Kingwell Group Limited — Proxy Solicitation & Information Statement 2010

May 7, 2010

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities of the Company.

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

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

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular and the accompanying proxy form, make no representation as to their accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular and the accompanying proxy form.

KINGWELL GROUP LIMITED

京 維 集 團 有 限 公 司

(formerly known as Sinotronics Holdings Limited 前稱華翔微電子控股有限公司[*] )

(incorporated in the Cayman Islands with limited liability)

(Stock code: 1195)

(i) MAJOR TRANSACTION IN RELATION TO THE ACQUISITION OF 70% EQUITY INTEREST IN STEPHIGH GROUP LIMITED INVOLVING THE ISSUE OF CONSIDERATION CONVERTIBLE BOND;

(ii) PLACING OF PLACING CONVERTIBLE BONDS;

(iii) PROPOSED REFRESHMENT OF GENERAL MANDATE TO ISSUE SHARES;

(iv) PROPOSED AMENDMENT OF SHARE OPTION SCHEME;

AND

(v) PROPOSED REFRESHMENT OF SCHEME MANDATE LIMIT OF SHARE OPTION SCHEME

Financial advisor and Placing Agent

Independent financial advisor to the Independent Board Committee

and the Independent Shareholders

==> picture [97 x 47] intentionally omitted <==

A letter from the Board is set out on pages 5 to 20 of this circular. A letter from the Independent Board Committee is set out on page 21 of this circular. A letter from Access Capital, the independent financial advisor to the Independent Board Committee and the Independent Shareholders, is set out on pages 22 to 27 of this circular.

A notice convening an extraordinary general meeting of the Company to be held at Boardroom 3 & 4, Mezzanine Floor, Renaissance Harbour View Hotel, No.1 Harbour Road, Wanchai, Hong Kong on 24th May, 2010 at 10:00 a.m. is set out on pages 145 to 149 of this circular. Whether or not you are able to attend the extraordinary general meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the share registrar of the Company, Hong Kong Registrars Limited at Shops 1712–1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong as soon as possible, but 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 adjourned meeting thereof should you so wish.

• For identification purposes only

7th May, 2010

CONTENTS

			Page
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			5
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . . .			21
LETTER FROM ACCESS CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			22
APPENDIX I	—	FINANCIAL INFORMATION ON THE GROUP . . . . . . . . . . . . . . . . . . . . .	28
APPENDIX II	—	ACCOUNTANT’S REPORT ON THE STEPHIGH GROUP . . . . . . . . . . . .	90
APPENDIX III	—	UNAUDITED PRO FORMA FINANCIAL INFORMATION
		OF THE ENLARGED GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	113
APPENDIX IV	—	MANAGEMENT DISCUSSION AND ANALYSIS ON STEPHIGH . . . . .	123
APPENDIX V	—	VALUATION REPORT ON THE PROPERTY . . . . . . . . . . . . . . . . . . . . . . .	126
APPENDIX VI	—	GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	137
NOTICE OF EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			145
PROXY FORM

– i –

DEFINITIONS

In this circular, the following terms shall have the following meanings:

‘‘Access Capital’’ Access Capital Limited, a licensed corporation under the SFO to conduct Type 1 (dealing in securities), Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities, being the independent financial advisor to the Independent Board Committee and the Independent Shareholders in respect of the proposed granting of the New General Mandate

• ‘‘Acquisition’’ the acquisition of 70% equity interest in Stephigh

• ‘‘Acquisition Agreement’’ the acquisition agreement dated 25th March, 2010 entered into between the Company and the Vendor in respect of the acquisition of 70% of the equity interest in Stephigh

• ‘‘Adjusted NAV’’ net asset value of Stephigh as adjusted by the difference between the cost and the appraised value of the Property

• ‘‘AGM’’ the annual general meeting of the Company on 17th December, 2009

• ‘‘Anlu’’ Anlu Taihe Real Estate Development Company (安陸泰合房地產 開發有限公司), a wholly foreign owned company incorporated in the PRC

• ‘‘Announcement’’ the announcement dated 28th March, 2010 in relation to the Acquisition and the Placing

• ‘‘Board’’ board of directors of the Company

• ‘‘Bondholder(s)’’ holder(s) of the Convertible Bond(s)

• ‘‘Bond Instrument’’ the instrument to be made by way of deed poll for the Convertible Bonds subject to the approval by Shareholders at the EGM

• ‘‘Business Day’’ a day other than a Saturday or a Sunday on which banks in Hong Kong are open to the general public for business

• ‘‘Company’’ or ‘‘Purchaser’’ Kingwell Group Limited (formerly known as Sinotronics Holdings Limited), a company incorporated in the Cayman Islands with limited liability and the shares of which are listed on the Main Board of the Stock Exchange

• ‘‘Completion’’ completion of the Acquisition Agreement ‘‘Consideration’’ the consideration of HK$126 million for the Acquisition payable to the Vendor by the Company

– 1 –

DEFINITIONS

• ‘‘Consideration Convertible Bond’’ the HK$80 million Convertible Bond to be issued by the Company as part of the consideration payable to the Vendor for the Acquisition

• ‘‘Controlling Shareholder(s)’’ has the meaning ascribed to it under the Listing Rules

• ‘‘Conversion Price’’ the conversion price of HK$0.28 per Conversion Share

• ‘‘Conversion Share(s)’’ the Share(s) falling to be issued by the Company upon conversion of the Consideration Convertible Bond and the Placing Convertible Bonds

• ‘‘Convertible Bond(s)’’ the convertible bonds to be issued by the Company pursuant to the Acquisition Agreement and the Placing Agreement, including the Consideration Convertible Bond and the Placing Convertible Bonds

• ‘‘Current General Mandate’’ the general mandate granted by Shareholders to allot, issue and deal with Shares not exceeding 20% of the issued share capital of the Company as at 17th December, 2009

• ‘‘Director(s)’’ the director(s) of the Company

‘‘EGM’’ the extraordinary general meeting to be convened to consider and approve, if thought fit, the Acquisition Agreement, the Placing Agreement and the transactions contemplated thereunder; refreshment of the general mandate; amendment to the Share Option Scheme; and refreshment of scheme mandate limit of the Share Option Scheme

• ‘‘Enlarged Group’’ the Group as enlarged by the Stephigh Group after the Acquisition

• ‘‘Group’’ the Company and its subsidiaries

• ‘‘HKFRS’’ Hong Kong Financial Reporting Standards

• ‘‘Independent Board Committee’’ the independent board committee consisting of Mr. Li Jianguo, Mr. Cheung Chuen and Ms. Wong Lai Wing established to advise the Independent Shareholders in respect of the refreshment of the general mandate to issue Shares

• ‘‘Independent Shareholder(s)’’ Shareholder(s) other than Controlling Shareholder(s) and their associates or, where there are no Controlling Shareholder(s), Directors (excluding independent non-executive Directors), and the chief executive of the Company and their respective associates

– 2 –

DEFINITIONS

• ‘‘Independent Third Party(ies)’’

• such person(s) who is(are) independent of and not connected nor acting in concert with the Directors, chief executive or substantial shareholders of the Company or its subsidiaries, or any of their respective associates, or parties acting in concert with any of them

• ‘‘Last Trading Date’’ 25th March, 2010, being the last trading date before the suspension of trading in the Shares prior to the release of the Announcement

• ‘‘Latest Practicable Date’’ 5th May, 2010, being the latest practicable date prior to the printing of this circular for ascertaining certain information referred to in this circular

• ‘‘Maturity Date’’ the 3rd anniversary of the date of issuance of the Convertible Bonds

• ‘‘New General Mandate’’ the proposed general mandate to allot, issue and deal with Shares not exceeding 20% of the issued share capital of the Company as at the date of the EGM, which is subject to Shareholders’ approval at the EGM

• ‘‘Placee(s)’’ professional investors that are independent third parties independent of the connected persons (as defined in the Listing Rules) of the Company or associates (as defined in the Listing Rules) of any of them

• ‘‘Placing’’

• the placing by the Placing Agent of the Placing Convertible Bonds with principal amount of HK$46 million to the Placees

• ‘‘Placing Agent’’ or ‘‘Yu Ming’’

• Yu Ming Investment Management Limited, a corporation licensed under the SFO to carry out regulated activities of type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management), and a company incorporated in Hong Kong with limited liability, being the placing agent in respect of the Placing and the financial adviser to the Company in respect of the Acquisition

• ‘‘Placing Agreement’’

• the placing agreement entered into between the Company and the Placing Agent

• ‘‘Placing Convertible Bonds’’

• the Convertible Bonds to be issued and allotted to the Placees by the Placing Agent

• ‘‘Previous Placing’’

the placing announced by the Company in the announcement dated 15th March, 2010

• ‘‘Property’’

property assets held by Anlu

– 3 –

DEFINITIONS

• ‘‘Settlement Agreement’’ the settlement agreement dated 16th November, 2009 entered into by the Company, Deutsche Bank AG and one of the employees of Deutsche Bank AG against whom the Company lodged a counter claim

• ‘‘SFO’’ Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

• ‘‘Share(s)’’ ordinary share(s) of HK$0.10 each in the issued share capital of the Company

• ‘‘Shareholder(s)’’ Shareholder(s) of the Company

• ‘‘Share Option Scheme’’ the share option scheme of the Company adopted on 11th February, 2010

• ‘‘Stephigh’’ Stephigh Group Limited (which was referred to as Stephigh Limited in the Announcement), a company incorporated in the British Virgin Islands with limited liability, owned as to 70% by the Vendor and 30% by Mr. Yin Jiatang, an Independent Third Party

• ‘‘Stephigh Group’’ Stephigh and its subsidiaries ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited ‘‘Union Day’’ Union Day Group Limited, a company incorporated in the British Virgin Islands with limited liability, holding 345,778,539 Shares, representing approximately 32.56% of the issued share capital of the Company as at the Latest Practicable Date, the Controlling Shareholder of the Company

• ‘‘Vendor’’ Mr. Hui Lung Hing, an Independent Third Party ‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong ‘‘RMB’’ Renminbi, the lawful currency of the People’s Republic of China ‘‘%’’ percent

(The exchange rate used for the purpose of this circular is at RMB1 = HK$1.1353)

– 4 –

LETTER FROM THE BOARD

KINGWELL GROUP LIMITED

京 維 集 團 有 限 公 司

(formerly known as Sinotronics Holdings Limited 前稱華翔微電子控股有限公司[*] )

(incorporated in the Cayman Islands with limited liability)

(Stock code: 1195)

Executive Directors Ms. Xu Yue Yue Mr. Xiang Song Mr. Sze Ming Yee Mr. Lin Wan Xin Mr. Chan Kin Mr. Tu Shuguang

Registered office Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Independent non-executive Directors

Mr. Li Jianguo Mr. Cheung Chuen Ms. Wong Lai Wing

Head office and principal place of business in Hong Kong Room 1805, 18th Floor Harbour Centre 25 Harbour Road Wanchai Hong Kong 7th May, 2010

To the Shareholders

Dear Sir or Madam,

(i) MAJOR TRANSACTION IN RELATION TO THE ACQUISITION OF 70% EQUITY INTEREST IN STEPHIGH GROUP LIMITED INVOLVING THE ISSUE OF CONSIDERATION CONVERTIBLE BOND; (ii) PLACING OF PLACING CONVERTIBLE BONDS; (iii) PROPOSED REFRESHMENT OF GENERAL MANDATE TO ISSUE SHARES;

(iv) PROPOSED AMENDMENT OF SHARE OPTION SCHEME; AND

(v) PROPOSED REFRESHMENT OF SCHEME MANDATE LIMIT OF SHARE OPTION SCHEME

INTRODUCTION

On 28th March, 2010, the Company announced a proposed Acquisition of 70% equity interest in Stephigh which involved the issue of the Consideration Convertible Bond and the proposed Placing of the Placing Convertible Bonds.

• For identification purposes only

– 5 –

LETTER FROM THE BOARD

The purpose of this circular is to provide you with further information regarding (i) the Acquisition, including the financial information on Stephigh and the valuation report of the Property by an independent valuer; (ii) the Placing; (iii) terms and conditions of the Convertible Bonds to be issued; (iv) the proposed refreshment of the general mandate of the Company; (v) the proposed amendment of the Share Option Scheme; and (vi) the proposed refreshment of scheme mandate limit of the Share Option Scheme.

THE ACQUISITION AGREEMENT

Date

25th March, 2010

Parties

• i. the Company as the purchaser;

• ii. Mr. Hui Lung Hing as the Vendor.

To the best of the Directors’ knowledge, information and belief, and after having made all reasonable enquires, the Vendor is an Independent Third Party.

Assets to be acquired:

Pursuant to the terms and conditions of the Acquisition Agreement, the Vendor has conditionally agreed to sell, and the Company has conditionally agreed to purchase the 70% equity interest in Stephigh. The principal asset of Stephigh is its 100% indirect equity interest in Anlu, which in turn owns the Property.

Consideration:

The Consideration will be satisfied upon Completion as follows:

• i. HK$80 million by the issue of the Consideration Convertible Bond to the Vendor; and

• ii. HK$46 million by cash.

The Consideration of HK$126 million represents a 10% discount to the 70% of the Adjusted NAV of Stephigh of RMB175.67 million (equivalent to approximately HK$200 million), which was determined between the Company and the Vendor after arm’s length negotiations with reference to the Adjusted NAV. The Adjusted NAV was calculated based on (i) the unaudited net asset value of the Stephigh as at 31st December, 2009 of RMB3.63 million (equivalent to approximately HK$4.12 million), which includes the cost of the Property of RMB180.63 million (equivalent to approximately HK$205.07 million), and (ii) adjusted by the difference between the cost of the Property and appraised value of the Property of RMB352,669,000 (equivalent to approximately HK$400,385,116) as at 28th February, 2010 by an independent valuer. If the net asset value of Stephigh is below HK$190,000,000 pursuant to an audited account on the Completion date, the Consideration will be adjusted downward in accordance to such difference in net asset value. The adjustment starts at HK$190 million but not HK$200 million because after arm’s length commercial negotiation, it was decided to allow a 5% de minimis (HK$10 million out of HK$200 million) out of the adjustment.

– 6 –

LETTER FROM THE BOARD

The Vendor’s cost for Stephigh on 30th July, 2008 was RMB21 million. However, given the significant rebound in economic conditions and in the PRC property market in 2009, the Directors are of the opinion that the Consideration, which is based on objective valuation figures derived by the independent valuer, is fair and reasonable.

Apart from the cost to be paid for the acquisition of 70% equity interest in Stephigh and the outstanding land premium of RMB460,000 that Anlu may be requested to settle (as set out in Appendix V to this circular), the Company does not intend to contribute capital or to contribute to or become liable for all or part of the cost of development of the property project or to the company involved in the development project.

The Consideration Convertible Bond is convertible into 285,714,286 Conversion Shares, which upon issue represent approximately (i) 26.90% of the existing issued share capital of the Company; and (ii) 21.20% of the total issued share capital of the Company as enlarged by such Conversion Shares upon full conversion of the Consideration Convertible Bond. Principal terms of the Consideration Convertible Bond are summarized in the section titled ‘‘Principal Terms of the Convertible Bonds’’ below. The transaction will not result in a change of control of the Company.

Based on the above, the Directors considered that the terms of the Acquisition Agreement, including the Consideration, which were arrived at after arm’s length negotiations, are fair and reasonable and are in the interest of the Group and the Shareholders as a whole.

Conditions precedent:

Completion of the Acquisition Agreement is conditional upon, amongst other things, following conditions precedent:

• (a) the Purchaser being reasonably satisfied with the financial, legal, taxation and commercial status of Stephigh and its subsidiaries, and the Purchaser having given written notice to the Vendor of such fact;

• (b) the Purchaser having obtained the approval from the Stock Exchange for the issue and dispatch of the circular to be issued to the Shareholders;

• (c) the Purchaser having obtained voting approvals as required by the Listing Rules and the memorandum and articles of association of the Company on the Acquisition Agreement and the transactions contemplated thereunder, including the issuance of the Consideration Convertible Bond to the Vendor;

• (d) the Listing Committee of the Stock Exchange having granted the listing of, and permission to deal in, all Conversion Shares that may be issued upon the exercise of the conversion rights attaching to the Consideration Convertible Bond;

• (e) the Purchaser and the Vendor having obtained all consents that are legally required from third parties;

• (f) the Vendor having fulfilled all obligations as set out in Clause 6 of the Acquisition Agreement; and

– 7 –

LETTER FROM THE BOARD

• (g) all warranties given in the Acquisition Agreement being true, accurate and not misleading as at the Completion date.

Other than conditions (b), (c) and (d), all above conditions may be waived by the Purchaser by written notice to the Vendor. The Vendor should on best efforts basis procure the fulfillment of conditions (a), (e) and (g) above, and the Purchaser should on best efforts basis procure the fulfillment of conditions (b) and (d) above.

Completion

Completion shall take place on the third Business Day after the fulfillment or waiver (as the case may be) of the last of the conditions precedent to the Acquisition Agreement or such other date as the parties to the Acquisition Agreement may agree in writing.

Immediately after Completion, Stephigh will become a 70% owned subsidiary of the Company. The Company currently has no intention to dispose of its existing business. There is currently no arrangement or understanding or agreement or negotiation for asset disposal or further asset acquisition by the Company.

It is proposed that one director would be appointed to the Board as a result of the Acquisition, but the proposal is still under negotiation. The Company will make further announcement in respect of any change in the Board in due course.

INFORMATION ON THE VENDOR AND STEPHIGH

The Vendor is Mr. Hui Lung Hing. Mr. Hui is a businessman in Hong Kong and the PRC and is currently engaged in sale and development of properties. Mr. Hui also has more than 30 years experience in corporate management and is currently the Chairman of Truroll Investment Limited, a private company engaged in diversified business. Mr. Hui holds 70% equity interest in Stephigh.

The Vendor had no prior business relationship with the Company, its connected persons and/or associates. Mr. Chan Kin, an Executive Director of the Company, referred the Vendor to the Company. Mr. Chan Kin was appointed an Executive Director of the Company on 25th September, 2009. One of his duties is to identify new projects to improve profitability of the Group. The Company announced its intention to identify projects in its annual results announcement on 27th October, 2009. Mr. Chan Kin knows the Vendor and is of the view that the Stephigh Group, being a property development company in Anlu, is an attractive opportunity to enter into a promising industry in a high growth country. Mr. Chan Kin initiated the discussion about the acquisition in about early March 2010, yet the Company did not have any prior arrangement or understanding or agreement or negotiation for the acquisition of equity interest in Stephigh prior to entering into the Acquisition Agreement.

Stephigh was incorporated in the British Virgin Islands with limited liability and 70% equity interest of it is owned by the Vendor. The principal asset of Stephigh is its 100% indirect equity interest in Anlu, which owns the Property. The Property is located in Anlu city of Hubei province of the PRC and is a residential complex including villas, houses, apartments, residential buildings, commercial buildings, and undeveloped land.

– 8 –

LETTER FROM THE BOARD

Set out below is the unaudited financial information of Stephigh since its incorporation on 16th July, 2008 which was prepared in accordance with HKFRS:

	For the
	twelve months	For six months
	ended	ended
	30th June,	31st December,
	2009	2009
	(Unaudited)	(Unaudited)
	RMB’	RMB’
Turnover	18,364,164	26,248,001
Net Profits before taxation and extraordinary items	771,908	5,689,082
Net Profits after taxation and extraordinary items	553,773	4,259,497
Net Assets	8,288,315	3,633,241

The profit after tax of Stephigh disclosed above is different from that disclosed in the Announcement. The difference in profit after tax results from the tax charge for the period ended 31st December, 2009, which has been changed by RMB681,102 from RMB748,483 to RMB1,429,585 upon review by PRC tax expertise after the publication of the Announcement.

PLACING AGREEMENT

On 25th March, 2010, the Company and the Placing Agent entered into the Placing Agreement pursuant to which the Placing Agent agreed to place, on a best effort basis, the Placing Convertible Bonds up to an aggregate principal amount of HK$46 million.

Date

25th March, 2010

Parties

• i. the Company; and

• ii. the Placing Agent.

The Placing Agent conditionally agreed with the Company to place, on a best effort basis, the Placing Convertible Bonds up to the principal amount of HK$46 million, to the Placees. To the best of the Directors’ knowledge, information and belief, and after having made all reasonable enquires, the Placing Agent and its ultimate beneficial owners are Independent Third Parties.

Placees

The Placing Convertible Bonds shall be offered to professional investors that are Independent Third Parties.

– 9 –

LETTER FROM THE BOARD

Terms

Total principal amount: HK$46 million Placing commission: 2.5% of the proceeds from the Placing

Please refer to section titled ‘‘Principal Terms of the Convertible Bonds’’ below.

Assuming the Placing Convertible Bonds in an aggregate principal amount of HK$46 million are placed in full, 164,285,714 Conversion Shares would fall to be issued upon full conversion of the Placing Convertible Bonds. Such Conversion Shares represents approximately (i) 15.47% of the existing issued share capital of the Company; and (ii) 10.86% of the total issued share capital of the Company as enlarged by such Conversion Shares.

Conditions of the Placing

The Placing is conditional upon the fulfillment of the following conditions:

• a. passing of ordinary resolution by the Shareholders of the Company to approve the issue and allotment of the Placing Convertible Bonds and the Conversion Shares which would fall to be issued and allotted upon conversion of the Placing Convertible Bonds; and

• b. the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Conversion Shares which would fall to be issued and allotted on the exercise of the conversion rights attached to the Placing Convertible Bonds either unconditionally or subject to conditions to which the Company does not object; and

• c. all other applicable legal requirements, rules and regulations, including but not limited to the Listing Rules and the Takeovers Code, for implementing all the transactions contemplated under the Placing Agreement shall have been duly complied with by the Company.

The Placing Agreement contain provisions entitling the Placing Agent to terminate the Placing Agreement on the occurrence of certain force majeure events which include, inter alia, the occurrence of any change in market conditions which makes it inexpedient or inadvisable to proceed with the placing of the Placing Convertible Bonds or any suspension in the trading of the Company’s securities on the Stock Exchange for a period of more than five consecutive Business Days, excluding any suspension in connection with the clearance of the announcement pertaining to the Placing Agreement.

Completion

Completion of the Placing will take place within five Business Days following the day on which the conditions set out in the Placing Agreement are satisfied or such later date as may be agreed between the Company and the Placing Agent. The long stop date of the Placing Agreement is 30th May, 2010 unless otherwise agreed between the Company and the Placing Agent.

– 10 –

LETTER FROM THE BOARD

Completion of the Acquisition and the Placing is subject to the satisfaction of the conditions precedent in the Acquisition Agreement and the Placing Agreement respectively, which may or may not materialize. Shareholders and potential investors are advised to exercise caution when dealing in the Shares.

PRINCIPAL TERMS OF THE CONVERTIBLE BONDS

The principal terms and conditions of Consideration Convertible Bond and the Placing Convertible Bonds are identical and are summarized as follows:

Issue Date: Within 5 business days after the Acquisition Agreement and Placing Agreement become unconditional

Issuer: the Company

Total principal amount: HK$126 million, out of which HK$80 million will be issued to the Vendor as consideration for the Acquisition, and HK$46 million will be placed by the Placing Agent to the Placees

Issue price: 100% at the full face value of the Convertible Bonds Interest rate: 1% per annum, payable by the Company annually in arrears on each anniversary date of the issue date and on the Maturity Date Maturity date: the 3rd anniversary of the date of issue of the Convertible Bonds Early repayment: at any time prior to the Maturity Date and on and only on any anniversary day of the Bond Instrument, the Company may by at least 14 Business Days’ advance notice in writing to the Bondholder to redeem the Convertible Bonds at an amount equal to one hundred and ten per cent (110%) of the outstanding principal amount of the Convertible Bonds.

Conversion rights: holder of the Convertible Bonds will have the right to convert the Convertible Bonds in whole or in part (in an integral multiple of HK$1,000,000) of the outstanding principal amount of the Convertible Bonds into Shares on any Business Day or any other day as the Bondholder and the Company may agree in writing at the Conversion Price per Share during the conversion period. Conversion of the Convertible Bonds by the bondholders is subject to the compliance with the requirements under the Listing Rules and Takeovers Code.

Conversion Shares:

a total of 450,000,000 Shares to be issued upon conversion of the Convertible Bonds, subject to adjustments to the Conversion Price.

Conversion Period:

any Business Day after the date of issue of the Convertible Bonds but before the fourteen (14)-day period ending on the Maturity Date.

– 11 –

LETTER FROM THE BOARD

Conversion Price:

HK$0.28 per Conversion Share, subject to adjustments for, among other things, customary anti-dilution provisions summarized below.

Redemption:

unless previously converted, the Company shall repay the Convertible Bonds in full with all interest accrued thereon up to and including the maturity date. At any time prior to the Maturity Date and on and only on any anniversary day of the Bond Instrument, the Company may by at least 14 Business Days’ advance notice in writing to the Bondholder to redeem the Convertible Bonds at an amount equal to one hundred and ten per cent (110%) of the outstanding principal amount of the Convertible Bonds.

• Anti-dilution adjustments: the Conversion Price shall from time to time be adjusted upon the occurrence of certain events including but not limited to the followings:

• (i) consolidation or sub-division;

• (ii) bonus issue of Shares;

• (iii) capital distribution of Shares;

• (iv) rights issues of Shares or rights to acquire Shares; and

• (v) right issues of other securities.

Transferability:

the Convertible Bonds are freely transferable (whether in whole or in part) except provided that: (i) it may not, without the prior written consent of the Company, be transferred to any person who is at the time of such transfer a connected person of the Company; and (ii) the principal amount to be transferred is in integral multiples of HK$1,000,000. Transfer of the Convertible Bonds is further subject to rules and regulations of the Stock Exchange, the approval for listing and dealing in the Conversion Shares by the Listing Committee of the Stock Exchange, and all applicable laws and regulations.

Voting:

holder(s) of the Convertible Bonds will not be entitled to attend or vote at any meetings of the Company by reason only of its being a bondholder(s).

Listing:

no application will be made for the listing of, or permission to deal in the Convertible Bonds on the Stock Exchange or any other stock exchange. An application will be made by the Company to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in the Conversion Shares that may be issued upon the conversion of the Convertible Bonds.

– 12 –

LETTER FROM THE BOARD

Ranking of Conversion Shares:

the Conversion Shares will rank pari passu in all respects among themselves and with other Shares in issue on the date of allotment and issue of such Conversion Shares.

Events of default:

customary events of default including:

• (i) if there is a default in the performance or observance by the Company of any of the obligations of the Company (including, without limitation, its undertakings) under the Convertible Bond or any breach by the Company of any warranty or undertaking under the Bond Instrument and (where such failure is capable of remedy) such default shall continue for not less than seven (7) days after the Company has been requested by the Bondholder to remedy such default; or

• (ii) if it shall become unlawful for the Company to perform all or any of its obligations under the Convertible Bond or the Convertible Bond shall for any reason cease to be in full force or effect or shall be declared to be void or illegal or be repudiated.

Upon the occurrence of an event of default, the Convertible Bonds becomes immediately repayable at the option of its holder.

Conversion Price

The Conversion Price of the Convertible Bonds of HK$0.28 per Conversion Share is determined after arm’s length negotiations between the Company and the Vendor with reference to the prevailing market price of the Shares, and represents:

• (i) a discount of approximately 43.43% to the closing price of HK$0.495 per Share as quoted on the Stock Exchange on the Last Trading Date;

• (ii) a discount of approximately 42.27% to the average closing price of approximately HK$0.485 per Share for the 5 trading days immediately prior to and including the Last Trading Date;

• (iii) a discount of approximately 41.42% to the average closing price of approximately HK$0.478 per Share for the 10 trading days immediately prior to and including the Last Trading Date;

• (iv) a discount of approximately 56.92% over the Group’s unaudited consolidated net assets of approximately HK$0.65 per Share calculated based on the Group’s unaudited consolidated net assets of RMB611,490,000 (approximately HK$694,224,597) as at 31st December, 2009 and 1,062,032,500 Shares in issue as at the date of the Announcement; and

• (v) a discount of approximately 33.33% over the closing price of HK$0.42 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

– 13 –

LETTER FROM THE BOARD

Use of proceeds

HK$80 million of Consideration Convertible Bond will be issued as part of the Consideration for the Acquisition. The net proceeds of approximately HK$44.7 million from issuance of the Placing Convertible Bonds will be used to satisfy the remaining balance of the Consideration in cash.

EQUITY FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS

		Net proceeds
Date of	Capital raising	Raised	Proposed use of	Actual use of
announcement	activity	(approximately)	the net proceeds	the net proceeds
15th March, 2010	Placing of 111,792,000	HK$39.60 million	To be used for general	approximately HK$1.8
	new Shares		working capital	million has been used
				as general working
				capital and the
				remaining will be used
				as intended
16th December,	Placing of 111,793,000	HK$40.5 million	To be used for general	used as intended
2009	new Shares		working capital and for
			settle payment for
			which the Company is
			liable under the
			Settlement Agreement
17th November,	Open offer on the basis	HK$45.0 million	To be used for settle	used as intended
2009	of one offer share		payment for which the
	for every two shares		Company is liable
	held at HK$0.18 per		under the Settlement
	offer share		Agreement

Save and except for the above, the Company has not undertaken any equity fund raising exercise in the 12-month period immediately preceding the date of the Announcement.

REASONS FOR AND BENEFITS OF THE ACQUISITION

The Group’s business is the manufacturing and sales of printed circuit boards, printed circuit board assembling products and surface mount technology processing services. Its products are used in a broad range of applications in items such as mobile communication devices, consumer digital devices, automotive and medical devices. The business is highly competitive and has been deteriorating since 2007 both in terms of sales and net profit after tax, and started to make a significant loss of RMB360.2 million for the year ended 30th June, 2009.

The Board has identified Anlu, a property development company with a residential development project in Anlu city, Hubei province in the PRC, as a company that offers good potential in property development business in the PRC. With rapid urbanization in the PRC, and leveraging on the management experience of Mr. Sze Ming Yee, a Director, in the property development industry, the Board is of the view that diversification into property development business in the PRC through Anlu can help improve the prospects of the Group.

– 14 –

LETTER FROM THE BOARD

The Company’s intention is to purchase 100% equity interest in Stephigh but negotiation with the 30% minority shareholder of Stephigh proves more challenging than the Board expected, and may take a long time to consummate. The Board will continue its negotiation with the 30% minority shareholder of Stephigh and report to Shareholders the progress at the appropriate time.

The Directors consider that the Acquisition Agreement has been entered into on normal commercial terms, and the terms and conditions therein are fair and reasonable and in the interest of the Company and the Shareholders as a whole. As such, the Directors recommend that the Shareholders vote in favour on the resolutions approving the Acquisition and the Placing. Given the potential profitability of Anlu, the Board believes that it is in the interest of the Group to participate in the property development business by the Acquisition. The Directors also consider that the Conversion Shares, upon conversion, will strengthen the capital base of the Company.

FINANCIAL EFFECT OF THE ACQUISITION

Assets

The audited consolidated total assets of the Group at 30th June, 2009 were approximately RMB1,216.7 million. The unaudited pro forma consolidated total assets of the Enlarged Group (as set out in Appendix III to this circular), assuming the Acquisition had been completed on 30th June, 2009, will be increased by approximately RMB370.5 million to approximately RMB1,587.2 million.

Liabilities

The audited consolidated total liabilities of the Group at 30th June, 2009 were approximately RMB582.2 million. The unaudited pro forma consolidated total liabilities of the Enlarged Group (as set out in Appendix III to this circular), assuming the Acquisition had been completed on 30th June, 2009, will be increased by approximately RMB262.7 million to approximately RMB844.9 million.

Net asset value

The audited consolidated net asset value of the Group at 30th June, 2009 was approximately RMB634.5 million. The unaudited consolidated net asset value of the Stephigh Group at 30th June, 2009 was approximately RMB8.3 million. Based on the unaudited pro forma consolidated balance sheet of the Enlarged Group (as set out in Appendix III to this circular), assuming the Acquisition had been completed on 30th June, 2009, the unaudited pro forma net asset value of the Enlarged Group as at 30th June, 2009 would be approximately RMB742.3 million.

Earnings

The unaudited consolidated loss attributable to equity shareholders of the Group for the financial year ended 30th June, 2009 was approximately RMB360.2 million. The unaudited consolidated net profit of the Stephigh Group for the period from 16th July, 2008 (date of incorporation) to 30th June, 2009 was approximately RMB0.6 million. Based on the unaudited pro forma consolidated income statement of the Enlarged Group, assuming the Acquisition had been completed on 30th June, 2009, the unaudited consolidated net loss and the loss attributable to equity shareholders for the year ended 30th June, 2009 would be approximately RMB347.7 million and RMB347.9 million respectively.

– 15 –

LETTER FROM THE BOARD

Gearing ratio

Prior to completion of the Acquisition, the Group’s gearing ratio as at 30th June, 2009 (calculated as the ratio of current liabilities plus non-current liabilities: total equity) was approximately 0.92. After completion of the Acquisition, the Enlarged Group’s gearing ratio (calculated as the ratio of current liabilities plus non-current liabilities (including the convertible bonds to be issued for the acquisition): total equity as stated in the pro forma balance sheet of the Enlarged Group as set out in Appendix III to this circular) will be approximately 1.14.

EFFECTS ON SHAREHOLDING STRUCTURE OF THE COMPANY

The following table illustrates shareholding structure of the Company (i) before the completion of the Acquisition and the Placing; (ii) after the completion of the Acquisition and conversion of the Consideration Convertible Bond; and (iii) after the completion of the Placing and the conversion of the Placing Convertible Bonds.

Shareholders Union Day (Note) The Vendor The Placees Other Shareholders Total	As at the Last Trading Date No. of Shares Approx. % 345,778,539 32.56% 0 0.00% 0 0.00% 716,253,961 67.44% 1,062,032,500 100.00%	Upon completion of the Acquisition (assuming immediate conversion of all the Consideration Convertible Bond) No. of Shares Approx. % 345,778,539 25.66% 285,714,286 21.20% 0 0.00% 716,253,961 53.14% 1,347,746,786 100.00%	Upon completion of the Placing (assuming immediate conversion of all the Placing Convertible Bonds) No. of Shares Approx. % 345,778,539 22.87% 285,714,286 18.90% 164,285,714 10.86% 716,253,961 47.37% 1,512,032,500 100.00%	Upon completion of the Placing (assuming immediate conversion of all the Placing Convertible Bonds) No. of Shares Approx. % 345,778,539 22.87% 285,714,286 18.90% 164,285,714 10.86% 716,253,961 47.37% 1,512,032,500 100.00%
				100.00%

Note: Mr. Sze Ming Yee, a Director, is a director and the controlling shareholder holding 72% equity interest in Union Day, which is the Controlling Shareholder of the Company. By virtue of the SFO, Mr. Sze is deemed to have interest in the 345,778,539 Shares.

REFRESHMENT OF GENERAL MANDATE TO ISSUE SHARES

The Current General Mandate

At the AGM, among other things, an ordinary resolution was passed to grant the Directors the Current General Mandate which enables the Directors to allot, issue and deal with Shares not exceeding 20% of aggregate nominal amount of the issued shares of the Company as at the date of the AGM (equivalent to 111,793,000 Shares).

Reasons for refreshment

The Current General Mandate has not been refreshed since it was granted at the AGM. On 15th March, 2010, the Company announced the Previous Placing and had issued and allotted 111,792,000 Shares through a placing agent under the Current General Mandate. The Previous Placing was completed on 19th March, 2010, and the net proceeds received by the Company from the Previous Placing amounted to approximately HK$39.60 million. It is intended that such net proceeds from the Previous Placing will be used for general working capital of the Group.

– 16 –

LETTER FROM THE BOARD

The Current General Mandate granted to the Directors had almost been fully utilized after the completion of the Previous Placing. If the Current General Mandate is not refreshed, the Directors would only be allowed to allot and issue up to 1,000 Shares, representing less than 0.001% of the issued share capital of the Company as at the Latest Practicable Date.

In order to allow the flexibility to raise further capital to finance future investments and/or for future business development, the Company wishes to seek approval of Shareholders at the EGM to grant the New General Mandate to the Directors. Save for the proposed Acquisition of Stephigh by the Company, details of which are set out in the section titled ‘‘The Acquisition Agreement’’ above, the Company does not have any specific plans of investments or business development at present. Based on the total number of issued Shares as at the Latest Practicable Date (i.e. 1,062,032,500 Shares) and assuming that the Company does not issue and repurchase any further Shares prior to the EGM, the New General Mandate will allow the Directors to issue and allot up to 212,406,500 new Shares. However, the Company does not have any immediate plans for any new issue of Shares under the New General Mandate at present.

The New General Mandate will expire at the earliest of: (a) the conclusion of the next annual general meeting of the Company; (b) the end of the period within which the Company is required by companies laws or the Company’s articles of association to hold its next annual general meeting; and (c) when revoked or varied by an ordinary resolution of the Shareholders in a general meeting prior to the next annual general meeting of the Company.

The refreshment of the New General Mandate is subject to Shareholders’ approval by an ordinary resolution where the Controlling Shareholder and its associates, in this case, Union Day, which own 345,778,539 Shares representing approximately 32.56% of the total issued share capital in the Company, shall abstain from voting in favour. The Independent Board Committee comprising Mr. Li Jianguo, Mr. Cheung Chuen and Ms. Wong Lai Wing, all being independent non-executive Directors, has been established to advise the Independent Shareholders on the grant of the New General Mandate. Access Capital has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the grant of the New General Mandate.

PROPOSED AMENDMENT OF SHARE OPTION SCHEME

The Share Option Scheme was adopted on 11th February, 2010. Paragraph 4.3 provides that ‘‘—

‘‘…Where any grant of Options to a Director, chief executive or substantial shareholder (as that term is defined in the Listing Rules), or any of their respective associates, would result in the Shares issued and to be issued upon exercise of all Options already granted and to be granted (including options exercised, cancelled and outstanding) to such person in the 12-month period up to and including the date of such grant:

• (i) representing in aggregate over 0.1% of the Shares in issue for the time being; and

• (ii) having an aggregate value, based on the closing price of the Shares as stated in the daily quotations sheets issued by the Stock Exchange on the Date of Grant, in excess of HK$5 million,

such grant of Options shall be approved by the Shareholders (voting by way of poll)…’’

– 17 –

LETTER FROM THE BOARD

Rule 17.04(1) of the Listing Rules provides that:

‘‘…Where any grant of options to a substantial shareholder or an independent non-executive director of the listed issuer, or any of their respective associates, would result in the securities issued and to be issued upon exercise of all options already granted and to be granted (including options exercised, cancelled and outstanding) to such person in the 12-month period up to and including the date of such grant:

• (a) representing in aggregate over 0.1% of the relevant class of securities in issue; and

• (b) (where the securities are listed on the Exchange), having an aggregate value, based on the closing price of the securities at the date of each grant, in excess of HK$5 million,

such further grant of options must be approved by shareholders of the listed issuer…’’

Paragraph 4.3 of the Share Option Scheme provides limit for grant of Options to a Directors, chief executive and substantial shareholder, whereas Rule 17.04(a) of the Listing Rules provides similar limit for grant of options to substantial shareholder and independent non-executive director only.

No option under the Share Option Scheme has been granted since its adoption. It is proposed that the Share Option Scheme be rectified to be in line with the relevant provisions of the Listing Rules, such that paragraph 4.3 be amended as limiting the grant of Options to substantial shareholder and independent non-executive director only.

REFRESHMENT OF THE EXISTING SCHEME MANDATE LIMIT OF THE SHARE OPTION SCHEME

The Company adopted the Share Option Scheme on 11th February, 2010. Under the rules of the Share Option Scheme:

• ‘‘8.2 Subject to paragraphs 8.1, 8.3, 8.4, 8.5 and 8.6, the Shares which are the subject of Options that may be granted immediately after the Adoption Date and options granted under any other option schemes of the Company must not in aggregate exceed 10% of the Shares in issue as at the Adoption Date (the ‘‘Scheme Mandate Limit’’). Options lapsed in accordance with the terms of the relevant scheme shall not be counted for the purpose of calculating the Scheme Mandate Limit.

• 8.3 The Company may renew the Scheme Mandate Limit at any time subject to prior Shareholders’ approval. However, the Scheme Mandate Limit as renewed shall not exceed 10% of the Shares in issue as at the date of the aforesaid Shareholders’ approval. Options previously granted under this Scheme, and other share option schemes (including those outstanding, cancelled, lapsed in accordance with the schemes or exercised options) shall not be counted for the purpose of calculating the limit as renewed. A circular must be sent to Shareholders in connection with the meeting at which their approval will be sought.’’

As at the date of adoption of the Share Option Scheme, the total issued share capital of the Company was 950,240,500 Shares, and thus the Scheme Mandate Limit was 95,024,050. No option had been granted under the Share Option Scheme since its adopted.

– 18 –

LETTER FROM THE BOARD

Total number of issued share capital has been increased since then and was 1,062,032,500 Shares as at the Latest Practicable Date. A refreshment of the Scheme Mandate Limit would increase the total number of options that the Directors may grant under the Share Option Scheme. The Directors consider that the Company should refresh the Scheme Mandate Limit to allow the Company to have the flexibility to provide incentive to participants of the Share Option Scheme by way of granting Options to them. If the refreshment of the existing Scheme Mandate Limit is approved at the EGM, based on the 1,062,032,500 Shares in issue as at the Latest Practicable Date and assuming no new Shares are issued and no Shares are repurchased after the Latest Practicable Date and up to the date of the EGM, the Directors will be able to grant Options to subscribe for up to a total of 106,203,250 Shares, representing 10% of the issued ordinary share capital of the Company as at the date of the EGM.

The proposed refreshment of the Scheme Mandate Limit will be conditional upon the Listing Committee of the Stock Exchange granting the listing of, and the permission to deal in, such number of Shares, representing 10% of the Shares in issue as at the date of EGM, which may fall to be allotted and issued pursuant to the exercise of Options which may be granted under the Share Option Scheme up to the refreshed Scheme Mandate Limit.

Application will be made to the Stock Exchange for granting the listing of, and the permission to deal in, the Shares to be issued pursuant to the exercise of the Options granted under the Share Option Scheme up to the refreshed Scheme Mandate Limit.

The Directors consider that the refreshment of the Scheme Mandate Limit is in the interest of the Group and the Shareholders as a whole because it enables the Company to reward and motivate its employees and other selected participants under the Share Option Scheme. The refreshment of the Scheme Mandate Limit is in line with the purpose of the Share Option Scheme.

An ordinary resolution, as special business, will be proposed at the forthcoming EGM to approve the refreshment of the existing Scheme Mandate Limit in the terms as set out in Resolution no. 5 of the EGM Notice. In order that the Company could continue to grant Options to selected participants as incentives or rewards for their contribution to the Company, the Directors recommend the Shareholders to vote in favour of this resolution.

GENERAL

As the relevant percentage ratios (as defined in the Listing Rules) in respect of the Acquisition is more than 25% but less than 100%, the Acquisition constitutes a major transaction for the Company under Chapter 14 of the Listing Rules and is therefore subject to the approval by the Shareholders at the EGM. Resolutions will be proposed to the Shareholders for approval of (i) the Acquisition Agreement; (ii) the issue and allotment of the Consideration Convertible Bond and the Conversion Shares fall to be issued upon conversion of the Consideration Convertible Bond. No Shareholder is required to abstain from voting in respect of the Acquisition Agreement and the issue and allotment of the Consideration Convertible Bond and the Conversion Shares.

The Placing is subject to the approval by Shareholders at the EGM of (i) the issue and allotment of the Placing Convertible Bonds and the Conversion Shares which fall to be issued upon conversion of the Placing Convertible Bonds. No Shareholder is required to abstain from voting in respect of the issue and allotment of the Placing Convertible Bonds and the Conversion Shares.

– 19 –

LETTER FROM THE BOARD

The granting of the New General Mandate is subject to the approval by Shareholders of an ordinary resolution to be passed at the EGM. Pursuant to Rule 13.36(4)(a), the Controlling Shareholder and its associates, in this case, Union Day, which owns 345,778,539 Shares representing approximately 32.56% of the total issued share capital in the Company, is required to abstain from voting in respect of the New General Mandate. The rectification of the Share Option Scheme and the refreshment of Scheme Mandate Limit of the Share Option Scheme is subject to the approval by Shareholders of an ordinary resolution to be passed at the EGM. Assuming no option will be granted under the Share Option Scheme to any Director or chief executive or their associates from the Latest Practicable Date up to the date of EGM, no Shareholder is required to abstain from voting in respect of the relevant amendment of the Share Option Scheme. No Shareholder is required to abstain from voting in respect of the refreshment of Scheme Mandate Limit of the Share Option Scheme.

Application will be made by the Company to the Stock Exchange for the listing of and permission to deal in the Conversion Shares and the Shares to be issued pursuant to the exercise of the options granted under the Share Option Scheme up to the refreshed Scheme Mandate Limit.

By Order of the Board KINGWELL GROUP LIMITED Xu Yue Yue Executive Director

– 20 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

KINGWELL GROUP LIMITED

京 維 集 團 有 限 公 司

(formerly known as Sinotronics Holdings Limited 前稱華翔微電子控股有限公司[*] )

(incorporated in the Cayman Islands with limited liability)

(Stock code: 1195)

7th May, 2010

To the Independent Shareholders,

Dear Sir and Madam,

REFRESHMENT OF GENERAL MANDATE TO ISSUE SHARES

We refer to the circular (the ‘‘Circular’’) to the Shareholders dated 7th May, 2010 issued by the Company of which this letter forms part. Terms used in this letter shall have the same meanings as those defined in the Circular, unless the context otherwise requires.

We have been appointed by the Board as members of the Independent Board Committee to advice the Independent Shareholders in respect of the proposed granting of the New General Mandate, details of which are set out in the Letter from the Board contained in the Circular.

Having taken into account the advice of Access Capital, the independent financial advisor to the Independent Board Committee and the Independent Shareholders, as set out in their letter of recommendation on pages 22 to 27 of the Circular, we are of the opinion that the proposed granting of the New General Mandate is fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the EGM to approve the New General Mandate.

Yours faithfully,

INDEPENDENT BOARD COMMITTEE OF

KINGWELL GROUP LIMITED

Li Jianguo Cheung Chuen

Independent Non-executive Independent Non-executive Director Director

Wong Lai Wing

Independent Non-executive Director

• For identification purposes only

– 21 –

LETTER FROM ACCESS CAPITAL

Set out below is the text of a letter of advice from Access Capital to the Independent Board Committee and the Independent Shareholders for inclusion in this circular.

==> picture [86 x 41] intentionally omitted <==

Suite 606, 6th Floor Bank of America Tower 12 Harcourt Road Central Hong Kong

7 May 2010

• To: The Independent Board Committee and

the Independent Shareholders of Kingwell Group Limited

Dear Sirs,

PROPOSED REFRESHMENT OF GENERAL MANDATE TO ISSUE SHARES

INTRODUCTION

We refer to our engagement as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in relation to the New General Mandate, details of which are set out in the letter from the Board contained in the circular of the Company dated 7 May 2010 to the Shareholders (the ‘‘Circular’’), of which this letter forms part. Terms used in this letter have the same meanings as defined elsewhere in the Circular unless the context requires otherwise.

As at the Latest Practicable Date, the Company had 1,062,032,500 Shares in issue. The Board proposes to seek approval of the Independent Shareholders for the New General Mandate at the EGM. Union Day, the Controlling Shareholder holding approximately 32.56% of the issued share capital of the Company as at the Latest Practicable Date, and its associates will abstain from voting on the resolution for the New General Mandate at the EGM pursuant to Rule 13.36(4) of the Listing Rules.

The Independent Board Committee comprising all the independent non-executive Directors, namely Mr. Li Jianguo, Mr. Cheung Chuen and Ms. Wong Lai Wing, has been formed to advise the Independent Shareholders as to whether the proposed granting of the New General Mandate is fair and reasonable so far as the Independent Shareholders are concerned and is in the interests of the Company and the Shareholders as a whole. We have been appointed to advise the Independent Board Committee and the Independent Shareholders in this respect.

BASIS OF OUR OPINION

In formulating our advice, we have relied solely on the statements, information, opinions and representations contained in the Circular and the information and representations provided to us by the Company and/or its senior management staff and/or the Directors. We have assumed that all such

– 22 –

LETTER FROM ACCESS CAPITAL

statements, information, opinions and representations contained or referred to in the Circular or otherwise provided or made or given by the Company and/or its senior management staff and/or the Directors and for which it is/they are solely responsible were true and accurate and valid at the time they were made and given and continue to be true and valid as at the date of the Circular.

We have assumed that all the opinions and representations made or provided by the Directors and/ or the senior management staff of the Company contained in the Circular has been reasonably made after due and careful enquiry. We have also sought and obtained confirmation from the Company and/or its senior management staff and/or the Directors that no material facts have been omitted from the information provided and referred to in the Circular.

We consider that we have reviewed all currently available information and documents which are made available to us to enable us to reach an informed view and to justify our reliance on the information provided so as to provide a reasonable basis for our opinion. We have no reason to doubt the truth, accuracy and completeness of the statements, information, opinions and representations provided to us by the Company and/or its senior management staff and/or the Directors and their respective advisers or to believe that material information has been withheld or omitted from the information provided to us or referred to in the aforesaid documents. We have not, however, carried out any independent verification of the information provided, nor have we conducted any independent investigation into the business and affairs of the Company or any of its subsidiaries.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion regarding the New General Mandate, we have taken into consideration the following principal factors and reasons:

A. Background to and reasons for the New General Mandate

The Company is principally engaged in the manufacturing and sales of printed circuit boards, printed circuit board assembling products and surface mount technology processing services.

At the AGM, among other things, the Directors were granted the Current General Mandate to allot, issue and deal with Shares not exceeding 20% of aggregate nominal amount of the issued shares of the Company as at the date of the AGM (equivalent to 111,793,000 Shares), pursuant to the terms of the Current General Mandate.

Following completion of the Previous Placing on 19 March 2010, 111,792,000 Shares had been issued under the Current General Mandate. If the Current General Mandate is not refreshed, the Directors would only be allowed to issue and allot up to 1,000 shares under the Current General Mandate, representing less than 0.001% of issued capital as at the Latest Practicable Date. In view of the majority of the Current General Mandate has been utilized, the Directors consider it desirable to refresh the Current General Mandate to allow the Company the flexibility to raise further capital to finance future investments and/or for future business development.

– 23 –

LETTER FROM ACCESS CAPITAL

As at the Latest Practicable Date, the Company had 1,062,032,500 Shares in issue. Subject to the passing of the ordinary resolution for the approval of the New General Mandate and assuming that no Shares are issued and/or repurchased by the Company between the Latest Practicable Date and the date of the EGM, the Directors will be allowed to allot and issue up to 212,406,500 new Shares under the New General Mandate.

According to the annual report of the Company for the year ended 30 June 2009 (‘‘Annual Report’’), the Company had a consolidated turnover of approximately RMB317 million (2008: approximately RMB564 million) and a consolidated loss for the year of approximately RMB360 million (2008: a profit of approximately RMB11 million). The management of the Company attributed the deterioration in operating result to the decline in consumer demand for the Group’s electronic products amid the global economic turmoil during the financial year of 2009, the impairment of non-current assets of approximately RMB282 million and the impairment of trade and other receivables of approximately RMB68 million. According to the interim report of the Company for the six months ended 31 December 2009 (‘‘Interim Report’’), the Company’s consolidated turnover for the period under review decreased by approximately 39% as compared to that of same period in 2008 to approximately RMB128 million (same period in 2008: approximately RMB208 million). With the absence of the valuation losses on property, plant and equipment of approximately RMB201 million for the six months ended 31 December 2008, the loss for the period under review narrowed to approximately RMB25 million (same period in 2008: approximately RMB221 million. The management of the Company represented that orders and average selling prices of the Group’s electronic products experienced sharp decline since January 2009 because of the prolonged consequence of the global economic turmoil on the electronic industry. However, orders have picked up and the decline of average selling prices has gradually narrowed starting from July 2009. The management of the Company indicated that the Group has implemented prudent operational strategies and strived to maintain orders from existing clients amid the economic downturn. They consider that the overall market sentiment has gradually improved since the start of 2010, which helps to trigger demand for electronic products. As mentioned in the Interim Report and discussed with the management of the Company, the Group seeks to diversify income sources as well as to explore new opportunities and will not rule out the possibilities to develop new projects which are beneficial to overall profitability. The Acquisition is a move of the Group to diversify into property development business and the Board is of the view that this can help improve prospects of the Company.

– 24 –

LETTER FROM ACCESS CAPITAL

The following table summarises the equity fund raising activities of the Group for the twelve months immediately prior to the Latest Practicable Date:

		Net proceeds		Actual use of proceeds
Date of		raised	Intended use	as at the Latest
announcement	Description	(approximately)	of proceeds	Practicable Date
15 March 2010	Placing of	HK$39.6 million	To be used for	Approximately HK$1.8
	111,792,000		general working	million has been
	new Shares		capital	used as general
				working capital and
				the remaining
				balance will be used
				as intended
16 December 2009	Placing of	HK$40.5 million	To be used for	Used as intended
	111,793,000		general working
	new Shares		capital and for
			settlement of
			liabilities
17 November 2009	Open offer on the	HK$45.0 million	To be used for	Used as intended
	basis of one offer		settlement of
	share for every two		liabilities
	shares held at
	HK$0.18 per
	offer share

Although the remaining balance of approximately HK$37.8 million of the net proceeds from the Previous Placing has not yet been utilized, this was designated for working capital purposes. According to the Annual Report, the Group had cash and cash equivalents of approximately RMB648 million and net current assets of approximately RMB281 million. As learnt from the ‘‘Unaudited pro forma financial information of the Enlarged Group’’ as set out in Appendix III to the Circular, the Enlarged Group had cash and cash equivalents of approximately RMB653 million and net current assets amounting to approximately RMB560 million. The management of the Company indicated that they may consider raising capital for funding new projects while reserving internal financial resources to support its core business. The management also indicated that the Company does not currently have any specific plans, save for the Acquisition, of investment and or business development at present. We also understand from the Company that it does not have any immediate plans to issue new Shares under the New General Mandate.

The management of the Company has considered other means of fund raising which is on a pro-rata basis, such as rights issue or open offer, or to seek for a specific mandate on specific new investment projects. We concur with the management of the Company that funding requirements or appropriate investment opportunities may arise at any time and such funding or investment decisions may have to be made within a short period of time. Should the issuance of new Shares be required and a specific mandate has to be sought, or a rights issue or open offer where Shareholders’ approval, as the case may be required by the Listing Rules, the Directors are uncertain as to whether the requisite approval from Shareholders or Independent Shareholders could be obtained in a timely manner.

– 25 –

LETTER FROM ACCESS CAPITAL

We understand from the management of the Company that apart from equity financing, the Directors will also consider other financing alternatives such as debt financing as possible fund raising method for the Company to meet its financial requirements, depending on the then financial position, capital structure and cost of funding of the Group as well as the then market condition. However, debt financing shall inevitably increase the interest burden to the Company and it may subject to lengthy due diligence and negotiations between the Company and its financiers.

In view of the above and having considered that the approval of the New General Mandate will (i) enable the Group to raise funding to invest judiciously in attractive opportunities for the purpose of diversification of income sources; (ii) provide the Directors with greater autonomy and more flexibility in their decision making process to respond to the competitive and rapidly changing capital market in a timely manner; and (iii) offer the Group an opportunity to finance its long-term growth with long-term funding in the form of equity, which will not have refinancing risk, we concur with the Directors’ view that the New General Mandate will provide the Company with an additional alternative and flexibility to raise capital in a simpler and less lead time process and avoid the uncertainties in obtaining Shareholders’ approval on specific mandate or rights issue or open offer (if required under the Listing Rules) in a timely manner when suitable opportunities arise. Accordingly, we consider that the New General Mandate is in the interests of the Company and its Shareholders as a whole.

B. Potential dilution to shareholdings of the Independent Shareholders

Assuming full utilization of the New General Mandate and no Shares will be issued and/or repurchased during the period between the Latest Practicable Date and the date of EGM, the Directors will be allowed to issue and allot up to 212,406,500 new Shares. The aggregate shareholding of the existing public Shareholders will be reduced from approximately 67.44% to approximately 56.2%.

Taking into account the aforementioned benefits of the New General Mandate and the fact that the shareholdings of all Shareholders will be diluted to the same extent so long as new Shares issued under the New General Mandate are to independent third parties being not connected persons (as defined in the Listing Rules) of the Company, we consider the potential dilution of shareholdings to be acceptable. If new Shares are issued to connected persons (other than the circumstances set out in Rule 14A.31(3) of the Listing Rules), a specific mandate will be required under the Listing Rules.

– 26 –

LETTER FROM ACCESS CAPITAL

RECOMMENDATION

Having considered the principal factors and reasons set out in this letter, we consider that the New General Mandate is fair and reasonable so far as the Independent Shareholders are concerned and is in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the resolution to approve the New General Mandate.

Yours faithfully, For and on behalf of Access Capital Limited

Alexander Tai Principal Director

– 27 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

1. SUMMARY OF FINANCIAL INFORMATION

The following summary of the financial information (the ‘‘Financial Information’’) has been extracted from the audited consolidated financial statements of the Group for each of the three years ended 30th June, 2007, 2008 and 2009 in the respective annual reports of the Company. KPMG, the auditors of the Company, expressed unqualified opinions on the financial statements of the Company for each of the three years ended 30th June, 2007, 2008 and 2009. During the three years ended 30th June, 2009, there was no extraordinary or exceptional item affecting the financial statements of the Group.

Consolidated Income Statement

Turnover Cost of sales Gross profit Other revenue Other net (loss)/income Distribution costs Administrative expenses Repair and maintenance costs Other operating expenses Impairment of non-current assets (Loss)/profit from operations Finance costs (Loss)/profit before taxation Income tax (Loss)/profit for the year Attributable to: Equity shareholders of the Company Minority interests (Loss)/profit for the year	2009 RMB’000 316,940 (270,693) 46,247 5,002 (95,248) (16,278) (30,500) (9,720) (820) (282,338) (383,655) (19,866) (403,521) 43,319 (360,202) (360,202) — (360,202)	Year ended 2008 RMB’000 564,317 (392,348) 171,969 8,991 (8,124) (7,051) (41,882) — (6,300) — 117,603 (81,833) 35,770 (24,591) 11,179 11,179 — 11,179	2007 RMB’000 695,936 (476,892) 219,044 8,061 8,623 (7,827) (34,102) — (1,882) — 191,917 (49,962) 141,955 (23,695) 118,260 115,085 3,175 118,260

– 28 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Dividends payable to equity shareholders of the Company attributable to the year: Final dividend proposed after the balance sheet date (Loss)/earnings per share Basic Diluted	2009 RMB’000 — (64) cents (64) cents	Year ended 2008 RMB’000 1,977 2 cents 2 cents	2007 RMB’000 18,838
			21 cents
			20 cents

– 29 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Balance Sheet

Non-current assets Property, plant and equipment Interests in leasehold land held for own use under operating lease Purchase deposits of property, plant and equipment Purchase deposits of leasehold land Deferred tax assets Current assets Trading securities Inventories Trade and other receivables Amount due from the Controlling Shareholder (‘‘the CS’’) Fixed deposits Pledged deposits Cash and cash equivalents Current liabilities Trade and other payables Bank loans Obligations under finance leases Taxation Derivative financial instruments Other financial liabilities Net current assets Total assets less current liabilities	30 June 2009 RMB’000 290,472 18,143 9,580 — 57,750 375,945 1,570 25,997 94,068 61,975 — 8,662 648,450 840,722 143,926 250,972 — — — 164,443 559,341 281,381 657,326	30 June 2008 RMB’000 390,299 18,643 25,321 — 2,147 436,410 — 45,459 201,776 — — 4,307 880,366 1,131,908 162,810 253,822 2,591 4,729 165,067 — 589,019 542,889 979,299	30 June 2007 RMB’000 358,242 17,159 11,557 1,916 2,056
			390,930
			— 36,100 262,691 — 75,660 — 728,432
			1,102,883
			159,815 146,498 3,059 6,416 151,280 —
			467,068
			635,815
			1,026,745

– 30 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Non-current liabilities Bank loans Obligations under finance leases Other long term payable Deferred tax liabilities NET ASSETS Capital and reserves Share capital Reserves TOTAL EQUITY	30 June 2009 RMB’000 16,000 — — 6,861 22,861 634,465 58,661 575,804 634,465	30 June 2008 RMB’000 30,000 510 16,089 6,567 53,166 926,133 58,661 867,472 926,133	30 June 2007 RMB’000 136,539 3,419 — —
			139,958
			886,787
			58,123 828,664
			886,787

– 31 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR THE TWO YEARS ENDED 30TH JUNE, 2009

Set out below is the audited consolidated income statement, consolidated balance sheet, consolidated cash flow statement and consolidated statement of changes in equity of the Group, and the balance sheet of the Company together with the notes to the financial statements of the Group as extracted from pages 32 to 97 of the annual report of the Company for the two years ended 30th June, 2009.

Consolidated Income Statement

for the year ended 30 June 2009 (Expressed in Renminbi)

Note Turnover 3 Cost of sales Gross profit Other revenue 4 Other net loss 4 Distribution costs Administrative expenses Repair and maintenance costs 5(d) Other operating expenses Impairment of non-current assets 13(a) (Loss)/profit from operations Finance costs 5(a) (Loss)/profit before taxation 5 Income tax 6(a) (Loss)/profit for the year attributable to equity shareholders of the Company Dividends payable to equity shareholders of the Company attributable to the year: 10 Final dividend proposed after the balance sheet date (Loss)/earnings per share 11 Basic Diluted	2009 RMB’000 316,940 (270,693) 46,247 5,002 (95,248) (16,278) (30,500) (9,720) (820) (282,338) (383,655) (19,866) (403,521) 43,319 (360,202) — (64) cents (64) cents	2008 RMB’000 564,317 (392,348) 171,969 8,991 (8,124) (7,051) (41,882) — (6,300) — 117,603 (81,833) 35,770 (24,591) 11,179 1,977 2 cents 2 cents

– 32 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Balance Sheet

at 30 June 2009 (Expressed in Renminbi)

Note Non-current assets Property, plant and equipment 13(a) Interests in leasehold land held for own use under operating lease 14 Deposits for the purchase of property, plant and equipment Deferred tax assets 24(b) Current assets Trading securities 16 Inventories 17 Trade and other receivables 18 Amount due from the controlling shareholder (the ‘‘CS’’) 27 Pledged deposits 20 Cash and cash equivalents 20 Current liabilities Trade and other payables 21 Bank loans 22 Obligations under finance leases 23 Taxation 24(a) Derivative financial instruments 25 Other financial liabilities 26 Net current assets Total assets less current liabilities	2009 RMB’000 290,472 18,143 9,580 57,750 375,945 1,570 25,997 94,068 61,975 8,662 648,450 840,722 143,926 250,972 — — — 164,443 559,341 281,381 657,326	2008 RMB’000 390,299 18,643 25,321 2,147
		436,410
		— 45,459 201,776 — 4,307 880,366
		1,131,908
		162,810 253,822 2,591 4,729 165,067 —
		589,019
		542,889
		979,299

– 33 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Note Non-current liabilities Bank loans 22 Obligations under finance leases 23 Amount due to the CS 27 Deferred tax liabilities 24(b) NET ASSETS Capital and reserves 28(a) Share capital Reserves TOTAL EQUITY	2009 RMB’000 16,000 — — 6,861 22,861 634,465 58,661 575,804 634,465	2008 RMB’000 30,000 510 16,089 6,567
		53,166
		926,133
		58,661 867,472
		926,133

– 34 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Balance Sheet

at 30 June 2009 (Expressed in Renminbi)

Note Non-current assets Property, plant and equipment 13(b) Investments in subsidiaries 15 Current assets Other receivables 18 Amount due from the CS 27 Cash and cash equivalents 20 Current liabilities Other payables 21 Bank loans 22 Derivative financial instruments 25 Other financial liabilities 26 Net current assets Total assets less current liabilities Non-current liabilities Amount due to the CS 27 NET ASSETS Capital and reserves 28(b) Share capital Reserves TOTAL EQUITY	2009 RMB’000 13 93,975 93,988 206,930 61,975 1,175 270,080 78,735 26,388 — 164,443 269,566 514 94,502 — 94,502 58,661 35,841 94,502	2008 RMB’000 13 93,975
		93,988
		427,231 — 8,475
		435,706
		14,337 99,022 165,067 —
		278,426
		157,280
		251,268
		16,089
		235,179
		58,661 176,518
		235,179

– 35 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Statement of Changes in Equity

for the year ended 30 June 2009 (Expressed in Renminbi)

Note Total equity at 1 July 2008/2007 Net (loss)/income for the year recognised directly in equity: Exchange differences on translation of financial statements of operations outside the People’s Republic of China (the ‘‘PRC’’) 28(a) Surplus on revaluation of buildings held for own use, net of deferred tax 28(a) Impairment of buildings held for own use, net of deferred tax 28(a) Net (loss)/profit for the year Total recognised income and expense for the year Movements in equity arising from capital transactions: Issue of shares upon exercise of subscription rights attached to convertible bonds 28(a) Issue of shares under share option scheme 28(a) Shares repurchased and cancelled — par value 28(a) — premium paid 28(a) Fair value adjustment of amount due to the CS 28(a) Contributions by the CS upon termination of derivative financial instruments 28(a) Dividends declared or approved during the year 28(a) Total equity at 30 June 2009/2008	2009 RMB’000 926,133 (689) — (10,536) (11,225) (360,202) (371,427) — — — — 561 81,167 81,728 (1,969) 634,465	2008 RMB’000 886,787 26,611 10,397 — 37,008 11,179 48,187 1,841 4,352 (19) (123) 3,272 — 9,323 (18,164) 926,133

– 36 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Cash Flow Statement

for the year ended 30 June 2009 (Expressed in Renminbi)

Note Operating activities (Loss)/profit before taxation Adjustments for: — Loss/(gain) on disposal of property, plant and equipment — Depreciation — Amortisation of interest in leasehold land held for own use under operating leases — Interest on bank borrowings — Interest on other financial liabilities — Interest on amount due to the CS — Interest element of finance leases — Interest income — Impairment of trade and other receivables — Impairment of non-current assets — Reversal of impairment of trade and other receivables — Fair value adjustments on derivative financial instruments — Loss on termination of derivative financial instruments — Deficit on revaluation of buildings held for own use — Net realised and unrealised gains on trading securities — Foreign exchange loss Operating profit before changes in working capital Decrease/(increase) in inventories Decrease in trade and other receivables (Decrease)/increase in trade and other payables Cash generated from operations Tax paid — PRC enterprise income tax paid Net cash generated from operating activities	2009 RMB’000 (403,521) 31,940 36,431 500 16,902 1,351 288 86 (4,782) 68,162 282,338 (5,258) — 1,087 — (70) 681 26,135 19,462 43,962 (15,896) 73,663 (13,515) 60,148	2008 RMB’000 35,770 (17) 24,435 479 20,997 — 175 327 (8,608) 3,339 — (330) 60,334 — 4,533 — 3,801 145,235 (9,359) 57,820 1,656 195,352 (23,054) 172,298

– 37 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Note Investing activities Increase in deposits for the purchase of property, plant and equipment Payments for the purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Payment for the purchase of trading securities Interest received Decrease in fixed deposits with maturity over three months at acquisition Net cash (used in)/generated from investing activities Financing activities Proceeds from new bank loans Repayment for bank loans Increase in pledged deposits Payment for derivative financial instruments Capital element of finance lease rentals paid Interest element of finance lease rentals paid (Decrease)/increase in amount due to a director Financial assistance from the CS Proceeds from shares issued under the share option scheme Proceeds from shares issued upon exercise of subscription rights attached to the convertible bonds Payment for repurchase of shares Interest paid Dividends paid Net cash used in financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at 1 July 2008/2007 Effect of foreign exchange rate changes Cash and cash equivalents at 30 June 2009/2008 20	2009 RMB’000 (21,557) (227,401) — (1,500) 4,782 — (245,676) 215,585 (232,568) (4,355) (3,434) (3,104) (86) (2,298) 3,434 — — — (17,580) (1,969) (46,375) (231,903) 880,366 (13) 648,450	2008 RMB’000 (13,764) (45,972) 76 — 8,608 72,392 21,340 164,800 (152,983) (4,307) (30,931) (2,927) (327) 795 20,072 4,352 1,841 (142) (20,997) (18,164) (38,918) 154,720 728,432 (2,786) 880,366

– 38 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

NOTES TO THE FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

1. SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of compliance

These financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (‘‘HKFRSs’’), which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (‘‘HKASs’’) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants (‘‘HKICPA’’), accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. These financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’). A summary of the significant accounting policies adopted by the Company and its subsidiaries (together referred to as the ‘‘Group’’) is set out below.

(b) Basis of preparation of the financial statements

The consolidated financial statements of the Company for the year ended 30 June 2009 comprise the Company and its subsidiaries.

The functional currencies of the Company and its subsidiaries in the PRC are Hong Kong dollars and Renminbi (‘‘RMB’’) respectively. For the purpose of presenting the consolidated financial statements, the Group has adopted RMB as its presentation currency. The measurement basis used in the preparation of the financial statements is the historical cost basis except as set out in the accounting policies below.

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

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgements made by management in the application of HKFRSs that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 34.

(c) Subsidiaries

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

An investment in a subsidiary is consolidated into the consolidated financial statements from the date that control commences until the date that control ceases. Intra-group balances and transactions and any unrealised profits arising from intra-group transactions are eliminated in full in preparing the consolidated financial statements. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment.

In the Company’s balance sheet, an investment in a subsidiary is stated at cost less impairment losses (see note 1(i)).

– 39 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(d) Trading securities

Investments in equity securities are initially stated at fair value, which is their transaction price unless fair value can be more reliably estimated using valuation techniques whose variables include only data from observable markets. Cost includes attributable transaction costs.

Investments in securities held for trading are classified as current assets. Any attributable transaction costs are recognised in profit or loss as incurred. At each balance sheet date the fair value is remeasured, with any resultant gain or loss being recognised in profit or loss. The net gain or loss recognised in profit or loss does not include any dividends or interest earned on these investments as these are recognised in accordance with the policies set out in notes 1(r)(iii) and (iv).

(e) Derivative financial instruments

Derivative financial instruments are recognised initially at fair value. At each balance sheet date the fair value is remeasured. The gain or loss on remeasurement to fair value is charged immediately to profit or loss.

(f) Property, plant and equipment

• (i) Property, plant and equipment is carried in the balance sheet on the following bases:

• buildings held for own use are stated in the balance sheet at revalued amount less accumulated depreciation (see note 1(h)) and impairment losses (see note 1(i)). The cost of self-constructed buildings includes the cost of materials, direct labour, the initial estimates, where relevant, of the cost of dismantling and removing the items and restoring the site on which they are located, and an appropriate proportion of production overheads and borrowing costs (see note 1(t));

• other items of plant and equipment are stated in the balance sheets at cost less accumulated depreciation (see note 1(h)) and impairment losses (see note 1(i)); and

• construction-in-progress represents buildings under construction and machinery pending installation and is stated at cost, which includes construction expenditure incurred, cost of machinery and other direct costs capitalised during the construction and installation period.

• (ii) Revaluations of buildings held for own use are performed with sufficient regularity to ensure that the carrying amount of these assets does not differ materially from that which would be determined using fair values at the balance sheet date.

• (iii) Changes arising on the revaluation of buildings held for own use are generally dealt with in reserves. The only exceptions are as follows:

• when a deficit arises on revaluation, it will be charged to profit or loss to the extent that it exceeds the amount held in the reserve in respect of that same asset immediately prior to the revaluation; and

• when a surplus arises on revaluation, it will be credited to profit or loss to the extent that a deficit on revaluation in respect of that same asset had previously been charged to profit or loss.

• (iv) Gains or losses arising from the retirement or disposal of an item of property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised in profit or loss on the date of retirement or disposal. Any related revaluation surplus is transferred from the revaluation reserve to retained profits.

– 40 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(g) Leased assets

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.

(i) Classification of assets leased to the Group

Assets that are held by the Group under leases which transfer to the Group substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Group are classified as operating leases, except that land held for own use under an operating lease, the fair value of which cannot be measured separately from the fair value of a building situated thereon at the inception of the lease, is accounted for as being held under a finance lease, unless the building is also clearly held under an operating lease. For these purposes, the inception of the lease is the time that the lease was first entered into by the Group, or taken over from the previous lessee.

(ii) Assets acquired under finance leases

Where the Group acquires the use of assets under finance leases, the amounts representing the fair value of the leased asset, or, if lower, the present value of the minimum lease payments, of such assets are included in property, plant and equipment and the corresponding liabilities, net of finance charges, are recorded as obligations under finance leases. Depreciation is provided at rates which write off the cost or valuation of the assets over the term of the relevant lease or, where it is likely the Group will obtain ownership of the asset, the life of the asset, as set out in note 1(h). Impairment losses are accounted for in accordance with the accounting policy as set out in note 1(i). Finance charges implicit in the lease payments are charged to profit or loss over the period of the leases so as to produce an approximately constant periodic rate of charge on the remaining balance of the obligations for each accounting period. Contingent rentals are charged to profit or loss in the accounting period in which they are incurred.

(iii) Operating lease charges

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

The cost of acquiring land held under an operating lease is amortised on a straight-line basis over the period of the lease term.

(h) Depreciation

• (i) No depreciation is provided on construction-in-progress until it is available for use.

• (ii) Depreciation is calculated to write off the cost or valuation of items of property, plant and equipment, less their estimated residual value, if any, using the straight-line method over their estimated useful lives as follows:

• buildings held for own use situated on leasehold land are depreciated over the shorter of the unexpired term of lease and their estimated useful lives, being 25 years from the date of completion.

—	Machinery	10 years
—	Fixture, furniture and equipment	5 years
—	Motor vehicles	5 years

– 41 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Where parts of an item of property, plant and equipment have different useful lives, the cost or valuation of the item is allocated on a reasonable basis between the parts and each part is depreciated separately. Both the useful life of an asset and its residual value, if any, are reviewed annually.

• (i) Impairment of assets

(i) Impairment of trade and other receivables

Trade and other current receivables that are stated at cost or amortised cost are reviewed at each balance sheet date to determine whether there is objective evidence of impairment. Objective evidence of impairment includes observable data that comes to the attention of the Group about one or more of the following loss events:

• significant financial difficulty of the debtor;

• a breach of contract, such as a default or delinquency in interest or principal payments;

• it becoming probable that the debtor will enter bankruptcy or other financial reorganisation; and

• significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor.

If any such evidence exists, the impairment loss is determined and recognised as follows:

• For trade and other current receivables and other financial assets carried at amortised cost, the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets), where the effect of discounting is material. This assessment is made collectively where financial assets carried at amortised cost share similar risk characteristics, such as similar past due status, and have not been individually assessed as impaired. Future cash flows for financial assets which are assessed for impairment collectively are based on historical loss experience for assets with credit risk characteristics similar to the collective group.

If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognised, the impairment loss is reversed through profit or loss. A reversal of an impairment loss shall not result in the asset’s carrying amount exceeding that which would have been determined had no impairment loss been recognised in prior years.

• For other current receivables and other financial assets carried at cost, the impairment loss is measured as the difference between the carrying amount of the financial asset and the estimated recoverable amount.

Impairment losses are written off against the corresponding assets directly, except for impairment losses recognised in respect of trade receivables and bills receivable included within trade and other receivables, whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded using an allowance account. When the Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade receivables and bills receivable directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in profit or loss.

– 42 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

• (ii) Impairment of other assets

Internal and external sources of information are reviewed at each balance sheet date to identify indications that the following assets may be impaired or an impairment loss previously recognised no longer exists or may have decreased:

property, plant and equipment;

• interests in leasehold land classified as being held under operating lease; and

• investments in subsidiaries.

If any such indication exists, the asset’s recoverable amount is estimated.

• Calculation of recoverable amount

The recoverable amount of an asset is the greater of its net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).

• Recognition of impairment losses

An impairment loss is recognised in profit or loss whenever the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated to reduce the carrying amount of the assets in the unit (or group of units) on a pro rata basis.

• Reversals of impairment losses

An impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount.

A reversal of an impairment loss is limited to the asset’s carrying amount that would have been determined had no impairment loss been recognised in prior years. Reversals of impairment losses are credited to profit or loss in the year in which the reversals are recognised.

• (iii) Interim financial reporting and impairment

Under the 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 (see notes 1(i)(i) and (ii)).

(j) Inventories

Inventories are carried at the lower of cost and net realisable value.

Cost is calculated using the weighted average cost formula and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

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

– 43 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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

(k) Trade and other receivables

Trade and other receivables are initially recognised at fair value and thereafter stated at amortised cost less allowance for impairment of doubtful debts (see note 1(i)), except where the receivables are interest-free loans made to related parties without any fixed repayment terms or the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less allowance for impairment of doubtful debts.

(l) Cash and cash equivalents

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

(m) Interest-bearing borrowings

Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between the amount initially recognised and redemption value being recognised in profit or loss over the period of the borrowings, together with any interest and fees payable, using the effective interest method.

(n) Trade and other payables

Trade and other payables are initially recognised at fair value. Except for financial guarantee liabilities measured in accordance with note 1(q)(i), trade and other payables are subsequently stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

(o) Employee benefits

(i) Short term employee benefits and contributions to defined contribution retirement plans

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

(ii) Share-based payments

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

During the vesting period, the number of share options that is expected to vest is reviewed. Any adjustment to the cumulative fair value recognised in prior years is charged/credited to the profit or loss for the year of the review, unless the original employee expenses qualify for recognition as an asset, with a corresponding adjustment to the capital reserve. On vesting date, the amount recognised as an expense is adjusted to reflect the actual number of options that vest (with a corresponding adjustment to the capital reserve) except where forfeiture is only due to not

– 44 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

achieving vesting conditions that relate to the market price of the Company’s shares. The equity amount is recognised in the capital reserve until either the option is exercised (when it is transferred to the share premium account) or the option expires (when it is released directly to retained profits).

(p) Income tax

Income tax for the year comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognised in profit or loss except to the extent that they relate to items recognised directly in equity, in which case they are recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.

Apart from certain limited exceptions, all deferred tax liabilities and all deferred tax assets, to the extent that it is probable that future taxable profits will be available against which the asset can be utilised, are recognised. Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary differences include those that will arise from the reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilised.

The limited exceptions to recognition of deferred tax assets and liabilities are those temporary differences arising from the initial recognition of assets or liabilities that affect neither accounting nor taxable profit (provided they are not part of a business combination), and temporary differences relating to investments in subsidiaries to the extent that, in the case of taxable differences, the Group controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable future, or in the case of deductible differences, unless it is probable that they will reverse in the future.

The amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. Deferred tax assets and liabilities are not discounted.

The carrying amount of a deferred tax asset is reviewed at each balance sheet date and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the related tax benefit to be utilised. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available.

Additional income taxes that arise from the distribution of dividends are recognised when the liability to pay the related dividends is recognised.

Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities if the Company or the Group has the legally enforceable right to set off current tax assets against current tax liabilities and the following additional conditions are met:

• in the case of current tax assets and liabilities, the Company or the Group intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously; or

• in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either:

• the same taxable entity; or

– 45 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

• different taxable entities, which, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered, intend to realise the current tax assets and settle the current tax liabilities on a net basis or realise and settle simultaneously.

(q) Financial guarantees issued, provisions and contingent liabilities

(i) Financial guarantees issued

Financial guarantees are contracts that require the issuer (i.e. the guarantor) to make specified payments to reimburse the beneficiary of the guarantee (the ‘‘holder’’) for a loss the holder incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument.

Where the Group issues a financial guarantee, the fair value of the guarantee (being the transaction price, unless the fair value can otherwise be reliably estimated) is initially recognised as deferred income within trade and other payables. Where consideration is received or receivable for the issuance of the guarantee, the consideration is recognised in accordance with the Group’s policies applicable to that category of asset. Where no such consideration is received or receivable, an immediate expense is recognised in profit or loss on initial recognition of any deferred income.

The amount of the guarantee initially recognised as deferred income is amortised in profit or loss over the term of the guarantee as income from financial guarantees issued. In addition, provisions are recognised in accordance with note 1(q)(ii) if and when (i) it becomes probable that the holder of the guarantee will call upon the Group under the guarantee, and (ii) the amount of that claim on the Group is expected to exceed the amount currently carried in trade and other payables in respect of that guarantee i.e. the amount initially recognised, less accumulated amortisation.

(ii) Other provisions and contingent liabilities

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

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

(r) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in profit or loss as follows:

(i) Sale of goods

Revenue arising from the sale of goods is recognised when the customer has accepted the goods and the related risks and rewards of ownership, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably and there is no continuing management involvement with the goods. Revenue excludes value-added tax or other sales taxes and is stated after deduction of any trade discounts.

(ii) Processing service income

Processing service income is recognised when services are rendered.

– 46 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

• (iii) Interest income

Interest income is recognised as it accrues using the effective interest method.

• (iv) Dividend income

Dividend income is recognised when the shareholder’s right to receive payment is established.

(s) Translation of foreign currencies

Foreign currency transactions during the year are translated at the foreign exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rates ruling at the balance sheet date. Exchange gains and losses are recognised in profit or loss.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the foreign exchange rates ruling at the transaction dates. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated using the foreign exchange rates ruling at the dates the fair value was determined.

The results of operations outside the PRC are translated into Renminbi at the exchange rates approximating the foreign exchange rates ruling at the dates of transactions. Balance sheet items are translated into Renminbi at the foreign exchange rates ruling at the balance sheet date. The resulting exchange differences are recognised directly in a separate component of equity.

On disposal of an operation outside the PRC, the cumulative amount of the exchange differences recognised in equity which relate to that foreign operation is included in the calculation of the profit or loss on disposal.

(t) Borrowing costs

Borrowing costs are expensed in profit or loss in the period in which they are incurred, except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to get ready for its intended use or sale.

The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or complete.

(u) Dividends

Dividends are recognised as a liability in the period in which they are declared.

(v) Contributions by shareholders

Contributions made by shareholders of the Company to the Group which the Group has no obligation to repay are recognised directly in the capital contribution reserve within equity.

(w) Related parties

For the purposes of these financial statements, a party is considered to be related to the Group if:

• (i) the party has the ability, directly or indirectly through one or more intermediaries, to control the Group or exercise significant influence over the Group in making financial and operating policy decisions, or has joint control over the Group;

• (ii) the Group and the party are subject to common control;

• (iii) the party is an associate of the Group or a joint venture in which the Group is a venturer;

– 47 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

• (iv) the party is a member of key management personnel of the Group or the Group’s parent, or a close family member of such an individual, or is an entity under the control, joint control or significant influence of such individuals;

• (v) the party is a close family member of a party referred to in (i) or is an entity under the control, joint control or significant influence of such individuals; or

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

Close family members of an individual are those family members who may be expected to influence, or be influenced by, that individual in their dealings with the entity.

(x) Segment reporting

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

In accordance with the Group’s internal financial reporting system, the Group has chosen business segment information as the primary reporting format and geographic segment information as the secondary reporting format for the purposes of these financial statements.

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

Segment capital expenditure is the total cost incurred during the period to acquire segment assets (both tangible and intangible) that are expected to be used for more than one period.

Unallocated items mainly comprise financial and corporate assets, derivative financial instruments, interest-bearing loans, borrowings, tax balances, corporate and financing expenses.

2. NEW AND REVISED HKFRSS EFFECTIVE FOR ACCOUNTING PERIODS BEGINNING ON OR AFTER 1 JULY 2008

The HKICPA has issued a number of new Interpretations and an amendment to HKFRSs that are first effective for the current accounting period of the Group and the Company. However, none of these developments are relevant to the Group’s or the Company’s operations.

The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period (see note 37).

– 48 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

3. TURNOVER

The Company acts as an investment holding company and the Group is principally engaged in the manufacture and sale of printed circuit boards (‘‘PCBs’’) and PCBs assembling products and the provision for surface mount technology (‘‘SMT’’) processing services.

Turnover represents the sales value of goods supplied to customers, which excludes value-added tax and is stated after deduction of all goods returns and trade discounts, and service income from SMT processing services. The amount of each significant category of revenue recognised in turnover during the year is as follows:

Sales of PCBs Sales of PCBs assembling products SMT processing service income OTHER REVENUE AND OTHER NET LOSS Other revenue Interest income Sundry income Other net loss Reversal of impairment of trade and other receivables Impairment of trade and other receivables (Loss)/gain on disposal of property, plant and equipment Exchange loss Net realised and unrealised gains on trading securities Others	2009 RMB’000 303,113 4,953 8,874 316,940 2009 RMB’000 4,782 220 5,002 5,258 (68,162) (31,940) (465) 70 (9) (95,248)	2008 RMB’000 484,123 59,481 20,713 564,317 2008 RMB’000 8,608 383 8,991 330 (3,339) 17 (5,081) — (51) (8,124)

4. OTHER REVENUE AND OTHER NET LOSS

– 49 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

5. (LOSS)/PROFIT BEFORE TAXATION

(Loss)/profit before taxation is arrived at after charging/(crediting):

(a) Finance costs: Interest on bank loans wholly repayable within five years Finance charges on obligations under finance leases Interest on other financial liabilities Interest on amount due to the CS Fair value adjustments on derivative financial instruments Loss on termination of derivative financial instruments Other borrowing costs Total borrowing costs Less: Borrowing costs capitalised into construction-in-progress* (b) Staff costs:# Salaries, wages and other benefits Contributions to defined contribution retirement plans (c) Other items: Cost of inventories# Amortisation of interest in leasehold land held for own use under operating lease# Depreciation# — owned fixed assets — assets held for use under finance leases Operating lease rentals for premises# Auditors’ remuneration Deficit on revaluation of buildings held for own use	2009 RMB’000 17,580 86 1,351 288 — 1,087 152 20,544 (678) 19,866 31,307 11,452 42,759 270,693 500 35,696 735 1,462 2,639 —	2008 RMB’000 22,729 327 — 175 60,334 — —
		83,565 (1,732
		81,833
		36,664 12,972
		49,636
		392,348 479 20,766 3,669 1,772 2,832 4,533

• The borrowing costs have been capitalised at rates of 6.05%–7.65% (2008: 6.01%–6.10%) per annum.

Cost of inventories includes RMB67,231,000 (2008: RMB57,369,000) relating to staff costs, depreciation expenses, operating lease charges and amortisation of interest in leasehold land held for own use under operating lease, which amount is also included in the respective total amounts disclosed separately above or in note 5(b) for each of these types of expenses.

(d) Repair and maintenance costs

During the year ended 30 June 2009, the building and underground infrastructure of one of the company’s subsidiaries, Shuangxiang (Fujian) Electronics Limited (‘‘Shuangxiang’’), located in the coastal area of Mawei, Fuzhou City of Fujian Province in the PRC, were damaged by land subsidence and repair and maintenance costs totalling RMB9,720,000 were incurred to restore the building and underground infrastructure to their original condition.

– 50 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

6. INCOME TAX IN THE CONSOLIDATED INCOME STATEMENT

• (a) Taxation in the consolidated income statement represents:

Current tax Provision for PRC enterprise income tax Deferred tax Origination and reversal of temporary differences Effect of change in tax rate in the PRC	2009 RMB’000 8,786 (52,105) — (52,105) (43,319)	2008 RMB’000 21,367
		2,908 316
		3,224
		24,591

Notes:

(i) Overseas income tax

The Company is incorporated in the Cayman Islands and is exempted from taxation in the Cayman Islands until 2019. The Company’s subsidiaries in the British Virgin Islands (‘‘BVI’’) are incorporated under the International Business Companies Acts of the British Virgin Islands and, accordingly, are exempt from British Virgin Islands income taxes.

(ii) Hong Kong profits tax

No provision for Hong Kong profits tax has been made as the Group did not generate any income subject to Hong Kong profits tax during the years presented.

• (iii) PRC enterprise income tax

The Company’s subsidiaries in the PRC are subject to PRC enterprise income tax. Pursuant to the income tax rules and regulations of the PRC, the provision for PRC enterprise income tax of the Group is calculated based on the following rates:

	Note	2009	2008
Fujian Fuqiang Delicate Circuit Plate Co., Ltd. (‘‘Fuqiang’’)	(1)	20%	18%
Gemini Electronics (Huizhou) Co., Ltd (‘‘Gemini’’)	(2)	10%	9%
Shuangxiang	(2)	10%	9%
Fuqing Haichuang Electron Technology Co., Ltd. (‘‘Haichuang’’)	(3)	N/A	N/A

Notes:

• (1) As Fuqiang is located in an economic and technological development zone, it is entitled to enjoy a reduced tax rate of 20% (2008: 18%) in 2009. The details are explained below.

• (2) In 2009, Gemini and Shuangxiang are subject to PRC enterprise income tax at a reduced rate of 10% (2008: 9%). The details are explained below.

• (3) Pursuant to the income tax rules and regulations in the PRC, Haichuang is not subject to PRC enterprise income tax as it did not commence business during the years presented.

– 51 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

On 16 March 2007, the Fifth Plenary Session of the Tenth National People’s Congress promulgated the Corporate Income Tax Law of the PRC (the ‘‘New Tax Law’’), which became effective on 1 January 2008. Further, the State Council released the Implementation Rules to the Corporate Income Tax Law (the ‘‘Implementation Rules’’) on 6 December 2007, and Notice on the Implementation Rules of the Grandfathering Relief under the Corporate Income Tax Law (Guo Fa 2007 No. 39) (‘‘Notice 39’’) on 26 December 2007.

According to the New Tax Law, effective on 1 January 2008, the standard income tax rate for PRC enterprises is reduced from 33% to 25%. Further, according to the Notice 39, for enterprises located in economic and technological development zones which had previously enjoyed a reduced tax rate of 15%, the tax rate will gradually increase to 25% during a 5-year transition period according to the following schedule: 18% in 2008, 20% in 2009, 22% in 2010, 24% in 2011 and 25% in 2012 (the ‘‘five-year transition rate’’).

Furthermore, as production-oriented foreign investment enterprises (‘‘FIEs’’), Gemini and Shuangxiang had kick started their Tax Holiday (‘‘Tax Holiday’’) under the old PRC Foreign Enterprise Income Tax (‘‘FEIT’’) regime in 2006. As such, the companies were exempted from FEIT in 2006 and 2007. According to Notice 39, the unexpired Tax Holiday enjoyed by FIEs established before 16 March 2007 is allowed to continue after implementation of New Tax Law on 1 January 2008 until expiry of the Tax Holiday. As such, the applicable enterprise income tax rate of Gemini and Shuangxiang is 9% (50% of 18%) in year 2008; 10% (50% of 20%) in year 2009; 11% (50% of 22%) in year 2010; 24% (Tax Holiday will expire) in year 2011 and 25% thereafter.

The deferred tax assets/liabilities of subsidiaries in the PRC are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Under the New Tax Law and Implementation Rules starting from 1 January 2008, dividends distributed by the PRC subsidiaries to their foreign holding investors are subject to withholding income tax at 10%, subject to reduction under double-taxation arrangements (‘‘DTA’’). Since the holding companies of the PRC subsidiaries are incorporated in the BVI, which currently has not entered into a DTA with China, dividends distributed by the PRC subsidiaries would be subject to withholding tax at 10%. Dividends receivable by the Group from subsidiaries in the PRC in respect of their undistributed profits accumulated up to 31 December 2007 are exempted from withholding tax.

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

(Loss)/profit before taxation Notional tax on (loss)/profit before taxation, calculated at the rates applicable to profits in the jurisdictions concerned Tax effect of non-deductible expenses Tax effect of non-taxable income Tax effect of differential tax rates Tax effect of temporary differences and tax losses not recognised Effect of change in tax rate on the deferred tax balances Actual tax (benefit)/expense	2009 RMB’000 (403,521) (79,368) 4,417 (422) (9,142) 41,196 — (43,319)	2008 RMB’000 35,770 10,579 15,214 (218) (1,300) — 316 24,591

– 52 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

7. DIRECTORS’ REMUNERATION

Directors’ remuneration disclosed pursuant to the Listing Rules is as follows:

Executive directors: Lin Wan Qaing Lin Wan Xin Xiang Song Hu Zhao Rui Tong Yiu On (resigned on 7 November 2008) Liu Zhao Cai (resigned on 7 February 2009) Independent non- executive directors: Pan Chang Chi Cai Xun Shan Cheung Chuen	Directors’ fees 2009 2008 RMB’000 RMB’000 — — — — — — — — — — — — 106 60 106 60 106 87 318 207	Salaries and other emoluments 2009 2008 RMB’000 RMB’000 424 760 316 297 317 346 236 361 216 557 236 458 — — — — — — 1,745 2,779	Retirement scheme contributions 2009 2008 RMB’000 RMB’000 12 13 — — — — — — 4 11 — — — — — — — — 16 24	Total 2009 2008 RMB’000 RMB’000 436 773 316 297 317 346 236 361 220 568 236 458 106 60 106 60 106 87 2,079 3,010	Total 2009 2008 RMB’000 RMB’000 436 773 316 297 317 346 236 361 220 568 236 458 106 60 106 60 106 87 2,079 3,010
					3,010

8. INDIVIDUALS WITH HIGHEST EMOLUMENTS

Of the five individuals with the highest emoluments, four (2008: five) are directors whose emoluments are disclosed in note 7. The aggregate of the emoluments in respect of the other one (2008: Nil) individual are as follows:

Salaries and other emoluments Retirement scheme contributions	2009 RMB’000 289 7 296	2008 RMB’000 — —
		—

The emoluments of the one (2008: Nil) individual with the highest emoluments are within the following band:

RMB Nil–500,000	2009 Number of individuals 1	2008 Number of individuals —

– 53 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

9. LOSS ATTRIBUTABLE TO EQUITY SHAREHOLDERS OF THE COMPANY

The consolidated (loss)/profit attributable to equity shareholders of the Company includes a loss of approximately RMB16,844,000 (2008: RMB79,445,000) which has been dealt with in the financial statements of the Company.

Reconciliation of the above amount to the Company’s loss for the year:

Amount of loss attributable to equity shareholders dealt with in the Company’s financial statements Final dividends from subsidiaries attributable to the profits of the previous financial year, approved and paid during the year Impairment loss on amounts due from subsidiaries Company’s loss for the year (note 28(b))	2009 RMB’000 (16,844) — (203,137) (219,981)	2008 RMB’000 (79,445 27,843 —
		(51,602

1. DIVIDENDS

2. (a) Dividends payable to equity shareholders of the Company attributable to the year

	2009	2008
	RMB’000	RMB’000
Final dividend proposed after the balance sheet date of HK$ nil (equivalent to
RMB nil) per ordinary share (2008: HK$0.004 (equivalent to approximately
RMB0.003536) per ordinary share)	—	1,977
The final dividend proposed after the balance sheet date of 2008 was not recognised as a liability at 30 June 2008.

• (b) Dividends payable to equity shareholders of the Company attributable to the previous financial year, approved and paid during the year

Final dividend of HK$0.004 (equivalent to approximately RMB0.003) per ordinary share (2008: HK$0.035 (equivalent to approximately RMB0.0325) per ordinary share) in respect of the previous financial year, approved and paid during the year	2009 RMB’000 1,969	2008 RMB’000 18,164

– 54 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

11. (LOSS)/EARNINGS PER SHARE

(a) Basic (loss)/earnings per share

The calculation of basic (loss)/earnings per share is based on the loss attributable to equity shareholders of the Company of RMB360,202,000 (2008: profit of RMB11,179,000) and the weighted average number of 558,965,000 (2008: 558,332,000) ordinary shares in issue during the year, calculated as follows:

Weighted average number of ordinary shares

Issued ordinary shares at 1 July 2008/2007 Effect of share options exercised Effect of exercise of subscription rights attached to convertible bonds Effect of shares repurchased Weighted average number of ordinary shares at 30 June 2009/2008	2009 ’000 558,965 — — — 558,965	2008 ’000 553,169 3,789 1,408 (34
		558,332

(b) Diluted (loss)/earnings per share

The diluted loss per share for the year ended 30 June 2009 is the same as the basic loss per share as the potential ordinary shares are anti-dilutive.

The calculation of diluted earnings per share for the year ended 30 June 2008 was based on the profit attributable to equity shareholders of the Company of RMB11,179,000 and the weighted average number of 560,339,000 ordinary shares in issue during the year after adjusting for the effect of all dilutive potential shares, calculated as follows:

Weighted average number of ordinary shares (diluted)

Weighted average number of ordinary shares at 30 June Effect of deemed issue of ordinary shares under the Company’s share option scheme for nil consideration per share (note 30) Weighted average number of ordinary shares (diluted) at 30 June	2009 ’000 558,965 — 558,965	2008 ’000 558,332 2,007
		560,339

– 55 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

12. SEGMENT REPORTING

Segment information is presented in respect of the Group’s business and geographical segments. Business segment information is chosen as the primary reporting format because this is more relevant to the Group’s internal financial reporting.

(a) Business segments

The Group comprises the following main business segments:

PCBs : the manufacture and sale of PCBs

PCBs assembling products : the manufacture and sale of PCBs assembling products SMT processing : the provision for service mount technology processing services

Revenue from external customers Inter-segment revenue Total Segment result Unallocated operating income and expenses (Loss)/profit from operations Finance costs Taxation (Loss)/profit after taxation Depreciation and amortisation for the year Impairment of non-current assets Segment assets Segment liabilities Capital expenditure incurred during the year	PC 2009 RMB’000 303,113 —	Bs 2008 RMB’000 484,123 —	PCBs assembling products SMT processing Inter-segment elimination Unallo 2009 2008 2009 2008 2009 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 4,953 59,481 8,874 20,713 — — — — — — — — — — 4,953 59,481 8,874 20,713 — — — (45,221) (1,542) (81,023) (537) 3,461 4,336 6,200 1,510 — — 11 37,941 — 67,980 — — — — 60,678 226,868 108,716 79,003 (162,640) (60,248) 122,049 12,697 51,600 22,749 17,969 (162,640) (60,248) 446,623 6,323 10,366 11,328 3,610 — — 46	PCBs assembling products SMT processing Inter-segment elimination Unallo 2009 2008 2009 2008 2009 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 4,953 59,481 8,874 20,713 — — — — — — — — — — 4,953 59,481 8,874 20,713 — — — (45,221) (1,542) (81,023) (537) 3,461 4,336 6,200 1,510 — — 11 37,941 — 67,980 — — — — 60,678 226,868 108,716 79,003 (162,640) (60,248) 122,049 12,697 51,600 22,749 17,969 (162,640) (60,248) 446,623 6,323 10,366 11,328 3,610 — — 46	PCBs assembling products SMT processing Inter-segment elimination Unallo 2009 2008 2009 2008 2009 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 4,953 59,481 8,874 20,713 — — — — — — — — — — 4,953 59,481 8,874 20,713 — — — (45,221) (1,542) (81,023) (537) 3,461 4,336 6,200 1,510 — — 11 37,941 — 67,980 — — — — 60,678 226,868 108,716 79,003 (162,640) (60,248) 122,049 12,697 51,600 22,749 17,969 (162,640) (60,248) 446,623 6,323 10,366 11,328 3,610 — — 46	PCBs assembling products SMT processing Inter-segment elimination Unallo 2009 2008 2009 2008 2009 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 4,953 59,481 8,874 20,713 — — — — — — — — — — 4,953 59,481 8,874 20,713 — — — (45,221) (1,542) (81,023) (537) 3,461 4,336 6,200 1,510 — — 11 37,941 — 67,980 — — — — 60,678 226,868 108,716 79,003 (162,640) (60,248) 122,049 12,697 51,600 22,749 17,969 (162,640) (60,248) 446,623 6,323 10,366 11,328 3,610 — — 46	PCBs assembling products SMT processing Inter-segment elimination Unallo 2009 2008 2009 2008 2009 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 4,953 59,481 8,874 20,713 — — — — — — — — — — 4,953 59,481 8,874 20,713 — — — (45,221) (1,542) (81,023) (537) 3,461 4,336 6,200 1,510 — — 11 37,941 — 67,980 — — — — 60,678 226,868 108,716 79,003 (162,640) (60,248) 122,049 12,697 51,600 22,749 17,969 (162,640) (60,248) 446,623 6,323 10,366 11,328 3,610 — — 46	PCBs assembling products SMT processing Inter-segment elimination Unallo 2009 2008 2009 2008 2009 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 4,953 59,481 8,874 20,713 — — — — — — — — — — 4,953 59,481 8,874 20,713 — — — (45,221) (1,542) (81,023) (537) 3,461 4,336 6,200 1,510 — — 11 37,941 — 67,980 — — — — 60,678 226,868 108,716 79,003 (162,640) (60,248) 122,049 12,697 51,600 22,749 17,969 (162,640) (60,248) 446,623 6,323 10,366 11,328 3,610 — — 46	Unallo 2009 RMB’000 — —	cated 2008 RMB’000 — —	Consol 2009 RMB’000 316,940 —	idated 2008 RMB’000 564,317 —
	303,113	484,123	4,953	59,481	8,874	20,713	—	—	—	—	316,940	564,317
	(244,458) 27,259	133,508 19,060						—	11	8
											36,931	24,914
	190,157	—	37,941	—	67,980	—	—	—	—	—	296,078	—
	1,087,864	1,310,894	60,678	226,868	108,716	79,003				11,801	1,216,667	1,568,318
	262,773	143,612	12,697	51,600	22,749	17,969				489,252	582,202	642,185
	209,627	35,409	6,323	10,366	11,328	3,610	—	—	46	21	227,324	49,406

– 56 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(b) Geographical segments

In presenting information on the basis of geographical segments, segment revenue is based on geographical location of customers. Segment assets and capital expenditure are based on the geographical location of the assets.

The Group’s business is principally managed in the PRC, and the Group’s customers are mainly located in the PRC (excluding Hong Kong and Taiwan), Australia and Germany.

Segment revenue — PRC, excluding Hong Kong and Taiwan — Hong Kong — Australia — Germany — Malaysia — USA — Others Total revenue from external customers	The Group 2009 2008 RMB’000 RMB’000 225,210 444,687 40,457 40,064 29,048 37,131 5,619 7,595 2,308 3,154 1,013 1,186 13,285 30,500 316,940 564,317	The Group 2009 2008 RMB’000 RMB’000 225,210 444,687 40,457 40,064 29,048 37,131 5,619 7,595 2,308 3,154 1,013 1,186 13,285 30,500 316,940 564,317
		564,317

All segment assets and related capital expenditure incurred during the year are located in the PRC (excluding Hong Kong and Taiwan) as at 30 June 2009 and 2008.

– 57 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

13. PROPERTY, PLANT AND EQUIPMENT

(a) The Group

Year 2007/2008

Cost or valuation: At 1 July 2007 Additions Disposals Transfer to fixed assets Fair value adjustment — Surplus — Deficit Less: Elimination of accumulated depreciation Exchange adjustments At 30 June 2008 Representing: Cost Valuation Accumulated depreciation: At 1 July 2007 Depreciation charge for the year Written back on disposals Elimination on revaluation Exchange adjustments At 30 June 2008 Net book value: At 30 June 2008	Buildings held for own use RMB’000 136,830 6,293 — 106,201 13,648 (4,533) (9,299) — 249,140 — 249,140 249,140 — 9,299 — (9,299) — — 249,140	Machinery RMB’000 184,807 20,768 (15) — — — — — 205,560 205,560 — 205,560 74,660 13,664 (6) — — 88,318 117,242	Fixture, furniture and equipment RMB’000 8,101 1,623 (11) — — — — (40) 9,673 9,673 — 9,673 4,254 1,122 (2) — (35) 5,339 4,334	Motor vehicles RMB’000 4,665 2,118 (418) — — — — — 6,365 6,365 — 6,365 3,448 350 (377) — — 3,421 2,944	Construction- in-progress RMB’000 106,201 16,639 — (106,201) — — — — 16,639 16,639 — 16,639 — — — — — — 16,639	Total RMB’000 440,604 47,441 (444 — 13,648 (4,533 (9,299 (40
						487,377
						238,237 249,140
						487,377
						82,362 24,435 (385 (9,299 (35
						97,078
						390,299

– 58 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Year 2008/2009

Cost or valuation: At 1 July 2008 Additions Disposals Transfer to fixed assets Exchange adjustments At 30 June 2009 Representing: Cost Valuation Accumulated depreciation and impairment losses: At 1 July 2008 Depreciation charge for the year Impairment losses Written back on disposals Exchange adjustments At 30 June 2009 Net book value: At 30 June 2009	Buildings held for own use RMB’000 249,140 — (30,501) 20,501 — 239,140 — 239,140 239,140 — 11,904 111,156 (1,305) — 121,755 117,385	Machinery RMB’000 205,560 54,592 (14,613) — — 245,539 245,539 — 245,539 88,318 16,100 56,180 (12,213) — 148,385 97,154	Fixture, furniture and equipment RMB’000 9,673 294 (405) 95,787 1 105,350 105,350 — 105,350 5,339 7,811 32,229 (360) 1 45,020 60,330	Motor vehicles RMB’000 6,365 173 — — — 6,538 6,538 — 6,538 3,421 616 1,792 — — 5,829 709	Construction- in-progress RMB’000 16,639 172,265 (299) (116,288) — 72,317 72,317 — 72,317 — — 57,423 — — 57,423 14,894	Total RMB’000 487,377 227,324 (45,818 — 1
						668,884
						429,744 239,140
						668,884
						97,078 36,431 258,780 (13,878 1
						378,412
						290,472

The construction-in-progress at 30 June 2009 primarily relates to the additional production premises and facilities of subsidiaries in the PRC.

Impairment loss

During the year, the Group experienced a significant drop in demand for its PCBs and related products under the prevailing market environment and consequently recorded operating losses. The directors considered that the existence of the above conditions indicated that non-current assets of the Group’s operating subsidiaries in the PRC may be impaired. In view of this, the directors prepared a cash flow projection to estimate the recoverable amount of these assets.

The estimates of recoverable amount were determined based on a value in use calculation using cash flow projections based on the five-year financial forecast approved by the directors, and a pre-tax discount rate.

Cash flows beyond the five-year period had been extrapolated using a zero growth rate to cover the remaining useful lives of related non-current assets.

Key assumptions used for the value in use calculation:

Sales volume growth rate	9%–37%
Gross contribution rate	7%–37%
Pre-tax discount rate	13.87%–15.05%

The directors determined the growth rate and gross contribution rate based on the expectation for market development.

– 59 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The directors concluded that it is appropriate to recognise an impairment losses of RMB296,078,000 against these non-current assets, details of which are as follows:

Note Property, plant and equipment 13(a) Deposits for the purchase of property, plant and equipment Charged to profit or loss Charged to building valuation reserve	The Group 2009 RMB’000 258,780 37,298
	296,078
	282,338 13,740
	296,078

• (b) The Company

Cost: At 1 July 2008/2007 and 30 June 2009/2008 Accumulated depreciation: At 1 July 2008/2007 Depreciation charge for the year At 30 June 2009/2008 Net book value: At 30 June 2009/2008	Fixture, furniture and equipment 2009 2008 RMB’000 RMB’000 125 125 112 112 — — 112 112 13 13	Fixture, furniture and equipment 2009 2008 RMB’000 RMB’000 125 125 112 112 — — 112 112 13 13
		112 —
		112
		13

• (c) All the Group’s buildings are located in the PRC. At 30 June 2008, the Group’s buildings were revalued by an independent firm of surveyors, Ample Appraisal Limited who has among their staff Professional Member of Hong Kong Institute of Surveyors and Professional Member of Royal Institution of Chartered Surveyors, with recent experience in the location and category of property being valued, on a depreciated replacement cost basis.

• (d) The Group leased certain machinery under finance leases for two to four years. At the end of the lease term the Group had the option to purchase the machineries at a price deemed to be a bargain purchase option. None of the leases included contingent rentals. The Group did not have any assets held under finance lease as at 30 June 2009.

At 30 June 2008, the net book value of machinery of the Group held under finance leases was RMB28,028,000.

• (e) Had the buildings held for own use of the Group been carried at cost less accumulated depreciation, the carrying amount would have been RMB218,747,000 (2008: RMB240,359,000).

– 60 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

14. INTERESTS IN LEASEHOLD LAND HELD FOR OWN USE UNDER OPERATING LEASE

The analysis of the net book value of leasehold land held for own use under operating leases is as follows:

Outside Hong Kong — medium-term leases	The Group 2009 2008 RMB’000 RMB’000 18,143 18,643

1. INVESTMENTS IN SUBSIDIARIES

				The	Company
				2009	2008
				RMB’000	RMB’000
Unlisted	shares,	at	cost	93,975	93,975

Details of the subsidiaries as at 30 June 2009 were as follows:

Name of company Place of incorporation and/ or operation Particulars of issued and fully paid up capital Superford Holding Limited (‘‘Superford’’) BVI/Hong Kong 10,001 shares of US$1 each Artic Hong Kong Limited Hong Kong 2 shares of HK$1 each Dynamic Fortune Technology Limited BVI/Hong Kong 100 shares of US$1 each China Electronic Holdings Limited Hong Kong 2 shares of HK$1 each Tempest Trading Limited (‘‘Tempest’’) BVI/Hong Kong 1 share of US$1 each Winrise International Limited (‘‘Winrise’’) BVI/Hong Kong 100 shares of US$1 each Herowin Limited (‘‘Herowin’’) BVI/ Hong Kong 100 shares of US$1 each Fuqiang PRC RMB109,652,300 Gemini PRC US$10,760,000 Shuangxiang PRC US$14,201,738 Haichuang PRC US$8,951,100

Proportion of ownership interest Group’s effective interest Held by the Company Held by a subsidiary Principal activities 100% 100% — Investment holding 100% 100% — Provision of administrative services to the Group 100% 100% — Investment holding 100% 100% — Not yet commenced business 100% 100% — Investment holding 100% 100% — Investment holding 100% 100% — Investment holding 100% — 100% Manufacturing and trading of PCBs 100% — 100% Manufacturing and trading of PCBs 100% — 100% Manufacturing and trading of PCBs assembling products and provision for SMT processing services 100% — 100% Not yet commenced business

• Registered under the laws of the PRC as a foreign investment enterprise.

The shares of certain subsidiaries were pledged as part of the security against financing facilities granted to the Company. The total net asset value of these subsidiaries as at 30 June 2009 is disclosed in note 22(ii).

– 61 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

16. TRADING SECURITIES

Equity securities listed outside Hong Kong, at fair value	The Group 2009 2008 RMB’000 RMB’000 1,570 —

17. INVENTORIES

Raw materials Work-in-progress Finished goods	The Group 2009 2008 RMB’000 RMB’000 16,131 23,659 5,046 7,094 4,820 14,706 25,997 45,459	The Group 2009 2008 RMB’000 RMB’000 16,131 23,659 5,046 7,094 4,820 14,706 25,997 45,459
		45,459

The analysis of the amount of inventories recognised as an expense is as follows:

Carrying amount of inventories sold Write down of inventories Reversal of write-down of inventories	The Group 2009 2008 RMB’000 RMB’000 275,866 384,428 1,327 8,000 (6,500) (80 270,693 392,348	The Group 2009 2008 RMB’000 RMB’000 275,866 384,428 1,327 8,000 (6,500) (80 270,693 392,348
		392,348

18. TRADE AND OTHER RECEIVABLES

Bills receivable Trade receivables Less: allowance for doubtful debts Amounts due from subsidiaries Rental and other deposits Advances to directors (note 19) Advances to employees Prepayments Others Less: impairment losses	The Group 2009 2008 RMB’000 RMB’000 13,810 644 143,508 203,686 (69,895) (11,206) 87,423 193,124 — — 436 511 381 161 808 854 2,478 2,657 2,542 4,469 — — 94,068 201,776	The Company 2009 2008 RMB’000 RMB’000 — — — — — — — — 410,067 427,231 — — — — — — — — — — (203,137) — 206,930 427,231	The Company 2009 2008 RMB’000 RMB’000 — — — — — — — — 410,067 427,231 — — — — — — — — — — (203,137) — 206,930 427,231
			— 427,231 — — — — — —
			427,231

The amounts due from subsidiaries are unsecured, interest-free and repayable on demand.

All of the trade and other receivables, apart from rental and other deposits, are expected to be recovered within one year.

– 62 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(a) Ageing analysis

Included in trade and other receivables are trade receivables and bills receivable (net of allowance for doubtful debts) with the following ageing analysis as of the balance sheet date:

Current Less than 1 month past due 1 to 3 months past due More than 3 months but less than 12 months past due More than 12 months but less than 2 years past due Amount past due	The Group 2009 2008 RMB’000 RMB’000 76,229 157,862 2,543 24,065 1,583 7,678 6,948 3,519 120 — 11,194 35,262 87,423 193,124	The Group 2009 2008 RMB’000 RMB’000 76,229 157,862 2,543 24,065 1,583 7,678 6,948 3,519 120 — 11,194 35,262 87,423 193,124
		24,065 7,678 3,519 —
		35,262
		193,124

The Group’s credit policy is set out in note 31(a).

(b) Impairment of trade receivables and bills receivable

Impairment losses in respect of trade receivables and bills receivable 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 and bills receivable directly (see note 1(i)(i)).

The movement in the allowance for doubtful debts during the year is as follows:

At 1 July 2008/2007 Impairment loss recognised Write-back of impairment losses Uncollectible amounts written off At 30 June 2009/2008	The Group 2009 2008 RMB’000 RMB’000 11,206 7,878 68,021 3,328 (5,258) — (4,074) — 69,895 11,206	The Group 2009 2008 RMB’000 RMB’000 11,206 7,878 68,021 3,328 (5,258) — (4,074) — 69,895 11,206
		11,206

At 30 June 2009, the Group’s trade receivables and bills receivable of RMB70,484,000 (2008: RMB13,594,000) were individually determined to be impaired. The individually impaired receivables related to customers that were in financial difficulties and management assessed that only a portion of the receivables is expected to be recovered. Consequently, specific allowances for doubtful debts of RMB69,895,000 (2008: RMB11,206,000) were recognised. The Group does not hold any collateral over these balances.

– 63 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(c) Trade receivables and bills receivable that are not impaired

The ageing analysis of trade receivables and bills receivable that are neither individually nor collectively considered to be impaired are as follows:

Neither past due nor impaired Less than 1 month past due 1 to 3 months past due More than 3 months but less than 12 months past due	The Group 2009 2008 RMB’000 RMB’000 76,145 156,909 2,544 24,004 1,409 7,665 6,736 2,158 10,689 33,827 86,834 190,736	The Group 2009 2008 RMB’000 RMB’000 76,145 156,909 2,544 24,004 1,409 7,665 6,736 2,158 10,689 33,827 86,834 190,736
		24,004 7,665 2,158
		33,827
		190,736

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

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

19. ADVANCE TO DIRECTORS

Advances to directors of the Company disclosed pursuant to section 161B of the Hong Kong Companies Ordinance are as follows:

Name of borrower	Mr Lin Wan Xin	Mr Hu Zhao Rui	Mr Lin Wan Qaing
Position	Chairman	Director	Director
Terms of the loan
— duration and repayment terms	Repayable on demand	Repayable on demand	Repayable on demand
— interest rate	Interest free	Interest free	Interest free
— security	None	None	None
Balance of the loan
— at 1 July 2007	RMB158,790	RMB2,000	—
— at 30 June 2008 and 1 July 2008	RMB58,790	RMB102,000	—
— at 30 June 2009	RMB278,790	RMB102,000	—
Maximum balance outstanding
during 2008/09	RMB278,790	RMB102,000	RMB4,277,879
— during 2007/08	RMB158,790	RMB102,000	—

There was no amount due but unpaid, nor any provision made against the principal amount of these loans at 30 June 2008 and 2009.

– 64 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

20. CASH AND CASH EQUIVALENTS

Deposits with banks Cash at bank and in hand Less: Pledged deposits	The Group 2009 2008 RMB’000 RMB’000 8,662 5,324 648,450 879,349 657,112 884,673 (8,662) (4,307) 648,450 880,366	The Company 2009 2008 RMB’000 RMB’000 — 1,017 1,175 7,458 1,175 8,475 — — 1,175 8,475	The Company 2009 2008 RMB’000 RMB’000 — 1,017 1,175 7,458 1,175 8,475 — — 1,175 8,475
			8,475 —
			8,475

Pledged deposits mainly represent the amounts pledged to the banks to secure bills payable of the Group.

At 30 June 2009, cash and cash equivalents of RMB655,202,000 (2008: RMB875,458,000) of the Group were subject to exchange controls in the PRC.

21. TRADE AND OTHER PAYABLES

Trade payables Bills payable Other payables and accruals Other tax payable Payables for the purchase of property, plant and equipment Staff welfare payable Utilities and rentals payable Amounts due to subsidiaries Amount due to a director	The Group 2009 2008 RMB’000 RMB’000 58,875 87,490 17,323 14,351 14,591 14,839 3,692 4,942 5,739 4,511 38,482 29,175 2,802 2,795 — — 2,422 4,707 143,926 162,810	The Company 2009 2008 RMB’000 RMB’000 — — — — 2,744 4,493 — — — — — — — — 71,057 5,097 4,934 4,747 78,735 14,337	The Company 2009 2008 RMB’000 RMB’000 — — — — 2,744 4,493 — — — — — — — — 71,057 5,097 4,934 4,747 78,735 14,337
			14,337

Amount due to a director is unsecured, non-interest bearing and has no fixed terms of repayment.

Included in trade and other payables are trade payables and bills payable with the following ageing analysis as of the balance sheet date:

Due within 6 months or on demand	The Group 2009 2008 RMB’000 RMB’000 76,198 101,841

– 65 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

22. BANK LOANS

At 30 June 2009, the bank loans were repayable as follows:

Within 1 year or on demand After 1 year but within 2 years After 2 years but within 5 years	The Group 2009 2008 RMB’000 RMB’000 250,972 253,822 4,000 30,000 12,000 — 266,972 283,822	The Company 2009 2008 RMB’000 RMB’000 26,388 99,022 — — — — 26,388 99,022	The Company 2009 2008 RMB’000 RMB’000 26,388 99,022 — — — — 26,388 99,022
			99,022

At 30 June 2009, the bank loans were secured as follows:

Secured by leasehold land and buildings held for own use (note (i)) Secured by shares (note (ii)) Secured by bills receivable (note (iii)) Secured by land and buildings of a third party (note (iv)) Unsecured (note (vii))	The Group 2009 2008 RMB’000 RMB’000 78,000 77,000 26,388 99,022 10,785 — 54,000 — 97,799 107,800 266,972 283,822	The Company 2009 2008 RMB’000 RMB’000 — — 26,388 99,022 — — — — — — 26,388 99,022	The Company 2009 2008 RMB’000 RMB’000 — — 26,388 99,022 — — — — — — 26,388 99,022
			99,022

Notes:

• (i) At 30 June 2009, certain interest in leasehold land held for own use under operating lease and buildings held for own use of RMB132,271,000 (2008: RMB169,907,000) were pledged to banks for bank loans totalling RMB78,000,000 (2008: RMB77,000,000) granted to the Group.

• (ii) As at 30 June 2009, a bank loan with outstanding principal amount of US$4,000,000 (equivalent to RMB27,509,000) (2008: US$15,000,000 (equivalent to RMB102,852,000)) granted to the Company was secured by the entire equity interest in Superford, Tempest, Winrise and Herowin (the ‘‘BVI subsidiaries’’). The BVI subsidiaries are the immediate holding companies of Fuqiang, Gemini, Shuangxiang and Haichuang, respectively (the ‘‘PRC subsidiaries’’). The PRC subsidiaries are the operating subsidiaries of the Group. Total net asset value of the BVI and PRC subsidiaries as at 30 June 2009 was approximately RMB474,166,000 (2008: RMB822,590,000).

• (iii) The Group’s discounted bills with recourse have been accounted for as collateralised bank advances. The discounted bills receivable and the related proceeds received from discounting banks are included in the Group’s ‘‘Bills receivable’’ and ‘‘Bank loans’’ as at the balance sheet date.

• (iv) As at 30 June 2009, bank loans totalling RMB54,000,000 (2008: RMB Nil) granted to the Group were secured by land and buildings of an unrelated individual, Zhou Hong Mei. The directors have confirmed that this individual is not related to the Group.

• (v) At 30 June 2009, the Group did not have any undrawn committed borrowing facilities (2008: RMB Nil).

• (vi) At 30 June 2008, the Company had breached one of the covenants of a bank loan amounting to RMB99,022,000, which required the Group to maintain its consolidated profits before interest expenses, tax on income and profits, tax credits, depreciation, amortisation, exceptional items and any extraordinary items (‘‘EBITDA’’) at not less than seven times the Group’s interest expenses. Included in the amount utilised was RMB60,254,000 which, in accordance with the terms of the banking facility, was scheduled to be repaid after one year from the balance sheet date, but was

– 66 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

classified as current liabilities in the consolidated and company balance sheets as at 30 June 2008 as the Company did not have an unconditional right at the balance sheet date to defer settlement for at least the next twelve months as a result of the breach of that covenant.

The Company signed a Waiver Agreement with the bank in December 2008 (the ‘‘Waiver Agreement’’), allowing the Company to repay the loan under a revised schedule and settle the outstanding amount in terms of instalments from January 2009 to October 2009. However, at 30 June 2009, the Company breached one of the conditions imposed under the Waiver Agreement that restricted the Group’s capital expenditure at a ceiling of US$1,000,000 (equivalent to approximately RMB6,877,000). At 30 June 2009, the outstanding principal amount of the bank loan was US$4,000,000 (equivalent to approximately RMB27,509,000). Subsequent to the balance sheet date, the Company defaulted on payment of the monthly instalment of US$1,000,000 (equivalent to approximately RMB6,877,000) due in August 2009. After discussion with the bank, the Company settled US$700,000 (equivalent to approximately RMB4,814,000) in September 2009. The directors are currently in discussion with the bank for a revised repayment schedule to have the remaining balance of the bank loan fully settled by 31 December 2009.

Other than the above, none of the covenants relating to drawn down facilities had been breached as at 30 June 2009 (2008: RMB Nil). Further details of the Group’s management of liquidity risk are set out in note 31(b).

• (vii) A corporate guarantee has been issued by the Company in respect of bank loans of RMB83,800,000 (2008: RMB83,800,000) granted to subsidiaries. As at the balance sheet date, the directors do not consider it probable that a claim will be made against the Company under the guarantee. The maximum liability of the Company at the balance sheet date under the guarantee issued amounted to RMB83,800,000 (2008: RMB83,800,000). The Company has not recognised any deferred income in respect of the guarantee as the fair value of such guarantee cannot be reliably measured and the transaction price was nil.

23. OBLIGATIONS UNDER FINANCE LEASES

At 30 June 2009, the obligations under finance leases were repayable as follows:

Within 1 year After 1 year but within 2 years	Present value of the minimum lease payments RMB’000 — — —	2009 Interest expense relating to future periods RMB’000 — — —	The Group Total minimum lease payments Present value of the minimum lease payments RMB’000 RMB’000 — 2,591 — 510 — 3,101	2008 Interest expense relating to future periods RMB’000 150 9 159	Total minimum lease payments RMB’000 2,741
					519
					3,260

24. INCOME TAX IN THE BALANCE SHEET

• (a) Current taxation in the balance sheet represents:

Provision for PRC enterprise income tax for the year PRC enterprise income tax paid relating to the current year	The Group 2009 2008 RMB’000 RMB’000 8,786 21,367 (8,786) (16,638 — 4,729	The Group 2009 2008 RMB’000 RMB’000 8,786 21,367 (8,786) (16,638 — 4,729
		4,729

– 67 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(b) Deferred tax (assets)/liabilities recognised:

The components of deferred tax (assets)/liabilities recognised in the consolidated balance sheet and the movements during the year are as follows:

General provision RMB’000 Deferred tax arising from: At 1 July 2007 (1,716) (Credited)/charged to profit or loss (676) Charged to reserves — At 30 June 2008 (2,392) At 1 July 2008 (2,392) Charged/(credited) to profit or loss 2,392 Credited to reserves — At 30 June 2009 — Net deferred tax assets recognised on the balance sheet Net deferred tax liabilities recognised on the balance sheet		The Group	The Group
		Withholding tax on undistributed profits of PRC subsidiaries RMB’000 — 5,280 — 5,280 5,280 1,581 — 6,861	Others Total RMB’000 RMB’000 (340) (2,056 (1,380) 3,224 3,252 3,252 1,532 4,420 1,532 4,420 (56,078) (52,105 (3,204) (3,204 (57,750) (50,889 The Group 2009 2008 RMB’000 RMB’000 (57,750) (2,147 6,861 6,567 (50,889) 4,420	Total RMB’000 (2,056 3,224 3,252
				4,420
				4,420 (52,105 (3,204
				(50,889
				4,420

(c) Deferred tax assets not recognised:

At 30 June 2009, the Group had not recognised deferred tax assets in respect of tax losses and other deductible temporary differences of approximately RMB15,168,000 (2008: RMB52,000) and RMB196,784,000 (2008: RMB Nil) respectively as it was not probable that future taxable profits against which the losses could be utilised would be available in the relevant tax jurisdiction and entity. The tax losses will expire within five years.

– 68 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

25. DERIVATIVE FINANCIAL INSTRUMENTS

As at 1 July 2008/2007 Payments made during the year Change in fair value Loss on termination Exchange adjustments Derecognition upon termination (note 26) Structured interest rate swaps as at 30 June 2009/2008	The Group and the Company 2009 2008 RMB’000 RMB’000 165,067 151,280 (3,434) (30,931 — 60,334 1,087 — 372 (15,616 (163,092) — — 165,067	The Group and the Company 2009 2008 RMB’000 RMB’000 165,067 151,280 (3,434) (30,931 — 60,334 1,087 — 372 (15,616 (163,092) — — 165,067
		165,067

During the year ended 30 June 2007, the Company entered into two structured interest rate swaps (the ‘‘Swaps’’) with maturity in 2012 with a commercial bank (the ‘‘Bank’’), under which total upfront payments (the ‘‘Upfront Payments’’) of approximately RMB113,490,000 were received at the inception of the Swap Agreements and were initially recognised as derivative financial liabilities in the balance sheet. The Swap Agreements were remeasured at fair value as provided and estimated by Deutsche Bank AG using a valuation technique based on certain assumptions at each balance sheet date.

The Swap Agreements are structured and packaged utilising a combination of different financial instruments. These may include but were not limited to cash instruments, futures and forward instruments, options instruments and other types of derivatives. The fair value of the Swap Agreements at each balance sheet date, besides taking into account the expected cashflows of the Swap Agreements, also took into consideration the aggregate market value of the different underlying financial instruments on that particular valuation date. In addition, factors such as the forward interest rates, interest rate volatility, the yield curve, the shape of the yield curve, the level of an index published on Bloomberg and other market data which Deutsche Bank AG believed to be appropriate at the time of calculating the fair value, affected the final valuation of the Swap Agreements. During the year ended 30 June 2008, a loss on change in fair value of RMB60,334,000 was recognised in profit or loss.

Key terms of the interest rate swaps are summarised as follows:

	Swap 1	Swap 2
Notional amounts:	HK$390,000,000	US$100,000,000
Upfront Payments:	HK$39,000,000	US$10,000,000
Effective date:	14 February 2007	19 April 2007
Maturity date:	14 February 2012	19 April 2012
Bank pays:		8% (semi-annually)
— First six months	7% (semi-annually)
— Thereafter	7%* N/D (semi-annually)
	(Note (i))
The Company pays:	9% (semi-annually)	First six months: 10% (semi-annually)
		Thereafter: 10%–5* (Index YoY Return-1%)
		Coupon capped at 13% and floored
		at 0% (semi-annually) (Note (ii))

Notes:

• (i) N equals the number of business days in the Observation Period (each such date a ‘‘Reference Date’’) for which Reference Rate 1 minus Reference Rate 2** is greater than or equal to 0%.

D equals the actual number of business days in such Observation Period.

– 69 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

For purpose of calculating ‘‘N’’ for each Observation Period, the Reference Rate 1 and Reference Rate 2 shall be observed on each Reference Date during such Observation Period (each such date an ‘‘Observation Date’’).

• Observation Period means each period beginning from and including the day which is five business days prior to the previous payment date (or the effective date in the case of the first six months), to but excluding the day that is six business days prior to the next following payment date.

• ** Reference Rate 1 means the HKD-Swap Rate published by the International Swaps and Derivatives Association, Inc. with a designated maturity of ten years.

• *** Reference Rate 2 means the HKD-Swap Rate published by the International Swaps and Derivatives Association, Inc. with a designated maturity of two years.

• (ii) Index means the Deutsche Bank Pan-Asian Forward Rate Bias Index (the ‘‘Index’’) as published on Bloomberg.

Index YoY Return is the closing level of the Index five business days prior to the end of the relevant coupon payment period/closing level of the Index five business days prior to the coupon payment date which is two coupon payment periods prior to the relevant coupon payment (or effective date in cash of the second coupon payment period) — 1.

In accordance with the terms and conditions of the Swap Agreements, the Group was required to settle with Deutsche Bank AG semi-annually on a net basis. During the year ended 30 June 2009, the Group made payments of approximately RMB3,434,000 (2008: RMB30,931,000) to Deutsche Bank AG, of which RMB3,434,000 (2008: RMB20,072,000) was financed by the controlling shareholder of the Company. The details of the financial assistance from the controlling shareholder are disclosed in note 27.

On 12 November 2008, the Swap Agreements were early terminated by Deutsche Bank AG as a result of the Company not paying the interest payment under the Swap 2 on the due date in October 2008 and the Company received a statement of demand dated 13 November 2008 for an early termination amount (the ‘‘Termination Amount’’) of US$23,714,693 (equivalent to approximately RMB163,092,000) and a loss of RMB1,087,000 was recognised upon termination of the Swap Agreements on the same date. Subsequently, Deutsche Bank AG filed a claim at the High Court of Hong Kong against the Company, details of which are set out in note 33. The Termination Amount remained unsettled with Deutsche Bank AG as at 30 June 2009 and is included under ‘‘Other financial liabilities’’ (see note 26) in the balance sheet as at that date.

26. OTHER FINANCIAL LIABILITIES

Upon early termination of Swaps on 12 November 2008 (note (i)) Accrued interest (note (ii)) At 30 June 2009 Notes:	The Group and the Company 2009 RMB’000 163,092 1,351
	164,443

• (i) The balance represents the Termination Amount demanded by Deutsche Bank AG as a result of the early termination of the Swap Agreements by Deutsche Bank AG (see note 25).

• (ii) Interest is accrued on the Termination Amount for the period from 12 November 2008 to 30 June 2009 at a rate per annum equal to the cost to Deutsche Bank AG if it were to fund the relevant amount plus 1% per annum in accordance with the ISDA 2002 Master Agreement of the Swap Agreements. The directors used the overnight USD London Interbank Offered Rates plus 1% per annum to estimate the accrued interest.

– 70 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

27. AMOUNT DUE FROM/(TO) THE CS

Amount due from the CS — current assets Amount due to the CS — non-current liabilities	The Group and the Company 2009 2008 RMB’000 RMB’000 61,975 — — (16,089	The Group and the Company 2009 2008 RMB’000 RMB’000 61,975 — — (16,089
		(16,089

In order to minimise speculation on the financial exposure of the Company under the Swap Agreements, on 12 December 2007, Mr Lin Wan Qaing, the CS and a director of the Company, executed a deed of indemnity (the ‘‘Deed’’) providing interestfree and unsecured financial assistance to the Company in respect of its interest payment obligations in connection with the Swap Agreements to the extent as follows:

• in respect of each payment period, payment by the CS will be limited to the amount payable by the Company to Deutsche Bank AG after netting off the amount payable by Deutsche Bank AG to the Company, if any;

• in case the Company receives amount from Deutsche Bank AG after netting off the amount payable by the Company to Deutsche Bank AG and the amount payable by Deutsche Bank AG, the Company will keep such amount received from Deutsche Bank AG; and

• at the maturity date of the Swap Agreements, the Company shall reimburse the CS such amount of sum(s) paid by the CS to the Company under the Deed to the extent of the amount of the Cash Inflow (as defined as the aggregate amount of the payments of approximately RMB113,490,000 received at the inception of the Swap Agreements (‘‘Upfront Payments’’) as disclosed in note 25 and the amount received from Deutsche Bank AG), and for the avoidance of doubt, if the Cash Inflow exceeds the aggregate amount of sums actually paid by the CS to the Company under the Deed, the Company will only be required to reimburse the CS such amount equivalent to the sum actually paid by the CS to the Company under the Deed.

In addition, under the Deed, the CS shall indemnify and at all times keep the Company fully indemnified against all liabilities, claims, damages, costs and expenses which the Company may suffer, incur or sustain by reason of the CS’s failure in his performance of obligations under the Deed.

As a result of the arrangement under the Deed, given the CS is assuming the obligations of the Company and the Company is required to reimburse the CS to the extent of the Cash Inflow, if the Company is eventually liable to pay more than it receives from Deutsche Bank AG (i.e. the Company makes a loss), the maximum future cash outflows of the Company under the Swap Agreements will be contained at the amount of the Upfront Payments. If however, the aggregate receivables by the Company from Deutsche Bank AG is greater than the payables by the Company to Deutsche Bank AG (i.e. the Company makes a gain), this would mean that the amount actually paid out by the CS is less than the amount received by the Company, the Company will still be entitled to keep the difference (i.e. net amount received) since the Company is only required to reimburse the CS such amount equivalent to the sum actually paid by the CS to the Company under the Deed.

– 71 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The movements during the year are as follows:

As at 1 July 2008/2007 Payments made by the CS to Deutsche Bank AG during the year Fair value adjustment of amount due to the CS (note (i)) Interest on amount due to the CS (note (i)) Contributions by the CS upon termination (note (ii)) Exchange adjustments As at 30 June 2009/2008	The Group and the Company 2009 2008 RMB’000 RMB’000 (16,089) — (3,434) (20,072) 561 3,272 (288) (175) 81,167 — 58 886 61,975 (16,089)

Notes:

• (i) In accordance with the accounting policies set out in notes 1(m) and (v), the amount of financial assistance received is initially recognised at fair value, as the indemnified amounts were expected to be settled upon original maturity dates of the Swap Agreements in 2012. During the year ended 30 June 2009, a total amount of RMB561,000 (2008: RMB3,272,000), being the difference between the fair value based on expected cash flows and the nominal amount of cash received by the Company was recognised as a capital contribution by the CS in the capital contribution reserve within equity. The financial assistance is subsequently stated at amortised cost and the related interest expense calculated using the effective interest method has been recognised in profit or loss.

• (ii) According to the Deed, the CS is obligated to indemnify the Company the semi-annual interest payments made after the execution of the indemnity, the early termination amount, the interest accrued subsequent to termination and all related costs incurred thereon, while the Company will be required to reimburse the CS such amount equivalent to the sum actually paid by the CS to the Company under the Deed to the extent of the amount of the Company’s Cash Inflow from Deutsche Bank AG.

– 72 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

28. CAPITAL AND RESERVES

(a) The Group

At 1 July 2007 Exchange difference on translation of financial statements of operations outside PRC Surplus on revaluation of buildings held for own use, net of deferred tax Issue of shares upon exercise of subscription rights attached to the convertible bonds Issue of shares under the share option scheme Purchase and cancellation of own shares — par value paid — premium paid — transfer between reserves Fair value adjustment of amount due to the CS Dividend approved in respect of the previous year (note 10(b)) Profit for the year Appropriations to statutory reserve At 30 June 2008 At 1 July 2008 Exchange difference on translation of financial statements of operations outside PRC Realisation of surplus on revaluation of buildings held for own use upon disposal, net of deferred tax Impairment of buildings held for own use, net of deferred tax Fair value adjustment of amount due to the CS Contributions by the CS upon termination of derivative financial instruments Dividend approved in respect of the previous year (note 10(b)) Loss for the year Lapse of share options At 30 June 2009	Share capital RMB’000 58,123 — — 186 371 (19) — — — — — — 58,661 58,661 — — — — — — — — 58,661	Share premium RMB’000 244,971 — — 1,655 4,107 — (123) (19) — (10,780) — — 239,811 239,811 — — — — — (1,969) — — 237,842	Share-based compensation reserve (note (i)) RMB’000 3,209 — — — (126) — — — — — — — 3,083 3,083 — — — — — — — (337) 2,746	Statutory reserve (note (ii)) RMB’000 3,440 — — — — — — — — — — 10,834 14,274 14,274 — — — — — — — — 14,274	Capital reserve (note (iii)) RMB’000 63,947 — — — — — — — — — — — 63,947 63,947 — — — — — — — — 63,947	Exchange reserve (note (iv)) RMB’000 2,001 26,611 — — — — — — — — — — 28,612 28,612 (689) — — — — — — — 27,923	Building valuation reserve (note (v)) RMB’000 4,030 — 10,397 — — — — — — — — — 14,427 14,427 — (3,891) (10,536) — — — — — —	Capital contribution reserve (note (vi)) RMB’000 — — — — — — — — 3,272 — — — 3,272 3,272 — — — 561 81,167 — — — 85,000	Capital redemption reserve (note (viii)) RMB’000 — — — — — — — 19 — — — — 19 19 — — — — — — — — 19	Retained profits RMB’000 507,066 — — — — — — — — (7,384) 11,179 (10,834) 500,027 500,027 — 3,891 — — — — (360,202) 337 144,053	Total equity RMB’000 886,787 26,611 10,397 1,841 4,352 (19 (123 — 3,272 (18,164 11,179 —
											926,133
											926,133 (689 — (10,536 561 81,167 (1,969 (360,202 —
											634,465

– 73 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(b) The Company

At 1 July 2007 Exchange difference on translation of financial statements of the Company into RMB Issue of shares upon exercise of subscription rights attached to the convertible bonds Issue of shares under the share option scheme Purchase and cancellation of own shares — par value paid — premium paid — transfer between reserves Fair value adjustment of amount due to the CS Dividend approved in respect of the previous year (note 10(b)) Loss for the year At 30 June 2008 At 1 July 2008 Exchange difference on translation of financial statements of the Company into RMB Fair value adjustment of amount due to the CS Contributions by the CS upon termination of derivative financial instruments Lapse of share options Dividend approved in respect of the previous year (note 10(b)) Loss for the year At 30 June 2009	Share capital RMB’000 58,123 — 186 371 (19) — — — — — 58,661 58,661 — — — — — — 58,661	Share premium RMB’000 244,971 — 1,655 4,107 — (123) (19) — (10,780) — 239,811 239,811 — — — — (1,969) — 237,842	Share-based compensation reserve (note (i)) RMB’000 3,209 — — (126) — — — — — — 3,083 3,083 — — — (337) — — 2,746	Exchange reserve (note (iv)) RMB’000 (3,697) 24,999 — — — — — — — — 21,302 21,302 (455) — — — — — 20,847	Contributed surplus (note (vii)) RMB’000 10,009 (2,625) — — — — — — (7,384) — — — — — — — — — —	Capital contribution reserve (note (vi)) RMB’000 — — — — — — — 3,272 — — 3,272 3,272 — 561 81,167 — — — 85,000	Capital redemption reserve (note (viii)) RMB’000 — — — — — — 19 — — — 19 19 — — — — — — 19	Accumulated losses RMB’000 (39,367) — — — — — — — — (51,602) (90,969) (90,969) — — — 337 — (219,981) (310,613)	Total RMB’000 273,248 22,374 1,841 4,352 (19 (123 — 3,272 (18,164 (51,602
									235,179
									235,179 (455 561 81,167 — (1,969 (219,981
									94,502

Notes:

• (i) Share-based compensation reserve represents the value of share options granted to the option holders which give them the right to subscribe for ordinary shares of the Company (note 30).

• (ii) According to the relevant rules and regulations in the PRC, Gemini, Shuangxiang, Fuqiang and Haichuang are required to appropriate 10% of their after-tax profit (after offsetting prior year losses), based on the PRC statutory financial statements prepared in accordance with the relevant accounting principles and financial regulations applicable to foreign investment enterprises in the PRC, to a general reserve fund until the balance of the reserve reaches 50% of their respective registered capital. Thereafter, any further appropriations can be made at the directors’ discretion. The general reserve fund can be utilised to offset losses, or be utilised for issuance of bonus shares on condition that the general reserve fund shall be maintained at a minimum of 25% of the registered capital after such issuance.

– 74 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

• (iii) The capital reserve of the Group represents:

• (a) capital reserve of a subsidiary;

• (b) the difference between the nominal value of the ordinary shares issued by the Company and the aggregate of the share capital and share premium of a subsidiary acquired through an exchange of shares pursuant to the Group reorganisation in 2001; and

• (c) the amount of non-controlling interest as at acquisition date in excess of the fair value of the consideration paid directly recognised in equity.

• (iv) The exchange reserve comprises all foreign exchange differences arising from the translation of the financial statements of operations outside the PRC. The reserve is dealt with in accordance with the accounting policy set out in note 1(s).

• (v) The revaluation reserve has been set up and is dealt with in accordance with the accounting policies adopted for buildings in note 1(f)(ii).

• (vi) The capital contribution reserve represents the difference between the fair value of the interest-free financial assistance provided by the controlling shareholder of the Company (see note 27) initially recognised in the financial statements and the nominal amount of cash received/receivable by the Group.

• (vii) The contributed surplus of the Company represents the difference between the nominal value of the ordinary shares issued by the Company and the net asset value of subsidiaries acquired through an exchange of shares pursuant to the Group reorganisation in 2001.

• (viii) The capital redemption reserve represents the nominal value of the shares repurchased which has been paid out of the distributable reserves of the Company.

Under the Companies Law (Revised) of the Cayman Islands, share premium and contributed surplus are distributable to shareholders, subject to the condition that the Company cannot declare or pay a dividend, or make a distribution out of share premium and contributed surplus if (i) it is, or would after the payment be, unable to pay its liabilities as they become due, or (ii) the realisable value of its assets would thereby be less than the aggregate of its liabilities and its issued share capital account.

As at 30 June 2009, the Company’s reserves available for distribution to shareholders amounted to RMB Nil (2008: RMB173,227,000) computed in accordance with the Companies Law (Revised) of the Cayman Islands and the Company’s articles of association.

• (c) Authorised and issued share capital

Authorised: Ordinary shares of HK$0.10 each Ordinary shares issued and fully paid: At 1 July Issue of shares upon exercise of subscription rights attached to the convertible bonds Issue of shares under the share option scheme Shares repurchased At 30 June	The Group and the Company	The Group and the Company	The Group and the Company
	2009 Number of shares Amount ’000 RMB’000 1,000,000 106,000 558,965 58,661 — — — — — — 558,965 58,661	2008 Number of shares Amount ’000 RMB’000 1,000,000 106,000 553,169 58,123 2,000 186 4,000 371 (204) (19 558,965 58,661
			58,123 186 371 (19
			58,661

– 75 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All ordinary shares rank equally with regard to the Company’s residual assets.

(i) Repurchase of own shares

The Company did not repurchase any of its own shares during the year ended 30 June 2009.

During the year ended 30 June 2008, the Company repurchased its own ordinary shares on The Stock Exchange of Hong Kong Limited as follows:

Month/year April 2008 May 2008	Number of shares repurchased HK$ 200,000 4,000 204,000	Price paid per share HK$ 0.75 0.74	Lowest price paid per share RMB’000 — —	Aggregate price paid 139 3
				142

The repurchased shares were cancelled and accordingly the issued share capital of the Company was reduced by the nominal value of these shares. Pursuant to section 37(4) of the Companies Law (2007 Revision) of the Cayman Islands, an amount equivalent to the par value of the shares cancelled of RMB19,000 was transferred from the distributable reserves to the capital redemption reserve. The premium paid on the repurchase of the shares of RMB123,000 was charged to share premium.

(ii) Shares issued under the share option scheme

During the year ended 30 June 2008, options were exercised to subscribe for 4,000,000 ordinary shares in the Company at a consideration of RMB4,352,000 of which RMB371,000 was credited to share capital and the balance of RMB3,981,000 was credited to the share premium account. RMB126,000 has been transferred from the capital reserve to the share premium account in accordance with policy set out in note 1(o)(ii).

• (iii) Shares issued upon exercise of subscription rights attached to the convertible bonds

As at 30 June 2008, all subscription rights attached to the convertible bonds had expired.

(d) Capital management

The Group’s primary objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, by pricing products and services commensurately with the level of risk and by securing access to finance at a reasonable cost.

The Group actively and regularly reviews and manages its capital structure to maintain a balance between the higher shareholder returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position, and makes adjustments to the capital structure in light of changes in economic conditions.

The Group monitors its capital structure on the basis of a net debt-to-capital ratio. For this purpose the Group defines net debt as total debt (which includes bank loans, obligations under finance leases, trade and other payables, derivative financial instruments and other long term payable) less cash and cash equivalents. Capital comprises all components of equity.

It is the Group’s strategy to keep the net debt-to-capital ratio at a reasonable level. In order to maintain or adjust the ratio, the Group may adjust the amount of dividends paid to shareholders, issue new shares, return capital to shareholders, raise new debt financing or sell assets to reduce debt.

– 76 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The net debt-to-capital ratio at 30 June 2009 and 2008 was as follows:

Note Bank loans 22 Obligations under finance leases 23 Trade and other payables 21 Derivative financial instruments 25 Amount due to the CS 27 Other financial liabilities 26 Total debt Less: Cash and cash equivalents 20 Net (cash)/debt Total equity 28 Net debt-to-capital ratio	The Group 2009 2008 RMB’000 RMB’000 266,972 283,822 — 3,101 143,926 162,810 — 165,067 — 16,089 164,443 — 575,341 630,889 (648,450) (880,366) (73,109) (249,477) 634,465 926,133 N/A N/A	The Company 2009 2008 RMB’000 RMB’000 26,388 99,022 — — 78,735 14,337 — 165,067 — 16,089 164,443 — 269,566 294,515 (1,175) (8,475 268,391 286,040 94,502 235,179 284% 122%	The Company 2009 2008 RMB’000 RMB’000 26,388 99,022 — — 78,735 14,337 — 165,067 — 16,089 164,443 — 269,566 294,515 (1,175) (8,475 268,391 286,040 94,502 235,179 284% 122%
			294,515 (8,475
			286,040
			235,179
			122%

As imposed by a bank loan agreement between a bank and the Company, the Group is required to maintain a ratio of ‘‘consolidated gross borrowings’’ to ‘‘equity’’ not exceeding 100%. For the purpose of this capital requirement, ‘‘consolidated gross borrowings’’ is defined as the aggregate of secured and unsecured financial indebtedness of the Group, and ‘‘equity’’ is defined as the aggregate of the amount paid up or credited as paid up on the issued share capital (other than any redeemable share capital) of the Company.

Other than the above, neither the Company nor any of its subsidiaries were subject to externally imposed capital requirements in either the current or prior year.

29. EMPLOYEE RETIREMENT BENEFITS

Hong Kong

The Group operates a Mandatory Provident Fund Scheme (the ‘‘MPF Scheme’’) under the Hong Kong Mandatory Provident Fund Schemes Ordinance for employees employed under the jurisdiction of the Hong Kong Employment Ordinance. The MPF Scheme is a defined contribution retirement scheme administered by independent trustees. Under the MPF Scheme, the employer and its employees are each required to make contributions to the MPF Scheme at 5% of the employees’ relevant income, subject to a cap of monthly relevant income of HK$20,000. Contributions to the MPF Scheme vest immediately.

PRC, other than Hong Kong

The PRC subsidiaries of the Group participates in a mandatory central pension scheme organised by the PRC government for certain of its employees, the assets of which are held separately from those of the Group. Contributions made are based on a percentage of the eligible employees’ salaries and are charged to profit or loss as they became payable, in accordance with the rules of the scheme. The employers’ contributions vest fully once they are made. Under this scheme, retirement benefits of existing and retired employees are payable by the relevant scheme administrators and the Group has no further obligations beyond the annual contributions.

The Group does not have any other pension schemes for its employees in respect of the subsidiaries outside Hong Kong and PRC. In the opinion of the directors of the Company, the Group did not have any significant liabilities beyond the above contributions in respect of the retirement benefits of its employees.

– 77 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

30. EQUITY SETTLED SHARE-BASED TRANSACTIONS

The Company adopted a share option scheme for a period of 10 years commencing from 9 January 2003. Under the terms of this scheme, the exercise price of options will be determined by the board of directors of the Company and should not be less than the highest of (i) the nominal value of the Company’s ordinary shares, (ii) the closing price of the ordinary shares on the Main Board of the Stock Exchange on the date of grant and (iii) the average closing price of the ordinary shares on the Main Board of the Stock Exchange for the five business days immediately preceding the date of grant. The options vest immediately at the date of grant and are then exercisable within a period of three years. Each option gives the holder the right to subscribe for one ordinary share in the Company.

• (a) The terms and conditions of the grants that existed during the years are as follows, whereby all options are settled by physical delivery of shares:

Options granted to employees: — on 4 September 2006 Options granted to directors: — on 4 September 2006 Total share options	Number of instruments Vesting conditions Contractual life of options 5,500,000 Immediate at the date of grant 3 years 6,500,000 Immediate at the date of grant 3 years 12,000,000

• (b) The number and weighted average exercise prices of share options are as follows:

Outstanding at 1 July 2008/2007 Exercised during the year Lapsed during the year Outstanding at 30 June 2009/2008 Exercisable at 30 June 2009/2008	2009 Weighted average exercise price Number of options HK$1.038 12,000,000 — — HK$1.038 (1,500,000) HK$1.038 10,500,000 10,500,000	2008 Weighted average exercise price Number of options HK$1.072 16,000,000 HK$1.172 (4,000,000 — — HK$1.038 12,000,000 12,000,000	2008 Weighted average exercise price Number of options HK$1.072 16,000,000 HK$1.172 (4,000,000 — — HK$1.038 12,000,000 12,000,000
			12,000,000
			12,000,000

No share option was exercised during the year. The weighted average share price at the date of exercise for shares options exercised during the year ended 30 June 2008 was RMB1.604.

The options outstanding at 30 June 2009 had an exercise price of RMB1.038 (2008: RMB1.038) and a weighted average remaining contractual life of 0.17 years (2008: 1.17 years).

– 78 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(c) Fair value of share options and assumptions

The fair value of services received in return for share options granted is measured by reference to the fair value of share options granted. The estimate of the fair value of the services received was measured based on Black-Scholes-Merton Option Pricing Model as follows:

	Options granted on
	4 September 2006
Fair value at measurement date	HK$0.2554
Exercise price	HK$1.038
Risk free rate	3.933%
Nature of the share options	Call
Expected life	3 years
Expected volatility	37.659%
Expected dividend yield	2.590%

The expected volatility is based on the historical share price of the Company over the 260 trading days immediately before the valuation date. Changes in the subjective input assumptions could materially affect the fair value estimate.

The above calculation is based on the assumption that there is no material difference between the expected volatility over the whole life of the options and the historical volatility of the ordinary shares as set out above.

31. FINANCIAL INSTRUMENTS

Exposure to credit, liquidity, interest rate and currency risks arises in the normal course of the Group’s business. The Group is also exposed to equity price risk arising from its equity investments in other entities. These risks are limited by the Group’s financial management policies and practices described below.

(a) Credit risk

The Group’s credit risk is primarily attributable to deposits with banks and trade and other receivables. Management has a credit policy in place and the exposures to these credit risks are monitored on an ongoing basis.

The major concentration of credit risk arises from exposures to deposits placed in financial institutions operating in one geographical region, the PRC. The Group only places deposits with the major financial institutions in the PRC.

The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheets.

Except for the financial guarantees given by the Company as set out in note 22(vii), the Company does not provide any other guarantees which would expose the Company to credit risk. The maximum exposure to credit risk in respect of these financial guarantees at the balance sheet date is disclosed in note 22(vii).

For year ended 30 June 2009, the largest and the five largest customers of the Group in aggregate accounted for approximately 15% (2008: 12%) and 44% (2008: 41%) respectively of the Group’s total sales. At 30 June 2009, approximately 26% (2008: 1%) and 46% (2008: 36%) of trade receivables was due from the largest and the five largest customers. As a result, a termination of the relationship or a reduction in orders from the five largest customers would have a material impact on the Group’s results of operations and financial condition. Credit evaluations are performed on all customers requiring credit over a certain amount. Normally, these receivables are due within 90 days to 180 days from the date of billing and the Group does not obtain collateral from customers.

(b) Liquidity risk

Individual operating entities within the Group are responsible for their own cash management, including the short term investment of surplus cash and the raising of loans to cover expected cash requirements, subject to approval by the Company’s board when the borrowings exceed certain predetermined levels of authority. The Group regularly monitors

– 79 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

current and expected liquidity requirements and its compliance with lending covenants, to ensure that it maintains sufficient reserves of cash and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term.

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

The Group

Bank loans Trade and other payables Other financial liabilities			2009
	Carrying amount RMB’000 266,972 143,926 164,443 575,341	Total contractual undiscounted cash flow RMB’000 276,202 143,926 164,443 584,571	Within 1 year or on demand RMB’000 258,687 143,926 164,443 567,056	More than 1 year but less than 2 years RMB’000 4,937 — — 4,937	More than 2 years but less than 5 years RMB’000 12,578 — —
					12,578

Bank loans Obligations under finance leases Trade and other payables Amount due to the CS			2008
	Carrying amount RMB’000 283,822 3,101 162,810 16,089 465,822	Total contractual undiscounted cash flow RMB’000 295,793 3,260 162,810 19,361 481,224	Within 1 year or on demand RMB’000 264,757 2,741 162,810 — 430,308	More than 1 year but less than 2 years RMB’000 31,036 519 — — 31,555	More than 2 years but less than 5 years RMB’000 — — — 19,361
					19,361

– 80 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The Company

Bank loans Other payables Other financial liabilities			2009
	Carrying amount RMB’000 26,388 78,735 164,443 269,566	Total contractual undiscounted cash flow RMB’000 26,629 78,735 164,443 269,807	Within 1 year or on demand RMB’000 26,629 78,735 164,443 269,807	More than 1 year but less than 2 years RMB’000 — — — —	More than 2 years but less than 5 years RMB’000 — — —
					—

Bank loans Other payables Amount due to the CS			2008
	Carrying amount RMB’000 99,022 14,337 16,089 129,448	Total contractual undiscounted cash flow RMB’000 103,478 14,337 19,361 137,176	Within 1 year or on demand RMB’000 103,478 14,337 — 117,815	More than 1 year but less than 2 years RMB’000 — — — —	More than 2 years but less than 5 years RMB’000 — — 19,361
					19,361

For the years ended 30 June 2008 and 2009, under the Deed executed by the CS (see note 27), the Group’s liquidity risk arising from the Swap Agreements (see note 25) and the early termination of the Swap Agreements (see note 26) was fully covered.

– 81 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(c) Interest rate risk

The Group’s interest rate risk arises primarily from bank loans. Bank loans issued at variable rates and at fixed rates expose the Group to cash flow interest rate risk and fair value interest rate risk respectively. The Group’s interest rate profile of the non-derivative financial instruments as monitored by management is set out in (i) below.

(i) Interest rate profile

The following table details the interest rate profile of the Group’s and the Company’s net borrowings (being interest-bearing borrowings less cash and cash equivalents and pledged deposits) at the balance sheet date.

Net fixed rate borrowings: Bank loans Net variable rate borrowings: Obligations under finance leases Bank loans Other financial liabilities Less: Pledged deposits Less: Cash and cash equivalents Total net (deposits)/ borrowings Net fixed rate borrowings as a percentage of total net borrowings	The Group 2009 2008 Effective interest rate Effective interest rate % RMB’000 % RMB’000 5.35 115,584 8.19 53,800 — — 4.77 3,101 5.15 151,388 6.15 230,022 1.28 164,443 — — 0.36 (8,662) 0.72 (4,307) 0.36 (648,450) 0.72 (880,366) (341,281) (651,550) (225,697) (597,750) N/A N/A	The Company	The Company
		2009 2008 Effective interest rate Effective interest rate % RMB’000 % RMB’000 — — — — — — — — 2.72 26,388 4.50 99,022 1.28 164,443 — — — — — — 0.01 (1,175) 0.36 (8,475 189,656 90,547 189,656 90,547 0% 0%
			— 99,022 — — (8,475
			90,547
			90,547
			0%

– 82 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(ii) Sensitivity analysis

The Group’s sensitivity to interest rate risk at each balance sheet date with all other variables were held constant is as follows:

(Decrease)/increase in loss for the year (2008: (increase)/decrease in profit for the year) if interest rates has been 100 basis points higher: — for net variable rate borrowings — for the Swap Agreements (note 25) (Increase)/decrease in loss for the year (2008: (increase)/decrease in profit for the year) if interest rates has been 100 basis points lower: — for net variable rate borrowings — for the Swap Agreements (note 25)	2009 RMB’000 (1,363) — (1,363) 1,363 — 1,363	2008 RMB’000 (1,960) 3,352 1,392 1,960 96 2,056

The sensitivity analysis above has been determined assuming that the change in interest rates had occurred at the balance sheet date and had been applied to the exposure to interest rate risk for both derivative and nonderivative financial instruments in existence at that date. The analysis has been performed on the same basis for 2008.

For the year ended 30 June 2008, apart from the changes in interest rate, the fair value of the Swap Agreements would be significantly affected by the applicable interest rate curve, the applicable interest rate curve projections, the volatility and correlation of applicable interest rate market and the market expectations of the forward rates of the underlying composites. It is not practicable without undue delay and cost to estimate how profit of the Group would have been affected by changes in each of these risk variable that were reasonably possible as at 30 June 2008. However, it is reasonably expected that such effects on profit or loss of the Group would be significant. As disclosed in note 25, the Swap Agreements were terminated during the year ended 30 June 2009.

– 83 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(d) Currency risk

• (i) The Group is exposed to currency risk primarily through sales and purchases and certain financial assets and liabilities that are denominated in a currency other than the functional currency of the operations to which they relate. The currencies giving rise to this risk are primarily Euros, United States Dollars and Hong Kong Dollars.

• (ii) Exposure to currency risk

The following table details the Group’s and the Company’s exposure at the balance sheet date to currency risk arising from recognised assets or liabilities denominated in a currency other than the functional currency of the entity to which they relate.

The Group

Trade and other receivables Amount due from the CS Cash and cash equivalents Trade and other payables Bank loans Other financial liabilities Amount due to the CS Overall net exposure		2009	Hong Kong Dollars ’000 1,998 — 125 (1,756) — — — 367		2008
	United States Dollars ’000 3,223 13,911 331 (327) (3,837) (23,911) — (10,610)	Euros ’000 326 — 30 (45) — — — 311		United States Dollars ’000 3,438 — 772 (398) (14,431) — (1,924) (12,543)	Euros ’000 294 — 79 (45) — — — 328	Hong Kong Dollars ’000 2,131 — 603 (1,640 — — —
						1,094

The Company

Trade and other receivables Amount due from the CS Cash and cash equivalents Bank loans Other financial liabilities Amount due to the CS Overall net exposure		2009	Hong Kong Dollars ’000 — — — — — — —		2008
	United States Dollars ’000 — 13,911 103 (3,837) (23,911) — (13,734)	Euros ’000 — — — — — — —		United States Dollars ’000 — — 206 (14,431) — (1,924) (16,149)	Euros ’000 — — — — — — —	Hong Kong Dollars ’000 — — — — — —
						—

– 84 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(iii) Sensitivity analysis

The following table indicates the instantaneous change in the Group’s (loss)/profit after taxation (and retained profits) and other components of consolidated equity that would arise if foreign exchange rates to which the Group has significant exposure at the balance sheet date had changed at that date, assuming all other risk variables remained constant.

The Group

United States Dollars Euros Hong Kong Dollars	2009 Increase/ (decrease) in foreign exchange rates Effect on loss after taxation and retained profits Effect on other components of equity RMB’000 RMB’000 10% (1,776) — (10)% 1,776 — 10% 240 — (10)% (240) — 10% 44 — (10)% (44) —	2008
		Increase/ (decrease) in foreign exchange rates Effect on profit after taxation and retained profits Effect on other components of equity RMB’000 RMB’000 10% (2,059) — (10)% 2,059 — 10% 291 — (10)% (291) — 10% 99 — (10)% (99) —

Results of the analysis as presented in the above table represent an aggregation of the instantaneous effects on each of the Group entities’ (loss)/profit after taxation and equity measured in the respective functional currencies, translated into Renminbi at the exchange rates ruling at the balance sheet date for presentation purposes.

The sensitivity analysis assumes that the change in foreign exchange rates had been applied to re-measure those financial instruments held by the Group which expose the Group to foreign currency risk at the balance sheet date, including inter-company payables and receivables within the Group which are denominated in a currency other than the functional currencies of the lender or the borrower. The analysis excludes differences that would result from the translation of the financial statements of operations outside the PRC into the Group’s presentation currency. The analysis has been performed on the same basis for 2008.

(e) Equity price risk

The Group is exposed to equity price changes arising from equity investments classified as trading securities which are listed (see note 16).

The Group’s listed investments are two mutual funds listed on the Shenzhen Stock Exchange and the Shanghai Stock Exchange respectively. The management monitors regularly the performance of the investments against expectation, as well as the Group’s liquidity needs.

(f) Fair values

The non-trade balances between the Company and its subsidiaries and the advances to directors are unsecured, interest-free and repayable on demand. The amount receivable from the CS at 30 June 2009 is unsecured, interest-free and has no fixed terms of repayment. Given these terms, it is not meaningful to disclose their fair values.

All other significant financial assets and liabilities are carried at amounts not materially different from their fair values as at 30 June 2009 and 2008.

– 85 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(g) Reliance on major suppliers

For year ended 30 June 2009, the largest and the five largest suppliers of the Group in aggregate accounted for approximately 14% (2008: 12%) and 41% (2008: 55%) respectively of the Group’s total purchases, evidencing a significant reliance on the Group’s largest supplier for the year ended 30 June 2009. The Group maintains several vendors for each major supply in order to diversify its vendor base. During the years ended 30 June 2009 and 2008, the Group had not encountered any material disruption of supply of raw materials and components used in the Group’s manufacture of PCBs.

32. COMMITMENTS

• (a) Capital commitments outstanding at 30 June 2009 not provided for in the financial statements were as follows:

Contracted for Authorised but not contracted for	The Group 2009 2008 RMB’000 RMB’000 62,559 35,393 43,296 52,978 105,855 88,371	The Group 2009 2008 RMB’000 RMB’000 62,559 35,393 43,296 52,978 105,855 88,371
		88,371

• (b) At 30 June 2009, the total future minimum lease payments in respect of buildings under non-cancellable operating leases are payable as follows:

Within 1 year After 1 year but within 5 years	The Group 2009 2008 RMB’000 RMB’000 461 1,441 120 430 581 1,871	The Company 2009 2008 RMB’000 RMB’000 — — — — — —	The Company 2009 2008 RMB’000 RMB’000 — — — — — —
			—

The Group leases a number of properties under operating leases. The leases typically run for an initial period of two to five years, with an option to renew each lease upon expiry when all terms are renegotiated. None of the leases includes contingent rentals.

• (c) At 30 June 2009, a subsidiary of the Company is required to inject capital of RMB88,438,000 (2008: RMB37,389,000) into a wholly owned subsidiary of that subsidiary in the PRC.

33. CONTINGENT LIABILITIES

On 10 November 2008, Deutsche Bank AG served a notice to the Company to early terminate the Swap Agreements effective on 12 November 2008 as a result of the Company not paying the interest payment under the Swap 2 on the due date in October 2008. In addition, the Company received a statement dated 13 November 2008 from Deutsche Bank AG requesting a payment of US$23,714,693 (equivalent to approximately RMB163,092,000) in total as a result of the early termination of the Swap Agreements. Deutsche Bank AG will in due course claim under the indemnity of their reasonable out-of-pocket expenses including legal fees, execution fees and stamp duty, incurred by reason of the enforcement and protection of their rights under the master agreement of the Swap Agreements or by reason of the early termination entered thereunder, including but not limited to costs of collection.

In March 2009, the Company received a Writ of Summons (‘‘the Writ’’) issued by Deutsche Bank AG as plaintiff, with the Company named as defendant, in a claim arising from the Swap Agreements.

In the Writ, the plaintiff claims against the Company for:

• (a) Damages in the liquidated sum of US$23,714,693;

– 86 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

• (b) Interest on the said sum of US$23,714,693 at the contractual rate;

• (c) Further or alternatively, interest at such rate and for such period as the Court thinks fit under sections 48 and 49 of the High Court Ordinance (Cap 4);

• (d) Further or other relief; and

• (e) Costs.

After consultation with external legal counsel in June 2009, the Company filed a defence and counterclaim against Deutsche Bank AG and an employee of Deutsche Bank AG to rescind the Swap Agreements transactions for the reason that it had been misrepresented in the true risks associated with the Swap Agreements. The directors have been advised by their external legal counsel that the case will not be concluded in a short period of time and that the outcome is uncertain. Based on the available information to date, the directors are of the opinion that no provision for legal or other related costs is required as at 30 June 2009.

In addition, under the Deed, the CS undertakes to perform the interest payment obligation of the Company under the Swap Agreements as disclosed in note 27 and is obligated to indemnify the Company against all liabilities, claims, damages, costs and expenses which the Company may suffer by reason of the CS’s failure in performance of the said obligations. Accordingly, the CS will honour his obligation to indemnify the Company should the Company be found liable to Deutsche Bank AG’s claim.

34. ACCOUNTING ESTIMATES AND JUDGMENTS

Key sources of estimation uncertainty

The method, estimates and judgements the directors use in applying the Group’s accounting policies have a significant impact on the Group’s financial position and operating results. Notes 25 and 30 contain information about the assumptions and their risk factors relating to fair value of the Swap Agreements and share options granted. Other key sources of estimation uncertainty are as follows:

Impairment of assets

The Group reviews the carrying amounts of the assets at each balance sheet date to determine whether there is objective evidence of impairment. When indication of impairment is identified, management prepares a discounted future cash flow to assess the differences between the carrying amount and value in use and provide for impairment losses, if appropriate. Any change in the assumptions adopted in the cash flow forecasts would increase or decrease in the provision for impairment losses and affect the net asset value of the Group and the Company.

Impairment losses for bad and doubtful debts are assessed and provided based on the management’s regular review of ageing analysis and evaluation of collectibility. A considerable level of judgement is exercised when assessing the credit worthiness and past collection history of each individual customer.

An increase or decrease in the above impairment loss would affect the results of the Group and the Company in future years.

Write-down of inventories

The Group reviews the carrying amounts of the inventories at each balance sheet date to determine whether the inventories are carried at the lower of cost and net realisable value in accordance with accounting policy as set out in note 1(j). Management estimates the net realisable value based on the current market situation and historical experience for similar inventories. Any change in the assumptions would increase or decrease the amount of inventories write-down or the related reversals of write-down made in prior years and affect the Group’s net asset value.

– 87 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Valuation of buildings held for own use

Buildings held for own use are stated at their revalued amount less accumulated depreciation and impairment losses. Revaluations are performed regularly. As disclosed in note 13(c), as at 30 June 2008 the buildings held for own use were revalued by independent professional valuers on an open market value basis. Such valuations are based on certain assumptions, which are subject to uncertainty and might materially differ from the actual results. Any increase or decrease in the valuations would affect the net asset value and the results of the Group in future years.

Recognition of deferred tax assets

Recognition of deferred tax assets, which principally relates to deductible temporary differences and tax losses, depends on whether it is probable that future taxable profits or taxable temporary differences will be available against which deferred tax assets can be utilised. In cases where the actual future taxable profits or taxable temporary differences generated are less than expected, a reversal of deferred tax assets may arise, which will be recognised in profit or loss for the period in which such a reversal takes place.

Depreciation

Depreciation is calculated to write off the cost of items of property, plant and equipment, less their estimated residual value, if any, using the straight-line method over their estimated useful lives. The Group reviews the estimated useful lives and residual values of the assets annually in order to determine the amount of depreciation expense to be recorded during any reporting period. The useful lives and residual values are based on the Group’s historical experience with similar assets and taking into account anticipated technological changes. The depreciation expense for future periods is adjusted if there are significant changes from previous estimates.

35. MATERIAL RELATED PARTY TRANSACTIONS

In addition to the transactions and balances disclosed elsewhere in these financial statements, the Group entered into the following material related party transactions:

Note Lease rental charged by He Yu Zhu (i) Remuneration for key management personnel (ii) — short-term employee benefits	The Group 2009 2008 RMB’000 RMB’000 277 277 3,563 4,024

Notes:

• (i) During the year, the Group entered into a lease arrangement with Ms He Yu Zhu, the spouse of Mr Lin Wan Qaing who is the controlling shareholder and a director of the Company, for leasing of an office premises in Fuzhou, the PRC. Office rentals are payable at a pre-determined amount per month by reference to market rates in accordance with the terms of the tenancy agreement signed by the Group and Ms He Yu Zhu.

• (ii) Remuneration for key management personnel includes amounts paid to the Company’s directors as disclosed in note 7. Total remuneration is included in staff costs (see note 5(b)).

36. POST BALANCE SHEET EVENT

After the restoration which was completed during the year as disclosed in notes 5(d) to the financial statements, the building and underground infrastructure of one of the Company’s subsidiaries, Shuangxiang, was damaged again by land subsidence subsequent to the balance sheet date. Up to the date of issue of these financial statements, the directors confirm that the damage did not affect the business operations of Shuangxiang and repair and maintenance work is expected to be performed and accounted for in the financial statements in future periods. At the date of issue of these financial statements, the directors are unable to estimate reliably the costs to be incurred as the Group has not yet concluded with the relevant professionals on how to carry out the restoration.

– 88 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

37. POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE FOR THE YEAR ENDED 30 JUNE 2009

Up to the date of issue of these financial statements, the HKICPA has issued a number of amendments, new standards and interpretations which are not yet effective for the year ended 30 June 2009 and which have not been adopted in these financial statements.

The Group is in the process of making an assessment of what the impact of these amendments, new standards and new interpretations is expected to be in the period of initial application. So far it has concluded that the adoption of them is unlikely to result in a restatement of the Group’s or the Company’s results of operations and financial position.

In addition, the following developments are expected to result in amended disclosures in the financial statements including restatement of comparative amounts in the first period of adoption:

		Effective for accounting periods
		beginning on or after
HKFRS 8	Operating segments	1 January 2009
Revised HKAS 1	Presentation of financial statements	1 January 2009
Amendments to HKFRS 7	Financial instruments: Disclosures	1 July 2009
	— improving disclosures about
	financial instruments
Amendments to HKAS 27	Consolidated and separate	1 July 2009
	financial statements

– 89 –

ACCOUNTANT’S REPORT ON THE STEPHIGH GROUP

APPENDIX II

The following is the text of a report, prepared for the purpose of inclusion in this circular, received from the reporting accountants, UHY Vocation HK CPA Limited, Certified Public Accountants.

==> picture [132 x 36] intentionally omitted <==

7 May 2010

The Directors Kingwell Group Limited (formerly known as ‘‘Sinotronics Holdings Limited’’)

Dear Sirs,

We set out below our report on the financial information (‘‘Financial Information’’) regarding Stephigh Group Limited (‘‘Stephigh’’) and its subsidiaries (collectively referred to as the ‘‘Stephigh Group’’) for the period from 16 July 2008 (date of incorporation) to 30 June 2009 and for the period from 16 July 2008 (date of incorporation) to 31 December 2008 and six months ended 31 December 2009 (the ‘‘Relevant Periods’’) for inclusion in the circular of Kingwell Group Limited (‘‘Kingwell’’) dated 7 May 2010 issued in connection with the proposed major acquisition of 70% equity interest in Stephigh at a consideration of HK$126,000,000 (equivalent to approximately RMB111,069,000) (the ‘‘Circular’’).

Stephigh, which acts as an investment holding company, was incorporated with limited liability in the British Virgin Islands (‘‘BVI’’) on 16 July 2008.

At the date of this report, Stephigh has the following direct and indirect subsidiaries:

			Proportion of	Proportion of
	Place of	Issued and fully	nominal value of issued
	incorporation/	paid share capital/	share capital/registered
Names of subsidiaries	establishment	registered capital	capital held		Principal activities
			Directly	Indirectly
Rise Win Group Limited	BVI	Ordinary shares	100%	—	Investment holding
(‘‘Rise Win’’)		US$50,000
Rising Ray China Group	Hong Kong	Ordinary shares	—	100%	Investment holding
Limited (‘‘Rising		HK$10,000
Ray’’)
Anlu Taihe Real Estate	The People Republic	Registered capital	—	100%	Development of
Development	of China (the	RMB30,000,000			properties for sale
Company (‘‘Anlu’’)	‘‘PRC’’)
(note)

Note: On 30 July 2008 and 31 August 2009, Rising Ray acquired 70% and 30% of the equity interests of Anlu respectively.

– 90 –

ACCOUNTANT’S REPORT ON THE STEPHIGH GROUP

APPENDIX II

The financial year end of Anlu is 31 December. The statutory audited financial statements for each of the years ended 31 December 2006, 2007 and 2008 of Anlu were prepared in accordance with the relevant accounting principles and financial regulations applicable to the PRC enterprises and audited by 湖北精誠有限責任會計師事務所, certified public accountants registered in the PRC.

For the purpose of this report, the directors of Stephigh have prepared the consolidated management accounts of Stephigh Group in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants (‘‘HKICPA’’) for the Relevant Periods (the ‘‘Underlying Financial Statements’’). We have undertaken an independent audit of the Underlying Financial Statements in accordance with Hong Kong Standards on Auditing issued by the HKICPA. We have examined the Underlying Financial Statements for the Relevant Periods in accordance with the Auditing Guideline 3.340 ‘‘Prospectuses and the Reporting Accountant’’ as recommended by the HKICPA.

The Financial Information of the Stephigh Group for the Relevant Periods as set out in this report has been prepared from the Underlying Financial Statements. No adjustments were considered necessary to adjust the Underlying Financial Statements in preparing our report for inclusion in the Circular.

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

In our opinion, the Financial Information gives, for the purpose of this report, a true and fair view of the state of affairs of the Stephigh Group as at 30 June 2009, 31 December 2008 and 31 December 2009 and of the consolidated results and cash flows of the Stephigh Group for the Relevant Periods.

– 91 –

ACCOUNTANT’S REPORT ON THE STEPHIGH GROUP

APPENDIX II

A. FINANCIAL INFORMATION

Consolidated Statements of Comprehensive Income

Note Revenue 5 Cost of sales Gross Profit Other income 6 Administrative expenses Operating profit Finance costs — net 8 Profit/(loss) before income tax 7 Income tax (charge)/credit 11 Profit/(loss) for the period Other comprehensive income: Currency translation differences Total comprehensive income/ (loss) for the period Profit/(loss) attributable to: Equity holders of the Company Non-controlling interests Total comprehensive income/ (loss) attributable to: Equity holders of the Company Non-controlling interests	For the period from 16 July 2008 (date of incorporation) to 30 June 2009 RMB 18,364,164 (12,564,919) 5,799,245 60,091 (2,059,562) 3,799,774 (3,027,866) 771,908 (218,135) 553,773 84,195 637,968 374,957 178,816 553,773 459,152 178,816 637,968	For the period from 16 July 2008 (date of incorporation) to 31 December 2008 RMB 6,348,440 (4,306,044) 2,042,396 49,517 (1,340,348) 751,565 (1,925,888) (1,174,323) 274,108 (900,215) 107,339 (792,876) (640,095) (260,120) (900,215) (532,756) (260,120) (792,876)	Six months ended 31 December 2009 RMB 26,248,001 (18,465,575) 7,782,426 15,383 (829,694) 6,968,115 (1,279,033) 5,689,082 (1,429,585) 4,259,497 85,429 4,344,926 3,786,036 473,461 4,259,497 3,871,465 473,461 4,344,926

– 92 –

ACCOUNTANT’S REPORT ON THE STEPHIGH GROUP

APPENDIX II

Consolidated Statements of Financial Position

Note ASSETS Non-current assets Property, plant and equipment 12 Deferred tax assets Available-for-sale financial assets 13 Current assets Stock of properties 14 Trade and other receivables 15 Tax recoverable Cash and cash equivalents 16 Total assets EQUITY Equity attributable to equity holders of the Company Share capital 17 Reserves Non-controlling interests Total Equity LIABILITIES Current liabilities Trade and other payables 18 Tax payable Borrowings 19 Non-current liabilities Borrowings 19 Total liabilities Total equity and liabilities Net current assets Total assets less current liabilities	As at 30 June 2009 RMB 1,814,685 188,858 — 2,003,543 170,027,168 10,008,767 947,979 8,200,829 189,184,743 191,188,286 338,667 (722,672) (384,005) 8,672,320 8,288,315 61,996,938 — 27,903,033 89,899,971 93,000,000 182,899,971 191,188,286 99,284,772 101,288,315	As at 31 December 2008 2009 RMB RMB 1,283,233 1,607,481 681,101 — — 100,000 1,964,334 1,707,481 166,568,287 180,633,358 9,666,896 7,464,587 947,979 — 2,652,840 5,206,584 179,836,002 193,304,529 181,800,336 195,012,010 338,667 338,667 (1,714,580) 3,294,574 (1,375,913) 3,633,241 8,233,383 — 6,857,470 3,633,241 76,839,833 61,685,667 — 292,748 98,103,033 12,100,354 174,942,866 74,078,769 — 117,300,000 174,942,866 191,378,769 181,800,336 195,012,010 4,893,136 119,225,760 6,857,470 120,933,241	As at 31 December 2008 2009 RMB RMB 1,283,233 1,607,481 681,101 — — 100,000 1,964,334 1,707,481 166,568,287 180,633,358 9,666,896 7,464,587 947,979 — 2,652,840 5,206,584 179,836,002 193,304,529 181,800,336 195,012,010 338,667 338,667 (1,714,580) 3,294,574 (1,375,913) 3,633,241 8,233,383 — 6,857,470 3,633,241 76,839,833 61,685,667 — 292,748 98,103,033 12,100,354 174,942,866 74,078,769 — 117,300,000 174,942,866 191,378,769 181,800,336 195,012,010 4,893,136 119,225,760 6,857,470 120,933,241
			1,707,481
			180,633,358 7,464,587 — 5,206,584
			193,304,529
			195,012,010
			338,667 3,294,574
			3,633,241 —
			3,633,241
			61,685,667 292,748 12,100,354
			74,078,769
			117,300,000
			191,378,769
			195,012,010
			119,225,760
			120,933,241

– 93 –

ACCOUNTANT’S REPORT ON THE STEPHIGH GROUP

APPENDIX II

Consolidated Statements of Changes in Equity

Issue of shares on 16 July 2008 (date of incorporation) Adjustment for business combination under common control At 16 July 2008, restated Deem distributions relating to business combinations under common control Profit for the period Other comprehensive income for the period Balance at 30 June 2009 Acquisition of non- controlling interests in a subsidiary Profit for the period Other comprehensive income for the period Balance at 31 December 2009	Attributable to equity Share capital Capital reserve RMB RMB 338,667 — — 21,000,000 338,667 21,000,000 — (21,000,000) — — — — 338,667 — — 145,781 — — — — 338,667 145,781	holders of the Exchange reserve RMB — — — — — 84,195 84,195 — — 85,429 169,624	Company (Accumulated losses)/ Retained earnings RMB — (1,181,824) (1,181,824) — 374,957 — (806,867) — 3,786,036 — 2,979,169	Total RMB 338,667 19,818,176 20,156,843 (21,000,000) 374,957 84,195 (384,005) 145,781 3,786,036 85,429 3,633,241	Non- controlling interests RMB — 8,493,504 8,493,504 — 178,816 — 8,672,320 (9,145,781) 473,461 — —	Total equity RMB 338,667 28,311,680
						28,650,347 (21,000,000 553,773 84,195
						8,288,315 (9,000,000 4,259,497 85,429
						3,633,241

– 94 –

ACCOUNTANT’S REPORT ON THE STEPHIGH GROUP

APPENDIX II

Consolidated Cash Flow Statement

Cash flows from operating activities Profit/(loss) before income tax expense Adjustments for: Depreciation (Gain)/loss on disposal of property, plant and equipment Impairment on available-for-sale financial assets Interest income Interest expenses Operating profit/(loss) before changes in working capital (Increase)/decrease in trade and other receivables Increase in inventories Increase/(decrease) in trade and other payables Cash flows from operating activities Income tax paid Net cash (used in)/generated from operating activities Cash flows from investing activities Cash paid for business combination under common control Acquisition of non-controlling interests in a subsidiary Purchase of available-for-sale financial assets Interest received Proceeds from disposal of property, plant and equipment Purchases of property, plant and equipment Net cash used in investing activities	For the period from 16 July 2008 (date of incorporation) to 30 June 2009 RMB 771,908 313,805 (41,602) 100,000 (41,506) 2,869,580 3,972,185 (1,530,954) (33,504,569) 27,704,403 (3,358,935) (657,484) (4,016,419) (21,000,000) — — 41,506 314,228 (827,948) (21,472,214)	For the period from 16 July 2008 (date of incorporation) to 31 December 2008 RMB (1,174,323) 121,651 (33,828) 100,000 (29,562) 1,930,798 914,736 (1,189,085) (30,045,688) 42,570,443 12,250,406 (657,484) 11,592,922 (21,000,000) — — 29,562 274,891 (72,779) (20,768,326)	Six months ended 31 December 2009 RMB 5,689,082 234,901 663 — (9,063) 1,276,156 7,191,739 2,543,668 (10,606,190) (225,330) (1,096,113) — (1,096,113) — (9,000,000) (100,000) 9,063 4,140 (32,500) (9,119,297)

– 95 –

ACCOUNTANT’S REPORT ON THE STEPHIGH GROUP

APPENDIX II

Cash flows from financing activities Interest paid Repayments of borrowings Proceeds from borrowings Proceeds from issue of shares Net cash flows generated from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Analysis of balances of cash and cash equivalents Cash and bank balances	For the period from 16 July 2008 (date of incorporation) to 30 June 2009 RMB (2,869,580) (7,321,748) 37,003,033 338,667 27,150,372 1,661,739 6,539,090 8,200,829 8,200,829	For the period from 16 July 2008 (date of incorporation) to 31 December 2008 RMB (1,930,798) (2,321,748) 9,203,033 338,667 5,289,154 (3,886,250) 6,539,090 2,652,840 2,652,840	Six months ended 31 December 2009 RMB (1,276,156) (29,203,033) 37,700,354 — 7,221,165 (2,994,245) 8,200,829 5,206,584 5,206,584

– 96 –

ACCOUNTANT’S REPORT ON THE STEPHIGH GROUP

APPENDIX II

NOTES TO THE FINANCIAL INFORMATION

1. COMPANY STRUCTURE AND PRINCIPAL ACTIVITIES

Stephigh is a private limited company incorporated in the British Virgin Islands (‘‘BVI’’) on 16 July 2008. The address of its registered office is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. The Company is engaged in investment holding.

The Financial Information is presented in Renminbi (‘‘RMB’’), which is the Company’s functional and presentation currency.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of the Financial Information are set out below. For the purpose of this report, these policies are materially consistent with those of Kingwell Group Limited and have been consistently applied to the Relevant Periods presented, unless otherwise stated.

2.1 Basis of preparation

Except as disclosed below, the Financial Information of Stephigh has been prepared in accordance with Hong Kong Financial Reporting Standards (‘‘HKFRS’’). The Financial Information have been prepared under the historical cost convention.

Business combination under common control

The Financial Information of the Stephigh has been accounted for as a combination of business under common control by applying the principles of merger accounting in accordance with the Accounting Guideline 5 ‘‘Merger Accounting for Common Control Combinations’’ issued by the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’).

In applying merger accounting, Financial Information items of the combining entities or businesses for the reporting periods are presented in which the common control combination occurs as if the combination had occurred from the date when the combining entities or businesses first came under the control of the controlling party. Accordingly, the Financial Information of Stephigh has been prepared as if the acquired company has always been the subsidiary of the Stephigh.

The Financial Information of comprehensive income includes the results of each of the combining entities or businesses from the earliest date presented or since the date when the combining entities or businesses first came under the common control, whichever is shorter, regardless of the date of the common control combination.

The comparative amounts in the Financial Information are presented as if the entities or businesses had been combined at the previous balance sheet date or when they first came under common control, whichever is shorter.

The net assets of the combining entities or businesses are consolidated by using the existing book values from the controlling parties’ perspective. There is no recognition of any goodwill or excess of the acquirer’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost at the time of common control combination, to the extent of the continuation of the controlling party’s interest.

Where the enterprises involved in the merger are under the ultimate control of the same party or parties before and after the merger and the control is not temporary, it shall be considered as merger of enterprises under common control. Assets and liabilities acquired by the Stephigh in the merger of enterprises shall be measured at book value of the merged party on the merger date. Capital reserve shall be adjusted if difference arises between the book value of net assets acquired by the Stephigh and that of the merger consideration.

Subsidiaries are fully de-consolidated from the date when control ceases, the profit or loss arising from disposal of subsidiaries to the third parties will be recognised in the statement of comprehensive income. Under common control, the profit or loss arising from the disposal of subsidiaries to the party of common control will be

– 97 –

ACCOUNTANT’S REPORT ON THE STEPHIGH GROUP

APPENDIX II

recognised in the statement of comprehensive income if the consideration is assessed to be on fair value terms. Otherwise, if the consideration is assessed not to be on fair value terms, such profit or loss derived will be recognised in the capital reserve.

The preparation of Financial Information in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Stephigh Group’s accounting policies. 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 of this section.

(a) New and amended standards adopted by Stephigh Group

Stephigh Group has adopted the following new and amended HKFRS as of 1 January 2009:

• . HKFRS 7 ‘Financial instruments — Disclosures’ (amendment) — effective 1 January 2009. The amendment requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by level of a fair value measurement hierarchy. As the change in accounting policy only results in additional disclosures, there is no impact on earnings per share.

• . HKAS 1 (revised), ‘Presentation of financial statements’ — effective 1 January 2009. The revised standard prohibits the presentation of items of income and expenses (that is, ‘non-owner changes in equity’ to be presented separately from owner changes in equity in a statement of comprehensive income. As a result Stephigh Group presents in the consolidated statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in the consolidated statement of comprehensive income. Comparative information has been re-presented so that it also is in conformity with the revised standard. As the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share.

• (b) Amended standard effective in 2009 but not relevant

• . HKFRS 8, ‘Operating segments’ (effective 1 January 2009). HKFRS 8 replaces HKAS 14, ‘Segment reporting’, and aligns segment reporting with the requirements of the US standard SFAS 131, ‘Disclosures about segments of an enterprise and related information’. The new standard requires a ‘management approach’, under which segment information is presented on the same basis as that used for internal reporting purposes. This has resulted in an increase in the number of reportable segments presented. In addition, the segments are reported in a manner that is more consistent with the internal reporting provided to the chief operating decisionmaker.

• . HKFRS 2 (amendment), ‘Share-based payment’ (effective 1 January 2009) deals with vesting conditions and cancellations. It clarifies that vesting conditions are service conditions and performance conditions only. Other features of a share-based payment are not vesting conditions. These features would need to be included in the grant date fair value for transactions with employees and others providing similar services; they would not impact the number of awards expected to vest or valuation there of subsequent to grant date. All cancellations, whether by the entity or by other parties, should receive the same accounting treatment.

• . In respect of borrowing costs relating to qualifying assets for which the commencement date for capitalisation is on or after 1 January 2009, Stephigh Group capitalises borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. Stephigh Group previously recognised all borrowing costs as an expense immediately. This change in accounting policy was due to the adoption of HKAS 23, ‘Borrowing costs’ (2007) in accordance with the transaction provisions of the standard; comparative figures have not been restated. The change in accounting policy has no material impact on earnings per share. Stephigh Group has capitalised borrowing costs with respect to property, plant and equipment.

– 98 –

ACCOUNTANT’S REPORT ON THE STEPHIGH GROUP

APPENDIX II

• (c) Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by Stephigh Group

The following standards and amendments to existing standards have been published and are mandatory for Stephigh Group’s accounting periods beginning on or after 1 January 2010 or later periods, but Stephigh Group has not early adopted them:

• . HK(IFRIC) 17, ‘Distribution of non-cash assets to owners’ (effective on or after 1 July 2009). The interpretation is part of the IASB’s annual improvements project published in April 2009. This interpretation provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. HKFRS 5 has also been amended to require that assets are classified as held for distribution only when they are available for distribution in their present condition and the distribution is highly probable. Stephigh Group will apply HK(IFRIC) 17 from 1 January 2010. It is not expected to have a material impact on the Stephigh Group’s Financial Information.

• . HKAS 27 (revised), ‘Consolidated and separate financial statements’, (effective from 1 July 2009). The revised standard requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in profit or loss. Stephigh Group will apply HKAS 27 (revised) prospectively to transactions with non-controlling interests from 1 January 2010.

• . HKFRS 3 (revised), ‘Business combinations’ (effective from 1 July 2009). The revised standard continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the consolidated statement of comprehensive income. There is a choice on an acquisition-byacquisition basis to measure the non-controlling interests in the acquiree at fair value or at the non-controlling interests’ proportionate share of the acquiree’s net assets. All acquisition-related costs should be expensed. Stephigh will apply HKFRS (revised) prospectively to all business combinations from 1 January 2010.

• . HKAS 38 (amendment), ‘Intangible Assets’ (effective from 1 July 2009). The amendment is part of the HKICPA’s annual improvements project published in April/May 2009 and Stephigh Group will apply HKAS 38 (amendment) from the date HKFRS 3 (revised) is adopted. The amendment clarifies guidance in measuring the fair value of an intangible asset acquired in a business combination and it permits the grouping of intangible assets as a single asset if each asset has similar useful economic lives. The amendment will not result in a material impact on the Stephigh Group’s Financial Information.

• . HKFRS 5 (amendment) (effective from 1 January 2010), ‘Measurement of non-current assets (or disposal groups) classified as held-for-sale. The amendment is part of the HKICPA’s annual improvements project published in April/May 2009. The amendment provides clarification that HKFRS 5 specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations. It also clarifies that the general requirement of HKAS 1 still apply, particularly paragraph 15 (to achieve a fair presentation) and paragraph 125 (sources of estimation uncertainty) of HKAS 1. Stephigh Group will apply HKFRS 5 (amendment) from 1 January 2010. It is not expected to have a material impact on Stephigh Group’s Financial Information.

• . HKAS 1 (amendment), ‘Presentation of financial statements’ (effective from 1 January 2010). The amendment is par of the HKICPA’s annual improvements project published in April/May 2009. The amendment provides clarification that the potential settlement of a liability by the issue of equity is not relevant to its classification as current or non current. By amending the definition of current liability, the amendment permits a liability to be classified as non-current (provided that the entity has an unconditional right to defer settlement by transfer of cash or other assets for at least 12 months after the accounting period) notwithstanding the fact that the

– 99 –

ACCOUNTANT’S REPORT ON THE STEPHIGH GROUP

APPENDIX II

entity could be required by the counterparty to settle in shares at any time. Stephigh Group will apply HKAS 1 (amendment) from 1 January 2010. It is not expected to have a material impact on Stephigh Group’s Financial Information.

• . HKFRS 2 (amendments), ‘Group cash-settled and share-based payment transactions (effective from 1 January 2010*). In addition to incorporating HK(IFRIC) 8, ‘Scope of HKFRS 2’, and HK(IFRIC) 11, ‘HKFRS 2 — Group and treasury share transactions’, the amendments expand on the guidance in HK(IFRIC) 11 to address the classification of group arrangements that were no covered by that interpretation. The new guidance is not expected to have a material impact on Stephigh’s Financial Information.

2.2 Consolidation

The Financial Information incorporates the Financial Information of Stephigh and entities controlled by Stephigh (its subsidiaries). Control is achieved where Stephigh has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the Relevant Periods are included in the Financial Information from the effective date of acquisition or up to the effective date of disposal, as appropriate.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

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

2.3 Foreign currency translation

• (i) Functional and presentation currency

Items included in the Financial Information of each of the Stephigh Group’s entities are measured using the currency of the primary economic environment in which entity operates (‘‘the functional currency’’). The Financial Information is presented in Renminbi (RMB), which is Stephigh’s functional and Stephigh Group’s presentation currency.

• (ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated statement of comprehensive income.

2.4 Property, plant and equipment

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

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

Depreciation of property, plant and equipment is calculated using the straight-line method to allocate cost to their residual values over their estimated useful lives. The principal rates are as follows:

Office equipment and furniture Motor vehicles

20%–33.33% 20%–50%

– 100 –

ACCOUNTANT’S REPORT ON THE STEPHIGH GROUP

APPENDIX II

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (see note 2.6).

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

2.5 Financial assets

2.5.1 Classification

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

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

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

(b) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Stephigh Group’s loans and receivables comprise ‘trade and other receivables’ and ‘cash and cash equivalents’ in the consolidated statement of financial position (notes 2.8 and 2.9).

(c) Available-for-sale financial assets

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

2.5.2 Recognition and measurement

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

Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in the consolidated statement of comprehensive income within ‘other (losses)/gains — net’ in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the consolidated statement of comprehensive income as part of other income when the Stephigh Group’s right to receive payments is established.

Changes in the fair value of monetary securities denominated in a foreign currency and classified as available for sale are analysed between translation differences resulting from changes in amortised cost of the security and other changes in the carrying amount of the security. The translation differences on monetary securities are

– 101 –

ACCOUNTANT’S REPORT ON THE STEPHIGH GROUP

APPENDIX II

recognised in profit or loss; translation differences on non-monetary securities are recognised in other comprehensive income. Changes in the fair value of monetary and non-monetary securities classified as available for sale are recognised in other comprehensive income.

When securities classified as available for sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the consolidated statement of comprehensive income as ‘gains and losses from investment securities’.

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

2.6 Impairment of non-financial assets

Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

2.7 Stock of properties

Stock of properties are stated at the lower of cost and net realisable value. Net realisable value is determined by reference to sale proceeds received after the balance sheet date less selling expenses, or by management estimates based on prevailing market condition. Costs of properties include acquisition costs, development expenditure, interest and other direct costs attributable to such properties.

2.8 Trade and other receivables

Trade receivables are amounts due from customers for property sold in the ordinary course of business. If collection of trade and other receivables is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

2.9 Cash and cash equivalents

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

2.10 Share capital

Ordinary shares are classified as equity.

2.11 Taxation

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

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

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the Financial Information and the corresponding tax base used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax

– 102 –

ACCOUNTANT’S REPORT ON THE STEPHIGH GROUP

APPENDIX II

assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

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

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

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

2.12 Trade and other payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

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

2.13 Borrowing cost

All borrowing costs are recognised and included in finance costs in the consolidated statement of comprehensive income in the period in which they are incurred, except to the extent that they are capitalised as being directly attributable to the construction or production of assets which necessarily take a substantial period of time to get ready for their intended use or sale. Capitalisation of such borrowing costs begins when construction or production activities commence and ceases when the assets are substantially ready for their intended use or sale.

2.14 Retirement benefit costs

Payments to state-managed retirement benefit schemes are charged as expense when employees have rendered service entitling them to the contributions.

2.15 Revenue recognition

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

Stephigh Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of Stephigh Group’s activities as described below. Stephigh Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

(a) Sale of properties

Revenue arising from the sale of properties held for sale is recognised upon the signing of the sale and purchase agreement or the issuance of an occupation permit/a completion certificate by the relevant government authorities, whichever is the later. Deposits and instalments received on properties sold prior to the date of revenue recognition are accounted for in the consolidated statement of financial position as forward sales deposits received.

– 103 –

ACCOUNTANT’S REPORT ON THE STEPHIGH GROUP

APPENDIX II

• (b) Interest income

Interest income is recognised using the effective interest method. When a loan and receivable is impaired, Stephigh Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loan and receivables are recognised using the effective interest rate.

3. FINANCIAL RISK MANAGEMENT

3.1 Financial risk factors

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

(a) Market risk

• (i) Foreign exchange risk

As most of the monetary assets and liabilities of Stephigh Group are denominated in RMB and Stephigh Group conducts its business transactions in RMB, the exchange rate risk of Stephigh Group is not significant.

• (ii) Cash flow interest rate risk

The Stephigh Group’s cash flow interest rate risk primarily relates to variable-rate bank balances and borrowings as set out in notes 16 and 19 respectively.

The Stephigh Group maintains a mixture of variable rate and fixed rate financial liabilities. The Stephigh Group currently does not have an interest rate hedging policy. However, management monitor interest rate change exposure and will consider hedging significant interest rate change exposure should the need arise.

Sensitivity analysis

Regarding the cash flow interest rate risk, the sensitivity analyses below have been determined based on the exposure to interest rates for non-derivative instruments at the balance sheet date. For variable-rate bank balances and borrowings, the analysis is prepared assuming the amount of the relevant asset and liability outstanding at the balance sheet date was outstanding for the whole year. A 50 basis points increase or decrease represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Stephigh Group’s profit/loss for the period ended 30 June 2009, 31 December 2008 and 31 December 2009 would increase/decrease by RMB40,960, RMB13,220 and RMB26,018, respectively.

• (b) Credit risk

Credit risk arises from cash and cash equivalents, as well as trade receivables and certain other receivables.

Stephigh Group has policies in place to ensure that sales are made to buyers/customers with an appropriate financial strength and appropriate percentage of down payment. It also has other monitoring procedures to ensure that follow up action is taken to recover overdue debts. In addition, Stephigh Group reviews regularly the recoverable amount of each individual receivable to ensure that adequate impairment losses are made for irrecoverable amounts. Stephigh Group has no significant concentrations of credit risk, with exposure spread over a number of counterparties and customers.

– 104 –

ACCOUNTANT’S REPORT ON THE STEPHIGH GROUP

APPENDIX II

The carrying amount of the receivables included in the consolidated statement of financial position represents Stephigh Group’s maximum exposure to credit risk in relation to these financial assets. The credit risk for bank deposits and bank balances is considered by Stephigh to be minimal as such amounts are generally placed with banks with good ratings.

No credit limits were exceeded during the reporting period, and management does not expect any losses from non-performance by counterparties. Stephigh Group does not hold any collateral as security.

The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies.

The maximum exposure to credit risk is represented by the carrying amount of each financial asset.

(c) Liquidity risk

Due to the capital intensive nature of Stephigh Group’s business, Stephigh Group ensures that it maintains sufficient cash and credit lines to meet its liquidity requirements.

Management monitors rolling forecasts of Stephigh Group’s liquidity reserve which comprises undrawn borrowing facilities and cash and cash equivalents on the basis of expected cash flows. Stephigh’s policy is to regularly monitor current and expected liquidity requirements and its compliance with lending covenants, to ensure that it maintains sufficient reserves of cash and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term.

The table below analyses the Stephigh Group’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity dates. The amounts disclosed in the table are the contractual undiscounted cash flows.

At 30 June 2009 Trade and other payables Borrowings At 31 December 2008 Trade and other payables Borrowings At 31 December 2009 Trade and other payables Borrowings	Less than 1 year RMB 61,996,938 27,903,033 89,899,971 76,839,833 98,103,033 174,942,866 61,685,667 12,100,354 73,786,021	Between 1 and 2 years RMB — 93,000,000 93,000,000 — — — — 117,300,000 117,300,000	Total RMB 61,996,938 120,903,033
			182,899,971
			76,839,833 98,103,033
			174,942,866
			61,685,667 129,400,354
			191,086,021

3.2 Capital risk management

The Stephigh Group’s objectives when managing capital are to safeguard the Stephigh Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

– 105 –

ACCOUNTANT’S REPORT ON THE STEPHIGH GROUP

APPENDIX II

In order to maintain or adjust the capital structure, the Stephigh Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

3.3 Fair value estimation

The carrying amounts of the Stephigh Group’s current financial assets including amounts due from fellow subsidiaries, trade and other receivables, and deposits, cash and cash equivalents and the Stephigh Group’s current financial liabilities including trade and other payables, amounts due to immediate holding company approximate their fair values due to the relatively short term maturities.

The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate available to the Stephigh for similar financial instruments.

4. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS

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.

Stephigh 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 or liabilities are discussed below.

Current taxation and deferred taxation

Stephigh is mainly subject to taxation in PRC and Hong Kong. Significant judgement is required in determining the amount of the provision for taxation and the timing of payment of the related taxations. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the periods in which such determination are made.

Deferred tax assets relating to certain temporary differences and tax losses are recognised as management considers it is probable that future taxable profit will be available against which the temporary differences or tax losses can be utilised. Where the expectation is different from the original estimate, such differences will impact the recognition of deferred taxation assets and taxation in the periods in which such estimate is changed.

5. REVENUE

The Stephigh acts as an investment holding company and the Stephigh Group is principally engaged in the development of properties for sales.

Revenue represents the sales value of the properties, which excludes value-added tax and is stated after deduction of all goods returns and trade discounts. There is only one reportable segment has been identified.

Sale of properties	For the period from 16 July 2008 (date of incorporation) to 30 June 2009 RMB 18,364,164	For the period from 16 July 2008 (date of incorporation) to 31 December 2008 RMB 6,348,440	Six months ended 31 December 2009 RMB 26,248,001

– 106 –

ACCOUNTANT’S REPORT ON THE STEPHIGH GROUP

APPENDIX II

6. OTHER INCOME

Gain on disposal of property, plant and equipment Other miscellaneous gain	For the period from 16 July 2008 (date of incorporation) to 30 June 2009 RMB 41,602 18,489 60,091	For the period from 16 July 2008 (date of incorporation) to 31 December 2008 RMB 33,828 15,689 49,517	Six months ended 31 December 2009 RMB — 15,383
			15,383

1. PROFIT/(LOSS) BEFORE INCOME TAX

Profit/(loss) before income tax has been arrived at after charging: Cost of sales Loss on disposal of property, plant and equipment Employee benefit expenses Depreciation	For the period from 16 July 2008 (date of incorporation) to 30 June 2009 RMB 12,564,919 — 1,035,813 313,805	For the period from 16 July 2008 (date of incorporation) to 31 December 2008 RMB 4,306,044 — 663,067 121,651	Six months ended 31 December 2009 RMB 18,465,575 663 677,165 234,901

1. FINANCE COSTS — NET

Bank interests income Interest expenses on borrowings Other bank charges	For the period from 16 July 2008 (date of incorporation) to 30 June 2009 RMB (41,506) 2,869,580 199,792 3,027,866	For the period from 16 July 2008 (date of incorporation) to 31 December 2008 RMB (29,562) 1,930,798 24,652 1,925,888	Six months ended 31 December 2009 RMB (9,063 1,276,156 11,940
			1,279,033

1. EMPLOYEE BENEFIT EXPENSES (INCLUDING DIRECTORS’ EMOLUMENTS)

Staff salaries Pension costs Staff welfare	For the period from 16 July 2008 (date of incorporation) to 30 June 2009 RMB 852,961 93,045 89,807 1,035,813	For the period from 16 July 2008 (date of incorporation) to 31 December 2008 RMB 528,061 68,412 66,594 663,067	Six months ended 31 December 2009 RMB 625,523 29,840 21,802
			677,165

– 107 –

ACCOUNTANT’S REPORT ON THE STEPHIGH GROUP

APPENDIX II

10. DIRECTORS’ EMOLUMENTS

None of the directors received or will receive any fees or emoluments in respect of their services to the Stephigh during the Relevant Period. Management considers the directors of the Stephigh as key management. Accordingly, there were no compensation paid or payable to key management for the Relevant Period.

11. INCOME TAX (CHARGE)/CREDIT

PRC income tax is calculated at 25% of the estimated assessable profit of the Stephigh Group as determined in accordance with relevant tax rules and regulations in the PRC.

The amount of income tax (charge)/credit in the consolidated statement of comprehensive income represents:

Current taxation — PRC corporate income tax Deferred tax Income tax (charge)/credit	For the period from 16 July 2008 (date of incorporation) to 30 June 2009 RMB — 218,135 218,135	For the period from 16 July 2008 (date of incorporation) to 31 December 2008 RMB — (274,108) (274,108)	Six months ended 31 December 2009 RMB 1,240,727 188,858
			1,429,585

No provision for Hong Kong Profits Tax has been made in the Financial Information of the Stephigh Group for the Relevant Periods as the Stephigh Group has not generated assessable profits for the Relevant Periods in Hong Kong.

The income tax for the Relevant Periods can be reconciled to the profit/(loss) before income tax per the consolidated statement of comprehensive income as follows:

Profit/(loss) before income tax Calculated at a taxation rate of 25% Expenses not deductible for tax purposes Income tax (charge)/credit	For the period from 16 July 2008 (date of incorporation) to 30 June 2009 RMB 771,908 192,977 25,158 218,135	For the period from 16 July 2008 (date of incorporation) to 31 December 2008 RMB (1,174,323) (293,581) 19,473 (274,108)	Six months ended 31 December 2009 RMB 5,689,082
			1,422,270 7,315
			1,429,585

– 108 –

ACCOUNTANT’S REPORT ON THE STEPHIGH GROUP

APPENDIX II

12. PROPERTY, PLANT AND EQUIPMENT

At 16 July 2008, restated Cost Accumulated depreciation Net book amount Period ended 30 June 2009 Opening net book amount Additions Depreciation Disposals At 30 June 2009 At 30 June 2009 Cost Accumulated depreciation Net book amount Period ended 31 December 2009 Opening net book amount Additions Depreciation Disposals At 31 December 2009 At 31 December 2009 Cost Accumulated depreciation Net book amount	Office equipment and furniture RMB 323,881 (142,541) 181,340 181,340 12,779 (82,489) (2,823) 108,807 329,052 (220,245) 108,807 108,807 7,500 (34,584) (4,803) 76,920 328,513 (251,593) 76,920	Motor vehicles RMB 2,215,113 (823,286) 1,391,827 1,391,827 815,169 (231,316) (269,802) 1,705,878 2,219,906 (514,028) 1,705,878 1,705,878 25,000 (200,317) — 1,530,561 2,244,906 (714,345) 1,530,561	Total RMB 2,538,994 (965,827) 1,573,167 1,573,167 827,948 (313,805) (272,625) 1,814,685 2,548,958 (734,273) 1,814,685 1,814,685 32,500 (234,901) (4,803) 1,607,481 2,573,419 (965,938) 1,607,481

– 109 –

ACCOUNTANT’S REPORT ON THE STEPHIGH GROUP

APPENDIX II

13. AVAILABLE-FOR-SALE FINANCIAL ASSETS

At the beginning of the period Additions At the end of the period Available-for-sale financial assets include the following: Unlisted securities: — Equity securities — PRC	As at 30 June 2009 RMB — — — As at 30 June 2009 RMB —	As at 31 December 2008 2009 RMB RMB — — — 100,000 — 100,000 As at 31 December 2008 2009 RMB RMB — 100,000

The unlisted equity securities are issued by private entities established in the PRC. They are measured at cost less impairment at each balance sheet date.

The maximum exposure to credit risk at the reporting date is the carrying value of the unlisted equity securities.

14. STOCK OF PROPERTIES

Properties held for sale Properties for/under development	As at 30 June 2009 RMB 169,210,896 816,272 170,027,168	As at 31 December 2008 2009 RMB RMB 165,796,722 177,778,963 771,565 2,954,395 166,568,287 180,633,358	As at 31 December 2008 2009 RMB RMB 165,796,722 177,778,963 771,565 2,954,395 166,568,287 180,633,358
			180,633,358

15. TRADE AND OTHER RECEIVABLES

Trade receivables Payment in advance Other receivables	As at 30 June 2009 RMB 90,000 9,089,443 829,324 10,008,767	As at 31 December 2008 2009 RMB RMB 70,000 90,000 3,316,157 2,073,211 6,280,739 5,301,376 9,666,896 7,464,587	As at 31 December 2008 2009 RMB RMB 70,000 90,000 3,316,157 2,073,211 6,280,739 5,301,376 9,666,896 7,464,587
			7,464,587

– 110 –

ACCOUNTANT’S REPORT ON THE STEPHIGH GROUP

APPENDIX II

As of 31 December 2009, trade receivables of RMB90,000 was past due but not impaired. This is related to two independent customers for whom there is no recent history of default. The ageing analysis of these trade receivable is as follows:

Within 30 days 31–60 days 61–90 days 91–180 days More than 180 days	As at 30 June 2009 RMB — — — 20,000 70,000 90,000	As at 31 December 2008 2009 RMB RMB — — — — — — 70,000 — — 90,000 70,000 90,000	As at 31 December 2008 2009 RMB RMB — — — — — — 70,000 — — 90,000 70,000 90,000
			90,000

The other classes within trade and other receivables do not contain impaired assets.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables mentioned above. Stephigh group does not hold any collateral as security.

16. CASH AND CASH EQUIVALENTS

Cash and cash equivalents are denominated in the following currencies:

Renminbi Hong Kong dollars	As at 30 June 2009 RMB 8,155,128 45,701 8,200,829	As at 31 December 2008 2009 RMB RMB 2,580,505 5,173,233 72,335 33,351 2,652,840 5,206,584	As at 31 December 2008 2009 RMB RMB 2,580,505 5,173,233 72,335 33,351 2,652,840 5,206,584
			5,206,584

Cash and cash equivalents comprises cash held by the Stephigh Group and the bank balances carry prevailing market interest rates ranging from 0.53% to 1.27% per annum during the Relevant Periods.

17. SHARE CAPITAL

Stephigh was incorporated with an authorised share capital of US$50,000 divided into 50,000 ordinary shares of US$1 each. On the date of incorporation, 50,000 ordinary shares of US$50,000 (equivalent to RMB338,667) was issued at par to the subscribers to provide the initial capital of Stephigh.

18. TRADE AND OTHER PAYABLES

Trade payables Receipt in advance Other payables Accrued expenses	As at 30 June 2009 RMB 11,093,773 5,415,539 40,657,402 4,830,224 61,996,938	As at 31 December 2008 2009 RMB RMB 17,816,429 7,587,726 4,783,668 5,242,934 44,513,529 44,726,705 9,726,207 4,128,302 76,839,833 61,685,667	As at 31 December 2008 2009 RMB RMB 17,816,429 7,587,726 4,783,668 5,242,934 44,513,529 44,726,705 9,726,207 4,128,302 76,839,833 61,685,667
			61,685,667

Trade and other payables are mainly denominated in RMB.

– 111 –

ACCOUNTANT’S REPORT ON THE STEPHIGH GROUP

APPENDIX II

19. BORROWINGS

The amounts represent borrowings raised from third parties. The amounts are unsecured and carry interest at borrowing rate ranging from 3.19% to 7.18% per annum during the Relevant Periods. The lender agreed that the amount will not be deemed until the sales of the properties under development for sale.

20. ACQUISITION OF ASSETS THROUGH ACQUISITION OF A SUBSIDIARY

On 30 July 2008, Stephigh acquired 70% of the equity interests of Anlu, for the total consideration of approximately RMB21,000,000. The acquired subsidiary group is principally engaged in the properties development and sale of properties.

The assets and liabilities of Anlu as at 30 July 2008, the date of acquisition are as follows:

Net assets acquired: Property, plant and equipment Deferred tax assets Tax recoverable Long term investment Cash and cash equivalents Trade and other receivables Inventory Trade and other payables Borrowings Net assets	RMB 1,563,031 406,993 106,295 100,000 6,539,090 8,478,635 130,670,499 (35,736,394 (91,221,748
	20,906,401

B. SUBSEQUENT EVENTS

No significant events took place subsequent to 31 December 2009 up to the date of this report.

C. SUBSEQUENT FINANCIAL INFORMATION

No audited Financial Information of the Stephigh Group have been prepared in respect of any period subsequent to 31 December 2009.

Yours faithfully, UHY Vocation HK CPA Limited Certified Public Accountants Hong Kong

– 112 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

ACCOUNTANT’S REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION TO THE DIRECTORS OF KINGWELL GROUP LIMITED

We report on the unaudited pro forma financial information set out on pages 115 to 122 under the heading of ‘‘Unaudited Pro Forma Financial Information’’ (the ‘‘Unaudited Pro Forma Financial Information’’) in Appendix III of the circular dated 7 May, 2010 (the ‘‘Circular’’) of Kingwell Group Limited (the ‘‘Company’’), in connection with the acquisition of 70% equity interest in Stephigh Group Limited (‘‘Stephigh’’) and its subsidiaries (collectively, the ‘‘Stephigh Group’’) (the ‘‘Acquisition’’) by the Company. The Unaudited Pro Forma Financial Information has been prepared by the directors of the Company, for illustrative purposes only, to provide information about how the Acquisition might have affected the relevant financial information of the Company and its subsidiaries (hereinafter collectively referred to as the ‘‘Group’’). The basis of preparation of the Unaudited Pro Forma Financial Information is set out on pages 113 to 114 of the Circular.

Respective Responsibilities of Directors of the Company and the Reporting Accountant

It is the responsibility solely of the directors of the Company to prepare the Unaudited Pro Forma Financial Information in accordance with rule 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’) and 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 rule 4.29(7) of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

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, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the Unaudited Pro Forma Financial Information with the directors of the Company.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to rule 4.29(1) of the Listing Rules.

– 113 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

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 30 June 2009 or any future date, or

• the results and cash flows of the Group for the period from 16 July 2008 (date of incorporation) to 30 June 2009 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 rule 4.29(1) of the Listing Rules.

UHY Vocation HK CPA Limited Certified Public Accountants Hong Kong, 7 May 2010

– 114 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

The following are the unaudited pro forma financial information on the Enlarged Group and the text of the accountant’s report thereon received from the reporting accountants, UHY Vocation HK CPA Limited, Certified Public Accountants, Hong Kong, prepared for the purpose of inclusion in this circular.

A. INTRODUCTION

On 25 March 2010, the Group entered into a conditional sale and purchase agreement to acquire 70% of the issued share capital of the Stephigh Group at a consideration of HK$126,000,000. Accordingly, the accompanying Unaudited Pro Forma Financial Information of the Enlarged Group has been prepared to illustrate the effect of the proposed acquisition of the 70% issued share capital of the Stephigh Group.

The unaudited pro forma consolidated statement of financial position of the Enlarged Group as at 30 June 2009 is prepared based on (i) the audited consolidated statement of financial position of the Group as at 30 June 2009, as extracted from the annual report of the Company for the year then ended; (ii) the audited consolidated statement of financial position of the Stephigh Group as at 30 June 2009, as extracted from the accountant’s report thereon set out in Appendix II to this Circular, as if the Acquisition had been completed on 30 June 2009.

The unaudited pro forma consolidated statement of comprehensive income and cash flow statement of the Enlarged Group for the year ended 30 June 2009 are prepared based on (i) the audited consolidated statement of comprehensive income and consolidated cash flow statement of the Group for the year ended 30 June 2009, as extracted from the annual report of the Company for the year then ended; (ii) the audited consolidated statement of comprehensive income and consolidated cash flow statement of the Stephigh Group for the year ended 30 June 2009, as extracted from the accountant’s report thereon set out in Appendix II to this Circular, as if the Acquisition had been completed on 16 July 2008.

The Unaudited Pro Forma Financial Information is prepared to provide information on the Enlarged Group as a result of the completion of the Acquisition. As it is prepared for illustration purposes only, it does not purport to present what the financial position or the results or cash flows of the Enlarged Group will be on completion of the Acquisition.

– 115 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

B. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE ENLARGED GROUP

NON-CURRENT ASSETS Property, plant and equipment Interests in leasehold land held for own use under operating lease Deposits for the purchase of property, plant and equipment Deferred tax assets CURRENT ASSETS Trading securities Inventories Trade and other receivables Tax recoverable Amount due from the controlling shareholder (the ‘‘CS’’) Pledged deposits Cash and cash equivalents CURRENT LIABILITIES Trade and other payables Bank loans Other financial liabilities NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Bank loans Trade and other payables Convertible notes Deferred tax liabilities NET ASSETS	The Group 30 June 2009 RMB’000 290,472 18,143 9,580 57,750 375,945 1,570 25,997 94,068 — 61,975 8,662 648,450 840,722 143,926 250,972 164,443 559,341 281,381 657,326 16,000 — — 6,861 22,861 634,465	Stephigh Group 30 June 2009 RMB’000 1,815 — — 189 2,004 — 170,027 10,008 948 — — 8,201 189,184 61,997 27,903 — 89,900 99,284 101,288 93,000 — — — 93,000 8,288	Subtotal Pro forma Adjustments RMB’000 RMB’000 292,287 18,143 9,580 57,939 377,949 1,570 196,024 182,642 1 104,076 948 61,975 8,662 656,651 (2,200) 4 (1,110) 6 1,029,906 205,923 278,875 164,443 649,241 380,665 758,614 109,000 — 1,175 6 — 29,427 2 49,212 3 6,861 115,861 642,753	Enlarged Group RMB’000 292,287 18,143 9,580 57,939
				377,949
				1,570 378,666 104,076 948 61,975 8,662 653,341
				1,209,238
				205,923 278,875 164,443
				649,241
				559,997
				937,946
				109,000 1,175 78,639 6,861
				195,675
				742,271

– 116 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

CAPITAL AND RESERVES Share capital Reserves Equity attributable to equity holders of the Company Non-controlling interests TOTAL EQUITY	The Group 30 June 2009 RMB’000 58,661 575,804 634,465 — 634,465	Stephigh Group 30 June 2009 RMB’000 339 (723) (384) 8,672 8,288	Subtotal Pro forma Adjustments RMB’000 RMB’000 59,000 (339) 5 575,081 16,396 1 11,122 2 21,308 3 (2,200) 4 723 5 (2,285) 6 634,081 8,672 54,793 1 642,753	Enlarged Group RMB’000 58,661 620,145
				678,806 63,465
				742,271

– 117 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

C. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME OF THE ENLARGED GROUP

Turnover Cost of sales Gross profit Other revenue Other net loss Distribution costs Administrative expenses Repair and maintenance costs Other operating expenses Impairment of non-current assets (Loss)/profit from operations Finance costs (Loss)/profit before taxation Income tax (Loss)/profit for the year Attributable to: Equity shareholders of the Company Non-controlling interests	The Group 30 June 2009 RMB’000 316,940 (270,693) 46,247 5,002 (95,248) (16,278) (30,500) (9,720) (820) (282,338) (383,655) (19,866) (403,521) 43,319 (360,202) (360,202) — (360,202)	Stephigh Group 30 June 2009 RMB’000 18,364 (12,565) 5,799 60 — — (2,059) — — — 3,800 (3,028) 772 (218) 554 375 179 554	Subtotal Pro forma Adjustments RMB’000 RMB’000 335,304 (283,258) 52,046 5,062 16,396 1 (95,248) (16,278) (32,559) (2,200) 4 (9,720) (820) (282,338) (379,855) (22,894) (2,285) 6 (402,749) 43,101 (359,648) (359,827) 16,396 1 (2,200) 4 (2,285) 6 179 (359,648)	Enlarged Group RMB’000 335,304 (283,258) 52,046 21,458 (95,248) (16,278) (34,759) (9,720) (820) (282,338) (365,659) (25,179) (390,838) 43,101 (347,737) (347,916) 179 (347,737)

– 118 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

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

Operating activities (Loss)/profit before taxation Adjustments for: Loss/(gain) on disposal of property, plant and equipment Discount on acquisition of interest in a subsidiary Depreciation Amortisation of interest in leasehold land held for own use under operating leases Interest on borrowings Interest on other financial liabilities Interest on amount due to the CS Interest element of finance leases Interest income Impairment of trade and other receivables Impairment of non-current assets Impairment on available-for-sale financial assets Reversal of impairment of trade and other receivables Loss on termination of derivative financial instruments Net realised and unrealised gains on trading securities Foreign exchange loss Operating profit before changes in working capital Decrease/(increase) in inventories Decrease in trade and other receivables (Decrease)/increase in trade and other payables Cash generated from operations Tax paid — Income tax paid Net cash generated from operating activities	The Group 30 June 2009 RMB’000 (403,521) 31,940 — 36,431 500 16,902 1,351 288 86 (4,782) 68,162 282,338 — (5,258) 1,087 (70) 681 26,135 19,462 43,962 (15,896) 73,663 (13,515) 60,148	Stephigh Group 30 June 2009 RMB’000 772 (42) — 314 — 2,870 — — — (42) — — 100 — — — — 3,972 (33,505) (1,531) 27,705 (3,359) (657) (4,016)	Subtotal Pro forma Adjustments RMB’000 RMB’000 (402,749) 16,396 1 (2,200) 4 (2,285) 6 31,898 — (16,396) 1 36,745 500 19,772 2,285 6 1,351 288 86 (4,824) 68,162 282,338 100 (5,258) 1,087 (70) 681 30,107 (14,043) 42,431 11,809 70,304 (14,172) 56,132	Enlarged Group RMB’000 (390,838) 31,898 (16,396) 36,745 500 22,057 1,351 288 86 (4,824) 68,162 282,338 100 (5,258) 1,087 (70) 681 27,907 (14,043) 42,431 11,809 68,104 (14,172) 53,932

– 119 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Investing activities Cash paid for business combination under common control Increase in deposits for the purchase of property, plant and equipment Payments for the purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Payment for the purchase of trading securities Payment for acquisition of subsidiary Interest received Net cash used in investing activities Financing activities Proceeds from new bank loans Repayment for bank loans Increase in pledged deposits Payment for derivative financial instruments Capital element of finance lease rentals paid Interest element of finance lease rentals paid (Decrease)/increase in amount due to a director Financial assistance from the CS Proceeds from issue of shares Proceeds from issuance of convertible notes Interest paid Dividends paid Net cash used in financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at 1 July 2008/2007 Effect of foreign exchange rate changes Cash and cash equivalents at 30 June 2009/2008	The Group 30 June 2009 RMB’000 — (21,557) (227,401) — (1,500) — 4,782 (245,676) 215,585 (232,568) (4,355) (3,434) (3,104) (86) (2,298) 3,434 — — (17,580) (1,969) (46,375) (231,903) 880,366 (13) 648,450	Stephigh Group 30 June 2009 RMB’000 (21,000) — (828) 314 — — 42 (21,472) 37,003 (7,322) — — — — — — 339 — (2,870) — 27,150 1,662 6,539 — 8,201	Subtotal Pro forma Adjustments RMB’000 RMB’000 (21,000) (21,557) (228,229) 314 (1,500) — (40,549) 2 4,824 (267,148) 252,588 (239,890) (4,355) (3,434) (3,104) (86) (2,298) 3,434 339 — 40,549 2 (20,450) (1,110) 6 (1,969) (19,225) (230,241) 886,905 (13) 656,651 (2,200) 4 (1,110) 6	Enlarged Group RMB’000 (21,000 (21,557 (228,229 314 (1,500 (40,549 4,824
				(307,697
				252,588 (239,890 (4,355 (3,434 (3,104 (86 (2,298 3,434 339 40,549 (21,560 (1,969
				20,214
				(233,551 886,905 (13
				653,341

– 120 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Notes:

1. The discount on acquisition of interest in subsidiary arising on the acquisition of Stephigh Group is calculated as follow,

Stephigh Group 100% of net liabilities of Stephigh Group as at 30 June 2009 (after deduction of minority interest (note (i)) Revaluation gain on stock of properties (after deduction of minority interest (note (i)) Discount on acquisition of interests in a subsidiary Consideration for acquisition of Stephigh Group (note (ii))	RMB’000 (384 127,849 (16,396
	111,069

This adjustment does not have continuing effect on the Enlarged Group.

Notes:

• (i) The net assets value of Stephigh Group, based on the carrying amounts of its assets and liabilities as at 30 June 2009 as if the Acquisition had been completed on 30 June 2009 and assumed the fair value of the assets and liabilities approximate to the carrying amounts, will be adjusted upon completion of the Acquisition with reference to the fair value of its assets, liabilities and contingent liabilities at that date.

Since the fair value of assets and liabilities of Stephigh Group at the Completion date of the Acquisition substantially different from the fair values used in the preparation of this Unaudited Pro Forma Financial Information of the Enlarged Group, the final amounts of the identified net assets (including other intangible assets) and goodwill to the recognised in connection with the Acquisition could be different from the amounts stated herein.

The table below shows the reconciliation of the revaluation gain on stock of properties shared by the Group.

Revaluation gain on stock of properties Less: revaluations gain shared by non-controlling interests Revaluation gain shared by the Group Total consideration for the acquisition of Stephigh Group is set out as follows: Stephigh Group — issue of convertible notes to third parties (note 2) — issue of convertible notes to Vendor (note 3) Total consideration	RMB’000 182,642 (54,793
	127,849
	RMB’000 40,549 70,520
	111,069

(ii) Total consideration for the acquisition of Stephigh Group is set out as follows:

1. This represents the debt component and equity component for the Convertible Notes to be issued to third parties for the acquisition of Stephigh Group.

Pursuant to the Acquisition Agreement, a convertible note with principal amounts of HK$46,000,000 (equivalent to approximately RMB40,549,000) will be issued. The convertible note will be matured 3 years from the date of issuance and will be converted at any time in the conversion period from the date of issue of convertible notes to and including the maturity date. The conversion price for the convertible note has been set at HK$0.28 per share.

The conversion price will be subject to adjustment for subdivision or consolidation of shares, bonus issues, capital distribution, right issues or other dilutive events.

– 121 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

The convertible notes are compound financial instruments of two elements, liabilities component and equity component. The fair value of the liabilities component of the convertible notes is estimated by using the Binomial Lattice approach at prevailing market rate of approximately 12.52% per annum. The fair value of the equity component of the convertible notes is represented by the residual amount after taking out the liability component. As such, the fair value of the convertible note is split into a debt component of approximately HK$33,382,627 (equivalent to approximately RMB29,426,796) which is recognised in the unaudited pro forma consolidated statement of financial position as non-current liabilities, and an equity component of approximately HK$12,617,373 (equivalent to approximately RMB11,122,214) which is recognised in the unaudited pro forma consolidated statement of financial position as equity.

1. This represents the debt component and equity component for the Convertible Notes to be issued to the Vendor for the acquisition of Stephigh Group.

Pursuant to the Acquisition Agreement, a convertible note with principal amounts of HK$80,000,000 (equivalent to approximately RMB70,520,000) will be issued. The convertible note will be matured 3 years from the date of issuance and will be converted at any time in the conversion period from the date of issue of convertible notes to and including the maturity date. The conversion price for the convertible note has been set at HK$0.28 per share.

The conversion price will be subject to adjustment for subdivision or consolidation of shares, bonus issues, capital distribution, rights issues or other dilutive events.

The convertible notes are compound financial instruments of two elements, liabilities component and equity component. The fair value of the liabilities component of the convertible notes is estimated by using the Binomial Lattice approach at prevailing market rate of approximately 12.52% per annum. The fair value of the equity component of the convertible notes is represented by the residual amount after taking out the liability component. As such, the fair value of the convertible note is split into a debt component of approximately HK$55,827,178 (equivalent to approximately RMB49,211,657) which is recognised in the unaudited pro forma consolidated balance sheet as non-current liabilities, and an equity component of approximately HK$24,172,822 (equivalent to approximately RMB21,308,343) which is recognised in the unaudited pro forma consolidated balance sheet as equity.

1. The amount represents the payment of expenses that are directly attributable to the Acquisition of approximately RMB2,200,000.

The adjustment will have no continuing effect to the Enlarged Group.

1. This represents the effects for the elimination of the share capital of Stephigh Group and the pre-acquisition reserves arising from consolidation as if the Acquisition had been completed on 30 June 2009.

2. This represents the imputed interest to be expensed by issuance of the convertible note as disclosed in note 1. This adjustment will have a continuing effect of the Enlarged Group.

The imputed interest to be expensed by issuance of the convertible notes are HK$2,592,261 (equivalent to approximately RMB2,285,078) where HK$1,260,000 (equivalent to RMB1,110,690) will be paid during the year.

• Note: Assuming the convertible note was issued on 1 July 2008, the adjustment of approximately HK$2,592,261 (equivalent to approximately RMB2,285,078) represents the imputed interest to be expensed by the Group for the year ended 30 June 2009. For the purpose of preparing the unaudited pro forma consolidated statement of comprehensive income, the imputed interest expense has been computed on the assumption that the principal amount of the convertible note was approximately HK$126,000,000 (equivalent to approximately RMB111,069,000), carried an effective interest rate of 1.87% per annum and had fixed term of three years from the date of issue.

This adjustment will have a continuing effect to the Enlarged Group, and the actual amount will be vary according to the timing of the conversion and redemption of the whole or any part of the convertible notes and the applicable effective interest rate.

– 122 –

MANAGEMENT DISCUSSION AND ANALYSIS ON STEPHIGH

APPENDIX IV

Set out below is the management discussion and analysis of the results of the Stephigh Group, which should be read in conjunction with the accountant’s report of the Stephigh Group set out in Appendix II.

Financial Results for the period from 16 July 2008 (date of incorporation) to 30 June 2009

For the period from 16 July 2008 to 30 June 2009, the Stephigh Group recorded a turnover of RMB18.4 million with a net profit of RMB0.6 million which was solely contributed from the sales of properties in Anlu.

Financial Results for the six months ended 31 December 2009

For the period from 1 July 2009 to 31 December 2009, the Stephigh Group Recorded a turnover of RMB26.2 million with a net profit of RMB4.3 million which was solely contributed from the sales of properties in Anlu.

Financial Results for the period from 16 July 2008 (date of incorporation) to 31 December 2008

For the period from 16 July 2008 to 31 December 2008, the Stephigh Group Recorded a turnover of RMB6.3 million with a net loss of RMB0.9 million which was solely attributable from the sales of properties in Anlu.

Liquidity, financial resources and capital structure

The Stephigh Group’s working capital requirement was principally financed by its internal resources and borrowings raised from third parties.

At 30 June 2009, the Stephigh Group had total interest-bearing borrowings of RMB120.9 million, of which RMB27.9 million were short-term and RMB93.0 million were long-term. All of these borrowings were unsecured. The gearing ratio (calculated as the ratio of current liabilities plus noncurrent liabilities: total equity) was 22.07 as at 30 June 2009.

At 31 December 2009, the Stephigh Group had total interest-bearing borrowings of RMB129.4 million, of which RMB12.1 million were short-term and RMB117.3 million were long-term. All of these borrowings were unsecured. The gearing ratio (calculated as the ratio of current liabilities plus noncurrent liabilities: total equity) was 52.7 as at 31 December 2009.

At 31 December 2008, the Stephigh Group had total interest-bearing borrowings of RMB98.1 million. All of these borrowings were short-term and unsecured. The gearing ratio (calculated as the ratio of current liabilities plus non-current liabilities: total equity) was 25.5 as at 31 December 2008.

The total borrowings of the Stephigh Group were mainly for business expansion, capital expenditure and working capital purposes and were denominated in Renminbi. There is no significant exposure to foreign currency fluctuation and no related hedges.

– 123 –

MANAGEMENT DISCUSSION AND ANALYSIS ON STEPHIGH

APPENDIX IV

Acquisition and disposal of subsidiaries and associated companies

On 30 July 2008, Stephigh acquired 70% of the equity interests of Anlu, for the total consideration of approximately RMB21,000,000. The acquired subsidiary group is principally engaged in the production and sale of properties. The Stephigh Group had no other material acquisition and disposals of subsidiaries and affiliated companies during the period from 16 July 2008 to 30 June 2009.

During the periods ended 31 December 2009 and 2008, the Stephigh Group had no material acquisition and disposals of subsidiaries and affiliated companies.

Employment information

The Stephigh Group employed 35 staff as at 30 June 2009, 38 staff as at 31 December 2009 and 42 staff as at 31 December 2008. Remuneration is determined by reference to market terms and qualifications and experience of the staff concerned. Salaries and performance bonus are reviewed on annual basis. Other benefits including retirement benefits scheme, medical insurance and allowances are provided to all eligible employees. For the year ended 30 June 2009, the employment cost (including directors’ emoluments) was amounted to approximately RMB1.0 million. For the periods ended 31 December 2009 and 2008, the employment costs (including directors’ emoluments) were amounted to approximately RMB0.7 million and RMB0.7 million respectively.

Property interests and property valuation

Greater China Appraisal Limited, an independent valuer, has valued Anlu’s property interests as at 28 February 2010. The full text of the letter with a summary of valuation and valuation certificates with regard to such property interests are set out in Appendix V of this Circular.

The table below shows the reconciliation of the net book value of Anlu’s property interests as at 31 December 2009 with the valuation of such interests as at 28 February 2010 as stated in Appendix V to this Circular.

Net book value of Anlu’s property interests as at 31 December 2009 Movements for the two months ended 28 February 2010 Additions Disposal Net book value as at 28 February 2010 Valuation surplus as at 28 February 2010 Capital value of Anlu’s property interests as at 28 February 2010 per Appendix V to this Circular	(RMB’000) 180,633 84,667 (163,689) 101,611 251,058 352,669

– 124 –

MANAGEMENT DISCUSSION AND ANALYSIS ON STEPHIGH

APPENDIX IV

Others

The Stephigh Group did not have any significant capital expenditure commitments and other contingent liabilities as at 30 June 2009, 31 December 2009 and 31 December 2008. There were no future plans for material investments or capital assets at 30 June 2009, 31 December 2009 and 31 December 2008.

– 125 –

VALUATION REPORT ON THE PROPERTY

APPENDIX V

==> picture [216 x 45] intentionally omitted <==

Room 2703 Shui On Centre 6–8 Harbour Road Wanchai Hong Kong

7 May, 2010

The Directors Kingwell Group Limited Room 1805, 18th Floor Harbour Centre 25 Harbour Road Wanchai Hong Kong

Dear Sirs,

In accordance with the instructions from Kingwell Group Limited (‘‘the Company’’) for us to value the properties of Anlu Taihe Real Estate Development Company (‘‘Anlu’’, an indirect 100%-owned subsidiary of Stephigh Group Limited (‘‘Stephigh’’)) in the People’s Republic of China (referred to as the ‘‘PRC’’), we confirm that we have carried out inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing the market values of such property interests as at 28 February 2010 (referred to as the ‘‘valuation date’’).

It is our understanding that this valuation is used for acquisition purpose.

This letter which forms part of our valuation report explains the basis and methodology of valuation, and clarifies our assumptions made, titleship of properties and the limiting conditions.

BASIS OF VALUATION

The valuation of such property interests is our opinion of the market value which we would define as intended to mean ‘‘the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.’’

– 126 –

VALUATION REPORT ON THE PROPERTY

APPENDIX V

VALUATION METHODOLOGY

All properties are valued by the comparison method where comparison based on prices realized or market prices of comparable properties is made. Comparable properties of similar size, character and location are analyzed and carefully weighed against all the respective advantages and disadvantages of each property in order to arrive at a fair comparison of capital values.

Similar approach is applied to valuation of land for development where land comparables were analysed and adjusted for application in the valuation.

ASSUMPTIONS

Our valuation has been made on the assumption that the owner sells the property on the open market in its existing state without the benefit of any deferred terms contracts, leaseback, joint ventures, management agreements or any similar arrangement which would serve to increase the value of the property.

As the property is held under long term land use rights, we have assumed that the owners of the property has free and uninterrupted rights to use or transfer the property for the whole of the unexpired term of the respective land use rights. In our valuation, we have assumed that the property can be freely disposed of and transferred to third parties on the open market without any additional payment to the relevant government authorities.

It is assumed that all applicable zoning and use regulations and restrictions have been complied with unless nonconformity has been stated, defined, and considered in the appraisal report. Moreover, it is assumed that the utilization of the land and improvements is within the boundaries of the site held by the owner or permitted to be occupied by the owner. In addition, we assumed that no encroachment or trespass exists, unless noted in the report.

Other special assumptions of the property, if any, have been stated out in the footnote of the valuation certificate for the property.

TITLESHIP INVESTIGATION

We have been provided with copies of legal documents regarding the property under valuation. However, due to the current registration system of the PRC, no investigation has been made for the legal title or any liabilities attached to the property.

In the course of our valuation, we have relied upon the legal opinion given by Mr. An Fenglian, PRC qualified lawyer and registered foreign lawyer of Mason Ching & Associates (‘‘the PRC Legal Advisor’’) in relation to the legal title to the property under valuation.

All legal documents disclosed in this report are for reference only and no responsibility is assumed for any legal matters concerning the legal title to the property set out in this report.

– 127 –

VALUATION REPORT ON THE PROPERTY

APPENDIX V

LIMITING CONDITIONS

We have not carried out detailed site measurements to verify the correctness of the land or building areas in respect of the relevant property but have assumed that the areas shown on the legal documents provided to us are correct. Based on our experience of valuation of similar properties in the PRC, we consider the assumptions so made to be reasonable. All documents and contracts have been used as reference only and all dimensions, measurements and areas are approximations.

We have inspected the exterior and, where possible, the interior of the property included in this valuation report. However, no structural survey has been made and we are therefore unable to report as to whether the property is free from rot, infestation or any other structural defects. No tests were carried out on any of the services.

Having examined all relevant documentation, we have relied to a very considerable extent on the information provided by Anlu and have accepted advice given to us by it on such matters as planning approvals, statutory notices, easements, tenure, occupation, lettings, construction costs, rentals, site and floor areas and in the identification of the property. We have had no reason to doubt the truth and accuracy of the information provided to us by Anlu. We were also advised by the Company that no material factors have been omitted from the information to reach an informed view, and have no reason to suspect that any material information has been withheld.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on any of the property valued nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the interest is free of encumbrances, restrictions and outgoings of an onerous nature which could affect its value.

Since the property is located in a relatively under-developed market, the PRC, those assumptions are often based on imperfect market evidence. A range of values may be attributable to the property depending upon the assumptions made. While the valuer has exercised his professional judgement in arriving at the value, investors are urged to consider carefully the nature of such assumptions which are disclosed in the valuation report and should exercise caution in interpreting the valuation report.

OPINION OF VALUE

The summary of valuation and valuation certificate have already shown the capital values of the property interests.

REMARKS

Our valuation has been prepared in accordance with generally accepted valuation procedures and in compliance with the requirements of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited including but not limited to the provisions of Chapter 5 and Practice Note 12.

– 128 –

VALUATION REPORT ON THE PROPERTY

APPENDIX V

In valuing the property, we have complied with the requirements contained in the HKIS Valuation Standards on Properties (1st Edition 2005) published by the Hong Kong Institute of Surveyors and effective from 1 January 2005.

Valuation of the property is denominated in Chinese Renminbi (RMB).

We enclose herewith the summary of valuation and valuation certificates.

This valuation report is issued subject to our General Service Conditions.

Yours faithfully, For and on behalf of

GREATER CHINA APPRAISAL LIMITED

K. K. Ip BLE, LLD Chartered Valuation Surveyor Registered Professional Surveyor Managing Director

Note: Mr. K. K. Ip, who is a chartered valuation surveyor and a registered professional surveyor, has substantial experience in valuation of properties in the PRC since 1992.

– 129 –

VALUATION REPORT ON THE PROPERTY

APPENDIX V

SUMMARY OF VALUATION

Group I — Property Interest held for sale by Anlu in the PRC

No. Property 1. Unsold units of Phase I of Anlu Taihe Paradise Liang Ji Bei Road Anlu Economic Development District Anlu City Hubei province The PRC 2. Unsold units of Phase II of Anlu Taihe Paradise Liang Ji Bei Road Anlu Economic Development District Anlu City Hubei province The PRC Sub-total:	Market Value as at 28 February 2010 (RMB) 185,308,000 154,653,000
	339,961,000

Group II — Property Interest held for future development by Anlu in the PRC

No. Property 3. Development land for Phase III of Anlu Taihe Paradise located at Liang Ji Bei Road Anlu Economic Development District Anlu City Hubei province The PRC Sub-total: Total:	Market Value as at 28 February 2010 (RMB) 12,708,000
	12,708,000
	352,669,000

– 130 –

VALUATION REPORT ON THE PROPERTY

APPENDIX V

VALUATION CERTIFICATE

Group I — Property Interest held for sale by Anlu in the PRC

			Particulars of	Market value as at
No.	Property	Description and tenure	occupancy	28 February 2010
				(RMB)
1.	Unsold units of Phase I of	Phase I of Anlu Taihe Paradise (安陸泰合樂	The property is	185,308,000
	Anlu Taihe Paradise	園), a composite residential development, is	currently vacant.
	Liang Ji Bei Road	built on a parcel of land (the ‘‘Land’’) with a
	Anlu Economic	land area of approximately 131,277 square
	Development District	meters.
	Anlu City
	Hubei province	Phase I of Anlu Taihe Paradise has 20 blocks
	The PRC	of 3-storey town house, 32 blocks of 3-storey
		detached villas, 24 blocks of 5- to 6-storey
		residential buildings, 1 block of apartment,
		and 1 block of commercial building
		accommodating 874 residential units and 120
		commercial units with a total gross floor area
		approximately 121,493.98 square meters. The
		development also includes a primary school
		and a kindergarten. It was completed in 2007.
		The subject property comprises 463 unsold
		units with a total gross floor area of
		approximately 55,559 square metres.
		Gross
		No. of Floor
		Use Units Area
		(sq.m.)
		Town house 39 11,653
		Detached villas 26 8,014
		Multi-storey
		residential 253 27,071
		Apartment 48 3,304
		Commercial 97 5,517
		Total: 463 55,559

The property is held under a State-owned Land Use Rights Certificate for residential and commercial uses with terms expiring on 22 August 2065 and 22 August 2045 respectively.

Notes:

• (i) According to a State-owned Land Use Rights Certificate (An Tu Guo Yong (2008) Di No. 0419) dated 29 April 2008 issued by the People’s Government of Anlu City, the land use rights of the Land has been granted to Anlu for residential and commercial uses with terms expiring on 22 August 2065 and 22 August 2045 respectively.

• (ii) The Land of the property, together with the lands of property numbered 2 and 3, was acquired by Anlu on 23 August 2005 with an acquisition cost of RMB12,640,000. There is an outstanding land premium of RMB460,000.

– 131 –

VALUATION REPORT ON THE PROPERTY

APPENDIX V

• (iii) According to a Construction Land Use Planning Permit (An Kai Gui (2003)02) issued by Development District Branch of Anlu Planning Bureau dated 10 December 2003, the proposed land use for the development on the land (where the Land forms part) with an area of 213,499.5 square meters was approved.

• (iv) According to a Construction Project Planning Permit (2008010) issued by Planning and Management Bureau of Anlu City dated 16 January 2008, the proposed construction of the property with gross floor area of 148,844.29 square meters was approved.

• (v) According to 80 sets of Construction Project Inspection and Acceptance Record Certificate of Hubei Province issued by Construction Bureau of Anlu City dated between 19 October 2007 and 14 November 2007, the construction of the property with a total gross floor area of 129,218.98 square meters has been completed with acceptance.

• (vi) As advised by Anlu, the primary school and the kindergarten with a total gross floor area of 7,725 square meters have been donated to the People’s Government of Anlu City.

• (vii) In the course of our valuation, we have assumed that Anlu will settle the outstanding land premium.

• (viii) Opinions of the PRC Legal Advisor are summarized as follows:

• (a) Anlu is the solely holder of the property and land use rights, during above land use term, Anlu has legal and valid rights for the property and land use rights.

• (b) Anlu has the rights to develop the property. Anlu has obtained all necessary approvals and permits for the construction of Phase I.

• (c) Upon settlement of the outstanding land premium, Anlu will have the rights to sell the property and to transfer, lease, mortgage and dispose of the property in accordance with the relevant PRC laws and regulations without obtaining any approval, permit or consent from any governmental authorities.

• (d) The property has been used for its prescribed usage.

• (e) The property is not subject to any mortgages or encumbrances.

• (ix) According to a Letter of Undertaking, Anlu will settle all outstanding land premium if Anlu is requested to do so by the relevant authorities in order to eliminate any adverse effects in legal title, sale, lease or mortgage of the subject property.

– 132 –

VALUATION REPORT ON THE PROPERTY

APPENDIX V

			Particulars of	Market value as at
No.	Property	Description and tenure	occupancy	28 February 2010
				(RMB)
2.	Unsold units of Phase II of	Phase II of Anlu Taihe Paradise (安陸泰合樂	The property is	154,653,000
	Anlu Taihe Paradise	園), a composite residential development, is	currently vacant.
	Liang Ji Bei Road	built on a parcel of land (the ‘‘Land’’) with a
	Anlu Economic	land area of approximately 65,206 square
	Development District	meters.
	Anlu City
	Hubei province	Phase II of Anlu Taihe Paradise has 3 blocks
	The PRC	of 12-storey residential building, 24 blocks of
		5- to 6-storey residential building, 1 block of
		commercial building and 1 block of 2-storey
		apartment accommodating 636 residential
		units and certain commercial spaces with a
		total gross floor area approximately 82,940.16
		square meters. It was completed in 2009.
		The subject property comprises 626 unsold
		residential units and certain commercial area
		with a total gross floor area of approximately
		74,401 square metres. Detailed breakdown is
		shown as follows:

Use Sub-high rise residential Multi-storey residential Apartment Commercial Total:	No. of Units 90 516 20 n/a 626	Gross Floor Area (sq.m.) 13,122 57,847 814 2,618
		74,401

The property is held under a State-owned Land Use Rights Certificate for residential and commercial uses with terms expiring on 22 August 2065 and 22 August 2045 respectively.

Notes:

• (i) According to a State-owned Land Use Rights Certificate (An Tu Guo Yong (2008) Di No. 0420) dated 29 April 2008 issued by the People’s Government of Anlu City, the land use rights of the property has been granted to Anlu for residential and commercial uses with terms expiring on 22 August 2065 and 22 August 2045 respectively.

• (ii) The Land of the property, together with the lands of property numbered 1 and 3, was acquired by Anlu on 23 August 2005 with an acquisition cost of RMB12,640,000. There is an outstanding land premium of RMB460,000.

• (iii) According to a Construction Land Use Planning Permit (An Kai Gui (2003)02) issued by Development District Branch of Anlu Planning Bureau dated 10 December 2003, the proposed land use for the development on the land (where the Land forms part) with an area of 213,499.5 square meters was approved.

– 133 –

VALUATION REPORT ON THE PROPERTY

APPENDIX V

• (iv) According to 9 sets of Construction Work Commencement Permit issued by Construction Industry Management Office of Anlu City dated between 26 March 2007 and 20 May 2008, Anlu is allowed to construct sub-high rise residential building, multi-storey residential building and apartment with a total planned gross floor area of 82,940.16 square meters.

• (v) According to a Construction Project Planning Permit (2009003) issued by Planning and Management Bureau of Anlu City dated 7 January 2009, the proposed construction of certain buildings with a total gross floor area of 18,328.38 square meters was approved. However, Anlu has not obtained Construction Planning Permits for the remaining 23 blocks of residential buildings.

• (vi) According to 8 sets of Construction Project Inspection and Acceptance Record Certificate of Hubei Province issued by Construction Bureau of Anlu City dated 24 July 2009, the construction of the property with a total gross floor area of 25,063 square meters has been completed with acceptance. As advised by Anlu, the application of Construction Project Inspection and Acceptance Record Certificate for remaining property with a total gross floor area of 57,877.16 square meters is in progress.

• (vii) In the course of our valuation, we have assumed that Anlu will settle the outstanding land premium and will obtained all outstanding necessary approvals and permits.

• (viii) Opinions of the PRC Legal Advisor are summarized as follows:

• (a) Anlu is the solely holder of the property and land use rights, during above land use term, Anlu has legal and valid rights for the property and land use rights.

• (b) Anlu has the rights to develop the property. Anlu has obtained all necessary approvals and permits for the construction of Phase II except the 23 blocks of building with no Construction Project Planning Permit obtained.

• (c) Upon settlement of the outstanding land premium, Anlu will have the rights to sell the property and to transfer, lease, mortgage and dispose of the property in accordance with the relevant PRC laws and regulations without obtaining any approval, permit or consent from any governmental authorities.

• (d) The property has been used for its prescribed usage.

• (e) The property is not subject to any mortgages or encumbrances.

• (ix) According to a Letter of Undertaking, Anlu will settle all outstanding land premium if Anlu is requested to do so by the relevant authorities in order to eliminate any adverse effects in legal title, sale, lease or mortgage of the subject property.

– 134 –

VALUATION REPORT ON THE PROPERTY

APPENDIX V

Group II — Property Interest held for future development by Anlu in the PRC

			Particulars of	Market value as at
No.	Property	Description and tenure	occupancy	28 February 2010
				(RMB)
3.	Development land for	The property comprises a parcel of	The property is	12,708,000
	Phase III of Anlu Taihe	rectangular-shaped land (the ‘‘Land’’) with a	currently vacant.
	Paradise located at	land area of 17,061 square meters.
	Liang Ji Bei Road
	Anlu Economic	As advised, a composite residential
	Development District	development named as Phase III of Anlu
	Anlu City	Taihe Paradise (安陸泰合樂園) will be
	Hubei province	developed on the Land.
	The PRC
		As advised by Anlu, Phase III of Anlu Taihe
		Paradise will include 4 high-rise residential
		buildings, 1 commercial building and 1 hotel
		with a total gross floor area of approximately
		60,412.55 square metres. The construction of
		Phase III will be commenced in mid-2010 and
		will be completed in 2011. However, the
		above building plan has not been approved
		and the Construction Project Planning Permit
		has not been obtained.
		The property is held under a State-owned
		Land Use Rights Certificate for residential and
		commercial uses with terms expiring on 22
		August 2065 and 22 August 2045
		respectively.

Notes:

• (i) According to a State-owned Land Use Rights Certificate (An Tu Guo Yong (2008) Di No. 0421) dated 29 April 2008 issued by the People’s Government of Anlu City, the land use rights of the Land has been granted to Anlu for residential and commercial uses with terms expiring on 22 August 2065 and 22 August 2045 respectively.

• (ii) The Land of the property, together with the lands of property numbered 1 and 2, was acquired by Anlu on 23 August 2005 with an acquisition cost of RMB12,640,000. There is an outstanding land premium of RMB460,000.

• (iii) According to a Construction Land Use Planning Permit (An Kai Gui (2003)02) issued by Development District Branch of Anlu Planning Bureau dated 10 December 2003, the proposed land use for the development on the land (where the Land forms part) with an area of 213,499.5 square meters was approved.

• (iv) In the course of our valuation, we have assumed that Anlu will settle the outstanding land premium.

• (v) Opinions of the PRC Legal Advisor are summarized as follows:

• (a) Anlu is the solely holder of the land use rights, during above land use term, Anlu has legal and valid land use rights for the Land.

• (b) Anlu has the rights to develop the property. Currently, no approvals or permits have been obtained by Anlu for the construction of Phase III.

• (c) Upon settlement of the outstanding land premium, Anlu will have the rights to sell the property and to transfer, lease, mortgage and dispose of the property in accordance with the relevant PRC laws and regulations without obtaining any approval, permit or consent from any governmental authorities.

– 135 –

VALUATION REPORT ON THE PROPERTY

APPENDIX V

• (d) The property has been used for its prescribed usage.

• (e) The property is not subject to any mortgages or encumbrances.

• (vi) According to a Letter of Undertaking, Anlu will settle all outstanding land premium if Anlu is requested to do so by the relevant authorities in order to eliminate any adverse effects in legal title, sale, lease or mortgage of the subject property.

• (vii) As advised by the Company, apart from the cost to be paid for the acquisition of 70% equity interest in Stephigh and the outstanding land premium of RMB460,000 that Anlu (which will become a 70% subsidiary of the Company after acquisition of Stephigh) may be requested to settle, the Company does not intend to contribute capital or to contribute to or become liable for all or part of the cost of development of the property project or to the company involved in the development project.

– 136 –

GENERAL INFORMATION

APPENDIX VI

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

2. SHARE CAPITAL

The authorised and issued share capital of the Company as at the Latest Practicable Date and immediately following conversion of the Convertible Bonds was and will be, as follows:

Authorised 5,000,000,000 Shares Issued as fully paid 1,062,032,500 Shares as at the Latest Practicable Date To be issued upon conversion of the Convertible Bonds 450,000,000 Conversion Shares	HK$ 500,000,000.00
	106,203,250.00 45,000,000.00
	151,203,250.00

All the Shares in issue and to be issued (when fully paid) rank and will rank pari passu in all respects with each other including rights to dividends, voting and return of capital. As at the Latest Practicable Date, no share or loan capital of the Company will be issued or is proposed to be issued for cash or otherwise and no commissions, discounts, brokerages or other special terms have been granted in connection with the issue or sale of any such capital, except for the proposed issue of Conversion Shares that would fall to be issued upon conversion of the Convertible Bonds.

3. DIRECTORS’ INTERESTS IN SECURITIES

As at the Latest Practicable Date, none of the Directors and chief executives of the Company had any interest or short position in shares, underlying shares and debentures of the Company or any of its associated corporation(s) (within the meaning of Part XV of the SFO) which (a) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions

– 137 –

GENERAL INFORMATION

APPENDIX VI

of the SFO); (b) were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (c) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies (the ‘‘Model Code’’), to be notified to the Company and the Stock Exchange.

		Number of	% of total
Name of Director	Capacity	Shares	issued Shares
Sze Ming Yee (Note)	Controlled corporation	345,778,539	32.56

Note: Mr. Sze Ming Yee, a Director, is a director and the controlling shareholder holding 72% equity interest in Union Day, which is the Controlling Shareholder of the Company. By virtue of the SFO, Mr. Sze is deemed to have interest in the 345,778,539 Shares.

4. SUBSTANTIAL SHAREHOLDERS

So far as is known to the Directors or chief executive of the Company, the following persons (other than a Director or chief executive of the Company) who, as at the Latest Practicable Date, had an interest or short position 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) which would fall to be disclosed under provisions of Division 2 and 3 of Part XV of the SFO, or who, as at the Latest Practicable Date, was directly and 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 other member the Group.

Long Position in the Shares of the Company

		Number of	Approximate
		ordinary	% of interest
Name	Capacity	Shares held	held
Union Day	Beneficial owner	345,778,539	32.56
Sze Ming Yee	Interest in controlled	345,778,539	32.56
	corporation

Save as disclosed above, so far as is known to the Directors or chief executive of the Company, the Company had not been notified of any other interest or short position 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) which would fall to be disclosed under provisions of Division 2 and 3 of Part XV of the SFO, or any persons (other then the Directors and chief executive of the Company) who, as at the Latest Practicable Date, was directly and 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 other member the Group.

5. WORKING CAPITAL

The Directors are of the opinion that after taking into account of the Enlarged Group’s internal resources, the Enlarged Group has sufficient working capital for its present requirements for the next twelve months from the Latest Practicable Date.

– 138 –

GENERAL INFORMATION

APPENDIX VI

6. INDEBTEDNESS STATEMENT

Borrowings

As at the close of business on 31st March, 2010, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Enlarged Group had total borrowings of RMB288.6 million, comprising bank borrowings of RMB155.0 million and other borrowings of RMB133.6 million raised from third parties. Details of the total borrowings are summarized below:

Secured bank loans — guaranteed — unguaranteed Unsecured bank loans — guaranteed — unguaranteed Total bank borrowings Other unsecured borrowings Total borrowings	The Enlarged Group RMB’000 14,500 57,000
	71,500
	41,500 42,000
	83,500
	155,000 133,600
	288,600

Interest in certain leasehold land held for own use under operating lease and buildings held for own use of the Group with total net asset value of RMB309.0 million at 31st March, 2010, were secured for bank loans. At 31st March, 2010, a bank loan with principal amount of US$4,000,000 (equivalent to approximately RMB27.5 million) granted to the Company had been fully settled. This bank loan was secured by the entire equity interest in Superford Holding Limited, Tempest Trading Limited, Winrise International Limited and Herown Limited (the ‘‘BVI Subsidiaries’’). The BVI subsidiaries are the immediate holding companies of Fujian Fuqiang Delicate Circuit Plate Co. Ltd, Gemini Electronics (Huizhou) Co. Ltd, Shuangxiang (Fujian) Electronics Ltd and Fuqing Haichuang Electron Technology Co. Ltd, respectively (the “PRC Subsidiaries”). The PRC Subsidiaries are the operating subsidiaries of the Group. The Company is currently arranging the release of charges with the bank.

– 139 –

GENERAL INFORMATION

APPENDIX VI

Other financial liabilities

At the close of business on 31st March, 2010, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of the circular, the Enlarged Group had other financial liabilities of RMB89,732,240, which was the amount demanded by Deutsche Bank AG and the interest accrued thereon as a result of the early termination of the Interest Rate Swaps by Deutsche Bank AG, deducted by HK$85,000,000 (approximately RMB74,712,139) paid by the Company to Deutsche Bank AG in accordance with the Settlement Agreement.

On 10th November, 2008, Deutsche Bank AG served a notice to the Company to early terminate the Swap Agreements effective on 12th November, 2008 as a result of the Company not paying the interest payment under one of the Swap Agreements on the due date in October 2008. In addition, the Company received a statement dated 13th November, 2008 from Deutsche Bank AG requesting a payment of US$23,714,693 (equivalent to approximately RMB163,092,000) in total as a result of the early termination of the Swap Agreements.

In March 2009, the Company received the Writ issued by Deutsche Bank AG as plaintiff with the Company named as defendant, in a claim arising from the Swap Agreements. In June 2009, the Company filed a defence and counterclaim against Deutsche Bank AG and an employee of Deutsche Bank AG to rescind the Swap Agreements transactions for the reason that it had been misrepresented in the true risks associated with the Swap Agreements.

As disclosed in the Announcement, the Company entered into the Settlement Agreement on 16th November, 2009 with Deutsche Bank AG for the settlement of the Action. Under the Settlement Agreement, the Company is obliged to pay Deutsche Bank AG less than the early termination amount of US$23,714,693, of which Mr. Lin Wan Qaing, the former controlling shareholder, is obliged to pay HK$29.2 million to the Company for settlement of his obligation under the Deed of Indemnity. The Company had settled partially the obligation amount at 31st March, 2010 and has settled the remaining balance as at the Latest Practicable Date in accordance with the Settlement Agreement. At 31st March, 2010, Mr. Lin Wan Qaing had discharged his obligation in full to the Company under the Deed of Indemnity.

Disclaimers

Save as disclosed above, the Consideration Convertible Bond and the Placing Convertible Bonds disclosed under the heading ‘‘Principal Terms of the Convertible Bonds’’ on pages 11 to 13, and apart from intra-group liabilities and normal trade payables, the Enlarged Group did not have any loan capital issued or agreed to be issued, bank overdrafts, debt securities issued and outstanding, and authorized or otherwise created but unissued and term loans or other borrowings, indebtedness in the nature of borrowings, liabilities under acceptance (other than normal trade bills) or acceptance credits, debentures, mortgages, charges, finance lease or hire purchase commitments, which are either guaranteed, unguaranteed, secured or unsecured, guarantees or other material contingent liabilities outstanding at the close of business on 31st March, 2010.

Except for settlement of the remaining balance of the obligation amount in April 2010 in accordance to the Settlement Agreement as mentioned above, the Directors have confirmed that there have been no material changes in the indebtedness and contingent liabilities of the Enlarged Group since 31st March, 2010, up to and including the Latest Practicable Date.

– 140 –

GENERAL INFORMATION

APPENDIX VI

7. FINANCIAL AND TRADING PROSPECTS OF THE ENLARGED GROUP

The financial tsunami has prolonged consequences and continued to bring challenges to the electronics industry. Given the negative market sentiment and severe pressure on average selling price, the Group has implemented prudent operational strategies and strived to maintain orders from existing clients amid the economic downturn. The management will continue to implement cost control measures to improve the Enlarged Group’s overall operation.

Looking ahead, the overall market sentiment has gradually improved since the start of 2010, which helps to trigger demand for electronic products. However, the management expects that the average selling prices will not be able to rebound quickly to improve significantly the profit margins in the short run, the operating environment for electronics industry is still relatively challenging in the current financial year.

However, while continuing to regain momentum on our core business, the Group strives to diversify income sources and propel business growth amid the difficult market conditions. In this respect, the Group proposes to acquire 70% equity interest in Stephigh, which offers the Group an opportunity to diversify its business into property development business in the PRC. With rapid urbanization in the PRC, the Directors consider that this move will help improving the prospects of the Enlarged Group.

The Group will continue to explore more opportunities which are beneficial to overall profitability.

8. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position or outlook of the Group since 30th June, 2009, being the date of which the latest published audited financial statements of the Group were made up.

9. SERVICE CONTRACT

As the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group which does not expire or is not terminable by such member of the Group within one year without payment of compensation (other than statutory compensation).

10. COMPETING INTERESTS

As at the Latest Practicable Date, so far as the Directors were aware, none of the Directors or their respective associates were considered to have interest in any business which competes or may compete, either directly or indirectly, with the business of the Group or have or may have any other conflicts of interest with the Group pursuant to the Listing Rules.

11. LITIGATION

As disclosed in the announcement of the Company dated 2nd April, 2009, on 31st March, 2009, the Company received a writ filed by Deutsche Bank AG against the Company claiming the early termination amount in respect of two interest rate swap agreements.

– 141 –

GENERAL INFORMATION

APPENDIX VI

As further disclosed in the announcement of the Company dated 17th November, 2009, the Company entered into the Settlement Agreement with Deutsche Bank AG on 16th November, 2009 for the settlement of the relevant action and the Company applied the proceeds from the open offer to settle payment liable under the Settlement Agreement.

Save as disclosed above, as at the Latest Practicable Date, no member of the Enlarged Group was engaged in any litigation or arbitration of material importance and no litigation or claim of material importance known to the Directors to be pending or threatened against any member of the Enlarged Group.

12. DIRECTORS’ INTEREST IN CONTRACTS AND ASSETS

No contract or arrangement in which any of the Directors is materially interested and which is significant in relation to the business of the Enlarged Group subsisted as at the Latest Practicable Date.

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which have been, since 30th June, 2009 (the date to which the latest published audited consolidated accounts of the Group 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.

13. EXPERT AND CONSENT

The following is the qualification of the experts whose letter and report are contained in this circular:

Name	Qualification
Access Capital	A licensed corporation to carry out Types 1, 4,
	6 and 9 regulated activities under the SFO
UHY Vocation HK CPA Limited	Certified Public Accountants
Greater China Appraisal Limited	Property valuer

Access Capital, UHY Vocation HK CPA Limited and Greater China Appraisal Limited have given and have not withdrawn their written consent to the issue of this circular with the inclusion of their report and the reference to their name in the form and context in which they appear.

As at the Latest Practicable Date, Access Capital, UHY Vocation HK CPA Limited and Greater China Appraisal Limited did not have any shareholding in any member of the Enlarged Group and did not have any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Enlarged Group.

– 142 –

GENERAL INFORMATION

APPENDIX VI

As at the Latest Practicable Date, Access Capital, UHY Vocation HK CPA Limited and Greater China Appraisal Limited did not have any direct or indirect interest in any assets which have been, since 30th June, 2009 (the date to which the latest published audited consolidated accounts of the Group 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.

14. MATERIAL CONTRACTS

Within the two years immediately preceding the date of this circular, the following are contracts (not being contracts entered into in the ordinary course of business) entered into by the members of the Enlarged Group which are or may be material:

• (i) the Settlement Agreement;

• (ii) the underwriting agreement dated 16th November, 2009 entered into between the Company and Upbest Securities Company Limited in relation to the open offer of 279,482,500 Shares at HK$0.18 each as announced by the Company on 17th November, 2009. The commission paid to Upbest Securities Company Limited was approximately HK$1.26 million, on the basis of 2.5% of the aggregate amount underwritten. The underwriting agreement became unconditional on 24th December, 2009. Further details were disclosed in the announcement of the Company dated 17th November, 2009 and the prospectus of the Company dated 8th December, 2009;

• (iii) the placing agreement dated 15th December, 2009 entered into between the Company and the subscribers, being Mr. Zhang Shaofen, Ms. Chen Li Hua, Ms. Yu Wai Fong, Ms. Tsang Siu Lan and Ms. Zheng Qing Hong, in relation to the issuance of 111,793,000 Shares at HK$0.38 each to the subscribers. Further details were disclosed in the announcement of the Company dated 16th December, 2009;

• (iv) the placing agreement dated 15th March, 2010 entered into between the Company and Emperor Securities Limited in relation to the placing of 111,792,000 Shares at HK$0.369 each. The commission paid to Emperor Securities Limited was approximately HK$1.55 million, on the basis of 3.75% of the aggregate amount underwritten. The placing was completed on 19th March, 2010. Further details were disclosed in the announcement of the Company dated 15th March, 2010;

• (v) the Acquisition Agreement; and

• (vi) the Placing Agreement.

15. MISCELLANEOUS

• (a) The registered office of the Company is at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands and the head office and principal place of business in Hong Kong is at Room 1805, 18th Floor, Harbour Centre, 25 Harbour Road, Wanchai, Hong Kong.

• (b) The secretary of the Company is Ms. Kuo Kwan Belinda, who is a member of CPA Australia and an associate member of The Hong Kong Institute of Certified Public Accountants.

– 143 –

GENERAL INFORMATION

APPENDIX VI

• (c) The Hong Kong branch share registrar of the Company is Hong Kong Registrars Limited at Shops 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

• (d) The English texts of this circular shall prevail over the Chinese text.

16. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the head office and principal place of business of the Company in Hong Kong at Room 1805, 18th Floor, Harbour Centre, 25 Harbour Road, Wanchai, Hong Kong, up to and including 20th May, 2010:

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

• (b) the annual report of the Company for the two financial years ended 30th June, 2009;

• (c) the material contracts referred to in the paragraph headed ‘‘Material Contracts’’ in this Appendix;

• (d) the letter from the Board, the text of which is set out in this circular;

• (e) the letter from the Independent Board Committee, the text of which is set out in this circular;

• (f) the letter from Access Capital, the text of which is set out in this circular;

• (g) the report from UHY Vocation HK CPA Limited in respect of the financial information on Stephigh referred to in Appendix II to this circular;

• (h) the report from UHY Vocation HK CPA Limited in respect of the pro-forma financial information on the Enlarged Group referred to in Appendix III to this circular;

• (i) the valuation report from Greater China Appraisal Limited in respect of the Property; and

• (j) the letters of consent from Access Capital, UHY Vocation HK CPA Limited and Greater China Appraisal Limited referred to in the section headed ‘‘Expert and Consent’’ in this Appendix.

– 144 –

NOTICE OF EGM

KINGWELL GROUP LIMITED

京 維 集 團 有 限 公 司

(formerly known as Sinotronics Holdings Limited

前稱華翔微電子控股有限公司[*] )

(incorporated in the Cayman Islands with limited liability)

(Stock code: 1195)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the ‘‘EGM’’) of Kingwell Group Limited (the ‘‘Company’’) will be held at Boardroom 3 & 4, Mezzanine Floor, Renaissance Harbour View Hotel, No.1 Harbour Road, Wanchai, Hong Kong on 24th May, 2010 at 10:00 a.m. for the purpose of considering and, if thought fit, passing with or without modifications, the following resolutions of the Company:

ORDINARY RESOLUTION

1. ‘‘THAT, conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited (the ‘‘Stock Exchange’’) granting or agreeing to grant (subject to allotment) and not having withdrawn or revoked the listing of, and permission to deal in, the shares of HK$0.10 each in the share capital of the Company (‘‘Shares’’) which may fall to be issued upon the conversion of the Convertible Bonds (as defined below):

2. (a) the creation and issue of the convertible bonds to be issued by the Company (the ‘‘Convertible Bonds’’) conferring rights on holders thereof to convert into new Shares at the initial conversion price of HK$0.28 per Share (subject to adjustment), subject to the terms substantially set out in the instrument constituting the Convertible Bonds (the ‘‘Bond Instrument’’) (a copy of the final draft of which has been produced to the Meeting marked ‘‘A’’ and signed by the chairman of the Meeting for the purpose of identification), during the period from the date of first issue of the Convertible Bonds to the date being 14 business days immediately preceding the third anniversary of the date of the Bond Instrument to be executed by way of deed poll by the Company be and hereby approved;

3. (b) (i) the directors of the Company be and are hereby authorised to allot and issue up to 450,000,000 new Shares which would fall to be issued upon the conversion of the Convertible Bonds in accordance with the terms and conditions of the Bond Instrument; and (ii) the Directors be and are hereby authorised to make such exclusions or other arrangements in relation to fractional entitlements as they may, in their absolute discretion, deem necessary or expedient or appropriate.’’

4. ‘‘THAT,

5. (a) The agreement dated 25th March, 2010 entered into between the Company as purchaser and Mr. Hui Lung Hing as vendor (the ‘‘Vendor’’) in relation to the sale and purchase of 70% share capital in Stephigh Group Limited (‘‘Stephigh’’) at a consideration of HK$126,000,000 (the ‘‘Acquisition Agreement’’), marked ‘‘B’’ and initialed by the chairman of the meeting for the purpose of identification; and further details which are

• For identification purposes only

– 145 –

NOTICE OF EGM

set out in the circular of the Company dated 7th May, 2010 (a copy of which has been produced to the meeting marked ‘‘C’’ and signed by the chairman of the meeting for the purpose of identification)) and all the transactions contemplated thereby be and are hereby approved, confirmed and ratified;

• (b) the allotment and issue of the Convertible Bonds to be issued to the Vendor as part of the consideration pursuant and subject to the terms and conditions of the Acquisition Agreement be and are hereby approved; and

• (c) the Directors be and are hereby authorised to do all such acts and things, to sign and execute all such further documents and to take such steps as the Directors in their discretion may consider necessary, appropriate, desirable or expedient to give effect to or in connection with the Acquisition Agreement, or any of the transactions contemplated under the Acquisition Agreement and to agree to such variation, amendments, waiver or matters relating thereto (including any variation, amendments or waiver of such documents, which are not fundamentally different from those as provided under the Acquisition Agreement) as are, in the opinion of the Directors, in the interest of the Company and its shareholders as a whole.’’

• ‘‘THAT,

• (a) the general mandate granted to the Directors to exercise the powers of the Company to allot, issue and deal with Shares as approved by the shareholders of the Company (the ‘‘Shareholders’’) at the annual general meeting of the Company held on 17th December, 2009 be and is hereby revoked (without prejudice to any valid exercise of such general mandate prior to the passing of this resolution);

• (b) the exercise by the Directors during the Relevant Period (as defined below) of all the powers of the Company to allot, issue and deal with additional Shares and to make or grant offers, agreements and options (including bonds, warrants, debentures, notes and any other securities which carrying rights to subscribe for and are convertible into Shares) which would or might require the exercise of such powers be and is hereby generally and unconditionally approved;

• (c) the approval in paragraph (b) of this resolution shall authorise the Directors during the Relevant Period to make or grant offers, agreements and options (including bonds, warrants, debentures, notes and any other securities which carrying rights to subscribe for and are convertible into Shares) which would or might require the exercise of such powers after the end of the Relevant Period;

• (d) the aggregate nominal amount of share capital of the Company allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) and issued by the Directors pursuant to the approval in paragraph (b) of this resolution, otherwise than pursuant to (i) a Rights Issue (as defined below), or (ii) the exercise of rights of subscription or conversion under the terms of any securities which are convertible into Shares, or (iii) the exercise of options granted under any share option scheme or similar arrangement for the time being adopted for the grant or issue to any eligible grantees to acquire Shares, or (iv) any scrip dividend or similar

– 146 –

NOTICE OF EGM

arrangement of the Company providing for the allotment of Shares in lieu of the whole or part of a dividend on Shares in accordance with the Articles of Association of the Company, shall not exceed 20% of the aggregate nominal amount of the share capital of the Company in issue as at the date of passing this resolution and the said approval shall be limited accordingly; and

• (e) for the purpose of this resolution:

‘‘Relevant Period’’ means the period from the date of passing of this resolution until whichever is the earliest of:

• (i) the conclusion of the next annual general meeting of the Company; or

• (ii) the expiration of the period within which the next annual general meeting of the Company is required by the Articles of Association of the Company or any applicable laws of the Cayman Islands to be held; or

• (iii) the passing of an ordinary resolution by the Shareholders in general meeting revoking or varying the authority given to the Directors by this resolution; and

‘‘Rights Issue’’ means an offer of Shares open for a period fixed by the Directors to holders of Shares or any class thereof whose names appear on the register of members of the Company on a fixed record date in proportion to their then holdings of such Shares or class thereof (subject to such exclusion or other arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements or having regard to any restrictions or obligations under the laws of, or the requirements of any recognised regulatory body or any stock exchange in, any territory applicable to the Company).’’

4. ‘‘THAT,

Paragraph 4.3 of the share option scheme of the Company adopted on 11th February, 2010 (the ‘‘Share Option Scheme’’) be deleted in its entirety and be replaced by the following paragraph:

‘‘The grant of Options to any Director, chief executive or substantial shareholder (as that term is defined in the Listing Rules) of the Company or their respective associates shall be approved by the independent non-executive Directors of the Company (excluding any independent non-executive director who is the proposed grantee of the Option). Where any grant of Options to an independent non-executive director or substantial shareholder (as that term is defined in the Listing Rules), or any of their respective associates, would result in the Shares issued and to be issued upon exercise of all Options already granted and to be granted (including options exercised, cancelled and outstanding) to such person in the 12-month period up to and including the date of such grant:

• (i) representing in aggregate over 0.1% of the Shares in issue for the time being; and

– 147 –

NOTICE OF EGM

• (ii) having an aggregate value, based on the closing price of the Shares as stated in the daily quotations sheets issued by the Stock Exchange on the Date of Grant, in excess of HK$5 million,

such further grant of Options shall be approved by the Shareholders (voting by way of poll). All connected persons (as defined in the Listing Rules) of the Company shall abstain from voting at such general meeting, except that any connected person may vote against the relevant resolution at the general meeting provided that his intention to do so has been stated in the circular to be sent to the Shareholders in connection therewith.’’

1. ‘‘THAT, subject to and conditional upon the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, such number of Shares which may fall to be allotted and issued pursuant to the exercise of the options which may be granted under the Share Option Scheme and any other share option scheme of the Company, representing 10% of the issued share capital of the Company as at the day on which this resolution is passed, the existing scheme mandate limit in respect of the granting of share options under the Share Option Scheme be refreshed provided that the total number of Shares which may be issued upon the exercise of all options to be granted under the Share Option Scheme and any other option scheme of the Company shall not exceed 10% of the aggregate nominal amount of the ordinary share capital of the Company in issue on the date of passing of this resolution.’’

By Order of the Board KINGWELL GROUP LIMITED Kuo Kwan Belinda Company Secretary

Hong Kong, 7th May, 2010

Notes:

1. A form of proxy for use at the EGM is enclosed herewith.

2. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his/her attorney duly authorized in writing or, if the appointor is a corporation, either executed under its common seal or under the hand of any officer, attorney or other person duly authorized to sign the same.

3. Any shareholder entitled to attend and vote at the EGM is entitled to appoint another person as his/her proxy to attend and vote instead of him/her. A shareholder who is the holder of two or more shares may appoint not more than two proxies (who must be an individual or individuals) to attend and vote instead of him/her on the same occasion. A proxy need not be a shareholder of the Company but must attend the EGM in person to represent him/her.

4. In order to be valid, a form of proxy in the prescribed form together with the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of such power or authority, must be lodged with the branch share registrar and transfer office of the Company in Hong Kong, Hong Kong Registrars Limited at Shops 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, not later than 48 hours before the time appointed for holding the EGM or any adjourned meeting thereof (as the case may be). Such prescribed form of proxy for use at the EGM is also published on the HKExnews website of The Stock Exchange of Hong Kong Limited at www.hkexnews.hk and the website of the Company at www.sinotronics.com.cn.

– 148 –

NOTICE OF EGM

1. Completion and return of the form of proxy will not preclude any shareholders from attending and voting in person at the EGM or at any adjourned meeting thereof (as the case may be) should they so wish, and in such event, the form of proxy shall be deemed to be revoked.

2. Where there are joint registered holders of any share(s), any one of such joint holders may attend and vote at the EGM or at any adjourned meeting thereof (as the case may be), either in person or by proxy, in respect of such share(s) as if he/she was solely entitled thereto, but if more than one of such joint holders are present at the EGM or at any adjourned meeting thereof (as the case may be), the most senior shall alone be entitled to vote, whether in person or by proxy. For this purpose, seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding.

– 149 –