Honbridge Holdings Limited — Proxy Solicitation & Information Statement 2008

Apr 30, 2008

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

This circular is for information purposes only and does not constitute an invitation or offer to acquire or subscribe for securities.

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

If you have sold or transferred all your shares in Honbridge Holdings Limited (the “Company”) you should at once hand this circular together with the accompanying form of proxy to the purchaser(s) or transferee(s) or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s).

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.

==> picture [28 x 55] intentionally omitted <==

HONBRIDGE HOLDINGS LIMITED

(incorporated in the Cayman Islands with limited liability)

(stock code：8137)

VERY SUBSTANTIAL ACQUISITION

Financial adviser

CIMB-GK Securities (HK) Limited

A letter from the Board is set out on pages 4 to 13 of this circular.

A notice convening an EGM of the Company to be held at Suite 2703, 27/F, Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong, at 10 a.m. on Tuesday, 20 May 2008 is set out on pages 120 to 122 of this circular. If you are not able to attend the EGM, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and deposit the same at the office of Union Registrars Limited Room 1901-02, Fook Lee Commercial Centre Town Plaza, 33 Lockhart Road Wanchai Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the extraordinary general meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the extraordinary general meeting or any adjournment thereof should you so wish.

This circular will remain on the GEM website at www.hkgem.com on the “Latest Company Announcements” page for at least seven days from the date of its posting and on the website of Honbridge Holdings Limited at www.8137.hk

2 May 2008

CHARACTERISTICS OF GEM

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

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

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

• i -

CONTENTS

	Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Appendix I – Financial information on the Group. . . . . . . . . . . . . . . . . . . . . . . . . .	14
Appendix II – Additional financial information on the Group. . . . . . . . . . . . . . . . .	60
Appendix III – Accountants’ report on Kailun PV (Jining). . . . . . . . . . . . . . . . . . . .	67
Appendix IV – Management discussion and analysis of
the Kailun PV (Jining). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	102
Appendix V – Unaudited pro forma financial information
on the Enlarged Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	106
Appendix VI – General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	114
Appendix VII – Notice of EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	120

• ii -

DEFINITIONS

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

• “associate(s)” has the same meaning ascribed to it under the GEM Listing Rules

• “Acquisition” the acquisition by the Company of 2,000 shares of Divine Mission from the Vendor pursuant to the terms and conditions of the Share Transfer Agreement

• “Company” Honbridge Holdings Limited, a company incorporated in the Cayman Islands with limited liabilities, the Shares of which are listed on the GEM

• “Completion” completion of the Share Transfer Agreement and the Subscription Agreement

• “connected person” has the same meaning ascribed to it under the GEM Listing Rules

• “Director(s)” the directors of the Company

• “Divine Mission” Divine Mission Holdings Limited, a company incorporated in the British Virgin Islands and wholly owned by the Vendor

• “Donnion” 東永投資有限公司 (Donnion Investments Limited), a company incorporated in Hong Kong and wholly owned by the Vendor

• “EGM” the extraordinary general meeting of the Company to be convened and held to consider and, if thought appropriate, to approve, among other matters (if any), the Share Transfer Agreement, the Subscription Agreement and the transactions contemplated thereunder

• “Enlarged Group” The Group as enlarged after the completion of the Acquisition of the Subscription

• “GEM” the Growth Enterprise Market of the Stock Exchange

• “GEM Listing Rules” The Rules Governing the Listing of Securities on the GEM

“Group” the Company and its subsidiaries

“HK$” Hong Kong dollar, the lawful currency of Hong Kong

• 1 -

DEFINITIONS

• “Kailun (China)” Kailun (China) Investments Holdings Limited (凱倫(中國)投 資控股有限公司), a company incorporated in Hong Kong and wholly owned by the Vendor

• “Kailun (QuFu)”

• Kailun (QuFu) Property Investment Limited (凱倫(曲阜)置業有 限公司), a company incorporated in the PRC and wholly owned by Kailun (China)

• “Kailun PV (Jining)”

• 濟寧凱倫光伏材料有限公司, a foreign investment enterprise with limited liabilities incorporated in Jining, Shandong Province, the PRC under the law of the PRC on 19 March 2004

• “Kailun PV (HK)” Kailun Photovoltaic Materials Investments Limited (凱倫光伏材 料投資有限公司), a company incorporated in Hong Kong with limited liabilities and is wholly owned by Divine Mission

• “Latest Practicable Date” 28 April 2008, being the latest practicable date prior to the printing of this circular for the purposes of ascertaining certain information contained herein

• “PRC” the Peoples’ Republic of China

• “Shares” ordinary share(s) of HK$0.001 in the share capital of the Company

• “Shareholder(s)”

holder(s) of the Shares

• “Share Transfer Agreement” the share transfer agreement dated 8 April 2008 as supplemented by a supplemental agreement dated 8 April 2008 entered into between the Company and the Vendor in relation to the Acquisition as more particularly set out under the section headed “The Share Transfer Agreement Dated 8 April 2008” of this circular

• “Solar Silicon” silicon of high purity applied in electronic and solar energy industries

• “Stock Exchange”

The Stock Exchange of Hong Kong Limited

• “Subscription”

• the subscription by the Company of 10,000 new shares of Divine Mission pursuant to the terms and conditions of the Subscription Agreement

• “Subscription Agreement”

the Subscription Agreement dated 8 April 2008 entered into between the Company and Divine Mission in relation to the subscription of 10,000 new shares of Divine Mission

• 2 -

DEFINITIONS

“Vendor”	Mr. LIU Xiangmao, the beneficial owner of 100% shareholding
	interest in Divine Mission
“%”	per cent.
“4N silicon”	silicon material with 99.99% purity
“5N silicon”	silicon material with 99.999% purity
“6N silicon”	silicon material with 99.9999% purity

In this circular, US$ has been converted to HK$ at the rate of US$1 = HK$7.78 for illustration purpose only. No representation is made that any amounts in US$ or HK$ have been, could have been or could be converted at the above rate or at any other rates or at all.

• 3 -

LETTER FROM THE BOARD

==> picture [28 x 55] intentionally omitted <==

HONBRIDGE HOLDINGS LIMITED

(incorporated in the Cayman Islands with limited liability)

(stock code：8137)

Executive Directors: Mr. HE Xuechu (Chairman) Mr. LIU Wei, William (Chief Executive Officer) Mr. SHI Lixin

Independent non-executive Directors: Mr. CHAN Chun Wai, Tony Mr. FOK Hon Mr. MA Gang

Registered office: Scotia Centre 4th Floor, P.O. Box 2804 George Town, Grand Cayman Cayman Islands

Head office and principal place of business in Hong Kong: Suite 2703, 27/F Great Eagle Centre 23 Harbour Road Wanchai Hong Kong

Unit C, 3/F Wah Shing Centre 5 Fung Yip Street Chai Wan Hong Kong 2 May 2008

To the Shareholders

Dear Sir or Madam,

VERY SUBSTANTIAL ACQUISITION

I. INTRODUCTION

On 8 April 2008, the Company entered into i) the Share Transfer Agreement with the Vendor for the acquisition of 2,000 shares in Divine Mission current owned by the Vendor, representing approximately 20% of the existing issued share capital of Divine Mission and 10% of the enlarged issued share capital of Divine Mission for a consideration of US$ 1,000,000 (equivalent to HK$7,780,000); and ii) the Subscription Agreement with Divine Mission pursuant to which the Company will subscribe for 10,000 new shares of Divine Mission, representing approximately 100% of the existing issued share capital of Divine Mission and 50% of the enlarged issued share capital of Divine Mission for a consideration of US$ 8,000,000 (equivalent to HK$62,240,000).

• 4 -

LETTER FROM THE BOARD

Pursuant to a separate share transfer agreement, Donnion and Kailun (QuFu) will transfer their equity interests in Kailun PV (Jining) to Kailun PV (HK), a wholly-owned subsidiary of Divine Mission. After completion of the transfer, Divine Mission will indirectly own the entire equity interest of Kailun PV (Jining).

The aggregated consideration will be satisfied by way of cash by internal resources and/or equity financing and/or shareholders loan of the Company.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, Divine Mission, its ultimate beneficial owner and the Vendor are third parties independent of the Company and its connected persons. As at the Latest Practicable Date, the Vendor is interested in 6,080,000 Shares, representing approximately 0.18% of the issued share capital of the Company. The Vendor and its associates will abstain from voting at the EGM. Upon Completion, Divine Mission will become a 60% subsidiary of the Company and the accounts of Divine Mission will be consolidated into that of the Group.

The purpose of this circular is to provide you with further information on the Share Transfer Agreement, the Subscription Agreement and, among other things, the accountants’ report on Kailun PV (Jining), a wholly-owned subsidiary of Divine Mission. A notice of the EGM in accordance with the requirement of the GEM Listing Rules has been included in this circular.

THE SHARE TRANSFER AGREEMENT DATED 8 APRIL 2008

Parties

Purchaser : the Company Seller : the Vendor

As at the Latest Practicable Date, the Vendor is interested in 6,080,000 Shares, representing approximately 0.18% of the issued share capital of the Company. To the best of the directors’ knowledge, information and belief and having made all reasonable enquiries, the Vendor is a third party independent of the Company and its connected persons.

Assets to be transferred:

2,000 shares in Divine Mission current owned by the Vendor, representing approximately 20% of the existing issued share capital of Divine Mission and 10% of the enlarged issued share capital of Divine Mission.

Consideration

US$1,000,000 (equivalent to HK$7,780,000) shall be payable in cash by the Company to the Vendor. The consideration will be satisfied by way of cash by internal resources and/or equity financing and/or shareholders’ loan of the Company.

• 5 -

LETTER FROM THE BOARD

Completion of the Share Transfer Agreement is conditional upon, amongst other things, satisfaction of the following conditions precedent within 3 months from the date of the Share Transfer Agreement, or such other date as the parties to the Share Transfer Agreement may agree:

• i) the approval of the Share Transfer Agreement by the Shareholders at the EGM;

• ii) completion of the separate share transfer agreement, pursuant to which Donnion and Kailun (QuFu) will transfer their equity interests in Kailun PV (Jining) to Kailun PV (HK), a wholly-owned subsidiary of Divine Mission; and

• iii) completion of the Subscription Agreement.

THE SUBSCRIPTION AGREEMENT DATED 8 APRIL 2008

Parties

Subscriber : the Company Issuer : Divine Mission

As at the Latest Practicable Date, the Vendor is interested in 6,080,000 Shares, representing approximately 0.18% of the issued share capital of the Company. To the best of the directors’ knowledge, information and belief and having made all reasonable enquiries, Divine Mission and its ultimate beneficial owner are third parties independent of the Company and its connected persons.

Shares to be issued:

10,000 new shares of Divine Mission, representing approximately 100% of the existing issued share capital of Divine Mission and 50% of the enlarged issued share capital of Divine Mission.

Consideration

US$8,000,000 (equivalent to HK$62,240,000) to subscribe for 10,000 new shares in Divine Mission. The consideration will be satisfied by way of cash by internal resources and/or equity financing and/or shareholders’ loan of the Company.

Completion of the Subscription Agreement is conditional upon, amongst other things, satisfaction of the following conditions precedent within 3 months from the date of the Subscription Agreement, or such other date as the parties to the Subscription Agreement may agree:

• i) approval of the Subscription Agreement by the Shareholders at the EGM;

• ii) completion of the separate share transfer agreement, pursuant to which Donnion and Kailun (QuFu) will transfer their equity interests in Kailun PV (Jining) to Kailun PV (HK), a wholly-owned subsidiary of Divine Mission; and

iii) completion of the Share Transfer Agreement.

• 6 -

LETTER FROM THE BOARD

The aggregated consideration has been determined after arm’s length negotiation between the parties thereto with reference to the recent financial performance and the future prospects of Kailun PV (Jining), taking into account the recent increase in price of highly purified silicon and the prospect of the solar energy industry. The Directors consider that the consideration is fair and reasonable so far as the Company and the Shareholders are concerned.

The Share Transfer Agreement and the Subscription Agreement are inter-conditional. Upon Completion, the Company will be interested in 60% of the enlarged issued share capital of Divine Mission. As at the Latest Practicable Date, the Company does not have any further capital commitment on Divine Mission and its subsidiaries.

Deposit

A deposit of HK$10,000,000 is payable by the Company to Divine Mission on the fifth business day after signing of the Share Transfer Agreement and the Subscription Agreement. As at the Latest Practicable Date, such deposit has been paid by the Company to Divine Mission. If the Share Transfer Agreement and the Subscription Agreement were terminated, Divine Mission shall refund the deposit to the Company within 3 business days of the date of termination of the Share Transfer Agreement and the Subscription Agreement. If the Share Transfer Agreement and the Subscription Agreement were completed, the deposit will form part of the consideration for the Subscription.

The consideration to the Vendors and the remaining balance of the consideration for the Subscription shall be payable by the Company upon Completion.

INFORMATION ON DIVINE MISSION

Divine Mission is a company incorporated in the British Virgin Islands. Its principal activity is investment holding and it is wholly owned by the Vendor. As at Latest Practicable Date, Kailun PV (Jining) is 51% owned by Donnion and 49% owned by Kailun (QuFu). Prior to Completion, Donnion and Kailun (QuFu) will transfer their equity interests in Kailun PV (Jining) to Kailun PV (HK) and Divine Mission will indirectly own the entire equity interest of Kailun PV (Jining).

As both Divine Mission and Kailun PV (HK) were recently incorporated in 2008 and its sole investment is on Kailun PV (Jining), the Directors considered that the accountants’ report of Kailun PV (Jining) for the three years ended 31 December 2007 as set out in Appendix III to this circular and the unaudited pro forma financial information of the Enlarge Group prepared based on the financial statements of Kailun PV (Jining) as set out in Appendix V to this circular would provide Shareholders with sufficient information in regard to the Acquisition and Subscription.

In addition, the Directors has noted that the accountant’s report of Kailun PV (Jining) was prepared by Grant Thornton on a going concern basis on the basis that (i) the ultimate beneficiary owner of Kailun PV (Jining), being Mr. Liu Xiangmao will continue to provide financial support to Kailun PV (Jining) to meet Kailun PV (Jining)’s liabilities and commitments up to 31 December 2008 or the date of Completion, whichever is shorter; (ii) fellow subsidiaries of Kailun PV (Jining) and minority equity holder of Kailun PV (Jining) have undertaken not to demand repayment of debts due from Kailun PV (Jining) until such time when repayment will not affect Kailun PV (Jining)’s

• 7 -

LETTER FROM THE BOARD

ability to repay other creditors in the normal course of business; and (iii) Divine Mission will indirectly make capital contribution to Kailun PV (Jining) in the amount of US$8,000,000 in cash upon Completion. Given that the Vendor will own 40% of Divine Mission after the Completion and that the consideration for the Subscription of US$8,000,000 will be used to enlarge the capital base of Kailun PV (Jining), the Directors considered that Kailun PV (Jining) should continue to operate as a going concern immediately after the Completion.

The existing shareholding structure of Kailun PV (Jining) and the shareholding structure of Kailun PV (Jining) after the Completion are as follows:

Existing shareholding structure

==> picture [398 x 221] intentionally omitted <==

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

Vendor
100% 100% 100%
Divine Mission Donnion Kailun (China)
100% 100%
51%
Kailun PV (HK) Kailun (QuFu)
49%
Kailun PV (Jining)
----- End of picture text -----

Shareholding structure after the Completion

==> picture [289 x 196] intentionally omitted <==

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

Vendor The Company
40% 60%
Divine Mission
100%
Kailun PV (HK)
100%
Kailun PV (Jining)
----- End of picture text -----

• 8 -

LETTER FROM THE BOARD

Overview of the Solar Industry

As energy resources generated from coal, crude oil and natural gas face a number of challenges including rising prices and growing environmental concerns, renewable energy such as solar, biomas, geothermal, hydroelectric and wind power generation have emerged as power alternatives. Among the available power alternatives, solar energy is one of the most popular renewable energy resources, and is estimated to continue increasing its importance as a common alternative power source for the global energy consumption.

According to Solarbuzz LLC, an independent international solar energy consulting company, the world solar photovoltaics (“PV”) market installations reached a record high of 2,826 megawatts (MW) in 2007, representing growth of 62% over the previous year. Remarkably, the industry has raised nearly US$10 billion and generated US$17.2 billion in global revenues for the year 2007.

Conversion of light energy into electricity:

PV technology, with no pollution emission and no greenhouse gasses production, enable the direct conversion of light energy to electricity, when PV cells are exposed to light energy. In brief, when light energy strikes the cell, electrons are knocked loose in the semiconductor material. If electrical conductors are attached to the positive and negative sides, the electrons can be captured into electricity.

PV value chain:

The PV value chain starts from the purification and crystallization of silicon, cutting of crystallized silicon (or ingot) into wafers, processing of wafers into cells, assembling the cells into modules, and the overhead energy use for the end users. Solar Silicon production is a complicated process which has been an oligarchical industry for the past 20 years. In general, the refining methods for silicon includes i) the chemistry crystallization method (which includes the siemens method and the modified siemens method); and ii) the physics purification method. Compared to the chemistry crystallization method, the physics purification method is a relatively safer method which requires a lower investment cost.

Low production capacity of the upstream Solar Silicon producers, together with the rapid growing needs for solar energy as power alternatives in countries such as Germany, the USA, Japan, Spain, Italy and China, has lead to the shortage for Solar Silicon in the PV industry, which has consequently led to the prices of this key component of solar cells to soar for the past few years. According to Solarbuzz LLC, despite polysilicon production for both solar and semiconductor use has increased for an approximately 30% in 2007, it remains as the most capacity constrained part along the PV value chain.

Currently, Kailun PV (Jining) is primarily focused in the production and sales of highly purified silicon up to the purity of 4N Silicon, and research and development in the production of Solar Silicon, which is well positioned in the upstream of the PV value chain. As represented by the Vendor and based on the information provided by the Vendor, Kailun PV (Jining) has achieved a technology breakthrough in producing 5N Silicon with the physics purification method.

• 9 -

LETTER FROM THE BOARD

Information of Kailun PV (Jining)

The Company understands from the Vendor that for the two years ended 31 December 2007, Kailun PV (Jining) was primarily engaged in the production and sales of highly purified silicon up to the purity of 4N Silicon. The highly purified silicon produced by Kailun PV (Jining) is used in the chemical and smelting industries. As represented by the Vendor and based on the information provided by the Vendor, Kailun PV (Jining) has achieved a technology breakthrough in producing 5N Silicon with the physics purification method, which has lower cost of production as compare to the conventional method. The newly developed 5N Silicon has passed internal testings by Kailun PV (Jining) and has been launched to the market on a small scale basis. 5N Silicon has a higher market selling price than 4N Silicon and can be used in the refining process of higher graded purified silicon, which is used in the solar industry. Kailun PV (Jining) is planning to make investment to commence commercial production of 5N Silicon in Beijing in the second half of 2008. At the same time, Kailun PV (Jining) continues its research and development in order to achieve the technology standard to produce 6N Silicon, which is used as the principal raw materials in the solar industry.

The Directors believe that with the commercial launch of 5N Silicon and the increasing trend in price of highly purified silicon, Kailun PV (Jining)’s business future is promising and hence the Acquisition and Subscription represents a good investment opportunity for the Company upon Completion.

The Company will nominate two directors and the Vendor will nominate one director into the board of directors of each of Divine Mission and Kailun PV (HK) and the Company will nominate four directors and the Vendor will nominate three directors into the board of directors of Kailun PV (Jining), immediately upon Completion.

In order to facilitate its research and development to achieve the technology standard to produce 6N Silicon, Kailun PV (Jining) has employed two expertise in the area of solar cell research and engineering, whose track records, background and awards received are outlined as follow:

Mr. Lin Anzhong , age 59, obtained his Doctor of Materials Science from Rice University in USA in 1978 and conducted his postdoctoral fellowship training in the Southern Methodist University, Texas, USA for the research and development of polycrystalline silicon thin-film solar cell. In 1979, he joined the General Research Institute for Nonferrous Metals, Beijing, China, and dedicated his time on the research and development of solar cell. From 1994-1999, he was appointed as the deputy directorgeneral of China Solar Energy Society and director of PV Professionals Committee. In November 2006, Mr. Lin was awarded with the China Solar Energy Suntech (PV) Award（中國太陽能光伏尚德 獎）by the PV Technical Committee of China Solar PV Association for his works and contribution to the solar cell research. In January 2007, Mr. Lin was appointed by the PRC government to participate in the Eleventh Five-Year Plan’s 863 research project on the development and manufacturing of the 270kg solar silicon igot furnace.

Mr. Zhao Zeshi , age 58, graduated from Tsinghua University, the PRC in 1983. He has been dedicated in the research and development of technology and facilities in metal material for over 20 years, as well as on the refining facilities and technology in Solar Silicon. During his career, Mr. Zhao has obtained numbers of awards from various recognized organization, including the National Science Technology Improvement Award in 1983 and the Beijing City Science Technology Improvement Award in 1986. Since 1994, Mr. Zhao has been granted the government special subsidy from the PRC State Council for his outstanding contribution in engineering technology.

• 10 -

LETTER FROM THE BOARD

REASONS FOR THE ACQUISITION

The Company is principally engaging in magazine publishing and advertising activities. As stated in the Company’s circular to the Shareholders dated 14 September 2007, the Company is also actively seeking business opportunities in the area of energy and resources.

Kailun PV (Jining) is a foreign investment enterprise with limited liabilities incorporated in the PRC under the law of the PRC on 19 March 2004. Based on information provided by the Vendor, Kailun PV (Jining)’s production facility located in Jining, Shandong Province, the PRC occupied a gross floor area of approximately 20,000m[2] . It produced approximately 3,500 tonnes of highly purified silicon in 2007. As stated above, the Vendor has represented and provided information stating that Kailun PV (Jining) has achieved a technology breakthrough in producing 5N Silicon with the physics purification method. The Directors understand from the Vendor that Kailun PV (Jining) is currently planning to commercialize the production of 5N Silicon. At the same time, Kailun PV (Jining) continues its research and development in order to achieve the technology standard to produce 6N Silicon, which is used in the solar industry.

The Company believes that entering into the Share Transfer Agreement and the Subscription Agreement would enable the Company to invest into a company with potential rapid growth. It is expected that the consideration for the Subscription of US$8,000,000 (equivalent to HK$62,240,000 million) will be used by Kailun PV (Jining) to make investment to commence commercial production of 5N Silicon in Beijing in the second half of 2008 and to conduct research and development in order to achieve the technology standard to produce 6N Silicon. Upon completion of the Acquisition and the Subscription, Divine Mission will become a 60% subsidiary of the Company and the accounts of Divine Mission will be consolidated into that of the Group.

Based on the current status of research and development as stated above, the Directors believe that Kailun PV (Jining) is progressing to achieve a significant breakthrough in technology to be able to produce higher value-added products. Hence, the Acquisition and the Subscription represents a good opportunity for the Company to invest in this industry which has good growth prospects and good return potential for the Company. The Directors consider the entering into of the Share Transfer Agreement and the Subscription Agreement is in the interests of the Company and the Shareholders as a whole and the terms of the Share Transfer Agreement and the Subscription Agreement are fair and reasonable so far as the Company and the Shareholders are concerned.

FINANCIAL EFFECTS OF THE ACQUISITION

Upon Completion, the Group will be interested in 60% in the share capital of the enlarged issued share capital of Divine Mission. Divine Mission will be accounted for a non-wholly owned subsidiary of the Company and its results will be consolidated in to the financial statements of the Group. Detailed financial effects of the Acquisition and Subscription on earnings and assets and liabilities to the Group are illustrated in the section headed “Appendix V – Unaudited Pro Forma Financial Information on the Enlarged Group” of this circular.

• 11 -

LETTER FROM THE BOARD

LISTING RULES IMPLICATION

The Acquisition and Subscription constitutes a very substantial acquisition for the Company under Chapter 19 of the GEM Listing Rules and is subject to the approval of Shareholders at the EGM.

The Company will seek the approval of its Shareholders at the EGM to be convened and held by the Company to approve the Share Transfer Agreement, Subscription Agreement and the transactions contemplated thereunder. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, Divine Mission, its ultimate beneficial owner and the Vendor are third parties independent of the Company and its connected persons. As at the Latest Practicable Date, the Vendor is interested in 6,080,000 Shares, representing approximately 0.18% of the issued share capital of the Company, and the Vendor will abstain from voting at the EGM.

Shareholders and investors should note that the Share Transfer Agreement and the Subscription Agreement are subject to various conditions as stated above and Shareholders and investors are urged to exercise caution when dealing in the Shares.

EGM

Set out pages 120 to 122 of this circular is a notice convening the EGM to be held at Suite 2703, 27/F, Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong, at 10:00 a.m. on Tuesday, 20 May 2008 at which ordinary resolutions will be proposed to the Shareholders to consider and, if thought fit, to approve the terms of the Share Transfer Agreement and the Subscription Agreement and the transactions contemplated thereunder. The vote of the Shareholders at the EGM will be taken by poll pursuant to the GEM Listing Rules. An announcement will be made in respect of the results of the poll. A form of proxy for use at the EGM is enclosed with this circular, whether or not you are able to attend the EGM, you are requested to complete and return the form of proxy in accordance with the instructions printed thereon to the branch share registrar of the Company, Union Registrars Limited Room 1901-02, Fook Lee Commercial Centre Town Plaza, 33 Lockhart Road Wanchai Hong Kong, as soon as possible, but in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof. Completion and return of the form of proxy will not prevent you from attending and voting in person at the EGM or any adjourned meeting thereof if you so wish.

Procedures for demanding a poll

Pursuant to article 80 of the articles of association of the Company, at any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is duly demanded. A poll may be demanded by:

• (a) the chairman of the meeting; or

• (b) at least five members present in person or by proxy and entitled to vote or who represent in the aggregate not less than one-tenth of the total voting rights of all members having the right to attend and vote at the meeting; or

• 12 -

LETTER FROM THE BOARD

• (c) any member or members present in person or by proxy and holding shares of the Company conferring a right to attend and vote at the meeting on which there have been paid up sums in the aggregate equal to not less than one-tenth of the total sum paid up on all shares of the Company conferring that right; or

• (d) if required by the GEM Listing Rules, by any Director or Directors who, individually or collectively, hold proxies in respect of shares representing five per cent (5%) or more of the total voting rights at such meeting.

Unless a poll is so demanded and not withdrawn, a declaration by the chairman of the meeting that a resolution has on a show of hands been carried, or carried unanimously, or by a particular majority, or lost, and an entry to that effect in the Company’s book containing the minutes of proceedings of meetings of the Company shall be conclusive evidence of that fact without proof of the number or proportion of the votes recorded in favour of or against such resolution.

RECOMMENDATION

The Directors consider that the entering into of the Share Transfer Agreement and the Subscription Agreement are beneficial to and in the best interests of the Company and the Shareholders as a whole. The terms of the Share Transfer Agreement and the Subscription Agreement and the transactions contemplated thereunder are fair and reasonable to the Company and in the interests of the Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of the resolutions to approve the entering into of the Share Transfer Agreement and the Subscription Agreement and the transactions contemplated thereunder at the EGM.

ADDITIONAL INFORMATION

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

On behalf of the Board Honbridge Holdings Limited HE Xuechu Chairman

• 13 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

I. FINANCIAL SUMMARY

The following is a summary of the audited consolidated financial information of the Group for each of the three years ended 31 December 2005, 2006 and 2007 as extracted from the relevant annual reports of the Company.

RESULTS OF THE GROUP:

	For the year ended 31 December	For the year ended 31 December	For the year ended 31 December	For the year ended 31 December
	2005	2006		2007
	HK$’000	HK$’000		HK$’000
Revenue	94,855	83,464		67,843
Profit/(loss) before taxation	3,430	(14,169 )		1,529
Taxation	–	–		–
Profit/(loss) for the year	3,430	(14,169 )		1,529
Profit/(loss) attributable to:
Equity holders of the Company	3,430	(14,169 )		1,529
Earnings/(loss) per share
attributable to ordinary equity
holders of the Company
Basic	HK$0.68 cent	HK$(2.80)cents		HK$0.14 cent
Diluted	N/A	N/A		HK$0.11 cent
FINANCIAL POSITION OF THE GROUP:
		As at 31 December
	2005	2006		2007
	HK$’000	HK$’000		HK$’000
Total assets	35,491	21,228		41,759
Total liabilities	31,225	28,229		22,561
Total equity/(capital deficiency)
attributable to equity holders
of the Company	4,266	(7,001 )		19,198

• 14 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

II. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP

Set out below are the audited consolidated financial statements of the Group, together with the relevant notes thereto, as extracted from the annual report of the Company for the year ended 31 December 2007.

Consolidated Income Statement

For the year ended 31 December 2007

Notes Revenue 5 Direct operating expenses Other operating revenue 6 Selling and distribution costs Administrative expenses Other operating income Other operating expenses Other operating income/(expenses), net 9 Operating profit/(loss) Finance cost 7 Profit/(loss) before income tax 9 Income tax expense 10 Profit/(loss) for the year Profit/(loss) attributable to: Equity holders of the Company 11 Earnings/(loss) per share for profit/(loss) attributable to the equity holders of the Company during the year 12 – Basic – Diluted	2007 HK$’000 67,843 (43,696 ) 192 (17,271 ) (9,998 ) 5,480 (852 ) 4,628 1,698 (169 ) 1,529 – 1,529 1,529 HK0.14 cent HK0.11 cent	2007 HK$’000 67,843 (43,696 ) 192 (17,271 ) (9,998 ) 5,480 (852 ) 4,628 1,698 (169 ) 1,529 – 1,529 1,529 HK0.14 cent HK0.11 cent	2006 HK$’000 83,464 (68,054 ) 259 (19,491 ) (8,332 )
			4,548 (6,563 )
			(2,015 ) (14,169 ) – (14,169 ) – (14,169 ) (14,169 ) HK(2.80) cents N/A

• 15 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Balance Sheet

As at 31 December 2007

Notes ASSETS AND LIABILITIES Non-current assets Plant and equipment 15 Other intangible asset 18 Current assets Trade receivables 19 Other receivables Cash and cash equivalents 20 Current liabilities Trade payables 21 Other payables, accrued expenses and receipts in advance Amount due to a related company 32 Net current assets/(liabilities) Total assets less current liabilities Non-current liability Convertible bonds 23 Net assets/(liabilities) EQUITY Equity attributable to equity holders of the Company Share capital 24 Reserves Total equity/(capital deficiency)	2007 HK$’000 1,293 – 1,293 5,414 1,300 33,752 40,466 5,375 4,017 – 9,392 31,074 32,367 13,169 19,198 3,413 15,785 19,198	2006 HK$’000 554 19 573 17,657 435 2,563 20,655 21,981 6,177 71 28,229 (7,574 ) (7,001 ) – (7,001 ) 507 (7,508 ) (7,001 )

• 16 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Balance Sheet

As at 31 December 2007

Notes ASSETS AND LIABILITIES Non-current assets Plant and equipment 15 Interest in a subsidiary 16 Current assets Amount due from a subsidiary 16 Other receivables Cash and cash equivalents 20 Current liabilities Other payables and accrued expenses Amount due to a subsidiary 22 Net current assets Total assets less current liabilities Non-current liability Convertible bonds 23 Net assets EQUITY Share capital 24 Reserves 26 Total equity	2007 HK$’000 997 7,266 8,263 – 177 31,331 31,508 432 1 433 31,075 39,338 13,169 26,169 3,413 22,756 26,169	2006 HK$’000 – 510
		510 3,910 25 21
		3,956 78 –
		78
		3,878
		4,388
		–
		4,388
		507 3,881
		4,388

• 17 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Cash Flow Statement

For the year ended 31 December 2007

Notes Cash flows from operating activities Profit/(loss) before income tax Adjustments for : Depreciation 9 Gain on disposal of subsidiaries 9 Impairment of plant and equipment 9 Equity-settled share-based payment expenses 13 Interest income 6 Interest expense on convertible bonds 7 Operating loss before working capital changes (Increase)/Decrease in trade and other receivables (Decrease)/Increase in trade payables Increase/(Decrease) in other payables, accrued expenses and receipts in advance Decrease in amount due to a related company Net cash used in operating activities Cash flows from investing activities Interest received 6 Proceed from disposal of subsidiaries 33 Purchase of plant and equipment Net cash used in investing activities Cash flows from financing activities Proceeds from shares issued under share option scheme Proceeds from issuance of new shares Proceeds from issuance of convertible bonds Share issue expenses Net cash generated from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December Analysis of cash and cash equivalents – Cash at banks and in hand 20	2007 HK$’000 1,529 285 (5,480 ) – 749 (79 ) 169 (2,827 ) (1,251 ) (2,623 ) 2,239 (71 ) (4,533 ) 79 309 (1,518 ) (1,130 ) 3,283 20,300 14,700 (1,431 ) 36,852 31,189 2,563 33,752 33,752	2006 HK$’000 (14,169 ) 481 (4,548 ) 617 – (58 ) – (17,677 ) 2,803 11,744 (231 ) (489 ) (3,850 ) 58 (853 ) (108 ) (903 ) – – – – – (4,753 ) 7,316 2,563 2,563

• 18 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Statement of Changes in Equity

For the year ended 31 December 2007

At 31 December 2005 and 1 January 2006 Loss for the year Total recognised income and expense for the year Disposal of a subsidiary Share options forfeited At 31 December 2006 and 1 January 2007 Profit for the year Total recognised income and expense for the year Disposal of subsidiaries Proceeds from issuance of shares Share issue expenses Proceeds from shares issued under share option scheme Share options forfeited Recognition of equity component of convertible bonds Recognition of equity-settled share- based compensation At 31 December 2007	Share capital HK$’000 507 – – – – 507 – – – 2,900 – 6 – – – 3,413	Equity attributable to equity holders of the Company Convertible Employee bonds Share Capital compensation Translation equity Accumulated premium reserve reserve reserve reserve losses HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 9,218 (510 ) 3,937 (90 ) – (6,098 ) – – – – – (14,169 ) – – – – – (14,169 ) – – – 204 – – – – (154 ) – – 154 9,218 (510 ) 3,783 114 – (20,113 ) – – – – – 1,529 – – – – – 1,529 – 183 – (114 ) – – 17,400 – – – – – (1,431 ) – – – – – 5,024 – (1,747 ) – – – – – (1,954 ) – – 1,954 – – – – 1,700 – – – 749 – – – 30,211 (327 ) 831 – 1,700 (16,630 )	Total HK$’000 6,964 (14,169 ) (14,169 ) 204 – (7,001 ) 1,529 1,529 69 20,300 (1,431 ) 3,283 – 1,700 749 19,198	Total equity/ Minority (capital Interest deficiency) HK$’000 HK$’000 (2,698 ) 4,266 – (14,169 ) – (14,169 ) 2,698 2,902 – – – (7,001 ) – 1,529 – 1,529 – 69 – 20,300 – (1,431 ) – 3,283 – – – 1,700 – 749 – 19,198	Total equity/ Minority (capital Interest deficiency) HK$’000 HK$’000 (2,698 ) 4,266 – (14,169 ) – (14,169 ) 2,698 2,902 – – – (7,001 ) – 1,529 – 1,529 – 69 – 20,300 – (1,431 ) – 3,283 – – – 1,700 – 749 – 19,198
					(14,169 ) 2,902 –
					(7,001 ) 1,529
					1,529 69 20,300 (1,431 ) 3,283 – 1,700 749
					19,198

• 19 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes to the Consolidated Financial Statements

For the year ended 31 December 2007

1. GENERAL INFORMATION

Honbridge Holdings Limited (the “Company”) was incorporated in the Cayman Islands as an exempted company with limited liability under the Companies Law (2001 Revision) of the Cayman Islands. The address of its registered office is Scotia Centre, 4th Floor, P.O. Box 2804, George Town, Grand Cayman, Cayman Islands and its principal place of business is Suite 2703, 27th Floor, Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong. The Company’s shares are listed on The Growth Enterprise Market (the “GEM”) of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

The Company acts as an investment holding company. The activities of its principal activities are set out in note 16 to the consolidated financial statements.

Pursuant to a special resolution passed at the Extra-ordinary General Meeting held on 12 October 2007, the name of the Company was changed from “Jessica Publications Limited” to “Honbridge Holdings Limited”.

The consolidated financial statements of the Group on pages 28 to 85 have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards and Interpretations issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). The consolidated financial statements also include the applicable disclosure requirements of the Hong Kong Companies Ordinance and the Rules Governing the Listing of Securities on The Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the “GEM Listing Rules”).

The consolidated financial statements for the year ended 31 December 2007 were approved for issue by the board of directors on 1 February 2008.

2. ADOPTION OF NEW OR AMENDED HKFRSs

In the current year, the Group has applied, for the first time, the following new standards, amendment and interpretations issued by the HKICPA, which are effective for the Group’s financial statements beginning on 1 January 2007.

HKAS 1 (Amendment) Capital Disclosures HKFRS 7 Financial Instruments : Disclosures HK(IFRIC) – Int 8 Scope of HKFRS 2 HK(IFRIC) – Int 9 Reassessment of Embedded Derivatives HK(IFRIC) – Int 10 Interim Financial Reporting and Impairment

The adoption of the new HKFRSs had no material effect on how the results and financial position for the current or prior accounting periods have been prepared and presented. Accordingly, no prior period adjustment is required.

• 20 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

2.1 HKAS 1 (Amendment) – Capital Disclosures

In accordance with the HKAS 1 (Amendment) – Capital Disclosures, the Group now reports on its capital management objectives, policies and procedures in each annual financial report. The new disclosures that become necessary due to this change are detailed in note 35.

2.2 HKFRS 7 – Financial Instruments : Disclosures

HKFRS 7 – Financial Instruments : Disclosures is mandatory for reporting periods beginning on 1 January 2007 or later. The new standard replaces and amends the disclosure requirements previously set out in HKAS 32 Financial Instruments: Presentation and Disclosures and has been adopted by the Group in its consolidated financial statements for the year ended 31 December 2007. All disclosures relating to financial instruments including the comparative information have been updated to reflect the new requirements. In particular, the Group’s consolidated financial statements now feature:

– a sensitive analysis explained the Group’s market risk exposure in regard to its financial instruments, and

– a maturity analysis that shows the remaining contractual maturities of financial liabilities,

each as at the balance sheet date. The first-time application of HKFRS 7, however, has not resulted in any priorperiod adjustments on cash flows, net income or balance sheet items.

2.3 New or amended HKFRSs that have been issued but are not yet effective

The Group has not early adopted the following HKFRSs that have been issued but are not yet effective. The Directors of the Company is currently assessing the impact of these HKFRSs but are not yet in a position to state whether they would have material financial impact on the Group’s consolidated financial statements.

HKAS 1 (Revised) Presentation of Financial Statements[1] HKAS 23 (Revised) Borrowing Costs[1] HKFRS 8 Operating Segments[1] HK(IFRIC) – Int 11 Group and Treasury Share Transactions[2] HK(IFRIC) – Int 12 HKFRS 2 – Service Concession Arrangements[3] HK(IFRIC) – Int 13 Customer Loyalty Programmes[4] HK(IFRIC) – Int 14 HKAS 19 – The Limit on Defined Benefit Asset, Minimum Funding Requirements and their Interaction[3]

Notes:

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

2 Effective for annual periods beginning on or after 1 March 2007

3 Effective for annual periods beginning on or after 1 January 2008

4 Effective for annual periods beginning on or after 1 July 2008

• 21 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3.1 Basis of preparation

The significant accounting policies that have been used in the preparation of these financial statements are summarised below. These policies have been consistently applied to all the years presented unless otherwise stated.

The financial statements have been prepared on the historical cost basis. The measurement bases are fully described in the accounting policies below.

It should be noted that accounting estimates and assumptions are used in preparation of the financial statements. Although these estimates are based on management’s best knowledge and judgement of current events and actions, actual results may ultimately differ from those estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 4.

3.2 Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to 31 December each year.

3.3 Subsidiaries

Subsidiaries are entities (including special purpose entities) over which the Group has the power to control the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are excluded from consolidation from the date that control ceases.

Intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated in preparing the consolidated financial statements. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

In the Company’s balance sheet, subsidiaries are carried at cost less any impairment loss. The results of the subsidiaries are accounted for by the Company on the basis of dividends received and receivable at the balance sheet date.

3.4 Foreign currency translation

The financial statements are presented in Hong Kong Dollars (HK$), which is also the functional currency of the Company.

In the individual financial statements of the consolidated entities, foreign currency transactions are translated into the functional currency of the individual entity using the exchange rates prevailing at the dates of the transactions. At balance sheet date, monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rates ruling at the balance sheet date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the balance sheet date retranslation of monetary assets and liabilities are recognised in the income statement.

Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined and are reported as part of the fair value gain or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

• 22 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

In the consolidated financial statements, all individual financial statements of foreign operations, originally presented in a currency different from the Group’s presentation currency, have been converted into Hong Kong dollars. Assets and liabilities have been translated into Hong Kong dollars at the closing rates at the balance sheet date. Income and expenses have been converted into the Hong Kong dollars at the exchange rates ruling at the transaction dates, or at the average rates over the reporting period provided that the exchange rates do not fluctuate significantly. Any differences arising from this procedure have been dealt with separately in the translation reserve in equity. Goodwill and fair value adjustments arising on the acquisition of a foreign operation have been treated as assets and liabilities of the foreign operation and translated into Hong Kong dollars at the closing rates.

Other exchange differences arising from the translation of the net investment in foreign entities are taken to shareholders’ equity. When a foreign operation is sold, such exchange differences are recognised in the income statement as part of the gain or loss on sale.

3.5 Revenue recognition

Revenue comprises the fair value for the sale of goods and rendering of services, net of rebates and discounts. 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 as follows:

• Sale of magazines is recognised when the magazines are delivered and title has passed, with advance subscription fee received from subscribers recorded as receipts in advance.

• Advertising income is recognised on the date of the relevant publication issue or on time basis by reference to the period in which the advertisement is published.

• Promotion and marketing income is recognised in the accounting period in which the services are rendered, by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided.

• Interest income is recognised on a time-proportion basis using the effective interest method.

3.6 Goodwill

Goodwill represents the excess of the cost of a business combination over the Group’s interest in the net fair value of the acquiree’s identifiable assets and liabilities. The cost of the business combination is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group, plus any costs directly attributable to the business combination.

Goodwill is stated at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units and is tested annually for impairment (see note 3.10).

Any excess of the Group’s interest in the net fair value of the acquiree’s identifiable assets and liabilities over the cost of a business combination is recognised immediately in profit or loss.

On subsequent disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the amount of gain or loss on disposal.

• 23 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

3.7 Other intangible asset

Other intangible asset represents trademarks. For separately acquired other intangible assets, they are initially recognised at cost. After initial recognition, other intangible assets with indefinite useful lives are carried at cost less subsequent accumulated impairment losses. Other intangible assets are tested for impairment as described below in note 3.10.

3.8 Borrowing costs

All borrowing costs are expensed when incurred.

3.9 Plant and equipment

Plant and equipment are stated at acquisition cost less accumulated depreciation and accumulated impairment losses.

Depreciation on plant and equipment is provided to write off the cost over their estimated useful lives, using the straight-line method, at 20% per annum.

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

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

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

3.10 Impairment of assets

Goodwill arising on an acquisition of subsidiaries, other intangible assets, plant and equipment and interests in subsidiaries are subject to impairment testing.

Goodwill and other intangible assets with an indefinite useful life are tested for impairment at least annually, irrespective of whether there is any indication that they are impaired. All other assets are tested for impairment whenever there are indications that the asset’s carrying amount may not be recoverable.

An impairment loss is recognised as an expense immediately for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, 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 assessment of time value of money and the risk specific to the asset.

For the purposes of assessing impairment, where an asset does not generate cash inflows largely independent from those from other assets, the recoverable amount is determined for the smallest group of assets that generate cash inflows independently (i.e. a cash-generating unit). Goodwill in particular is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which the goodwill is monitored for internal management purpose.

Impairment loss recognised for cash-generating units, to which goodwill has been allocated, are credited to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash generating unit, except that the carrying value of an asset will not be reduced below its individual fair value less cost to sell, or value in use, if determinable.

• 24 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

An impairment loss on goodwill is not reversed in subsequent periods. In respect of other assets, an impairment loss is reversed if there has been a favourable change in the estimates used to determine the asset’s recoverable amount and only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Interim financial reporting and impairment

Under the GEM Listing Rules, the Group is required to prepare an interim financial report in compliance with HKAS 34 – Interim Financial Reporting, in respect of the first six months of the financial year. At the end of the interim period, the Group applies the same impairment testing, recognition and reversal criteria as it would at the end of the financial year.

Impairment loss recognised in an interim period in respect of goodwill is not reversed in a subsequent period. This is the case even if no loss, or a smaller loss, would have been recognised had the impairment been assessed only at the end of the financial year to which the interim period relates.

3.11 Leases

An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Group determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease.

Operating lease charges as the lessee

Where the Group has the right to use the assets held under operating leases, payments made under the leases are charged to the income statement on a straight-line basis over the lease terms except where an alternative basis is more representative of the pattern of benefits to be derived from the leased assets.

3.12 Financial assets

The Group’s financial assets include trade receivables, other receivables, cash and cash equivalents and investment in subsidiaries.

The Group’s accounting policy for financial assets other than investments in subsidiaries are set out below:

Management determines the classification of its financial assets at initial recognition depending on the purpose for which the financial assets were acquired and where allowed and appropriate, re-evaluates this designation at every reporting date.

All financial assets are recognised when, and only when, the Group becomes a party to the contractual provisions of the instrument. When financial assets are recognised initially, they are measured at fair value, plus any directly attributable transaction costs.

Derecognition of financial assets occurs when the rights to receive cash flows from the investments expire or are transferred and substantially all of the risks and rewards of ownership have been transferred. At each balance sheet date, financial assets are reviewed to assess whether there is objective evidence of impairment. If any such evidence exists, impairment loss is determined and recognised based on the classification of asset.

• 25 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are subsequently measured at amortised cost using the effective interest method, less impairment losses. Amortised cost is calculated taking into account any discount or premium on acquisition and includes fees that are an integral part of the effective interest rate and transaction cost. The Group’s trade and most other receivables fall into this category of financial instruments.

Impairment of loans and receivables

At each balance sheet date, loans and receivables are reviewed to determine whether there is any objective evidence of impairment. If there is objective evidence that an impairment loss on loans and receivables has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The amount of the loss is recognised in profit or loss of the period in which the impairment occurs.

If, in subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that it does not result in a carrying amount of the financial asset exceeding what the amortised cost would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in profit or loss of the period in which the reversal occurs.

3.13 Accounting for income taxes

Income tax comprises current tax and deferred tax

Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting period, that are unpaid at the balance sheet date. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable profit for the year. All changes to current tax assets or liabilities are recognised as a component of tax expense in the income statement.

Deferred tax is calculated using the liability method on temporary differences at the balance sheet date between the carrying amounts of assets and liabilities in the financial statements and their respective tax bases. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences, tax losses available to be carried forward as well as other unused tax credits, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised.

Deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither taxable nor accounting profit or loss.

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 differences and it is probable that the temporary differences will not reverse in the foreseeable future.

• 26 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Deferred tax is calculated, without discounting, at tax rates that are expected to apply in the period the liability is settled or the asset realised, provided they are enacted or substantively enacted at the balance sheet date.

Changes in deferred tax assets or liabilities are recognised in the income statement, or in equity if they relate to items that are charged or credited directly to equity.

3.14 Cash and cash equivalents

Cash and cash equivalents include cash at bank and in hand.

3.15 Share capital

Ordinary shares are classified as equity. Share capital is determined using the nominal value of shares that have been issued.

Any transaction costs associated with the issuing of shares are deducted from share premium (net of any related income tax benefit) to the extent they are incremental costs directly attributable to the equity transaction.

3.16 Retirement benefit costs and short-term employee benefits

Defined contribution plan

Retirement benefits to employees are provided through several defined contribution plans. For details of the retirement benefits schemes, please refer to note 31 to the consolidated financial statements.

A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions after payment of the fixed contribution.

The contributions recognised in respect of defined contribution plans are expensed as they fall due. Liabilities and assets may be recognised if underpayment or prepayment has occurred and are included in current liabilities or current assets as they are normally of a short term nature.

Retirement benefits scheme

Pursuant to the relevant regulations of the People’s Republic of China (the “PRC”) government, the Group participates in a local municipal government retirement benefits scheme (the “Scheme”), whereby the Group is required to contribute a certain percentage of the basic salaries of its employees to the Scheme to fund their retirement benefits. The local municipal government undertakes to assume the retirement benefits obligations of all existing and future retired employees of the Group. The only obligation of the Group with respect to the Scheme is to pay the ongoing required contributions under the Scheme mentioned above. Contributions under the Scheme are charged to the income statement as incurred. There were no provisions under the Scheme whereby forfeited contributions may be used to reduce future contributions.

• 27 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Short-term employee benefits

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

Non-accumulating compensated absences such as sick leave and maternity leave are not recognised until the time of leave.

3.17 Share-based employee compensation

All share-based payment arrangements granted after 7 November 2002 and had not vested on 1 January 2005 are recognised in the financial statements. The Group operates equity-settled share-based compensation plans for remuneration of its employees.

All employee services received in exchange for the grant of any share-based compensation are measured at their fair values. These are indirectly determined by reference to the share options awarded. Their value is appraised at the grant date and excludes the impact of any non-market vesting conditions.

All share-based compensation is ultimately recognised as an expense in income statement with a corresponding increase in employee compensation reserve. If vesting periods or other vesting conditions apply, the expense is recognised over the vesting period, based on the best available estimate of the number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised, if there is any indication that the number of share options expected to vest differs from previous estimates. No adjustment to expense recognised in prior periods is made if fewer share options ultimately are exercised than originally estimated.

At the time when the share options are exercised, the amount previously recognised in employee compensation reserve will be transferred to share premium. When the share options are forfeited or are still not exercised at the expiry date, the amount previously recognised in employee compensation reserve will be transferred to accumulated losses.

3.18 Financial liabilities

The Group’s financial liabilities include trade payables, other payables, amount due to a related company and convertible bonds. They are included in balance sheet as “Trade payables”, “Other payables, accrued expenses and receipts in advance”, “Amount due to a related company” and “Convertible bonds”.

Financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument. All interest related charges are recognised as an expense in finance costs in the income statement.

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amount is recognised in the income statement.

• 28 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Convertible bonds that contain an equity component

Convertible bonds that can be converted to equity share capital at the option of the holder, where the number of shares that would be issued on conversion and the value of the consideration that would be received at that time do not vary, are accounted for as compound financial instruments which contain both a liability component and an equity component.

Convertible bond issued by the Company that contain both financial liability and equity components are classified separately into respective liability and equity components on initial recognition. On initial recognition, the fair value of the liability component is determined using the prevailing market interest rate for similar non-convertible debts. The difference between the proceeds of the issue of the convertible bond and the fair value assigned to the liability component, representing the call option for conversion of the bond into equity, is included in equity as convertible bond equity reserve.

The liability component is subsequently carried at amortised cost using the effective interest method. The equity component will remain in equity until conversion or redemption of the bond.

When the bond is converted, the convertible bond equity reserve and the carrying value of the liability component at the time of conversion, is transferred to share capital and share premium as consideration for the shares issued. If the bond is redeemed, the convertible bond equity reserve is released directly to accumulated losses.

Trade and other payables

Trade and other payables are recognised initially at their fair value and subsequently measured at amortised cost, using the effective interest method.

3.19 Provisions and contingent liabilities

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and 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 expenditure expected to settle the obligation.

All provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate.

When 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.

Contingent liabilities are recognised in the course of the allocation of purchase price to the assets and liabilities acquired in a business combination. They are initially measured at fair value at the date of acquisition and subsequently measured at the higher of the amount that would be recognised in a comparable provision as described above and the amount initially recognised less any accumulated amortisation, if appropriate.

• 29 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

3.20 Segment reporting

In accordance with the Group’s internal financial reporting, the Group has determined that geographical segments be presented as the primary reporting format. No further business segment information is presented as the Group’s operation relates solely to magazine publishing and advertising activities.

In respect of geographical segment reporting, revenue is based on the country in which the customer is located and total assets and capital expenditure are where the assets are located.

Segment assets consist of goodwill, other intangible asset, plant and equipment, trade receivables, other receivables, cash and cash equivalents. Segment liabilities comprise trade payables, other payables, accrued expenses, receipts in advance and amount due to a related company.

Capital expenditure comprises additions to plant and equipment.

3.21 Related parties

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

• (i) directly, or indirectly through one or more intermediaries, the party:

• controls, is controlled by, or is under common control with, the Company or the Group;

• has an interest in the Company that gives it significant influence over the Company or the Group;

• has joint control over the Company or the Group;

• (ii) the party is an associate;

• (iii) the party is a jointly-controlled entity;

• (iv) the party is a member of the key management personnel of the Company or its parent;

• (v) the party is a close member of the family of any individual referred to in (i) or (iv);

• (vi) 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 (iv) or (v); or

• (vii) the party is a post-employment benefit plan for the benefit of employees of the Company or Group, or of any entity that is a related party of the Company or Group.

• 30 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

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

Critical accounting estimates and assumptions

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

(i) Impairment of receivables

The Group’s management determines impairment of receivables on a regular basis. This estimate is based on the credit history of its customers and current market conditions. Management reassesses the impairment of receivables at the balance sheet date.

(ii) Valuation of share option granted

The fair value of share option granted was calculated using the Black-Scholes valuation model based on the Group’s management’s significant inputs into calculation including an estimated life of share options granted to be two and a half years to ten years, based on exercise restrictions and behavioural consideration, the volatility of share price, weighted average share prices and exercise price of the share options granted. Furthermore, the calculation assumes nil future dividends.

(iii) Valuation of convertible bonds

On initial recognition date, the fair value of convertible bonds that are not traded in an active market is determined by using discounted cash flow method. The Group uses its judgement to make assumptions that are mainly based on market conditions existing at the issue date. Details of the key assumptions are disclosed in note 23.

(iv) Depreciation on plant and equipment

The Group depreciates its plant and equipment on a straight-line method over their estimated useful lives of five years, i.e. 20% per annum. The estimated useful lives reflect the directors’ estimate of the period that the Group will derive future economic benefits from the use of the Group’s plant and equipment.

• 31 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

5. REVENUE

Revenue, which is also the Group’s turnover, represents amounts received or receivable for magazines sold by the Group to outside customers, less returns and allowances, advertising income and promotion and marketing income for the year, and is analysed as follows:

Sale of magazines Advertising income Promotion and marketing income 6. OTHER OPERATING REVENUE Bank interest income Sundry income 7. FINANCE COST Imputed interest on convertible bonds	2007 HK$’000 9,575 43,783 14,485 67,843 2007 HK$’000 79 113 192 2007 HK$’000 169	2006 HK$’000 20,470 52,268 10,726
		83,464
		2006 HK$’000 58 201
		259
		2006 HK$’000 –

• 32 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

8. SEGMENT INFORMATION

Geographical segments

The geographical locations of the Group’s customers are the basis on which the Group reports its primary segment information. The following tables present revenue, asset, liabilities and expenditure information for the Group’s geographical segments for the years ended 31 December 2007 and 2006.

Year ended 31 December 2007

Revenue Segment results Other operating revenue Other operating income, net Finance cost Profit for the year Segment assets Segment liabilities Unallocated liabilities Total liabilities Other information Depreciation Impairment and written-off of receivables Capital expenditure	Hong Kong Mainland China HK$’000 HK$’000 61,682 6,161 1,704 (4,826 ) 41,759 – (9,392 ) – 285 – 36 816 1,518 –	Total HK$’000 67,843 (3,122 ) 192 4,628 (169 ) 1,529 41,759 (9,392 ) (13,169 ) (22,561 ) 285 852 1,518

• 33 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Year ended 31 December 2006

Revenue Segment results Other operating revenue Other operating expenses, net Loss for the year Segment assets Segment liabilities Other information Depreciation Impairment and written off of receivables Impairment of plant and equipment Capital expenditure	Hong Kong Mainland China HK$’000 HK$’000 66,540 16,924 738 (13,151 ) 21,079 149 (23,994 ) (4,235 ) 307 174 (31 ) 5,977 – 617 81 27	Total HK$’000 83,464 (12,413 ) 259 (2,015) (14,169 ) 21,228 (28,229 ) 481 5,946 617 108

Business segments

No business segment information is presented as the Group’s operation relates solely to the magazine publishing and advertising activities.

9. PROFIT/(LOSS) BEFORE INCOME TAX

Profit/(loss) before income tax is arrived at after charging/(crediting): Auditors’ remuneration Depreciation on plant and equipment Exchange loss Other operating income: – Gain on disposal of subsidiaries_(note 33)_ Other operating expense: – Impairment and written-off of receivables – Impairment of plant and equipment Other operating (income)/expense, net Minimum lease payments paid under operating leases in respect of rental premises	2007 HK$’000 350 285 162 (5,480 ) 852 – (4,628 ) 283	2006 HK$’000 300 481 212
		(4,548 ) 5,946 617
		2,015 766

• 34 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

10. INCOME TAX EXPENSE

For the year ended 31 December 2007, no provision for Hong Kong profits tax has been provided in the financial statements as the Group has tax losses brought forward from previous years to offset against the assessable profit for the year.

For the year ended 31 December 2006, no Hong Kong profits tax had been provided as the Group had no estimated assessable profit arising in or derived from Hong Kong.

Taxation on profits assessable elsewhere have been calculated on the estimated assessable profit for the year at the rates of taxation prevailing in the jurisdictions in which the Group operates, based on existing legislation, interpretations and practices in respect thereof during both years.

Reconciliation between tax expense and accounting profit/(loss) at applicable tax rates:

Profit/(loss) before income tax Tax on profit/(loss) before income tax, calculated at the rates applicable to profits in the tax jurisdiction concerned Tax effect of non-deductible expenses Tax effect of non-taxable revenue Tax effect of prior years’ unrecognised tax losses utilised this year Tax effect of unrecognised tax losses Tax effect on temporary difference not recognised Income tax expense	2007 HK$’000 1,529 279 1,502 (1,207 ) (534 ) – (40 ) –	2006 HK$’000 (14,169 ) (4,053 ) 4,247 (9 ) (393 ) 172 36 –

11. PROFIT/(LOSS) ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

Of the consolidated profit attributable to the equity holders of the Company of HK$1,529,000 (2006: loss of HK$14,169,000), a loss of HK$2,820,000 (2006: a loss of HK$255,000) has been dealt with in the financial statements of the Company.

12. EARNINGS/(LOSS) PER SHARE

(a) Basic earnings/(loss) per share

The calculation of basic earnings/(loss) per share is based on the profit attributable to equity holders of the Company of HK$1,529,000 (2006: loss of HK$14,169,000) and on the weighted average of approximately 1,120,782,000 (2006: 506,639,716) ordinary shares in issue during the year.

• 35 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(b) Diluted earnings/(loss) per share

For the year ended 31 December 2007, the calculation of diluted earnings per share is based on profit attributable to equity holders of the Company of HK$1,698,000 and the weighted average number of ordinary shares of 1,563,846,000, calculated as follows:

• (i) Profit attributable to equity holders of the Company (diluted)

Profit attributable to equity holders of the Company After tax effect of imputed interest on liability component of convertible bonds (ii) Weighted average number of ordinary shares (diluted) Weighted average number of ordinary shares at 31 December 2007 Effect of deemed issue of shares under the Company’s share option scheme Effect of conversion of convertible bonds Weighted average number of ordinary shares (diluted) at 31 December 2007	HK$’000 1,529 169
	1,698
	’000 1,120,782 50 443,014
	1,563,846

For the year ended 31 December 2006, no diluted loss per share has been presented because the exercise price of the Company’s share options was higher than the average market price per share for that year.

13. EMPLOYEE BENEFIT EXPENSE (INCLUDING DIRECTORS’ EMOLUMENTS)

Wages and salaries Share-based payment Pension costs – defined contribution plans	2007 HK$’000 17,040 749 638 18,427	2006 HK$’000 21,436 – 616
		22,052

• 36 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Included in staff costs are key management personnel compensation and comprises the following categories:

Short-term employee benefits Post-employment benefits Equity compensation benefits	2007 HK$’000 3,822 63 706 4,591	2006 HK$’000 4,455 102 –
		4,557

14. DIRECTORS’ REMUNERATION AND SENIOR MANAGEMENT’S EMOLUMENT

(a) Directors’ emoluments

The emoluments paid or payable to the directors were as follows:

Date of appointment/resignation Year ended 31 December 2007 Executive directors HE Xuechu Appointed on 16 October 2007 LIU Wei William Appointed on 16 October 2007 SHI Lixin Appointed on 16 October 2007 NG Hung Sang Resigned on 16 October 2007 NG Yuk Fung Peter Resigned on 16 October 2007 FOO Kit Tak Resigned on 28 May 2007 CHEUNG Mei Yu Resigned on 2 April 2007 Non-executive director NG Yuk Mui Jessica Resigned on 16 October 2007 Independent non-executive directors MA Gang Appointed on 16 October 2007 CHAN Chun Wai Tony Appointed on 16 October 2007 FOK Hon Appointed on 16 October 2007 SO Siu Ming George Resigned on 16 October 2007 PONG Oi Lan Scarlett Resigned on 16 October 2007 CHENG Yuk Wo Resigned on 16 October 2007	Fees HK$’000 152 172 152 – 8 – – 8 25 25 25 40 40 40 687	Salaries and allowances HK$’000 – – – – 466 157 153 – 5 – – – – – 781	Contribution to defined contribution plan HK$’000 1 1 – – 10 5 8 – – – – – – – 25	Equity- settled share-based payment expenses HK$’000 – 353 353 – – – – – – – – – – – 706	Total HK$’000 153 526 505 – 484 162 161 8 30 25 25 40 40 40
					2,199

• 37 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Year ended 31 December 2006 Executive directors NG Hung Sang NG Yuk Fung Peter FOO Kit Tak CHEUNG Mei Yu Non-executive director NG Yuk Mui Jessica Independent non-executive directors SO Siu Ming George PONG Oi Lan Scarlett CHENG Yuk Wo	Fees HK$’000 – 10 – – 10 50 50 40 160	Salaries and allowances HK$’000 – 510 409 617 – – – – 1,536	Contribution to defined contribution plan HK$’000 – 12 12 30 – – – – 54	Total HK$’000 – 532 421 647 10 50 50 40
				1,750

There was no arrangement under which a director waived or agreed to waive any remuneration during the year. (2006: Nil)

(b) Five highest paid individuals

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

Basic salaries, housing allowances, share options, other allowances and benefits in kind Pension cost- defined contribution plans The emoluments fell within the following band: Emolument band HK$ nil – HK$1,000,000	2007 2006 HK$’000 HK$’000 2,354 2,759 38 48 2,392 2,807 Number of individuals 2007 2006 4 4	2006 HK$’000 2,759 48
		2,807

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

• 38 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

15. PLANT AND EQUIPMENT

GROUP

Leasehold improvements HK$’000 At 1 January 2006 Cost 790 Accumulated depreciation (392 ) Net book amount 398 Year ended 31 December 2006 Opening net book amount 398 Additions – Depreciation (143 ) Impairment loss (193 ) Closing net book amount 62 At 31 December 2006 Cost 486 Accumulated depreciation and impairment (424 ) Net book amount 62 Year ended 31 December 2007 Opening net book amount 62 Additions 917 Depreciation (96 ) Disposal of subsidiaries (22 ) Closing net book amount 861 At 31 December 2007 Cost 898 Accumulated depreciation (37 ) Net book amount 861	Furniture and office equipment HK$’000 1,820 (746 ) 1,074 1,074 108 (326 ) (364 ) 492 1,130 (638 ) 492 492 601 (189 ) (472 ) 432 455 (23 ) 432	Motor vehicles HK$’000 87 (15 ) 72 72 – (12 ) (60 ) – – – – – – – – – – – –	Total HK$’000 2,697 (1,153 ) 1,544 1,544 108 (481 ) (617 ) 554 1,616 (1,062 ) 554 554 1,518 (285 ) (494 ) 1,293 1,353 (60) 1,293

• 39 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

COMPANY

At 1 January 2006, 31 December 2006 and 1 January 2007 Cost Accumulated depreciation Net book amount Year ended 31 December 2007 Opening net book amount Additions Depreciation Closing net book amount At 31 December 2007 Cost Accumulated depreciation Net book amount	Leasehold improvements HK$’000 – – – – 898 (37 ) 861 898 (37 ) 861	Furniture and office equipment HK$’000 – – – – 142 (6 ) 136 142 (6 ) 136	Total HK$’000 – – – – 1,040 (43 ) 997 1,040 (43 ) 997

16. INTEREST IN A SUBSIDIARY/AMOUNT DUE FROM A SUBSIDIARY

COMPANY

Unlisted shares, at cost Less: Impairment loss recognised Amount due from a subsidiary Less: Impairment losses recognised	2007 HK$’000 12,266 (5,000 ) 7,266 – – –	2006 HK$’000 510 – 510 8,910 (5,000) 3,910

During the year, the directors reviewed the carrying value of the investment in a subsidiary with reference to the business operated by the subsidiary. Impairment loss of HK$5,000,000 (2006: Nil) has been identified and recognised in the Company’s income statement.

• 40 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Particulars of the principal subsidiaries at 31 December 2007 are as follows:

	Place of
	incorporation	Particulars	Percentage of
	and kind	of issued	issued capital held
Name of subsidiary	of legal entity	share capital	by the Company		Principal activities
			Directly	Indirectly
Great Ready Assets Limited	British Virgin Islands,	3 ordinary shares	100%	–	Investment holding
	limited liability	of US$1 each
	company
Beforward Trading Limited	British Virgin Islands,	2 ordinary shares	–	100%	Investment holding
	limited liability	of US$1 each
	company
Jessicacode Limited	Hong Kong, limited	2 ordinary shares	–	100%	Publication of
	liability company	of HK$1 each			“味道JESSICACODE”
					magazine
Honbridge Management	Hong Kong, limited	2 ordinary shares	–	100%	Provision of employee
Limited (formerly known	liability company	of HK$1 each			and personnel services
as Jessica Management					and holding of a lease
Limited)					agreement
Superb Taste Company	Hong Kong, limited	2 ordinary shares	–	100%	Publication of
Limited	liability company	of HK$1 each			“味道LISA” magazine

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

• 41 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

17. GOODWILL

GROUP At 1 January Gross carrying amount Accumulated impairment losses Carrying amount Carrying amount at 1 January Disposal of a subsidiary Carrying amount at 31 December At 31 December Gross carrying amount Accumulated impairment losses Carrying amount 18. OTHER INTANGIBLE ASSET GROUP Trademarks At 1 January Gross carrying amount Accumulated impairment losses Carrying amount Net carrying amount at 1 January Disposal of subsidiaries_(note 33)_ Net carrying amount at 31 December At 31 December Gross carrying amount Accumulated impairment losses Carrying amount	2007 HK$’000 – – – – – – – – – 2007 HK$’000 19 – 19 19 (19 ) – – – –	2006 HK$’000 3,933 – 3,933 3,933 (3,933) – – – – 2006 HK$’000 19 – 19 19 – 19 19 – 19

• 42 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

19. TRADE RECEIVABLES

GROUP

GROUP
Trade receivables Less: Impairment of receivables Trade receivables – net	2007 HK$’000 5,857 (443 ) 5,414	2006 HK$’000 19,044 (1,387 )
		17,657

Impairment losses in respect of trade receivables are recorded using an allowance account unless the Group is satisfied that recovery of the amount is remote, in which case the impairment loss is written off against trade receivables directly. The movement in the provision for impairment of trade receivables is as follows:

At 1 January Amount written off Impairment loss and allowances charged/(reversed) to the income statement Disposal of subsidiaries At 31 December	2007 HK$’000 1,387 (171 ) 735 (1,508 ) 443	2006 HK$’000 1,793 – (31 ) (375)
		1,387

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

The Group allows a credit period from 30 days to 120 days to its trade customers. The following is an aged analysis of net trade receivables at the balance sheet date:

0 – 30 days 31 – 60 days 61 – 90 days 91 to 180 days Over 180 days	2007 HK$’000 2,342 1,622 174 1,243 33 5,414	2006 HK$’000 5,509 3,373 484 5,771 2,520
		17,657

• 43 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The ageing analysis of trade receivables that are not impaired is as follows:

Neither past due nor impaired 1 – 90 days past due 91 – 180 days past due Over 180 days past due	2007 HK$’000 2,462 2,430 495 27 2,952 5,414	2006 HK$’000 5,554
		6,767 3,383 1,953
		12,103
		17,657

Receivables that were neither past due nor impaired related to a wide range of customers for whom there was no recent history of default.

Receivables that were past due but not impaired related to a number of customers that have a good track record with the Group. Based on past experience, the management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. The Group does not held any collateral over these balances.

20. CASH AND CASH EQUIVALENTS

Cash and cash equivalents include the following components:

GROUP Cash at banks and in hand COMPANY Cash at banks and in hand	2007 HK$’000 33,752 2007 HK$’000 31,331	2006 HK$’000 2,563
		2006 HK$’000 21

As at 31 December 2007, the Group does not have any bank and cash balances denominated in Renminbi (“RMB”).

Included in bank and cash balances of the Group as at 31 December 2006 was HK$16,000 of bank balances denominated in RMB placed with banks in the PRC. RMB is not a freely convertible currency. Under the PRC’s Foreign Exchange Control Regulations and Administration of Settlement, Sales and Payment of Foreign Exchange Regulations, the Group is permitted to exchange RMB for foreign currencies through banks that are authorised to conduct foreign exchange business.

• 44 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

21. TRADE PAYABLES

GROUP

	2007	2006
	HK$’000	HK$’000
Trade payables	5,375	21,981

The following is an aged analysis of trade payables at the balance sheet date:

0 – 30 days 31 – 60 days 61 – 90 days 91 – 180 days Over 180 days	2007 HK$’000 511 1,172 1,394 1,448 850 5,375	2006 HK$’000 435 4,463 3,480 10,006 3,597
		21,981

22. AMOUNT DUE TO A SUBSIDIARY

The amount due is unsecured, interest-free and repayable on demand (2006: Nil).

23. CONVERTIBLE BONDS

GROUP AND COMPANY

	2007	2006
	HK$’000	HK$’000
Convertible bonds	13,169	–

The convertible bonds were issued on 16 October 2007. The bonds are convertible into ordinary shares of the Company at any time between the date of issue of the bonds and their settlement date. The bonds can be converted into approximately 143 ordinary shares per HK$1 bond at par.

If the bonds have not been converted, they will be redeemed on 16 October 2009 at par. The convertible bonds do not bear any interest.

The fair value of the liability component, included in the convertible bonds, was calculated using a market interest rate for an equivalent non-convertible bond. The residual amount, representing the value of the equity conversion component, is included in shareholders’ equity in convertible bond equity reserve, net of deferred taxes.

The carrying amount of the convertible bonds is denominated in Hong Kong dollars.

• 45 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

At 31 December 2007, the convertible bonds were repayable as follows:

	2007	2006
	HK$’000	HK$’000
Within one year	–	–
In the second year	13,169	–

The convertible bonds recognised in the balance sheet are calculated as follows:

Fair value of convertible bond Equity component Liability component on initial recognition Imputed interest expense Liability component at 31 December	2007 HK$’000 14,700 (1,700 ) 13,000 169 13,169	2006 HK$’000 – –
		– –
		–

The fair value of the liability component of the convertible bonds at 31 December 2007 amounted to HK$13,300,000 (2006: Nil). The fair value is calculated using cash flows discounted at a rate based on the estimated discount rate of 5.74%.

Interest expense of HK$169,000 (2006: Nil) has been recognised in the income statement in respect of the convertible bonds for the year ended 31 December 2007, using the effective interest method by applying effective interest rate of 6.34% to the liability component.

24. SHARE CAPITAL

	2007	2006
	HK$’000	HK$’000
Authorised:
1,000,000,000,000 (2006: 1,000,000,000,000)
ordinary shares of HK$0.001 each	1,000,000	1,000,000

• 46 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Issued and fully paid: At 1 January 2006, 31 December 2006 and 1 January 2007 Issue of shares during the year_(note i) Employee share option scheme – proceeds from share issued(note ii)_ At 31 December 2007	Number of shares 506,639,716 2,900,000,000 6,080,000 3,412,719,716	Total HK$’000 507 2,900 6
		3,413

Notes:

• (i) On 16 October 2007, 2,900,000,000 ordinary shares of HK$0.001 each were issued and alloted to Hong Bridge Capital Limited at a price of HK$0.007 per share.

• (ii) During the year, the issued share capital of the Company was increased due to the exercise of share options by the employees of the Company and other parties. Details of the share options exercised during the year are summarised in note 25.

All the new ordinary shares issued during the year have the same rights as other ordinary shares of the Company

in issue.

25. SHARE-BASED EMPLOYEE COMPENSATION

The Company’s share option scheme (the “Scheme”) was adopted pursuant to a resolution passed on 20 December 2001 and became effective on 8 January 2002 for the primary purpose of providing incentives to directors and eligible employees and will be expired on 7 January 2012. Under the Scheme, the board of directors of the Company may offer to any director or employee of the Company, or any of its subsidiaries, options to subscribe for shares in the Company.

Under the Scheme, without prior approval from the Company’s shareholders, the total number of shares in respect of which options may be granted under the Scheme is not permitted to exceed 10% of the shares of the Company in issue at any point in time, and the aggregate number of shares in respect of which options may be granted to any individual in any year is not permitted to exceed 1% of the shares of the Company in issue at any point in time.

In order to provide the Company with greater flexibility in granting share options to eligible persons under the Scheme as incentive or rewards for their contribution to the Group, the board proposed to refresh the scheme mandate limit of the Scheme.

An extraordinary general meeting of the Company was held on 12 October 2007 and the above refreshment of the scheme mandate limit of the Scheme was approved by the independent shareholders.

At 31 December 2007, the number of shares in respect of which options were granted under the Scheme was 21,440,000 (2006: 13,413,440), representing 0.6% (2006: 2.6%) of the shares of the Company in issue at that date. As at 31 December 2007, the total number of shares available for issue under the Scheme was 29,831,972 (2006: 37,074,707), representing approximately 0.9% (2006: 7.3%) of the issued share capital of the Company as at 31 December 2007 and the date of this Annual Report.

• 47 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The consideration payable on the grant of an option is HK$1 for each grant transaction. Options may be exercised at any time within the exercisable period. The exercise price would be determined by the Board but in any case will not be less than higher of (1) the closing price of the Shares as stated in the Stock Exchange’s daily quotations sheet on the date of offer, which must be a trading day; (2) the average closing price of the Shares as stated in the Stock Exchange’s daily quotations sheets for the five trading days immediately preceding the date of offer; or (3) the nominal value of a share.

The following tables set out the movement in the Scheme:

During the year ended 31 December 2007 :

Name or category Date of appointment/ Share option of participant resignation type Executive director LIU Wei, William Appointed on 16 October 2007 2007 SHI Lixin Appointed on 16 October 2007 2007 FOO Kit Tak Resigned on 28 May 2007 2002 (a) 2002 (b) CHEUNG Mei Yu Resigned on 2 April 2007 2002 (a) 2002 (b) Sub–total Employees In aggregate 2002 (a) 2002 (b) 2007 Sub–total Others In aggregate 2002 (a) 2002 (b) Sub–total Total	Outstanding at 1 January 2007 – – 1,600,000 1,600,000 1,600,000 1,600,000 6,400,000 1,600,000 1,760,000 – 3,360,000 2,800,000 853,440 3,653,440 13,413,440	Number of share options Granted Exercised Forfeited during during during the year the year the year 10,000,000 – – 10,000,000 – – – – (1,600,000 ) – – (1,600,000 ) – – (1,600,000 ) – – (1,600,000 ) 20,000,000 – (6,400,000 ) – (1,600,000 ) – – (1,760,000 ) – 1,200,000 – – 1,200,000 (3,360,000 ) – – (2,080,000 ) (480,000 ) – (640,000 ) (213,440 ) – (2,720,000 ) (693,440 ) 21,200,000 (6,080,000 ) (7,093,440 )	Outstanding at 31 December 2007 10,000,000 10,000,000 – – – –
			20,000,000
			– – 1,200,000
			1,200,000
			240,000 –
			240,000
			21,440,000

• 48 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

During the year ended 31 December 2006:

Name or category Share of participant option type Executive director FOO Kit Tak 2002 (a) 2002 (b) CHEUNG Mei Yu 2002 (a) 2002 (b) Sub-total Employees In aggregate 2002 (a) 2002 (b) Sub-total Others In aggregate 2002 (a) 2002 (b) Sub-total Total Details of the share options are as follows: Share option type Date of grant 2002 (a)(note i) 15 April 2002 2002 (b)(note i) 2 September 2002 2007_(note ii & iii)_ 22 November 2007	Number of share options Outstanding at Outstanding at 1 January Forfeited during 31 December 2006 the year 2006 1,600,000 – 1,600,000 1,600,000 – 1,600,000 1,600,000 – 1,600,000 1,600,000 – 1,600,000 6,400,000 – 6,400,000 1,600,000 – 1,600,000 2,080,000 (320,000 ) 1,760,000 3,680,000 (320,000 ) 3,360,000 2,960,000 (160,000 ) 2,800,000 1,013,440 (160,000 ) 853,440 3,973,440 (320,000 ) 3,653,440 14,053,440 (640,000 ) 13,413,440 Exercisable period Exercise price 15 April 2003 HK$0.69 to 7 January 2012 2 September 2003 HK$0.31 to 7 January 2012 22 May 2008 HK$1.20 to 7 January 2012	Number of share options Outstanding at Outstanding at 1 January Forfeited during 31 December 2006 the year 2006 1,600,000 – 1,600,000 1,600,000 – 1,600,000 1,600,000 – 1,600,000 1,600,000 – 1,600,000 6,400,000 – 6,400,000 1,600,000 – 1,600,000 2,080,000 (320,000 ) 1,760,000 3,680,000 (320,000 ) 3,360,000 2,960,000 (160,000 ) 2,800,000 1,013,440 (160,000 ) 853,440 3,973,440 (320,000 ) 3,653,440 14,053,440 (640,000 ) 13,413,440 Exercisable period Exercise price 15 April 2003 HK$0.69 to 7 January 2012 2 September 2003 HK$0.31 to 7 January 2012 22 May 2008 HK$1.20 to 7 January 2012
		6,400,000
		1,600,000 1,760,000
		3,360,000
		2,800,000 853,440
		3,653,440
		13,413,440
		Exercise price HK$0.69 HK$0.31 HK$1.20

• 49 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes:

• (i) Share options granted on 15 April 2002 and 2 September 2002 are subject to a vesting period and became exercisable in whole or in part in the following manner:

From the date of grant of share options	Exercisable percentage
Within 12 month	Nil
13th – 24th month	331/3%
25th – 36th month	331/3%
37th – 48th month and thereafter	331/3%

• (ii) On 22 November 2007, the board of directors proposed to grant 21,200,000 share options to the Company’s executive directors and employees of the Group at exercise price of HK$1.20 per share. The grant of share options was approved by the independent non-executive directors on 22 November 2007. Consideration of HK$5 in respect of these newly granted share options was received.

• (iii) Share options granted on 22 November 2007 are subject to a vesting period of six months from the date of grant and became exercisable in whole or in part in the following manner :

From the date of grant of share options	Exercisable percentage
Within 6 month	Nil
7th month and thereafter	100%

• (iv) The share options exercised during the year resulted in an equal number of ordinary shares (see also note 24).

• (v) The fair values of options granted under the relevant Scheme on 15 April 2002, 2 September 2002 and 22 November 2007, measured at the date of grant, were approximately HK$5,024,000, HK$2,123,000 and HK$3,455,000 respectively. The following significant assumptions were used to derive the fair values, using the Black- Scholes option pricing model:

Date of grant	15 April	2 September	22 November
	2002	2002	2007
Expected volatility	29%	56%	20%
Expected life (in years)	9.7	9.4	2.5
Risk-free interest rate	5%	5%	2%
Expected dividend yield	Nil	Nil	Nil

The expected volatility is based on the historical volatility of the Company’s share price, adjusted for any expected changes to future volatility based on publicly available information. The expected life used in the model has been adjusted based on management’s best estimate.

• (vi) For the year ended 31 December 2007, employee compensation expense of HK$749,000 has been included in the consolidated income statement (2006: Nil), with a corresponding credit in employee compensation reserve. No liabilities were recognised due to share-based payment transactions.

• 50 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(vii) Share options and weighted average exercise prices are as follows for the reporting period presented:

Outstanding at 1 January Granted Exercise Forfeited Outstanding at 31 December	2007 Weighted average Number exercise price HK$ 13,413,440 0.53 21,200,000 1.20 (6,080,000 ) 0.54 (7,093,440 ) 0.51 21,440,000 1.19	2006 Weighted average Number exercise price HK$ 14,053,440 0.52 – – – – (640,000 ) 0.41 13,413,440 0.53

The options outstanding at 31 December 2007 had exercise prices of HK$0.69 or HK$1.20 (2006: HK$0.69, HK$0.31 or HK$1.20) and a weighted average remaining contractual life of 4.9 years (2006: 5.4 years).

26. RESERVES

GROUP

The amount of the Group’s reserves and the movements therein for the current and prior years are presented in the consolidated statement of changes in equity on page 32 of the consolidated financial statements.

COMPANY

At 31 December 2005 and 1 January 2006 Loss for the year Share option forfeited At 31 December 2006 and 1 January 2007 Proceeds from issuance of shares Share issue expenses Proceeds from shares issued under share option scheme Share options forfeited Recognition of equity component of convertible bonds Loss for the year Recognition of equity–settled share–based compensation At 31 December 2007	Employee Share compensation premium reserve HK$’000 HK$’000 9,218 3,937 – – – (154 ) 9,218 3,783 17,400 – (1,431 ) – 5,024 (1,747 ) – (1,954 ) – – – – – 749 30,211 831	Convertible bonds equity reserve HK$’000 – – – – – – – – 1,700 – – 1,700	Accumulated losses HK$’000 (9,529 ) 255 154 (9,120 ) – – – 1,954 – (2,820 ) – (9,986 )	Total HK$’000 3,626 255 –
				3,881 17,400 (1,431 ) 3,277 – 1,700 (2,820 ) 749
				22,756

• 51 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

27. DEFERRED TAX

Deferred taxation is calculated in full on temporary differences under the liability method using a principal taxation rate of 17.5% (2006: 17.5%).

The following are the major deferred tax (assets) and liabilities recognised by the Group and movements thereon during the current and prior reporting years.

At 31 December 2005 and 1 January 2006 Charge/(credit) to income statement At 31 December 2006 and 1 January 2007 Charge/(credit) to income statement At 31 December 2007	Accelerated tax depreciation HK$’000 73 (36 ) 37 46 83	Tax losses HK$’000 (73 ) 36 (37 ) (46 ) (83 )	Total HK$’000 – –
			– –
			–

No deferred tax has been provided in the financial statements of the Company as there are no material temporary differences.

Deferred tax assets are recognised for tax loss carried forward to the extent that realisation of the related tax benefit through the future taxable profits is probable. As at 31 December 2007, the Group has unused tax losses of HK$763,000 (2006: HK$3,617,000) available for offset against future profits. A deferred tax asset has been recognised in respect of HK$474,000 (2006: HK$211,000) of such losses which equal the taxable temporary differences relating to accelerated tax depreciation. No deferred tax asset has been recognised in respect of the remaining HK$289,000 (2006: HK$3,406,000) due to the unpredictability of future profit streams. This tax loss has no expiry date.

28. OPERATING LEASE COMMITMENTS

GROUP

At 31 December 2007, the total future minimum lease payments under non-cancellable operating leases are payable by the Group as follows:

Within one year In the second to fifth year inclusive	2007 HK$’000 329 164 493	2006 HK$’000 141 –
		141

The Group leases a number of rented premises under operating leases. The leases run for an initial period of two years. None of the leases include contingent rentals.

• 52 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

COMPANY

The Company did not have any significant operating lease commitments as at 31 December 2007 and 2006.

29. CAPITAL COMMITMENTS

The Group and the Company did not have any significant capital commitments as at 31 December 2007 and

30. CONTINGENT LIABILITIES

GROUP

As at 31 December 2007 and 2006, the Group has no significant contingent liabilities.

COMPANY

As at 31 December 2007, the Company has no significant contingent liabilities.

As at 31 December 2006, the Company provided a corporate guarantee to a bank to secure a banking facility of HK$1,000,000 granted to a subsidiary, which remained unused as at 31 December 2006.

31. RETIREMENT BENEFITS SCHEME

The Group participates in both a defined contribution scheme which is registered under the Occupational Retirement Schemes Ordinance (the “ORSO Scheme”) and a Mandatory Provident Fund Scheme (the “MPF Scheme”) established under the Mandatory Provident Fund Ordinance in December 2000. The assets of the schemes are held separately from those of the Group, in funds under the control of trustees. Employees who were members of the ORSO Scheme prior to the establishment of the MPF Scheme were offered a choice of staying within the ORSO Scheme or switching to the MPF Scheme, whereas all new employees joining the Group on or after 1 December 2000 are required to join the MPF Scheme.

The retirement benefits cost charged to income statement represents contributions payable to the schemes by the Group at rates specified in the rules of the schemes.

For members of the MPF Scheme, the Group contributes 5% of the relevant payroll costs to the Scheme, which contribution is matched by the employee. Both the employer’s and employees’ contribution are subject to maximum of monthly earnings of HK$20,000 per employee.

The ORSO Scheme is funded by monthly contributions from both employees and the Group at 5% of the employee’s basic salary. The employees are entitled to receive their entire contributions and the accrued interest thereon, and 100% of the employer’s contributions and the accrued interest thereon upon retirement or leaving the employer after completing 10 years of service or at a reduced scale of between 30% to 90% after completing 3 to 9 years of service.

Where there are employees who leave the ORSO Scheme prior to vesting fully in the contributions, the contributions payable by the Group are reduced by the amount of forfeited contributions. The amount of forfeited contributions utilised in this manner during the year was HK$66,000 (2006: HK$55,000). There was no significant amount of forfeited contributions available to reduce future contribution payable by the Group as at 31 December 2007 and 2006.

Employees located in the PRC are covered by the retirement and pension schemes defined by local practice and regulations and which are essentially defined contribution schemes.

The calculation of contributions for the PRC eligible staff is based on certain percentage of the applicable payroll costs.

• 53 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

32. RELATED PARTY TRANSACTIONS

Save as disclosed elsewhere in these financial statements, during the year, the Group had significant transactions with its related parties as follows:

• (a) Mr. Ng Hung Sang, Robert, was a former director of the Company for the period from 1 January 2007 to 16 October 2007, was also a substantial shareholder and a Director of South China Holdings Limited in that period. Transactions with companies controlled by, or affiliated with, South China Holdings Limited (collectively referred to as “South China Group”) were as follows:

(1)
			2007	2006
			HK$’000	HK$’000
	(i)	Purchase of services
		– Management fee	360	720
	(ii)	Operating lease expenses	223	283
	(iii)	Colour separation and photo processing fees	430	783
	(iv)	Royalty income	77	25

• (2) As at 31 December 2007, the Group does not have any outstanding payable to related companies.

As at 31 December 2006, as disclosed in the notes to the consolidated balance sheet, the Group had outstanding payable to a related company of HK$71,000. The balance was unsecured, interestfree and repayable on demand.

• (3) The Group had entered into a mutual agreement with South China Group that South China Group has a right to use the title “旭茉Jessica” on publication of various magazines at a nominal value.

• (4) An agreement dated 21 December 2006 entered into among the Company as the purchaser, South China Strategic Limited (“SCS”), a wholly owned subsidiary of South China Industries Limited (“SCI”), as the vendor, and SCI, a subsidiary of South China Holdings Limited, as the guarantor, pursuant to which SCS had conditionally agreed to sell the projects relating to the agricultural businesses in the PRC to the Company at a consideration of HK$140,000,000. The consideration would be satisfied by the Company’s issuance a convertible note. Subsequently, a termination agreement dated 27 December 2006 was entered into among the aforesaid contracting parties to terminate the aforesaid agreement.

• (5) On 16 August 2007, Great Ready Assets Limited (“Great Ready Assets”), being a wholly-owned subsidiary of the Company, entered into an agreement with Win Gain Investments Limited (“Win Gain), being a company wholly-owned by Mr. Ng Hung Sang, Robert, a Director of the Company for the period from 1 January 2007 to 16 October 2007. Under the agreement, Great Ready Assets agreed to sell and Win Gain agreed to acquire the entire issued share capital of Jessica Publications (BVI) Limited at a consideration of HK$1,000,000, payable in cash.

Since Win Gain is a company wholly-owned by Mr. Ng Hung Sang, Robert, a Director and substantial shareholder of the Company for the period from 1 January 2007 to 16 October 2007, Win Gain is a connected person of the Company. Under GEM Listing Rules, the transaction

• 54 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

constitutes a connected transaction and major transaction for the Company. Further details of the transaction are set out in the Company’s circular dated 14 September 2007.

An extraordinary general meeting of the Company was held on 12 October 2007 and the above transactions were approved by the independent shareholders. The transaction was completed on 16 October 2007.

• (b) The Group occupies the office premises at Suite 2703, 27th Floor, Great Eagle Centre, 23 Harbour Road, Wan Chai, Hong Kong which is provided rent-free by Mr. HE Xuechu, a substantial shareholder and a director of the Company.

33. DISPOSAL OF SUBSIDIARIES

• (a) For the year ended 31 December 2007, the Group disposed 100% equity interest in Jessica Publications (BVI) Limited and its subsidiaries. Particulars of the disposal transaction are as follows:

Net liabilities disposed of : Plant and equipment Other intangible assets Trade receivables Other receivables Cash and cash equivalents Trade payables Other payables Realisation of capital reserve Realisation of translation reserve Gain on disposal of subsidiaries Total consideration Satisfied by: Cash An analysis of the net inflow of cash and cash equivalents in respect of the disposal of subsidiaries is as follow : Cash consideration received Cash and bank balances disposed of Net inflow of cash and cash equivalents in respect of the disposal of subsidiaries

2007 HK$’000 494 19 12,020 609 691 (13,983 ) (4,399 ) (4,549 ) 183 (114 ) (4,480 ) 5,480 1,000 1,000 1,000 (691) 309

• 55 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

• (b) For the year ended 31 December 2006, the Group disposed 55% equity interest in Shanghai South China & Boyang Culture Media Co. Ltd. (“BCM”). Particulars of the disposal are as follows:

Net liabilities disposed of : Trade and other receivables Cash at banks Other intangible assets Trade and other payables Amounts due to immediate holding company and a fellow subsidiary of BCM Amount due to minority shareholder of BCM Minority interest Goodwill previously recognised Realisation of translation reserve Other intangible assets retained to the Group Impairment of amounts due from BCM Gain on disposal of a subsidiary Cash consideration paid in connected with the disposal The analysis of the net outflow of cash and cash equivalents in respect of the disposal of a subsidiary is as follow : Cash at banks disposed of Cash consideration paid Net outflow of cash and cash equivalents in respect of the disposal of a subsidiary

2006 HK$’000 1,784 53 19 (11,779 ) (10,160 ) (2,241) (22,324 ) 2,698 (19,626 ) 3,933 204 (19 ) 10,160 4,548 (800 ) (53 ) (800) (853 )

34. RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group is exposed to market risk through its use of financial instruments and specifically to currency risk, interest rate risk and certain other price risks, which result from both its operating and investing activities. Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The Group’s risk management is coordinated at its headquarter, in close monitor with the board of directors, and focuses on actively securing the Group’s short to medium term cash flows by minimising the exposure to financial markets. Long term financial investments are managed to generate lasting returns.

• 56 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The Group does not actively engage in the trading of financial assets for speculative purposes nor does it write options. The most significant financial risks to which the Group is exposed to are described below.

34.1 Currency risk

Currency risk to the Group is minimal as most of the Group’s transactions are carried out in Hong Kong dollars. All businesses in the Mainland China that are exposed to higher currency risk have been disposed of during the year.

34.2 Interest rate risk

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

34.3 Other price risk

The Company is exposed to other price risk in respect of its investment in subsidiaries. The sensitivity to price risk in regards to the investment in subsidiaries cannot be reliably determined due to numerous uncertainties regarding the future development of these subsidiaries.

34.4 Credit risk

The Group’s exposure to credit risk is limited to the carrying amount of financial assets recognised at the balance sheet date, as summarised below:

Classes of financial assets – carrying amounts Cash and cash equivalents Trade receivables Other receivables	2007 HK$’000 33,752 5,414 1,300 40,466	2006 HK$’000 2,563 17,657 435
		20,655

The Group continuously monitors defaults of customers and other counterparties, identifies either individually or by group, and incorporates this information into its credit risk controls. Where available at reasonable cost, external reports on customers and other counterparties are obtained and used. The Group’s policy is to deal only with creditworthy counterparties.

The Group’s management considers that all the above financial assets that are not impaired for each of the reporting dates under review are of good credit quality, including those that are past due.

None of the Group’s financial assets are secured by collateral or other credit enhancements.

In respect of trade and other receivables, the Group is not exposed to any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The credit risk for liquid funds is considered negligible, since the counterparties are reputable banks with high quality external credit ratings.

• 57 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

34.5 Liquidity risk

The Group manages its liquidity needs by carefully monitoring scheduled debt servicing payments for long-term financial liabilities as well as cash-outflows due in day-today business. Liquidity needs are monitored on a day-to-day basis. Long-term liquidity needs for a 360-day lookout period are identified monthly.

The Group maintains mainly cash to meet its liquidity requirements for up to 30-day periods. Funding for long-term liquidity needs is additionally secured by an adequate amount of committed credit facilities.

As at 31 December 2007 and 31 December 2006, the Group’s financial liabilities have contractual maturities which are summarised below:

At 31 December 2007 Convertible bonds Trade payables At 31 December 2006 Trade payables	Within 1 month HK$’000 – 4,000 4,000 15,871	1 to 3 months HK$’000 – 1,375 1,375 6,110	3 to 12 months HK$’000 – – – –	1 to 5 years HK$’000 13,169 –
				13,169
				–

34.6 Summary of financial assets and liabilities by category

The carrying amounts of the Group’s financial assets and liabilities as recognised at 31 December 2007 and 2006 may be categorised as follows. See notes 3.12 and 3.18 for explanations about how the category of financial instruments affects their subsequent measurement.

(i) Financial assets

Cash and cash equivalents Loans and receivables: Trade receivables Other receivables	2007 HK$’000 33,752 5,414 1,300 6,714 40,466	2006 HK$’000 2,563 17,657 435
		18,092
		20,655

• 58 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(ii) Financial liabilities

Financial liabilities at amortised cost:

Current liabilities Trade payables Other payables Amount due to a related company Non-current liabilities Convertible bonds	2007 HK$’000 5,375 1,486 – 6,861 13,169	2006 HK$’000 21,981 1,829 71
		23,881
		–

35. CAPITAL MANAGEMENT

The Group’s capital management objectives are:

• (i) to ensure the Group’s ability to continue as a going concern;

• (ii) to provide an adequate return to shareholders;

• (iii) to support the Group’s sustainable growth; and

• (iv) to provide capital for the purpose of potential mergers and acquisitions.

The Group sets the amount of equity capital in proportion to its overall financing structure. The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.

The capital-to-overall financing ratio at balance sheet date was as follows:

Capital Total equity/(capital deficiency) Convertible bonds – equity components Overall financing Convertible bonds – equity and liability components Capital-to-overall financing ratio	2007 HK$’000 19,198 (1,700 ) 17,498 14,869 1.18	2006 HK$’000 (7,001 ) –
		(7,001 )
		–
		N/A

36. COMPARATIVE

Certain comparatives are reclassified during the year to conform current year’s presentation.

• 59 -

ADDITIONAL FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

I. WORKING CAPITAL

The Directors are of the opinion that, having regard to the financial resources available to the Enlarged Group, including internally generated funds and shareholders’ loan from Hong Bridge Capital Limited, the Enlarged Group will have sufficient working capital for its present requirements for the next twelve months from the date of this circular.

II. MATERIAL CHANGES

The Directors confirm that there was no material adverse change in the financial or trading position or prospects of the Group since 31 December 2007, the date to which the latest published audited accounts of the Group were made up.

III. INDEBTEDNESS

As at the close of business on 31 March 2008, being the latest practicable date for ascertaining information regarding this indebtedness statement, the Group had convertibles bonds liabilities of approximately HK$13.4 million.

As at the close of business on 31 March 2008, Kailun PV (Jining) had unsecured amount due to former minority equity holder of approximately HK$13,539,000, unsecured government loans of approximately HK$1,222,000 and unsecured other loans of approximately HK$3,800,000.

Save as aforesaid and apart from intra-group liabilities and normal trade payables, the Enlarged Group did not have any mortgages, charges or debentures, loan capital, bank overdrafts, loans or other similar indebtedness or any hire purchase commitments, liabilities under acceptances or acceptable credits or any guarantees or other contingent liabilities as at 31 March 2008.

IV. MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS AND OPERATIONS OF THE GROUP

The following is the management discussion and analysis of the Group principally extracted from the annual reports of the Company for each of the three years ended 31 December 2005, 2006 and 2007.

i) For the year ended 31 December 2005

a) Financial Review

The Group made significant improvement both in revenue and result in 2005. For the year ended 31 December, the Group’s turnover increased by 16.6% to HK$94.9 million, comprising HK$63.9 million from Hong Kong operations and HK$31 million from the PRC operation. Profit for the year attributable to the equity holders of the Company was HK$3.4 million, which consisted of profit from Hong Kong operations of HK$6.5 million and a loss of HK$2.9 million from the PRC operations. Earnings per share was HK$0.68 cent.

• 60 -

ADDITIONAL FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

b) Liquidity and Financial Resources

As at 31 December 2005, the Group had net current assets of HK$1,000,000. The current assets comprised of bank balances and cash of HK$7.3 million together with trade and other receivables of HK$22.7 million. The current liabilities comprised of trade and other payables, accrued expenses and receipts in advance of HK$28.4 million and amount due to a related company of HK$0.6 million.

c) Capital Structure, Exposure to Exchange Rates Fluctuation and Charge of Assets

As at 31 December 2005, the Group had a banking facility granted under corporate guarantee by the Company in respect of a revolving term loan of HK$1 million, none of which had been utilized. The gearing ratio of the Group remained inapplicable as at 31 December 2005.

As at 31 December 2005, (i) the Group had no significant exposure to fluctuations in exchange rates and related hedges, (ii) the Group had no charges on its assets; and (iii) the Group had no significant investment held.

d) Material Acquisitions and Disposals and Significant Investments

During the year, the Group did not make any material acquisitions and disposals of subsidiaries and affiliated companies and investment during the year.

e) Segmental Information

The Group’s Hong Kong operation achieved a turnover of HK$63.9 million in the year of 2005, representing a 13.7% increase on that of the year of 2004 and profit increased by 150% to HK$6.5 million.

The major contribution to the net result of 2005 comes from the significant growth in advertising revenues of our Hong Kong portfolio, recording a year-on-year growth of 19.4%, while our circulation position and cost structure remained largely unchanged.

The Group’s PRC operations achieved a turnover of HK$31 million in the year of 2005, representing a 22.7% increase on that of the year of 2004, but continue to be loss-making.

f) Employees

As at 31 December 2005, the total number of employees of the Group was 158. Employees’ costs (including directors’ emoluments) amounted to HK$18.8 million for the year.

• 61 -

ADDITIONAL FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

g) Contingent Liabilities

The Company had provided a corporate guarantee to a bank to secure a banking facility of HK$1,000,000 granted to a subsidiary, which remained unused as at 31 December 2005.

ii) For the year ended 31 December 2006

a) Financial Review

For the year ended 31 December 2006, the Group’s turnover decreased by 12% to HK$83.4 million, comprising HK$66.5 million from Hong Kong operations and HK$16.9 million from the PRC operations. Loss for the year attributable to the equity holders of the Company was HK$14.2 million (2005: profit of HK$3.4 million), which consisted of profit from Hong Kong operations of HK$0.9 million and a loss of HK$15.1 million from the PRC operations.

b) Liquidity and Financial Resources

During the year ended 31 December 2006, the Group’s operation was mainly financed by the internal financial resources of the Group.

As at 31 December 2006, the Group had net current liabilities of HK$7.6 million (2005: net current assets of HK$1 million). The current assets comprised bank balances and cash of HK$2.6 million together with trade and other receivables of HK$18 million. The current liabilities comprised trade and other payables, accrued expenses and receipts in advance of HK$28.1 million and amount due to a related company of HK$0.1 million.

• c) Capital Structure, Exposure to Exchange Rates Fluctuation and Charge of Assets

As at 31 December 2006, the Group had aggregate banking facilities granted under corporate guarantee by the Company in respect of a revolving term loan of HK$1 million, none of which had been utilized. The gearing ratio of the Group remained inapplicable as at 31 December 2006.

As at 31 December 2006, (i) the Group had no significant exposure to fluctuations in exchange rates and any related hedges; (ii) the Group had no charges on its assets; and (iii) the Group had no significant investment held.

The Board is of the opinion that, taking into account the internal financial resources of the Group and the financial support agreed to be provided by the substantial shareholder, the Group has sufficient working capital for its present requirements.

• 62 -

ADDITIONAL FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

d) Material Acquisitions

An agreement dated 21 December 2006 entered into among the Company as the purchaser, South China Strategic Limited (“SCS”), a wholly-owned subsidiary of South China Industries Limited (“SCI”), as the vendor and SCI, a subsidiary of South China Holdings Limited, as the guarantor, pursuant to which SCS had conditionally agreed to sell the projects relating to the agricultural businesses in the PRC to the Company at a consideration of HK$140,000,000. The consideration would be satisfied by the Company’s issuance a convertible note. Subsequently, a termination agreement dated 27 December 2006 was entered into among the aforesaid contracting parties to terminate the aforesaid agreement.

e) Segmental Information

The Group’s Hong Kong operations achieved a turnover of HK$66.5 million in the year of 2006, representing a 4% increase on that of the year of 2005 and net profit decrease by 85% to HK$0.9 million. The decrease in net profit in the Hong Kong operations is largely attributable to the increase in marketing and printing costs resulting from circulation boost strategies. “旭茉JESSICACODE” saw strong advertising and circulation growth, while the revenue and cost structure of “味道LISA” remained largely unchanged.

The Group’s PRC operations accounted for a turnover of HK$16.9 million in the year of 2006, representing a 45% decrease on that of the year of 2005, due to the adverse impact of restructuring and disposal of a subsidiary. 2006 recorded the full year results of “旭茉JESSICA” PRC version, as compared to only 4 months in 2005. The magazine continues to be in its investment period.

f) Employees

As at 31 December 2006, the total number of employees of the Group was 74. Employees’ costs (including directors’ emoluments) amounted to HK$22 million for the year.

g) Contingent Liabilities

The Company had provided a corporate guarantee to a bank to secure a banking facility of HK$1,000,000 granted to a subsidiary, which remained unused as at 31 December 2006.

• 63 -

ADDITIONAL FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

iii) For the year ended 31 December 2007

a) Financial Review

For the year ended 31 December 2007, the Group’s turnover decreased by 19% to HK$67.8 million. Compared to a loss of HK$14.2 million for the year 2006, the Group has turnaround to profit-making. Profit for the year attributable to the equity holders of the Company was HK$1.5 million, mainly due to the disposal of the loss-making PRC business. Disregard the share based payment of share options issued to employees amounting to HK$0.7 million recognised during the year, actual profit before share based payment for the year of the Group should be HK$2.2 million.

b) Liquidity and Financial Resources

During the year ended 31 December 2007, the Group’s operation was mainly financed by the internal financial resources of the Group.

As at 31 December 2007, the Group had net current assets of HK$31.1 million (2006: net current liabilities of HK$7.6 million). The current assets comprised bank balances and cash of HK$33.8 million together with trade and other receivables of HK$6.7 million. The current liabilities comprised trade and other payables, accrued expenses and receipts in advance of HK$9.4 million.

• c) Capital Structure, Exposure to Exchange Rates Fluctuation and Charge of Assets

As at 31 December 2007, the Group does not have any banking facilities (2006: HK$1.0 million). The gearing ratio of the Group remained inapplicable as at 31 December 2007.

As at 31 December 2007, (i) the Group had no significant exposure to fluctuations in exchange rates and any related hedges; (ii) the Group had no charges on its assets; and (iii) the Group had no significant investment held.

d) Major Transactions

On 16 August 2007, the Company entered into a subscription agreement (“2007 Subscription”) with Hong Bridge Capital Limited (“Hong Bridge”) to subscribe in cash for (i) 2,900 million new shares of the Company at a subscription price of HK$0.007 per Share; and (ii) convertible notes of the Company in the principal amount of HK$14.7 million with an initial conversion price of HK$0.007 per Share. Subsequent to the 2007 Subscription, Hong Bridge became the controlling Shareholders of the Company. Hong Bridge is wholly owned by Mr. HE Xuechu, the Chairman of the Company.

• 64 -

ADDITIONAL FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

On 16 August 2007, Great Ready Assets Limited, a wholly-owned subsidiary of the Company entered into a disposal agreement (“Disposal”) with Win Gain Investments Limited, a company wholly owned by Mr. Ng Hung Sang, a former executive director of the Company to dispose of the entire issued share capital of Jessica Publications (BVI) Limited at a consideration of HK$1 million.

Details of the above transactions were set out in the Company’s circular dated 14 September 2007. The 2007 Subscription and the Disposal had been completed on 16 October 2007.

On 16 October 2007, Hong Bridge entered into a placing agreement with an independent placing agent to place out 345,000,000 Shares of the Company to independent placees at the placing price of HK$0.7 per Share. Upon the completion of the placement, the Company continued to maintain the 25% minimum public float requirement under Rule 11.23 of the GEM Listing Rules.

On 20 November 2007, the Company and Hunan Non-ferrous Metals Holding Group Co. Ltd. entered into a co-operative agreement to set up a joint venture for the acquisition of a company principally engaged in the mining business.

e) Segmental Information

The Group’s Hong Kong operations achieved a turnover of HK$61.7 million for 2007, representing a slight year on year 7% decrease compared to 2006. However, profit for the year has been increased by 131% to HK$1.7 million, which is mainly attributable to the growth in advertising income.

The Group’s Mainland China operations accounted for a turnover of HK$6.2 million for 2007, representing a 64% decrease compared to 2006. Loss for the year has been reduced by 63% to HK$4.8 million, which is mainly due to the gradual divestment in the Mainland China magazine publication market.

At the year end, the Group has disposed all the magazine publication business in the Mainland China.

f) Employees

As at 31 December 2007, the total number of employees of the Group was 48. Employees’ costs (including directors’ emoluments) amounted to HK$18.4 million for the year.

g) Contingent Liabilities

As at 31 December 2007, the Group did not have any significant contingent liabilities.

• 65 -

ADDITIONAL FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

V. FINANCIAL AND TRADING PROSPECTS

The Directors believes that the magazine publication business will continue to generate stable income for the Group. Whilst continuing to operate the existing magazine publication business, the Group is also actively seeking business opportunities in the area of energy and resources. Upon completion of the Acquisition and the Subscription, Divine Mission will become a 60% subsidiary of the Company and the accounts of Divine Mission will be consolidated into that of the Group. The Directors believes that would enable the Company to invest into a company with potential rapid growth. It is expected that the consideration for the Subscription of US$8,000,000 (equivalent to HK$62,240,000 million) will be used by Kailun PV (Jining) to make investment to commence commercial production of 5N Silicon in Beijing in the second half of 2008 and to conduct research and development in order to achieve the technology standard to produce 6N Silicon.

• 66 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

The following is the text of a report, prepared for the sole purpose of inclusion in this circular, received from the reporting accountants, Grant Thornton, Certified Public Accountants, Hong Kong:

==> picture [20 x 20] intentionally omitted <==

==> picture [110 x 34] intentionally omitted <==

2 May 2008

The Directors

Honbridge Holdings Limited

Suite 2703 27th Floor Great Eagle Centre 23 Harbour Road Wanchai Hong Kong

Dear Sirs,

We set out below our report on the financial information of 濟寧凱倫光伏材料有限公司 (“Kailun PV (Jining)”), formerly known as 濟寧凱倫硅業有限公司, in Sections I and II below, including the balance sheets as at 31 December 2005, 2006 and 2007, income statements, cash flow statements and statements of changes in equity for the three years ended 31 December 2005, 2006 and 2007 (the “Relevant Periods”) and the notes thereto, prepared for inclusion in the circular (the “Circular”) dated 2 May 2008 issued by Honbridge Holdings Limited (the “Company”) in connection with the proposed acquisition of 20% of the existing issued share capital of Divine Mission Holdings Limited (“Divine Mission”) and 10% of the enlarged issued share capital of Divine Mission (the “Proposed Acquisition”) and the proposed subscription of 10,000 new ordinary shares of Divine Mission (the “Proposed Subscription”), which represents 100% of the existing issued capital of Divine Mission and 50% of the enlarged issued share capital of Divine Mission. Upon completion of the Proposed Acquisition and Proposed Subscription thereafter, the effective interest of the Company in Divine Mission will be 60% and Divine Mission will indirectly own the entire equity interest of Kailun PV (Jining).

Kailun PV (Jining) is a sino-foreign incorporated in the People’s Republic of China (the “PRC”) on 19 March 2004 with limited liability with a registered capital of US$2,000,000 which has been fully paid up. The address of Kailun PV (Jining)’s registered office and principal place of business is Lineng Industrial Site of Zoucheng City, Shandong Province, the PRC. Kailun PV (Jining) is principally engaged in the production and sales of highly purified silicon and research and development in the production of Solar Silicon.

• 67 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

The financial statements of Kailun PV (Jining) for the three years ended 31 December 2005, 2006 and 2007 (collectively referred to as the “Underlying Financial Statements”) were prepared in accordance with the relevant accounting principles and financial regulations applicable to the companies incorporated in the PRC. The financial statements of Kailun PV (Jining) for the years ended 31 December 2005, 2006 and 2007 were audited by Shan Dong Zhong Xin CPA Co. Ltd. (山東 忠信會計師事務所有限公司) (“Zhong Xin”). Zhong Xin is member of the China Institute of Certified Public Accountants.

The financial information and the notes thereto for the Relevant Periods (the “Financial Information”) as set out in this report has been prepared by the directors of Kailun PV (Jining) based on the Underlying Financial Statements in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). For the purpose of this report, we have examined the Financial Information and carried out such additional procedures as are necessary in accordance with Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA.

The directors of Kailun PV (Jining) are responsible for the preparation of the Underlying Financial Statements and the Financial Information which give a true and fair view. The directors of the Company are responsible for the contents of the circular in which this report is included. In preparing the Financial Information which gives a true and fair view, it is fundamental that appropriate accounting policies are selected and applied consistently. It is our responsibility to form an independent opinion, based on our examination, on the Financial Information and to report our opinion to you.

In our opinion, the Financial Information, for the purpose of this report, gives a true and fair view of the state of affairs of Kailun PV (Jining) as at 31 December 2005, 2006 and 2007 and of the results and cash flows of Kailun PV (Jining) for each of the Relevant Periods.

• 68 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

I. FINANCIAL INFORMATION

A. INCOME STATEMENTS

Notes Revenue 5 Cost of sales Gross loss Other revenue 6 Selling and distribution costs Administrative expenses Other operating expenses Operating loss Finance cost 8 Loss before income tax 9 Income tax expense 10 Loss for the year	2005 HK$’000 4,639 (9,355 ) (4,716 ) 117 (2 ) (631 ) (6,807 ) (12,039 ) (109 ) (12,148 ) – (12,148 )	2006 HK$’000 4,574 (5,008 ) (434 ) 51 (6 ) (1,566 ) (1,311 ) (3,266 ) (465 ) (3,731 ) – (3,731 )	2007 HK$’000 28,940 (31,491 ) (2,551 ) 201 (441 ) (1,984 ) (462 ) (5,237 ) (1,024 ) (6,261 ) – (6,261 )

• 69 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

B. BALANCE SHEETS

Notes ASSETS AND LIABILITIES Non-current assets Property, plant and equipment 12 Land use rights 13 Deposits 14 Current assets Inventories 15 Trade and bills receivables 16 Prepayment and other receivables 17 Cash and bank balances 18 Current liabilities Trade and bills payables 19 Other payables, accrued expenses and receipts in advance 20 Amount due to minority equity holder 21 Amounts due to fellow subsidiaries 21 Amount due to former minority equity holder 22 Borrowings 23 Net current liabilities Total assets less current liabilities Non-current liabilities Other payables Amount due to former minority equity holder 22 Borrowings 23 Net assets/(liabilities) EQUITY Equity attributable to equity holders of Kailun PV (Jining) Paid in capital 24 Reserves Total equity/(capital deficiency)	2005 HK$’000 17,275 – 1,929 19,204 5,459 1,942 2,770 3,164 13,335 5,178 11,748 – 3,753 – 8,654 29,333 (15,998 ) 3,206 – – – – 3,206 15,893 (12,687 ) 3,206	2006 HK$’000 16,544 17,006 4,012 37,562 2,022 – 690 856 3,568 2,290 12,825 – 7,388 – 4,000 26,503 (22,935 ) 14,627 15,024 – – 15,024 (397 ) 15,893 (16,290 ) (397 )	2007 HK$’000 20,773 17,729 – 38,502 3,701 275 2,598 873 7,447 2,694 10,076 1,596 4,149 6,936 3,517 28,968 (21,521 ) 16,981 15,983 6,936 745 23,664 (6,683) 15,893 (22,576 ) (6,683)

• 70 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

C. CASH FLOW STATEMENTS

Notes Cash flows from operating activities Loss before income tax Adjusted for: Interest income 6 Finance cost 8 Depreciation 9 Amortisation of land use rights 9 Write-down of inventories 9 Operating loss before working capital changes (Increase)/decrease in inventories (Increase)/decrease in trade and bills receivables (Increase)/decrease in prepayment and other receivables Increase/(decrease) in trade and bills payables Increase/(decrease) in other payables, accrued expenses and receipts in advance Increase in amount due to minority equity holder Increase/(decrease) in amounts due to fellow subsidiaries Net cash (used in)/generated from operating activities Cash flows from investing activities Interest received Deposits paid for acquisition of property, plant and equipment Purchases of property, plant and equipment Purchases of land use rights Net cash used in investing activities	2005 HK$’000 (12,148 ) (117 ) 109 105 – 2,294 (9,757 ) (7,753 ) (1,942 ) (1,795 ) 2,052 10,136 – 3,753 (5,306 ) 117 (1,929 ) (5,911 ) – (7,723 )	2006 HK$’000 (3,731 ) (44 ) 465 1,556 28 – (1,726 ) 3,437 1,942 2,080 (2,888 ) 1,077 – 3,635 7,557 44 (2,083 ) (134 ) (2,010 ) (4,183 )	2007 HK$’000 (6,261 ) (12 ) 1,024 1,989 362 – (2,898 ) (1,679 ) (275 ) (1,908 ) 404 (2,749 ) 1,596 (3,239 ) (10,748 ) 12 – (1,151 ) – (1,139 )

• 71 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

Notes Cash flows from financing activities Interest paid Increase in amount due to former equity holder Drawdown of other loans Repayment of other loans Drawdown of government loans Net cash generated from/(used in) financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at 1 January Effect of foreign exchange rates, net Cash and cash equivalents at 31 December Analysis of cash and cash equivalents Cash on hand and at banks 18 Pledged short-term bank deposits 18	2005 HK$’000 (109 ) – 8,654 (4,808 ) – 3,737 (9,292 ) 12,456 – 3,164 2,789 375 3,164	2006 HK$’000 (465 ) – 4,000 (8,654 ) – (5,119 ) (1,745 ) 3,164 (563 ) 856 856 – 856	2007 HK$’000 (1,024 ) 13,872 3,297 (4,206 ) 1,171 13,110 1,223 856 (1,206 ) 873 873 – 873

• 72 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

D. STATEMENTS OF CHANGES IN EQUITY

Paid in capital HK$’000 At 1 January 2005 15,893 Loss for the year – Total recognised income and expense for the year – At 31 December 2005 and at 1 January 2006 15,893 Currency translation – Net income/(expense) recognised directly in equity – Loss for the year – Total recognised income and expense for the year – At 31 December 2006 and at 1 January 2007 15,893 Currency translation – Net income/(expense) recognised directly in equity – Loss for the year – Total recognised income and expense for the year – At 31 December 2007 15,893

Exchange Total equity/ fluctuation Accumulated (capital reserve losses deficiency)** HK$’000 HK$’000 HK$’000 – (539 ) 15,354 – (12,148 ) (12,148 ) – (12,148 ) (12,148 ) – (12,687 ) 3,206 128 – 128 128 – 128 – (3,731 ) (3,731 ) 128 (3,731 ) (3,603 ) 128 (16,418 ) (397 ) (25 ) – (25 ) (25 ) – (25 ) – (6,261 ) (6,261 ) (25 ) (6,261 ) (6,286 ) 103 (22,679 ) (6,683)

• These reserve accounts comprise Kailun PV (Jining)’s reserves in the balance sheets.

• 73 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

II. NOTES TO THE FINANCIAL INFORMATION

1. Basis of Presentation

The Financial Information set out in this report have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”), which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards and Interpretations issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and the applicable disclosure requirements of the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited and have been consistently applied throughout the Relevant Periods.

2. Adoption of New and Revised HKFRSs

For the purpose of preparing and presenting the Financial Information, Kailun PV (Jining) has adopted all the new and revised HKFRSs issued by the HKICPA that are effective for the Relevant Period, and have been adopted as at the beginning of the Relevant Periods.

Kailun PV (Jining) has not early adopted the following HKFRSs that have been issued but are not yet effective. The directors of Kailun PV (Jining) anticipate that the adoption of such HKFRSs will not result in material financial impact on the Financial Information for the Relevant Periods.

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

Notes:

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

2 Effective for annual periods beginning on or after 1 January 2008

3 Effective for annual periods beginning on or after 1 July 2008

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

5 Effective for annual periods beginning on or after 1 July 2009

• 74 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

3. Summary of Significant Accounting Policies

• 3.1 Basis of preparation

The significant accounting policies that have been adopted in the preparation of the Financial Information are summarised below. These policies have been consistently applied to all the years presented unless otherwise stated. The Financial Information has been prepared on the historical cost convention.

Kailun PV (Jining) incurred losses of HK$12,148,000, HK$3,731,000 and HK$6,261,000 for the years ended 31 December 2005, 2006 and 2007 respectively. In additional, Kailun PV (Jining) had net current liabilities of HK$15,998,000, HK$22,935,000 and HK$21,521,000 as at 31 December 2005, 2006 and 2007 respectively and net liabilities of HK$397,000 and HK$6,683,000 as at 31 December 2006 and 2007 respectively.

Notwithstanding this, the Financial Information has been prepared on a going concern basis on the assumption that Kailun PV (Jining) will continue to operate as a going concern. The going concern basis has been adopted on the basis that:

• (i) the ultimate beneficiary owner of Kailun PV (Jining), being Mr. Liu Xiangmao will continue to provide financial support to Kailun PV (Jining) to meet Kailun PV (Jining)’s liabilities and commitments as and when they fall due from the date of this report up to 31 December 2008 or the date of completion of the Proposed Acquisition and the Proposed Subscription whichever is shorter;

• (ii) fellow subsidiaries of Kailun PV (Jining) and an minority equity holder of Kailun PV (Jining) have undertaken not to demand repayment of debts due from Kailun PV (Jining) until such time when repayment will not affect Kailun PV (Jining)’s ability to repay other creditors in the normal course of business; and

• (iii) pursuant to the Subscription Agreement, Divine Mission will indirectly make capital contribution to Kailun PV (Jining) in the amount of US$8,000,000 in cash upon completion of the Proposed Acquisition and the Proposed Subscription.

The Financial Information does not include any adjustments that would result from a failure of Kailun PV (Jining) to operate as a going concern. Should Kailun PV (Jining) be unable to continue in business as a going concern, adjustments would have to be made to reduce the value of assets to their recoverable amounts, to provide for any further liabilities which might arise, and to reclassify non-current assets and non-current liabilities as current assets and current liabilities respectively. These adjustments have not yet been reflected in the Financial Information.

• 75 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

It should be noted that accounting estimates and assumptions are used in preparation of the Financial Information. Although these estimates are based on management’s best knowledge and judgement of current events and actions, actual results may ultimately differ from those estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Financial Information, are disclosed in note 4.

• 3.2 Income and expense recognition

Revenue comprises the fair value for the sale of goods. Provided it is probable that the economic benefits will flow to Kailun PV (Jining) and the revenue and costs, if applicable, can be measured reliably, revenue is recognised as follows:

• Sales of goods are recognised upon transfer of the significant risks and rewards of ownership to the customer. This is usually taken as the time when the goods are delivered and the customer has accepted the goods; and

• Interest income is recognised on a time-proportion basis using the effective interest rate method.

• 3.3 Foreign currencies translation

The financial statements of Kailun PV (Jining) are prepared in Renminbi (“RMB”), being the functional currency of Kailun PV (Jining). Foreign currency transactions are translated into the functional currency of Kailun PV (Jining) using the exchange rates prevailing at the dates of the transactions. At balance sheet date, monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rates ruling at the balance sheet date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the balance sheet retranslation of monetary assets and liabilities denominated in foreign currencies at year-end exchange rates are recognised in the income statement.

Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined and are reported as part of the fair value gain or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

In the Financial Information, the financial statements of Kailun PV (Jining) originally presented in a currency different from the Company presentation currency, have been converted into Hong Kong Dollars (“HK$”). Assets and liabilities have been translated into HK$ at the closing rate at the balance sheet date. Income and expenses

• 76 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

have been converted into HK$ at the exchange rates ruling at the transaction dates, or at the average rates over the Relevant Periods provided that the exchange rates do not fluctuate significant. Any differences arising from this procedure have been dealt with separately in the exchange fluctuation reserve in equity. In the opinion of the directors of the Company, the presentation of the Financial Information of Kailun PV (Jining) in HK$ provides a more relevant information about the circular.

3.4 Property, plant and equipment

Property, plant and equipment, other than construction in progress, are stated at cost less accumulated depreciation and any impairment losses. The cost of an asset 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 property, plant and equipment have 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 an item of property, plant and equipment and the expenditure of the item can be measured reliably, the expenditure is capitalised as an additional cost of that asset or as a replacement.

Depreciation is calculated on the straight-line method to write off the cost of each item of property, plant and equipment, less any estimated residual values, over the following estimated useful lives:

Buildings	20 years
Plant and machinery	5 and 10 years
Furniture, fixtures and office equipment	5 years
Motor vehicles	5 years

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

The gain or loss on disposal or retirement of an item of property, plant and equipment recognised in the income statement is the difference between the sales proceeds and the carrying amount of the relevant asset.

Construction in progress represents property, plant and equipment under construction, which is stated at cost less any impairment losses, and is not depreciated. Cost comprises the direct costs of construction. Construction in progress is reclassified to the appropriate category of property, plant and equipment when completed and ready for use.

• 77 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

3.5 Land use rights

Land use rights represent up-front payments to acquire the land use rights. They are stated at cost less accumulated amortisation and accumulated impairment losses. Amortisation is calculated on the straight-line method over the lease term except where an alternative basis is more representative of the pattern of benefits to be derived from the leased assets.

3.6 Impairment of assets

Land use rights, property, plant and equipment are subject to impairment testing.

All assets are tested for impairment whenever there are indications that the asset’s carrying amount may not be recoverable.

An impairment loss is recognised as an expense immediately for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, 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 assessment of time value of money and the risk specific to the asset.

For the purposes of assessing impairment, where an asset does not generate cash inflows largely independent from those from other assets, the recoverable amount is determined for the smallest group of assets that generate cash inflows independently (i.e. a cash-generating unit). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level.

Impairment loss is charged pro rata to the other assets in the cash generating unit, except that the carrying value of an asset will not be reduced below its individual fair value less cost to sell, or value in use, if determinable.

An impairment loss is reversed in subsequent periods if there has been a favourable change in the estimates used to determine the asset’s recoverable amount and only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

3.7 Financial assets

The financial assets of Kailun PV (Jining) include trade and bills receivables, other receivables, cash and bank balances.

• 78 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

Management determines the classification of its financial assets at initial recognition depending on the purpose for which the financial assets were acquired and where allowed and appropriate, re-evaluates this designation at every reporting date.

All financial assets are recognised when, and only when, Kailun PV (Jining) becomes a party to the contractual provisions of the instrument. When financial assets are recognised initially, they are measured at fair value, plus any directly attributable transaction costs.

Derecognition of financial assets occurs when the rights to receive cash flows from the investments expire or are transferred and substantially all of the risks and rewards of ownership have been transferred. At each balance sheet date, financial assets are reviewed to assess whether there is objective evidence of impairment. If any such evidence exists, impairment loss is determined and recognised based on the classification of asset.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are subsequently measured at amortised cost using the effective interest rate method, less impairment losses. Amortised cost is calculated taking into account any discount or premium on acquisition and includes fees that are an integral part of the effective interest rate and transaction cost.

Impairment of loans and receivables

At each balance sheet date, loans and receivables are reviewed to determine whether there is any objective evidence of impairment. If there is objective evidence that an impairment loss on loans and receivables has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The amount of the loss is recognised in the income statement for the period in which the impairment occurs.

If, in subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that it does not result in a carrying amount of the financial asset exceeding what the amortised cost would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in the income statement for the period in which the reversal occurs.

• 79 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

3.8 Inventories

Inventories are carried at the lower of cost and net realisable value. Cost is determined using the weighted average basis, and in the case of work in progress and finished goods, comprises direct materials, direct labour and an appropriate proportion of overheads. Net realisable value is the estimated selling prices in the ordinary course of business less the estimated costs of completion and applicable selling expenses.

3.9 Cash and bank balances

Cash and bank balances comprise cash at banks and on hand, demand deposits with banks and short term highly liquid investments with original maturities of three months or less that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, less bank overdrafts which are repayable on demand and form an integral part of Kailun PV (Jining)’s cash management.

3.10 Paid in capital

Paid in capital is classified as equity. This is determined using the proceeds from capital contributions made by the investors.

3.11 Financial liabilities

The financial liabilities of Kailun PV (Jining) include trade and bills payables, other payables, amount due to minority equity holder, amounts due to fellow subsidiaries, amount due to former equity holder and borrowings.

Financial liabilities are recognised when Kailun PV (Jining) becomes a party to the contractual provisions of the instrument. All interest related charges are recognised as an expense in finance costs in the income statement.

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amount is recognised in the income statement.

Trade and other payables

Trade and other payables are recognised initially at their fair value and subsequently measured at amortised cost, using the effective interest rate method.

• 80 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

Borrowings

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

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

3.12 Accounting for income taxes

Income tax comprises current tax and deferred tax.

Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting period, that are unpaid at the balance sheet date. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable profit for the year. All changes to current tax assets or liabilities are recognised as a component of tax expense in the income statement.

Deferred tax is calculated using the liability method on temporary differences at the balance sheet date between the carrying amounts of assets and liabilities in the financial statements and their respective tax bases. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences, tax losses available to be carried forward as well as other unused tax credits, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised.

Deferred tax assets and liabilities are not recognised if the temporary difference arises from initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither taxable nor accounting profit or loss.

Deferred tax is calculated, without discounting, at tax rates that are expected to apply in the period the liability is settled or the asset realised, provided they are enacted or substantively enacted at the balance sheet date.

Changes in deferred tax assets or liabilities are recognised in the income statement, or in equity if they relate to items that are charged or credited directly to equity.

• 81 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

3.13 Employee benefits

Retirement benefits to employees are provided through a defined contribution plan.

The employees of Kailun PV (Jining) are required to participate in a central pension scheme operated by the local municipal government (the “Scheme”). Kailun PV (Jining) is required to contribute certain percentage of its payroll costs to the Scheme. The local municipal government undertakes to assume the retirement benefits obligation of all existing and future retired employees of Kailun PV (Jining). The only obligation of Kailun PV (Jining) with respect to the Scheme is to pay the ongoing required contributions under the Scheme mention above. The contributions are charged to the income statement as they become payable in accordance with the rules of the Scheme.

3.14 Segment reporting

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

3.15 Related parties

A party is considered to be related to Kailun PV (Jining) if:

• (i) directly, or indirectly through one or more intermediaries, the party:

• controls, is controlled by, or is under common control with, Kailun PV (Jining);

• has an interest in Kailun PV (Jining) that gives it significant influence over Kailun PV (Jining); or

• has joint control over Kailun PV (Jining);

• (ii) the party is an associate of Kailun PV (Jining);

• (iii) the party is a jointly-controlled entity in which Kailun PV (Jining) has joint control;

• (iv) the party is a member of the key management personnel of Kailun PV (Jining) or its parent;

• (v) the party is a close member of the family of any individual referred to in (i) or (iv);

• 82 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

• (vi) 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 (iv) or (v); or

• (vii) the party is a post-employment benefit plan for the benefit of employees of Kailun PV (Jining), or of any entity that is a related party of Kailun PV (Jining).

4. Critical Accounting Estimates and Judgements

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

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

4.1 Impairment of assets

Kailun PV (Jining) assesses whether there are any indicators of impairment for assets at each reporting date. They are tested for impairment when there are indicators that the carrying amounts may not be recoverable. When value in use calculations are undertaken, management of Kailun PV (Jining) estimates the expected future cash flows from the asset or cash-generating unit and determines a suitable discount rate in order to calculate the present value of those cash flows.

4.2 Depreciation and amortisation

Kailun PV (Jining) depreciates the property, plant and equipment and amortises the land use rights in accordance with the accounting policies stated in notes 3.4 and 3.5 respectively. The estimated useful lives reflect the directors of Kailun PV (Jining)’s estimate of the periods that Kailun PV (Jining) intends to derive future economic benefits from the use of these assets.

4.3 Impairment of receivables

Kailun PV (Jining)’s management determines impairment of receivables on a regular basis. This estimate is based on the credit history of its customers and current market conditions. Management of Kailun PV (Jining) reassesses the impairment of receivables at the balance sheet date.

• 83 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

4.4 Net realisable value of inventories

These estimates are based on the current market condition and the historical experience of selling products of similar nature. It could change significantly as a result of competitor actions in response to severe industry cycles. Management of Kailun PV (Jining) reassesses the estimations at the balance sheet dates.

4.5 Borrowings

Significant judgement is required in determining the timing of payment of borrowings. This estimate is based on the payment history and current Kailun PV (Jining)’s conditions. Management of Kailun PV (Jining) reassesses the timing of the repayments of the borrowings at the balance sheet date.

5. Revenue

Revenue, which is also Kailun PV (Jining)’s turnover, represents the total invoiced value of goods sold, and is analysed as:

Sales of goods 6. Other Revenue Bank interest income Sundry income	2005 HK$’000 4,639 2005 HK$’000 117 – 117	2006 HK$’000 4,574 2006 HK$’000 44 7 51	2007 HK$’000 28,940
			2007 HK$’000 12 189
			201

7. Segment Information

No separate analysis of segment information by business or geographical segments is presented as Kailun PV (Jining)’s sole business is the production and sales of highly purified silicon and research and development in the production of Solar Silicon, and Kailun PV (Jining)’s revenue, assets and capital expenditure are principally attributable to a single geographical region, which is the PRC.

• 84 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

8. Finance Cost

Other borrowings wholly repayable within five years 9. Loss Before Income Tax Loss before income tax is arrived at after charging/(crediting): Cost of inventories sold Depreciation Amortisation of land use rights Auditors’ remuneration Write-down of inventories Research and development costs Staff costs (including directors’ remuneration –note 11) – Salaries and wages – Retirement scheme contribution	2005 HK$’000 109 2005 HK$’000 9,355 105 – 2 2,294 – 1,778 1 1,779	2006 HK$’000 465 2006 HK$’000 5,008 1,556 28 3 – – 916 11 927	2007 HK$’000 1,024
			2007 HK$’000 31,491 1,989 362 3 – 462 2,489 12
			2,501

10. Income Tax Expense

No enterprise income tax has been provided as Kailun PV (Jining) had no estimated assessable profits arising in or derived from the PRC during the Relevant Periods.

In accordance with various approval documents issued by the State Tax Bureau and the Local Tax Bureau of the PRC, Kailun PV (Jining), being established as sino-foreign enterprise in the PRC, are entitled to an exemption from the PRC state and local enterprise income tax for the first two profitable financial years of their operations (the “Tax Holiday”) and thereafter a 50% relief from the state enterprise income tax of the PRC for the following three financial years (the “Tax Relief”). Upon expiry of the Tax Holiday and the Tax Relief, the usual PRC enterprise income tax will be applicable.

• 85 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

Pursuant to the PRC enterprise income tax law passed by the Tenth National People’s Congress on 16 March 2007, the new enterprise income tax rates for domestic and foreign enterprises are unified at 25% and will be effective from 1 January 2008. Subsequent to 16 March 2007, the implementation measure on transitional policy of preferential tax rate is announced and Kailun PV (Jining)’s entitlement to the Tax Holiday and Tax Relief is still applicable. Upon expiry of the Tax Holiday and Tax Relief, the new PRC enterprise income tax rate of 25% is applicable to Kailun PV (Jining).

Pursuant to the announcement (the “Announcement”) on the traditional preferential policy issued by State Council on 26 December 2007, the Tax Holiday is still effective under new tax policy. For those enterprises not yet got assessable profits, their preferential period is no longer delayed. The calendar year of 2008 shall be counted as the first preferential year of preferential period and lasts for five years up to year 2012.

Accordingly, the two years’ tax exemption periods for Kailun PV (Jining) shall commence in the financial year ending 31 December 2008 under the Announcement and upon expiry of two years’ tax exemption periods in the financial year ending 31 December 2009, Kailun PV (Jining) will be subject to the reduced tax rate of 18% for the three financial years from 1 January 2010 to 31 December 2012.

No deferred tax has been provided as Kailun PV (Jining) did not have any significant temporary differences which gave rise to a deferred tax asset or liability at the balance sheet date for all periods presented.

Reconciliation between income tax expense and accounting loss at applicable tax rate is as follows:

Loss before income tax Tax on loss before income tax, calculated at the tax rate of 33% Tax effect of non-taxable items Income tax expense	2005 HK$’000 (12,148 ) (4,009 ) 4,009 –	2006 HK$’000 (3,731 ) (1,231 ) 1,231 –	2007 HK$’000 (6,261) (2,066 ) 2,066 –

• 86 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

11. Directors’ Remuneration and Senior Management’s Emoluments

(a) Directors’ emoluments

The emoluments paid or payable to the directors were as follows:

Year ended 31 December 2005 Liu Xiangmao Liu Jie Yan Yunzhu Year ended 31 December 2006 Liu Xiangmao Liu Jie Yan Yunzhu Year ended 31 December 2007 Liu Xiangmao Liu Jie Yan Yunzhu* Liu Feng#	Fees HK$’000 – – – – – – – – – – – – –	Salaries, allowance and other benefits HK$’000 – 51 – 51 – 21 – 21 – 3 – 55 58	Retirement scheme contribution HK$’000 – – – – – – – – – – – – –	Total HK$’000 – 51 –
				51
				– 21 –
				21
				– 3 – 55
				58

• Resigned on 8 January 2007

• Appointed on 8 January 2007

There was no arrangement under which a director waived or agreed to waive any remuneration during the Relevant Periods.

• 87 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

(b) Five highest paid individuals

The five individuals whose emoluments were the highest in Kailun PV (Jining) for the Relevant Periods included one, none and one of the directors for the years ended 31 December 2005, 2006 and 2007 respectively, whose emoluments are reflected in the analysis presented above. The emoluments payable to the remaining highest paid individuals during the Relevant Periods are as follows:

Salaries, allowances and other benefits Retirement scheme contribution	2005 HK$’000 203 1 204	2006 HK$’000 215 22 237	2007 HK$’000 247 2
			249

The number of individuals fell within the following emolument band (excluding directors):

Emolument band HK$nil – HK$1,000,000	2005 4	2006 5	2007 4

During the Relevant Periods, no emoluments were paid by Kailun PV (Jining) to the directors or highest paid individuals as an inducement to join or upon joining Kailun PV (Jining) or as compensation for loss of office.

• 88 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

12. Property, Plant and Equipment

At 1 January 2005 Cost Accumulated depreciation Net book amount Year ended 31 December 2005 Opening net book amount Additions Transfers Depreciation Closing net book amount At 31 December 2005 Cost Accumulated depreciation Net book amount Year ended 31 December 2006 Opening net book amount Additions Transfers Depreciation Exchange realignment Closing net book amount At 31 December 2006 Cost Accumulated depreciation Net book amount Year ended 31 December 2007 Opening net book amount Additions Transfers Depreciation Exchange realignment Closing net book amount At 31 December 2007 Cost Accumulated depreciation Net book amount	Furniture Plant fixtures and and office Buildings machinery equipment HK$’000 HK$’000 HK$’000 – 6 57 – – (1 ) – 6 56 – 6 56 – 251 248 7,294 9,185 – – (11 ) (34 ) 7,294 9,431 270 7,294 9,442 305 – (11 ) (35 ) 7,294 9,431 270 7,294 9,431 270 – 34 – 100 – – (341 ) (1,094 ) (57 ) 292 377 11 7,345 8,748 224 7,686 9,854 318 (341 ) (1,106 ) (94 ) 7,345 8,748 224 7,345 8,748 224 – 4,103 – 683 – – (378 ) (1,443 ) (61 ) 469 558 14 8,119 11,966 177 8,860 14,585 338 (741 ) (2,619 ) (161 ) 8,119 11,966 177	Motor Construction vehicles in progress HK$’000 HK$’000 321 8,610 (4 ) – 317 8,610 317 8,610 23 7,869 – (16,479 ) (60 ) – 280 – 344 – (64 ) – 280 – 280 – – 100 – (100 ) (64 ) – 11 – 227 – 357 – (130 ) – 227 – 227 – 377 683 – (683 ) (107 ) – 14 – 511 – 756 – (245 ) – 511 –	Total HK$’000 8,994 (5 ) 8,989 8,989 8,391 – (105 ) 17,275 17,385 (110 ) 17,275 17,275 134 – (1,556 ) 691 16,544 18,215 (1,671 ) 16,544 16,544 5,163 – (1,989 ) 1,055 20,773 24,539 (3,766 ) 20,773

• 89 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

At the balance sheet date, the building ownership certificates of the above buildings have not yet been obtained. The land use rights certificates where these buildings are situated have already been obtained and have been included in land use rights (note 13). In the opinion of the independent PRC legal advisors of Kailun PV (Jining), Kailun PV (Jining) is entitled to obtain the building ownership certificates without legal impediment and is entitled to lawfully and validly use the buildings during the Relevant Periods.

13. Land Use Rights

At 1 January 2006 Cost Accumulated amortisation Net book amount Year ended 31 December 2006 Opening net book amount Additions Amortisation Net book amount At 31 December 2006 Cost Accumulated amortisation Net book amount Year ended 31 December 2007 Opening net book amount Amortisation Exchange realignment Net book amount At 31 December 2007 Cost Accumulated amortisation Net book amount	HK$’000 – – – – 17,034 (28 ) 17,006 17,034 (28 ) 17,006 17,006 (362 ) 1,085 17,729 18,121 (392 ) 17,729

The land use rights represent up-front payments to acquire long term interest in the usage of land situated in the PRC, which are held under medium term leases.

• 90 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

14. Deposits

The balance represented the deposits paid for the acquisition of property, plant and equipment as at 31 December 2005 and 2006.

15. Inventories

Raw materials Finished goods 16. Trade and Bills Receivables Trade receivables Bills receivables	2005 HK$’000 2,249 3,210 5,459 2005 HK$’000 – 1,942 1,942	2006 HK$’000 2,022 – 2,022 2006 HK$’000 – – –	2007 HK$’000 2,004 1,697
			3,701
			2007 HK$’000 275 –
			275

Kailun PV (Jining) normally allows credit terms to its trade customers within 30 days. Overdue balances are reviewed regularly by the Kailun PV (Jining)’s management. All trade and bills receivables are denominated in RMB.

The carrying amount of trade and bill receivables is considered a reasonable approximation of fair value as this financial asset, which is measured at amortised cost, is expected to be paid within a short timescale, such that the time value of money impact is not significant.

At each balance sheet date, trade and bill receivables are individually determined to be impaired. The individually impaired receivables, if any, are recognised, based on the credit history of its customers, such as financial difficulties or default in payments, and current market conditions. Consequently, specific impairment provision is recognised. Kailun PV (Jining) does not hold any collaterals over these balances.

As at 31 December 2005 and 2006, the ageing of the net trade and bill receivables, based on the invoice dates, are all within 90 days.

• 91 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

As at 31 December 2005 and 2007, Kailun PV (Jining) had no significant balances of trade and bills receivables that were past due but not impaired. The directors of Kailun PV (Jining) are of the opinion that no allowance for impairment of trade receivables is necessary as there was no recent history of default in respect of these trade debtors.

17. Prepayment and Other Receivables

Prepayment Other receivables Cash and Bank Balances Pledged short-term bank deposits Cash on hand and at banks	2005 HK$’000 2,577 193 2,770 2005 HK$’000 375 2,789 3,164	2006 HK$’000 626 64 690 2006 HK$’000 – 856 856	2007 HK$’000 2,053 545
			2,598
			2007 HK$’000 – 873
			873

18. Cash and Bank Balances

Bank balances earns interest at the floating rates based on the daily bank deposits rates.

Pledged short-term bank deposits are made for varying periods between three months and six months for the issuance of bills payables to suppliers, and earned interest at the respective short-term time deposit rates, ranging from 0.72% to 1.71% per annum for the year ended 31 December 2005.

As at 31 December 2005, 2006 and 2007, all of Kailun PV (Jining)’s cash and bank balances were denominated in RMB, which were deposited with banks in the PRC and held in hand. RMB is not freely convertible into foreign currencies. Under the PRC’s Foreign Exchange Control Regulations and Administration of Settlement and Sales and Payment of Foreign Exchange Regulations, Kailun PV (Jining) is permitted to exchange RMB for foreign currencies through banks that are authorised to conduct foreign exchange business.

• 92 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

19. Trade and Bills Payables

Trade payables Bills payables	2005 HK$’000 4,803 375 5,178	2006 HK$’000 2,290 – 2,290	2007 HK$’000 2,694 –
			2,694

The credit terms of trade payables vary according to the terms agreed with different suppliers. The ageing analysis of Kailun PV (Jining)’s trade payables as at the balance sheet is as follows:

0-30 days 31-60 days 61-90 days Over 90 days	2005 HK$’000 2,058 440 869 1,436 4,803	2006 HK$’000 13 8 2 2,267 2,290	2007 HK$’000 614 25 – 2,055
			2,694

20. Other Payables, Accrued Expenses and Receipts in Advance

Other payables Accrued expenses Receipts in advance	2005 HK$’000 11,748 – – 11,748	2006 HK$’000 11,927 898 – 12,825	2007 HK$’000 10,002 3 71
			10,076

21. Balances with Minority Equity Holder and Fellow Subsidiaries

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

22. Amount Due to Former Minority Equity Holder

The amount due to former minority equity holder is unsecured, repayable within three years starting from January 2007 and bear floating interest rate which is based on the monthly interest rate of The People’s Bank of China.

• 93 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

23. Borrowings

Current Other loans Government loans Non-current Government loans Total borrowings Analysed into: Other loans repayable: – Within one year or on demand Government loans repayable: – Within one year or on demand – In the second year – In the third to fifth years, inclusive Less: Portion due within one year include under current liabilities Non-current portion include under non-current liabilities	2005 HK$’000 8,654 – 8,654 – 8,654 8,654 – – – – – –	2006 HK$’000 4,000 – 4,000 – 4,000 4,000 – – – – – –	2007 HK$’000 3,091 426 3,517 745 4,262 3,091 426 320 425 1,171 (426 ) 745

• 94 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

Notes:

• (a) Other loans as at 31 December 2005 and 2006, were unsecured and bore fixed interest rates ranging from 0.3% to 0.6% per month. These loans were guaranteed by the independent third parties, 山東中能電力 建設有限公司, 山東中芬能源有限公司 and 濟寧里能建工混凝土有限公司. Kailun PV (Jining) has not recognised the financial impact in respect of these guarantee as their fair value cannot be reliably measured and no transaction price was recorded.

As at 31 December 2007, other loans are unsecured, interest-free and repayable on demand.

• (b) Government loans comprise an interest free loan of HK$107,000 (the “Government Interest Free Loan”) granted by the local government of the PRC. The local government of the PRC agreed to waive the repayment of the Government Interest Free Loan on the condition that Kailun PV (Jining)’s research and development project in the local county satisfies the requirements set by the local government. Other government loans of HK$1,064,000 are unsecured and interest-free.

24. Paid in Capital

Registered and paid up capital: US$2,000,000	2005 HK$’000 15,893	2006 HK$’000 15,893	2007 HK$’000 15,893

25. Notes to the Cash Flow Statements

Major non-cash transactions

In addition to those disclosed elsewhere in the Financial Information, Kailun PV (Jining) had the following significant non-cash transactions:

• (a) During the year ended 31 December 2005 and 2007, deposits of HK$2,480,000 and HK$4,012,000 respectively paid in prior year for the acquisition of property, plant and equipment were capitalised as property, plant and equipment.

• (b) As at 31 December 2006 and 2007, the other payables in the amount of HK$15,024,000 and HK$15,983,000 respectively under non-current liabilities represented the outstanding consideration payable in respect of the acquisition of land use rights during the year ended 31 December 2006.

• 95 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

26. Related Party Transactions

In addition to the transactions and balances disclosed elsewhere in the Financial Information, Kailun PV (Jining) had the following material related party transactions:

Sales of goods to fellow subsidiaries	2005 HK$’000 4,639	2006 HK$’000 2,738	2007 HK$’000 –

Notes:

• (a) The sales were made with reference to the terms negotiated between the two parties.

• (b) The directors of Kailun PV (Jining) are of the opinion that the compensation of key management personnel were fully disclosed in note 11.

27. Risk Management Objective and Policies

Kailun PV (Jining) does not have written risk management policies and guidelines. However, the directors of Kailun PV (Jining) meet periodically to analyse and formulate measures to manage Kailun PV (Jining)’s exposure to market risk (including principally changes in interest rates and currency exchange rates), credit risk and liquidity risk. Generally Kailun PV (Jining) employs conservative strategies regarding its risk management. As Kailun PV (Jining)’s exposure to market risk is kept to a minimum level, Kailun PV (Jining) has not used any derivatives and other instruments for hedging purposes. Kailun PV (Jining) does not hold or issue derivative financial instruments for trading purposes.

(a) Credit risk

• The maximum credit risk exposure of the financial assets is summarised in note

• (f) below.

In the opinion of the directors of Kailun PV (Jining), Kailun PV (Jining) does not have significant credit risk exposure because:

• ‧ Kailun PV (Jining)’s bank balances are deposited with the PRC banks;

• ‧ Kailun PV (Jining) has no significant concentration of credit risk arising from its ordinary course of business due to its relatively large customer base.

There is no requirement for collateral by Kailun PV (Jining).

• 96 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

(b) Interest rate risk

Kailun PV (Jining)’s exposure to interest rate risk mainly arises on bank deposits, amount due to former equity holder and other loans. Kailun PV (Jining) has not used any derivative contracts to hedge its exposure to interest rate risk. Kailun PV (Jining) has not formulated a policy to manage the interest rate risk.

Interest rate sensitivity

If the saving interest rates had been increased/decreased by 10 basis points at the beginning of the year and all other variables were held constant, Kailun PV (Jining)’s loss after tax and retained profits would increase/decrease by approximately HK$55,000, HK$31,000 and HK$173,000 for the year ended 31 December 2005, 2006 and 2007.

(c) Foreign currency risk

Kailun PV (Jining) does not have significant exposure to foreign currency risk, as transactions are predominately in RMB. Accordingly, Kailun PV (Jining) does not use derivative financial instruments to hedge its foreign currency risk.

(d) Fair values

The fair values of Kailun PV (Jining)’s financial assets and liabilities are not materially different from their carrying amount because of the immediate or short term maturity of these financial instruments. The fair value of long term liabilities was not disclosed because the carrying value is not materially different from the fair value.

(e) Liquidity risk

Kailun PV (Jining)’s policy is to maintain sufficient cash and cash equivalents and have available funding to meet its working capital requirements. Kailun PV (Jining)’s liquidity is dependent upon as mentioned in note 3.1. The directors of Kailun PV (Jining) are satisfied that Kailun PV (Jining) will be able to meet in full its financial obligations as and when they fall due in the foreseeable future.

• 97 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

The following table summaries the remaining maturities at the balance sheet date of Kailun PV (Jining)’s financial liabilities, which are based on contractual undiscounted cash flows:

Less than On three demand months HK$’000 HK$’000 At 31 December 2005 Trade and bills payables 2,745 2,058 Other payables 10,081 1,667 Amounts due to fellow subsidiaries 3,753 – Borrowings – 3,846 16,579 7,571 At 31 December 2006 Trade and bills payables 2,277 13 Other payables 10,114 1,813 Amounts due to fellow subsidiaries 7,388 – Borrowings – 4,000 19,779 5,826 At 31 December 2007 Trade and bills payables 2,080 614 Other payables 9,775 227 Amount due to minority equity holder 1,596 – Amounts due to fellow subsidiaries 4,149 – Amount due to former minority equity holder – 1,156 Borrowings 3,091 426 20,691 2,423	Three to twelve months HK$’000 375 – – 4,808 5,183 – – – – – – – – – 5,780 – 5,780	One year or above HK$’000 – – – – – – 15,024 – – 15,024 – 15,983 – – 6,936 745 23,664	Total HK$’000 5,178 11,748 3,753 8,654
			29,333
			2,290 26,951 7,388 4,000
			40,629
			2,694 25,985 1,596 4,149 13,872 4,262
			52,558

• 98 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

• (f) Summary of financial assets and liabilities by categories

The carrying amounts of Kailun PV (Jining)’s financial assets and liabilities recognised at the balance sheet dates are also analysed into the following categories. See notes 3.7 and 3.11 for explanations about how the category of financial instruments affects their subsequent measurement.

Financial assets

Loans and receivables – Trade and bill receivables – Other receivables Cash and bank balances Financial liabilities Financial liabilities measured at amortised cost – Trade and bill payables – Other payables – Amount due to minority equity holder – Amounts due to fellow subsidiaries – Amount due to former minority equity holder – Borrowings	2005 HK$’000 1,942 193 2,789 4,924 5,178 11,748 – 3,753 – 8,654 29,333	2006 HK$’000 – 64 856 920 2,290 26,951 – 7,388 – 4,000 40,629	2007 HK$’000 275 545 873
			1,693
			2,694 25,985 1,596 4,149 13,872 4,262
			52,558

28. Capital Management

Kailun PV (Jining)’s objectives when managing capital include:

• (i) to safeguard Kailun PV (Jining)’s ability to continue as a going concern, so that it continues to provide returns for equity holders and benefits for other stakeholders;

• 99 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

• (ii) to support Kailun PV (Jining)’s stability and growth; and

• (iii) to provide capital for the purpose of strengthening Kailun PV (Jining)’s risk management capability.

Kailun PV (Jining) actively and regularly reviews and manages its capital structure to ensure optimal capital structure and equity holder returns, taking into consideration the future capital requirements of Kailun PV (Jining) and capital efficiency, prevailing and projected profitability, projected operating cash flows, projected capital expenditures and projected strategic investment opportunities. Kailun PV (Jining) currently does not adopt any formal dividend policy.

Kailun PV (Jining) sets the amount of equity capital in proportion to its overall financing structure. Kailun PV (Jining) manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, Kailun PV (Jining) may adjust the amount dividends paid to equity holders, return capital to equity holders, issue new shares, or sell assets to reduce debt.

The capital-to-overall financing ratio at balance sheet date was as follows:

Capital: Total equity/(capital deficiency) Overall financing: Interest-bearing loans and borrowings	2005 HK$’000 3,206 8,654	2006 HK$’000 (397 ) 4,000	2007 HK$’000 (6,683 ) 18,134

• 100 -

ACCOUNTANTS’ REPORT ON KAILUN PV (JINING)

APPENDIX III

29. Subsequent Events

No significant event has taken place subsequent to 31 December 2007.

Yours faithfully,

Grant Thornton

Certified Public Accountants 13th Floor, Gloucester Tower The Landmark 15 Queen’s Road Central Hong Kong

• 101 -

MANAGEMENT DISCUSSION AND ANALYSIS OF THE KAILUN PV (JININIG)

APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS AND OPERATIONS OF KAILUN PV (JINING)

The following is the management discussion and analysis of Kailun PV (Jining) for each of the three years ended 31 December 2005, 2006 and 2007.

i) FOR THE YEAR ENDED 31 DECEMBER 2005

• a) FINANCIAL REVIEW

The revenue of Kailun PV (Jining) for the year ended 31 December 2005 was approximately HK$4,639,000. Kailun PV (Jining) reported a net loss for the year attributable to the equity holders of HK$12,148,000.

b) LIQUIDITY AND FINANCIAL RESOURCES

As at 31 December 2005, Kailun PV (Jining) had total assets of HK$32,539,000. Total assets comprised cash and bank balances of HK$3,164,000, trade and bills receivables of HK$1,942,000, prepayment and other receivables of HK$2,770,000, inventories of HK$5,459,000, together with property, plant and equipment of HK$17,275,000 and deposits of HK$1,929,000. Total liabilities comprised borrowings of HK$8,654,000, trade and bills payables of HK$5,178,000, other payables, accrued expenses and receipts in advance of HK$11,748,000, and amounts due to fellow subsidiaries of HK$3,753,000.

As at 31 December 2005, the current ratio (current assets/current liabilities) of Kailun PV (Jining) was 45.5% and the gearing ratio of Kailun PV (Jining) was 269.9% which was calculated as total borrowings divided by the total equity.

• c) CAPITAL STRUCTURE, EXPOSURE TO EXCHANGE RATES FLUCTUATION AND CHARGE OF ASSETS

As at 31 December 2005, the total equity of Kailun PV (Jining) amounted to HK$3,206,000, comprising registered capital of US$1,020,000 and US$980,000 invested by Donnion and 濟寧 惠嘉豐投資有限公司, respectively.

As at 31 December 2005, (i) Kailun PV (Jining) had no significant exposure to fluctuations in exchange rates and related hedges, (ii) Kailun PV (Jining) had no charges on its assets; and (iii) Kailun PV (Jining) had no significant investment held.

• d) MATERIAL ACQUISITIONS AND DISPOSALS AND SIGNIFICANT INVESTMENTS

During the year, Kailun PV (Jining) did not make any material acquisitions and disposals of subsidiaries and affiliated companies and investment.

• 102 -

MANAGEMENT DISCUSSION AND ANALYSIS OF THE KAILUN PV (JININIG)

APPENDIX IV

e) SEGMENTAL INFORMATION

No business or geographical segment information has been presented as all operations, assets and liabilities of Kailun PV (Jining) during the year were related to the production and sales of highly purified silicon and research and development in the production of Solar Silicon in the PRC.

f) EMPLOYEES

For the year ended 31 December 2005, the average number of employees of Kailun PV (Jining) was 126 with an average emoluments, including directors’ emoluments of HK$13,000 for the year.

g) CONTINGENT LIABILITIES

As at 31 December 2005, Kailun PV (Jining) did not have any significant contingent liabilities.

ii) FOR THE YEAR ENDED 31 DECEMBER 2006

• a) FINANCIAL REVIEW

The revenue of Kailun PV (Jining) for the year ended 31 December 2006 was approximately HK$4,574,000, representing a 1.4% decrease as compared with last year. Kailun PV (Jining) reported a net loss for the year attributable to the equity holders of HK$3,731,000.

b) LIQUIDITY AND FINANCIAL RESOURCES

As at 31 December 2006, Kailun PV (Jining) had total assets of HK$41,130,000. Total assets comprised cash and bank balances of HK$856,000, prepayment and other receivables of HK$690,000, inventories of HK$2,022,000, together with property, plant and equipment of HK$16,544,000, land use rights of HK$17,006,000, and deposits of HK$4,012,000. Total liabilities comprised borrowings of HK$4,000,000, trade and bills payables of HK$2,290,000, other payables, accrued expenses and receipts in advance of HK$12,825,000, amounts due to fellow subsidiaries of HK$7,388,000, and other non-current payables of HK$15,024,000.

As at 31 December 2006, the current ratio (current assets/current liabilities) of Kailun PV (Jining) was 13.5% and the gearing ratio of Kailun PV (Jining) was not applicable as Kailun PV (Jining) had negative total equity.

• c) CAPITAL STRUCTURE, EXPOSURE TO EXCHANGE RATES FLUCTUATION AND CHARGE OF ASSETS

As at 31 December 2006, the capital deficiency of Kailun PV (Jining) amounted to HK$397,000, comprising registered capital of US$1,020,000 and US$980,000 invested by Donnion and 濟寧惠嘉豐投資有限公司, respectively.

• 103 -

APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF THE KAILUN PV (JININIG)

As at 31 December 2006, (i) Kailun PV (Jining) had no significant exposure to fluctuations in exchange rates and related hedges, (ii) Kailun PV (Jining) had no charges on its assets; and (iii) Kailun PV (Jining) had no significant investment held.

d) MATERIAL ACQUISITIONS AND DISPOSALS AND SIGNIFICANT INVESTMENTS

During the year, Kailun PV (Jining) did not make any material acquisitions and disposals of subsidiaries and affiliated companies and investment.

e) SEGMENTAL INFORMATION

No business or geographical segment information has been presented as all operations, assets and liabilities of Kailun PV (Jining) during the year were related to the production and sales of highly purified silicon and research and development in the production of Solar Silicon in the PRC.

f) EMPLOYEES

For the year ended 31 December 2006, the average number of employees of Kailun PV (Jining) was 123 with an average emoluments, including directors’ emoluments of HK$7,000 for the year.

g) CONTINGENT LIABILITIES

As at 31 December 2006, Kailun PV (Jining) did not have any significant contingent liabilities.

iii) FOR THE YEAR ENDED 31 DECEMBER 2007

• a) FINANCIAL REVIEW

The revenue of Kailun PV (Jining) for the year ended 31 December 2007 was approximately HK$28,940,000, representing a 532.7% increase as compared with last year. Kailun PV (Jining) reported a net loss for the year attributable to the equity holders of HK$6,261,000.

b) LIQUIDITY AND FINANCIAL RESOURCES

As at 31 December 2007, Kailun PV (Jining) had total assets of HK$45,949,000. Total assets comprised cash and bank balances of HK$873,000, inventories of HK$3,701,000, trade and bills receivables of HK$275,000 prepayment and other receivables of HK$2,598,000, together with property, plant and equipment of HK$20,773,000 and land use rights of HK$17,729,000. Total liabilities comprised borrowings of HK$4,262,000, trade and bills payables of HK$2,694,000, other payables, accrued expenses and receipts in advance of HK$10,076,000, amount due to minority equity holder of HK$1,596,000, amounts due to fellow subsidiaries of HK$4,149,000, amount due to former minority equity holder of HK$13,872,000, and other non-current payables of HK$15,983,000.

• 104 -

MANAGEMENT DISCUSSION AND ANALYSIS OF THE KAILUN PV (JININIG)

APPENDIX IV

As at 31 December 2007, the current ratio (current assets/current liabilities) of Kailun PV (Jining) was 25.7% and the gearing ratio of Kailun PV (Jining) was not applicable as Kailun PV (Jining) had negative total equity.

• c) CAPITAL STRUCTURE, EXPOSURE TO EXCHANGE RATES FLUCTUATION AND CHARGE OF ASSETS

As at 31 December 2007, the capital deficiency of Kailun PV (Jining) amounted to HK$6,683,000, comprising registered capital of US$1,020,000 and US$980,000 invested by Donnion and Kailun (QuFu), respectively.

As at 31 December 2007, (i) Kailun PV (Jining) had no significant exposure to fluctuations in exchange rates and related hedges, (ii) Kailun PV (Jining) had no charges on its assets; and (iii) Kailun PV (Jining) had no significant investment held.

d) MATERIAL ACQUISITIONS AND DISPOSALS AND SIGNIFICANT INVESTMENTS

During the year, Kailun PV (Jining) did not make any material acquisitions and disposals of subsidiaries and affiliated companies and investment.

e) SEGMENTAL INFORMATION

No business or geographical segment information has been presented as all operations, assets and liabilities of Kailun PV (Jining) during the year were related to the production and sales of highly purified silicon and research and development in the production of Solar Silicon in the PRC.

f) EMPLOYEES

For the year ended 31 December 2007, the average number of employees of Kailun PV (Jining) was 141 with an average emoluments, including directors’ emoluments of HK$17,000 for the year.

g) CONTINGENT LIABILITIES

As at 31 December 2007, Kailun PV (Jining) did not have any significant contingent liabilities.

• 105 -

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

1. INTRODUCTION

The following is the unaudited pro forma financial information of the Enlarged Group prepared in accordance with paragraph 31 of Chapter 7 of the Rules Governing the Listing of Securities on The Growth Enterprise Market of The Stock Exchange of Hong Kong Limited for the purpose of illustrating the effect of the Proposed Acquisition and the Proposed Subscription on the financial position of the Enlarged Group as at 31 December 2007 and the results and cash flows of the Enlarged Group for the year ended 31 December 2007. As it is prepared for illustrative purpose only, and because of its nature, it may not give a true picture of the financial position of the Enlarged Group following the completion of the Proposed Acquisition and the Proposed Subscription.

The unaudited pro forma consolidated balance sheet of the Enlarged Group is prepared based on the audited consolidated balance sheet of the Group as at 31 December 2007 extracted from the published annual report of the Company as set out in Appendix I to this circular and the audited balance sheet of Kailun PV (Jining) as at 31 December 2007 extracted from the accountants’ report on Kailun PV (Jining) as set out in Appendix III to this circular as if the Proposed Acquisition and the Proposed Subscription had been completed on 31 December 2007.

The unaudited pro forma consolidated income statement and cash flow statement of the Enlarged Group are prepared based on the audited consolidated income statement and cash flow statement of the Group for the year ended 31 December 2007 extracted from the published annual report of the Company as set out in Appendix I to this circular and the audited income statement and cash flow statement of Kailun PV (Jining) for the year ended 31 December 2007 extracted from the accountants’ report on Kailun PV (Jining) as set out in Appendix III to this circular as if the Proposed Acquisition and the Proposed Subscription had been completed on 1 January 2007.

As Divine Mission Holdings Limited (“Divine Mission”) and Kailun Photovoltaic Materials Investments Limited (“Kailun PV (HK)”) were established on 25 January 2008 and 4 March 2008 respectively, and both companies’ sole investment is on Kailun PV (Jining), the balance sheet, income statement and cash flow statement of Divine Mission and Kailun PV (HK) were not included in the unaudited pro forma consolidated balance sheet, the unaudited pro forma consolidated income statement and the unaudited pro forma consolidated cash flow statement of the Enlarged Group in this respect.

• 106 -

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

2. UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET OF THE ENLARGED GROUP

ASSETS AND LIABILITIES Non-current assets Property, plant and equipment Land use rights Goodwill Current assets Inventories Trade and bills receivables Prepayments and other receivables Cash and bank balances Current liabilities Trade and bills payables Other payables, accrued expenses and receipts in advance Amount due to minority equity holder of Kailun PV (Jining) Amounts due to fellow subsidiaries of Kailun PV (Jining) Amount due to former minority equity holder of Kailun PV (Jining) Amounts due to related companies Unsecured borrowings Net current assets/(liabilities) Total assets less current liabilities Non-current liabilities Other payables Amount due to former minority equity holder of Kailun PV (Jining) Unsecured borrowings Convertible bonds Net assets/(liabilities) EQUITY Equity attributable to equity holders of the Company Share capital/Paid in capital Reserves Minority interests Total equity/(capital deficiency)	The Group as at 31 December 2007 HK$’000 (Audited) 1,293 – – 1,293 – 5,414 1,300 33,752 40,466 5,375 4,017 – – – – – 9,392 31,074 32,367 – – – 13,169 13,169 19,198 3,413 15,785 19,198 – 19,198	Kailun PV (Jining) as at 31 December 2007 HK$’000 (Audited) 20,773 17,729 – 38,502 3,701 275 2,598 873 7,447 2,694 10,076 1,596 4,149 6,936 – 3,517 28,968 (21,521 ) 16,981 15,983 6,936 745 – 23,664 (6,683 ) 15,893 (22,576 ) (6,683 ) – (6,683 )	Pro forma adjustments HK$’000 HK$’000 HK$’000 HK$’000 (Note (1)(a)(i)) (Note (1)(a)(ii)) (Note (1)(b)) (Note (3)) 36,690 (7,780 ) (1,596 ) (4,149 ) (6,936 ) 5,745 6,936 (6,936 ) 6,936 (7,788 ) 7,788 (15,893 ) 7,788 (7,788 ) 22,576 7,788 (7,788 ) 22,227 (7,788 ) 7,788	Pro forma Enlarged Group HK$’000 22,066 17,729 36,690
				76,485
				3,701 5,689 3,898 26,845
				40,133
				8,069 14,093 – – – 5,745 10,453
				38,360
				1,773
				78,258 15,983 – 7,681 13,169
				36,833
				41,425
				3,413 15,785
				19,198 22,227
				41,425

• 107 -

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

3. UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT OF THE ENLARGED GROUP

Kailun PV The Group (Jining) year ended year ended 31 December 31 December Pro forma 2007 2007 adjustment HK$’000 HK$’000 HK$’000 (Audited) (Audited) (Note (2)) Revenue 67,843 28,940 Direct operating expenses/Cost of sales (43,696 ) (31,491 ) Gross profit/(loss) 24,147 (2,551 ) Other operating revenue/Other revenue 192 201 Selling and distribution costs (17,271 ) (441 ) Administrative expenses (9,998 ) (1,984 ) Other operating income/(expenses), net 4,628 (462 ) Operating profit/(loss) 1,698 (5,237 ) Finance cost (169 ) (1,024 ) Profit/(loss) before income tax 1,529 (6,261 ) Income tax expense – – Profit/(loss) for the year 1,529 (6,261 ) Attributable to: Equity holders of the Company 1,529 (6,261 ) 2,504 Minority interests – – (2,504 ) Profit/(loss) for the year 1,529 (6,261 )

Pro forma Enlarged Group HK$’000 96,783 (75,187 ) 21,596 393 (17,712 ) (11,982 ) 4,166 (3,539 ) (1,193 ) (4,732 ) – (4,732 ) (2,228 ) (2,504 ) (4,732 )

• 108 -

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

4. UNAUDITED PRO FORMA CONSOLIDATED CASH FLOW STATEMENT OF THE ENLARGED GROUP

Cash flows from operating activities Profit/(loss) before income tax Adjustments for: Interest income Finance cost Depreciation Amortisation of land use rights Gain on disposal of subsidiaries Equity-settled share-based payment expenses Operating loss before workings capital changes Increase in inventories Increase in trade and bills receivables, prepayments and other receivables (Decrease)/increase in trade and bills payables Increase/(decrease) in other payables, accrued expenses and receipts in advance Decrease in amount due to a related company Increase in amount due to minority equity holder of Kailun PV (Jining) Decrease in amounts due to fellow subsidiaries of Kailun PV (Jining) Net cash used in operating activities Cash flows from investing activities Interest received Proceeds from disposal of subsidiaries Acquisition of subsidiary (net of cash and cash equivalent acquired) Purchase of property, plant and equipment Net cash used in investing activities Cash flows from financing activities Proceeds from shares issued under share option scheme Proceeds from issuance of new shares Proceeds from issuance of convertible bonds Share issue expenses Interest paid Increase in amount due to former minority equity holder of Kailun PV (Jining) Drawdown of other loans Repayment of other loans Drawdown of government loans Net cash generated from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at 1 January Effect of foreign exchange rates, net Cash and cash equivalents at 31 December Analysis of cash and cash equivalents Cash at banks and in hand	The Group year ended 31 December 2007 HK$’000 (Audited) 1,529 (79 ) 169 285 – (5,480 ) 749 (2,827 ) – (1,251 ) (2,623 ) 2,239 (71 ) – – (4,533 ) 79 309 – (1,518 ) (1,130 ) 3,283 20,300 14,700 (1,431 ) – – – – – 36,852 31,189 2,563 – 33,752 33,752	Kailun PV (Jining) year ended 31 December Pro forma 2007 adjustment HK$’000 HK$’000 (Audited) (Note (1)(c)) (6,261 ) (12 ) 1,024 1,989 362 – – (2,898 ) (1,679 ) (2,183 ) 404 (2,749 ) – 1,596 (3,239 ) (10,748 ) 12 – – (6,924 ) (1,151 ) (1,139 ) – – – – (1,024 ) 13,872 3,297 (4,206 ) 1,171 13,110 1,223 856 (856 ) (1,206 ) 873 873 (7,780 )	Pro forma Enlarged Group HK$’000 (4,732 ) (91 ) 1,193 2,274 362 (5,480 ) 749
			(5,725 ) (1,679 ) (3,434 ) (2,219 ) (510 ) (71 ) 1,596 (3,239 )
			(15,281 )
			91 309 (6,924 ) (2,669 )
			(9,193 )
			3,283 20,300 14,700 (1,431 ) (1,024 ) 13,872 3,297 (4,206 ) 1,171
			49,962
			25,488 2,563 (1,206 )
			26,845
			26,845

• 109 -

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Notes to the pro forma financial information of the Enlarged Group

• (1) On 8 April 2008, the Company entered into the Share Transfer Agreement with the Vendor to acquire of 2,000 of the existing issued share capital of Divine Mission Holdings Limited (“Divine Mission”) at a consideration of US$1,000,000 (equivalent to HK$7,780,000) (the “Proposed Acquisition”).

On 8 April 2008, the Company entered into the Subscription Agreement with Divine Mission to subscribe for 10,000 of new shares of Divine Mission at a consideration of US$8,000,000 (equivalent to HK$62,240,000) (the “Proposed Subscription”).

HK$70,020,000 of the total consideration of the Proposed Acquisition and the Proposed Subscription are satisfied by:

• (1) HK$10,000,000 has been paid by the Company in cash as a deposit; and

• (2) HK$60,020,000 will be satisfied by way of cash by internal resources and/or equity financing and/or shareholders loan of the Company.

Divine Mission is wholly owned by the Vendor and Divine Mission wholly owns of Kailun Photovoltaic Materials Investments Limited (“Kailun PV (HK)”). Divine Mission was incorporated in the British Virgins Islands on 25 January 2008 and Kailun PV (HK) was incorporated in Hong Kong on 4 March 2008. The net assets value of Divine Mission and Kailun PV (HK) were US$10,000 (equivalent to HK$77,800) and HK$10,000,000 respectively which represented their respective issued share capital at the date of this circular. As at the date of this circular, 濟寧凱倫光伏材料有限公 司(“Kailun PV (Jining)”) is 51% owned by Donnion Investments Limited and 49% owned by 凱倫(曲阜)置業有限公司. Donnion Investments Limited and 凱倫(曲阜)置業有限公司 are wholly owned by the Vendor. Prior to the completion of the Proposed Acquisition and the Proposed Subscription, Donnion Investments Limited and 凱倫(曲阜)置業有限公 司 will transfer their equity interests in Kailun PV (Jining) to Kailun PV (HK) and Divine Mission will indirectly own the entire equity interest of Kailun PV (Jining). As Divine Mission and Kailun PV (HK) were established on 25 January 2008 and 4 March 2008 respectively, the balance sheet, income statement and cash flow statement of Divine Mission and Kailun PV (HK) were not included in the unaudited pro forma consolidated balance sheet, the unaudited pro forma consolidated income statement and the unaudited pro forma consolidated cash flow statement of the Enlarged Group in this respect.

Kailun PV (Jining) is, therefore, considered by the directors of the Company as indirectly 60% owned subsidiary of the Company because Kailun PV (Jining) will be controlled by the Group immediately after completion of the Proposed Acquisition and the Proposed Subscription. The balance sheet of Kailun PV (Jining) will be consolidated with that of the Group from the date on which control is transferred to the Group.

According to the Share Transfer Agreement and the Subscription Agreement, US$8,000,000 (equivalent to HK$62,240,000) will be used for the purpose of capital injection in Kailun PV (Jining). Since this pro forma financial information is prepared solely for the illustrative purpose of the effect of financial position of the Enlarged Group on the Proposed Acquisition and the Proposed Subscription, the proposed adjustments for the capital injection in Kailun PV (Jining) amounted to HK$62,240,000 were not reflected in the unaudited pro forma consolidated balance sheet of the Enlarged Group in this respect.

• 110 -

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

• (a) On 8 January 2007, 凱倫(曲阜)置業有限公司 acquired 49% equity interests in Kailun PV (Jining) from the former minority equity holder of Kailun PV (Jining) for a consideration of approximately RMB8,099,000 (equivalent to HK$7,788,000) based on the amount of the paid-up capital of Kailun PV (Jining) (the “Minority Acquisition”). Kailun PV (Jining) is, therefore, considered by the directors of the Company as additional 49% equity interests in Kailun PV (Jining) by the Vendor because Donnion Investments Limited and 凱倫(曲阜)置業有限公司 are wholly owned by the Vendor. The pro forma adjustments have been made as follows to reflect:

• (i) the result in net assets value of Kailun PV (Jining) shared by the former minority equity holder of Kailun PV (Jining) before completion of the Minority Acquisition; and

• (ii) the recognition of excess of cost of acquisition in Kailun PV (Jining) over the net carrying amounts acquired arising from the Minority Acquisition as capital reserve.

• (b) The pro forma adjustment is to reflect the effect of the Proposed Acquisition and the Proposed Subscription on the consolidated balance sheet of the Group as if the Proposed Acquisition and the Proposed Subscription had taken place on 31 December 2007. Goodwill was determined assuming that the total consideration of HK$70,020,000 and the fair values of the identifiable assets and liabilities of Kailun PV (Jining) acquired by the Company are equal to those balances recorded by Kailun PV (Jining) as at 31 December 2007 extracted from the accountants’ report of Kailun PV (Jining) as set out in Appendix III to this circular. With reference to the net liabilities values of Kailun PV (Jining) attributable to the equity holders as at 31 December 2007, goodwill of HK$36,690,000 arose from the Proposed Acquisition and the Proposed Subscription. The goodwill is stated at cost less accumulated impairment loss. The paid in capital of Kailun PV (Jining) would be eliminated upon consideration, together with the pre-acquisition reserves of HK$22,576,000.

On completion of the Proposed Acquisition and the Proposed Subscription, the fair value of the net consideration and the net identifiable assets and liabilities of Kailun PV (Jining) will have to be reassessed. As a result of the reassessment, the amount of goodwill may be different from that estimated based on the basis stated above for the purpose of preparation of the unaudited pro forma financial information. Accordingly, the actual goodwill at the date of completion of the Proposed Acquisition and the Proposed Subscription may be different from that presented above.

• (c) The pro forma adjustment of HK$7,780,000 represented the cash consideration settlement of the Proposed Subscription of HK$62,240,000. For the purpose of unaudited pro forma consolidated cash flow statement presentation, the beginning balance of cash and bank balances of Kailun PV (Jining) for the year ended 31 December 2007 amounted to HK$856,000 has been adjusted to reflect the net cash flow effect on the Proposed Acquisition and the Proposed Subscription as if the Proposed Acquisition and the Proposed Subscription has been completed on 1 January 2007.

• (2) The reduction of 40% of the results of Kailun PV (Jining) share by the minority equity holders in the unaudited pro forma consolidated income statement.

• (3) The adjustment represents the reclassification of accounts under the Enlarged Group.

• 111 -

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

5. LETTER ON UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following is the text of a report, prepared for the propose of inclusion in this circular, received from Grant Thornton, Certified Public Accountants, Hong Kong.

==> picture [20 x 21] intentionally omitted <==

==> picture [110 x 34] intentionally omitted <==

2 May 2008

The Directors

Honbridge Holdings Limited Suite 2703 27th Floor Great Eagle Centre 23 Harbour Road Wanchai Hong Kong

Dear Sirs,

We report on the unaudited pro forma financial information of Honbridge Holdings Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”), and 濟寧凱倫光伏材料有 限公司 (“Kailun PV (Jining)”), formerly known as 濟寧凱倫硅業有限公司 (together with the Group collectively referred to as the “Enlarged Group”), which has been prepared by the directors of the Company for illustrative purposes only, to provide information about how the proposed acquisition of 20% of the existing issued share capital of Divine Mission Holdings Limited (“Divine Mission”) and 10% of the enlarged issued share capital of Divine Mission (the “Proposed Acquisition”) and the proposed subscription of 10,000 new ordinary shares of Divine Mission (the “Proposed Subscription”), which represents 100% of the existing issued capital of Divine Mission and 50% of the enlarged issued share capital of Divine Mission, and 60% effective interest of the Company in Divine Mission upon completion of the Proposed Acquisition and Proposed Subscription, might have affected the financial information presented, for the inclusion in Appendix V of the Company’s circular dated 2 May 2008 (the “Circular”). The basis of the preparation of the unaudited pro forma financial information is set out on pages 106 to 111 of Appendix V 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 31 of Chapter 7 of the Rules Governing the Listing of Securities on The Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the “GEM Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

It is our responsibility to form an opinion, as required by paragraph 31 of Chapter 7 of the GEM Listing Rules, on the unaudited pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

• 112 -

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

BASIS OF OPINION

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

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the unaudited pro forma financial information has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant to paragraph 31(1) of Chapter 7 of the GEM Listing Rules.

Our work did not constitute an audit or review made in accordance with Hong Kong Standards on Audit or Hong Kong Standards on Review Engagements issued by the HKICPA, and accordingly, we did not express any such assurance on the unaudited pro forma financial information.

The unaudited pro forma financial information is for illustrative purposes only, based on the judgements and assumptions of the directors of the Company, and because of its hypothetical nature, does not provide any assurance or indication that any event will take place in the future and may not be indicative of:

• the financial position of the Group as at 31 December 2007 or any future date; or

• the results and cash flows of the Enlarged Group for the year ended 31 December 2007 or any future periods.

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 31(1) of Chapter 7 of the GEM Listing Rules.

Yours faithfully,

Grant Thornton

Certified Public Accountants 13th Floor, Gloucester Tower The Landmark 15 Queen’s Road Central Hong Kong

• 113 -

GENERAL INFORMATION

APPENDIX VI

I. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief:

1. the information contained in this circular is accurate and complete in all material respects and not misleading;

2. there are no other matters the omission of which would make any statement in this circular misleading; and

3. all opinions expressed in this circular have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable.

a) Share Capital

The authorized and issued share capital of the Company as at the Latest Practicable Date are as follows:

Authorised:

1,000,000,000,000 HK$1,000,000,000

ordinary shares of HK$0.001 each

Issued and fully paid:

3,412,719,716 HK$3,412,720

ordinary shares of HK$0.001 each

II. DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORT POSITION IN SHARES, UNDERLYING SHARES AND DEBENTURES

As at the Latest Practicable Date, the interests and short positions of the Directors and the chief executives of the Company in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (“SFO”)) as recorded in the register required to be kept under Section 352 of the SFO were as follows:

• 114 -

GENERAL INFORMATION

APPENDIX VI

a. Long positions in shares of associated corporations:

	Number of Ordinary	Number of Ordinary	Shares
		Interests of		Approximate
Name of	Beneficial	Controlled		% of
Director	Owner	Corporation	Total	Shareholding
HE Xuechu	–	2,555,000,000	2,555,000,000	74.87%
		(Note)

Note: The 2,555,000,000 shares were held by Hong Bridge Capital Limited (“Hong Bridge”). Hong Bridge is wholly owned by Mr. HE Xuechu.

Save as disclosed above and the interests as disclosed below, none of the Directors or chief executives of the Company had, as at the Latest Practicable Date, any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept under Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the required standard of dealings by directors of listed issuers as referred to in Rule 5.46 of the GEM Listing Rules.

III. SUBSTANTIAL SHAREHOLDERS AND OTHER PERSONS’ INTERESTS OR SHORT POSITIONS IN SHARES AND UNDERLYING SHARES

As at the Latest Practicable Date, so far as was known to the Directors and chief executive of the Company, those persons, other than the Directors or chief executive of the Company, who had an interest or short position in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO; or were, directly or indirectly, interested in ten per cent 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 and the amount of each such person’s interest in such securities, together with particulars of any options in respect of such capital or which were recorded in the register required to be kept by the Company under Section 336 of the SFO, were as follows:

			Approximate
	Capacity	Number of	percentage
Name of	and nature	ordinary	of issued
shareholder	of interest	shares held	shareholding
Hong Bridge	Beneficial owner	2,555,000,000	74.87%
		(Note)

Note: Hong Bridge is wholly-owned by Mr. HE Xuechu. Mr. HE Xuechu is the sole director of Hong Bridge and the chairman and Director of the Company.

• 115 -

GENERAL INFORMATION

APPENDIX VI

Save as disclosed above, as at Latest Practicable Date, the Company had not been notified by any other persons (other than the Directors or chief executives of the Company) who had interests or short positions in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Division 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept by the Company under Section 336 of the SFO.

IV. DIRECTORS’ SERVICE CONTRACTS

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

V. LITIGATION

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

VI. COMPETING INTEREST

Mr. Fok Hon, an Independent Non-Executive Director of the Company, is also the managing director of All Leaders Publication Group Limited. Since All Leaders Publication Group Limited is engaged in the publication business, Mr. Fok is regarded as interested in such competing business of the Group.

Save as disclosed above, as at the Latest Practicable Date, so far as the Directors are aware of, none of the directors or the management shareholders of the Company (as defined under the GEM Listing Rules) or their respective associates have any interest in a business which competes or may compete with the business of the Enlarged Group.

VII. MATERIAL CONTRACTS

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

• (a) An agreement dated 21 December 2006 entered into among the Company as the purchaser, South China Strategic Limited (“SCS”), a wholly-owned subsidiary of South China (China) Limited (“SCC”), as the vendor and SCC, a subsidiary of South China Holdings, as the guarantor, pursuant to which SCS had conditionally agreed to sell the projects relating to the agricultural businesses in the PRC to the Company at a consideration of HK$140,000,000. The consideration would be satisfied by the Company’s issuance a convertible note. Subsequently, a termination agreement dated 27 December 2006 was entered into among the aforesaid contracting parties to terminate the aforesaid agreement;

• 116 -

GENERAL INFORMATION

APPENDIX VI

• (b) the subscription agreement dated 16 August 2007 entered into between the Company and Hong Bridge, pursuant to which, Hong Bridge has conditionally agreed to subscribe in cash for (i) 2,900 million new Shares to be issued pursuant to the subscription agreement dated 16 August 2007 at the subscription price of HK$0.007 per share; and (ii) the convertible notes in the principal amount of HK$14.7 million with an initial conversion price of HK$0.007 per conversion shares;

• (c) the disposal agreement dated 16 August 2007 entered into between Great Ready Assets and Win Gain Investments Limited in relation to the Disposal of the Jessica Publications (BVI) Limited sale shares;

• (d) the Share Transfer Agreement; and

• (e) the Subscription Agreement.

Save as disclosed above, no material contract (not being a contract entered into in the ordinary course of business carried on by the Group) has been entered into by any member of the Enlarged Group within two years preceding the Latest Practicable Date which are or may be material.

VIII. INTERESTS IN ASSETS AND/OR CONTRACTS AND OTHER INTERESTS

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any asset which had been, since 31 December 2007, being the date to which the latest published audited financial statements of the Company were made up, acquired or disposed of by or leased to any member of the Enlarged Group or are proposed to be acquired or disposed of by or leased to any member of the Enlarged Group.

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

IX. QUALIFICATION OF EXPERT

The following is the qualification of the expert whose advice or opinion are contained in this circular:

Name	Qualification
Grant Thornton	Certified Public Accountants

Grant Thornton has given and has not withdrawn their written consents to the issue of this circular with the inclusion herein of its reports and/or letters or references to its name in the form and context in which they respectively appear.

As at the Latest Practicable Date, Grant Thornton did not have any shareholding in any member of the Enlarged Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Enlarged Group.

• 117 -

GENERAL INFORMATION

APPENDIX VI

As at the Latest Practicable Date, Grant Thornton did not have any direct or indirect interest in any asset which had been, since 31 December 2007, being the date to which the latest published audited financial statements of the company were made up, acquired or disposed of by or leased to any member of the Enlarged Group or are proposed to be acquired or disposed of by or leased to any member of the Enlarged Group.

VIII. GENERAL

• a. So far as is known to the Directors, as at the Latest Practicable Date, there was no discrepancy between any Shareholder’s beneficial shareholding interest in the Company as disclosed in this circular and the number of shares in respect of which it will control or will be entitled to exercise control over the voting rights at the EGM.

• b. The compliance officer of the Company is Mr. Liu Wei William, aged 43, who is also a director and the Chief Executive Officer of the Company. Mr. Liu has over 10 years of experience in corporate banking and corporate finance, including his previous employment with The Hongkong Chinese Bank Ltd. and Lippo Group. During the period from 2004 to 2006, Mr. Liu was a director of Hans Energy Company Limited (stock code: 0554), the shares of which are listed on the Stock Exchange. Mr. Liu was also a director of China Metal and Technologies (H.K.) Limited, a private company engaged in the trading of non-ferrous metal. He was the managing director of a private company engaged in media business. Mr. Liu was experienced in the publication business and was involved in the publication of 世界經濟論壇 (World Economic Journal Monthly), 今日健康生活 (Healthy Life Today) and 中國新聞周刊 (China News Weekly) during his tenure with the above private company. Mr. Liu holds a master degree in business administration from the University of San Francisco. Mr. Liu is also director of Great Ready Assets Limited, Beforward Trading Limited, Superb Taste Company Limited, Honbridge Management Limited, Jessicacode Limited and Clear Success Limited, all being subsidiaries of the Company.

• c. The company secretary and qualified accountant of the Company is Mr. Lam King Ho. Mr. Lam holds a bachelor degree in accounting and finance. He is a member of the American Institute of Certified Public Accountants, the Association of Chartered Certified Accountants and the Hong Kong Institute of Certified Public Accountants. Mr. Lam has over 12 years of finance and business management experience in major international accounting firms and listed companies in Hong Kong.

• 118 -

GENERAL INFORMATION

APPENDIX VI

• d. The Company established an audit committee with written terms of reference in compliance with Rules 5.28 and 5.33 of the GEM Listing Rules. The primary duties of the audit committee are to review and supervise the financial reporting process and internal controls system of the Group. The audit committee comprises three members, including Mr. Chan Chun Wai, Tony, who is a practicing certified public accountant and a director of a certified public accounting practice, has the appropriate financial and accounting experience required by the GEM Listing Rules and acts as the chairman of the Audit Committee.

• e. The registered office of the Company is at Scotia Centre 4th Floor, P.O. Box 2804 George Town, Grand Cayman Cayman Islands.

• f. The Hong Kong branch share registrar and transfer office of the Company is Union Registrars Limited Room 1901-02, Fook Lee Commercial Centre Town Plaza, 33 Lockhart Road, Wanchai, Hong Kong.

IX. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the Company’s principal place of business in Hong Kong at Suite 2703, 27/F, Great Eagle Centre, 23 Harbour Road Wanchai, Hong Kong, from the date of this circular up to and including the date of the EGM:

• (a) the memorandum and articles of association of the Company;

• (b) the material contracts referred to in the paragraph headed “Material contracts” in this appendix;.

• (c) the annual reports of the Company for two years ended 31 December 2007;

• (d) the written consents referred to in paragraph headed “Qualification of Expert” in this appendix;

• (e) the accountants’ report on Kailun PV (Jining) prepared by Grant Thornton, the text of which set out in Appendix III to this circular;

• (f) the letter on unaudited pro forma consolidated financial information from Grant Thornton, the text of which is set out in Appendix V of this circular, and

• 119 -

NOTICE OF EGM

APPENDIX VII

==> picture [28 x 55] intentionally omitted <==

HONBRIDGE HOLDINGS LIMITED

(incorporated in the Cayman Islands with limited liability)

(stock code：8137)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “EGM”) of the Shareholders of Honbridge Holdings Limited (the “Company”) will be held at Suit 2703, 27/F., Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong, at 10:00 a.m. on Tuesday, 20 May 2008 for the purpose of considering and, if thought appropriate, to approve the following ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

(1) “ THAT

• (a) The Share Transfer Agreement dated 8 April 2008 (a copy of which is tabled at the meeting and marked “A” and initialed by the chairman of the meeting for identification purpose), as supplemented by a supplemental agreement dated 8 April 2008 (a copy of which is tabled at the meeting and marked “B” and initialed by the chairman of the meeting for identification purpose), entered into between Honbridge Holdings Limited (the Company) and Mr. LIU Xiangmao (the Vendor) in relation to the Acquisition.

Pursuant to the Share Transfer Agreement, the Company will acquire from the Vendor 2,000 shares in Divine Mission current owned by the Vendor, representing approximately 20% of the existing issued share capital of Divine Mission and 10% of the enlarged issued share capital of Divine Mission for a consideration of US$1,000,000 (equivalent to HK$7,780,000); which shall be payable in cash by the Company to the Vendor.

The consideration will be satisfied by way of cash by internal resources and/or equity financing and/or shareholders’ loan of the Company.

Completion of the Share Transfer Agreement is conditional upon, amongst other things, satisfaction of the following conditions precedent within 3 months from the date of the Share Transfer Agreement, or such other date as the parties to the Share Transfer Agreement may agree: the approval of the Share Transfer Agreement by the Shareholders at the EGM; completion of the separate share transfer agreement (a copy of which is tabled at the meeting and marked “C” and initialed by the chairman of the meeting for identification purpose), pursuant to which Donnion and

• 120 -

NOTICE OF EGM

APPENDIX VII

Kailun (QuFu) will transfer their equity interests in Kailun PV (Jining) to Kailun PV (HK), a wholly-owned subsidiary of Divine Mission; and completion of the Subscription Agreement (a copy of which is tabled at the meeting and marked “D” and initialed by the chairman of the meeting for identification purpose).

• (b) Any one director of the Company be and is/are hereby authorized for and on behalf of the Company to do all such acts and things and execute all documents or make such arrangements as he or she may consider necessary or expedient to effect the Share Transfer Agreement between the Company and the Vendor.”

• (2) “ THAT

• (a) The Subscription Agreement dated 8 April 2008 (a copy of which is tabled at the meeting and marked “D” and initialed by the chairman of the meeting for identification purpose), entered into between Honbridge Holdings Limited (the Subscriber, or the Company) and Divine Mission (the Issuer) in relation to the Subscription.

Pursuant to the Subscription Agreement the Company will subscribe for 10,000 new Shares of Divine Mission, representing approximately 100% of the existing issued share capital of Divine Mission and 50% of the enlarged issued share capital of Divine Mission for an consideration of US$8,000,000 (equivalent to HK$62,240,000).

The consideration to subscribe for 10,000 new shares in Divine Mission is US$8,000,000 (equivalent to HK$62,240,000).

Completion of the Subscription Agreement is conditional upon, amongst other things, satisfaction of the following conditions precedent within 3 months from the date of the Subscription Agreement, or such other date as the parties to the Subscription Agreement may agree: approval of the Subscription Agreement by the Shareholders at the EGM; completion of the separate share transfer agreement, pursuant to which Donnion and Kailun (QuFu) will transfer their equity interests in Kailun PV (Jining) to Kailun PV (HK), a wholly-owned subsidiary of Divine Mission; and completion of the Share Transfer Agreement.

The Share Transfer Agreement and the Subscription Agreement are interconditional.

Upon Completion, the Company will be interested in 60% of the enlarged issued share capital of Divine Mission.

• 121 -

NOTICE OF EGM

APPENDIX VII

• (b) Any one director of the Company be and is/are hereby authorized for and on behalf of the Company to do all such acts and things and execute all documents or make such arrangements as he or she may consider necessary or expedient to effect the Subscription Agreement between the Company and the Divine Mission.”

On behalf of the Board Honbridge Holdings Limited HE Xuechu Chairman

Hong Kong, 2 May 2008

Suite 2703, 27/F Great Eagle Centre 23 Harbour Road Wanchai Hong Kong

Notes:

1. A member of the Company entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and, subject to the provisions of the articles of association of the company, to vote on his behalf. A proxy need not be a member of the Company but must be present in person at the meeting to represent the member. If more than one proxy is so appointed, the appointment shall specify the number and class of Shares in respect of which each such proxy is so appointed.

2. A form of proxy for use at the meeting is enclosed. In order to be valid, the form of proxy must be duly completed and signed in accordance with the instructions printed thereon and deposited together with a power of attorney or other authority, if any, under which it is signed, or a certified copy of such power or authority, at Union Registrars Limited of Room 1901-02, Fook Lee Commercial Centre, Town Plaza, 33 Lockhart Road, Wanchai, Hong Kong, not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof. Completion and return of a form of proxy will not preclude a member from attending in person and voting at the Meeting or any adjournment thereof, should he so wish.

3. In the case of joint holders of Shares, any one of such holders may vote at the meeting, either personally or by proxy, in respect of such Share as if he was solely entitled thereto, but if more than one of such joint holders are present at the meeting personally or by proxy, that one of the said persons so present whose name stands first in the register of members of the Company in respect of such Shares shall alone be entitled to vote in respect thereof.

4. 122 -