinued operations	VFJ (3,021) (5) 3,112 86	2006 HK$’000 WTG 1,665 32 – 1,697	Total (1,356) 27 3,112 1,783	VFJ (4,349) (5) 4,410 56	2005 HK$’000 WTG 19,476 (2,357) (1,068) 16,051	Total 15,127 (2,362) 3,342
						16,107

11. NET LOSS ATTRIBUTABLE TO SHAREHOLDERS

The net loss attributable to shareholders dealt with in the financial statements of the Company is HK$57,893,000 (2005: HK$1,963,000).

12. DIVIDEND

		2006	2005
		HK$’000	HK$’000
Special interim – HK$0.2	(2005: Nil) per ordinary share	30,088	–

No final dividend was proposed for the Year (2005: Nil).

13. LOSS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

The calculations of basic loss per share are based on:

Net (loss) / profit attributable to ordinary equity holders of the parent company – Continuing operations – Discontinued operations Weighted average number of ordinary shares in issue during the year	2006 HK$’000 (43,293) 12,637 (30,656) 150,439,152	2005 HK$’000 (restated) (33,131) 13,340
		(19,791)
		140,691,370

No diluted loss per share is presented for the years ended 31 December 2006 and 2005 as the exercise of share options outstanding would be anti-dilutive.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

14. PROPERTIES, PLANT AND EQUIPMENT

Group

Land and buildings situated Leasehold overseas improvements HK$’000 HK$’000 Cost 1 January 2005 4,255 8,530 Exchange difference 82 35 Additions – 4,391 Disposals (4,337) (452) 31 December 2005 and 1 January 2006 – 12,504 Exchange difference – 73 Additions – 866 Disposals – (234) Disposal of subsidiaries – (2,027) 31 December 2006 – 11,182 Accumulated depreciation 1 January 2005 33 1,972 Exchange difference 1 2 Additions 200 1,896 Disposals (234) (135) 31 December 2005 and 1 January 2006 – 3,735 Exchange difference – 24 Additions – 2,235 Disposals – (118) Disposal of subsidiaries – (628) 31 December 2006 – 5,248 Net book value 31 December 2006 – 5,934 31 December 2005 – 8,769	Plant and machinery HK$’000 39,290 406 5,074 (153) 44,617 359 747 – (24,077) 21,646 21,562 184 3,693 (153) 25,286 467 4,321 – (14,158) 15,916 5,730 19,331	Furniture and equipment HK$’000 9,830 26 573 (227) 10,202 60 160 (336) (2,087) 7,999 7,983 11 612 (62) 8,544 37 419 (205) (1,378) 7,417 582 1,658	Motor vehicles HK$’000 4,036 54 – (340) 3,750 90 235 (66) (2,740) 1,269 2,314 24 515 (340) 2,513 54 148 (4) (1,508) 1,203 66 1,237	Total HK$’000 65,941 603 10,038 (5,509)
				71,073 582 2,008 (636) (30,931)
				42,096

				33,864 222 6,916 (924)
				40,078 582 7,123 (327) (17,672)
				29,784

				12,312

				30,995

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

15. INVESTMENT PROPERTY

1 January, at valuation Impairment 31 December, at valuation Analysed by lease term and geographical location: Medium term leasehold properties situated outside Hong Kong	Group 2006 2005 HK$’000 HK$’000 10,430 12,000 (1,360) (1,570) 9,070 10,430 9,070 10,430	Group 2006 2005 HK$’000 HK$’000 10,430 12,000 (1,360) (1,570) 9,070 10,430 9,070 10,430
		10,430

		10,430

The investment property was revalued by reference to appraisals made by Dudley Surveyors Limited, chartered surveyors, on an open market value basis based on its existing use on 31 December 2006.

Details of the investment property of the Group as at 31 December 2006 are as follows:

Location	Lease	Term Use
No. 15,	Medium term lease	Industrial
Lane 2, Bao An County,
Gong Yuan Road East,
Shenzhen, PRC

16. LONG TERM INVESTMENTS


	2006	2005
	HK$’000	HK$’000
Unlisted equity investments, at cost	10,000	23,700

In the opinion of the Directors, the underlying values of the long term investments were not less than their carrying values at the balance sheet date.

17. INTERESTS IN SUBSIDIARIES

Unlisted shares, at cost Due from subsidiaries Due to subsidiaries Less: provision	Company 2006 2005 HK$’000 HK$’000 1 1 451,898 467,846 (1) (1) 451,898 467,846 (325,751) (247,751) 126,147 220,095	Company 2006 2005 HK$’000 HK$’000 1 1 451,898 467,846 (1) (1) 451,898 467,846 (325,751) (247,751) 126,147 220,095
		467,846 (247,751)
		220,095

The amounts due from/to subsidiaries are unsecured, interest-free and there are no fixed terms of repayment.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Particulars of the principal subsidiaries are as follows:

		Total issued
	Place of	ordinary/
	incorporation/	registered	Equity
	registration and	and paid-up	interest owned
Name of subsidiary	operation	capital	by the	Group	Principal activities
			2006	2005
Directly held:
Hai Yang Investment Limited	British Virgin	US$1	100%	100%	Investment holding
	Islands
Team Talent Limited	British Virgin	US$1	100%	100%	Investment holding
	Islands
Indirectly held:
Asia eMarket Limited	British Virgin	US$152	A-share	A-share	Investment holding
	Islands		96.2%	96.2%
Barnet Consultancy Limited	British Virgin	US$1	100%	100%	Provision of
	Islands				corporate services
Best Start Services Limited	British Virgin	US$1	96.2%	96.2%	Investment holding
	Islands
Crown Tech Holdings Limited	British Virgin	US$1	100%	100%	Investment holding
	Islands
Up Crown International	British Virgin	US$1	96.2%	96.2%	Investment holding
Limited	Islands
Vandyke Limited	British Virgin	US$1,000	100%	100%	Property holding
	Islands/
	The People’s
	Republic of
	China (“PRC”)
Omnitech Holdings Limited	Bermuda	AUD49,489,391	77.04%	77.04%	Investment holding

The above table lists the subsidiaries of the Company which, in the opinion of the Directors, principally affected the results of 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.

In the opinion of the Directors, the underlying values of interests in subsidiaries were not less than their carrying values at the balance sheet date.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

18. INTERESTS IN ASSOCIATES

Share of net assets Net book value of goodwill – see below Loan to associate Interest receivable on loan to associate	Group 2006 2005 HK$’000 HK$’000 50,659 50,689 – – 50,659 50,689 9,000 – 58 – 59,717 50,689	Group 2006 2005 HK$’000 HK$’000 50,659 50,689 – – 50,659 50,689 9,000 – 58 – 59,717 50,689
		50,689 – –
		50,689

The loan to associate as at 31 December 2006 is unsecured, bearing interest at the rate of 2% per annum over prime rate and there are fixed terms of repayment.

Movements in goodwill: Cost 1 January 2005 Elimination of accumulated amortisation upon the application of HKFRS 3 Impairment 31 December 2005 and 31 December 2006 Accumulated amortisation 1 January 2005 Elimination of accumulated amortisation upon the application of HKFRS 3 31 December 2005 and 31 December 2006 Net book value 31 December 2006 31 December 2005	HK$’000 220,000 (210,392 (9,608
	–
	210,392 (210,392
	–
	–

	–

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Particulars of the Group’s principal associates are as follows:

		Place of
		incorporation/	Equity
	Class of	registration	interest owned
Name of associate	shares held	and operation	by the	Group	Principal activities
			2006	2005
PVP Limited	Ordinary	British Virgin	A-share	A-share	Investment holding
		Islands	37.2%	37.2%
			B-share	B-share
			37.2%	37.2%
Princeton Venture Partners Limited	Ordinary	British Virgin	37.2%	37.2%	Investment holding
		Islands			and consultancy

The above table lists the principal associates of the Group which, in the opinion of the Directors, principally affected the results of the Year, or formed a substantial portion of the net assets of the Group.

Information relating to PVP Limited and its subsidiaries (“PVP Group”) as required by HKAS 28 “Accounting for investments in associates” is as follows:

PVP Group

	2006	2005
	HK$’000	HK$’000
Turnover	4,334	1,006
Loss for the year	(80)	(1,238)
Non-current assets	206,033	111,850
Current assets	9,703	25,021
Current liabilities	(9,084)	(625)
Non-current liabilities	–	–

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

19. GOODWILL

Cost 1 January 2005 Elimination of accumulated amortisation upon the application of HKFRS 3 31 December 2005 Release on disposal of subsidiaries Impairment 31 December 2006 Accumulated amortisation 1 January 2005 Elimination of accumulated amortisation upon the application of HKFRS 3 31 December 2005 and 31 December 2006 Net book value 31 December 2006 31 December 2005	Group HK$’000 23,225 (1,458
	21,767 (12,282 (9,485
	–
	1,458 (1,458
	–
	–

	21,767

20. INVENTORIES

Raw materials Work in progress Finished goods	Group 2006 2005 HK$’000 HK$’000 50,797 51,143 – 11,443 4,075 27,378 54,872 89,964	Group 2006 2005 HK$’000 HK$’000 50,797 51,143 – 11,443 4,075 27,378 54,872 89,964
		89,964

There is HK$Nil inventory stated at net realisable value (2005: HK$815,000), included in the above.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

21. TRADE AND OTHER RECEIVABLES

The aging analysis of trade and other receivables (net of provision for doubtful debts) is as follows:

Current One to three months More than three months	Group 2006 2005 HK$’000 HK$’000 43,981 69,241 15,529 21,241 2,477 54,939 61,987 145,421	Group 2006 2005 HK$’000 HK$’000 43,981 69,241 15,529 21,241 2,477 54,939 61,987 145,421
		145,421

The Group allows an average credit period of 30 to 45 days to its trade customers.

Trade and other receivables comprise the following:

Hong Kong dollars United States dollars Chinese Renminbi	Group 2006 2005 HK$’000 HK$’000 60,594 92,819 1,393 7,005 – 45,597 61,987 145,421	Group 2006 2005 HK$’000 HK$’000 60,594 92,819 1,393 7,005 – 45,597 61,987 145,421
		145,421

22. LISTED INVESTMENTS

Listed equity investments, at market value: Hong Kong Overseas	Group 2006 2005 HK$’000 HK$’000 975 2,637 14,272 16,931 15,247 19,568	Group 2006 2005 HK$’000 HK$’000 975 2,637 14,272 16,931 15,247 19,568
		19,568

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

23. CASH AND BANK BALANCES

Cash and bank balances represent cash on hand and at banks and include time deposits and guarantee funds of HK$22,479,000 (2005: HK$22,285,000) pledged as security for general banking facilities provided to certain subsidiaries.

Cash and bank balances comprise the following:

Hong Kong dollars United States dollars Chinese Renminbi Australian dollars Euros	Group 2006 2005 HK$’000 HK$’000 35,076 34,868 135 24,571 76 7,444 281 1,057 1 50 35,569 67,990	Group 2006 2005 HK$’000 HK$’000 35,076 34,868 135 24,571 76 7,444 281 1,057 1 50 35,569 67,990
		67,990

24. DUE TO RELATED PARTIES

The amounts due to related parties are unsecured, interest-free and there are no fixed terms of repayment.

25. TRADE AND OTHER PAYABLES

The aging analysis of trade and other payables is as follows:

Current One to three months More than three months	Group 2006 2005 HK$’000 HK$’000 11,671 34,474 7,400 11,666 8,650 19,293 27,721 65,433	Group 2006 2005 HK$’000 HK$’000 11,671 34,474 7,400 11,666 8,650 19,293 27,721 65,433
		65,433

Trade and other payables comprise the following:

Hong Kong dollars Australian dollars Chinese Renminbi	Group 2006 2005 HK$’000 HK$’000 24,077 23,137 1,709 133 1,935 42,163 27,721 65,433	Group 2006 2005 HK$’000 HK$’000 24,077 23,137 1,709 133 1,935 42,163 27,721 65,433
		65,433

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

26. INTEREST BEARING BANK BORROWINGS

The terms of the interest bearing bank borrowings are as follows:

Repayable on demand or within one year Bank overdrafts – secured Bank loan – secured – unsecured Repayable in the second year Bank loans – secured Repayable in the third to fifth years, inclusive Bank loans – secured	Group 2006 2005 HK$’000 HK$’000 6,117 7,391 47,763 50,146 – 9,615 53,880 67,152 1,284 1,289 101 1,835 1,385 3,124 55,265 70,276	Group 2006 2005 HK$’000 HK$’000 6,117 7,391 47,763 50,146 – 9,615 53,880 67,152 1,284 1,289 101 1,835 1,385 3,124 55,265 70,276
		67,152
		1,289 1,835
		3,124
		70,276

The above secured bank borrowings are secured by:

(a) charges over time deposits and guarantee funds of approximately HK$22,479,000 (2005: HK$22,285,000);

(b) against guarantees issued by certain subsidiaries and a Director of these subsidiaries.

27. OTHER LOAN PAYABLE

The other loan was secured by a fixed charge against the Group’s equity holding in a subsidiary, a floating charge against the Company’s entire assets and a corporate guarantee issued by the Company. It was interest bearing at 1.25% per month and was fully repaid in 2006.

28. DEFERRED TAX LIABILITIES

1 January Release to profit and loss account – note 9 31 December	Group 2006 2005 HK$’000 HK$’000 17 44 – (27 17 17	Group 2006 2005 HK$’000 HK$’000 17 44 – (27 17 17
		17

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The principal components of the Group’s deferred tax liabilities provided for/(deferred tax assets recognised), and the amounts not provided/(not recognised) are as follows:

Accelerated capital allowances Tax losses	Group Provided Not provided 2006 2005 2006 2005 HK$’000 HK$’000 HK$’000 HK$’000 17 17 12 (16) – – (10,184) (36,759) 17 17 (10,172) (36,775)	Group Provided Not provided 2006 2005 2006 2005 HK$’000 HK$’000 HK$’000 HK$’000 17 17 12 (16) – – (10,184) (36,759) 17 17 (10,172) (36,775)
		(36,775)

No deferred tax asset has been recognised in respect of tax losses due to the unpredictability of future profit streams.

29. SHARE CAPITAL

Authorised: 1 January 2006 and 31 December 2006 Issued and fully paid: 1 January 2006 and 31 December 2006	Number of ordinary shares of HK$0.01 15,000,000,000 150,439,152	Amount HK$’000 150,000

		1,504

Share options

At the Special General Meeting held on 22 March 2002, a new share option scheme in compliance with the new listing requirements was approved for adoption by the Company. Please refer to the Report of the Directors for details.

At the balance sheet date, there were 4,274,000 share options outstanding under the share option scheme adopted by the Company on 22 March 2002.

The number and weighted average exercise prices of share options are as follows:


	Weighted		Weighted
	average		average
	exercise	Number	exercise	Number
	price	of options	price	of options
Outstanding at the beginning of the year	HK$0.84	10,814,000	HK$0.95	2,720,000
Adjustment during the year for open offer	–	–	HK$0.95	544,000
Granted during the year	–	–	HK$0.80	8,510,000
Lapsed during the year	HK$0.83	(6,540,000)	HK$0.88	(960,000)
Outstanding at the end of the year	HK$0.85	4,274,000	HK$0.84	10,814,000
Exercisable at the end of the year	HK$0.85	4,274,000	HK$0.84	10,814,000

The options outstanding at 31 December 2006 had an exercise price of HK$0.95 or HK$0.80 (2005: HK$0.95 or HK$0.80) and a weighted average remaining contractual life of 2.85 years (2005: 3.96 years).

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Valuation of share options

The fair value of the options granted on 14 June 2005 was calculated using the Black-Scholes Option Pricing Model. The inputs into the model were as follows:

Weighted average share price at the date of grant	HK$0.77
Exercise price	HK$0.80
Risk free rate	3.22%
Expected life	3 years
Expected volatility	41.53%
Expected dividend yield	–

Expected volatility refers to the historical volatility of share prices of the Company over the 260 trading days of the year immediately before the grant date.

The Group recognised the total expense of HK$1,015,000 for the year ended 31 December 2005 in relation to share options granted by the Company.

The Black-Scholes option pricing model was developed to estimate the fair value of the share options. The value of an option varies with different variables of certain subjective assumptions. Any changes in variables and assumptions so adopted may materially affect the estimation of the fair value of an option.

Options which are cancelled prior to their exercise date are deleted from the register of outstanding options.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

30. RESERVES

Group

1 January 2005 Loss for the year Currency translation differences Transfer Employee share options Movement for the year Issue of new shares Share issue expenses 31 December 2005 and 1 January 2006 Loss for the year Currency translation differences Movement for the year Release on disposal of subsidiaries Share options lapsed Dividend paid 31 December 2006	Share Premium HK$’000 90,219 – – – – – 27,104 (1,093) 116,230 – – – – – – 116,230	Contributed Surplus HK$’000 83,274 – – – – – – – 83,274 – – – – – – 83,274	Exchange Fluctuation Reserve HK$’000 10,269 – 428 – – – – – 10,697 – 507 – (1,972) – – 9,232	Enterprises Development Fund HK$’000 – – – 15 – (101) – – (86) – – – 86 – – –	Employee Reserve Compensation Fund Reserve HK$’000 HK$’000 – – – – – – 16 – – 1,015 (134) – – – – – (118) 1,015 – – – – 118 – – – – (492) – – – 523	Retained Profits/ (Accumulated Losses) HK$’000 8,690 (19,791) – (31) – – – – (11,132) (30,656) – – – – (30,088) (71,876)	Total HK$’000 192,452 (19,791) 428 – 1,015 (235) 27,104 (1,093)
							199,880 (30,656) 507 118 (1,886) (492) (30,088)
							137,383

Included in the Group’s accumulated losses at 31 December 2006 were accumulated losses of HK$8,281,000 (2005: HK$8,251,000) relating to associates.

Company

1 January 2005 Loss for the year Employee share options Issue of new shares Share issue expenses 31 December 2005 and 1 January 2006 Loss for the year Share options lapsed Dividend paid 31 December 2006	Share Premium HK$’000 90,219 – – 27,104 (1,093) 116,230 – – – 116,230	Employee Contributed Compensation Accumulated Surplus Reserve Losses HK$’000 HK$’000 HK$’000 125,376 – (22,131) – – (1,963) – 1,015 – – – – – – – 125,376 1,015 (24,094) – – (57,893) – (492) – – – (30,088) 125,376 523 (112,075)	Total HK$’000 193,464 (1,963) 1,015 27,104 (1,093)
			218,527 (57,893) (492) (30,088)
			130,054

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Company’s contributed surplus, which arose from the Group reorganisation on 2 July 1991, represents the difference between the nominal value of the Company’s shares issued under the reorganisation scheme, in exchange for the shares in the subsidiaries and the fair value of the consolidated net asset value of the acquired subsidiaries, reduced by distributions to shareholders.

Under the Companies Act of Bermuda and the Bye-Laws of the Company, the contributed surplus is distributable to shareholders. The Companies Act of Bermuda also stipulates that a company shall not declare or pay a dividend, or make a distribution out of contributed surplus, if there are reasonable grounds for believing that (a) the company is, or would after the payment be, unable to pay its liabilities as they become due; or (b) the realisable value of the company’s assets would thereby be less than the aggregate of its liabilities and its issued capital and share premium account.

31. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT

(a) Reconciliation of (loss)/profit before taxation to net cash used in operations

(Loss)/profit before taxation
– Continuing operations
– Discontinued operations
Adjustments for:
Profit on disposal of subsidiaries
Interest income
Interest expenses
Write back of provisions
Depreciation on properties, plant and equipment
Bad and doubtful debts
Write off of amount due from associates
Write off of rental deposit
Revaluation deficit on listed investments
Amortisation and impairment on goodwill of associates
Impairment on goodwill of subsidiaries
Impairment on investment property
Impairment on long term investments
Loss on disposal of properties, plant and equipment
(Profit)/loss on disposal of listed investments
(Write back on lapse of options)/Employee share options
Negative goodwill
Write back of share of loss of an associate
Share of results of associates
Operating profit before working capital changes
Decrease/(increase) in inventories
Increase in trade and other receivables
(Increase)/decrease in prepayments and deposits
Increase/(decrease) in trade and other payables
Decrease in amounts due to related parties
(Decrease)/increase in deposits received
Net cash used in operations

Group
2006
2005
HK$’000
HK$’000
(39,061)
(31,443)
25,001
26,004
(4,131)
–
(1,354)
(1,194)
9,368
7,539
(67)
(339)
7,123
6,916
297
3,367
–
1,864
–
239
466
8,206
–
9,608
9,485
–
1,360
1,570
17,700
–
243
1,415
(36)
14
(492)
1,015
–
(1,505)
–
(1,545)
30
391
25,932
32,122
6,093
(12,700)
(46,534)
(48,943)
(1,559)
3,842
26,798
(9,775)
(8)
(4,159)
(21,041)
12,019
(10,319)
(27,594)

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Disposal of subsidiaries

Net assets disposed of: Properties, plant and equipment Inventories Deposits and prepayments Trade and other receivables Tax recoverable Cash and bank balances Trade and other payables Due to related parties Tax payables Short term loans Shareholders’ loan Minority interests Goodwill on consolidation released Loan to subsidiaries Represented by: Cash received Profit on disposal Exchange fluctuation reserve released Enterprises development fund released Minority interests	Group 2006 2005 HK$’000 HK$’000 13,259 – 29,000 – 2,448 – 94,820 – 2,574 – 37,297 – (64,444) – (18) – (216) – (9,615) – (29,028) – (54,274) – 21,803 – 12,282 – 34,085 – 59,992 – 94,077 – 96,010 – (4,131) – 1,972 – (86) – 312 – 94,077 –	Group 2006 2005 HK$’000 HK$’000 13,259 – 29,000 – 2,448 – 94,820 – 2,574 – 37,297 – (64,444) – (18) – (216) – (9,615) – (29,028) – (54,274) – 21,803 – 12,282 – 34,085 – 59,992 – 94,077 – 96,010 – (4,131) – 1,972 – (86) – 312 – 94,077 –
		– –
		– –
		–

		– – – – –
		–

Analysis of net inflow of cash and cash equivalents in respect of the disposed subsidiaries:

Cash received Cash and bank balances of disposed subsidiaries	2006 HK$’000 96,010 (37,297) 58,713	2005 HK$’000 – –
		–

32. CONTINGENT LIABILITIES

	Group		Company	Company
	2006	2005	2006	2005
	HK$’000	HK$’000	HK$’000	HK$’000
Corporate guarantees given to banks and others	75,000	86,800	–	31,100

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

33. COMMITMENTS

Capital commitments – contracted for – authorised but not contracted for Total minimum commitments under non-cancellable operating leases for land and buildings due: As lessee Within one year In the second to fifth years, inclusive After five years As lessor Within one year In the second to fifth years, inclusive	Group 2006 2005 HK$’000 HK$’000 – – – – – – 2,301 9,866 4,019 21,599 – 29,415 6,320 60,880 1,577 1,577 1,972 3,549 3,549 5,126	Group 2006 2005 HK$’000 HK$’000 – – – – – – 2,301 9,866 4,019 21,599 – 29,415 6,320 60,880 1,577 1,577 1,972 3,549 3,549 5,126
		–

		9,866 21,599 29,415
		60,880

		1,577 3,549
		5,126

The Company has no capital or operating lease commitments.

34. FINANCIAL INSTRUMENTS

a) Financial risk management

The Group is exposed to a variety of risks including foreign currency risk, credit risk, liquidity risk and cash flow interest rate risk arising in the normal course of the Group’s business activities.

The Group does not have any written risk management policies and guidelines. The directors monitor the financial risk management of the Group and take such measures as considered necessary from time to time to minimise such financial risks.

i) Foreign currency risk

Foreign currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates.

The Group is exposed to foreign currency risk primarily through sales and purchases that are denominated in a currency other than the functional currency of the operations to which they relate. The currencies giving rise to this risk are primarily United States dollars, Australian dollars and Chinese Renminbi. The Group does not hold or issue any derivative financial instruments for trading purposes or to hedge against fluctuations in foreign exchange rates. The Group mitigates this risk by conducting the sales and purchases transactions in the same currency, whenever possible.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

ii) Credit risk

Credit risk arises from the possibility that customers may not be able to settle obligations within the normal terms of transactions. The Group performs ongoing credit evaluation of the debtors’ financial condition and maintains an account for allowance for doubtful trade and other accounts receivable based upon the expected collectibles of all trade and other accounts receivable.

At the balance sheet date, there were no major concentrations of credit risk.

The maximum exposure to credit risk is therefore represented by the carrying amount of each financial asset as stated in the balance sheet.

Cash is held with financial institutions of good standing.

iii) Liquidity risk

Liquidity risk is the risk that an enterprise will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from an inability to sell a financial asset quickly at close to its fair value.

Prudent liquidity risk management implies maintaining sufficient cash. The Group monitors and maintains a level of bank balances deemed adequate to finance the Group’s operations.

iv) Cash flow and fair value interest rate risk

Cash flow interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates.

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.

b) Estimation of fair values

The notional amounts of financial assets and liabilities with a maturity of less than one year (including trade and other receivables, cash at bank, trade and other payables) are assumed to approximate their fair values.

The fair value of non-trade balances due from/to group and related companies has not been determined as the timing of the expected cash flows of these balances cannot be reasonably determined because of the relationship.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

35. POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE FOR THE ANNUAL ACCOUNTING PERIOD ENDED 31 DECEMBER 2006

The Group has not early applied the following new HKFRSs that have been issued but are not yet effective:

HKAS 1 (Amendment) Presentation of Financial Statements: Capital Disclosures * 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[ø] HK(IFRIC)-INT 9 Reassessment of Embedded Derivatives[@]

Effective for annual periods beginning on or after 1 January 2007 # Effective for annual periods beginning on or after 1 March 2006 ø Effective for annual periods beginning on or after 1 May 2006 @ Effective for annual periods beginning on or after 1 June 2006

The Group has commenced assessing the potential impact of those new HKFRSs but is not yet in a position to determine whether they would have a significant impact on how its results of operations and financial position are presented.

36. COMPARATIVE FIGURES

The comparative figures in the Segment Information have been reclassified to conform to the current year’s presentation. In the opinion of the Directors, the change in presentation better presents the financial characteristics of the Group.

37. APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the Board of Directors on 23 March 2007.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. INDEBTEDNESS

Borrowings

As at the close of business on 31 July 2007, being the latest practicable date for the purpose of this indebtedness statement, the Enlarged Group had outstanding secured bank borrowings of approximately HK$37,965,000, which comprise bank overdrafts of approximately HK$3,204,000, bank loans of approximately HK$2,222,000 and import loans of approximately HK$32,539,000. The Enlarged Group also had a secured loan of HK$2,000,000 from an authorised financial institution.

Debt securities

As at the close of business on 31 July 2007, the Enlarged Group did not have any debt securities issued outstanding, or authorised or otherwise created but unissued.

Mortgages, charges and security

As at the close of business on 31 July 2007, the Enlarged Group’s time deposits and guarantee funds totalling approximately HK$13,720,000 were pledged to banks to secure the bank borrowings granted by the banks to the Enlarged Group. The Enlarged Group also had a mortgage over the entire issued share capital of a subsidiary to secure the loans granted by an authorised financial institution to the Enlarged Group.

Other commitments

As at the close of business on 31 July 2007, the Enlarged Group had outstanding minimum commitments under non-cancellable operating leases in respect of land and buildings which fall due within one year, in the second to fifth years inclusive, and over five years of approximately HK$3,738,000, HK$7,631,000 and HK$3,229,000, respectively.

The Enlarged Group also had capital commitments which were contracted but not accounted for in the financial statements of HK$5,788,000.

Contingent liabilities

As at the close of business on 31 July 2007, the Enlarged Group had contingent liabilities in respect of corporate guarantees of up to HK$57,700,000 given to banks by an indirect subsidiary of the Company.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Disclaimer

Save as disclosed above, and apart from intra-group liabilities, the Enlarged Group did not, as at the close of business on 31 July 2007, have any outstanding mortgages, charges or debentures, loan capital issued or agreed to be issued, bank overdrafts and loans, debt securities or other similar indebtedness, liabilities under acceptances (other than normal trade bills) or acceptance credits or any hire purchase commitments, finance lease commitments, guarantees or other material contingent liabilities.

The Directors have confirmed that there had not been any material change in the Group’s indebtedness subsequent to 31 July 2007.

4. WORKING CAPITAL

The Directors are of the opinion that in the absence of unforeseen circumstances, following the investment in the Greenheart Group and after taking into account the financial resources available to the Enlarged Group including internally generated cash flows and other credit facilities available, the Enlarged Group has sufficient working capital for its present requirements for the next twelve months from the date of this circular.

FINANCIAL INFORMATION OF THE GREENHEART GROUP

APPENDIX II

The following is the text of an accountants’ report on the Greenheart Group, prepared for the sole purpose of inclusion in this circular, received from the independent reporting accountants, Moore Stephens, Certified Public Accountants, Hong Kong.

==> picture [151 x 127] intentionally omitted <==

3 October 2007

The Directors Omnicorp Limited Units 1505-07, Shui On Centre 6-8 Harbour Road Wanchai Hong Kong

Dear Sirs,

We set out below our report on the consolidated financial information (“Financial Information”) relating to Greenheart Resources Holdings Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) for the three years ended 31 December 2004, 2005 and 2006 and the seven months ended 31 July 2007 (the “Relevant Periods”) for inclusion in the circular of Omnicorp Limited (“Omnicorp”) dated 3 October 2007 (the “Circular”) in connection with the proposed acquisition of 60% of the issued share capital of the Company by Omnicorp.

The Company was incorporated as an International Business Company under the International Business Companies Act of the Territory of the British Virgin Islands on 8 October 2004. It has not carried on any business since its incorporation until 10 March 2006 when it acquired 100% equity interests in Superb Able Industrial Limited, the then wholly-owned subsidiary of the Company, and became the holding company of the Group. The Group is a natural forest concession owner and operator in Suriname, South America and currently holds a forest concession for the exploitation of timber on a parcel of land in Suriname of approximately 126,825 hectares. The Group has also contracted with certain independent third party concession holders/owners and was granted cutting rights in respect of certain parcels of land in Suriname with a total area of approximately 51,140 hectares. The Group’s principal business activities include (i) log harvesting, (ii) lumber processing and (iii) marketing and sales of logs and lumber products.

FINANCIAL INFORMATION OF THE GREENHEART GROUP

APPENDIX II

As at 31 July 2007, the Company had the following subsidiaries:

			Equity
		Issued	interest
	Place and date	and fully	attributable
	of incorporation/	paid-up	to the	Principal
Name of company	registration	capital	Company	activities
Prime Forest Holdings	British Virgin	US$1	100%	Investment
Limited (formerly,	Islands (“BVI”)			holding
Superb Resources	10 August 2001
Holdings Limited)
Octagon International N.V.	Suriname	US$73	100%*	Timber
	16 December 2004			harvesting
Superb Manufacturing	BVI	US$1	100%*	Investment
Company Limited	22 June 2006			holding
Greenheart Manufacturing	BVI	US$1	100%*	Dormant
Company Limited	22 June 2006
Superb Able Industrial	BVI	US$1	100%*	Sales of logs
Limited	2 July 2002
Greenheart Resources	Hong Kong	HK$1	100%*	Provision of
(Hong Kong) Limited	1 August 2006			administrative
				and
				management
				services
Topwood Holdings Limited	BVI	US$1	100%*	Trading of
	5 July 2005			equipment
Epro N.V.	Suriname	US$18	100%*	Timber
	11 October 2004			concession
				holding
Beach Paradise N.V.	Suriname	US$364	100%*	Manufacturing
	16 December 2004			of sawn
				timber

indirectly held through Prime Forest Holdings Limited

No audited financial statements have been prepared for the Company and its subsidiaries since their respective dates of incorporation.

FINANCIAL INFORMATION OF THE GREENHEART GROUP

APPENDIX II

For the purpose of this report, we have undertaken an independent audit of the financial statements of the respective companies in the Group for the Relevant Periods in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

For the purpose of this report, the directors of the Company have prepared consolidated financial statements of the Group and financial statements of the Company (the “Underlying Financial Statements”) for the Relevant Periods in accordance with Hong Kong Financial Reporting Standards issued by the HKICPA. We have examined the Underlying Financial Statements for the Relevant Periods in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” promulgated by the HKICPA.

The Financial Information of the Group for the Relevant Periods set out in this report has been prepared from the Underlying Financial Statements, on the basis set out in note 1 of Section VI below.

The Underlying Financial Statements are the responsibility of the directors of the Company who approve their issue. It is also the responsibility of the directors of Company to compile the Financial Information set out in this report from the Underlying Financial Statements. The directors of Omnicorp are responsible for the contents of the Circular in which this report is included. It is our responsibility to form an independent opinion on the Financial Information, based on our examination, and to report our opinion to you.

In our opinion, the Financial Information gives, for the purpose of this report and on the basis of presentation set out in note 1 of Section VI below, a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2004, 2005 and 2006 and 31 July 2007 and of the Group’s results and cash flows for the years ended 31 December 2004, 2005 and 2006 and the seven months ended 31 July 2007.

The comparative consolidated financial information of the Group for the seven months ended 31 July 2006 have been extracted from the Group’s consolidated financial statements for the same period, which were prepared by the directors of the Company solely for the purpose of this report. We have conducted a review of the consolidated financial information for the seven months ended 31 July 2006 in accordance with Hong Kong Standard on Review Engagements 2400 “Engagements to Review Financial Statements” issued by the HKICPA. As required by the Standard, we have planned and performed the review to obtain moderate assurance as to whether the financial statements are free of material misstatement. A review is limited primarily to inquiries of company personnel and analytical procedures applied to financial data and thus provides less assurance than an audit. We have not performed an audit, and, accordingly, we do not express an audit opinion. On the basis of our review which does not constitute an audit, nothing has come to our attention that causes us to believe that the consolidated financial information for the seven months ended 31 July 2006 is not prepared, in all material respects, in accordance with Hong Kong Financial Reporting Standards.

FINANCIAL INFORMATION OF THE GREENHEART GROUP

APPENDIX II

FINANCIAL INFORMATION

I. CONSOLIDATED INCOME STATEMENTS

Note Turnover 4 Cost of sales Gross profit Other revenue 4 Selling expenses Administrative and operating expenses Loss from operating activities Finance costs 8 Loss before taxation Taxation 9 Loss for the year/period	Year ended 31.12.2004 US$’000 – – – – (73) (507) (580) (2) (582) – (582)	Year ended 31.12.2005 US$’000 – – – 4 (44) (2,580) (2,620) (205) (2,825) – (2,825)	Year Ended 31.12.2006 US$’000 1,091 (423) 668 15 (798) (4,088) (4,203) (142) (4,345) – (4,345)	1.1.2006 to 31.7.2006 US$’000 (unaudited) 420 (250) 170 8 (92) (1,911) (1,825) (131) (1,956) – (1,956)	1.1.2007 to 31.7.2007 US$’000 1,662 (493) 1,169 11 (137) (2,498) (1,455) ( 98) (1,553) – (1,553)

FINANCIAL INFORMATION OF THE GREENHEART GROUP

APPENDIX II

II. CONSOLIDATED BALANCE SHEETS

Note Assets Non-current assets Property, plant and equipment 10 Timber concession and cutting rights 11 Current assets Due from a related company 13 Due from shareholders 13 Due from directors 13 Inventories 14 Trade and other receivables 15 Cash and bank balances 16 Total assets Equity and liabilities Capital and reserves Share capital 17 Accumulated losses Total equity Non-current liabilities Other payables 18 Current liabilities Loan from a related company 19 Loan from a shareholder 20 Loans from directors 21 Loans payable 22 Due to a related company 13 Due to directors 13 Receipts in advance Trade and other payables 18 Other taxes payable Total liabilities Total equity and liabilities	31.12.2004 US$’000 24 – 24 330 – – – 5 1,511 1,846 1,870 1 (608) (607) – – – 1,485 950 – 13 – 29 – 2,477 2,477 1,870	31.12.2005 US$’000 1,039 1,209 2,248 – – – 47 56 944 1,047 3,295 1 (3,433) (3,432) 331 – – 4,982 731 48 10 – 613 12 6,396 6,727 3,295	31.12.2006 US$’000 1,699 1,201 2,900 – – – 986 282 208 1,476 4,376 10,128 (7,778) 2,350 110 469 645 – – 42 118 – 480 162 1,916 2,026 4,376	31.7.2006 US$’000 (unaudited) 1,616 1,206 2,822 – – 8 280 576 1,827 2,691 5,513 10,128 (5,389) 4,739 220 – – – – 84 43 – 415 12 554 774 5,513	31.7.2007 US$’000 1,597 1,197 2,794 – 259 15 941 339 11,254 12,808 15,602 20,693 (9,331) 11,362 – – – – – 53 4 3,011 508 664 4,240 4,240 15,602

FINANCIAL INFORMATION OF THE GREENHEART GROUP

APPENDIX II

III. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

1 January 2004 Loss for the year 31 December 2004 Loss for the year 31 December 2005 Issue of additional shares Loss for the period 31 July 2006 (unaudited) Loss for the period 31 December 2006 Issue of additional shares Loss for the period 31 July 2007	Share Accumulated Capital losses US$’000 US$’000 1 (26) – (582) 1 (608) – (2,825) 1 (3,433) 10,127 – – (1,956) 10,128 (5,389) – (2,389) 10,128 (7,778) 10,565 – – (1,553) 20,693 (9,332)	Total US$’000 (25) (582) (607) (2,825) (3,432) 10,127 (1,956) 4,739 (2,389) 2,350 10,565 (1,553) 11,362

FINANCIAL INFORMATION OF THE GREENHEART GROUP

APPENDIX II

IV. CONSOLIDATED CASH FLOW STATEMENTS

Note Cash flows from operating activities Loss before taxation Adjustments for: Interest expenses Interest income Bad and doubtful debts Amortisation Depreciation Loss on disposal of property, plant and equipment Operating loss before changes in working capital Decrease/(increase) in amount due from a related company Increase in amounts due from shareholders Increase in amounts due from directors Decrease/(increase) in inventories Increase in trade and other receivables (Decrease)/increase in amount due to a related company Increase/(decrease) in amounts due to directors Increase in receipts in advance Increase/(decrease) in trade and other payables Increase in other taxes payable Cash generated from operations Interest paid	Year ended 31.12.2004 US$’000 (582) 2 – – – 2 – (578) (330) – – – (1) – 13 – 19 – (877) (2)	Year ended 31.12.2005 US$’000 (2,825) 205 (4) – 1 97 242 (2,284) 330 – – (47) (51) 48 (3) – 49 12 (1,946) (205)	Year ended 31.12.2006 US$’000 (4,345) 142 (15) 495 8 166 11 (3,538) – – – (939) (721) (6) 108 – 172 150 (4,774) (142)	1.1.2006 to 31.7.2006 US$’000 (unaudited) (1,956) 131 (8) – 3 83 11 (1,736) – – (8) (233) (520) 36 33 – 117 – (2,311) (131)	1.1.2007 to 31.7.2007 US$’000 (1,553) 98 (3) – 4 122 – (1,332) – (259) (15) 45 (57) 11 (114) 3,011 18 502 1,810 (98)

APPENDIX II

FINANCIAL INFORMATION OF THE GREENHEART GROUP

Note Net cash generated from operating activities Cash flows from investing activities Interest received Payments to acquire a subsidiary 24 Payments to acquire property, plant and equipment Net cash used in investing activities Cash flows from financing activities Proceeds from borrowings Repayment of borrowings Proceeds from issuance of shares Net cash generated from financing activities (Decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of year/period Cash and cash equivalents at end of year/period Analysis of cash and cash equivalents Bank balances	Year ended 31.12.2004 US$’000 (879) – – (21) (21) 2,411 – – 2,411 1,511 – 1,511 1,511	Year ended 31.12.2005 US$’000 (2,151) 4 (678) (1,354) (2,028) 3,651 (39) – 3,612 (567) 1,511 944 944	Year ended 31.12.2006 US$’000 (4,916) 15 (192) (837) (1,014) 2,065 (294) 3,423 5,194 (736) 944 208 208	1.1.2006 to 31.7.2006 US$’000 (unaudited) (2,442) 8 (92) (671) (755) 951 (294) 3,423 4,080 883 944 1,827 1,827	1.1.2007 to 31.7.2007 US$’000 1,712 3 (100) (20) (117) – (714) 10,165 9,451 11,046 208 11,254 11,254

FINANCIAL INFORMATION OF THE GREENHEART GROUP

APPENDIX II

V. COMPANY BALANCE SHEETS

Note Assets Non-current assets Investment in a subsidiary 12 Current assets Due from a subsidiary Due from shareholders Total assets Equity and liabilities Capital and reserves Share capital 17 Accumulated losses Total equity Current liabilities Due to a related company Total liabilities Total equity and liabilities	31.12.2004 US$’000 – – – – – 1 (1) – – – –	31.12.2005 US$’000 – – – – – 1 (4) (3) 3 3 –	31.12.2006 US$’000 1 9,761 – 9,761 9,762 10,128 (366) 9,762 – – 9,762	31.7.2006 US$’000 (unaudited) 1 10,073 – 10,073 10,074 10,128 (54) 10,074 – – 10,074	31.7.2007 US$’000 – 19,384 257 19,641 19,641 20,693 (1,052) 19,641 – – 19,641

FINANCIAL INFORMATION OF THE GREENHEART GROUP

APPENDIX II

VI. NOTES TO THE FINANCIAL INFORMATION

1. Basis of presentation of consolidated financial statements

The Company is a limited liability company incorporated in the British Virgin Islands on 8 October 2004. Its principal activity is investment holding. Pursuant to a group reorganisation (the “Group Reorganisation”) to rationalise the structure of the Company and its subsidiaries (hereinafter collectively referred to as the “Group”), the Company became the holding company of the Group on 10 March 2006.

The Group resulting from the Group Reorganisation is regarded as a continuing entity. Accordingly, the consolidated financial statements of the Group for the accounting periods prior to 10 March 2006 have been prepared under the principles of merger accounting, pursuant to Accounting Guideline 5 “Merger Accounting for Common Control Combinations” issued by the HKICPA, as if the current group structure had been in existence throughout the Relevant Periods.

The consolidated income statements and the consolidated cash flow statements of the Group for the Relevant Periods have been prepared as if the proposed group structure had been in existence throughout the Relevant Periods, or, in the case of certain companies in the Group, since their dates of incorporation to 31 July 2007 where this is a shorter period. The consolidated balance sheets of the Group as at 31 December 2003, 2004 and 2005, 31 July 2006 and 2007 have been prepared to present the assets and liabilities of the Group as if the group structure had been in existence as at those dates.

All significant intra-group transactions, cash flows and balances have been eliminated on consolidation.

The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”), which collectively include all applicable individual HKFRSs, Hong Kong Accounting Standards (“HKASs”) and Interpretations issued by the HKICPA. The measurement basis used in the preparation of the consolidated financial statements is the historical cost basis. The consolidated financial statements are presented in United States dollars, the functional currency of the Group.

2. Significant accounting policies

a) Judgments and estimates

The preparation of financial statements in conformity with HKFRSs requires the directors to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The directors have considered the development, selection and disclosure of the Group’s critical accounting policies and estimates. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets or liabilities are as follows:

i) Useful lives and depreciation of property, plant and equipment

The Group determines the estimated useful lives and related depreciation charges of its property, plant and equipment. These estimates are based on the historical experience of the actual useful lives of property, plant and equipment of similar nature and functions. The Group will increase the depreciation charge where useful lives are less than previously estimated lives, and will write off or write down technically obsolete or non-strategic assets that have been abandoned or sold. Actual economic lives may differ from estimated useful lives. Periodic review could result in a change in depreciable lives and therefore depreciation charge in the future periods.

FINANCIAL INFORMATION OF THE GREENHEART GROUP

APPENDIX II

ii) Amortisation of timber concession and cutting rights

Amortisation is charged to the income statement on a ractuity basis over the estimated useful lives of timber concession. The Group determines the estimated useful lives and related amortisation charges of its timber concession. These estimates are based on the total proven and probable reserves of the total forestry exploitation volume or contractual period from the date of commencement of commercial exploitation.

iii) Net realisable value of inventories

Net realisable value of inventories is the estimated selling price in the ordinary course of business, less estimated costs of completion and variable selling expenses. These estimates are based on the current market condition and the historical experience of manufacturing and selling products of similar nature. It could change significantly as a result of changes in customer taste and competitor actions in response to severe industry cycle. The directors reassess the estimations at each balance sheet date.

iv) Allowance of bad and doubtful trade and other receivables

The Group makes the allowance of bad and doubtful trade and other receivables based on an assessment of the recoverability of the receivables. This assessment is based on the credit history of the customers and other debtors and the current market condition. The directors reassess the allowance at each balance sheet date.

b) Impairment of assets

c) Property, plant and equipment and depreciation

Property, plant and equipment are stated at cost, less provisions for depreciation and any impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable cost of bringing the asset to its working condition and location for its intended use. Expenditure incurred after the item has been put into operation, such as repairs and maintenance and overhaul costs, is normally charged to the income statement in the year in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in future economic benefits expected to be obtained from the use of the item, the expenditure is capitalised as an additional cost of the item. When an item of property, plant and equipment is sold, its cost and accumulated depreciation are removed from the financial statements and any gain or loss resulting from the disposal, being the difference between the net disposal proceeds and the carrying amount of the asset, is included in the income statement.

Depreciation is provided on the straight-line basis over the estimated economic useful lives of the individual assets. The principal annual rates used for this purpose are as follows:

Plant and machinery 10% Furniture and fixtures 20% River crafts 10% Motor vehicles 10%

FINANCIAL INFORMATION OF THE GREENHEART GROUP

APPENDIX II

d)

Timber concession and cutting rights

Timber concession licences and cutting rights acquired by the Group are stated at cost less accumulated amortisation and any accumulated impairment losses. These licences give the Group rights to harvest trees in the allocated concession forests in designated areas in Suriname.

e) Investment in subsidiary

A subsidiary is an entity controlled by the Company. Control exists when the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account.

Investment in subsidiary is stated in the Company’s balance sheet at cost less any identified impairment losses. Results of the subsidiary are accounted for by the Company on the basis of dividends received and receivable.

f) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the standard costing method and comprises all costs of logging, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

g) Trade and other receivables

Trade and other receivables are initially recognised at fair value and thereafter stated at cost less allowance for bad and doubtful debts. An allowance for bad and doubtful trade and other receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtors, probability that the debtors will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the receivables are impaired. The amount of the allowance is the difference between the receivables’ carrying amounts and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the allowance is recognised in the income statement.

h) Trade and other payables

Trade and other payables are initially recognised at fair value and thereafter stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

i) Provisions

Provisions are recognised for liabilities of uncertain timing or amount when the Group has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditures expected to settle the obligation.

When the effect of discounting is material, the amount recognised for a provision is the present value at the balance sheet date of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in finance costs in the income statement.

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, whose existence 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.

FINANCIAL INFORMATION OF THE GREENHEART GROUP

APPENDIX II

j) Foreign currency translation

Group

The balance sheets of the overseas subsidiaries are translated at the rates of exchange ruling at the balance sheet date, whilst their income statements are translated at the average rates for the period/year. The exchange difference arising on the retranslation of opening net assets, and the difference between the income statements translated at the average rates and at the closing rates are taken directly to reserves.

Company

Transactions in foreign currencies are translated into United States dollars at the approximate rates ruling on the dates of the individual transactions. Monetary assets and liabilities denominated in other currencies are translated at the approximate rates ruling on the balance sheet date. Gains and losses arising on exchange are dealt with in the income statement.

k) Revenue recognition

Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in the income statement as follows:–

i) Sale of goods

Revenue is recognised when the customer has accepted the goods and the related risks and rewards of ownership. Revenue excludes value added tax or other sales taxes and is after deduction of any trade discounts and returns.

ii) Interest income

Interest income is recognised on a time proportion basis, taking into account the principal amounts outstanding and the interest rates applicable.

iii) Sundry income

Sundry income is recognised on an actual basis.

l) Employee benefits

Salaries, annual bonuses, paid annual leave, leave passage and the cost to the Group of non-monetary benefits are accrued in the year in which the associated services are rendered by employees of the Group. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

Contributions to provident funds are recognised as an expense in the income statement as incurred.

m) Operating lease charges

n) Borrowing costs

Borrowing costs are interest and other costs incurred in connection with the borrowing of funds. All borrowing costs are charged to the income statement in the year in which they are incurred.

o) Taxation

Taxation in the income statement represents the sum of the tax currently payable and deferred tax.

FINANCIAL INFORMATION OF THE GREENHEART GROUP

APPENDIX II

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases 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 the initial recognition of assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

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

p) Cash and cash equivalents

q) Related parties

A party is considered to be related to the Group if:

i) the party has the ability, directly or indirectly through one or more intermediaries, to control the Group or exercise significant influence over the Group in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common significant influence;
ii) the party is a member of the key management personnel of the Group;
iii) the party is a close member of the family of any individual referred to in i) or ii);
iv) the party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in ii) or iii); or
v) the party is a post-employment benefit plan for the benefit of employees of the Group, or of any entity that is a related party of the Group.

r)

Segment reporting

A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.

In accordance with the Group’s internal financial reporting, the Group has chosen geographical segment information as the primary reporting format. No business segments analysis of the Group is presented as all the Group’s turnover and trading result are generated from the log harvesting activities.

FINANCIAL INFORMATION OF THE GREENHEART GROUP

APPENDIX II

Segment revenue, expenses, results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis to that segment. For example, segment assets may include property, plant and equipment, inventories and trade receivables, etc. Segment revenue, expenses, assets and liabilities are determined before intra-group balances and intra-group transactions are eliminated as part of the consolidation process, except to the extent that such intra-group balances and transactions are between group enterprises within a single segment.

Segment capital expenditure is the total cost incurred during the years/periods to acquire segment assets that are expected to be used for more than one year.

3. Segmental information

Segment information is presented in respect of the Group’s geographical segments. Information relating to geographical segments based on the location of the customers is chosen because, in the opinion of the directors, this is more relevant to the Group in making operating and financial decisions. No business segments analysis of the Group is presented as over 90% of the Group’s turnover and trading results are generated from the log harvesting activities.

Segment revenue – PRC – elsewhere Segment assets, liabilities and other information Assets – Suriname – Hong Kong Liabilities – Suriname – Hong Kong Capital expenditure – Suriname – Hong Kong Depreciation and amortisation – Suriname – Hong Kong	Year ended 31.12.2004 US$’000 – – – 351 1,519 1,870 78 2,399 2,477 21 – 21 1 1 2	Year ended 31.12.2005 US$’000 – – – 2,545 750 3,295 708 6,019 6,727 2,564 – 2,564 96 2 98	Year 1.1.2006 ended to 31.12.2006 31.7.2006 US$’000 US$’000 (unaudited) 1,091 420 – – 1,091 420 4,150 3,312 226 2,201 4,376 5,513 730 541 1,296 233 2,026 774 822 659 15 12 837 671 172 85 2 1 174 86	1.1.2007 to 31.7.2007 US$’000 1,574 88
				1,662

				4,114 11,488
				15,602

				1,160 3,080
				4,240

				18 2
				20

				124 2
				126

FINANCIAL INFORMATION OF THE GREENHEART GROUP

APPENDIX II

4. Turnover and revenue

Turnover represents the revenue from trading of logs to customers. An analysis of turnover and revenue is as follows:

Year Year ended ended 31.12.2004 31.12.2005 US$’000 US$’000 Turnover Sales of logs – – Less: Export tax – – Net turnover – – Other revenue Interest income – 4 Sundry income – – – 4 Total revenue recognised during the year/period – 4 5. Loss from operating activities Loss from operating activities is arrived at after charging: Year Year ended ended 31.12.2004 31.12.2005 US$’000 US$’000 Auditors’ remuneration – – Bad and doubtful debts – – Amortisation of timber concession – 1 Cost of inventories sold – – Depreciation of property, plant and equipment 2 97 Loss on disposal of property, plant and equipment – 242 Operating lease rentals – land and buildings 15 49 Provident fund contributions (included in staff costs below) – – Staff costs – directors’ emoluments_(note 6)_ 144 192 – others 53 318	Year 1.1.2006 ended to 31.12.2006 31.7.2006 US$’000 US$’000 (unaudited) 1,221 453 (130) (33) 1,091 420 15 8 – – 15 8 1,106 428 Year 1.1.2006 ended to 31.12.2006 31.7.2006 US$’000 US$’000 (unaudited) – – 495 – 8 3 423 250 166 83 11 11 205 102 1 – 457 189 906 411	1.1.2007 to 31.7.2007 US$’000 1,910 ( 248) 1,662 3 8 11 1,673 1.1.2007 to 31.7.2007 US$’000 – – 4 493 122 – 205 1 178 602

FINANCIAL INFORMATION OF THE GREENHEART GROUP

APPENDIX II

6. Directors’ emoluments

Details of the emoluments paid by the Group to the directors during the relevant periods are as follows:

Fees Other emoluments	Year ended 31.12.2004 US$’000 144 – 144	Year ended 31.12.2005 US$’000 192 – 192	Year 1.1.2006 ended to 31.12.2006 31.7.2006 US$’000 US$’000 (unaudited) 457 189 – – 457 189	1.1.2007 to 31.7.2007 US$’000 178 –
				178

Emoluments of the directors fell within the following bands:

	Number	Number	Number	Number	Number
	of	of	of	of	of
	director	director	director	director	director
Nil – HK$1,000,000	2	3	6	5	5

There was no arrangement under which a director waived or agreed to waive any emoluments during the relevant periods.

7. Emoluments of the five highest paid employees

The five highest paid individuals of the Group include two, three, four, three and four directors for the years ended 31 December 2004, 2005, 2006 and the seven months ended 31 July 2006 and 2007, respectively, whose emoluments are disclosed in note 5. Details of remuneration paid to the remaining highest paid individuals of the Group are as follows:

Salaries and allowances Retirement/pension contributions	Year ended 31.12.2004 US$’000 – – –	Year ended 31.12.2005 US$’000 104 – 104	Year 1.1.2006 ended to 31.12.2006 31.7.2006 US$’000 US$’000 (unaudited) 100 77 – – 100 77	1.1.2007 to 31.7.2007 US$’000 27 –
				27

Emoluments of the above individuals, who are not directors of the Group, fell within the following band:–

Nil – HK$1,000,000 8. Finance costs Interest on other loans	Number of individual – Year ended 31.12.2004 US$’000 2	Number of individual 2 Year ended 31.12.2005 US$’000 205	Number Number of of individual individual 1 2 Year 1.1.2006 ended to 31.12.2006 31.7.2006 US$’000 US$’000 (unaudited) 142 131	Number of individual 1

				1.1.2007 to 31.7.2007 US$’000 98

FINANCIAL INFORMATION OF THE GREENHEART GROUP

APPENDIX II

9. Taxation

No provision for domestic taxation has been made by the Company as the Company is not subject to tax in the British Virgin Islands and elsewhere. Taxation for overseas subsidiaries is charged at the appropriate current rates of taxation ruling in the relevant countries.

The reconciliation between loss before taxation and taxation in the consolidated income statements is as follows:

Loss before taxation Tax at statutory income tax rate of 36% Tax effect of different tax rates of subsidiaries Tax effect of non-deductible expenses Tax effect of unused tax losses not recognised Taxation	Year ended 31.12.2004 US$’000 (582) (209) 109 – 100 –	Year ended 31.12.2005 US$’000 (2,825) (1,017) 326 1 690 –	Year 1.1.2006 ended to 31.12.2006 31.7.2006 US$’000 US$’000 (unaudited) (4,345) (1,956) (1,564) (704) 669 267 10 – 885 437 – –	1.1.2007 to 31.7.2007 US$’000 (1,553) (560) 329 9 222 –

No provision for deferred tax has been made as there are no temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.

100

FINANCIAL INFORMATION OF THE GREENHEART GROUP

APPENDIX II

10. Property, plant and equipment

Cost 1 January 2004 Additions Disposals 31 December 2004 Additions Disposals 31 December 2005 Additions Disposals 31 July 2006 (unaudited) Additions 31 December 2006 Additions 31 July 2007 Depreciation 1 January 2004 Charge for the year On disposals 31 December 2004 Charge for the year On disposals 31 December 2005 Charge for the period On disposals 31 July 2006 (unaudited) Charge for the period 31 December 2006 Charge for the period 31 July 2007 Net book value 31 July 2007 31 July 2006 (unaudited) 31 December 2006 31 December 2005 31 December 2004	Plant and machinery US$’000 – – – – 700 – 700 264 – 964 65 1,029 – 1,029 – – – – 63 – 63 42 – 105 44 149 61 210 819 859 880 637 –	Furniture and fixtures US$’000 6 3 – 9 53 (6) 56 27 – 83 27 110 20 130 1 1 – 2 6 (4) 4 8 – 12 9 21 14 35 95 71 89 52 7	River crafts US$’000 – – – – 256 (250) 6 340 – 346 – 346 – 346 – – – – 10 (10) – 14 – 14 8 22 20 42 304 332 324 6 –	Motor vehicles US$’000 – 18 – 18 345 – 363 40 (12) 391 74 465 – 465 – 1 – 1 18 – 19 19 (1) 37 22 59 27 86 379 354 406 344 17	Total US$’000 6 21 – 27 1,354 (256) 1,125 671 (12) 1,784 166 1,950 20 1,970 1 2 – 3 97 (14) 86 83 (1) 168 83 251 122 373 1,597 1,616 1,699 1,039 24

101

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APPENDIX II

11. Timber concession and cutting rights

Cost 1 January 2004 Additions 31 December 2004 Additions 31 December 2005 Additions 31 July 2006 (unaudited) Additions 31 December 2006 Additions 31 July 2007 Accumulated amortisation 1 January 2004 Charge for the year 31 December 2004 Charge for the year 31 December 2005 Charge for the period 31 July 2006 (unaudited) Charge for the period 31 December 2006 Charge for the period 31 July 2007 Net carrying amount 31 July 2007 31 July 2006 (unaudited) 31 December 2006 31 December 2005 31 December 2004	US$’000 – –
	– 1,210
	1,210 –
	1,210 –
	1,210 –
	1,210
	– –
	– 1
	1 3
	4 5
	9 4
	13
	1,197

	1,206

	1,201

	1,209

	–

102

FINANCIAL INFORMATION OF THE GREENHEART GROUP

APPENDIX II

12. Investment in a subsidiary

Unlisted shares, at cost At beginning of year/period Additions Arising on group reorganisation At end of the year/period	31.12.2004 US$’000 – – – –	31.12.2005 US$’000 – – – –	31.12.2006 31.7.2006 US$’000 US$’000 (unaudited) – – 1 1 – – 1 1	31.7.2007 US$’000 1 – (1) –

On 10 March 2006, the Company acquired 100% equity interest in Superb Able Industrial Limited(“SAlL”), a limited liability company incorporated in the British Virgin Islands whose principal activity is investment holding.

During the period ended 31 July 2007, the Company underwent another group reorganisation and acquired 100% equity interest in Prime Forest Holdings Limited (formerly, Superb Resources Holdings Limited), a limited liability company incorporated in the British Virgin Islands whose principal activity is investment holding and which at the same time acquired 100% equity interest in SAIL at nominal value.

In the opinion of the directors, the recoverable amount of the investment in subsidiary is not less than the carrying amount reflected in the balance sheet and no provision for impairment is required.

13. Due from/to related companies, directors and shareholders

The amounts due from/to related companies, directors and shareholders are unsecured, interest-free and there are no fixed terms for repayment.

14. Inventories

Timber log Sawn Timber Less: Provision 15. Trade and other receivables Trade receivables – gross Less: Provision Trade receivables – net Other receivables Prepayments and deposits Trade and other receivables	31.12.2004 US$’000 – – – – – 31.12.2004 US$’000 – – – 1 4 5	31.12.2005 US$’000 47 – 47 – 47 31.12.2005 US$’000 – – – 47 9 56	31.12.2006 31.7.2006 US$’000 US$’000 (unaudited) 986 280 – – 986 280 – – 986 280 31.12.2006 31.7.2006 US$’000 US$’000 (unaudited) 648 181 (495) – 153 181 46 70 83 325 282 576	31.7.2007 US$’000 908 33 941 – 941 31.7.2007 US$’000 545 (495) 50 77 212 339

103

FINANCIAL INFORMATION OF THE GREENHEART GROUP

APPENDIX II

An ageing analysis of the gross amount of trade receivables is as follows:

Current 1 to 3 months Over 3 months Trade receivables – gross	31.12.2004 US$’000 – – – –	31.12.2005 US$’000 – – – –	31.12.2006 31.7.2006 US$’000 US$’000 (unaudited) 388 – 183 181 77 – 648 181	31.7.2007 US$’000 – – 545
				545

Generally, the Group has granted credit terms to its customers, ranging from 30 to 90 days.

All trade and other receivables were denominated in United States Dollars.

The directors consider that the carrying amounts of trade and other receivables approximate to their fair value.

Movements in provision for bad and doubtful debts during the years/periods were as follows:

At beginning of year/period Charge to income statement At end of year/period	Year ended 31.12.2004 US$’000 – – –	Year ended 31.12.2005 US$’000 – – –	Year 1.1.2006 ended to 31.12.2006 31.7.2006 US$’000 US$’000 (unaudited) – – 495 – 495 –	1.1.2007 to 31.7.2007 US$’000 495 –
				495

16. Cash and bank balances

Details of cash and bank balances denominated in different currencies are as follows:

United States dollars Hong Kong dollars	31.12.2004 US$’000 1,501 10 1,511	31.12.2005 US$’000 700 244 944	31.12.2006 31.7.2006 US$’000 US$’000 (unaudited) 103 1,780 105 47 208 1,827	31.7.2007 US$’000 11,008 246
				11,254

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APPENDIX II

17. Share capital

31.12.2004 US$’000 Authorised: 50,000 ordinary shares of US$1 each 50 2,000,000,000 ordinary shares of HK$1 each – 10,000,000,000 ordinary shares of no par value – 20,000,000,000 class B shares of no par value – Issued and fully paid: 1 ordinary share of US$1 each 1 1 ordinary shares of HK$1 each – 1,505,000,000 ordinary shares of no par value – 455,000,000 ordinary shares of no par value – 140,000,000 ordinary shares of no par value – 4,200,000,000 class B shares of no par value – 365,000,000 class B shares of no par value – 1,000,000,000 class B shares of no par value – 1 18. Trade and other payables 31.12.2004 US$’000 Trade payables – Other payables and accruals 29 Trade and other payables 29 31.12.2004 US$’000 Non-current portion – Current portion 29 Trade and other payables 29 An ageing analysis of trade payables is as follows: 31.12.2004 US$’000 Current – 1 to 3 months – Trade payables –	31.12.2005 US$’000 – 256,410 – – – 1 – – – – – – 1 31.12.2005 US$’000 – 944 944 31.12.2005 US$’000 331 613 944 31.12.2005 US$’000 – – –	31.12.2006 31.7.2006 US$’000 US$’000 (unaudited) – – – – – – – – – – – – 615 615 7,000 7,000 2,513 2,513 – – – – – – 10,128 10,128 31.12.2006 31.7.2006 US$’000 US$’000 (unaudited) 132 – 458 635 590 635 31.12.2006 31.7.2006 US$’000 US$’000 (unaudited) 110 220 480 415 590 635 31.12.2006 31.7.2006 US$’000 US$’000 (unaudited) – – 132 – 132 –	31.7.2007 US$’000 – – – –

			– – 615 7,000 2,513 4,200 365 6,000
			20,693

			31.7.2007 US$’000 94 414
			508

			31.7.2007 US$’000 – 508
			508

			31.7.2007 US$’000 – 94
			94

105

FINANCIAL INFORMATION OF THE GREENHEART GROUP

APPENDIX II

Details of trade and other payables denominated in different currencies are as follows:

United States dollars Hong Kong dollars Trade and other payables	31.12.2004 US$’000 – 29 29	31.12.2005 US$’000 944 – 944	31.12.2006 31.7.2006 US$’000 US$’000 (unaudited) 590 635 – – 590 635	31.7.2007 US$’000 486 22
				508

The directors consider that the carrying amounts of trade and other payables approximate their fair values.

19. Loan from a related company

Loan from a related company is unsecured, carries compound interest at 1% per month and the entire amount has been fully repaid during the seven months ended 31 July 2007.

20. Loan from a shareholder

Loan from a shareholder is unsecured, carries compound interest at 1% per month and except for US$400,000 which has been capitalised, the entire amount has been fully repaid during the seven months ended 31 July 2007.

21. Loans from directors

Loans from directors are unsecured and except for US$179,000 which carries interest at 5% per annum, the entire amount has been capitalised during the seven months ended 31 July 2006.

22. Loans payable

Loans payable are unsecured, interest-free and they do not have any fixed terms for repayment.

23. Acquisition of an indirect subsidiary

On 3 March 2005, the Group acquired all the issued shares of Epro N.V. for US$1,047,000, satisfied in cash and payable by 8 instalments. Epro N.V. holds a forest concession with a total area of 126,825 hectare in West Suriname. Except for the holding of the forest concession, Epro N.V. remained dormant since the acquisition and had no contributions to the Group’s consolidated net loss during the Relevant Periods.

Effect of acquisition

The acquisition had the following effect on the Group’s assets and liabilities:

	Acquiree’s	Fair value	Acquisition
	book value	adjustments	amount
	US$’000	US$’000	US$’000
Acquiree’s net assets at the acquisition date
Net identifiable assets acquired
– timber concession and cutting rights	–	1,047	1,047
Satisfied by
– cash			1,047

No goodwill arose on the acquisition.

106

APPENDIX II

FINANCIAL INFORMATION OF THE GREENHEART GROUP

Analysis of the net outflow of cash and cash equivalents in respect of the acquisition during the years ended 31 December 2004, 2005, 2006 and the seven months ended 31 July 2006 and 2007 is as follows:

1.1.2006 Year ended Year ended Year ended to 31.12.2004 31.12.2005 31.12.2006 31.7.2006 US$’000 US$’000 US$’000 US$’000 Cash consideration/unpaid portion at beginning of year/period – 1,047 369 369 Unpaid portion at end of year/period – (369) (177) (277) Net outflow of cash and cash equivalents – 678 192 92 Commitments i) Capital commitments 31.12.2004 31.12.2005 31.12.2006 31.7.2006 US$’000 US$’000 US$’000 US$’000 (unaudited) Contracted but not accounted for – – 816 834	1.1.2007 to 31.7.2007 US$’000 177 (77)
	100

	31.7.2007 US$’000 742

24. Commitments

ii) Operating lease commitments

At 31 December 2004, 2005 and 2006 and 31 July 2006 and 2007, the Group had outstanding minimum commitments under non-cancellable operating leases in respect of land and buildings which fall due as follows:

Within one year In the second and fifth years inclusive Over five years	31.12.2004 US$’000 1 – – 1	31.12.2005 US$’000 12 – – 12	31.12.2006 31.7.2006 US$’000 US$’000 (unaudited) 119 108 422 422 475 519 1,016 1,049	31.7.2007 US$’000 119 422 414
				955

The Group leases a number of properties under operating leases. Except for the lease of a sawmill production plant which lasts for ten years, the other leases typically run for an initial period of one year, with an option to renew the lease when all terms are renegotiated. Lease payments are usually adjusted to reflect market rentals upon renegotiation of the terms of the leases.

25. Related party transactions

a) Transactions with related companies during the years/periods not disclosed elsewhere in the financial statements are summarised as follows:

	Year	Year	Year	1.1.2006	1.1.2007
	ended	ended	ended	to	to
	31.12.2004	31.12.2005	31.12.2006	31.7.2006	31.7.2007
	US$’000	US$’000	US$’000	US$’000	US$’000
				(unaudited)
Consultancy fee paid to a
related company	–	60	35	35	–
Interest charged by a director	1	151	114	114	–
Interest paid to a shareholder	–	–	4	–	41
Interest paid to
related companies	–	–	8	17	25

The above transactions were made at prices and terms as agreed between the parties in the normal course of business.

107

FINANCIAL INFORMATION OF THE GREENHEART GROUP

APPENDIX II

b) Remuneration for key management personnel, including amounts paid to the Company’s directors as disclosed in note 6, is as follows:

Short-term employee benefits Post employment benefits	Year ended 31.12.2004 US$’000 144 – 144	Year ended 31.12.2005 US$’000 192 – 192	Year 1.1.2006 ended to 31.12.2006 31.7.2006 US$’000 US$’000 (unaudited) 457 189 – – 457 189	1.1.2007 to 31.7.2007 US$’000 178 –
				178

26. Financial risk management and estimation of fair values

a) Financial risk management

i) Foreign currency risk

Foreign currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates.

The Group is exposed to foreign currency risk primarily through sales and purchases that are denominated in a currency other than the functional currency of the operations to which they relate. The currency giving rise to this risk is primarily United States dollars. The Group does not hold or issue any derivative financial instruments for trading purposes or to hedge against fluctuations in foreign exchange rates. The Group mitigates this risk by conducting the sales and purchases transactions in the same currency, whenever possible.

ii) Credit risk

Credit risk arises from the possibility that customers may not be able to settle obligations within the normal terms of transactions. The Group performs ongoing credit evaluation of the debtors’ financial condition and maintains an account for allowance of bad and doubtful trade and other accounts receivable based upon the expected collectibles of all trade and other accounts receivable.

At the balance sheet date, there were no major concentrations of credit risk.

The maximum exposure to credit risk is therefore represented by the carrying amount of each financial asset as stated in the balance sheet.

Cash is held with financial institutions of good standing.

iii) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash. The Group monitors and maintains a level of bank balances deemed adequate to finance the Group’s operations.

108

FINANCIAL INFORMATION OF THE GREENHEART GROUP

APPENDIX II

iv) Cash flow and fair value interest rate risk

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

v) Natural risk

The Group’s revenue depends significantly on the ability to harvest wood at adequate levels. The ability to harvest wood in forests may be affected by unfavourable local weather conditions and natural disasters. Weather conditions such as flood, droughts, cyclones and windstorms and natural disasters such as earthquakes, fire, disease, insect infestation and pests are examples of such events. The occurrence of severe weather conditions nor natural disasters may diminish the supply of trees available for harvesting, or otherwise impede the Group’s logging operations, which in turn may have a material adverse effect on the Group’s ability to produce the products in sufficient quantities and in a timely manner.

Moreover, bad weather may adversely affect the condition of the Group’s transportation infrastructure, which is critical for the Group to supply timber from the forests to the Group’s manufacturing plants and customers. The Group has developed a strategy for utilizing different transportation modes and stockpiling, but its daily operations may be unfavourably affected by interruption of transportation due to bad weather or other reasons.

b) Estimation of fair values

The notional amounts of financial assets and liabilities with a maturity of less than one year are assumed to approximate their fair values.

The fair value of balances with related parties has not been determined as the timing of the expected cash flows of these balances cannot be reasonably determined because of the relationship.

27. Recent accounting and financial reporting pronouncements

The HKICPA has issued the following amendments, new standards and interpretations which may be/are relevant to the preparation of the Group’s financial statements for the accounting period after 1 January 2007:

		Effective for
		accounting periods
		beginning on or after
HKAS 23 (Revised)	Borrowing costs	1 January 2009
HKFRS 8	Operating Segments	1 January 2009
HK(IFRIC)-Int 11	HKFRS 2 – Group and Treasury Share Transactions	1 March 2007
HK(IFRIC)-Int 12	Service Concession Arrangements	1 January 2008

The Group is in the process of making an assessment of the impact of these new and revised HKFRSs upon initial application. So far, it has concluded that the adoption of these amendments is unlikely to have a significant impact on the Group’s results of operations and financial position.

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APPENDIX II FINANCIAL INFORMATION OF THE GREENHEART GROUP

VII. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Group in respect of any period subsequent to 31 July 2007.

Yours faithfully,

Moore Stephens Certified Public Accountants Hong Kong

110

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED COMBINED ASSETS AND LIABILITIES

The following is a summary of the unaudited pro forma statement of adjusted combined assets and liabilities of the Enlarged Group based on the unaudited consolidated balance sheet of the Group as at 30 June 2007, as set out in the announcement of Interim Results for the six months ended 30 June 2007 published on 21 September 2007 and the audited consolidated balance sheet of the Greenheart Group as at 31 July 2007 as set out in Appendix II to this circular. This statement has been prepared for illustrative purposes only and because of its nature, it may not give a true picture of financial position of the Enlarged Group immediately upon completion of the Acquisition, as if the Acquisition took place on 30 June 2007.

Unaudited statement of adjusted combined assets and liabilities

Non-current assets Tangible_(Note 3) Intangible Goodwill(Note 4) Current assets(Note 5) Current liabilities (Note 6) Net current assets Non-current liabilities (Note 6) Minority interests (Note 7)_ Net asset value	The Group 30.6.2007 HK$’000 (Note 1) 89,796 – – 89,796 182,199 70,108 112,091 693 36,060 165,134	Greenheart Group 31.7.2007 HK$’000 (Note 2) 12,457 9,337 – 21,794 99,902 33,072 66,830 – – 88,624	Adjustments to reflect the Combined Acquisition HK$’000 HK$’000 102,253 (4,156) 9,337 – 321,826 111,590 282,101 (18,000) 103,180 8,956 178,921 693 212,433 36,060 35,104 253,758	Adjusted Combined HK$’000 98,097 9,337 321,826
				429,260
				264,101 112,136
				151,965 213,126 71,164
				296,935

111

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Notes:

The figures for the Group are based on the unaudited financial statements of the Group set out in the announcement of Interim Results for the six months ended 30 June 2007 published on 21 September 2007.
The figures for the Greenheart Group are based on the Accountants’ Report set out in Appendix II to this circular.
The adjustment reflects the elimination of the 0.39% interest in the Greenheart Group originally held by the Group prior to the Acquisition.
The goodwill arising from acquisition of the Greenheart Group is calculated as follows:

Consideration Net assets of the entire Greenheart Group as of 31 July 2007 Net assets of 60% of the Greenheart Group as of 31 July 2007 Goodwill	HK$’000 88,624	HK$’000 375,000 53,174
		321,826

The consideration was calculated based on HK$18,000,000 in cash, HK$120,000,000 by the issue of the Consideration Shares at HK$2.00 per Consideration Share and HK$237,000,000 by the issue of Convertible Bonds which are convertible into Conversion Shares at the initial conversion price of HK$2.00 per Conversion Share during the Conversion Period.

The final amount of goodwill will be determined on the day of completion of the Acquisition when a further review of the value of the underlying assets of the Greenheart Group will be performed. The unaudited pro forma adjusted combined assets and liabilities of the Enlarged Group will be increased or decreased by the amount of goodwill so allocated to the underlying assets of the Greenheart Group.

The adjustment reflects the payment of consideration of HK$18,000,000 in cash for the Acquisition.
The adjustment reflects the issue of Convertible Bonds to finance the Acquisition, which is calculated as follows:

Present value of the principal HK$237,000,000 repayable at the end of two years Present value of the interest HK$9,480,000 payable semi-annually in arrears in the second year Present value of the interest HK$9,480,000 payable semi-annually in arrears within one year Total liability component Equity component (by deduction) Proceeds of the bond issue	HK$’000 204,133 8,300
	212,433 8,956
	221,389 15,611
	237,000

The present value of the liability component is calculated using a discount rate of 7.75%, the market interest rate that the Group is likely to pay for external debt financing.

Minority interests will be increased by the 39.61% interest in the Greenheart Group upon Completion.

112

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

B. ACCOUNTANTS’ REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following is the text of a report, prepared for the sole purpose of inclusion in this circular, received from the independent reporting accountants of the Company, Moore Stephens, Certified Public Accountants, Hong Kong.

==> picture [151 x 126] intentionally omitted <==

3 October 2007

The Directors Omnicorp Limited Units 1505-07, Shui On Centre 6-8 Harbour Road Wanchai Hong Kong

Dear Sirs

We report on the unaudited pro forma financial information of Omnicorp Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”), which has been prepared by the directors for illustrative purposes only, to provide information about how the acquisition of 60% interest in the share capital of Greenheart Resources Holdings Limited (the “Acquisition”) might have affected the financial information presented, for inclusion as Appendix III to the circular of Omnicorp Limited dated 3 October 2007 (the “Circular”). The basis of preparation of the pro forma financial information is set out on Section A of Appendix III to the Circular.

Respective responsibilities of directors of the Company and reporting accountants

It is the responsibility solely of the directors of the Company to prepare the unaudited pro forma financial information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to AG 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants.

It is our responsibility to form an opinion, as required by paragraph 4.29 of the Listing Rules, on the unaudited pro forma financial information and to report our opinion to you. We do not accept any

113

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

Basis of opinion

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements (HKSIR) 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants. Our work consisted primarily of comparing the unadjusted financial information with source documents, considering the evidence supporting the adjustments and discussing the 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 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 4.29(1) of the Listing Rules.

The unaudited pro forma financial information is for illustrative purposes only, based on the judgments and assumptions of the directors of the Company, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in the future and may not be indicative of the financial position of the Enlarged Group had the Acquisition actually occured as at 30 June 2007 or any future date.

Opinion

In our opinion:

a. the unaudited pro forma financial information has been properly compiled by the directors of the Company on the basis stated;
b. such basis is consistent with the accounting policies of the Group; and
c. the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

Yours faithfully, Moore Stephens

Certified Public Accountants Hong Kong

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The following is the text of a report, prepared for the sole purpose of inclusion in this circular, received from an independent international firm of forestry experts, Pöyry Forestry Industry Limited, New Zealand

PÖYRY FOREST INDUSTRY LIMITED

Level 5, HSBC Building 1 Queen Street PO Box 105 891 Auckland City, NEW ZEALAND Tel. +64 9 918 1100 Fax +64 9 918 1107

3 October 2007

The Board of Directors Omnicorp Limited Units 1505-7, 15th Floor, Shui On Centre, 6-8 Harbour Road, Wanchai, Hong Kong

The Board of Directors Greenheart Resources Holdings Limited, Suites 2708-10 27/F Dah Sing Financial Centre, 108 Gloucester Road, HONG KONG

Dear Sirs,

At the request of the Board of Directors of Greenheart Resources Holdings Limited (“Greenheart”), the Board of Directors of Omnicorp Limited (“Omnicorp”) and their financial advisors, Pöyry Forest Industry Limited (“Pöyry”) has carried out a Standing Stock valuation of Greenheart’s forestry concession and cutting rights areas in Suriname. These include concessions 725, 506 and 506a (hereinafter collectively referred as Epro FMU) and concessions 551a, 550, 550b and 1040 (hereinafter collectively referred as Dynasty concessions) as at 31st July 2007.

Pöyry certifies the following statements to be true to the best of our knowledge and belief:

The statements of fact contained in this report are true and correct.
The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, impartial, and unbiased professional analyses, opinions, and conclusions.
Pöyry has no present or prospective interest in the subject properties, and no personal interest or bias with respect to the parties involved.

The report has been prepared by staff consultants and office support personnel of Pöyry. The valuation of the Standing Stock within the Epro FMU is derived based on the due diligence review and on site inspection of the Greenheart operations conducted by Pöyry in the mid of 2006, updated using information provided by Greenheart. The valuation of the Standing Stock within the Dynasty concessions is derived based on the data provided by Greenheart and extrapolation of information and observations from the Epro FMU which is located east of the Dynasty concessions.

Pöyry is a global client and technology-oriented consulting and engineering services firm with offices in 45 countries. It has three core areas of expertise encompassing the forest industry, energy, and infrastructure & environment sectors. Group companies employ 5,600 experts. Pöyry is listed on the Helsinki Stock Exchange.

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The Forest Industry Consulting business group provides advice to its clients in business strategy, processes and operations designed to enhance stakeholder value. The business group’s expertise covers the complete supply chain from raw materials to technology, markets and financing. Consulting and advisory services are provided in three main practice areas:

Management Consulting
Investment Banking
Operations Management

Pöyry Forest Industry Limited is an independent management company within the Pöyry Group and is recognised as one of the world’s leading advisors to the global forest industry. The cornerstones of its operations are its strong business understanding and industry expertise. The business group’s global network of over 300 experts covers all major forest products regions in the world.

1 VALUATION SUMMARY

On specific instructions from Greenheart and Omnicorp, Pöyry has prepared a Standing Stock valuation of the Greenheart concessions in Suriname, South America. The Greenheart natural forest concession area known as (i) the Epro FMU, includes three adjoining concessions, 725, 506 and 506A and (ii) the Dynasty concession, includes four areas referred as to concessions 551a, 550, 550b and 1040.

The Standing Stock Valuation means using the present market value per unit volume of log, the estimated harvesting and distribution costs and the total merchantable volume of log in the concessions as a basis for coming up with the estimated value.

The valuation approach followed in this report complies fully with the International Financial Reporting Standards for Agriculture (IFRS41).

The Standing Stock value of Epro FMU’s harvesting and log sales business as at 31st July 2007 is USD248.3 million. Details of the derivation are provided in Appendix A.

The Standing Stock value of Dynasty concessions’ harvesting and log sales business as at 31st July 2007 is USD47.3 million. Details of the derivation are provided in Appendix B.

2 SCOPE AND LIMITING CONDITIONS

This report presents an estimated value of the standing stock of Epro FMU and Dynasty concessions as at 31st July 2007.

Epro FMU valuation:

This 2007 valuation for Epro FMU largely relies on information provided to Pöyry by Greenheart and its subsidiaries for an earlier due diligence review and on site inspection of the Greenheart Operations conducted by Pöyry in the mid of 2006, and incorporates updated information relating to operational costs and harvested area. Previous work by Pöyry in the Epro FMU sought to verify the key data provided through independent field assessment, interviews with management and government and research agencies, internal sources and a review of relevant literature. No such review has been conducted for information used in this 2007 valuation.

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This update appraisal assumes that the conditions observed at the sites visited are representative of the balance of Greenheart’s concession and that the same conditions exist in 2007.

Dynasty Concessions valuation:

This valuation for Dynasty concessions is based largely on information extrapolated from Epro FMU and did not include an independent forest inspection to verify the information provided by Greenheart.

Legal matters are beyond the scope of this report and any existing liens and encumbrances (if any) have been disregarded. With the exception of the relevant government royalties and taxes, the harvest rights to the concession have been appraised as though free and clear, and under responsible and competent management. Pöyry has relied upon the confirmation by Greenheart that the rights to the forest concession which are the basis of this valuation are owned by Greenheart.

Nothing in this report is, or should be relied upon as, a promise by Pöyry as to the future growth, yields, costs or returns of these forests. Actual results may be different from the opinions contained in this report, as anticipated events may not occur as expected and the variation may be significant.

3 VALUATION METHODOLOGY FOR FOREST RESOURCES

The methods employed to value forest resources generally fall into three approaches:

Application of values demonstrated in transactions involving comparable assets.
Assessment of the cost of replacement.
Assessment of the present value of the future cash flows from the forest resources (or “Expectation” approach)

Recognised appraisal practice requires that all three methods be considered. It is the valuer’s responsibility to then apply their professional judgement in the weighting given to the respective results.

3.1 Transaction Approach

Where there is plentiful transaction evidence, then appraisers are inclined to award this the greatest authority. With forest assets it is commonly the case that the evidence is both sparse and equivocal. The less similar the “comparable” examples become, then the more uncertain the process by which such evidence is extended to the subject property. This may severely limit the application of this approach.

3.2 Costs Approach

This approach has a well recognised role in appraisal practice generally, but finds less expression in forest valuation. In Pöyry’s experience, it is mostly confined to the valuation of young plantation forest crops.

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3.3 Expectation Approach

In the absence of readily applicable transaction evidence the general recommendation is to turn to methodologies based on discounted cash flow analysis (“DCF”). In their most common expression, these derive the Present Value (PV, or NPV) of future projected cash flows. Notwithstanding the requirement to form assumptions concerning future growth, costs and markets, this method is observed to most closely emulate the way in which informed buyers and sellers derive transaction values. Thus, in the absence of immediately comparable transaction results an Expectation approach at least reflects the methods by which market participants arrive at their values.

If the Expectation approach provides a general case, there is one special case within this where the forest asset may be assessed on the basis of its standing stock. The special circumstances involve the assumption that the resource can be harvested immediately. If this is indeed the case then the discounting period is zero. This situation may apply with relatively small tracts which contain mature timber. Other necessary requirements are sufficient harvesting capability and a market capacity to absorb all of the harvested volumes at once.

3.4 Preferred Approach

A preferred approach to forest valuation would involve using all three main methods of appraisal and then weighting the results. In practice the comparable sales and cost approaches may quickly fall from serious contention. This leaves the expectation approach as the method that is most commonly demonstrated on an international basis.

3.5 Requirements of the Accounting Standards

Hong Kong Accounting Standard 41 (Agriculture) treat forests as regenerating assets which are required to be accounted for at ‘fair value’. This standard is drawn up largely in line with International Financial Reporting Standard 41 (Agriculture) (“IFRS-41”) and identifies the three valuation approaches described above. In recognising the difficulties in finding applicable transaction evidence, the standard assigns most attention to the Expectation approach which it refers to under the title of “DCF”.

Ambiguous wording in Paragraph 21 of the IFRS-41 was interpreted in some localised jurisdictions to suggest that the IFRS-41 contemplated a standing stock approach. Following widespread reaction to the anachronistic expression, the IASB has indicated that it will be releasing revised wording for Paragraph 21 in October 2007. This will result in the standard providing an unequivocal recommendation of DCFbased approaches.

3.6 Approach Adopted for the Greenheart Valuation

At the request of Greenheart and Omnicorp, Pöyry has conducted a Standing Stock valuation of the Greenheart business.

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4 SURINAME

Suriname is one of the smallest independent states on the South American continent, covering some 163 270 square kilometres. It is located on the North East Coast of the continent between latitudes 1˚10’ and 6˚ north and separates Guyana to the west from French Guiana to the east. The North Atlantic Ocean forms the northern border. Suriname was previously a Dutch colony, gaining its independence in 1975. Subsequent to independence, Suriname suffered a period of instability culminating in a civil war between 1986 and 1991. Stability returned with a democratically elected civilian government in 1991. Prudent financial management of the economy has seen the situation largely brought under control with inflation rates back down to manageable levels and international investment beginning to flow into the country.

The small population of Suriname of 440,000 (2007 est.) is ethnically diverse. East Indians (Hindustani) are the largest group comprising 37% of the population. Creoles (mixed white and black) comprise 31%, Javanese 15% and Maroons (originating from escaped black slaves) 10%. Of the balance, the indigenous Amerindian population forms only 1-2% of the total.

Natural resources include timber, fish, kaolin, shrimp, bauxite, gold and small amounts of nickel, copper, platinum and iron ore.

The economy is dominated by the mining industry (predominantly bauxite and gold) which accounts for more than a third of the countries GDP. The forest industry currently makes a minimal contribution to the economy.

4.1 Suriname Land Use

Approximately 90% of Suriname (14.8 million ha) remains under natural forest cover which forms an extension of the Amazon basin. Arable land comprises less than 0.5% of land area.

The broad classification of land use is shown in Table 4-1.

Table 4-1: Land Use Classification

Class (Zone) Area (000 ha) Permanent Production Forest 9,216 Temporarily Maintained Forest 2,642 Conversion Forest 259 Permanent Protection Forest 881 Special Protected Forest 893 Other Forest Conservation Areas 1,168 Non-forest Conservation Areas 761 Other Land 370 Water bodies 210 Total Area 16,400	% 56.2 16.1 1.6 5.4 5.5 7.1 4.6 2.2 1.3
	100

Source: SBB August 2003

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A significant proportion (3.7 million ha) of the 14.8 million ha of forest is classified as protection or conservation forest. Included in this total are 12 conservation reserves, the largest being the CSNR nature reserve at 1.6 million ha.

Table 4-2:

Suriname Conservation Areas

Reserve	Land Area ha
Herenrits Nature Reserve	87
Coppename Monding Nature Reserve	10,500
Wai wai Nature Reserve	37,000
Galibi Natrue Reserve	1,500
Peruvia Nature Reserve	31,000
Boven Coesewijne Nature Reserve	27,000
Copie Nature Reserve	28,000
Wanekreek Nature Reserve	51,000
Brinckheuvel Nature Reserve	6,000
Brownsberg Nature Park	17,600
CSNR Nature Reserve	1,600,000
Sipaliwini Nature Reserve	77,300
Total Nature Reserves	1,886,987
Water bodies	42,013
Total Conservation Areas	1,929,000

Source: SBB August 2003

4.2 Suriname Forestry Sector

The forestry sector in Suriname has suffered difficult times since the end of the civil war in 1991. The main limitations to progress have been a lack of skilled workers, outdated equipment and a lack of capital investment. Recently there have been positive signs of development and improved management and control by SBB (Foundation for Management and Control).

Utilization of the forest is controlled and allocated through licences or concessions awarded by the Suriname Ministry of Forests and Lands. Of the 14.8 million ha of forest cover, around 15% is under some form of licence.

There are three types of concession:

Large concessions of 100-150,000 ha issued for 20 years
Medium sized concessions of 10-100,000 ha issued for 10 years
Small concessions of up to 10,000 ha issued for 5 years.

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Concessions can be renewed for a second term provided the concessionaire has adhered to the conditions of the licence. The second term is for the same period of time as the first term.

Within these types there are a range of sizes. Small concessions of up to 5,000 ha are the most common. Large licences of 100,000 to 150,000 ha are restricted to substantial organisations and carry the requirement to process the material in Suriname.

4.3 Forest Management Act of Suriname

In the early 1990s the Suriname Government, with foreign technical assistance, revised its forestry legislation into a fully modernised Forest Management Act. This Act was passed in 1992. The legislation established a clear basis for restricting all timber harvesting to that carried out under proper management regimes. Under the Forest Management Act of Suriname, forests may only be open to exploitation once an inventory has been made of the timber in the concession area and a proper management plan has been drawn up. Only on acceptance of this plan can a felling licence be awarded.

The Act provides the basis for the application of more detailed regulations stipulating the species, sizes and volumes of timbers that may be extracted. Currently, only trees greater than 35 cm in diameter which are listed on the official commercial species list may be felled.

The Act also places clear limits on the size of concessions. Normally, concessions will be limited to 5,000 ha per concessionaire but can be increased up to 150,000 ha for operators with sawmills. Exceptionally, 150,000 ha concessions may be allocated to ‘integrated’ timber industries. No concessions may be handed out to companies that cannot prove they are financially secure and possess the required skills to carry out the management plans. The Act also protects as much as possible the common law rights of the inhabitants of the interior living in tribes in their villages and settlements, as well as their agricultural plots.

The Act lays the basis for the collection of royalties on production and fees based on the concession area from the concessionaire. The actual level of payments is to be determined by the Ministry of Forests and Lands of Suriname. In addition, there is provision for collection of compensation for marketable trees identified in the Forest Management Plan (“FMP”) as either not felled, or felled and not removed.

From observations made in the field, perusal of relevant documents and discussions with the regulatory agency Stiching voor Bosbeheer & Bostoezicht (“SBB”), it appears that Greenheart currently complies with the Forest Management Act of Suriname.

4.4 Potential of Suriname Forest Industry

The Suriname forest industry has been and remains significantly underdeveloped. To date it has lacked available skilled labour, capital and infrastructure. The environment now appears to be changing with a conducive and encouraging regulatory environment, prudent financial management of the country, and a developing interest from offshore forestry companies and investors. The Suriname economy is currently exposed to fluctuating revenues due to its dependence on mining as a generator of export receipts. This means the government is strongly motivated to develop alternative sources of revenue to reduce its exposure to the vagaries of international mineral commodity prices.

The growing shortages of tropical hardwood logs from traditional sources, driven to an increasing extent by burgeoning Chinese demand growth, is focusing attention on countries such as Suriname with untapped forest resources.

In Pöyry’s view, Greenheart is well placed to capitalise on this opportunity and to potentially become a dominant force in the industry.

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5 RISKS

The main risks to Greenheart’s Suriname forestry business are:

The level of and trend in product prices.
Operational costs.
Market acceptability of the wide range of species comprising the harvest.
Forest productivity and the achievable cutting cycle.
Potential economic shocks to the Suriname economy.
Potential operational restrictions from Forest Stewardship Council (“FSC”) certification.
Capital cost and operating risks of the lumber processing strategy.
Biotic and abiotic risks:
Storm damage
Fire
Pests and disease
Competing land use rights.

5.1 Trends in Product Prices

The Standing Stock valuation assumes all volume is harvested and sold at an instant in time and therefore, no price growth assumptions are required.

5.2 Operational Costs

The Standing Stock valuation assumes all volume is harvested and sold at an instant in time and therefore, no operational cost change assumptions are required.

5.3 Market Acceptability

Both concessions contain a wide range of tree species, some of which are unknown internationally. The characteristics of some of these as yet unknown species have been tested while the suitability of others remains untested. The Pöyry base case valuation assumes that these species will be marketable at a lower price than the better known species.

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5.4 Economic Shocks to the Suriname Economy

The Suriname economy is dependent on the mining industry and is strongly affected by commodity cycles. This can potentially raise the costs and increase the difficulties of doing business in the country. The forest industry offers an alternative source of revenue that may eventually reduce the economy’s exposure to cyclic fluctuations driven by mineral prices. The government is favourably disposed towards the industry for this reason, among others. During periods of low commodity prices the Suriname exchange rate is likely to be low compared to other currencies provide some offset to increased costs.

5.5 Potential Restrictions from FSC Certification

Greenheart intends to pursue a programme aimed at achieving FSC certification for its Suriname business. This is likely to bring benefits in terms of market access and more positive perceptions by environmentalists. However, balancing these benefits, certification may introduce restrictions that could impinge unfavourably on Greenheart’s operations and cost structure. Pöyry is not able to assess the balance of favourable and unfavourable impacts at this time.

5.6 Biotic & Abiotic Risks

Suriname lies to the South of the hurricane belt which affects the Southern United States and the Caribbean. The risks of major catastrophic damage are therefore lower than in some other tropical areas. Losses to storms do occur and Pöyry has observed this in parts of the EPRO FMU. In general however, these losses should be already captured in the yield forecasts.

Pathogens can cause major losses in growth and even tree death. However, impacts tend to be species specific. Pöyry anticipates a relatively low risk of commercially significant disease and pest damage in the EPRO FMU due to the indigenous nature and wide species diversity of Suriname’s forests.

Fire risk is an ever present danger to most forests. In the case of Suriname’s forests, the risk is somewhat mitigated by the high rainfall received by the area. Greenheart will need to ensure it has an adequately trained and equipped force able to fight forest fires and minimise resulting damage.

5.7 Competing Land Use Rights

Forest concessions in Suriname do not convey exclusive rights to the land. It is possible to have geographically overlapping rights to different resources. A little over 50% of the EPRO FMU is covered by mining exploration and/or reconnaissance licences covering bauxite, gold and granite. This leaves open the potential for future land use conflict. The only active mining in the project area however, is a granite quarry which is unlikely to cause any land use conflict. Pöyry understands that Greenheart is seeking to maintain a cooperative dialogue with potentially competing land users to minimise the possibility of future conflicts.

Yours faithfully,

Andy Fyfe Brian Johnson President (Asia Pacific) Senior Consultant Pöyry Forest Industry Limited

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APPENDIX A

VALUATION OF THE STANDING STOCK OF EPRO FMU

1 SITE DESCRIPTION

1.1 Forest Location

The EPRO Forest Management Unit (EPRO FMU) evaluated by Pöyry is located in Suriname, South America and comprises three forestry concessions. Greenheart’s subsidiary EPRO NV currently holds operating licenses for these concessions 725, 506 and 506a. The three areas are contiguous and are located in Sipaliwini District, to the west of Suriname’s commercial forestry belt. They lie between 4°44’ to 5°11’ N and 56°30’ to 57°00’ W (Figure 1-1).

Figure 1-1: Forest Location

==> picture [434 x 439] intentionally omitted <==

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1.2 Forest Area

The registered official area for the EPRO FMU is as follows:

• Concession 725 • Concession 506 • Concession 506a Total	126,825 ha 12,000 ha 7,700 ha
	146,525 ha

While the total official concession area is 146,525 ha, the assessed total area of the EPRO FMU currently held by Greenheart (concessions 725, 506 and 506a) is 158,610 ha. The discrepancy is believed to be due to inexact mapping of the concession areas by the Suriname forest authorities. Of this total, some 118,604 ha are regarded as productive forest.

1.3 Topography and Slope

A majority of the EPRO FMU is characterized by gently undulating hills and river valleys. Elevation tends to increase to the south-east around the Bakhuis range of mountains. Approximately 2.5% of the total area is unsuitable for harvesting due to excessive slope (>15°).

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Figure 1-2: Topography

==> picture [434 x 445] intentionally omitted <==

The Bakhuis range rises to 460 m elevation in the south-east of the EPRO FMU. The remainder of the area is characterized by gently undulating hills and river valleys (Figure 1-3). According to the FMP, only 17% of the entire current operational area rises above 100 m in elevation and just 3% (of concession 725) is classed as “difficult” terrain (class 4 on a scale of 1-5).

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Figure 1-3: Elevation

==> picture [434 x 411] intentionally omitted <==

1.4 Geology

The geology of the EPRO FMU is varied but can be divided into distinguishable segments. The NW is dominated by brown quartz sands and clayish/silty gravels with scattered outcrops of white quartz sands. The SW consists of medium-to coarse-grained granites. The central portion consists of metamorphic gneisses while the SE portion is formed of ortho-pyroxene-bearing metamorphics with outcrops of bauxite and laterite.

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1.5 Soils

The coastal area of Suriname is dominated by clay soils combined with some sandy soils in a fertile plain area. The hinterland areas however, are characterized by low fertility acid soils and, to a lesser extent, by savannah soils.

The EPRO FMU can be broadly divided into two soil types:

Sandy to clayish loams in the NW (with areas of bleached medium/coarse sands).
Gravelly clays in the SE.

Between these are found alluvial loams and clays associated with the Nickerie basin.

1.6 Hydrology

The drainage of the EPRO FMU is dominated by the Nickerie River that traverses through the centre of the area, generally in a north-easterly direction. The entire EPRO FMU area falls within the drainage of the Nickerie River, which continues in a northerly then westerly direction before discharging into the mouth of the Corantijn River (Figure 1-4). Sub-watersheds exist within the EPRO FMU, which drain into the Marataka (to the west), the Falawatra River (to the east) and Mozes Creek (to the south), among other smaller watercourses (Figure 1-5).

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Figure 1-4: Hydrology of EPRO FMU

==> picture [428 x 377] intentionally omitted <==

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Figure 1-5: Drainage for the EPRO FMU

==> picture [434 x 381] intentionally omitted <==

1.7 Access and Surrounding Land-Use

The main access to the EPRO FMU is by the east-west road linking Apura to Zanderij and thereafter Paramaribo (Figure 1-6). The eastern sections of this road were constructed in the 1980s though apparently little if any maintenance has been conducted. Therefore, though vehicular access is possible from the east, the road is only readily passable by 4WD vehicles and medium-sized buses. The journey from Paramaribo takes around 9 hours. The result is that relatively little vehicular traffic accesses the EPRO FMU from the east. Within the EPRO FMU, and to Apura, the road is in good condition (though not paved) as it is maintained by Greenheart and other users. The 70 km journey from the base camp to Apura takes less than 90 minutes in a 4WD vehicle.

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Figure 1-6: Road Access

==> picture [438 x 393] intentionally omitted <==

Apart from the logging roads that Greenheart has constructed, there are other roads and trails that branch from the main artery. According to an official road map, these trails could provide vehicular access at two other points into the EPRO FMU from external sources. However, of the three roads running south, only one allows vehicular access into the concession and that originates at the BHP Billiton camp just south of the EPRO FMU. This road does continue north after the base camp to the airstrip, but thereafter turns south again and becomes impassable just over the EPRO FMU boundary. The road running south from the camp becomes impassable after 5 km and the trail accessing Blanche Marie Falls terminates there.

The EPRO FMU is surrounded on all sides by other forestry concessions though only a few of these to the west appear to be currently operational.

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2 FOREST DESCRIPTION

2.1 Forest Classification

The existing CELOS (Centre for Agricultural Research in Suriname) forest classification was evaluated to provide an indication of the main forest classes over the concession areas. This classification was updated using a time-series of satellite imagery and further refined using information gathered during the aerial and field inspections (Figure 2-1). The images provided coverage over all of the area.

Figure 2-1: Forest Classification Map

==> picture [434 x 411] intentionally omitted <==

The CELOS classification differentiates five forest classes. Based on field and aerial inspection of the EPRO FMU, Pöyry identified four productive forest classes. Three of these classes are recognised as having a high percentage of closed forest cover. The fourth class comprises the 50% of the area identified as Liana Forest which carries sufficient forest cover to be considered by Pöyry to be productive. It is

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difficult spectrally to identify areas of pure Liana Forest. In this context the definition of Liana Forest describes a range of forest types and conditions, spanning sparsely stocked forest, scrub and forest dominated by liana vines.

Figure 2-2: Forest Class Suitability

Forest Class Productivity Class High Dryland Forest Suitable Hilly Dryland Marsh Forest Suitable Marsh Forest Association Suitable Liana Forest 50% suitable Savannah Forest Unsuitable

High Dryland Forest occupies lower elevations, mixing with marsh forest closer to the river basins to the north of the EPRO FMU and hilly dryland/marsh forest on the border of concession 704. The species composition is diverse, with over 110 tree species observed in the 1,800 ha surveyed by Greenheart. Walaba (Eperua grandiflora), kimboto (Pradosia spp.) and bolletrie (Manilkara bidentata) contribute 35% of the forest volume. Dominant trees in the forest canopy can reach heights of 55 to 60 m and tree diameters of 70+ cm.

Figure 2-3: High Dryland Forest

==> picture [401 x 303] intentionally omitted <==

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Hilly Dryland/Marsh Forest predominantly occurs around the Bakhuis mountain range. Only a small area of this forest type is found in the EPRO FMU, but it is more common in adjacent concessions.

Figure 2-4: Hilly Dryland/ Marsh Forest

==> picture [400 x 273] intentionally omitted <==

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Marsh Forest Association is found in low lying areas around main river catchments. Previous inventories, the topography and the spatial pattern of the forest canopy indicate that some of these areas are seasonally inundated.

Figure 2-5: Marsh Forest Association

==> picture [361 x 228] intentionally omitted <==

The description Liana Forest is used here in a generic sense and covers a broad range of cover types including sparsely stocked areas, scrub and areas dominated by liana vines.

Figure 2-6: Liana Forest

==> picture [361 x 219] intentionally omitted <==

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Savannah Forest is found on the white sandy soils that occur sporadically in the north of the EPRO FMU. Typically, these are shrub and grassland mixtures not reaching a substantial height.

Figure 2-7: Savannah Forest

==> picture [287 x 279] intentionally omitted <==

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2.2 Non-Forest Areas, Slope and Riparian Buffers

Several non-forest classes were also identified, including bareland or agricultural plots, mining activities and wind damage. It is possible that misclassification could occur between the areas identified as wind damaged and those identified as mining, as spectrally these areas are similar.

Figure 2-8:

Forest Disturbance Caused by Mining Exploration and Wind Damage

==> picture [407 x 268] intentionally omitted <==

River networks and the slope classification were generated using elevation data at a 90 m resolution obtained from the Shuttle Radar Topography Mission (SRTM). The road locations were obtained using GPS or from existing GIS layers created during the 2000 forest inventory.

These data were used as a basis to remove buffer zones and areas of excessive slope from the forest classification using the following criteria:

Riparian buffers alongside rivers in accordance with the Guyanese Forest Harvesting Code of Practice. That is 20 m for main rivers and 15 m for secondary streams;
50 m buffers either side of public roads;
Slopes exceeding the normal 15º operating limit of ground based harvesting equipment.

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2.3 Forest Areas

The gross area of each forest class was calculated from the classification map by removing the area associated with non-forest, slope areas and buffer zones. A further correction was made to account for small forest gaps that would not be detected by the satellite imagery. The gross area was reduced by 10% for dryland forest types and 15% for the marsh forest type to account for this. Larger reductions were made to the marsh forest type to account for inaccessibility in low lying swampy areas. The Liana Forest is also identified as containing merchantable volume. Overall, only 50% of the area is considered merchantable as, from a satellite mapping perspective, the Liana Forest class also contains areas of sparsely stocked forest and scrub which do not contain merchantable forest. In reality some limited log recovery may occur from the savannah, mining and wind-damaged forest types. Table 2-1 provides a summary of area and forest types for the EPRO FMU.

Table 2-1:

Forest Types and Areas for the EPRO FMU

Productivity Forest Type/ Landuse Class High Dryland Forest Productive Hilly Dryland Forest Productive Marsh Forest Association Productive Liana Forest 50% productive Savannah forest Non productive Bareland Non productive Mining Exploration Non productive Wind Damage Non productive Riparian buffers Non productive Road and rail buffer Non productive Slope areas >15¢X Non productive Total	Classified Area (ha) 91,316 2,614 28,679 19,381 8,017 299 793 1,684 2,057 1,337 2,433 158,610	Net Area % (ha) 82,185 2,352 24,377 9,690 118,604	Productive Area 51.8% 1.5% 15.4% 6.1%
			74.8

Pöyry conducted an inspection of the Greenheart operations between 12 April and 4 May 2006. This involved:

Aerial and ground inspections of the resource.
Audit checks of field inventory.
Audit checks of log tally assessments.
Inspecting harvesting and distribution operations and facilities.
Interviewing Greenheart management and field staff.

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Interviews with regulatory authorities and research personnel.
The use of satellite imagery, oblique aerial photographs and GPS traces to forest type and map the resource.
Reviewing information provided by Greenheart management, external sources and Pöyry internal sources.

The information provided by Greenheart or other external sources has not been independently verified by Pöyry.

The concession is covered in largely unmodified natural tropical rainforest. The topography of the area is characterised by gently undulating hills and river valleys which rise in elevation towards the south-east adjoining the Bakhuis range. From its field inspections, satellite imagery analysis and oblique aerial photogrammetry Pöyry has identified four productive forest classes.

The productive and unproductive areas of the EPRO FMU are:

Table 2-2:

Forest Types and Areas for the EPRO FMU

Forest Type/Landuse High Dryland Forest Hilly Dryland Forest Marsh Forest Association Liana Forest Unproductive Forest & Bareland Riparian Reserves and Buffers Total	Classified Area (ha) 91,316 2,614 28,679 19,381 10,793 5,827 158,610	Productive Area (ha) 82,185 2,352 24,377 9,690 118,604	Productive Area (%) 51.8% 1.5% 15.4% 6.1%
			74.8%

Harvesting has been undertaken in the resource since Greenheart assumed ownership in 2005. During this time an estimated 1,689 ha has been harvested.

Forest Type/Landuse High Dryland Forest Hilly Dryland/Liana Forest Marsh Forest Association Total	Productive Area (ha) 82,185 12,042 24,377 118,604	Remaining Unharvested Harvested Area (ha) 1,171.0 81,014 171.0 11,871 347.0 24,030 1,689 116,915	Remaining Unharvested Harvested Area (ha) 1,171.0 81,014 171.0 11,871 347.0 24,030 1,689 116,915
			116,915

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3 PRODUCT YIELDS

Pöyry has reviewed the available information on Suriname forests. This includes information collected from a series of forest inventories covering parts of the Suriname productive forest resource and the Greenheart pre harvest inventory of the first 500 ha of the EPRO FMU. Pöyry has also inspected the project area both from the ground and from aerial inspections. Pöyry has reviewed the available information for this valuation and has adopted the recoverable yields by forest type illustrated below:

Recoverable Yield by Forest Type

EPRO FMU	Extractable Volume m3/Gross ha
High Dryland Forest	37.1
Hilly Dryland/Liana Forest	19.4
Marsh Forest Association	30.8

The Suriname forests contain a wide range of tree species with 40-60 species present in any one particular area of forest. In the EPRO FMU Kimboto tends to be the most numerous of the commercial species contributing around 17% of the harvest volume.

Occurrence of 10 Most Numerous Species by Volume in the EPRO FMU

Species Common Name	Volume m3/Gross ha	% Occurrence
Kimboto	5.1	17.6
Ingipipa	3.0	10.4
Walaba	2.9	10.1
Bolletrie	1.4	5.0
Gindya-udu	1.2	4.1
Maka-grin/Groenhart	1.1	3.8
Hoogland babun	0.7	2.4
Mora	0.7	2.4
Witte pinto-locus	0.6	2.1
Kopi	0.6	2.0
Balance	11.6	40.1
Total	28.9	100.0

On average, the top 10 species by volume comprise around 60% of the total merchantable volume per hectare within the project area. Market knowledge of Suriname species varies. Outside of the domestic market, China currently imports the broadest range of Suriname species. Gaining full value market acceptance for all species in other markets may take time. Greenheart is planning to maximise returns within the shortest possible timeframe by processing all logs into lumber. Lumber is expected to be easier to market than raw logs, as species with similar characteristics can be more easily grouped and sold as parcels. Pöyry considers that this strategy should minimise market risk.

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4 PRODUCT OUT-TURN

Pöyry has grouped the various commercial species into seven export price groups.

Proportion of Log Volume by Price Group by Forest type

	High	Hilly Dryland/	Marsh Forest
Price Goup	Dryland forest	Liana forest	Association
Export		% Out-turn
1	0.5	0.6	0.8
2	4.3	2.2	8.6
3	17.3	18.5	19.4
4	25.5	51.9	24.2
5	45.6	22.8	41.9
6	0.3	0.2	0.2
7	6.5	3.8	4.9
Total	100	100	100

5 VALUATION ASSUMPTIONS

The principal assumptions used in the preparation of a standing stock value of Greenheart’s Suriname forestry business are:

The valuation currency is US dollars.
The valuation date is 31st July 2007.
The harvest profile assumes all the merchantable volume within the concession is harvested and sold at midnight 31st July 2007.
Harvesting and distribution costs applying in 2007 are assumed.
All logs are exported.

The costs of production adotped are illustrated below. These costs have been revised based on data provided by Greenheart, and Pöyry’s experience in similar harvesting operations.

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FOB Cost Structure for Export Logs

	USD/m3
	FOB Paramiribo
Harvesting	23.40
Cartage	12.70
Barging	17.01
Handling & FOB costs	14.30
Royalties	5.75
Export Taxes	24.00
Total FOB Costs	97.16

Greenheart has signed a contract for sale of 34,285 m[3] of selected log species from Groups 2 – 5 during the period 20 July 2007 and 31 January 2009. These contract prices have been adopted in this valuation in deriving average group prices to be applied as illustrated below. Where no contract price exists, Pöyry has adopted the price for each species based on Pöyry’s assessment of value and product acceptance in the export market in 2006.

Assumed Log Prices

Price Group	Logs USD/m3	FOB Paramaribo
1		675
2		175
3		175
4		170
5		148
6		100
7		95

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The table below illustrates the calculation of value apportioned to each log price group. The FOB value for species in Group 7 is lower than the assumed production costs, resulting in a negative stumpage for this group. Pöyry has assumed that until prices increase the Group 7 species will not be harvested.

Price Group 1 2 3 4 5 6 7 Total	Logs USD/m3 FOB Volume (m3) Paramaribo A B 22,558 675.00 198,709 175.00 706,685 175.00 1,065,571 170.00 1,731,502 148.50 9,796 100.00 – 95.00 3,734,821 163.65	Production Costs (USD/m3) C 97.16 97.16 97.16 97.16 97.16 97.16 97.16 97.16	Stumpage Unit value (USD/m3) D 577.84 77.84 77.84 72.84 50.34 2.84 -2.16 66.49	Stumpage Revenue (USD) E 13,035,037 15,467,497 55,008,379 77,616,192 87,163,799 27,821 –
				248,318,726

Stumpage Unit Value (D) = B - C

Value (E) = A * D

Under instruction from Greenheart and Omnicorp, Pöyry have adopted a standing Stock valuation methodology. This method does however have particular limitations when applied to a large forest resource business and Pöyry considers that these results should be read with the limitations in mind. The fundamental feature of the method is that it assumes all of the standing volume in a particular resource can be marketed at one specific point of time without impacting demand, prices or the related cost of doing so. Such impact should be taken into account when considering the “liquidation” of a large amount of resource at a specific point in time.

The Standing Stock value of Epro FMU’s harvesting and log sales business as at 31st July 2007 is USD248.3 million.

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APPENDIX B VALUATION OF THE STANDING STOCK OF DYNASTY CONCESSIONS

1 SITE DESCRIPTION OF DYNASTY CONCESSIONS

1.1 Forest Location

The concessions evaluated by Pöyry are located in Suriname, South America and comprises four forestry concessions. Dynasty Forestry Industry N.V. currently holds operating licenses for these concessions 551a, 550, 550b and 1040 located in the Sipaliwani District.

The areas 550, 551a and 550b are joined whilst concession area 1040 is located to the north west. All areas are located to the west of Suriname’s commercial forestry belt and adjoining Greenheart’s other concession area, “EPRO FMU”. The Dynasty concessions are considerably closer to Apura river port than EPRO FMU and road transport costs in this valuation have been adjusted to reflect that.

Figure 1-1: Forest Location

==> picture [268 x 377] intentionally omitted <==

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1.2 Forest Area

The official area for combined Dynasty Concessions is 31,440ha. Pöyry’s analysis of the GIS data representing the Dynasty concessions currently held by Greenheart is slightly higher at 32 218 ha. The discrepancy is believed to be due to inexact mapping of the concession areas by the Suriname forest authorities. A breakdown of this area by concession is as follows:

• Concession 550 12,333 ha • Concession 550b 9,056 ha • Concession 551a 4,239 ha • Concession 1040 6,590 ha Total 32,218 ha

Of this total, some 23,559 ha (73%) are regarded as productive forest.

2 FOREST DESCRIPTION OF DYNASTY CONCESSIONS

2.1 Forest Classification

The existing CELOS (“Centre for Agricultural Research in Suriname”) forest classification was evaluated to provide an indication of the main forest classes over the concession areas. This classification will be updated by Pöyry using a time-series of satellite imagery and refined using information gathered during the aerial and field inspections yet to be conducted.

The CELOS classification differentiates four forest classes within the area. Three of these classes are recognised as having a high percentage of closed forest cover. The fourth class comprises the area identified as Savannah Forest which carries insufficient forest cover to be considered by Pöyry to be productive.

Figure 2-1: Forest Class Suitability

Forest Class	Productivity Class
High Dryland Forest	Suitable
Marsh Forest	Suitable
Creek Forest Association	Suitable
Savannah Forest	Unsuitable

High Dryland Forest occupies lower elevations, mixing with marsh forest closer to the river. The species composition is typically diverse. Dominant trees in the forest canopy can reach heights of 55 to 60 m and tree diameters of 70+ cm.

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Figure 2-2: High Dryland Forest

==> picture [241 x 182] intentionally omitted <==

Figure 2-3: Marsh/Creek Forest Association

==> picture [281 x 177] intentionally omitted <==

Savannah Forest is found on the white sandy soils that occur sporadically in the central part of the concession. Typically, these are shrub and grassland mixtures not reaching a substantial height.

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Figure 2-4: Savannah Forest

==> picture [201 x 195] intentionally omitted <==

Non-Forest Areas, Slope and Riparian Buffers

Several non-forest classes are also likely to be identified once the image analysis and aerial inspections are completed. These include bareland or agricultural plots, mining activities and wind damage.

Figure 2-5: Forest Disturbance Caused by Mining Exploration and Wind Damage

==> picture [144 x 188] intentionally omitted <==

==> picture [142 x 187] intentionally omitted <==

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Adjustments were made to the gross concession area for Dynasty using figures derived during analysis of the EPRO FMU concessions. These data were used as a basis to remove buffer zones and areas of excessive slope from the forest classification using the following criteria:

Riparian buffers alongside rivers in accordance with the Guyanese Forest Harvesting Code of Practice. That is 20 m for main rivers and 15 m for secondary streams;
50 m buffers either side of public roads;
Slopes exceeding the normal 15¢X operating limit of ground based harvesting equipment.

2.2 Forest Areas

The gross area of each forest class was calculated from the classification map by removing the area associated with non-forest, slope areas and buffer zones. A further correction was made to account for small forest gaps that would not be detected by the satellite imagery. The gross area was reduced by 10% for dryland forest types and 15% for the Swamp forest type to account for this. In reality some limited log recovery may occur from the savannah, mining and wind-damaged forest types. Table 2-1 provides a summary of area and forest types for the Dynasty concessions derived from a high level review of immediately available forest classification data. Pöyry have ordered more detailed satellite imagery and will incorporate the results of its analysis in the final value derivations for the Dynasty concessions in due course.

Table 2-1:

Forest Types and Areas for the EPRO FMU

Forest Type/ Landuse	Productivity Class	Productivity Class	Area (ha)	% Gross Area
High Dryland Forest	Productive		18,807	58%
Marsh Forest Association	Productive		4,752	15%
Sub Total Productive			23,559	73%
Savannah forest Bareland Mining Exploration Wind Damage Riparian buffers Road and rail buffer Slope areas >15o	Non productive Non productive Non productive Non productive Non productive Non productive Non productive	}	8,658	27%
Total			32,217	100%

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3 PRODUCT YIELDS

Pöyry has reviewed the available information on the Dynasty concessions and other Suriname forests. This includes information collected from a series of forest inventories covering parts of the Suriname productive forest resource and the Dynasty pre harvest inventory of the first 200 ha of the Concession area. This inventory indicates a recoverable volume of 15.1m[3] / gross ha (20.6m[3] / productive ha.). Pöyry’s experience in Suriname suggests that Inventory data typically underestimates merchantable volume by around 30% and that recoverable volume in the order of 19m[3] to 37m[3] / productive ha are achievable. In this valuation Pöyry have adopted an average recoverable volume of 30m3/productive ha across both the dominant productive forest types identified in the preliminary review of available data.

The inventory data suggests a different species dominance than is present in the EPRO FMU concessions with Bolletri making up the largest portion. An analysis conducted by Pöyry suggests however that the gross log value per hectare is similar to the EPRO FMU indicating that although the species mix may be different the Dynasty concessions contain species of similar value to those in the EPRO FMU.

SPECIES	Volume (m3/ha)	%
Bolletri	3.6	23.8
Gindya-udu	1.4	9.3
Kopi	0.9	6.0
Hooglaand gronfolo	0.8	5.3
Pikin-misiki	0.7	4.6
Mawsi-kwari	0.7	4.6
Ingipipa	0.6	4.0
Witte pinto-locus	0.6	4.0
Kimboto	0.5	3.3
Sali	0.5	3.3
Balance	4.8	31.8
Total	15.1	100

On average, the top 10 species by volume comprise around 68% of the total merchantable volume per hectare within the project area. Market knowledge of Suriname species varies. Outside of the domestic market, China currently imports the broadest range of Suriname species. Gaining full value market acceptance for all species in other markets may take time. Greenheart is planning to maximise returns within the shortest possible timeframe by processing all logs into lumber. Lumber is expected to be easier to market than raw logs, as species with similar characteristics can be more easily grouped and sold as parcels. Pöyry considers that this strategy should minimise market risk

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4 PRODUCT OUT-TURN

Pöyry has grouped the various commercial species into seven export price groups.

Proportion of Log Volume by Price Group

Price Goup	Volume %
Export
1	0.1
2	2.4
3	8.9
4	35.3
5	50.8
6 (restricted)	0
7 (untested)	2.5
Total	100

5 VALUATION ASSUMPTIONS

The principal assumptions used in the preparation of a standing stock value of Greenheart’s Suriname forestry business are:

The valuation currency is US dollars.
The valuation date is 31st July 2007.
The harvest profile assumes all the merchantable volume within the concession is harvested and sold at midnight 31st July 2007.
Harvesting and distribution costs applying in 2007 are assumed.
All logs are exported.

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As Dynasty concessions are located just west to the Epro FMU, the costs of production adotped for Dynasty concessions are same as the one for Epro FMU and are illustrated below. These costs have been revised based on data provided by Greenheart, and Pöyry’s experience in similar harvesting operations.

FOB Cost Structure for Export Logs

	USD/m3
	FOB Paramiribo
Harvesting (incl camp and roads)	25.80
Cartage	5.40
Barging	17.01
Handling & FOB costs	14.30
Royalties	5.75
Export Taxes	24.00
Total FOB Costs	92.26

Assumed Log Prices

Price Group	Logs USD/m3	FOB Paramaribo
1		675
2		175
3		175
4		170
5		148
6		100
7		95

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APPENDIX IV

Price Group 1 2 3 4 5 6 7 Total	Logs USD/m3 FOB Volume (m3) Paramaribo A B 948 675.00 17,281 175.00 63,230 175.00 249,756 170.00 359,138 149.60 0 100.00 16,416 95.00 706,769 159.14	Production Costs (USD/m3) C 92.26 92.26 92.26 92.26 92.26 92.26 92.26 92.26	Stumpage Unit value (USD/m3) D 582.74 82.74 82.74 77.74 57.34 7.74 2.74 66.88	Stumpage Revenue (USD) E 552,562 1,429,792 5,231,635 19,416,069 20,592,989 0 44,980
				47,268,026

Stumpage Unit Value (D) = B - C

Value (E) = A * D

The Standing Stock value of Dynasty Concessions’ harvesting and log sales business as at 31st July 2007 is USD47.3 million.

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APPENDIX V

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. SHARE CAPITAL

The authorised and issued share capital of the Company as at the Latest Practicable Date were as follows:

Authorised: 15,000,000,000 Shares of HK$0.01 each Issued and fully paid: 183,639,152 Shares of HK$0.01 each	HK$ 150,000,000

	HK$ 1,836,391.52

3. INTERESTS OF DIRECTORS

(a) Interests in Securities

As at the Latest Practicable Date, the interests and short positions of each Director and chief executive of the Company in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) 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 and short positions in which he was deemed or taken to have under such provisions of the SFO), or which were required, pursuant to section 352 of the SFO, to be entered in the register maintained by the Company referred to

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APPENDIX V

therein, or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers of the Listing Rules, to be notified to the Company and the Stock Exchange were as follows:

Long Positions

(i) Interests in the Shares

Name of Director Capacity Hui Tung Wah, Samuel Beneficial owner Family interest_(Note)_	Percentage of issued share Number capital of the of Shares Company (%) 280,000 0.15 75,000 0.04 355,000 0.19	Percentage of issued share Number capital of the of Shares Company (%) 280,000 0.15 75,000 0.04 355,000 0.19
		0.19

Note: These 75,000 Shares were jointly owned by Mr. Hui Tung Wah, Samuel and his spouse.

(ii) Interest in share options of the Company

The Company adopted a share option scheme at its general meeting held on 22 March 2002. Each option gives the holder the right to subscribe for one Share. Details of the interests of Directors in the share options as at the Latest Practicable Date were as follows:

	Number
	of share
	options				Number of
	as at		Exercise price		share options
	1 January	Date	per share of	Exercise	as at the Latest
Name of Director	2007	of grant	the Company	period	Practicable Date
Wong Kin Chi	70,000	14/06/2005	HK$0.80	15/06/2005 –	70,000
				14/06/2010
	–	16/04/2007	HK$0.46	17/04/2007 –	30,000
				16/04/2012
	–	14/06/2007	HK$1.36	15/06/2007 –	50,000
				14/06/2012

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APPENDIX V

	Number
	of share
	options				Number of
	as at		Exercise price		share options
	1 January	Date	per share of	Exercise	as at the Latest
Name of Director	2007	of grant	the Company	period	Practicable Date
Sung Yan Wai, Petrus	240,000	14/07/2003	HK$0.95	15/07/2003 –	240,000
				14/07/2008
	250,000	14/06/2005	HK$0.80	15/06/2005 –	250,000
				14/06/2010
	–	16/04/2007	HK$0.46	17/04/2007 –	300,000
				16/04/2012
	–	14/06/2007	HK$1.36	15/06/2007 –	1,200,000
				14/06/2012
Hui Tung Wah,	800,000	14/06/2005	HK$0.80	15/06/2005 –	800,000
Samuel				14/06/2010
	–	16/04/2007	HK$0.46	17/04/2007 –	50,000
				16/04/2012
	–	14/06/2007	HK$1.36	15/06/2007 –	300,000
				14/06/2012
Wong Che Keung,	72,000	14/07/2003	HK$0.95	15/07/2003 –	72,000
Richard				14/07/2008
	70,000	14/06/2005	HK$0.80	15/06/2005 –	70,000
				14/06/2010
	–	16/04/2007	HK$0.46	17/04/2007 –	30,000
				16/04/2012
	–	14/06/2007	HK$1.36	15/06/2007 –	50,000
				14/06/2012
Tong Yee Yung,	72,000	14/07/2003	HK$0.95	15/07/2003 –	72,000
Joseph				14/07/2008
	70,000	14/06/2005	HK$0.80	15/06/2005 –	70,000
				14/06/2010
	–	16/04/2007	HK$0.46	17/04/2007 –	30,000
				16/04/2012
	–	14/06/2007	HK$1.36	15/06/2007 –	50,000
				14/06/2012

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APPENDIX V

(iii) Interest in share options of associated corporation

Share options were granted by Omnitech Holdings Limited (“ OHL ”), which was owned as to 77.04% by the Company, under a share option scheme adopted by the Company on 20 May 2004. Each option gives the holder the right to subscribe one share. Details of the interests of Directors in the share options as at the Latest Practicable Date were as follows:

					Number of
					share options
	Number of		Exercise		as at
	share options		price		the Latest
	as at 1		per share	Exercise	Practicable
Name of Director	January 2007	Date of grant	in OHL	period	Date
Sung Yan Wai, Petrus	75,000	18/05/2005	AUD0.069	18/05/2005-	75,000
				18/05/2008

Save as disclosed herein, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interest and short positions in the shares, underlying shares and debentures of the Company or any associated corporations (within the meaning of Part XV of the SFO) 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 the interests and short positions in which they were deemed or taken to have under such provisions of the SFO), or which are required, pursuant to section 352 of the SFO, to be entered in the register maintained by the Company referred to therein, or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers of the Listing Rules, to be notified to the Company and the Stock Exchange.

(b) Other Interests

As at the Latest Practicable Date,

(i) none of the Directors had any direct or indirect interest in any asset which had been acquired, or disposed of by, or leased to any member of the Enlarged Group, or was proposed to be acquired, or disposed of by, or leased to any member of the Enlarged Group since 31 December 2006, the date to which the latest published audited financial statements of the Group were made up;
(ii) none of the Directors was materially interested, directly or indirectly, in any contract or arrangement entered into by any member of the Enlarged Group subsisting as at the date of this circular and which was significant in relation to the business of the Enlarged Group; and

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(iii) none of the Directors or their respective associates was interested in any business apart from the business of the Group, which competed or was likely to compete, either directly or indirectly, with that of the Group.

4. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as is known to any Director or chief executive of the Company, the following persons, other than a Director or chief executive of the Company, had an interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV 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 other member of the Enlarged Group:

Interest in the Shares

			Approximate
		Number	percentage
Name of Shareholder	Capacity	of shares	of interest held
Planet Adventure	Beneficial owner	9,300,000	5.06%
Limited
Huen Wing Ming,	Corporate_(Note 1)_	9,450,000	5.15%
Patrick
Zeng Hai Bin	Corporate_(Note 2)_	41,447,700	22.57%
Lau Tai Hang	Corporate_(Note 3)_	25,543,350	13.91%
Sino-Forest Corporation	Corporate_(Note 4)_	23,383,500	12.73%
Chau Chi Piu	Corporate_(Note 5)_	16,725,450	9.11%
Ma Ming Fai	Corporate_(Note 6)_	14,030,100	7.64%
Lei Guangyu	Corporate_(Note 7)_	13,226,850	7.20%
Wang Yu Fan	Corporate_(Note 7)_	13,226,850	7.20%
Ma Chun Ling	Corporate_(Note 8)_	10,513,650	5.73%

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APPENDIX V

Notes:

Planet Adventure Limited and Patova International Limited were wholly owned by Mr. Huen Wing Ming, Patrick who was deemed to be interested in 9,300,000 Shares and 150,000 Shares held by Planet Adventure Limited and Patova International Limited respectively under the SFO.
Subject to the terms and conditions of the Agreement, an aggregate of 13,932,000 Consideration Shares and up to 27,515,700 Conversion Shares would be allotted and issued to Montsford Limited which was wholly owned by Mr. Zeng Hai Bin. Mr. Zeng Hai Bin was deemed to be interested in these Shares under the SFO.
Subject to the terms and conditions of the Agreement, an aggregate of 8,586,000 Consideration Shares and up to 16,957,350 Conversion Shares would be allotted and issued to Rise Jet Limited which was wholly owned by Mr. Lau Tai Hang. Mr. Lau Tai Hang was deemed to be interested in these Shares under the SFO.
Subject to the terms and conditions of the Agreement, an aggregate of 7,860,000 Consideration Shares and up to 15,523,500 Conversion Shares would be allotted and issued to Sino-Capital Global Inc. which was a whollyowned subsidiary of Sino-Forest Corporation. Sino-Forest Corporation was deemed to be interested in these Shares under the SFO.
Subject to the terms and conditions of the Agreement, an aggregate of 4,470,000 Consideration Shares and up to 8,828,250 Conversion Shares would be allotted and issued to Fame Sea Profits Limited and an aggregate of 1,152,000 Consideration Shares and up to 2,275,200 Conversion Shares would be allotted and issued to Greenheart Foundation Limited. Both Fame Sea Profits Limited and Greenheart Foundation Limited were wholly owned by Mr. Chau Chi Piu who was deemed to be interested in these Shares under the SFO.
Subject to the terms and conditions of the Agreement, an aggregate of 4,716,000 Consideration Shares and up to 9,314,100 Conversion Shares would be allotted and issued to PVP Resources Limited which was wholly owned by Mr. Ma Ming Fai. Mr. Ma Ming Fai was deemed to be interested in these Shares under the SFO.
Subject to the terms and conditions of the Agreement, an aggregate of 3,576,000 Consideration Shares and up to 7,062,600 Conversion Shares would be allotted and issued to Fortune Universe Limited and an aggregate of 870,000 Consideration Shares and up to 1,718,250 Conversion Shares would be allotted and issued to Spirit Land Limited. Fortune Universe Limited is wholly-owned by Mr. Lei Guang Yu and Spirit Land Limited was jointly by Mr. Lei Guang Yu and his spouse, Ms. Wang Yu Fan. Accordingly, Mr. Lei Guang Yu and Ms. Wang Yu Fan were deemed to be interested in these Shares under the SFO.
Subject to the terms and conditions of the Agreement, an aggregate of 3,534,000 Consideration Shares and up to 6,979,650 Conversion Shares would be allotted and issued to Always Bright Group Limited which was wholly owned by Ms. Ma Chun Ling. Ms. Ma Chun Ling was deemed to be interested in these Shares under the SFO.

Save as disclosed in this section headed “Substantial Shareholders”, as at the Latest Practicable Date, so far as is known to any Director or chief executive of the Company, there is no other person who had an interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or was 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 Enlarged Group.

158

GENERAL INFORMATION

APPENDIX V

5. MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business of the Company) have been entered into by the Company and/or member(s) of the Enlarged Group within two years immediately preceding the date of this circular which are or may be material:

(i) a conditional deed of assignment dated 23 November 2005 entered into between Hai Yang Investment Limited (“ Hai Yang ”), a wholly-owned subsidiary of the Company, as assignor, OHL, a 77.04% owned subsidiary of the Company, as assignee and VFJ Technology Holdings Limited (“ VFJ ”), a 53.2% owned subsidiary of the Company, as debtor in relation to the assignment of part of the debt due from VFJ to Hai Yang in the amount of HK$16,363,299.50;
(ii) a loan agreement dated 30 November 2005 entered into between, inter alia, Talent Sino Holdings Limited (“ Talent Sino ”), a wholly-owned subsidiary of the Company, as borrower, AMS Corporate Finance Limited (“ AMS ”) and Great Charm International Limited (“ Great Charm ”) as lenders and the Company as guarantor in relation to a term loan facility of up to HK$30,000,000;
(iii) a supplemental deed dated 22 May 2006 entered into between, inter alia, Talent Sino as borrower, AMS and Great Charm as lenders and the Company as guarantor in relation to the extension of the repayment date of the term loan facility mentioned in paragraph (ii) above;
(iv) a conditional agreement dated 22 May 2006 entered into between Talent Sino as vendor, Triple Express Enterprises Limited as purchaser and the Company as guarantor for the sale and purchase of the 20,820 ordinary shares representing approximately 51.52% of the entire issued share capital of and shareholder’s loan to Windsor Treasure Group Holdings Limited at a total consideration of HK$96,000,000;
(v) a put and call option deed dated 21 July 2006 entered into between Best Start Services Limited (“ Best Start ”), a 96.2% owned subsidiary of the Company, Up Crown International Limited (“ Up Crown ”), a 96.2% owned subsidiary of the Company and Mr. Frank Hudson (“ Mr. Hudson ”) in relation to 4,000,000 shares in TZ Limited whereby Best Start and Up Crown agreed to grant to Mr. Hudson call options (the “ Call Options ”) to purchase and Mr. Hudson agreed to grant to Best Start and Up Crown put options to require Mr. Hudson to purchase 4,000,000 shares in TZ Limited (the “ TZ Shares ”) at an exercise price of AUD0.55 per share of TZ Limited;
(vi) a deed of variation dated 27 October 2006 entered into between Best Start, Up Crown and Mr. Hudson in relation to the extension of the exercise period of the Call Options for one month as mentioned in paragraph (v) above;
(vii) a loan agreement dated 24 November 2006 entered into between Hillking Profits Limited (“ Hillking ”), a wholly-owned subsidiary of the Company, as lender and PVP Limited (“ PVP ”) as borrower pursuant to which Hillking agreed to make available to PVP an unsecured revolving loan facility of up to the maximum principal amount of HK$9,000,000;

159

GENERAL INFORMATION

APPENDIX V

(viii) a second deed of variation dated 11 December 2006 entered into between Best Start, Up Crown and Mr. Hudson in relation to the extension of the completion date of the sale and purchase of the TZ Shares from 1 December 2006 to 20 December 2006 as mentioned in paragraphs (v) and (vi) above;
(ix) a sale and purchase agreement dated 29 December 2006 entered into between OHL, Hai Yang and Best Treasure Technology Limited (“ Best Treasure ”) in relation to the disposal by OHL of 2,594,724 shares in the issued share capital of VFJ and the total amount owed by VFJ to OHL in the amount of HK$19,450,475 and the disposal by Hai Yang of the total amount owed by VFJ to Hai Yang in the amount of HK$11,527,297.35 to Best Treasure at a total consideration of HK$10,000;
(x) a conditional placing agreement dated 13 June 2007 entered into between the Company and Kingston Securities Limited in relation to the placing of 30,000,000 new Shares at a price of HK$0.90 per placing share;
(xi) the master sales and purchase contract dated 20 July 2007 entered into between Greenheart, Superb Able Industrial Limited (“ SAIL ”), a member of the Enlarged Group, and SFRI in relation to the supply of logs by SAIL to SFRI under which an option was granted by Greenheart to SFRI for the subscription of a maximum of 1,000,000,000 new Class B shares of Greenheart at a subscription price of US$0.006 per Class B share which is exercisable during the period from 20 July 2007 to 20 January 2008;
(xii) a conditional placing agreement dated 2 August 2007 entered into between the Company and Kingston Securities Limited in relation to the placing of 70,000,000 new Shares at a price of HK$3.00 per placing share; and

(xiii) the Agreement.

6. LITIGATION

As at the Latest Practicable Date, no member of the Enlarged Group was engaged in any litigation or claim of material importance and no litigation or claim of material importance is known to the Directors to be pending or threatened by or against any member of the Enlarged Group.

160

GENERAL INFORMATION

APPENDIX V

7. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had a service contract with any member of the Group which is not determinable by the Group within one year without payment of compensation other than statutory compensation.

8. MATERIAL ADVERSE CHANGE

The Directors confirmed that there was no material adverse change in the financial or trading positions of the Group since 31 December 2006, being the date to which the latest published audited financial statements of the Group were made up.

9. QUALIFICATIONS AND CONSENTS OF EXPERTS

The followings are the qualifications of the experts who have given their reports, opinions or advice which are included in this circular:

Name Qualification Moore Stephens Certified Public Accountants Pöyry Forest Industry Limited An independent international firm of forestry experts

As at the Latest Practicable Date,

(a) none of the above experts had any shareholding, directly or indirectly, in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group;
(b) each of the above experts has given and has not withdrawn its written consent to the issue of this circular, with copies of its letter and/or reports and the references to its name included in the forms and contexts in which they are respectively included; and
(c) none of the above experts had any direct or indirect interest in any asset which had been acquired, or disposed of by, or leased to any member of Enlarged the Group, or was proposed to be acquired, or disposed of by, or leased to any member of the Enlarged Group since 31 December 2006, the date to which the latest published audited financial statements of the Group were made up.

161

GENERAL INFORMATION

APPENDIX V

12. MISCELLANEOUS

(a) The registered office of the Company is located at Canon’s Court, 22 Victoria Street, Hamilton HM12, Bermuda.
(b) The head office and principal place of business of the Company in Hong Kong is at Units 1505-7, 15th Floor, Shui On Centre, 6-8 Harbour Road, Wanchai, Hong Kong.
(c) Man Sau Ying, Karen, an associate member of the Hong Kong Institute of Chartered Secretaries, is the company secretary of the Company.
(d) Tam Wing Yiu, Alex, an associate member of the Hong Kong Institute of Certified Public Accountants, is the qualified accountant of the Company.
(e) The branch share registrar and transfer office of the Company is Tricor Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.
(f) In the event of inconsistency, the English text of this circular shall prevail over the Chinese text.

13. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the head office and principal place of business of the Company in Hong Kong at 1505-7, 15th Floor, Shui On Centre, 6-8 Harbour Road, Wanchai, Hong Kong, up to and including the date of the SGM:

(a) the memorandum of association and bye-laws of the Company;
(b) the annual reports of the Company for each of the two years ended 31 December 2006;
(c) the report from Moore Stephens in relation to financial information of Greenheart as set out in Appendix II to this circular;
(d) the report from Moore Stephens in relation to the unaudited pro forma financial information of the Enlarged Group as set out in Appendix III to this circular;
(e) the valuation report prepared by the Valuer, the text of which is set out in Appendix IV to this circular;
(f) the material contracts referred to in the section headed “Material Contracts” in this Appendix;
(g) the letters of consent referred to in the section headed “Qualifications and Consents of Experts” in this appendix;
(h) this circular.

162

NOTICE OF SGM

**OMNICORP LIMITED 兩儀控股有限公司[*]**

(Incorporated in Bermuda with limited liability)

(Stock code: 94)

NOTICE OF SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that a special general meeting of Omnicorp Limited (the “Company”) will be held at Concord Rooms 2 and 3, 8th Floor, Renaissance Harbour View Hotel, No.1 Harbour Road, Wanchai, Hong Kong on Monday, 22 October 2007 at 3:00 p.m. to consider and, if thought fit, pass the following ordinary resolution (with or without modifications):

ORDINARY RESOLUTION

“ THAT

(a) (i) the Agreement as defined and described in the circular of the Company dated 3 October 2007 (the “ Circular ”), a copy of the Agreement marked “A” together with a copy of the Circular marked “B” being tabled before the meeting and initialled by the chairman of the meeting for identification purpose, and all transactions contemplated thereunder and in connection therewith, be and are hereby approved, ratified and confirmed;
(ii) conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) granting the listing of and permission to deal in the Consideration Shares (as defined below), the allotment and issue of up to 60,000,000 new shares (the “ Consideration Shares ”) in the capital of the Company credited as fully paid pursuant to the terms of the Agreement be and are hereby approved;
(iii) conditional upon the Listing Committee of the Stock Exchange granting the listing of and permission to deal in the Conversion Shares (as defined below), the creation and issue of the Convertible Bonds (as defined in the Circular) pursuant to the Agreement, and the allotment and issue to the holders of the Convertible Bonds, upon exercise of the conversion rights attaching to the Convertible Bonds, of shares in the capital of the Company credited as fully paid (the “ Conversion Shares ”) in accordance with the terms and conditions of the Convertible Bonds, be and are hereby approved;

* for identification purposes only

163

NOTICE OF SGM

(b) the directors of the Company (the “ Directors ”) be and are hereby authorized to:
(i) execute all such other documents and agreements and to do all such acts or things deemed by him to be incidental to, ancillary to or in connection with the matters contemplated under the Agreement and completion thereof as he may consider necessary, desirable or expedient to give effect to the Agreement and the transactions contemplated thereunder, including, without limitation, exercising or enforcing any right thereunder and to agree to any amendment to any of the terms of the Agreement;
(ii) allot and issue the Consideration Shares pursuant to the Agreement; and
(iii) issue the Convertible Bonds and/or the Conversion Shares upon exercise of the conversion rights attaching to the Convertible Bonds in accordance with the terms and conditions of the Convertible Bonds,

save that the mandates given under this Resolution (b)(ii) and (iii) are in addition to and shall not prejudice nor revoke the existing general mandate granted to the Directors by the shareholders of the Company in the annual general meeting of the Company held on 18 May 2007 or such other general or special mandate(s) which may from time to time be granted to the Directors prior to the passing of this Resolution.”

By order of the board of Directors Omnicorp Limited Sung Yan Wai, Petrus Executive Director

Hong Kong, 3 October 2007

Notes:

(1) Any shareholder entitled to attend and vote at the meeting is entitled to appoint another person as his proxy to attend and vote instead of him. A proxy need not be a shareholder of the Company. A shareholder who is a holder of two or more Shares may appoint more than one proxy to attend and vote on the same occasion.
(2) In order to be valid, a form of proxy in the prescribed form together with the power of attorney or other authority (if any) under which it is signed or a notarially certified copy of that power or authority must be deposited at the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited of 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time fixed for holding the meeting.
(3) Completion and return of the form of proxy will not preclude members from attending and voting at the annual general meeting or any adjourned meeting thereof (as the case may be) should they so wish, and in such event, the form of proxy shall be deemed to be revoked.
(4) Where there are joint registered holders of any Share(s), any one of such joint holders may attend and vote at the meeting, either in person or by proxy, in respect of such Share(s) as if he/she were solely entitled thereto, but if more than one of such joint holders are present at the meeting or any adjourned meeting thereof (as the case may be), the most senior shall alone be entitled to vote, whether in person or by proxy. For this purpose, seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding.

164

AI assistant

Greenheart Group Limited — Proxy Solicitation & Information Statement 2007

48939_rns_2007-10-02_c401a5bc-3d89-40c4-b60e-9d1623122037.pdf

MAJOR TRANSACTION

IN RELATION TO THE PROPOSED ACQUISITION OF 60% INTEREST IN GREENHEART AND

Financial Adviser to Omnicorp Limited

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

OMNICORP LIMITED 兩儀控股有限公司[*]

MAJOR TRANSACTION

IN RELATION TO THE PROPOSED ACQUISITION OF 60% INTEREST IN GREENHEART AND

INTRODUCTION

I. The Agreement

Parties

Subject matter of the Acquisition

Consideration

LETTER FROM THE BOARD

Lock-up

Pre-emption rights and Co-sale rights

Conditions precedent

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Guarantee

II. The Convertible Bonds

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Ranking

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Security

LETTER FROM THE BOARD

III. Option

IV. Information on the Greenheart Group

The Concession

The Cutting Rights

INDUSTRY OVERVIEW

(a) Global Forest Coverage

(b) Tropical Hardwood Log Markets

Asia-Pacific Tropical Hardwood Log Exports

Log Consumption

CHINA – Hardwood Log Imports (1995-2005)

(c) Tropical Hardwood Lumber market

Asia-Pacific Tropical Hardwood Lumber Exports

Greenheart Business

LETTER FROM THE BOARD

REASONS FOR THE ACQUISITION

MANAGEMENT DISCUSSION AND ANALYSIS ON THE GREENHEART GROUP

(i) For the year ended 31 December 2004

(ii) For the year ended 31 December 2005

LETTER FROM THE BOARD

(iii) For the year ended 31 December 2006

LETTER FROM THE BOARD

(iv) For the seven months ended 31 July 2007

Remuneration Policies and Employee Information

Foreign Exchange Exposure

Contingent Liabilities

BUSINESS REVIEW AND PROSPECTS OF THE ENLARGED GROUP

FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS

EFFECTS ON SHAREHOLDING STRUCTURE

LETTER FROM THE BOARD

FINANCIAL EFFECTS OF THE ACQUISITION ON THE GROUP

Net assets value

Earnings

LISTING RULES IMPLICATIONS

INFORMATION OF THE GROUP AND THE VENDORS

SGM

PROCEDURES TO DEMAND A POLL AT GENERAL MEETING

RECOMMENDATIONS

ADDITIONAL INFORMATION

1. THREE-YEAR FINANCIAL SUMMARY

Consolidated Income Statement

APPENDIX I

Consolidated Balance Sheet

2. AUDITED FINANCIAL INFORMATION OF THE GROUP

Consolidated Income Statement

Consolidated Balance Sheet

Consolidated Statement of Changes in Equity

Greenheart Group Limited Proxy Solicitation & Information Statement 2007

**OMNICORP LIMITED 兩儀控股有限公司[*]**