RemeGen Co., Ltd. - Proxy Solicitation & Information Statement 2008

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Overseas Chinese Town (Asia) Holdings Limited (the “ Company ”), you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee, or to the bank, stockbroker or other agent through whom the sale or transfer was effected, for transmission to the purchaser or transferee.

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

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

OVERSEAS CHINESE TOWN (ASIA) HOLDINGS LIMITED

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 3366)

MAJOR AND CONNECTED TRANSACTION

ACQUISITION OF 51% EQUITY INTEREST AND THE SHAREHOLDER’S LOAN IN OCT INVESTMENTS LIMITED

Financial adviser

==> picture [193 x 31] intentionally omitted <==

Independent financial adviser to the independent board committee

and independent shareholders of Overseas Chinese Town (Asia) Holdings Limited

Hantec Capital Limited

A letter from the board of directors of the Company is set out on pages 5 to 22 of this circular. A letter from the independent board committee of the Company is set out on page 23 of this circular and a letter of advice from the independent financial adviser is set out on pages 24 to 41 of this circular.

A notice convening an extraordinary general meeting of the Company to be held at suites 3203-3204, Tower 6, The Gateway, Harbour City, Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong on 10 July 2008 (Thursday) at 11:00 a.m. is set out on pages 124 to 125 of this circular.

Whether or not you are able to attend the extraordinary general meeting in person, you are requested to complete and return the form of proxy enclosed with this circular in accordance with the instructions printed thereon to the Company’s principal place of business at suites 3203-3204, Tower 6, The Gateway, Harbour City, Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong, as soon as possible and in any event not less than 48 hours before the time appointed for holding the extraordinary general meeting or any adjournment thereof. Completion and return of a form of proxy will not preclude you from attending and voting at the meeting, or any adjournment thereof, in person.

24 June 2008

		Page
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM	THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
LETTER FROM	THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . .	23
LETTER FROM	THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . .	24
APPENDIX I	– FINANCIAL INFORMATION OF THE GROUP . . . . . . .	42
APPENDIX II	– ACCOUNTANTS’ REPORT ON OCT INVESTMENTS . .	88
APPENDIX III	– UNAUDITED PRO FORMA FINANCIAL
	INFORMATION OF THE ENLARGED GROUP . . . . . .	106
APPENDIX IV	– PROPERTY VALUATION . . . . . . . . . . . . . . . . . . . . . . . . .	111
APPENDIX V	– GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . .	117
NOTICE OF EXTRAORDINARY GENERAL MEETING . . . . . . . . . . . . . . . . . .		124

– i –

DEFINITIONS

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

“Acquisition” the acquisition of the Sale Shares and the Shareholder’s Loan by the Company from the Vendor pursuant to the terms and subject to the conditions set out in the Share Transfer Agreement (as amended and supplemented by the Supplemental Agreement)
“associate(s)” has the meaning ascribed thereto under the Listing Rules “Bantix International” Bantix International Limited, a company incorporated in Hong Kong on 11 October 2007, is a wholly owned subsidiary of OCT Investments
“Board” the board of Directors “Business Day” a day (other than a Saturday, Sunday and public holiday in Hong Kong) on which banks in Hong Kong are open for business over 6 hours
“Chengdu OCT” (Chengdu Tianfu OCT Industry Development Co., Ltd.), a company incorporated in the PRC on 31 October 2005, with a registered capital of RMB400 million (equivalent to approximately HK$449.44 million)
“Company” Overseas Chinese Town (Asia) Holdings Limited, an exempted company incorporated in the Cayman Islands with limited liability, the Shares of which are listed on the main board of the Stock Exchange
“Completion” the completion of the Share Transfer Agreement “Completion Date” the 15th Business Day after the fulfillment or waiver of the conditions precedent of the Share Transfer Agreement (or such other date as may be agreed between the Vendor and the Company before the Completion Date)
“connected person(s)” has the meaning ascribed thereto under the Listing Rules

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DEFINITIONS

“Consideration Shares” Shares to be allotted and issued by the Company to the Vendor (or its nominee) credited as fully paid pursuant to the Share Transfer Agreement (as amended and supplemented by the Supplemental Agreement)
“Director(s)” director(s) of the Company “Enlarged Group” the Group as enlarged by OCT Investments and Bantix International (both of which will become wholly owned subsidiaries of the Company following completion of the Acquisition), and “member(s) of the Enlarged Group” shall be construed accordingly
“Group” the Company and its subsidiaries, and “member(s) of the Group” shall be construed accordingly
“Hong Kong” the Hong Kong Special Administrative Region of the PRC
“Hantec” or “Independent Hantec Capital Limited, the independent financial Financial Adviser” adviser to the Independent Board Committee and the Independent Shareholders
“Independent Board Committee” the committee comprising all the independent nonexecutive Directors, namely Ms. Wong Wai Ling, Mr. Chen Xiangdong and Mr. Xiao Yongping formed to advise the Independent Shareholders in respect of the Acquisition
“Independent Shareholders” Shareholders other than Pacific Climax and its associates
“Last Trading Day”
2 June 2008, being the last day on which the Shares were traded on the Stock Exchange prior to suspension of trading in the Shares pending the release of the announcement dated 4 June 2008 in relation to the Acquisition
“Latest Practicable Date” 19 June 2008, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein
“Listing Rules”
the Rules Governing the Listing of Securities on the Stock Exchange

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DEFINITIONS

“OCT Group”	(Overseas Chinese Town Enterprises Co. Ltd.), a company incorporated in the PRC and as at
	the Latest Practicable Date, was the holding company of
	the Vendor
“OCT Investments”	OCT Investments Limited, a company incorporated in the
	British Virgin Islands
“Pacific Climax”	Pacific Climax Limited, a company incorporated in the
	British Virgin Islands with limited liability, the
	controlling Shareholder which held 160,370,000 Shares,
	representing approximately 63.69% of the existing issued
	share capital of the Company as at the Latest Practicable
	Date. The entire issued share capital of Pacific Climax is
	wholly owned by the Vendor
“PRC”	the People’s Republic of China
“Project”	a metropolitan composite area which is developed and
	managed by Chengdu OCT and shall contain modern
	theme parks, metropolitan entertainments, and high-class
	residential buildings on a plot of land located at both
	sides of Shaxi line of Outer Sanhuan Road, Jinniu
	District, Chengdu City, the PRC
“Sale Shares”	51 shares of OCT Investments, representing 51% equity
	interest of OCT Investments as at the Latest Practicable
	Date
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong) as amended, modified and
	supplemented from time to time
“Share Transfer Agreement”	the agreement for the transfer of the 51% equity interest
	and the Shareholder’s Loan in OCT Investments from the
	Vendor to the Company dated 2 June 2008 entered into
	between the Vendor and the Company, which had been
	amended and supplemented by the Supplemental
	Agreement
“Share(s)”	share(s) of HK$0.10 each in the share capital of the
	Company
“Shareholder(s)”	holder(s) of the Shares

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DEFINITIONS

“Shareholder’s Loan” the full amount of the shareholder’s loan owed by OCT Investments to the Vendor. As at the Latest Practicable Date, OCT Investments borrowed from the Vendor a shareholder’s loan of HK$48,913,524
“Stock Exchange” The Stock Exchange of Hong Kong Limited “Supplemental Agreement” a supplemental agreement dated 4 June 2008 entered into between the Company and the Vendor to amend and supplement certain terms of the Share Transfer Agreement
“Target Group” OCT Investments, Bantix International and Chengdu OCT
“Vendor” Overseas Chinese Town (HK) Company Limited, a company incorporated in Hong Kong on 31 October 1997 and the holding company of Pacific Climax, which is the controlling Shareholder
“HK$” Hong Kong dollar(s), the lawful currency of Hong Kong “RMB” Renminbi, the lawful currency of the PRC “%” per cent.

If there is any inconsistency between the Chinese names of PRC entities, departments, facilities or titles mentioned in this circular and their English translation, the Chinese version shall prevail.

Save for the pro forma financial information set out in Appendix III to this circular and unless the context requires otherwise, the conversion of RMB and US$ into HK$ is based on the exchange rate of HK$1.00=RMB0.89 and US$1=HK$7.8 respectively. Such conversion should not be construed as a representation that the amount in question has been, could have been or could be converted at any particular rate at all.

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LETTER FROM THE BOARD

OVERSEAS CHINESE TOWN (ASIA) HOLDINGS LIMITED

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 3366)

Executive Directors: Mr. Zheng Fan (Chairman) Mr. Ni Zheng Ms. Xie Mei Mr. Zhou Guangneng

Registered Office: Clifton House PO Box 1350 GT 75 Fort Street Grand Cayman Cayman Islands

Independent non-executive Directors:

Ms. Wong Wai Ling Mr. Chen Xiangdong Mr. Xiao Yongping

Head Office and Principal Place of Business: Suites 3203-3204, Tower 6 The Gateway Harbour City Canton Road Tsim Sha Tsui Kowloon Hong Kong 24 June 2008

To the Shareholders

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTION

Acquisition of 51% equity interest and the shareholder’s loan in OCT Investments Limited

INTRODUCTION

Reference is made to the announcement of the Company dated 24 August 2007. On 24 August 2007, the Board announced that the Company entered into an agreement with the Vendor on 21 August 2007, pursuant to which the Company had acquired from the Vendor (i) 49 shares of OCT Investments, representing 49% equity interest of OCT Investments; and (ii) 49% of the then shareholder’s loan owed by OCT Investments to the Vendor at an aggregate consideration of HK$140,000,000 (the “August Acquisition”). The August Acquisition constituted a discloseable transaction of the Company under Chapter 14 of the Listing Rules. The completion of the August Acquisition took place in October 2007. As at the Latest

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LETTER FROM THE BOARD

Practicable Date, the Company was interested in 49% equity interest in OCT Investments, while the Vendor was interested in 51% equity interest in OCT Investments, which in turn, held the entire equity interest in Bantix International. Bantix International held 25% equity interest in Chengdu OCT.

On 2 June 2008 and 4 June 2008, the Company entered into the Share Transfer Agreement and the Supplemental Agreement with the Vendor, respectively, pursuant to which the Company has conditionally agreed to acquire and the Vendor has conditionally agreed to sell the Sale Shares, representing 51% of the total issued share capital of OCT Investments, and the Shareholder’s Loan at an aggregate consideration of HK$170 million.

As the applicable percentage ratios as defined in the Listing Rules exceed 25% but less than 100%, the Acquisition constitutes a major acquisition of the Company under Chapter 14 of the Listing Rules. The Vendor is an indirect controlling Shareholder, holding approximately 63.69% of the issued share capital of the Company through Pacific Climax as at the Latest Practicable Date. Under Chapter 14A of the Listing Rules, the Vendor is a connected person of the Company and therefore the Acquisition constitutes a connected transaction of the Company. The Acquisition is subject to the reporting and announcement requirements, and the approval of the Independent Shareholders at an extraordinary general meeting by way of poll under the Listing Rules. Pacific Climax and its associates are required to abstain from voting on the resolution(s) in respect of the Acquisition at the extraordinary general meeting.

The purpose of this circular is to provide you with further details, in relation to, among other things, (i) further details of the Acquisition; (ii) the advice of the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the Acquisition; (iii) the recommendation of the Independent Board Committee to the Independent Shareholders in relation to the Acquisition; and (iv) a notice of the extraordinary general meeting at which resolution will be proposed to be considered and if thought fit, approve the Share Transfer Agreement and the transactions contemplated thereunder and certain information as required by the Listing Rules.

THE ACQUISITION

1. Principal terms of the Share Transfer Agreement (as amended and supplemented by the Supplemental Agreement)

The principal terms of the Share Transfer Agreement (as amended and supplemented by the Supplemental Agreement) are set out below:

Date

2 June 2008

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LETTER FROM THE BOARD

Parties

Vendor: Overseas Chinese Town (HK) Company Limited, a company incorporated in Hong Kong and is beneficially wholly owned by OCT Group. The principal business activity of the Vendor is investment holding and its investments cover different areas of businesses such as paper-based packaging containers, hotels, tourism and property.

Purchaser: The Company.

Subject matter of the Share Transfer Agreement

Pursuant to the Share Transfer Agreement, the Company has conditionally agreed to acquire and the Vendor has conditionally agreed to sell (i) the Sale Shares, representing 51% of the total issued share capital of OCT Investments, free from encumbrance and together with all rights now or hereinafter attached thereto including but not limited to all dividends declared in respect thereof on or after the date of the Share Transfer Agreement; and (ii) the Shareholder’s Loan. Upon Completion, together with the existing 49% equity interest in OCT Investments held by the Company as at the Latest Practicable Date, the Company will be interested in the entire equity interest in OCT Investments, which in turn, holds the entire equity interest in Bantix International. Bantix International is an investment holding company. The sole investment held by Bantix International is the 25% equity interest in Chengdu OCT. Accordingly, the Company will be indirectly interested in 25% equity interest of Chengdu OCT. Upon Completion, OCT Investments and Bantix International will become wholly owned subsidiaries of the Company and their results will be consolidated into the consolidated financial statements of the Company while Chengdu OCT will be remained as an associated company of the Company and its result will be equity accounted for in the consolidated financial statements of the Company.

The consideration of the Acquisition

The aggregate consideration of the Acquisition payable by the Company to the Vendor on the Completion Date for the Acquisition shall be HK$170 million, of which:

(i) HK$50 million is payable by the Company to the Vendor in cash; and
(ii) HK$120 million shall be satisfied by the Company to issue and allot 50 million Consideration Shares to the Vendor (or its nominee(s)).

If the issued share capital of the Company held by the public is less than 25% immediately upon the issue of the 50 million Consideration Shares, the Vendor agreed that the consideration of HK$170 million will instead be satisfied as follows:

(i) HK$83 million shall be payable by the Company to the Vendor in cash; and
(ii) HK$87 million shall be satisfied by the Company to issue and allot 36.25 million Consideration Shares to the Vendor (or its nominee(s)).

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LETTER FROM THE BOARD

The Company will make an announcement on the settlement method of the consideration for the Acquisition when the settlement method is confirmed.

The aggregate consideration of the Acquisition has been determined after arm’s length negotiations between the Company and the Vendor with reference to, among other things, (i) the audited net asset value of Chengdu OCT of RMB400 million (equivalent to approximately HK$449.44 million) as at 31 December 2007 prepared in accordance with the PRC accounting principles; (ii) the market value of the Land (as defined in the paragraph headed “Information on OCT Investments and Chengdu OCT” below) and property under development of Chengdu OCT of approximately RMB2,612 million (equivalent to approximately HK$2,934.83 million) as at 30 April 2008 as appraised by Savills Valuation and Professional Services Limited assuming a valid State-owned Land Use Certificate having been obtained by Chengdu OCT; (iii) the net book value of the Land and property under development of Chengdu OCT (without taking into account of the relevant construction cost and tax) of approximately RMB1,833 million (equivalent to approximately HK$2,059.55 million) as at 30 April 2008; (iv) the Shareholder’s Loan; and (v) the prospect of the Project which is further elaborated in the section headed “Information on OCT Investments and Chengdu OCT” below. The Directors intend to finance the cash payment of HK$50 million (in the case of issue of 50 million Consideration Shares) or HK$83 million (in the case of issue of 36.25 million Consideration Shares) by internal resources of the Group or bank loan(s).

The Directors considered that the aggregate consideration of the Acquisition is fair and reasonable and on normal commercial terms and that the entering into the Share Transfer Agreement (as amended and supplemented by the Supplemental Agreement) is in the interests of the Company and the Shareholders as a whole.

Conditions precedent of the Share Transfer Agreement

Completion of the Acquisition is conditional upon fulfillment of the conditions including but not limited to the following:

(i) there being no material adverse impact on the legal, financial, commercial or trading position of the Target Group from the date of the Share Transfer Agreement up to and including the Completion Date;
(ii) the Company being satisfactory with the due diligence results in relation to, inter alia, the finance, corporate, taxation, business, rights to its assets and all legal aspects of the Target Group;
(iii) the Listing Committee of the Stock Exchange having granted the listing of, and permission to deal in, the Consideration Shares;
(iv) the Share Transfer Agreement having fulfilled the requirements of the Stock Exchange, including but not limited to, the Company having obtained the approval by the Independent Shareholders at the extraordinary general meeting

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LETTER FROM THE BOARD

in respect of the Share Transfer Agreement and the transactions contemplated under the Share Transfer Agreement including the issue of the Consideration Shares; and

(v) the issue of a legal opinion by the PRC legal advisers in relation to, inter alia, Chengdu OCT and/or the Project.

If the conditions precedent as set out in the Share Transfer Agreement have not been fulfilled or waived by the Company (other than conditions (iii) and (iv) which may not be waived) within 6 months from the date of the Share Transfer Agreement (or such later date as the parties to the Share Transfer Agreement may agree), the provisions of the Share Transfer Agreement (other than, among others, the confidentiality clause) shall become null and void.

Completion

Completion shall take place on the 15th Business Day after the fulfillment or waiver of the conditions precedent of the Share Transfer Agreement (or such other date as may be agreed between the Vendor and the Company before the Completion Date).

2. Consideration Shares

The issue price of the Consideration Shares of HK$2.40 per Share represents:

(i) a premium of approximately 11.11% over the closing price of HK$2.16 per Share as quoted on the Stock Exchange on the Latest Practicable Date;
(ii) a discount of approximately 4% to the closing price of HK$2.5 per Share as quoted on the Stock Exchange on the Last Trading Day;
(iii) a premium of approximately 11.73% over the average of the closing prices of HK$2.148 per Share for the last five consecutive trading days up to and including the Last Trading Day;
(iv) a premium of approximately 12.46% over the average of the closing prices of HK$2.134 per Share for the last ten trading days up to and including the Last Trading Day; and
(v) a premium of approximately 2.56% over the audited consolidated net asset value per Share of approximately RMB2.08 (equivalent to approximately HK$2.34) as at 31 December 2007 (as calculated by the total net asset value of approximately RMB510,818,000 (equivalent to HK$573,953,000) and the number of Shares in issue of 246,000,000 as at 31 December 2007 based on the latest published audited consolidated financial statements of the Company for the year ended 31 December 2007).

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LETTER FROM THE BOARD

The issue price of HK$2.40 per Consideration Share was arrived at by the Company and the Vendor after taking into account of the closing prices of the Shares and the audited consolidated net asset value per Share as at 31 December 2007 as shown in (ii) to (v) above.

The 50 million Consideration Shares represents (i) approximately 19.86% of the existing issued share capital of the Company as at the Latest Practicable Date; and (ii) approximately 16.57% of the issued share capital of the Company as enlarged by the allotment and issue of the 50 million Consideration Shares. The 36.25 million Consideration Shares represents (i) approximately 14.40% of the existing issued share capital of the Company as at the Latest Practicable Date; and (ii) approximately 12.58% of the issued share capital of the Company as enlarged by the allotment and issue of the 36.25 million Consideration Shares.

Based on the closing price of HK$2.5 per Share on the Last Trading Day, the market value of the 50 million Consideration Shares was HK$125 million and the market value of the 36.25 million Consideration Shares was HK$90.63 million.

3. Special mandate

The Company will seek the grant of a special mandate at the extraordinary general meeting to allot and issue the Consideration Shares which may fall to be allotted and issued upon Completion.

4. Listing application

An application will be made to the Stock Exchange for the listing of and permission to deal in the Consideration Shares which will rank pari passu with the existing Shares.

INFORMATION ON OCT INVESTMENTS AND CHENGDU OCT

OCT Investments is a company incorporated in the British Virgin Islands with limited liability on 6 September 2005. As at the Latest Practicable Date, OCT Investments had paid-up capital of US$100 (equivalent to approximately HK$780). As at the Latest Practicable Date, the Vendor owned 51% equity interest in OCT Investments while the Company held the remaining 49% equity interest in OCT Investments. OCT Investments owed shareholders’ loans of approximately HK$48,913,524 and HK$46,996,846 to the Vendor and the Company, respectively, as at the Latest Practicable Date. The principal business activity of OCT Investments is investment holding. Save as holding the 100% equity interest in Bantix International, OCT Investments did not have any other investment or operations. Save for the loan from the shareholders of OCT Investments amounted to HK$95,910,370, OCT Investments did not have any other loan or liabilities to the Vendor or the Company or other creditors. The sole asset of Bantix International is the 25% equity interest in Chengdu OCT.

According to the accountants’ report on OCT Investments set out in Appendix II to this circular, the audited consolidated total assets of OCT Investments was approximately HK$102.51 million and the audited consolidated net assets of OCT Investments was

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LETTER FROM THE BOARD

approximately HK$6.60 million as at 31 December 2007. According to the accountants’ report on OCT Investments set out in Appendix II to this circular, OCT Investments did not generate any audited profit or loss (both before and after taxation and extraordinary items) for the year ended 31 December 2006. According to the accountants’ report on OCT Investments set out in Appendix II to this circular, OCT Investments had incurred audited consolidated loss (both before and after taxation and extraordinary items) of approximately HK$4.07 million for the year ended 31 December 2007, which was mainly resulted from the share of loss from its associated company, Chengdu OCT. The loss of Chengdu OCT for the year ended 31 December 2007 represents the amortization of the preliminary expenses of Chengdu OCT in accordance with Hong Kong Financial Reporting Standards.

Chengdu OCT is a company incorporated in the PRC on 31 October 2005 with a registered capital of RMB400 million (equivalent to approximately HK$449.44 million) which has been fully paid-up. As at the Latest Practicable Date, Chengdu OCT was owned as to 38%, 35%, 25% and 2% by (Shenzhen OCT Properties Co., Ltd.), (Shenzhen OCT Holding Co., Ltd.), Bantix International and OCT Group respectively. OCT Investments has contributed HK$95.90 million registered capital to Chengdu OCT at its incorporation. Shenzhen OCT Properties Co., Ltd. and Shenzhen OCT Holding Co., Ltd. are non-wholly owned subsidiaries of OCT Group.

The principal business activities of Chengdu OCT are the provision of the development and operation of travel facilities, organization and design of travel projects, development and management of real estate, management of restaurant and entertainment, organization and planning of culture activities, stage design, arts training, crafts making, sale of its own products, travel information services, plant cultivation and garden design.

As at the Latest Practicable Date, Chengdu OCT had fully paid the consideration for the plot of land with approximately 2,036,779 square meters which is located at both sides of Shaxi line of Outer Sanhuan Road, Jinniu District, Chengdu, the PRC (the “Land”). Chengdu OCT is in the progress of obtaining the State-owned Land Use Certificate for the Land. The Directors concur with the view of the legal advisers to the Company as to the PRC Laws, Win and Sun Law Firm, that there will be no legal impediment for Chengdu OCT to obtain the State-owned Land Use Certificate for the Land. Chengdu OCT intends to use the Land for the development of the Project given the tourism industry and the real estate industry are two of the core industries of Chengdu, which are highly emphasized by the local authorities. The increase in the purchasing power of the citizens in Chengdu will stimulate market growth for the tourism and the real estate industries. Hence, it will bring business opportunities to the Project. Therefore, the Directors believe that the Project has good prospects in the future.

As at the Latest Practicable Date, the Project was under development. According to the audited accounts of Chengdu OCT for the two years ended 31 December 2006 and 31 December 2007 prepared in accordance with the PRC accounting principles, Chengdu OCT had not generated any turnover and net profits or losses (both before and after taxation and extraordinary items) for the two years ended 31 December 2006 and 31 December 2007. According to the audited accounts of Chengdu OCT for the year ended 31 December 2007

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LETTER FROM THE BOARD

prepared in accordance with the PRC accounting principles, as at 31 December 2007, the audited total assets of Chengdu OCT was approximately RMB1,423.76 million (equivalent to approximately HK$1,599.73 million) and the audited net asset value of Chengdu OCT was RMB400 million (equivalent to approximately HK$449.44 million). Pursuant to the Share Transfer Agreement, the Company has not committed to make other financial commitment other than the payment of the consideration as mentioned in the section headed “The consideration of the Acquisition” above.

REASONS FOR AND THE BENEFITS OF THE ACQUISITION

The Group is principally engaged in the manufacture of quality paper-based packaging containers and materials, including corrugated paperboard and printed cartons for customers.

As stated in the annual report of the Company for the year ended 31 December 2007, since raw material prices, energy prices, labour costs and interest rates have been rising continuously to different extents, the competition in the paper packaging industry became increasingly intensive. Despite unfavorable market condition, the Group still managed to achieve business growth and the Group will continue its existing business after the completion of the Acquisition. However, the Directors consider that it would be beneficial to the Company to increase its equity interest in Chengdu OCT after considering the favourable prospect of the Project which is mentioned in the section headed “Information on OCT Investments and Chengdu OCT” above and the future income stream expected to be generated from the Project. Moreover, as the joint-venture partners, Shenzhen OCT Holding Co., Ltd. and Shenzhen OCT Properties Co., Ltd., have successful experience on developing and operating the metropolitan entertainment parks and high-class residential buildings, the Directors consider that the Acquisition will leverage the successful experience of the joint-venture partners to the Group.

Having considered the above, the Directors (including the independent non-executive Directors) consider that the terms of the Share Transfer Agreement (as amended and supplemented by the Supplemental Agreement) are on normal commercial terms, fair and reasonable and the Acquisition is in the interest of the Company and the Shareholders as a whole.

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LETTER FROM THE BOARD

CHANGES IN THE SHAREHOLDING INTERESTS OF THE COMPANY

Assuming there is no change in the shareholding interests of the Company and the Shares in issue from the Latest Practicable Date up to and including the Completion Date, the shareholding interests of the Company (i) as at the Latest Practicable Date; (ii) immediately upon Completion assuming the issue of the 50 million Consideration Shares; and (iii) immediately upon Completion assuming the issue of the 36.25 million Consideration Shares are as follows:

Shareholders Pacific Climax Vendor Sub-total Polyfairz Group Limited (note 1) Directors or other connected persons of the Company Public Total	Existing shareholding Shares 160,370,000 –	approximately % 63.69 –	Immediately upon Completion assuming 50 million Consideration Shares are issued Shares 160,370,000 50,000,000	approximately % 53.14 16.57	Immediately upon Completion assuming 36.25 million Consideration Shares are issued Shares 160,370,000 36,250,000	approximately % 55.68 12.58
	160,370,000 15,630,000 3,780,000 72,010,000	63.69 6.21 1.50 28.60	210,370,000 15,630,000 3,780,000 72,010,000	69.71 5.18 1.25 23.86 (note 2)	196,620,000 15,630,000 3,780,000 72,010,000	68.26 5.43 1.31 25.00
	251,790,000	100.00	301,790,000	100.00	288,040,000	100.00

Notes:

Polyfairz Group Limited was beneficially owned as to 90% by a director of a subsidiary of the Company as at the Latest Practicable Date.
Pursuant to the Share Transfer Agreement (as amended and supplemented by the Supplemental Agreement), if the issued share capital of the Company held by the public is less than 25% immediately upon the issue of the 50 million Consideration Shares, the Company will only issue 36.25 million Shares as Consideration Shares.
The issue of the Consideration Shares will not result in a change of control of the Company.

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LETTER FROM THE BOARD

MANAGEMENT DISCUSSION AND ANALYSIS OF OCT INVESTMENTS

Set out below is the management discussion and analysis on OCT Investments for the period from 6 September 2005 to 31 December 2005 and the two financial years ended 31 December 2006 and 2007:

Business review for the period from 6 September 2005 to 31 December 2005

Financial review, business review and prospects

OCT Investments is an investment holding company and the sole asset of OCT Investments was its 25% equity interest in Chengdu OCT. The principal business activities of Chengdu OCT are the provision of the development and operation of travel facilities, organization and design of travel projects, development and management of real estate, management of restaurant and entertainment, organization and planning of culture activities, stage design, arts training, crafts making, sale of its own products, travel information services, plant cultivation and garden design.

Chengdu OCT intended to use the Land for the development of the Project given the tourism industry and the real estate industry were two of the core industries of Chengdu, which were highly emphasized by the local authorities. The increase in the purchasing power of the citizens in Chengdu will stimulate market growth for the tourism and the real estate industries. Hence, it will bring business opportunities to the Project. Therefore, the Directors believed that the Project had good prospects in the future.

Since OCT Investments’ only major asset was investment in Chengdu OCT, it did not generate any audited turnover for the period ended 31 December 2005. OCT Investments incurred a loss of approximately HK$5,000 for the period ended 31 December 2005.

Capital structure, liquidity, financial resources and gearing ratio

As at 31 December 2005, the audited total assets, total liabilities and net assets of OCT Investments valued at approximately HK$96.15 million, HK$95.91 million and HK$0.24 million, respectively. The audited cash and cash equivalents of OCT Investments as at 31 December 2005 amounted to HK$10, and there was no bank borrowings. All cash and bank balances were denominated in HK$. The gearing ratio (calculated as total liabilities over total assets) was approximately 1.00 as at 31 December 2005.

Capital commitment

OCT Investments did not have any capital commitment as at 31 December 2005.

Treasury policies

Individual operating entities within OCT Investments were responsible for their own cash management, including the raising of loans to cover expected cash demands. The parent company had agreed to provide continuing financial support to OCT Investments for its existing and future investments.

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LETTER FROM THE BOARD

Exchange rate exposure

Given that the entire investment in its associate was denominated in RMB, OCT Investments was exposed to the risk from possible depreciation of RMB against the Hong Kong dollars.

Contingent liabilities

OCT Investments did not have any contingent liabilities for the period ended 31 December 2005.

Significant investments, material acquisitions and disposals

Save as the investment in Chengdu OCT, OCT Investments did not have any significant investments, material acquisitions and disposals for the period ended 31 December 2005.

Employment and remuneration policy

As at 31 December 2005, OCT Investments did not employ any employees.

Pledged of assets

OCT Investments did not pledge any assets for the period ended 31 December 2005.

Business review for the year ended 31 December 2006

Financial review, business review and prospects

Chengdu OCT intended to use the Land for the development of the Project given the tourism industry and the real estate industry were two of the core industries of Chengdu, which were highly emphasized by the local authorities. The increase in the purchasing power of the citizens in Chengdu will stimulate market growth for the tourism and the real estate industries. Hence, it will bring business opportunities to the Project. Therefore, the Directors believed that the Project had good prospects in the future.

Since OCT Investments’ only major asset was investment in Chengdu OCT, it did not generate any audited turnover for the year ended 31 December 2006. OCT Investments has not incurred any audited profit or loss for the year ended 31 December 2006.

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LETTER FROM THE BOARD

Capital structure, liquidity, financial resources and gearing ratio

As at 31 December 2006, the audited total assets, total liabilities and net assets of OCT Investments valued at approximately HK$99.53 million, HK$95.91 million and HK$3.62 million, respectively. The audited cash and cash equivalents of OCT Investments as at 31 December 2006 amounted to HK$10, and there was no bank borrowings. All cash and bank balances were denominated in HK$. The gearing ratio (calculated as total liabilities over total assets) was 0.96 as at 31 December 2006.

Capital commitment

OCT Investments did not have any capital commitment as at 31 December 2006.

Treasury policies

Exchange rate exposure

Given that the entire investment in its associate was denominated in RMB, OCT Investments was exposed to the risk from possible depreciation of RMB against the Hong Kong dollars.

Contingent liabilities

OCT Investments did not have any contingent liabilities for the year ended 31 December 2006.

Significant investments, material acquisitions and disposals

Save as the investment in Chengdu OCT, OCT Investments did not have any significant investments, material acquisitions and disposals for the year ended 31 December 2006.

Employment and remuneration policy

As at 31 December 2006, OCT Investments did not employ any employees.

Pledged of assets

OCT Investments did not pledge any assets for the year ended 31 December 2006.

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LETTER FROM THE BOARD

Business review for the year ended 31 December 2007

Financial review, business review and prospects

During the year ended 31 December 2007, OCT Investments transferred its interest in Chengdu OCT to Bantix International, a wholly owned subsidiary of OCT Investments, for tax purposes.

OCT Investments is an investment holding company and the sole asset of OCT Investments was the entire equity interest in Bantix International, which in turn, holds 25% equity interest in Chengdu OCT. The principal business activities of Chengdu OCT are the provision of the development and operation of travel facilities, organization and design of travel projects, development and management of real estate, management of restaurant and entertainment, organization and planning of culture activities, stage design, arts training, crafts making, sale of its own products, travel information services, plant cultivation and garden design.

Chengdu OCT intended to use the Land for the development of the Project given the tourism industry and the real estate industry were two of the core industries of Chengdu, which were highly emphasized by the local authorities. As at the Latest Practicable Date, the Project was under development. The pre-sale of high-class residential buildings under the Project is estimated to commence in the third quarter of 2008, whereas the theme parks will open and the commercial buildings for metropolitan entertainments purpose will be available for leasing in the fourth quarter of 2008. The increase in the purchasing power of the citizens in Chengdu will stimulate market growth for the tourism and the real estate industries. Hence, it will bring business opportunities to the Project. Therefore, the Directors believed that the Project had good prospects in the future.

Since OCT Investments’ only major asset was investment in Bantix International, of which it holds 25% equity interest in Chengdu OCT, Chengdu OCT did not generate any consolidated turnover for the year ended 31 December 2007.

OCT Investments had incurred audited consolidated loss (both before and after taxation and extraordinary items) of approximately HK$4.07 million for the year ended 31 December 2007, which was mainly resulted from the share of loss from its associate company, Chengdu OCT. The loss of Chengdu OCT for the year ended 31 December 2007 under the Hong Kong Financial Reporting Standards represented the amortization of the preliminary expenses of Chengdu OCT.

Capital structure, liquidity, financial resources and gearing ratio

As at 31 December 2007, the audited consolidated total assets, total liabilities and net assets of OCT Investments valued at approximately HK$102.51 million, HK$95.91 million and HK$6.60 million, respectively. The consolidated cash and cash equivalents of OCT Investments as at 31 December 2007 amounted to approximately HK$1,000, and there was no bank borrowings. All consolidated cash and bank balances were denominated in HK$. The gearing ratio (calculated as consolidated total liabilities over consolidated total assets) was 0.94 as at 31 December 2007.

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LETTER FROM THE BOARD

Capital commitment

OCT Investments did not have any capital commitment as at 31 December 2007.

Treasury policies

Exchange rate exposure

Given that the entire investment in its associate is denominated in RMB, OCT Investments is exposed to the risk from possible depreciation of RMB against the Hong Kong dollars.

Contingent liabilities

OCT Investments did not have any contingent liabilities for the year ended 31 December 2007.

Significant investments, material acquisitions and disposals

Save as the investment in Bantix International, OCT Investments did not have any significant investments, material acquisitions and disposals other than stated in this circular for the year ended 31 December 2007.

Employment and remuneration policy

As at 31 December 2007, OCT Investments did not employ any employees.

Pledged of assets

OCT Investments did not pledge any assets for the year ended 31 December 2007.

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LETTER FROM THE BOARD

VALUATION OF THE LAND

For the purpose of the Acquisition, the Company has engaged Savills Valuation and Professional Services Limited to value the Land and property under development of Chengdu OCT. Details of the valuation report prepared by Savills Valuation and Professional Services Limited are set out in Appendix IV to this circular. Disclosure of the reconciliation of net book value of the Land and property under development of Chengdu OCT and the valuation of the Land and property under development of Chengdu OCT as required under Rule 5.07 of Listing Rules is set out below:

Valuation of the Land and property under development of Chengdu OCT as at 30 April 2008 as set out in the valuation report included in Appendix IV to this circular assuming a valid State-owned Land Use Certificate has been obtained Net book value of the Land and property under development of Chengdu OCT as at 31 December 2007 Add: Relevant construction costs and the payment of the Land for the period from 1 January 2008 to 30 April 2008 Net book value of the Land and the property under development of Chengdu OCT as at 30 April 2008 Net revaluation surplus	RMB’000 1,209,541 876,037	RMB’000 2,612,000
		2,085,578
		526,422

FINANCIAL EFFECTS OF THE ACQUISITION

Upon completion of the Acquisition, OCT Investments and Bantix International will become wholly owned subsidiaries of the Company and their results would be consolidated into the consolidated financial statements of the Company while Chengdu OCT will be remained as an associated company of the Company and its results will be equity accounted for in the consolidated financial statements of the Company. According to the unaudited pro forma financial information of the Enlarged Group as set out in Appendix III to this circular, the unaudited pro forma total assets of the Enlarged Group would be approximately RMB931.73 million (equivalent to approximately HK$1,046.89 million) and the unaudited pro forma total liabilities of the Enlarged Group would be approximately RMB308.84 million (equivalent to

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LETTER FROM THE BOARD

approximately HK$347.01 million) as at 31 December 2007. The Acquisition has no immediate impact on the earnings of the Group immediately upon Completion. Given the positive prospect of the Project which is further elaborated in the section headed “Information on OCT Investments and Chengdu OCT” above, the Directors consider that the earnings of the Enlarged Group will be improved in the near future. As the Directors believe that the Acquisition will facilitate the Group to expand its business scope and explore potential profits sources, the Group’s long-term development would be improved upon the Completion.

FINANCIAL AND PROSPECTS OF THE ENLARGED GROUP

Looking ahead in 2008, the Directors expect that the continuous rise in operation cost and the increasingly intense market competition will present more challenges to the packaging industry. The Group will use its best endeavours in improving its products and marketing in order to cope with the possible difficulties and maintain its competitive edge. Apart from enhancing the bonding of valued customers, the Group will also explore new customer base, increase the proportion of high margin products such as colour packaging products, strengthen the innovation of production technology, satisfy customers’ needs and continuously enlarge its market share. In addition, Huizhou Huali Packaging Co., Ltd., a subsidiary of the Company, is expected to complete the construction of factories and installation of basic production facilities in the early 2009, and production facilities of Shenzhen Huali Packaging Co., Ltd. will be gradually relocated to the new production base in Huizhou in the coming years.

The increase in the purchasing power of the citizens in Chengdu and surrounding areas will stimulate market growth for tourism and real estate industries. Hence, it will bring business opportunities to the Project. Therefore, the Directors believe that the Project has good prospects in the future.

EXTRAORDINARY GENERAL MEETING

A notice convening the extraordinary general meeting to be held at suites 3203-3204, Tower 6, The Gateway, Harbour City, Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong on 10 July 2008 (Thursday) at 11:00 a.m. is set out on pages 124 to 125 of this circular for the purpose of considering and, if thought fit, passing the resolution set out therein. The voting in respect of the approval of the resolution will be conducted by way of poll.

You will find enclosed a proxy form for use at the extraordinary general meeting. Whether or not you are able to attend the extraordinary general meeting in person, you are requested to complete and return the form of proxy enclosed with this circular in accordance with the instructions printed thereon to the Company’s principal place of business at suites 3203-3204, Tower 6, The Gateway, Harbour City, Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for holding the extraordinary general meeting or any adjournment thereof. Completion and return of the proxy form will not preclude you from attending and voting in person at the extraordinary general meeting, or any adjournment thereof, in person.

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LETTER FROM THE BOARD

PROCEDURES FOR DEMANDING A POLL

Pursuant to Article 72 of the Articles, a resolution put to the vote of a general meeting shall be decided on a show of hands unless (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is demanded by: (i) the chairman of such meeting; or (ii) at least two shareholders present in person (or in the case of a shareholder being a corporation by its duly authorized representative) or by proxy for the time being entitled to vote at the meeting; or (iii) any shareholder or shareholders present in person (or in the case of a shareholder being a corporation, by its duly authorized representative) or by proxy and representing not less than one-tenth of the total voting rights of all the shareholders having the right to vote at the meeting; or (iv) any shareholder or shareholders present in person (or in the case of a shareholder being a corporation, by its duly authorised representative) or by proxy and holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right.

Pursuant to Article 73 of the Articles, unless a poll is demanded and the demand is not withdrawn, a declaration by the chairman of the general meeting that a resolution has on a show of hands been carried, or carried unanimously, or by a particular majority, or lost, and an entry to that effect made in the book containing the minutes of the proceedings of the Company, shall be conclusive evidence of the facts without proof of the number or proportion of the votes recorded for or against the resolution.

RECOMMENDATION

Hantec has been appointed to advise the Independent Board Committee and the Independent Shareholders with regard to the Acquisition. Hantec considers that the Share Transfer Agreement is entered into on normal commercial terms, in the ordinary and usual course of business, fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole. The text of the letter of advice from Hantec containing its recommendation and the principal factors it has taken into account in arriving at its recommendation are set out on pages 24 to 41 of this circular.

The Independent Board Committee, having taken into account the advice of Hantec, considers the Acquisition is fair and reasonable so far as the Independent Shareholders are concerned and that the terms of the Acquisition are entered into on normal commercial terms, in the ordinary and usual course of business, and in the interests of the Company and the Shareholders as a whole. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the resolution relating to the Share Transfer Agreement. The full text of the letter from the Independent Board Committee is set out on page 23 of this circular.

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LETTER FROM THE BOARD

For reasons set out above, the Directors consider that the Acquisition is fair and reasonable so far as the Shareholders are concerned and that the terms of the Acquisition are entered into on normal commercial terms, in the ordinary and usual course of business, and in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the extraordinary general meeting of the Company.

FURTHER INFORMATION

Your attention is also drawn to the additional information set out in the appendix to this circular and the notice of the extraordinary general meeting.

Yours faithfully,

By Order of the Board

OVERSEAS CHINESE TOWN (ASIA) HOLDINGS LIMITED ZHENG FAN

Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of a letter from the Independent Board Committee setting out its recommendation to the Independent Shareholders in relation to the Acquisition.

==> picture [194 x 49] intentionally omitted <==

OVERSEAS CHINESE TOWN (ASIA) HOLDINGS LIMITED

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 3366)

24 June 2008

To the Independent Shareholders

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTION

Acquisition of 51% equity interest and the shareholder’s loan in OCT Investments Limited

We refer to the circular (“Circular”) issued by the Company to its Shareholders dated 24 June 2008 of which this letter forms part. Capitalised terms defined in the Circular shall have the same meanings in this letter unless the context otherwise requires.

We have been appointed by the Board to consider the terms of the Share Transfer Agreement (as amended and supplemented by the Supplemental Agreement) and the transactions contemplated thereunder including the issue of the Consideration Shares. Hantec has been appointed as the independent financial adviser to advise us and the Independent Shareholders in this respect.

We wish to draw your attention to the letter from the Board and the letter from Hantec set out in the Circular. Having considered the principal factors and reasons considered by, and the advice of, Hantec set out in its letter of advice contained in the Circular, we consider that the Acquisition is fair and reasonable so far as the Independent Shareholders are concerned and that the terms of the Acquisition are entered into on normal commercial terms, in the ordinary and usual course of business, 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 approve the Acquisition at the extraordinary general meeting.

Yours faithfully, For and on behalf of The Independent Board Committee of Overseas Chinese Town (Asia) Holdings Limited Wong Wai Ling Chen Xiangdong Xiao Yongping Independent non-executive Directors

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of a letter of advice from Hantec to the Independent Board Committee and the Independent Shareholders for the purpose of inclusion in this circular:

==> picture [42 x 47] intentionally omitted <==

Hantec Capital Limited

45th Floor, COSCO Tower 183 Queen’s Road Central Hong Kong

24 June 2008

To the Independent Board Committee and the Independent Shareholders of Overseas Chinese Town (Asia) Holdings Limited

Dear Sirs,

MAJOR AND CONNECTED TRANSACTION: ACQUISITION OF 51% EQUITY INTEREST AND THE SHAREHOLDER’S LOAN IN OCT INVESTMENTS LIMITED

INTRODUCTION

We refer to our engagement as the independent financial adviser to the Independent Board Committee and the Independent Shareholders on the terms of the Share Transfer Agreement (as amended and supplemented by the Supplemental Agreement) and the transactions contemplated thereunder including the issue of the Consideration Shares, details of which are contained in the Letter from the Board (the “ Letter from the Board ”) contained in the circular (the “ Circular ”) of the Company to the Shareholders dated 24 June 2008, of which this letter forms part. Terms used in this letter have the same meanings as defined in the Circular unless the context otherwise requires.

On 21 August 2007, the Company entered into an agreement with the Vendor, pursuant to which the Company had acquired from the Vendor (i) 49 shares of OCT Investments, representing 49% equity interest of OCT Investments; and (ii) 49% of the then shareholder’s loan owed by OCT Investments to the Vendor at an aggregate consideration of HK$140 million (the “ August Acquisition ”). The completion of the August Acquisition took place in October 2007.

On 2 June 2008 and 4 June 2008, the Company entered into the Share Transfer Agreement and the Supplemental Agreement with the Vendor respectively, pursuant to which the Company has conditionally agreed to acquire and the Vendor has conditionally agreed to sell the Sale Shares and the Shareholder’s Loan at an aggregate consideration of HK$170 million.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Vendor is an indirect controlling Shareholder, holding approximately 63.69% of the issued share capital of the Company through Pacific Climax as at the Latest Practicable Date. Under Chapter 14A of the Listing Rules, the Vendor is a connected person of the Company and therefore the Acquisition constitutes a connected transaction of the Company. The Acquisition is subject to the reporting and announcement requirements, and the approval of the Independent Shareholders at an extraordinary general meeting by way of poll under the Listing Rules. Pacific Climax and its associates are required to abstain from voting on the resolution(s) in respect of the Acquisition at the extraordinary general meeting.

The Independent Board Committee, comprising three independent non-executive Directors, namely Ms. Wong Wai Ling, Mr. Chen Xiangdong and Mr. Xiao Yongping, has been established to advise the Independent Shareholders as to whether the terms of the Share Transfer Agreement (as amended and supplemented by the Supplemental Agreement) and the transactions contemplated thereunder are fair and reasonable and in the interests of the Company and its Independent Shareholders as a whole

BASIS OF OUR ADVICE

In arriving at our recommendation, we have relied on the information and facts provided by the Company and have assumed that any representations made to us are true, accurate and complete. We have also relied on the statements, information, opinions and representations contained in the Circular and the information and representations provided to us by the Directors and management of the Company. We have assumed that all information, representations and opinions contained or referred to in the Circular and all information, representations and opinions which have been provided by the Directors and management of the Company for which they are solely responsible, are true and accurate at the time they were made and will continue to be accurate at the date of the despatch to the Circular.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in the Circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, opinions expressed in the Circular have been arrived at after due and careful consideration and there are no other facts not contained in the Circular the omission of which would make any such statement contained in the Circular misleading. We consider that we have been provided with sufficient information on which to form a reasonable basis for our opinion. We have no reason to suspect that any relevant information has been withheld, nor are we aware of any fact or circumstance which would render the information provided and representations and opinions made to us untrue, inaccurate or misleading. Having made all reasonable enquiries, the Directors have further confirmed that, to the best of their knowledge, they believe there are no other facts or representations the omission of which would make any statement in the Circular, including this letter, misleading. We have not, however, carried out any independent verification of the information provided by the Directors and management of the Company, nor have we conducted an independent investigation into the business and affairs of the Group, the OCT Group and the Vendor.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS TAKEN INTO ACCOUNT

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

1. Background

On 21 August 2007, the Company entered into an agreement with the Vendor for the August Acquisition at a consideration of HK$140 million. The August Acquisition constituted a discloseable transaction of the Company under Chapter 14 of the Listing Rules. The completion of the August Acquisition took place in October 2007. As at the Latest Practicable Date, the Company was interested in 49% equity interest in OCT Investments (indirectly holds 12.25% equity interest in Chengdu OCT), while the Vendor was interested in 51% equity interest in OCT Investments (indirectly holds 12.75% equity interest in Chengdu OCT).

On 2 June 2008 and on 4 June 2008, the Company entered into the Share Transfer Agreement and the Supplemental Agreement with the Vendor respectively, pursuant to which the Company has conditionally agreed to acquire and the Vendor has conditionally agreed to sell the Sale Shares, representing 51% of the total issued share capital of OCT Investments, and the Shareholder’s Loan at an aggregate consideration of HK$170 million.

Upon Completion, together with the existing 49% equity interest in OCT Investments held by the Company, the Company will be interested in the entire equity interest in OCT Investments, which in turn, holds the entire equity interest in Bantix International. Bantix International is an investment holding company. The sole investment held by Bantix International is the 25% equity interest in Chengdu OCT. Accordingly, the Company will be indirectly interested in 25% equity interest of Chengdu OCT. Upon Completion, OCT Investments and Bantix International will become wholly owned subsidiaries of the Company and their results will be consolidated into the consolidated financial statements of the Company while Chengdu OCT will be remained as an associated company of the Company and its result will be equity accounted for in the consolidated financial statements of the Company.

(a) Information on the Group

The Group is principally engaged in the manufacture of quality paper-based packaging containers and materials, including corrugated paperboard and printed cartons for customers.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

favourable prospect of the Project which is mentioned in the paragraphs headed “Information on OCT Investments” and “Information on Chengdu OCT” below and the future income stream expected to be generated from the Project. Moreover, as the joint-venture partners, (Shenzhen OCT Holding Co., Ltd.) (“ OCT Holding ”) and (Shenzhen OCT Properties Co., Ltd.) (“ OCT Properties ”), have successful experience on developing and operating the metropolitan entertainment parks and high-class residential buildings, the Directors consider that the Acquisition will leverage the successful experience of the joint-venture partners to the Group.

(b) Information on OCT Investments

The principal activities of OCT Investments is investment holding. As at the Latest Practicable Date, the Vendor owned 51% equity interest in OCT Investments while the Company held the remaining 49% equity interest in OCT Investments. OCT Investments owed shareholders’ loans of approximately HK$48,913,524 and HK$46,996,846 to the Vendor and the Company, respectively, as at the date of the Share Transfer Agreement. Save as holding the 100% equity interest in Bantix International, OCT Investments does not have any other investment or operations. Save for the loan from the shareholders of OCT Investments amounted to HK$95,910,370, OCT Investments does not have any other loan or liabilities to the Vendor or the Company or other creditors. The sole asset of Bantix International is the 25% equity interest in Chengdu OCT.

According to the accountants’ report on OCT Investments set out in Appendix II to the Circular, the audited consolidated total assets of OCT Investments was approximately HK$102.51 million and the audited consolidated net asset of OCT Investments was approximately HK$6.60 million as at 31 December 2007. According to the accountants’ report on OCT Investments set out in Appendix II to the Circular, OCT Investments did not generate any audited profit or loss (both before and after taxation and extraordinary items) for the year ended 31 December 2006, and OCT Investments had incurred audited consolidated loss (both before and after taxation and extraordinary items) of approximately HK$4.07 million for the year ended 31 December 2007, which was mainly resulted from the share of loss from its associated company, Chengdu OCT. The loss of Chengdu OCT for the year ended 31 December 2007 represents the amortization of the preliminary expenses of Chengdu OCT in accordance with Hong Kong Financial Reporting Standards.

(c) Information on Chengdu OCT

Chengdu OCT is a company incorporated in the PRC on 31 October 2005, and is currently owned as to 38%, 35%, 25% and 2% by OCT Properties, OCT Holding, Bantix International and OCT Group respectively. OCT Investments has contributed HK$95.90 million registered capital to Chengdu OCT at its incorporation. OCT Properties and OCT Holding are non-wholly owned subsidiaries of OCT Group.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As stated in the Letter from the Board, as at the Latest Practicable Date, Chengdu OCT had fully paid the consideration for the plot of land with approximately 2,036,779 square meters which is located at both sides of Shaxi line of Outer Sanhuan Road, Jinniu District, Chengdu, the PRC (the “ Land ”). Chengdu OCT is in the progress of obtaining the State-owned Land Use Certificate for the Land. Chengdu OCT intends to use the Land for the development of the Project given the tourism industry and the real estate industry are two of the core industries of Chengdu, which are highly emphasized by the local authorities.

As at the Latest Practicable Date, the Project was under development. According to the audited accounts of Chengdu OCT for the years ended 31 December 2006 and 31 December 2007 prepared in accordance with the PRC accounting principles, Chengdu OCT had not generated any turnover and net profits or losses (both before and after taxation and extraordinary items) for the years ended 31 December 2006 and 31 December 2007. According to the audited accounts of Chengdu OCT for the year ended 31 December 2007 prepared in accordance with the PRC accounting principles, as at 31 December 2007, the audited total assets of Chengdu OCT was approximately RMB1,423.76 million (equivalent to approximately HK$1,599.73 million) and the audited net asset value of Chengdu OCT was RMB400 million (equivalent to approximately HK$449.44 million).

2. Reasons for the Acquisition

According to Chengdu Statistic Bureau and the announcement “2007 ” dated 17 March 2008 as published in www.chengdu.gov.cn/cd_know , the domestic tourist arrivals recorded approximately 42.5 million in 2007 and the international tourist arrivals recorded approximately 0.8 million in 2007, showing a compound annual growth rate of approximately 7.3% and approximately 17.3% respectively during the period from 1998 to 2007. We also noted from the data released by Chengdu Statistic Bureau and the said announcement that the real estate industry in Chengdu has been experienced continuous growth during the past years. The investments in property development in Chengdu recorded approximately RMB91.0 billion (equivalent to approximately HK$102.2 billion) in 2007, being approximately 11.6 times over that in 1998.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

OCT Holding, one of the joint venture partners of Chengdu OCT, is a pioneer in the theme park industry in the PRC and is dedicated to develop amusement entertainment in the tourism industry. OCT Holding invested in several metropolitan and profitable theme parks in the PRC, including but not limited to Happy Valley ( ), Splendid China ( ), Window of the World ( ), and China Folk Culture Villages ( ). According to the information as published in the website of OCT Holding, since the opening of abovementioned theme parks invested by OCT Holding and up to 30 September 2006, the tourist arrivals of the theme parks had reached 100 million visitors in aggregate and generate an aggregate net profit of over RMB2.1 billion (equivalent to approximately HK$2.4 billion). As disclosed in the annual report of OCT Holding for the year ended 31 December 2007, OCT Holding’s tourism entertainment business maintain a steady and strong growth, the tourist arrivals of the theme parks invested by OCT Holding had reached more than 12.50 million visitors in the year 2007, represented an increase of approximately 29% over the year 2006. OCT Properties, one of the joint venture partners of Chengdu OCT, has over 20 years’ property development experiences and is one of the largest property development enterprises in Shenzhen. Apart from the Project, OCT Properties has numerous projects including Beijing OCT ( ) in Beijing, Shanghai OCT ( ) in Shanghai and OCT East ( ) in Shenzhen. These are large metropolitan composite areas comprise of theme parks, residential buildings, shopping malls/commercial areas, art/cultural center, hotels/resorts, etc. The project of OCT East in Shenzhen is under development with theme of ecology. It occupies about nine square kilometers and comprises resorts and three major theme parks. Phase I of the resort was opened in mid 2007.

As stated in the Letter from the Board, Chengdu OCT intends to use the Land for the development of the Project given the tourism industry and the real estate industry are two of the core industries of Chengdu, which are highly emphasized by the local authorities. The Directors believe that the increase in the purchasing power of the citizens in Chengdu will stimulate market growth for the tourism and the real estate industries, hence, it will bring business opportunities to the Project and that the Project has good prospects in the future.

In view of the continuous growth of the tourism and real estate markets in Chengdu and the ample experience of OCT Properties and OCT Holding in developing and operating metropolitan entertainment parks and high-class residential buildings, we concur with the Directors that Chengdu OCT can leverage the successful experience of its shareholders to capitalize on the business opportunities offered by the growing tourism and real estate market. Accordingly, we are of the view that the entering into the Share Transfer Agreement (as amended and supplemented by the Supplemental Agreement) is in the interest of the Group and the Shareholders as a whole as (i) it would be beneficial to the Company after considering the favourable prospect of the Project; and (ii) it makes use of the experiences and expertise of the related companies of the Company’s controlling Shareholders.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3. Terms of the Acquisition

(a) Consideration

The aggregate consideration of the Acquisition (the “ Consideration ”) payable by the Company to the Vendor on the Completion Date for the Acquisition shall be HK$170 million, of which:

(i) HK$50 million is payable by the Company to the Vendor in cash; and
(ii) HK$120 million shall be satisfied by the Company to issue and allot 50,000,000 Consideration Shares to the Vendor (or its nominee(s)).

If the issued share capital of the Company held by the public is less than 25% immediately upon the issue of the 50,000,000 Consideration Shares, the Vendor agreed that the consideration of HK$170 million will be satisfied as follow:

(i) HK$83 million shall be payable by the Company to the Vendor in cash; and
(ii) HK$87 million shall be satisfied by the Company to issue and allot 36,250,000 Consideration Shares to the Vendor (or its nominee(s)).

The Company will make an announcement on the settlement method of the consideration for the Acquisition when the settlement method is confirmed.

The Consideration has been determined after arm’s length negotiations between the Company and the Vendor with reference to, among other things, (i) the audited net asset value of Chengdu OCT of RMB400 million (equivalent to approximately HK$449.44 million) as at 31 December 2007 prepared in accordance with the PRC accounting principles; (ii) the market value of the property under development of Chengdu OCT (referred to as the “ Property ”) of approximately RMB2.61 billion (equivalent to approximately HK$2.93 billion) as at 30 April 2008 assuming a valid State-owned Land Use Certificate having been obtained by Chengdu OCT as appraised by Savills Valuation and Professional Services Limited (“ Savills ”), an independent property valuer of the Group; (iii) the net book value of the Property (without taking into account of the relevant construction cost and tax) of approximately RMB1.83 billion (equivalent to approximately HK$2.06 billion) as at 30 April 2008; (iv) the Shareholder’s Loan; and (v) the prospect of the Project. The Directors intend to finance the cash payment of HK$50 million (in the case of issue of 50,000,000 Consideration Shares) or HK$83 million (in the case of issue of 36,250,000 Consideration Shares) by internal resources of the Group or bank loan(s).

As confirmed by the Directors, save as holding the 100% equity interest in Bantix International, OCT Investments does not have any other investment or operations. While the sole asset of Bantix International is the 25% equity interest in Chengdu OCT. Upon Completion, OCT Investments and Bantix International will be wholly-owned by the Company and the Company will be indirectly interested in 25% equity interest of Chengdu OCT.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

According to the audited accounts of Chengdu OCT for the year ended 31 December 2007 prepared in accordance with the PRC accounting principles, as at 31 December 2007, the audited net asset value of Chengdu OCT was RMB400 million (equivalent to approximately HK$449.44 million). As set out in the valuation report made by Savills, which is set out in Appendix IV to the Circular, Savills has assigned no commercial value to the Property as Chengdu OCT has not obtained the State-owned Land Use Certificate. However, the market value (the “ Valuation ”) of the Property as at 30 April 2008 would be approximately RMB2.61 billion (equivalent to approximately HK$2.93 billion) assuming a valid State-owned Land Use Certificate having been obtained by Chengdu OCT. According to the PRC legal opinion of the Company’s PRC legal adviser, Win & Sun Law Firm, Chengdu OCT has fully paid the relevant land grant premium of the Land and Chengdu OCT is in the progress of obtaining the State-owned Land Use Certificate for the Land. Win & Sun Law Firm are of the opinion that there will be no legal impediment for Chengdu OCT to obtain the State-owned Land Use Certificate for the Land. Considering the aforesaid opinion from Win & Sun Law Firm, we consider Savills’ valuation with the assumption that a valid State-owned Land Use Certificate has been obtained by Chengdu OCT is reasonable.

We have reviewed the Valuation and have discussed with Savills on the methodology adopted and assumptions used in arriving at the market value of the Property as at 30 April 2008. We understand that Savills has adopted direct comparison approach by making reference to comparable market transactions as available in the markets and also have taken into account the construction costs to be expended to reflect the quality of the completed developments. We have no reason to doubt the fairness and appropriateness of the methodology adopted and assumptions used by Savills in arriving at the Valuation which is in general, such methodology and assumptions usually used in the market for valuation of such property.

As set out in the section headed “Valuation of the Land” in the Letter from the Board, the net book value of the Property (after taking into account of the relevant construction cost and tax) as at 30 April 2008 was approximately RMB2,085.58 million (equivalent to approximately HK$2,343.35 million) and assuming that Chengdu OCT can obtain the State-owned Land Use Certificate for the Land, the Property would have a valuation surplus of approximately RMB526.42 million (equivalent to approximately HK$591.48 million), which translate into an adjusted net asset value of Chengdu OCT of approximately RMB926.42 million (equivalent to approximately HK$1,040.92 million). A 12.75% equity interest of Chengdu OCT to be acquired under the Acquisition accordingly would share an adjusted net asset of approximately RMB118.12 million (equivalent to approximately HK$132.72 million). The Consideration of approximately HK$121.09 million (after net of the Shareholder’s Loan of approximately HK$48.91 million) for 51% equity interest in OCT Investments (representing 12.75% indirect equity interest in Chengdu OCT) therefore represents a discount of approximately 8.76% to the Company’s share of adjusted net asset value of Chengdu OCT as at 30 April 2008 of approximately HK$132.72 million. Taken into account that (i) the potential favourable prospect of the Project as expected by the Directors under the continuous growth of the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

tourism and real estate markets in Chengdu and the future income stream expected to be generated from the Project; (ii) OCT Investments and Bantix International will become wholly owned subsidiaries of the Company and their financial results will be consolidated into the Group upon Completion; and (iii) the Consideration of HK$121.09 million (after net of the Shareholder’s Loan of approximately HK$48.91 million) for 51% equity interest in OCT Investments represents a discount to the Company’s share of adjusted net asset value of Chengdu OCT, we consider that the Consideration is fair and reasonable.

As OCT Investments had incurred consolidated loss for the year ended 31 December 2007 and Chengdu OCT had not generated any profits or losses for the two years ended 31 December 2007, it is not applicable to use the price-to-earnings ratio to justify the Consideration. Based on 51% equity interest in OCT Investments (represent 12.75% indirect interest in Chengdu OCT) to be acquired by the Company under the Acquisition and the audited net asset value of Chengdu OCT of RMB400 million (equivalent to approximately HK$449.44 million) as at 31 December 2007 prepared in accordance with the PRC accounting principles, the Company will share a net asset of Chengdu OCT of approximately RMB51 million (equivalent to approximately HK$57.3 million). The Consideration of approximately HK$121.09 million (after net of the Shareholder’s Loan of approximately HK$48.91 million) would therefore represent a price to net asset multiple of approximately 2.11 times. We have identified the following companies (the “ Comparable Companies ”) listed in Hong Kong which is principally engaged in similar business to that of Chengdu OCT, that is property development in the PRC, and examined the price to net asset multiple (“ P/B ”, calculated based on the net asset value per their respective latest published financial statement and the market capitalization of such companies based on their closing prices as quoted on 2 June 2008 (being the date of the Share Transfer Agreement) or the latest trading day prior to 2 June 2008) of the Comparable Companies, which are set out in the following table:

	Market
	capitalisation	Audited
	as at	consolidated
Company name (stock code)	3 June 2008	net asset value	P/B
	(HK$)	(HK$)	(times)
China Fair Land Holdings Limited (169)	350,947,590	294,388,000	1.19
Shui On Land Limited (272)	30,303,723,518	17,840,449,438	1.70
SPG Land (Holdings) Limited (337)	4,015,434,600	3,717,522,472	1.08
China Overseas Land & Investment	111,422,609,477	26,282,040,000	4.24
Limited (688)
Hopson Development Holdings Limited	22,232,762,025	17,864,383,000	1.24
(754)
Shimao Property Holdings Limited (813)	43,605,434,492	20,728,296,629	2.10
Franshion Properties (China) Limited	17,449,187,200	8,613,817,000	2.03
(817)

– 32 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

	Market
	capitalisation	Audited
	as at	consolidated
Company name (stock code)	3 June 2008	net asset value	P/B
	(HK$)	(HK$)	(times)
New World China Land Limited (917)	20,049,461,437	26,229,888,000	0.76
China Resources Land Limited (1109)	56,075,745,820	22,129,461,000	2.53
Hong Long Holdings Limited (1383)	1,248,300,000	1,828,604,494	0.68
KWG Property Holding Limited (1813)	18,934,375,000	9,588,407,865	1.97
China Properties Group Limited (1838)	6,182,645,700	17,442,050,000	0.35
Country Garden Holdings Co. Limited	97,342,000,000	21,526,125,843	4.52
(2007)
Guangzhou R&F Properties Co., Limited	19,269,604,432	14,186,001,124	1.36
(2777)
Beijing Capital Land Limited (2868)	2,735,626,080	5,131,282,022	0.53
Agile Property Holdings Limited (3383)	36,220,532,200	10,129,097,753	3.58
Greentown China Holdings Limited (3900)	13,129,068,124	9,109,514,607	1.44
Lowest			0.35
Highest			4.52
Median			1.44
Mean			1.84
Chengdu OCT			2.11

Source: www.hkex.com.hk

As shown in the above table, the P/B of the Comparable Companies are in the range of 0.35 time to 4.52 times. The median and average of these P/B are 1.44 and 1.84 times respectively. The P/B in relation to the Consideration of 2.11 times falls within the range of the Comparable Companies but slightly higher than the average of the Comparable Companies.

Having considered that (i) the Project is in initial stage of development with respect to which a relatively lower asset value was accounted; (ii) the P/B as represented by the Consideration is fall within the range of Comparable Companies; and (iii) the promising future business prospect of the Project as expected by the Directors under the historical growth of Chengdu’s tourism and real estate markets, we are of the opinion that the slightly higher P/B as represented by the Consideration as compared with the average of the Comparable Companies is acceptable.

Taken into account of the analysis above and the probable promising future business prospect of the Project, we consider that the Consideration is fair and reasonable so far as the Group and the Independent Shareholders are concerned.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(b) Consideration Shares

HK$120 million out of the Consideration will be satisfied by the Company to issue and allot 50,000,000 Consideration Shares to the Vendor (or its nominees(s)). However, if the issued share capital of the Company held by the public is less than 25% immediately upon the issue of the 50,000,000 Consideration Shares, HK$87 million out of the Consideration will be satisfied by the Company to issue and allot 36,250,000 Consideration Shares to the Vendor (or its nominee(s)). The Directors will seek a special mandate from its Shareholders for the issue and allotment of the Consideration Shares. The 50,000,000 Consideration Shares represent (i) approximately 19.86% of the issued share capital of the Company as at the Latest Practicable Date; and (ii) approximately 16.57% of the issued share capital of the Company as enlarged by the allotment and issue of the 50,000,000 Consideration Shares. The 36,250,000 Consideration Shares represents (i) approximately 14.40% of the existing issued share capital of the Company as at the Latest Practicable Date; and (ii) approximately 12.58% of the issued share capital of the Company as enlarged by the allotment and issue of the 36,250,000 Consideration Shares.

The issue price of the Consideration Shares of HK$2.40 per Share represents:

(i) a discount of approximately 4.00% to the closing price of HK$2.50 per Share as quoted on the Stock Exchange on the Last Trading Day;
(ii) a premium of approximately 11.73% to the average of the closing prices of HK$2.148 per Share for the last five consecutive trading days up to and including the Last Trading Day;
(iii) a premium of approximately 12.46% to the average of the closing prices of HK$2.134 per Share for the last ten trading days up to and including the Last Trading Day;
(iv) a premium of approximately 2.56% to the audited consolidated net asset value per Share of approximately RMB2.08 (equivalent to approximately HK$2.34) as at 31 December 2007 (as calculated by the total net assets of approximately RMB510.82 million (equivalent to approximately HK$573.95 million) and the number of Shares in issue of 246,000,000 as at 31 December 2007 based on the latest published audited consolidated financial statements of the Company for the year ended 31 December 2007); and
(v) a premium of approximately 11.11% over the closing price of HK$2.16 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

The issue price of the Consideration Shares was arrived at by the Company and the Vendor after taking into account of the closing prices of the Shares and the audited consolidated net asset value per Share as at 31 December 2007 as shown in (i) to (iv) above.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In order to assess the fairness and reasonableness of the issue price of the Consideration Shares, we have identified and reviewed, on a best effort basis, a number of connected transactions involving the issue of consideration shares (the “ Comparable Issues ”) of companies listed on the Stock Exchange announced since 1 January 2008 up to 2 June 2008, being the date of the Share Transfer Agreement, as summarized below:

				Premium/	Premium/	Premium/
			Premium/	(discount) of	(discount) of	(discount) of
			(discount) of	issue price to	issue price to	issue price to
			issue price to	the average	the average	the
			the closing	closing price	closing price	consolidated
			price as at	for the last	for the last	net asset
Company name	Date of	Issue	the last	five trading	ten trading	value per
(Stock code)	announcement	price	trading day	days	days	share
		HK$	%	%	%	%
Kasen International Holdings	30-May-08	1.354	(3.97)	(3.29)	(1.88)	(30.08)
Limited (496)
TravelSky Technology Limited	26-May-08	6.39	(4.91)	(5.42)	(4.13)	(16.64)
(0696)
Parkson Retail Group Limited	22-May-08	67.45	0.00	(6.10)	(6.26)	1,125.54
(3368)
Fushan International Energy	21-May-08	4.50	(0.66)	(3.27)	3.97	1,396.19
Group Limited (639)
Henry Group Holdings Limited	14-May-08	1.63	83.15	81.11	83.15	n/a_(note)_
(859)
Inspur International Limited	8-May-08	1.36272	3.23	2.46	2.23	1,403.61
(8141)
Macau Success Limited (487)	7-May-08	1.16	0.00	4.50	7.11	187.29
Shanghai Zendai Property	29-Apr-08	0.25	12.11	6.84	5.93	(17.67)
Limited (755)
Ajisen (China) Holdings Limited	28-Apr-08	9.24	(8.53)	0.00	3.66	336.36
(538)
Sino Union Petroleum &	22-Apr-08	2.80	53.80	74.60	88.40	164.11
Chemical International Limited
(346)
Wasion Meters Group Limited	18-Apr-08	3.58	20.00	21.00	14.00	117.61
(3393)
The Sun’s Group Limited (988)	28-Mar-08	2.50	34.00	40.00	38.00	174.78
Wang Sing International Holdings	25-Mar-08	0.42	(16.00)	(14.30)	(9.58)	144.98
Group Limited (2389)
Melco Lott Ventures Limited	6-Mar-08	1.42	12.70	12.70	7.17	13.66
(8198)
Nubrands Group Holdings	19-Feb-08	0.25	(1.96)	(6.02)	(3.10)	380.51
Limited (835)
Henry Group Holdings Limited	19-Feb-08	1.63	63.00	59.80	58.30	n/a_(note)_
(859)
Challenger Group Holdings	18-Feb-08	0.80	14.29	29.03	40.35	504.90
Limited (8203)
Jade Dynasty Group Limited	23-Jan-08	0.22	(63.93)	(63.33)	(61.40)	(26.94)
(970)
China Metal Resources Holdings	23-Jan-08	0.40	2.56	11.42	14.78	(60.00)
Limited (8071)
CATIC Shenzhen Holdings	22-Jan-08	6.73	(5.41)	(6.69)	(6.48)	(12.18)
Limited (161)
China Vanguard Group Limited	17-Jan-08	0.69	(15.90)	(7.10)	(5.70)	52.67
(8156)

– 35 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

				Premium/	Premium/	Premium/
			Premium/	(discount) of	(discount) of	(discount) of
			(discount) of	issue price to	issue price to	issue price to
			issue price to	the average	the average	the
			the closing	closing price	closing price	consolidated
			price as at	for the last	for the last	net asset
Company name	Date of	Issue	the last	five trading	ten trading	value per
(Stock code)	announcement	price	trading day	days	days	share
		HK$	%	%	%	%
Asian Capital Resources	11-Jan-08	0.218	(16.20)	(15.50)	(14.50)	n/a_(note)_
(Holdings) Limited (8025)
Rexcapital Financial Holdings	9-Jan-08	1.4173	(4.88)	7.37	18.11	338.43
Limited (555)
Highest premium/lowest			83.15	81.11	88.40	1,403.61
discount
Lowest premium/highest			(63.93)	(63.33)	(61.40)	(60.00)
discount
Mean premium			6.80	9.56	11.83	308.86
The Company (3366)	4-Jun-08	2.40	(4.00)	11.73	12.46	2.56

Source: www.hkex.com.hk

Note: The companies had negative net asset value.

As indicated in the above table setting out the issue statistics of the Comparable Issues, we observed that:

(i) the discount of approximately 4.00% represented by the issue price of the Consideration Share over the closing price on the Last Trading Day falls within the range of premiums/discounts represented by the Comparable Issues on the relevant last trading days, which ranges from a discount of approximately 63.93% to a premium of approximately 83.15% (the “ Last Day Range ”);
(ii) the premium of approximately 11.73% represented by the issue price of the Consideration Share over the 5-day average closing price for the last five trading days up to and including the Last Trading Day falls within the range of premiums/discounts represented by 5-day average closing prices of the Comparable Issues on the relevant last five trading days, which ranges from a discount of approximately 63.33% to a premium of approximately 81.11% (the “ 5-day Range ”);
(iii) the premium of approximately 11.73% represented by the issue price of the Consideration Share over the 5-day average closing price is higher than the average of the 5-Day Range of a premium of 9.56%;
(iv) the premium of approximately 12.46% represented by the issue price of the Consideration Share over the 10-day average closing price for the last ten trading days up to and including the Last Trading Day falls within the range of premiums/discounts represented by 10-day average closing prices of the Comparable Issues on the relevant last ten trading days, which range from a discount of approximately 61.40% to a premium of approximately 88.40% (the “ 10-day Range ”);

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(v) the premium of approximately 12.46% represented by the issue price of the Consideration Share over the 10-day average closing price is higher than the average of the 10-Day Range of a premium of 11.83%; and
(vi) the premium/(discount) of issue price to the consolidated net asset value per share of the Comparable Issues range widely from a discount of approximately 60.00% to a premium of approximately 1,403.61% with a mean premium of approximately 308.86% respectively. The premium of approximately 2.56% represented by the Issue Price to the audited consolidated net asset value per Share falls within the said range and is smaller than the mean premium of the Comparable Issues.

Based on the above comparison with the Comparable Issues, we are of the view that the issue price of the Consideration Shares is fair and reasonable so far as the Company and the Independent Shareholders are concerned.

4. Dilution of the shareholding interests in the Company

Assuming there is no change in the shareholding interests of the Company and the Shares in issue from the Latest Practicable Date up to and including the Completion Date, the table below demonstrates the shareholding structure of the Company (i) as at the Latest Practicable Date; (ii) immediately upon Completion assuming the issue of the 50,000,000 Consideration Shares; and (iii) immediately upon Completion assuming the issue of the 36,250,000 Consideration Shares:

Existing Shareholding No. of Shares % 160,370,000 63.69 – –	Existing Shareholding No. of Shares % 160,370,000 63.69 – –	Immediately upon Completion assuming 50,000,000 Consideration Shares are issued No. of Shares % 160,370,000 53.14 50,000,000 16.57	Immediately upon Completion assuming 50,000,000 Consideration Shares are issued No. of Shares % 160,370,000 53.14 50,000,000 16.57	Immediately upon Completion assuming 36,250,000 Consideration Shares are issued No. of Shares % 160,370,000 55.68 36,250,000 12.58	Immediately upon Completion assuming 36,250,000 Consideration Shares are issued No. of Shares % 160,370,000 55.68 36,250,000 12.58
160,370,000 15,630,000 3,780,000 72,010,000	63.69 6.21 1.50 28.60	210,370,000 15,630,000 3,780,000 72,010,000	69.71 5.18 1.25 23.86 (note 2)	196,620,000 15,630,000 3,780,000 72,010,000	68.26
					5.43 1.31 25.00
251,790,000	100.00	301,790,000	100.00	288,040,000	100.00

– 37 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Notes:

Polyfairz Group Limited was beneficially owned as to 90% by a director of a subsidiary of the Company as at the Latest Practicable Date.
Pursuant to the Share Transfer Agreement (as amended and supplemented by the Supplemental Agreement), if the issued share capital of the Company held by the public is less than 25% immediately upon the issue of the 50,000,000 Consideration Shares, the Company will only issue 36,250,000 Shares as Consideration Shares.

As shown in the above table, immediately upon Completion and the issue of 50,000,000 Consideration Shares, the shareholding interests of the existing public Shareholders will be decreased from approximately 28.60% to 23.86%, representing a decrease in shareholding of approximately 4.74%. If the Company only issue 36,250,000 Shares as Consideration Shares, the shareholding interests of the existing public Shareholders will be decreased from approximately 28.60% to 25.00%, representing a decrease in shareholding of approximately 3.60% immediately upon Completion.

After taking into account that (i) the promising future business prospect of Chengdu OCT leveraging on the possible growth of the tourism and real estate markets in Chengdu and the ample experience of OCT Properties and OCT Holding in developing and operating metropolitan entertainment parks and high-class residential buildings; (ii) the future income stream expected to be generated from the Project; and (iii) the Consideration Shares are issued at premium over the audited consolidated net asset value per Share of approximately RMB2.08 (equivalent to approximately HK$2.34) as at 31 December 2007, we are of the view that the above dilution effect to the public Shareholders is fair and reasonable.

5. Financial effects of the Acquisition

After the August Acquisition and prior to the Completion, OCT Investments is an associated company of the Company and the Company’s shareholding in OCT Investments was accounted for by the Company by equity method. Upon the Completion, OCT Investments will become a wholly owned subsidiary of the Company, and accordingly, its financial results will be consolidated into the Group.

(i) Earnings

According to the audited financial statements of the Group for the year ended 31 December 2007 as set out Appendix I to the Circular, the Group recorded an audited consolidated profit attributable to the equity holders of the Company of approximately HK$38.42 million for the year ended 31 December 2007. According to the accountants’ report on OCT Investments set out in Appendix II to the Circular for the two years ended 31 December 2007, OCT Investments did not generate any audited profit or loss for the year ended 31 December 2006, and the audited consolidated loss of OCT Investments was approximately HK$4.07 million for the year ended 31 December 2007, which was mainly resulted from the share of loss from its associated company, Chengdu OCT. The loss of Chengdu OCT for the year ended 31 December 2007 represents the amortization of the preliminary expenses of Chengdu OCT in accordance with Hong Kong Financial Reporting Standards.

– 38 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Although Chengdu OCT was yet to generate any turnover and net profit or loss for the two years ended 31 December 2007 according to the audited accounts of Chengdu OCT for the year ended 31 December 2006 and 31 December 2007 prepared in accordance with the PRC accounting principles, the Directors believe that the prospects of the Project will be encouraging and the Acquisition would provide positive impact to the Group upon completion of the development of the Project. Given (i) the continuous growth of the Chengdu tourism market and Chengdu’s real estate industry as discussed in paragraph headed “Reasons for the Acquisition” above; (ii) OCT Investments’ financial results will be consolidated into the Group; and (iii) the Project is still under development and the potential future business prospect of the Project, we are of the view that the Acquisition will contribute positively to the Group’s earning.

(ii) Net asset value

According to the audited financial statements of the Group for the year ended 31 December 2007 as set out Appendix I to the Circular, the consolidated net assets of the Group was approximately RMB510.82 million as at 31 December 2007. According to the unaudited pro forma balance sheet of the Enlarged Group as set out in Appendix III to the Circular and assuming the Consideration shall be partially satisfied by cash of HK$50 million and the remaining HK$120 million shall be satisfied by issuance of 50,000,000 Consideration Shares, the net assets of the Enlarged Group after the Completion was approximately RMB622.89 million, represent an increase of 21.94% as compared with the net assets of the Group as at 31 December 2007. According to the notes to the unaudited pro forma balance sheet of the Enlarged Group as set out in Appendix III to the Circular and assuming the Consideration shall be satisfied by cash of HK$83 million and issuance of 36,250,000 Consideration Shares, the unaudited pro-forma net assets of the Enlarged Group after the Completion was approximately RMB591.99 million, represent an increase of 15.89% as compared with the net assets of the Group as at 31 December 2007.

(iii) Cash position/gearing of the Group

According to the audited financial statements of the Group for the year ended 31 December 2007 as set out Appendix I to the Circular, the cash and cash equivalents of the Group was approximately RMB119.29 million as at 31 December 2007. As set out in the unaudited pro forma balance sheet of the Enlarged Group in Appendix III to the Circular and assuming the Consideration shall be partially satisfied by cash of HK$50 million and the remaining HK$120 million shall be satisfied by issuance of 50,000,000 Consideration Shares, the unaudited pro forma cash position will be decreased to approximately RMB70.72 million as a result of the cash payment of the consideration of HK$50 million by internal resources of the Group.

– 39 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As set out in the annual report of the Company for the year ended 31 December 2007, the Group’s gearing ratio (being the total borrowings including bills payable and bank loans divided by total assets) was approximately 21.23% as at 31 December 2007. According to the unaudited pro forma balance sheet of the Enlarged Group as set out in Appendix III to the Circular and assuming the Consideration shall be partially satisfied by cash of HK$50 million and the remaining HK$120 million shall be satisfied by issuance of 50,000,000 Consideration Shares, the total borrowings (bills payable and bank loans) and total assets of the Enlarged Group would be approximately RMB173.99 million (equivalent to approximately HK$195.49 million) and RMB931.73 million (equivalent to approximately HK$1,046.89 million) respectively, accordingly, the gearing ratio of the Enlarged Group after the Completion would be 18.67%, represent an improvement of 2.56% as a result of increased assets.

RECOMMENDATION

Having taken into account the principal factors and reasons referred to the above, in particular:

(i) the promising future business prospect of the Project leveraging on the continuous growth in tourism and real estate market in Chengdu;
(ii) the Consideration for 51% equity interest in OCT Investments (after net of the Shareholder’s Loan) represents a discount to the Company’s share of adjusted net asset value of Chengdu OCT as at 30 April 2008;
(iii) the discount of approximately 4.00% and premiums of approximately 11.73% and 12.46% represented by the issue price per Consideration Share to the closing price as at the last trading day, the last five trading days and last ten trading days of the Shares respectively are fall within the respective Last Day Range, 5-day Range and 10-day Range, also the premium represented by the issue price per Consideration Share to the last five trading days and last then trading days of the Shares is higher than the average premium of the 5-day Range and 10-day Range;
(iv) the issue of the Consideration Shares to the Vendor or its nominee(s) to partly settle the consideration of the Acquisition will not draw on the existing cash resources of the Group for the Acquisition;

– 40 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(v) the improvement in net assets and gearing ratio of the Enlarged Group attributable to the Shareholders upon Completion,

we are of the opinion that the Acquisition is fair and reasonable so far as the Independent Shareholders are concerned and in ordinary and usual course of business of the Company. We also consider the terms of the Acquisition are entered into on normal commercial terms and in the interests of the Company and the Shareholders as a whole. We therefore advise the Independent Board Committee to recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the extraordinary general meeting to approve the Share Transfer Agreement (as amended and supplemented by the Supplemental Agreement) and the transactions contemplated thereunder.

Yours faithfully, For and on behalf of

Hantec Capital Limited Kinson Li Annie Ho Director Associate Director

– 41 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

I. SUMMARY OF FINANCIAL INFORMATION OF THE GROUP FOR EACH OF THE THREE YEARS ENDED 31 DECEMBER 2007

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

Income Statement

Turnover Profit before tax Income tax expense Profit for the year	Year ended 31 December 2007 2006 2005 RMB’000 RMB’000 RMB’000 739,907 695,503 662,243 41,245 39,277 45,814 (2,826) (5,970) (5,440) 38,419 33,307 40,374	Year ended 31 December 2007 2006 2005 RMB’000 RMB’000 RMB’000 739,907 695,503 662,243 41,245 39,277 45,814 (2,826) (5,970) (5,440) 38,419 33,307 40,374	Year ended 31 December 2007 2006 2005 RMB’000 RMB’000 RMB’000 739,907 695,503 662,243 41,245 39,277 45,814 (2,826) (5,970) (5,440) 38,419 33,307 40,374
	41,245 (2,826)	39,277 (5,970)	45,814 (5,440
	38,419	33,307

Assets and Liabilities

Total assets Total liabilities Total equity	Year ended 31 December 2007 2006 2005 RMB’000 RMB’000 RMB’000 819,661 619,940 554,654 (308,843) (282,079) (229,006) 510,818 337,861 325,648

– 42 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

II. AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR THE YEARS ENDED 31 DECEMBER 2006 AND 2007

Set out below are the audited financial statements for the two years ended 31 December 2006 and 2007 as extracted from the annual report of the Company for the year ended 31 December 2007.

CONSOLIDATED INCOME STATEMENT

for the year ended 31 December 2007

Note Turnover 3 Cost of sales Gross profit Other revenue 4(a) Other net loss 4(b) Distribution costs Administrative expenses Other operating expenses Profit from operations Finance costs 5(a) Share of losses from associates Profit before taxation 5 Income tax 6 Profit for the year Attributable to: Equity shareholders of the Company Minority interests Profit for the year Dividends payable to equity shareholders of the Company attributable to the year: Final dividend proposed after the balance sheet date 10 Earnings per share (RMB) Basic 11 Diluted	2007 RMB’000 739,907 (654,846)	2006 RMB’000 695,503 (608,381) 87,122 22,544 (3,394) (32,562) (30,125) (756) 42,829 (3,552) – 39,277 (5,970) 33,307 32,999 308 33,307 12,675 0.16 0.16
	85,061 28,276 (3,836) (30,799) (28,378) (4,214) 46,110 (4,381) (484) 41,245 (2,826)	87,122 22,544 (3,394 (32,562 (30,125 (756
		42,829 (3,552 –
		39,277 (5,970
	38,419
	38,361 58	32,999 308
	38,419 12,809 0.18 0.17

– 43 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED BALANCE SHEET

at 31 December 2007

Note Non-current assets Property, plant and equipment 12 Construction in progress 13 Goodwill 14 Lease prepayments 15 Interest in associate 17 Deferred tax assets 26(b) Current assets Non-current assets held for sale 18 Inventories 19 Trade and other receivables 20 Cash and cash equivalents 21 Current liabilities Trade and other payables 22 Bank loans 23 Current taxation 26(a) Net current assets Total assets less current liabilities Non-current liabilities Bank loans 23 NET ASSETS CAPITAL AND RESERVES Share capital 27(a) Reserves Total equity attributable to equity shareholders of the Company 27 Minority interests TOTAL EQUITY	2007 RMB’000 191,468 921 24,937 72,169 89,907 6,444	2006 RMB’000 179,884 20,438 24,937 20,010 – 2,878
	385,846 - - - - - - - - - - - - 12,361 91,866 210,296 119,292 433,815 - - - - - - - - - - - - 259,789 32,735 4,333	248,147 - - - - - - - - - - - - – 63,775 135,858 172,160
		371,793 - - - - - - - - - - - - 207,009 43,664 4,882
	296,857 - - - - - - - - - - - - 136,958 - - - - - - - - - - - - 522,804 - - - - - - - - - - - - 11,986 - - - - - - - - - - - - 510,818	255,555 - - - - - - - - - - - -
		116,238 - - - - - - - - - - - -
		364,385 - - - - - - - - - - - - 26,524 - - - - - - - - - - - -
		337,861

	25,260 485,558 510,818 –	20,800 315,362
		336,162 1,699
	510,818	337,861

– 44 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

BALANCE SHEET

at 31 December 2007

Note Non-current assets Investments in subsidiaries 16 Investment in associate 17 Property, plant and equipment 12 Current assets Trade and other receivables 20 Cash and cash equivalents 21 Current liabilities Trade and other payables 22 Bank loans 23 Net current assets Total assets less current liabilities Non-current liabilities Bank loans 23 NET ASSETS CAPITAL AND RESERVES Share capital 27(a) Reserves 27(g) TOTAL EQUITY	2007 RMB’000 248,970 90,391 22	2006 RMB’000 248,970 – 122
	339,383 - - - - - - - - - - - - 202,702 10,524 213,226 - - - - - - - - - - - - 14,713 12,735	249,092 - - - - - - - - - - - - 53,891 51,981
		105,872 - - - - - - - - - - - - 3,754 13,664
	27,448 - - - - - - - - - - - - 185,778 - - - - - - - - - - - - 525,161 - - - - - - - - - - - - 11,986 - - - - - - - - - - - - 513,175	17,418 - - - - - - - - - - - -
		88,454 - - - - - - - - - - - -
		337,546 - - - - - - - - - - - - 26,524 - - - - - - - - - - - -
		311,022

	25,260 487,915	20,800 290,222
	513,175	311,022

– 45 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2007

			Attributable	to equity sha	reholders of t	he Company
Registered/ issued capital RMB’000 (note 27(a)) 20,800 – – – – – – –	Share premium RMB’000 (note 27(b)) 29,964 – – – – – – –	Contributed surplus RMB’000 (note 27(b)) 156,507 – – – – – – (8,796)	Merger reserve RMB’000 (note 27(c)) 24,757 – – – – – – –	Capital reserve RMB’000 (note 27(d)) 20,828 – – 4,558 – – – –	Exchange reserve RMB’000 (958) – – – (332) – – –	General reserve fund RMB’000 (note 27(e)) 28,701 – 2,430 – – – – –	Enterprise expansion fund RMB’000 (note 27(f)) 5,366 – – – – – – –	Retained profits RMB’000 37,992 32,999 (2,430) – – (16,224) – –	Total RMB’000 323,957 32,999 – 4,558 (332) (16,224) – (8,796)	Minority interests RMB’000 1,691 308 – – – – (300) –	Total RMB’000 325,648 33,307 – 4,558 (332 (16,224 (300 (8,796
20,800	29,964	147,711	24,757	25,386	(1,290)	31,131	5,366	52,337	336,162	1,699	337,861

20,800 4,460 – – – – –	29,964 144,996 – – – – –	147,711 – – – – – –	24,757 – – – – – –	25,386 – – – – – –	(1,290) – – – (486) – –	31,131 – – 2,566 – – –	5,366 – – – – – –	52,337 – 38,361 (2,566) – (12,675) –	336,162 149,456 38,361 – (486) (12,675) –	1,699 – 58 – – – (1,757)	337,861 149,456 38,419 – (486 (12,675 (1,757
25,260	174,960	147,711	24,757	25,386	(1,776)	33,697	5,366	75,457	510,818	–	510,818

– 46 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED CASH FLOW STATEMENT

for the year ended 31 December 2007

Operating activities Profit before taxation Adjustments for: – Depreciation and amortisation – Interest income – Loss on disposal of property, plant and equipment – Equity settled share-based payment expenses – Impairment on property, plant and equipment – Interest expense – Gain on disposal of a subsidiary Operating profit before changes in working capital (Increase)/decrease in inventories (Increase)/decrease in trade and other receivables Increase in trade and other payables Cash generated from operations PRC tax paid Interest paid Net cash generated from operating activities	2007 RMB’000 41,245 30,769 (2,511) 41 – 3,707 4,381 (696)	2006 RMB’000 39,277 27,293 (2,935) 6 4,558 – 3,552 – 71,751 9,406 7,603 30,893 119,653 (5,576) (3,552) 110,525 - - - - - - - - - - - - - -
	76,936 (28,091) (30,727) 55,302 73,420 (9,614) (4,279)	71,751 9,406 7,603 30,893
		119,653 (5,576 (3,552
	59,527 - - - - - - - - - - - - - -

– 47 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Note Investing activities Payment for purchase of property, plant and equipment Payment for acquisition of associate Proceeds from disposal of property, plant and equipment Proceeds from disposal of a subsidiary (Note) Payment for construction in progress Interest received Consideration for the acquisition of a subsidiary Lease prepayments Acquisition of minority interest of a subsidiary Net cash used in investing activities Financing activities Net proceeds from issuance of shares Proceeds from new bank loans Dividends paid to the equity shareholders of the Company Repayment of bank loans Net cash generated from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at 1 January Effect of foreign exchange rate changes Cash and cash equivalents at 31 December 21	2007 RMB’000 (4,329) (50,857) 34 7,578 (26,251) 2,511 – (62,313) –	2006 RMB’000 (4,909) – 21 – (30,970) 2,935 (8,796) (9,118) (300) (51,137) - - - - - - - - - - - - – 77,600 (16,224) (44,474) 16,902 - - - - - - - - - - - - 76,290 97,951 (2,081) 172,160
	(133,627) - - - - - - - - - - - - 65,953 81,000 (12,675) (106,467) 27,811 - - - - - - - - - - - - (46,289) 172,160 (6,579)	(51,137 - - - - - - - - - - - - – 77,600 (16,224 (44,474
		16,902 - - - - - - - - - - - -
		76,290 97,951 (2,081
	119,292

– 48 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Note:

Proceeds from disposal of a subsidiary

On 20 May 2007, the Group disposed of 100% equity interest in its subsidiary, Mission Holdings Services Limited (“Mission Holdings”) to an independent third party. Mission Holdings is an investment holding company which holds 85% interest in its sole subsidiary, Mudanjiang Huali Packaging Co., Ltd. (“Mudanjiang Huali”).

The value of assets disposed of and liabilities assumed were as follows:

Net assets disposed of:

Property, plant and equipment Trade and other receivables Inventories Cash Trade and other payables Minority interest Gain on disposal of subsidiaries Satisfied by: Cash Analysis of the net inflow of cash and cash equivalent in respect of the disposal of subsidiary Cash consideration Cash disposal of Net inflow of cash and cash equivalents in respect of disposal of subsidiary	RMB’000 3,169 2,952 5,096 2,202 (2,578) (1,757) 9,084 696 9,780 9,780 2,202 7,578

– 49 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

NOTES TO THE FINANCIAL STATEMENTS

The Company was incorporated in the Cayman Islands on 28 February 2005 as an exempted company with limited liability under the Companies Law, Cap 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands.

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 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. A summary of the significant accounting policies adopted by the Group is set out below.

The HKICPA has issued certain new and revised HKFRSs that are first effective or available for early adoption for the current accounting period of the Group. The adoption of these new and revised HKFRSs did not result in significant changes to the Group’s accounting policies applied in these financial statements for the periods presented (see note 2).

The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period (see note 35).

(b) Basis of preparation of the financial statements

The consolidated financial statements for the year ended 31 December 2007 comprise the Company and its subsidiaries (collectively referred to as the “Group”) and the Group’s interest in an associate. The Group is primarily involved in the manufacture and sale of paper cartons and products.

The measurement basis used in the preparation of the financial statements is the historical cost basis.

The preparation of financial statements in conformity with HKFRSs requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the 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 and minority interests

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 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.

– 50 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Minority interests represent the portion of the net assets of subsidiaries attributable to interests that are not owned by the Company, whether directly or indirectly through subsidiaries, and in respect of which the Group has not agreed any additional terms with the holders of those interests which would result in the Group as a whole having a contractual obligation in respect of those interests that meets the definition of a financial liability. Minority interests are presented in the consolidated balance sheet within equity, separately from equity attributable to the equity shareholders of the Company. Minority interests in the results of the Group are presented on the face of the consolidated income statement as an allocation of the total profit or loss for the year between minority interests and the equity shareholders of the Company.

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

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

1(i)).

(d) Associates

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

An investment in an associate is accounted for in the consolidated financial statements under the equity method and is initially recorded at cost and adjusted thereafter for the post acquisition change in the group’s share of the associate’s, unless it is classified as held for sale (or included in a disposal group that is classified as held for sale). The consolidated income statement includes the Group’s share of the post-acquisition, post-tax results of the associates for the year, including any impairment loss on goodwill relating to the investment in associates recognised for the year (see note 1(i)).

When the Group’s share of losses exceeds its interest in the associate, the Group’s interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. For this purpose, the Group’s interest in the associate is the carrying amount of the investment under the equity method together with the Group’s long-term interests that in substance form part of the Group’s net investment in the associate.

Unrealised profits and losses resulting from transactions between the group and its associates are eliminated to the extent of the Group’s interest in the associate, except where unrealised losses provide evidence of an impairment of the asset transferred, in which case they are recognised immediately in profit or loss.

In the Company’s balance sheet, its investments in associates are stated at cost less impairment losses (see note 1(i)), unless it is classified as held for sale (or included in a disposal group that is classified as held for sale).

(e) Goodwill

Goodwill represents the excess of the cost of a business combination over the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities.

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is tested annually for impairment (see note 1(i)).

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

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

– 51 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(f) Property, plant and equipment

(i) Property, plant and equipment are stated in the balance sheet at cost less accumulated depreciation and impairment losses (see note 1(i)). The cost of an asset comprises its purchase price, any directly attributable costs of bringing the asset to working condition and location for its intended use, the cost of borrowed funds used during the year of construction and, when relevant, the costs of dismantling and removing the items and restoring the site on which they are located, and changes in the measurement of existing liabilities recognised for these costs resulting from changes in the timing or outflow of resources required to settle the obligation or from changes in the discount rate.
(ii) The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied with the item will flow to the Group and the cost of the item can be measured reliably. All other costs are recognised in the income statement as an expense as incurred.
(iii) 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 as follows:

Buildings	10 to 40 years
Plant and machinery	5 to 10 years
Motor vehicles	3 years
Other property, plant and equipment	3 to 5 years

(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.
(v) Construction in progress represents items of property, plant and equipment under construction and pending installation and is stated in the balance sheet at cost less impairment losses (see note 1(i)). Cost comprises all direct and indirect costs, including interest charges (see note 1(t)) related to acquisition and installation of the property, plant and equipment, incurred before the asset is substantially ready for its intended use.

Capitalisation of these costs ceases and the construction in progress is transferred to the property, plant and equipment when the asset is substantially ready for its intended use.

No depreciation is provided in respect of construction in progress until it is substantially complete and ready for its intended use.

(g) Operating lease charges

Leases of assets under which the lessor has not transferred all the risks and benefits of ownership to the Group are classified as operating leases.

Where the Group has the use of assets 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.

(h) Lease prepayments

Lease prepayments represent amounts paid for land use rights in the PRC. Land use rights are carried at cost and amortised on a straight-line basis over the respective periods of the rights which range from 20 to 47 years, and impairment losses (see note 1(i)).

– 52 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(i) Impairment of assets

(i) Impairment of trade and other receivables

Trade and other receivables that are stated in the balance sheet at cost or amortised cost are reviewed at each balance sheet date to determine whether there is objective evidence of impairment. If any such evidence exists, any impairment loss is determined and recognised as follows.

For trade and other receivables carried at cost, the impairment loss is measured as the difference between the carrying amount of the financial asset and the estimated future cash flows, discounted at the current market rate of return for a similar financial asset where the effect of discounting is material.
For trade and other receivables carried at amortised cost, the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows, discounted at the 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.

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 and 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.

(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, except in the case of goodwill, an impairment loss previously recognised no longer exists or may have decreased:

property, plant and equipment;
construction in progress;
lease prepayments;
investments in subsidiaries; and
goodwill.

If any such indication exists, the asset’s recoverable amount is estimated. In addition, for goodwill, the recoverable amount is estimated annually whether or not there is any indication of impairment.

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 first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (group of units) and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less cost to sell, or value in use, if determinable.

– 53 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Reversals of impairment losses

In respect of assets other than goodwill, an impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount. An impairment loss in respect of goodwill is not reversed.

A reversal of impairment losses 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.

(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.

When the inventories are sold, the carrying amount of those inventories is realisable as an expense in the period in which the related revenue is realisable. 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 impairment loss for bad and 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 impairment losses for bad and doubtful debts (see note 1(i)).

(l) 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 borrowings, together with any interest and fee payable, using the effective interest method.

(m) Trade and other payables

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

(n) 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.

(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.

– 54 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(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 grant date using the Black-Scholes 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 options, the total estimated fair value of the 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 achieving vesting conditions that relate to the market price of the Company’s share. 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).

(iii) Termination benefits

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

(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 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 differences 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 goodwill not deductible for tax purposes, 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.

– 55 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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
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) Provisions and contingent liabilities

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

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

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) Sales of goods

Revenue is recognised when goods are delivered at the customers’ premises, which is taken to be the point in time when the customer has accepted the goods and the related risks and rewards of ownership. Revenue excludes value added tax or other sales taxes and is after deduction of any trade discounts.

(ii) Interest income

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

(iii) Government grants

Government grants are recognised in the balance sheet initially when there is reasonable assurance that they will be received and that the Group will comply with the conditions attaching to them. Grants that compensate the Group for expenses incurred are recognised as revenue in profit or loss on a systematic basis in the same period in which the expenses are incurred. Grants that compensate the Group for the cost of an asset are deducted in arriving at the carrying amount of the asset and consequently are recognised in profit or loss over the useful life of the asset.

– 56 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(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.

The results of foreign operations are translated into Renminbi at the exchange rates approximating the foreign exchange rates ruling at the dates of the 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 a foreign operation, 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) Non-current assets held for sale

A non-current asset is classified as held for sale if it is highly probable that its carrying amount will be recovered through a sale transaction rather than through continuing use and the asset is available for sale in its present condition.

Immediately before classification as held for sale, the measurement of the non-current assets is brought up-to-date in accordance with the accounting policies before the classification. Then, on initial classification as held for sale and until disposal, the non-current assets (except for certain assets as explained below), are recognised at the lower of their carrying amount and fair value less costs to sell. The principal exceptions to this measurement policy so far as the financial statements of the Group and the Company are concerned are deferred tax assets, assets arising from employee benefits, financial assets (other than investments in subsidiaries and associates) and investment properties.

These assets, even if for sale, would continue to be measured in accordance with the policies set out elsewhere in note 1.

Impairment losses on initial classification as held for sale, and on subsequent remeasurement while held for sale, are recognised in profit or loss. As long as a non-current asset is classified as held for sale, the non-current asset is not depreciated or amortised.

(v) 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;

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(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 venture;
(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.

(w) Segment reporting

The directors consider the Group operates within a single business and geographical segment. Accordingly, no segment information is provided.

2 CHANGES IN ACCOUNTING POLICIES

The HKICPA has issued a number of new and revised HKFRSs and Interpretations that are first effective or available for early adoption for the current accounting period of the Group and the Company.

There have been no significant changes to the accounting policies applied in these financial statements for the years presented as a result of these developments. However, as a result of the adoption of HKFRS 7, Financial instruments: Disclosures and the amendment to HKAS 1, Presentation of financial statements: Capital disclosures, there have been some additional disclosures provided as follows:

As a result of the adoption of HKFRS 7, the financial statements include expanded disclosure about the significance of the Group’s financial instruments and the nature and extent of risks arising from those instruments, compared with the information previously required to be disclosed by HKAS 32, Financial instruments: Disclosure and presentation. These disclosures are provided throughout these financial statements, in particular in note 28.

The amendment to HKAS 1 introduces additional disclosure requirements to provide information about the level of capital and the Group’s and the Company’s objectives, policies and processes for managing capital. These new disclosures are set out in note 27(i).

Both HKFRS 7 and the amendment to HKAS 1 do not have any material impact on the classification, recognition and measurement of the amounts recognised in the financial instruments.

The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period (see note 35).

3 TURNOVER

The principal activity of the Group is the manufacture and sale of paper boxes and products. Turnover represents the sales value of goods supplied to customers, net of value-added tax.

– 58 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4 OTHER REVENUE AND NET LOSS

(a) Other revenue

Interest income Sale of scrap paper Sale of materials Government grants Tax refund for dividend re-investment Others (b) Other net loss Gain on disposal of a subsidiary (note 16) Net loss on disposal of property, plant and equipment Exchange loss Others	2007 RMB’000 2,511 20,856 761 220 3,900 28 28,276 2007 RMB’000 696 (41) (4,502) 11 (3,836)	2006 RMB’000 2,935 17,851 1,307 160 – 291
		22,544

		2006 RMB’000 – (6) (3,400) 12
		(3,394)

5 PROFIT BEFORE TAXATION

Profit before taxation is arrived at after charging:

(a) Finance costs: Interest on bank loans (b) Staff costs: Salaries, wages and other benefits# Contributions to defined contribution retirement schemes# (note 24) Equity-settled share-based payment expenses	2007 RMB’000 4,381	2006 RMB’000 3,552

	54,562 3,271 –	51,847 3,579 4,558
	57,833	59,984

– 59 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

		2007	2006
		RMB’000	RMB’000
(c)	Other items:
	Amortisation of lease prepayments#	1,663	579
	Depreciation of property, plant and equipment#	29,106	26,714
	Impairment losses on trade and other receivables	23	516
	Impairment losses on property, plant and equipment	3,707	–
	Auditors’ remuneration
	– audit services	1,900	1,770
	– tax services	90	8
	Operating lease charges in respect of land and properties#	8,064	7,749
	Exchange loss	4,502	3,400
	Cost of inventories# (note 19(b))	655,408	608,548

Cost of inventories included RMB72,084,642 (2006: RMB68,122,000) relating to staff costs, depreciation and amortisation expenses and operating lease charges, amount of which is also included in the respective total amounts disclosed separately in notes 5(b) and 5(c) for each of these types of expenses.

6 INCOME TAX IN THE CONSOLIDATED INCOME STATEMENT

(a) Taxation in the consolidated income statement represents:

Current tax – Provision for PRC income tax Provision for the year Deferred tax Origination and reversal of temporary differences (note 26(b)) Effect of change in PRC income tax rate on deferred tax balance (note 26(b))	2007 RMB’000 6,513 - - - - - - - - - - - (2,020) (1,667) (3,687) - - - - - - - - - - - 2,826	2006 RMB’000 6,488 - - - - - - - - - - - (518) –
		(518) - - - - - - - - - - -
		5,970

Pursuant to the rules and regulations of the Cayman Islands and the British Virgin Islands, the Group is not subject to any income tax in the Cayman Islands and the British Virgin Islands during the year (2006: Nil).

No provision for Hong Kong Profits Tax has been made as the Group did not have any assessable profits subject to Hong Kong Profits Tax during the year (2006: Nil).

On 27 February 2008, the Financial Secretary of the Hong Kong SAR Government announced his annual Budget which proposes a cut in the profits tax rate from 17.5% to 16.5% with effect from the fiscal year 2008-09 and a one-off reduction of 75% of the tax payable for the 2007-08 assessment subject to a ceiling of $25,000. In accordance with the group’s accounting policy set out in note 1(p), no adjustments have been made to these financial statements as a result of this announcement.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The directors estimate that these proposed changes will have no material impact on the opening balances of the Group and the Company as at 1 January 2008.

Pursuant to the income tax rules and regulations of the PRC, taxation for PRC subsidiaries is charged at the appropriate current rates of taxation ruling in the relevant cities in the PRC, which range between 15%-33% (2006: 15%-33%). Certain subsidiaries are entitled to a tax concession period in which it is fully exempted from PRC income tax for 2 years starting from its first profit-making year, followed by a 50% reduction in the PRC income tax for the next 3 years.

On 16 March 2007, the Fifth Plenary Session of the Tenth National People’s Congress passed the Corporate Income Tax Law of the PRC (“new tax law”) which takes effect on 1 January 2008. Thereafter, the State Council passed Circular 39 on 26 December 2007, to clarify the grandfathering treating for existing enterprises that are entitled to preferential tax treatments. As a result of new tax law and Circular 39, the income tax rate of certain PRC subsidiaries are reduced from 33% to 25% from 1 January 2008; the tax rate of certain PRC subsidiaries in Shenzhen area gradually increases from 15% to 25% over a five-year transitional period (being 18% in 2008, 20% in 2009, 22% in 2010, 24% in 2011 and 25% in 2012 and thereafter).

Pursuant to the new tax law, a 10% withholding tax is levied on dividends declared to foreign investors from the PRC effective from 1 January 2008. A lower withholding tax rate may be applied if there is a tax treaty arrangement between the PRC and jurisdiction of the foreign investors. On 22 February 2008, Caishui (2008) No.1 was promulgated by the tax authorities to specify that dividends declared and remitted out of the PRC from the retained earnings as at 31 December 2007 are exempted from withholding tax.

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

Profit before taxation Notional tax on profit before taxation, calculated at the rates applicable to profits in the tax jurisdictions concerned Tax effect of non-deductible expenses Tax effect of non-taxable income Tax effect of prior year’s unrecognised tax losses utilised Tax effect of unused tax losses not recognised Effect of tax concessions Effect of income tax rates changes in respect of current year temporary differences Effect of income tax rates changes in respect of brought forward temporary differences Actual tax expense	2007 RMB’000 41,245	2006 RMB’000 39,277 6,436 451 (443) – 3,042 (3,516) – – 5,970
	5,605 1,878 (591) (247) 1,909 (3,740) (321) (1,667)	6,436 451 (443 – 3,042 (3,516 – –
	2,826

– 61 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

7 DIRECTORS’ REMUNERATION

Directors’ remuneration is as follows:

Executive directors: – Zheng Fan – Ni Zheng – Zhou Guangneng – Xie Mei – Liu Danlin Independent non- executive directors: – Wong Wai Ling – Chen Xiangdong – Xiao Yongping – Lee Kit Wah Executive directors: – Zheng Fan – Ni Zheng – Zhou Guangneng – Liu Danlin Non-executive director: – Xie Mei Independent non-executive directors: – Lee Kit Wah – Chen Xiangdong – Xiao Yongping	Directors’ fees Salaries, allowances and benefits in kind Discretionary bonuses Retirement schemes contributions RMB’000 RMB’000 RMB’000 RMB’000 – – – – – 381 229 11 – 280 130 12 – 114 – 6 – 133 133 6 78 – – – – – – – 117 – – – 39 – – – 234 908 492 35 Directors’ fees Salaries, allowances and benefits in kind Retirement schemes contributions Sub-total Share- based payments (note) RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 – – – – – – 329 17 346 473 – 294 12 306 401 – 117 12 129 401 – – – – – 122 – – 122 – – – – – – 122 – – 122 – 244 740 41 1,025 1,275		2007 Total RMB’000 – 621 422 120 272 78 – 117 39
			1,669

			2006 Total RMB’000 – 819 707 530 – 122 – 122
			2,300

Note: These represent the estimated value of share options granted to the directors under the Company’s share option scheme. The value of theses share options is measured according to the Group’s accounting policies for share-based payment transactions as set out in note 1(o)(ii).

The details of these benefits in kind, including the principal terms and number of options granted, are disclosed in note 25.

– 62 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

8 INDIVIDUALS WITH HIGHEST EMOLUMENTS

Of the five individuals with the highest emoluments, two (2006: two) are directors whose emoluments are disclosed in note 7. The aggregate of the emoluments in respect of the other three (2006: three) individuals are as follows:

Salaries and other emoluments Discretionary bonuses Share-based payments Retirement schemes contributions	2007 RMB’000 1,006 429 – 34 1,469	2006 RMB’000 1,051 396 992 62
		2,501

The emoluments of the three (2006: three) individuals with the highest emoluments are within the band from HK$Nil to HK$1,000,000.

9 PROFIT ATTRIBUTABLE TO EQUITY SHAREHOLDERS OF THE COMPANY

The consolidated profit attributable to equity shareholders of the Company includes a loss of RMB11,758,000 (2006: RMB15,072,000) which has been dealt with in the financial statements of the Company.

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

Amount of consolidated profit 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 Company’s profit for the year (note 27(g))	2007 RMB’000 (11,758) 77,130 65,372	2006 RMB’000 (15,072) 33,599
		18,527

10 DIVIDENDS

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

	2007	2006
	RMB’000	RMB’000
Final dividend proposed after the balance sheet date of HK$5.70
cents per share (equivalent RMB5.207 cents per share)
(2006: HK$6.40 cents per share
(equivalent RMB6.337 cents per share))	12,809	12,675

Final dividend proposed after the balance sheet date has not been recognised as a liability at the balance sheet date.

– 63 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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

	2007	2006
	RMB’000	RMB’000
Final dividend in respect of the previous financial year, approved
and paid during the year, of HK$6.40 cents per share
(equivalent RMB6.337 cents per share) (2006: HK$7.8 cents
per share (equivalent RMB8.112 cents per share))	12,675	16,224

11 EARNINGS PER SHARE

(a) Basic earnings per share

The calculation of basic earnings per share is based on the profit attributable to equity shareholders of the Company of RMB38,361,000 (2006: RMB32,999,000) and the weighted average of 216,761,644 (2006: 200,000,000) ordinary shares in issue during the year, calculated as follows:

Weighted average number of ordinary shares

Ordinary shares issued at 1 January (note 27(a)) Issuance of new shares (note 27(a)) Weighted average number of shares at 31 December	2007 No. of shares 200,000,000 16,761,644 216,761,644	2006 No. of shares 200,000,000 –
		200,000,000

(b) Diluted earnings per share

The calculation of diluted earnings per share is based on the profit attributable to equity shareholders of the Company of RMB38,361,000 (2006: RMB32,999,000) and the weighted average of 228,460,247 (2006: 208,252,699) ordinary shares (diluted), calculated as follows:

Weighted average number of ordinary shares (diluted)

Weighted average number of ordinary shares at 31 December Effect of deemed issue of shares under the Company’s share option scheme for nil consideration (note 25) Weighted average number of ordinary shares (diluted) at 31 December	2007 216,761,644 11,698,603 228,460,247	2006 200,000,000 8,252,699
		208,252,699

– 64 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

12 PROPERTY, PLANT AND EQUIPMENT

The Group

Buildings RMB’000 71,748 – 11,073 –	Plant and machinery RMB’000 259,995 3,558 4,428 (111)	Motor vehicles RMB’000 20,077 911 596 (795)	Other property, plant and equipment RMB’000 19,595 2,492 573 (519)	Total RMB’000 371,415 6,961 16,670 (1,425) 393,621 - - - - - - - - - - 393,621 (3) 5,745 45,768 (820) (12,434) (18,754) 413,123 - - - - - - - - - - 188,409 26,714 (1,386) 213,737 - - - - - - - - - 213,737 (1) 29,106 3,707 (745) (9,265) (14,884) 221,655 - - - - - - - - - 191,468 179,884
82,821 - - - - - - - - - - 82,821 – 26 3,904 – (1,672) (18,754) 66,325 - - - - - - - - - - 23,938 4,045 – 27,983 - - - - - - - - - - 27,983 – 4,561 – – (1,388) (14,884)	267,870 - - - - - - - - - - 267,870 – 2,931 41,453 (168) (7,494) – 304,592 - - - - - - - - - - 136,656 18,549 (111) 155,094 - - - - - - - - - 155,094 – 20,101 3,539 (102) (4,740) –	20,789 - - - - - - - - - - 20,789 – 1,053 411 (495) (488) – 21,270 - - - - - - - - - - 15,344 1,594 (791) 16,147 - - - - - - - - - 16,147 – 1,784 – (495) (445) –	22,141 - - - - - - - - - - 22,141 (3) 1,735 – (157) (2,780) – 20,936 - - - - - - - - - - 12,471 2,526 (484) 14,513 - - - - - - - - - 14,513 (1) 2,660 168 (148) (2,692) –	393,621 - - - - - - - - - - 393,621 (3 5,745 45,768 (820 (12,434 (18,754
				413,123 - - - - - - - - - - 188,409 26,714 (1,386
				213,737 - - - - - - - - -
				213,737 (1 29,106 3,707 (745 (9,265 (14,884
16,272 - - - - - - - - - - 50,053 54,838	173,892 - - - - - - - - - 130,700 112,776	16,991 - - - - - - - - - 4,279 4,642	14,500 - - - - - - - - - 6,436 7,628

All of the Group’s buildings are located in the PRC.

– 65 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Company

Cost:
As at 1 January 2006
Additions
As at 31 December 2006
As at 1 January 2007
Exchange adjustment
Disposals
As at 31 December 2007
Accumulated depreciation
As at 1 January 2006
Charge for the year
As at 31 December 2006
As at 1 January 2007
Exchange adjustment
Charge for the year
Disposals
As at 31 December 2007
Net book value
As at 31 December 2007
As at 31 December 2006
CONSTRUCTION IN PROGRESS
Cost:
At 1 January
Additions
Transfer to property, plant and equipment (note 12)
At 31 December

Other
property,
plant and
equipment
RMB’000
–
147
147
- - - - - - - - - - -
147
(2)
(106)
39
- - - - - - - - - - -
–
25
25
- - - - - - - - - - -
25
(1)
14
(21)
17
- - - - - - - - - - -
22
122
The Group
2007
2006
RMB’000
RMB’000
20,438
9,506
26,251
27,602
(45,768)
(16,670)
921
20,438

13 CONSTRUCTION IN PROGRESS

Construction in progress at 31 December 2007 mainly represented the construction and development of production facilities at Anhui Huali and Huali Holding Company Limited.

– 66 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

14 GOODWILL

	The Group
	RMB’000
Cost:
At 1 January 2006, 31 December 2006 and 31 December 2007	24,937

Impairment test for cash-generating units containing goodwill

Goodwill is allocated to the Group’s cash-generating units (“CGU”) identified according to the manufacturing base as follows:

Shanghai Shenzhen	2007 RMB’000 1,012 23,925 24,937	2006 RMB’000 1,012 23,925
		24,937

The recoverable amount of the above CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimate rates stated below. The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates.

Key assumptions used for value-in-use calculations:

	2007	2006
	%	%
Gross margin	11	12
Growth rate	8	8
Discount rate	5	5

Management determined the budgeted gross margin based on past performance and its expectation for market development. The weighted average growth rates used are consistent with the forecasts included in industry reports. The discount rates used are pre-tax and reflect specific risks relating to the paper packaging industry.

15 LEASE PREPAYMENTS

Leasehold land of the Group is held in the PRC. At 31 December 2007, the remaining lease terms of these pieces of land range from 20 to 47 years.

16 INVESTMENTS IN SUBSIDIARIES

				The Company	The Company
				2007	2006
				RMB’000	RMB’000
Unlisted	shares,	at	cost	248,970	248,970

– 67 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Details of major subsidiaries at 31 December 2007 are as follows. The class of shares held is ordinary.

Name of company
Place of
incorporation/
establishment
Particular of
registered/issued
capital
Shenzhen Huali
Packing & Trading.
Co., Ltd. (“Shenzhen
Huali”) (note (i))
PRC
Paid-up capital of
HK$40,000,000
Shanghai Huali
Packaging Co., Ltd.
(“Shanghai Huali”)
(note (i))
PRC
Paid-up capital of
RMB55,000,000
Zhongshan Huali
Packaging Co., Ltd.
(“Zhongshan Huali”)
(note (i))
PRC
Paid-up capital of
HK$40,000,000
Anhui Huali Packaging
Co., Ltd. (“Anhui
Huali”) (note (i))
PRC
Paid-up capital of
HK$40,000,000
Shenzhen Huayou
Packaging Co., Ltd.
(“Shenzhen
Huayou”) (note (ii))
PRC
Paid-up capital of
RMB3,000,000
Huizhou Huali
Packaging Co., Ltd.
(“Huizhou Huali”)
(note (i) and
note (iii))
PRC
Issued capital of
HK$90,000,000
Paid-up capital
of
HK$54,070,000
Max Surplus Limited
(“Max Surplus”)
British Virgin
Islands (“BVI”)
1 share of US$1
each
Forever Galaxies
Limited
BVI
1 share of US$1
each
Fortune Crown
International Limited
BVI
1 share of US$1
each
Miracle Stone
Development
Limited
BVI
1 share of US$1
each
Grand Signal Limited
BVI
1 share of US$1
each
Huali Holdings
Company Limited
Hong Kong
1,000,000 share
of HK$1 each

Proportion of ownership interest
Group’s
effective
interest
Held by the
Company
Held by a
subsidiary
Principal
activities
100%
–
100%
Manufacture and
sale of paper
boxes and
products
100%
–
100%
Manufacture and
sale of paper
boxes and
products
100%
–
100%
Manufacture and
sale of paper
boxes and
products
100%
–
100%
Manufacture and
sale of paper
boxes and
products
100%
–
100%
Manufacture and
sale of paper
boxes and
products
100%
–
100%
Manufacture and
sale of paper
boxes and
products
100%
100%
–
Investment
holding
100%
–
100%
Investment
holding
100%
–
100%
Investment
holding
100%
–
100%
Investment
holding
100%
–
100%
Investment
holding
100%
–
100%
Investment
holding

Notes:

(i) These companies are wholly foreign-owned enterprises established in the PRC.
(ii) The company is a limited company established in the PRC.
(iii) During the year, the Group established a wholly owned subsidiary, Huizhou Huali.
(iv) On 20 May 2007, the Group disposed of 100% equity interest in its subsidiary, Mission Holdings to an independent third party. Mission Holdings is an investment holding company which holds 85% interest in its sole subsidiary, Mudanjiang Huali.

– 68 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

17 INTEREST IN ASSOCIATE

Unlisted shares at cost Share of net assets	The Group 2007 2006 RMB’000 RMB’000 – – 89,907 – 89,907 –	The Company 2007 2006 RMB’000 RMB’000 90,391 – – – 90,391 –	The Company 2007 2006 RMB’000 RMB’000 90,391 – – – 90,391 –
			–

Details of the associate, which is an unlisted corporate entity, are as follows:

Name of associate Form of business structure Registered Particulars of issued and paid up capital OCT Investments Limited (“OCT Investments”) Incorporated BVI 100 shares of US$1 each	Proportion of ownership interest Group’s effective interest Held by the Company Held by a subsidiary Principal activity 49% 49% – Investment holding

On 21 August 2007, the Company signed an agreement to acquire 49% equity interest in OCT Investments, together with a shareholder’s loan of HK$46,995,000 (RMB45,675,000 equivalent) at an aggregate consideration of HK$140,000,000 (RMB136,066,000 equivalent), from Overseas Chinese Town (HK) Company Limited (“OCTHK”), its intermediate holding company. OCT Investments holds 25% equity interest in Chengdu Tianfu OCT Industry Development Company Limited (“Chengdu OCT”), which has not commenced operation in October 2007. The principal activities of Chengdu OCT are the provision of the development and operation of travel facilities. The transaction was completed in October 2007.

Summary financial information on the associate

	Assets	Liabilities	Equity	Revenue	(Loss)
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
2007
100 per cent	273,293	(89,809)	183,484	–	(3,956)
Group’s effective interest	133,913	(44,006)	89,907	–	(484)

18 NON-CURRENT ASSETS HELD FOR SALE

On 11 July 2007, a subsidiary of the Group, Shenzhen Huali, entered into an agreement with Shenzhen Overseas Chinese Town Real Estate Company Limited (“OCT Properties”), its fellow subsidiary, to sell the land use right of a piece of land located in Shenzhen and two factory buildings erected on the land (the “Properties”), at a cash consideration of RMB50,600,000. Shenzhen Huali also entered into a tenancy agreement with OCT Properties to lease back the Properties at a monthly rental of approximately RMB264,000. The lease term will commence from the day OCT Properties obtain the title of the Properties and end by 31 December 2009. As at 31 December 2007, the procedure of transferring title of the Properties is in process, the sales has not been completed and the rental agreement has not commenced.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

19 INVENTORIES

(a) Inventories in the balance sheet comprise:

Raw materials Work-in-progress Finished goods Spare parts	The Group 2007 2006 RMB’000 RMB’000 78,451 51,156 2,929 2,426 10,215 9,623 271 570 91,866 63,775	The Group 2007 2006 RMB’000 RMB’000 78,451 51,156 2,929 2,426 10,215 9,623 271 570 91,866 63,775
		63,775

(b) 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 inventories	The Group 2007 2006 RMB’000 RMB’000 654,846 608,381 700 385 (138) (218 655,408 608,548	The Group 2007 2006 RMB’000 RMB’000 654,846 608,381 700 385 (138) (218 655,408 608,548
		608,548

The reversal of write-down of inventories made in prior years arose due to an increase in the estimated net realisable value of certain paper cartons as a result of change in customer preference.

20 TRADE AND OTHER RECEIVABLES

Trade receivables and bills receivable: Amounts due from subsidiaries Amounts due from fellow subsidiaries (note 30(b)) Amounts due from other related companies (note 30(b)) Amounts due from third parties Less: allowance for doubtful debt (note 20(b)) Prepayment, deposits and other receivables: Amounts due from fellow subsidiaries (note 30(b)) Amounts due from associates (note 30(b)) Others	The Group 2007 2006 RMB’000 RMB’000 – – 173 174 982 486 162,724 134,833 (3,146) (3,513)	The Group 2007 2006 RMB’000 RMB’000 – – 173 174 982 486 162,724 134,833 (3,146) (3,513)	The Company 2007 2006 RMB’000 RMB’000 158,686 53,861 – – – – – – – –	The Company 2007 2006 RMB’000 RMB’000 158,686 53,861 – – – – – – – –
	160,733 293 44,008 5,262	131,980 293 – 3,585	158,686 – 44,008 8	53,861 – – 30
	210,296	135,858	202,702	53,891

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The amounts due from subsidiaries, associates, fellow subsidiaries and other related companies are unsecured, non-interest bearing and have no fixed terms of repayment.

Apart from rental deposits of RMB604,000 (2006: RMB436,000) and amounts due from associates of RMB44,008,000 (2006: Nil) which are expected to be recovered after one year, all of the trade and other receivables, net of impairment losses for bad and doubtful debts, are expected to be recovered within one year.

(a) Ageing analysis

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

Current Less than 3 months past due 3 to 6 months past due Amount past due	The Group 2007 2006 RMB’000 RMB’000 146,657 122,031 - - - - - - - - - - - - - - - - - - - - - - 13,997 9,449 79 500 14,076 9,949 - - - - - - - - - - - - - - - - - - - - - - 160,733 131,980	The Group 2007 2006 RMB’000 RMB’000 146,657 122,031 - - - - - - - - - - - - - - - - - - - - - - 13,997 9,449 79 500 14,076 9,949 - - - - - - - - - - - - - - - - - - - - - - 160,733 131,980
		9,949 - - - - - - - - - - -
		131,980

The Group’s credit policy is set out in note 28(a).

(b) Impairment of trade receivables

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

The movement in the allowance for doubtful debts during the year, including both specific and collective loss components, is as follows:

At 1 January Impairment loss recognised Amount of reversal Uncollectible amount written off At 31 December	2007 RMB’000 3,513 297 (174) (490) 3,146	2006 RMB’000 3,147 932 (187) (379)
		3,513

At 31 December 2007, the Group’s trade receivables of RMB545,000 (2006: RMB585,000) were individually determined to be impaired. The individually impaired receivables related to customers that were in financial difficulties and management assessed that it is highly unlikely that the receivables can be recovered. Consequently, specific allowances for doubtful debts of RMB545,000 (2006: RMB585,000) were recognised. The Group does not hold any collateral over these balances.

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

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.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

21 CASH AND CASH EQUIVALENTS

Cash at bank and in hand 22 TRADE AND OTHER PAYABLES Trade payables and bills payable: Amounts due to fellow subsidiaries (note 30(b)) Amounts due to other related companies (note 30(b)) Amount due to third parties Other payables: Amounts due to other related companies (note 30(b)) Amount due to third parties	The Group 2007 2006 RMB’000 RMB’000 119,292 172,160 The Group 2007 2006 RMB’000 RMB’000 72 297 20 7 227,360 170,198	The Group 2007 2006 RMB’000 RMB’000 119,292 172,160 The Group 2007 2006 RMB’000 RMB’000 72 297 20 7 227,360 170,198	The Company 2007 2006 RMB’000 RMB’000 10,524 51,981 The Company 2007 2006 RMB’000 RMB’000 – – – – – –	The Company 2007 2006 RMB’000 RMB’000 10,524 51,981 The Company 2007 2006 RMB’000 RMB’000 – – – – – –
	227,452 194 32,143	170,502 92 36,415	– – 14,713	– – 3,754
	259,789	207,009	14,713	3,754

All of the trade and other payables (including amount due to related parties) are expected to be settled within one year.

The Group’s exposure to currency and liquidity risks related to trade and other payables is disclosed in note

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

Due within 3 months or on demand Due after 3 months but less than 1 year Due after 1 year	The Group 2007 2006 RMB’000 RMB’000 166,638 124,374 60,812 45,934 2 194 227,452 170,502	The Group 2007 2006 RMB’000 RMB’000 166,638 124,374 60,812 45,934 2 194 227,452 170,502
		170,502

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

23 BANK LOANS

At 31 December 2007, 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 2007 2006 RMB’000 RMB’000 32,735 43,664 - - - - - - - - - - - - - - - - - - - - - - 11,986 13,664 – 12,860 11,986 26,524 - - - - - - - - - - - - - - - - - - - - - - 44,721 70,188	The Company 2007 2006 RMB’000 RMB’000 12,735 13,664 - - - - - - - - - - - - - - - - - - - - - - 11,986 13,664 – 12,860 11,986 26,524 - - - - - - - - - - - - - - - - - - - - - - 24,721 40,188	The Company 2007 2006 RMB’000 RMB’000 12,735 13,664 - - - - - - - - - - - - - - - - - - - - - - 11,986 13,664 – 12,860 11,986 26,524 - - - - - - - - - - - - - - - - - - - - - - 24,721 40,188
			26,524 - - - - - - - - - - -
			40,188

The Group’s short-term bank loans comprise:

Renminbi denominated Interest rates at 5.8780%- 6.5610% per annum with maturities through 19 October 2008 (2006: 5.6304% or floating rate at 90% and 95% of PBOC*’s base lending rate) Current portion of long-term bank loan	The Group 2007 2006 RMB’000 RMB’000 20,000 30,000 12,735 13,664 32,735 43,664	The Company 2007 2006 RMB’000 RMB’000 – – 12,735 13,664 12,735 13,664	The Company 2007 2006 RMB’000 RMB’000 – – 12,735 13,664 12,735 13,664
			13,664

* People’s Bank of China

The Group’s long-term bank loans comprise:

HK Dollars denominated Interest rates at HIBOR* + 1.18% per annum with maturities through 2 June 2009 Less: Current portion of long-term bank loan	The Group 2007 2006 RMB’000 RMB’000 24,721 40,188 (12,735) (13,664) 11,986 26,524	The Company 2007 2006 RMB’000 RMB’000 24,721 40,188 (12,735) (13,664) 11,986 26,524	The Company 2007 2006 RMB’000 RMB’000 24,721 40,188 (12,735) (13,664) 11,986 26,524
			26,524

* Hong Kong Interbank Offered Rate

– 73 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The bank loans of the Group at 31 December 2007 were guaranteed by its subsidiaries, namely Shenzhen Huali, Forever Galaxies Limited, Fortune Crown International Limited and Miracle Stone Development Limited. Except for the above, the Group and the Company did not have secured or guaranteed bank loans at 31 December 2007.

All of the Group’s banking facilities are subject to the fulfilment of covenants relating to certain of the Group’s balance sheet ratios, as are commonly found in lending arrangements with financial institutions. If the Group were to breach the covenants, the drawn down facilities would become payable on demand. The Group regularly monitors its compliance with these covenants. Further details of the Group’s management of liquidity risk are set out in note 28(b). As at 31 December 2007 none of the covenants relating to drawn down facilities had been breached (2006: RMBNil).

24 EMPLOYEE RETIREMENT BENEFITS

Pursuant to the relevant labour rules and regulations in the PRC, the Group participates in defined contribution retirement benefit schemes (the “Schemes”) organised by the relevant local government authorities in Shenzhen, Zhongshan, Huizhou, Shanghai, Anhui and Mudanjiang whereby the Group is required to make contributions to the Schemes at a rate ranging from 10% to 25% (2006: 8% to 25%) of the eligible employees’ salaries. The local government authorities are responsible for the entire pension obligations payable to the retired employees.

The Group also 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 plan administered by independent trustees. Under the MPF scheme, the employer and its employees are each required to make contributions to the plan at 5% of the employees’ relevant income, subject to a cap of monthly relevant income of HK$20,000. Contributions to the plan vest immediately.

The Group has no other material obligation for the payment of pension benefits associated with those schemes beyond the annual contributions described above.

25 EQUITY SETTLED SHARE-BASED TRANSACTION

The Company has a share option scheme which was adopted on 12 October 2005 whereby the directors are authorised, at its absolute discretion and on such terms as it may think fit, grant an employee (full-time or part-time), a director, consultant and adviser of the Group, or any substantial shareholder of the Group, options to subscribe for share of the Company. The share option scheme shall be valid and effective for a period of ten years ending on 11 October 2015, unless terminated earlier by shareholders of the Company in general meetings.

On 7 February 2006, 5,400,000 and 13,900,000 share options were granted to directors and employees of the Company respectively under the Company’s share option scheme (no share options were granted for the year ended 31 December 2007). Each option gives the holder the right to subscribe for one ordinary share of HK$0.1 each of the Company which will be settled by physical delivery of shares. These share options vested immediately from the date of grant, and then be exercisable within a period of ten years. The exercise price is HK$1.41, as specified in the rules governing the share option scheme, being the higher of (i) the closing price of the shares of the Company on the Stock Exchange on the date of the grant of the options, (ii) the average of the closing prices of the shares on the Stock Exchange for the five business days immediately preceding the date of the grant of the options and (iii) the nominal value of the Company’s share of the date of grant of the option. No option was exercised, forfeited or expired during the year. All options granted above were outstanding and exercisable at 31 December 2007 (2006: Nil) with a remaining contractual life of 8 years and 1 month.

During the year ended 31 December 2007, the Company did not recognise any amount in expenses and equity in respect of the grant of share options (2006: RMB4,558,000).

The fair value of services received in return for share options granted are measured by reference to the fair value of share options granted. The estimate of the fair value of the service received is measured based on Black-Scholes option pricing model.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

26 INCOME TAX IN THE BALANCE SHEET

Fair value of share options and assumptions

Fair value at measurement date (date of grant)	HK$0.2271
Share price (date of grant)	HK$1.41
Exercise price	HK$1.41
Expected volatility	28.30%
Time to maturity	10 years
Expected exercise period by the option holders	2 years
Expected dividends	2.60%
Risk-free interest rate (based on Exchange Fund Notes)	3.89%

The expected volatility is estimated by the annualised standard deviations of the continuously compounded rates of return on return on the comparable listed paper-based packaging companies in Hong Kong. Expected dividends are estimated by the management. There were no market conditions associated with the share option grants. Changes in the subjective input assumptions could materially affect the fair value estimate.

(a) Current taxation in the balance sheet represents:

					The
					2007	2006
					RMB’000	RMB’000
Provision	for	PRC	income	tax	4,333	4,882

(b) Deferred tax assets and liabilities recognised:

The Group

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

Accounting depreciation in excess of depreciation allowances RMB’000 1,715 560 2,275	Provisions RMB’000 280 45 325	Accrued expenses RMB’000 152 (39) 113	Pre- operating expenses RMB’000 213 (48) 165	Total RMB’000 2,360 518
				2,878

2,275 (84) 2,108	325 (37) 1,199	113 – 23	165 – 357	2,878 (121 3,687
4,299	1,487	136	522	6,444

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

In accordance with the accounting policy set out in note 1(p), the Group has not recognised deferred tax assets in respect of cumulative tax losses of RMB2,885,000 (2006: RMB2,584,000) as it is not probable that future taxable profits against which the losses can be utilised will be available in the relevant tax jurisdiction and entity. The tax losses do not expire under current tax legislation.

27 EQUITY ATTRIBUTABLE TO EQUITY SHAREHOLDERS OF THE COMPANY

(a) Share capital

Authorised and issued share capital

2007 No. of shares ’000 HK$’000 Authorised: Ordinary shares of HK$0.1 each 2,000,000 200,000 Ordinary shares, issued and fully paid	2006 No. of shares ’000 HK$’000 2,000,000 200,000	2006 No. of shares ’000 HK$’000 2,000,000 200,000

At 1 January Issuance of new shares At 31 December	No. of shares ’000 200,000 46,000 246,000	RMB’000 20,800 4,460 25,260	No. of shares ’000 200,000 – 200,000	RMB’000 20,800 –
				20,800

On 21 August 2007, 20,000,000 new ordinary shares of the Company at a par value of HK$0.1 were issued to the public at a price of HK$3.4 per share.

Upon the issue of the new shares above, the Company issued an additional 26,000,000 new ordinary shares at a par value of HK$0.1 to its holding company, OCTHK, at a price of HK$3.4 per share as part of the consideration for acquiring 49% shareholding of OCT Investments, a subsidiary of OCTHK.

(b) Share premium and contributed surplus

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

The excess of the issued price net of any issuance expenses over the par value of the shares issued has been credited to the share premium account of the Company.

On 20 January 2006, the Group acquired 100% interest in Grand Signal Limited (“Grand Signal”) from its intermediate holding company, OCTHK, at a cash consideration of HK$8,457,000 (RMB8,796,000 equivalent) (hereinafter referred to as the “Acquisition”). The consideration paid by the Group for the Acquisition has been accounted for as an equity transaction in the consolidated statement of changes in equity for the year ended 31 December 2006.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(c) Merger reserve

Merger reserve arose from the recognition of the remaining goodwill arising on the original acquisition of the subsidiaries as recorded in the controlling party’s financial statements in these financial statements.

(d) Capital reserve

Capital reserve comprises the following:

difference between the total amount of registered capital and the amount of contributions from the equity holders of a subsidiary; and
the fair value of the unexercised share options granted to employees of the Company recognised in accordance with the accounting policy adopted for share based payments in note 1(o)(ii).

(e) General reserve fund

Transfers from retained earnings to general reserve fund were made in accordance with the relevant PRC rules and regulations and the articles of association of the Company’s subsidiaries incorporated in the PRC and were approved by the respective boards of directors.

The subsidiaries in the PRC are required to transfer 10% of their net profits, as determined in accordance with the PRC accounting rules and regulations, to general reserve fund until the reserve balance reaches 50% of the registered capital. The transfer to this fund must be made before distribution of dividends to the equity holders.

General reserve fund can be used to make good previous years’ losses, if any, and may be converted into paid up capital provided that the balance of the general reserve fund after such conversion is not less than 25% of the registered capital.

(f) Enterprise expansion fund

The subsidiaries in the PRC are required to transfer a certain percentage of their net profits, as determined in accordance with the PRC accounting rules and regulations, to the enterprise expansion fund. The percentage of this appropriation is decided by the directors of the subsidiaries.

The enterprise expansion fund can be used for the subsidiaries’ business development purposes and for working capital purposes. This fund can also be used to increase capital of the subsidiaries, if approved. This fund is non-distributable other than upon liquidation. Transfers to this fund must be made before distribution of dividends to the equity holders.

– 77 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(g) Reserves of the Company

Note At 1 January 2006 Profit for the year Dividend approved in respect of the previous year 10(b) Equity settled share-based transaction 25 At 31 December 2006 At 1 January 2007 Issue of shares Profit for the year Dividend approved in respect of the previous year 10(b) At 31 December 2007	Share premium Contributed surplus RMB’000 RMB’000 29,964 248,970 – – – – – – 29,964 248,970	Share premium Contributed surplus RMB’000 RMB’000 29,964 248,970 – – – – – – 29,964 248,970	Capital reserve RMB’000 – – – 4,558 4,558	Retained profits RMB’000 4,427 18,527 (16,224) – 6,730	Total RMB’000 283,361 18,527 (16,224) 4,558 290,222 290,222 144,996 65,372 (12,675) 487,915
	29,964 144,996 – –	248,970 – – –	4,558 – – –	6,730 – 65,372 (12,675)	290,222 144,996 65,372 (12,675
	174,960	248,970	4,558	59,427

(h) Distributability of reserves

At 31 December 2007, the aggregate amount of reserves available for distribution to equity shareholders of the Company is RMB487,915,000 (2006: RMB290,222,000).

After the balance sheet date, the directors proposed a final dividend of HK$5.70 cents per ordinary share (2006: HK$6.40 cents per share), amounting to RMB12,809,000 (2006: RMB12,675,000). This dividend has not been recognised as a liability at the balance sheet date.

(i) 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.

Consistent with industry practice, the Group monitors its capital structure on the basis of a net debt-to-adjusted capital ratio. For this purpose the Group defines net debt as total debt (which includes interest-bearing loans and borrowings and trade and other payables, plus unaccrued proposed dividends, less cash and cash equivalents. Adjusted capital comprises all components of equity less unaccrued proposed dividends.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

During 2007, the Group’s strategy, which was unchanged from 2006, was to maintain the net debt-to-adjusted capital ratio at a level of lower than 100%. In order to maintain or adjust the ratio, the Group may issue new shares, return capital to shareholders, raise new debt financing or sell assets to reduce debt.

28 FINANCIAL INSTRUMENTS

Exposure to credit, liquidity, interest rate and currency risks arises in the normal course of the Group’s business. 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 trade and other receivables. Management has a credit policy in place and the exposures to these credit risks are monitored on an ongoing basis.

In respect of trade and other receivables, credit evaluations are performed on all customers requiring credit over a certain amount. The credit evaluations are reperformed periodically for the existing customers. The Group chases the customers to settle outstanding balances and monitors the settlement progress on an ongoing basis. Normally, the Group does not obtain collateral from customers. The impairment losses on bad and doubtful accounts are within management’s expectation.

Further quantitative disclosures in respect of the Group’s exposure to credit risk arising from trade and other receivables are set out in note 20.

(b) Liquidity risk

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

(c) Interest rate risk

The effective interest rate of cash and cash equivalents is 2.14% per annum (2006: 2.30% per annum). The effective interest rate of bank loans is 5.84% per annum (2006: 5.72% per annum). The interest rates and terms of repayment of the Group’s bank loans are disclosed in note 23.

(d) Currency risk

(i) Forecast transactions

The Group is exposed to foreign currency risk primarily through sales and purchases that are denominated in a currency other than the functional currency of the operations to which they relate. The currencies giving rise to this risk are primarily United States dollars 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.

– 79 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The Group

Trade and other receivables Cash and cash equivalents Trade and other payables Bank loans Gross exposure arising from recognised assets and liabilities	United States Dollars ’000 2,538 1,915 (1,296) – 3,157	2007 Hong Kong Dollars ’000 90,005 55,766 (46,419) (26,400) 72,952	Euros ’000 – 4 22 – 26	2006 United States Dollars Hong Kong Dollars ’000 ’000 2,012 36,911 1,418 93,660 (236) (32,139) – (40,000) 3,194 58,432

The Company

Trade and other receivables Cash and cash equivalents Trade and other payables Bank loans Gross exposure arising from recognised assets and liabilities	2007 United States Dollars Hong Kong Dollars ’000 ’000 – 216,469 1 11,236 – (15,712) – (26,400) 1 185,593	2006 United States Dollars Hong Kong Dollars ’000 ’000 – 53,642 1 51,154 – (3,736) – (40,000) 1 61,060

The Group and the Company ensure that the net exposure is kept to an acceptable level.

(iii) Sensitivity analysis

A 5 per cent weakening of the Hong Kong dollars and USD against the above Renminbi at 31 December 2007 would have decreased profit by RMB2,003,000 (2006: RMB3,667,000). This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2006.

A 5 per cent strengthening of the Hong Kong dollars and USD against the above currencies at 31 December would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

(e) Fair values

All financial instruments are carried at amounts not materially different from their fair values as at 31 December 2007 and 2006 due to their nature of short-term maturities or floating interest rate for the long-term bank loans.

– 80 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

29 COMMITMENTS

(a) Capital commitments, outstanding at 31 December 2007 not provided for in the financial statements were as follows:

Contracted for Authorised but not contracted for	The Group 2007 2006 RMB’000 RMB’000 5,978 21,318 2,665 3,158 8,643 24,476	The Company 2007 2006 RMB’000 RMB’000 – – – – – –	The Company 2007 2006 RMB’000 RMB’000 – – – – – –
			–

The capital commitments mainly represented the commitments in connection with the planned capital expenditure for expansion of production facilities.

(b) At 31 December 2007, the total future minimum lease payments under non-cancellable operating leases in respect of land and properties were payable as follows:

Within 1 year After 1 year but within 5 years After 5 years	The Group 2007 2006 RMB’000 RMB’000 7,155 5,357 6,224 3,993 1,569 1,675 14,948 11,025	The Company 2007 2006 RMB’000 RMB’000 – – – – – – – –	The Company 2007 2006 RMB’000 RMB’000 – – – – – – – –
			–

The Group leases a number of land and properties under operating leases. The leases run for period from one to twenty-six years, certain of the leases are with an option to renew when all terms are renegotiated. None of the leases includes contingent rentals.

30 MATERIAL RELATED PARTY TRANSACTIONS

(a) Transactions with other state-controlled entities

The Company is a state-controlled entity and operates in an economic regime currently dominated by entities directly or indirectly controlled by the PRC government (“state-controlled entities”) through its government authorities, agencies, affiliations and other organisations.

Other than those disclosed in 30(b), transactions with other state-controlled entities include but are not limited to the following:

Utility supplies; and
Financial services arrangement.

These transactions are conducted in the ordinary course of the Group’s business on terms comparable to those with other entities that are not state-controlled. The Group has established its buying, pricing strategy and approval process for purchases and sales of products and services. Such buying, pricing strategy and approval processes do not depend on whether the counterparties are state-controlled entities or not.

– 81 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Having considered the potential for transactions to be impacted by related party relationships, the Group’s pricing strategy, buying and approval processes and what information would be necessary for an understanding of the potential effect of the relationship on the financial statements, the directors are of the opinion that the following transactions with other state-controlled entities require disclosure:

Transactions with other state-controlled entities in the PRC:
	2007	2006
	RMB’000	RMB’000
Interest income	2,104	2,007
Interest expenses	4,248	3,552

Balances with other state-controlled entities in the PRC:
	2007	2006
	RMB’000	RMB’000
Cash at bank	86,281	152,402
Bank loans	44,721	70,188

(b) The Group has a related party relationship with the following parties:

Name of party

Relationship with the Group

Overseas Chinese Town Enterprises Corporation (“OCT Group”)

Ultimate holding company

Overseas Chinese Town (HK) Company Limited (“OCTHK”)

Intermediate holding company

Shanghai Huiyang Industry Co., Ltd. (“Shanghai Hui Yang”)

An entity majority-owned by an equity shareholder who has significant influence over the Company

Shanghai Mei Ling Central Air Conditioner Company Limited (“Mei Ling AirConditioner”)

Subsidiary of Shanghai Hui Yang

Shanghai Pudong Xiamei Plastics Co., Ltd. (“Shanghai Xiamei”)

Subsidiary of Shanghai Hui Yang

Shenzhen Overseas Chinese Town Real Estate Company Limited (“OCT Properties”)

Subsidiary of OCT Group

Mudanjiang Nanhua Hesheng Co., Ltd.

Minority equity holder of a subsidiary

(“Mudanjiang Nanhua”) (Note)

Note: Mudanjiang Nanhua ceased to be a related party of the Group upon the disposal of Mudanjiang Huali on 20 May 2007.

– 82 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Recurring transactions

Sales of goods to: OCT Group, its subsidiaries and associates Mei Ling Air-Conditioner Mudanjiang Nanhua (Note) Purchase of goods from: OCT Group, its subsidiaries and associates Mudanjiang Nanhua (Note) Rental paid to: OCT Group, its subsidiaries and associates Shanghai Xia Mei Utility expenses paid to: OCT Group, its subsidiaries and associates	2007 RMB’000 952 8,370 – 9,322	2006 RMB’000 912 7,448 33
		8,393

	663 547	1,002 2,114
	1,210	3,116

	1,701 180	1,711 180
	1,881 3,603	1,891

		3,785

Note: The amount for the year ended 31 December 2007 represents transactions occurred before 20 May 2007 when Mudanjianag Nanhua was still regarded as a related party of the Group.

Non recurring transactions

Acquisition of Grand Signal: OCT Group Acquisition of OCT Investments: OCTHK	2007 RMB’000 – 136,066	2006 RMB’000 8,796

		–

In October 2007, the Company acquired 49% equity interest in OCT Investments from OCTHK. OCT Investments holds 25% equity interest in Chengdu OCT, which has not commenced operation in 2007.

– 83 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Disposal and leaseback of properties:

On 11 July 2007, Shenzhen Huali entered into an agreement with OCT Properties, to sell the land use right of a piece of land located in Shenzhen and two factory buildings erected on the land (the “Properties”), at a cash consideration of RMB50,600,000. Shenzhen Huali also entered into a tenancy agreement with OCT Properties to lease back the Properties at a monthly rental of approximately RMB264,000. The lease term will commence from the day OCT Properties obtain the title of the Properties and end by 31 December 2009. As at 31 December 2007, the procedure of transferring title of the Properties is in process, the sales has not been completed and the rental agreement has not commenced.

The directors of the Company are of the opinion that the above transactions with related parties were conducted in the ordinary course of business, on normal commercial terms and in accordance with the agreements governing such transactions.

Balances with related parties

Amounts due from/(to) related parties are as follows:

			2007	2006
		Note	RMB’000	RMB’000
Trade	receivables from fellow subsidiaries (note 20)	(i)	173	174
Trade	receivables from other related companies (note 20)	(i)	982	486
Trade	payables to fellow subsidiaries (note 22)	(ii)	(72)	(297)
Trade	payables to other related companies (note 22)	(ii)	(20)	(7)
Other	receivables from fellow subsidiaries (note 20)	(iii)	293	293
Other	receivables from associates (note 20)	(iii)	44,008	–
Other	payable to other related companies (note 22)	(iii)	(194)	(92)

Notes:

(i) The trade receivable balances are unsecured, non-interest bearing and are expected to be recovered within six months. These refer to receivables in respect of sales of paper cartons and paper boxes to related parties.
(ii) The trade payable balances are unsecured, non-interest bearing and are expected to be settled within three months. These refer to payables in respect of purchases of raw material from related parties.
(iii) Other receivables and payables are unsecured, non-interest bearing, and repayable on demand.

(c) The key management personnel remuneration is as follows:

Remuneration for key management personnel, including amounts paid to the Company’s directors as disclosed in note 7 and certain of the highest paid employees as disclosed in note 8, is as follows:

Short-term employee benefits Post employment benefits Equity compensation benefits	2007 RMB’000 3,069 69 – 3,138	2006 RMB’000 2,431 103 2,267
		4,801

Total remuneration is included in “staff costs” (see note 5(b)).

– 84 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(d) Contributions to post-employment benefits plans

The Group participates in various defined contribution post-employment benefit plans for its employees. Further details of these plans are disclosed in note 24.

31 NON-ADJUSTING POST BALANCE SHEET EVENTS

After the balance sheet date the directors proposed a final dividend. Further details are disclosed in note 10.

32 COMPARATIVE FIGURES

As a result of adopting HKFRS 7, Financial instruments: Disclosures, and the amendments to HKAS 1, Presentation of financial statements: Capital disclosures, certain comparative figures have been adjusted to conform with changes in disclosures in the current year and to show separately comparative amounts in respect of items disclosed for the first time in 2007. Further details of these developments are disclosed in note 2.

33 PARENT AND ULTIMATE HOLDING COMPANY

At 31 December 2007, the directors consider the ultimate holding company of the Group to be Overseas Chinese Town Enterprises Corporation, which is incorporated in the PRC. The directors consider the immediate holding company to be Pacific Climax Limited, which is incorporated in BVI. These entities do not produce financial statements available for public use.

34 ACCOUNTING ESTIMATES AND JUDGEMENTS

Note 14 contains information about the assumptions relating to goodwill impairment. Other key sources of estimation uncertainty are as follows:

(i) Impairment loss for trade and other receivables

As explained in note 1(i), the Group makes impairment loss for trade and other receivables based on the Group’s estimates of the present value of the estimated future cash flow. Given the uncertainties involved in estimating the future cash flow of individual customer, the actual recoverable amount may be higher or lower than that estimated at the balance sheet date.

(ii) Provision for inventories

As explained in note 1(j), the Group’s inventories are stated at the lower of cost and net realisable value. Based on the Group’s recent experience and the nature of the inventories, the Group makes estimates of the selling prices, the costs of completion in case for work in progress, and the costs to be incurred in selling the inventories. Uncertainty exists in these estimations.

(iii) Impairment loss for property, plant and equipment

As explained in note 1(i), the Group makes impairment loss for property, plant and equipment based on the Group’s estimates of the recoverable amount. Uncertainty exists in these estimations.

35 POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE FOR THE YEAR ENDED 31 DECEMBER 2007

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 31 December 2007 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 these standards is unlikely to have a significant impact on the Group’s results of operations and financial position.

– 85 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

III. INDEBTEDNESS

Borrowings

As at the close of business on 30 April 2008, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Enlarged Group had outstanding unsecured bank loans of approximately RMB47.70 million (equivalent to approximately HK$53.60 million), bills payable of approximately RMB106.92 million (equivalent to approximately HK$120.13 million), in which approximately RMB89.11 million (equivalent to approximately HK$100.12 million) was unsecured and approximately RMB17.81 million (equivalent to approximately HK$20.01 million) was secured, and unsecured letter of credit of approximately RMB55.55 million (equivalent to approximately HK$62.42 million).

Contingent liabilities

As at 30 April 2008, the Enlarged Group had no significant contingent liabilities.

As at 30 April 2008, the Enlarged Group’s total credit facilities provided by the banks were approximately RMB571.34 million (equivalent to approximately HK$641.96 million), of which approximately RMB47.70 million (equivalent to approximately HK$53.60 million) bank loans, approximately RMB89.11 million (equivalent to approximately HK$100.12 million) bills payable and approximately RMB55.55 million (equivalent to approximately HK$62.42 million) letter of credit were utilised. Bills payable of approximately RMB17.81 million (equivalent to approximately HK$20.01 million) were pledged by bills receivable and the Enlarged Group did not utilise any of the above mentioned credit facilities.

For the purpose of the above indebtedness statement, foreign currency amounts have been translated into RMB at appropriate rates of exchange prevailing at the close of business on 30 April 2008.

Save as disclosed in this circular and apart from intra-group company liabilities, the Enlarged Group did not have any outstanding debt securities issued and outstanding, and authorised or otherwise created but unissued, term loans, other borrowings or indebtedness in the nature of borrowing including bank overdrafts and other liabilities under acceptances (other than normal trade bills), acceptance credits, hire purchase commitments, mortgages and charges, contingent liabilities or guarantees outstanding at the close of business on 30 April 2008.

The Directors are not aware of any material changes in the indebtedness or contingent liabilities of the Enlarged Group since 30 April 2008.

– 86 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

IV. WORKING CAPITAL

The Directors are of the opinion that, following the Acquisition, taking into account the financial resources available to the Enlarged Group, including the internally generated funds and the present available bank facilities, and in the absence of unforeseen circumstances, the Enlarged Group will have sufficient working capital for its requirements for at least the next 12 months from the date of this circular.

V. 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 of the Group since 31 December 2007, the date to which the latest published audited financial information of the Group were made up.

– 87 –

APPENDIX II ACCOUNTANTS’ REPORT ON OCT INVESTMENTS

The following is the text of a report, prepared for the purpose of incorporation in this circular, received from the independent reporting accountants, KPMG, Certified Public Accountants, Hong Kong. As described in the section headed “Documents available for inspection” in Appendix V to this circular, a copy of the following accountants’ report is available for inspection.

8th Floor Prince’s Building 10 Chater Road Central Hong Kong

24 June 2008

The Directors

Overseas Chinese Town (Asia) Holdings Limited

Dear Sirs,

Introduction

We set out below our report on the financial information relating to OCT Investments Limited (“OCT Investments”) and its subsidiary (hereinafter collectively referred to as the “OCT Investments Group”) for the period from 6 September 2005 to 31 December 2005 and for each of the years ended 31 December 2006 and 2007 (the “Track Record Period”) in sections A to E below, including the income statements, statements of changes in equity and cash flow statements of OCT Investments for the period from 6 September 2005 (date of incorporation) to 31 December 2005 and for the year ended 31 December 2006; the consolidated income statement, consolidated statement of changes in equity and consolidated cash flow statement of the OCT Investments Group for the year ended 31 December 2007 and the balance sheets of OCT Investments as at 31 December 2005 and 2006, and the consolidated balance sheet of the OCT Investments Group as at 31 December 2007, together with a summary of significant accounting policies and other explanatory notes thereto (the “Financial Information”) for inclusion in the shareholders’ circular of Overseas Chinese Town (Asia) Holdings Limited (the “Company”) dated 24 June 2008 (the “Circular”).

OCT Investments was incorporated in the British Virgin Islands (the “BVI”) on 6 September 2005 with limited liability. Pursuant to the share transfer agreement dated 2 June 2008 and the supplemental agreement dated 4 June 2008 entered into between Overseas Chinese Town (HK) Company Limited (“OCT (HK)”) and the Company, the Company will buy from OCT (HK) its 51% equity interest in OCT Investments, representing all of the interest in OCT Investments held by OCT (HK). As a result of the foregoing transaction, the Company will own 100% equity interest in OCT Investments.

– 88 –

APPENDIX II ACCOUNTANTS’ REPORT ON OCT INVESTMENTS

The OCT Investments Group is principally engaged in investment holding, which in turn owns 25% equity interest in Chengdu Tianfu OCT Industry Development Company Limited (“Chengdu OCT”). Chengdu OCT was incorporated in the People’s Republic of China (the “PRC”) on 31 October 2005. It is principally engaged in the provision of development and operation of travel facilities, and development and management of properties.

As at the date of this report, the OCT Investments Group has direct equity interest in the following subsidiary:

			Attributable	Attributable
	Place and date of	Issued and fully	equity	interest
Name of company	incorporation	paid up capital	Direct	Indirect	Principal activities
Bantix International	Hong Kong	1 share of	100%	–	Investment holding
Limited (“Bantix	11 October 2007	Hong Kong
International”)		Dollar (“HK$”) 1

On 28 December 2007, OCT Investments transferred its 25% equity interest in Chengdu OCT to Bantix International.

Basis of preparation

The Financial Information has been prepared by the directors of OCT Investments based on the unaudited financial statements for the period from 6 September 2005 (date of incorporation) to 31 December 2005 and for the year ended 31 December 2006 of OCT Investments and unaudited consolidated financial statements for the year ended 31 December 2007 of the OCT Investments Group which was prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and to comply with applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”). HKFRSs include all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards and Interpretations.

No audited financial statements have been prepared for OCT Investments as it is not subject to statutory audit requirements under the relevant rules and regulations in its jurisdiction of incorporation.

Respective responsibilities of directors and reporting accountants

The directors of OCT Investments are responsible for the preparation of the Financial Information which gives true and fair view. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of the Financial Information that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

– 89 –

APPENDIX II ACCOUNTANTS’ REPORT ON OCT INVESTMENTS

Our responsibility is to express an opinion on the Financial Information based on our audit.

Basis of opinion

As a basis for forming an opinion on the Financial Information for the purpose of this report, we have carried out appropriate audit procedures in respect of the Financial Information for the Track Record Period in accordance with Hong Kong Standards on Auditing issued by the HKICPA and we have carried out such additional procedures as we considered necessary in accordance with the Auditing Guideline “Prospectuses and the Reporting Accountant” (Statement 3.340) issued by the HKICPA. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the Financial Information is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Financial Information. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the Financial Information, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and true and fair presentation of the Financial Information in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the Financial Information.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

We have not audited any financial statements of OCT Investments, its subsidiary or the OCT Investments Group in respect of any period subsequent to 31 December 2007.

Opinion

In our opinion, for the purpose of this report, no adjustments are considered necessary and the Financial Information gives a true and fair view of the results and cash flows of OCT Investments for the period from 6 September 2005 (date of incorporation) to 31 December 2005 and the year ended 31 December 2006, of the consolidated results and consolidated cash flow of the OCT Investments Group for the year ended 31 December 2007, of the state of affairs of OCT Investments as at 31 December 2005 and 2006, and of the consolidated state of the affairs of the OCT Investments Group as at 31 December 2007.

– 90 –

APPENDIX II ACCOUNTANTS’ REPORT ON OCT INVESTMENTS

A FINANCIAL INFORMATION

1 Income statements/consolidated income statement

Period from 6 September 2005 (date of incorporation) to 31 December 2005 HK$ (Section B Note 2(b)) – (5,360)	For the year ended 31 December 2006 2007 HK$ HK$ (Section B Note 2(b)) – – – (261) – (261) – (4,066,183) – (4,066,444) – – – (4,066,444) – (40,664)	For the year ended 31 December 2006 2007 HK$ HK$ (Section B Note 2(b)) – – – (261) – (261) – (4,066,183) – (4,066,444) – – – (4,066,444) – (40,664)
(5,360) – (5,360) –	– – – –	(261 (4,066,183
		(4,066,444 –
(5,360) (5,360)	– –

The accompanying notes form part of this Financial Information.

– 91 –

APPENDIX II ACCOUNTANTS’ REPORT ON OCT INVESTMENTS

2 Balance sheets/consolidated balance sheet

At 31 December 2005 2006 2007 HK$ HK$ HK$ (Section B Note 2(b)) (Section B Note 2(b)) 96,153,846 99,532,199 102,505,228 96,153,846 99,532,199 102,505,228 ----------- ----------- ----------- 8 8 780 10 10 1,250 18 18 2,030 ----------- ----------- ----------- (95,908,870) (95,908,870) (95,910,370) (95,908,870) (95,908,870) (95,910,370) ----------- ----------- ----------- (95,908,852) (95,908,852) (95,908,340) ----------- ----------- ----------- 244,994 3,623,347 6,596,888 ----------- ----------- ----------- 244,994 3,623,347 6,596,888 8 8 781 244,986 3,623,339 6,596,107 244,994 3,623,347 6,596,888 244,994 3,623,347 6,596,888	At 31 December 2005 2006 2007 HK$ HK$ HK$ (Section B Note 2(b)) (Section B Note 2(b)) 96,153,846 99,532,199 102,505,228 96,153,846 99,532,199 102,505,228 ----------- ----------- ----------- 8 8 780 10 10 1,250 18 18 2,030 ----------- ----------- ----------- (95,908,870) (95,908,870) (95,910,370) (95,908,870) (95,908,870) (95,910,370) ----------- ----------- ----------- (95,908,852) (95,908,852) (95,908,340) ----------- ----------- ----------- 244,994 3,623,347 6,596,888 ----------- ----------- ----------- 244,994 3,623,347 6,596,888 8 8 781 244,986 3,623,339 6,596,107 244,994 3,623,347 6,596,888 244,994 3,623,347 6,596,888	At 31 December 2005 2006 2007 HK$ HK$ HK$ (Section B Note 2(b)) (Section B Note 2(b)) 96,153,846 99,532,199 102,505,228 96,153,846 99,532,199 102,505,228 ----------- ----------- ----------- 8 8 780 10 10 1,250 18 18 2,030 ----------- ----------- ----------- (95,908,870) (95,908,870) (95,910,370) (95,908,870) (95,908,870) (95,910,370) ----------- ----------- ----------- (95,908,852) (95,908,852) (95,908,340) ----------- ----------- ----------- 244,994 3,623,347 6,596,888 ----------- ----------- ----------- 244,994 3,623,347 6,596,888 8 8 781 244,986 3,623,339 6,596,107 244,994 3,623,347 6,596,888 244,994 3,623,347 6,596,888
96,153,846 ----------- 8 10 18 ----------- (95,908,870)	99,532,199 ----------- 8 10 18 ----------- (95,908,870)	102,505,228 ----------- 780 1,250
		2,030 ----------- (95,910,370
(95,908,870) ----------- (95,908,852) ----------- 244,994 ----------- 244,994	(95,908,870) ----------- (95,908,852) ----------- 3,623,347 ----------- 3,623,347
8 244,986 244,994	8 3,623,339 3,623,347	781 6,596,107
		6,596,888
244,994	3,623,347

The accompanying notes form part of this Financial Information.

– 92 –

APPENDIX II ACCOUNTANTS’ REPORT ON OCT INVESTMENTS

3 Statements of changes in equity/consolidated statement of changes in equity

Attributable to equity shareholders of OCT Investments Share capital Exchange reserve Accumulated losses Total HK$ HK$ HK$ HK$ (Section B Note 13) 8 – – 8 – 250,346 – 250,346 – – (5,360) (5,360) 8 250,346 (5,360) 244,994 8 250,346 (5,360) 244,994 – 3,378,353 – 3,378,353 8 3,628,699 (5,360) 3,623,347 8 3,628,699 (5,360) 3,623,347 773 – – 773 – – (4,066,444) (4,066,444) – 7,039,212 – 7,039,212 781 10,667,911 (4,071,804) 6,596,888	Attributable to equity shareholders of OCT Investments Share capital Exchange reserve Accumulated losses Total HK$ HK$ HK$ HK$ (Section B Note 13) 8 – – 8 – 250,346 – 250,346 – – (5,360) (5,360) 8 250,346 (5,360) 244,994 8 250,346 (5,360) 244,994 – 3,378,353 – 3,378,353 8 3,628,699 (5,360) 3,623,347 8 3,628,699 (5,360) 3,623,347 773 – – 773 – – (4,066,444) (4,066,444) – 7,039,212 – 7,039,212 781 10,667,911 (4,071,804) 6,596,888	Attributable to equity shareholders of OCT Investments Share capital Exchange reserve Accumulated losses Total HK$ HK$ HK$ HK$ (Section B Note 13) 8 – – 8 – 250,346 – 250,346 – – (5,360) (5,360) 8 250,346 (5,360) 244,994 8 250,346 (5,360) 244,994 – 3,378,353 – 3,378,353 8 3,628,699 (5,360) 3,623,347 8 3,628,699 (5,360) 3,623,347 773 – – 773 – – (4,066,444) (4,066,444) – 7,039,212 – 7,039,212 781 10,667,911 (4,071,804) 6,596,888	Attributable to equity shareholders of OCT Investments Share capital Exchange reserve Accumulated losses Total HK$ HK$ HK$ HK$ (Section B Note 13) 8 – – 8 – 250,346 – 250,346 – – (5,360) (5,360) 8 250,346 (5,360) 244,994 8 250,346 (5,360) 244,994 – 3,378,353 – 3,378,353 8 3,628,699 (5,360) 3,623,347 8 3,628,699 (5,360) 3,623,347 773 – – 773 – – (4,066,444) (4,066,444) – 7,039,212 – 7,039,212 781 10,667,911 (4,071,804) 6,596,888
8 –	250,346 3,378,353	(5,360) –	244,994 3,378,353
8	3,628,699	(5,360)
8 773 – –	3,628,699 – – 7,039,212	(5,360) – (4,066,444) –	3,623,347 773 (4,066,444 7,039,212
781	10,667,911	(4,071,804)

The accompanying notes form part of this Financial Information.

– 93 –

APPENDIX II ACCOUNTANTS’ REPORT ON OCT INVESTMENTS

4 Cash flow statements/consolidated cash flow statement

Period from 6 September 2005 (date of incorporation) to 31 December 2005 HK$ (Section B Note 2(b)) (5,360) –	For the year ended 31 December 2006 2007 HK$ HK$ (Section B Note 2(b)) – (4,066,444) – 4,066,183 – (261) – 1,501 – 1,240 – – – 1,240 - - - - - - - - - - - - - - - - - - - - - - - - – – – – - - - - - - - - - - - - - - - - - - - - - - - - – – – – - - - - - - - - - - - - - - - - - - - - - - - - – 1,240 10 10 10 1,250	For the year ended 31 December 2006 2007 HK$ HK$ (Section B Note 2(b)) – (4,066,444) – 4,066,183 – (261) – 1,501 – 1,240 – – – 1,240 - - - - - - - - - - - - - - - - - - - - - - - - – – – – - - - - - - - - - - - - - - - - - - - - - - - - – – – – - - - - - - - - - - - - - - - - - - - - - - - - – 1,240 10 10 10 1,250
(5,360) – (5,360) – (5,360) - - - - - - - - - - - - - - 95,908,870 95,908,870 - - - - - - - - - - - - - - (95,903,500) (95,903,500) - - - - - - - - - - - - - - 10 –	– – – – – - - - - - - - - - - - - – – - - - - - - - - - - - - – – - - - - - - - - - - - - – 10	(261 1,501
		1,240 –
		1,240 - - - - - - - - - - - - –
		– - - - - - - - - - - - - –
		– - - - - - - - - - - - - 1,240 10
10	10

The accompanying notes form part of this Financial Information.

– 94 –

APPENDIX II ACCOUNTANTS’ REPORT ON OCT INVESTMENTS

B NOTES TO THE FINANCIAL INFORMATION

1 Principal place of business

OCT Investments Limited (“OCT Investments”) is a company incorporated and domiciled in the British Virgin Islands and has its registered office and principal place of business at Sea Meadow House, Blackburne Highway, Road Town, Tortola, British Virgin Islands and Rooms 3203-3204, Tower 6, The Gateway, Harbour City, Canton Road, Tsimshatsui, Kowloon, Hong Kong respectively.

2 Significant accounting policies

(a) Statement of compliance

The Financial Information set out in this report has been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”), which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“HKASs”) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), accounting principles generally accepted in Hong Kong. The Financial Information also complies with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. A summary of the significant accounting policies adopted and applied consistently by the OCT Investments Group is set out below.

During the Track Record Period, the HKICPA has issued a number of new and revised HKFRSs. For the purpose of preparing this Financial Information, the OCT Investments Group has adopted all these new and revised HKFRSs in the Track Record Period, except for any new standards or interpretation that are not yet effective for the Track Record Period.

(b) Basis of preparation of the Financial Information

The financial statements for the period from 6 September 2005 (date of incorporation) to 31 December 2005 and for the year ended 31 December 2006 comprise OCT Investments and its interest in an associate.

The consolidated financial statements for the year ended 31 December 2007 comprise OCT Investments and its subsidiary (collectively referred to as the “OCT Investments Group”) and the group’s interest in an associate.

The OCT Investments Group is primarily involved in the investment holding business.

The measurement basis used in the preparation of the Financial Information is the historical cost basis.

The preparation of Financial Information 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.

(c) Subsidiaries

A subsidiary is an entity controlled by the OCT Investments Group. Control exists when the OCT Investments 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.

– 95 –

APPENDIX II ACCOUNTANTS’ REPORT ON OCT INVESTMENTS

In OCT Investments’ balance sheet, an investment in a subsidiary is stated at cost less impairment loss (see note 2(f)).

(d) Associates

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

An investment in an associate is accounted for in the consolidated financial statements under the equity method and is initially recorded at cost and adjusted thereafter for the post acquisition change in the OCT Investments Group’s share of the associate’s net assets, unless it is classified as held for sale (or included in a disposal group that is classified as held for sale). The consolidated income statement includes the OCT Investments Group’s share of the post-acquisition, post-tax results of the associate for the period/year, including any impairment loss on goodwill relating to the investment in an associate recognised for the period/year (see note 2(f)).

When the OCT Investments Group’s share of losses exceeds its interest in the associate, the OCT Investments Group’s interest is reduced to nil and recognition of further losses is discontinued except to the extent that the OCT Investments Group has incurred legal or constructive obligations or made payments on behalf of the associate. For this purpose, the OCT Investments Group’s interest in the associate is the carrying amount of the investment under the equity method together with the OCT Investments Group’s long-term interests that in substance form part of the OCT Investments Group’s net investment in the associate.

Unrealised profits and losses resulting from transactions between the OCT Investments Group and its associate are eliminated to the extent of the OCT Investments Group’s interest in the associate, except where unrealised losses provide evidence of an impairment of the asset transferred, in which case they are recognised immediately in profit or loss.

(e) Translation of foreign currencies

Foreign currency transactions during the period/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 dates. 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.

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

(f) Impairment of assets

(i) Impairment of other receivables

Other receivables are reviewed at each balance sheet date to determine whether there is objective evidence of impairment. If any such evidence exists, the impairment loss is measured as the difference between the carrying amount of the financial asset and the estimated future cash flows, discounted at the current market rate of return for a similar financial asset where the effect of discounting is material.

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.

– 96 –

APPENDIX II ACCOUNTANTS’ REPORT ON OCT INVESTMENTS

(ii) Impairment of other assets

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

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

Calculation of recoverable amount

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. The carrying value of an asset will not be reduced below its individual fair value less cost to sell, or value in use, if determinable.

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.

(g) Other receivables

Other receivables are initially recognised at fair value and thereafter stated at cost less impairment losses for bad and doubtful debts, 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.

(h) Other payables

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

(i) Cash and cash equivalents

(j) Income tax

Income tax for the period/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 income statement except to the extent that they relate to items recognised directly in equity, in which case they are recognised in equity.

– 97 –

APPENDIX II ACCOUNTANTS’ REPORT ON OCT INVESTMENTS

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

(k) Related parties

For the purposes of the Financial Information, a party is considered to be related to the OCT Investments Group if:

(i) the party has the ability, directly or indirectly through one or more intermediaries, to control the OCT Investments Group or exercise significant influence over the OCT Investments Group in making financial and operating policy decisions, or has joint control over the OCT Investments Group;
(ii) the OCT Investments Group and the party are subject to common control;
(iii) the party is an associate of the OCT Investments Group or a joint venture in which the OCT Investments Group is a venturer;
(iv) the party is a member of key management personnel of the OCT Investments Group or the OCT Investments 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 individual;
(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 OCT Investments Group or of any entity that is a related party of the OCT Investments 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.

(l) Segment reporting

The directors consider the OCT Investments Group operates within a single business and geographical segment. Accordingly, no segment information is provided.

3 Turnover

The principal activity of the OCT Investments Group is investment holding. The OCT Investments Group does not have any turnover as its only major asset is investment in an associate.

4 Income tax

(a) Taxation in the income statements:

No provision of Hong Kong Profits Tax has been made as its subsidiary in Hong Kong has no assessable profits subject to Hong Kong Profits Tax during the Track Record Period.

Pursuant to the rules and regulations of the BVI, OCT Investments is not subject to any income tax in the BVI during the Track Record Period.

– 98 –

APPENDIX II ACCOUNTANTS’ REPORT ON OCT INVESTMENTS

(b) Reconciliation between income tax expense and accounting loss at applicable tax rates:

Period from 6 September 2005 (date of incorporation) to 31 December 2005 HK$ (5,360)	For the year ended 31 December 2006 2007 HK$ HK$ – (4,066,444	For the year ended 31 December 2006 2007 HK$ HK$ – (4,066,444

(938) 938	– –	(711,628 711,628
–	–	–

5 Directors’ remuneration

None of the directors has received remuneration throughout the Track Record Period.

During the Track Record Period, there were no amounts paid or payable by OCT Investments Group to the directors or any highest paid individuals as an inducement to join or upon joining the OCT Investments Group or as compensation for loss of office. There was no arrangement under which a director waived or agreed to waive any remuneration during the Track Record Period.

6 Loss attributable to equity shareholders of OCT Investments

The loss attributable to equity shareholders of OCT Investments for the year ended 31 December 2007 includes loss of HK$1 which has been dealt with in the financial statements of OCT Investments.

7 Dividends

OCT Investments has not declared any dividend throughout the Track Record Period.

8 Loss per share

The calculation of basic loss per share during the Track Record Period is based on the loss attributable to equity shareholders of OCT Investments and the ordinary shares in issue during the Track Record Period.

There were no dilutive potential ordinary shares during the Track Record Period, and therefore, diluted loss per share is the same as the basic loss per share.

9 Interest in an associate

					31 December
				2005	2006	2007
				HK$	HK$	HK$
Share	of	net	assets	96,153,846	99,532,199	102,505,228

– 99 –

APPENDIX II ACCOUNTANTS’ REPORT ON OCT INVESTMENTS

Details of the associate, which is an unlisted corporate entity, are as follows:

Name of Associate Form of business structure Place of incorporation and operation Particulars of issued and paid up capital Chengdu Tianfu OCT Industry Development Company Limited Incorporated the PRC RMB400,000,000	Proportion of ownership interest The OCT Investments Group’s effective interest Held by OCT Investments Held by a subsidiary Principal activity 25% 25% (before 28 December 2007) – Development and operation of travel facilities, and development and management of properties 25% – 25% (from 28 December 2007)

Chengdu Tianfu OCT Industry Development Company Limited (“Chengdu OCT”) is a limited company established in Chengdu City, Sichuan province in the PRC by Shenzhen Overseas Chinese Town Real Estate Company Limited, Shenzhen OCT Holding Co., Ltd., OCT Investments and Chengdu Jinpeng Investment Management Company Limited (“Jinpeng Investment”) with equity interests of 38%, 35%, 25% and 2% respectively.

On 28 December 2007, OCT Investments and Jinpeng Investment transferred their equity interests of Chengdu OCT to Bantix International and Overseas Chinese Town Enterprise Corporation respectively.

Chengdu OCT obtained an approval certificate (Shang Wai Zi Chuan Rong Zi [2005] No. 0014) from the People’s Government of Sichuan City on 31 October 2005, and a business licence (Qi He Chuan Rong Zong Zi No. 003774) issued by Chengdu City Administration of Industry and Commerce of the PRC.

According to the business licence, Chengdu OCT’s period of operation is 40 years and its principal activities are development and operation of travel facilities, design of travel project; development and operation of real estate.

Summary financial information of the associate

2005 100 per cent Group’s effective interest 2006 100 per cent Group’s effective interest 2007 100 per cent Group’s effective interest	Assets HK$’000 384,615 96,154 462,092 115,523 1,503,318 375,829	Liabilities HK$’000 – – (63,963) (15,991) (1,093,297) (273,324)	Equity HK$’000 384,615 96,154 398,129 99,532 410,021 102,505	Revenue HK$’000 – – – – – –	Loss HK$’000 – – – – (16,265) (4,066)

– 100 –

APPENDIX II ACCOUNTANTS’ REPORT ON OCT INVESTMENTS

10 Other receivables

At 31 December 2005 2006 Note HK$ HK$ Amount due from parent company 15 8 8 The amount is unsecured, interest free and repayable on demand.	2007 HK$ 780

11 Cash and cash equivalents

Cash and bank balances 12 Other payables Note Amounts due to parent company 15 Amounts due to a shareholder 15		At 31 December 2005 2006 HK$ HK$ 10 10 At 31 December 2005 2006 HK$ HK$ 95,908,870 95,908,870 – – 95,908,870 95,908,870		2007 HK$ 1,250

				2007 HK$ 48,913,524 46,996,846
				95,910,370

Amounts due to parent company and a shareholder are unsecured, interest free and repayable on demand. Please also refer to note 16(a) for the financial support provided by the parent company.

13 Share capital

Authorised and issued share capital

Authorised: Ordinary shares of US$1 each Ordinary shares issued:	At 31 December 2005, 2006 and 2007 No. of shares US$ 50,000 50,000	At 31 December 2005, 2006 and 2007 No. of shares US$ 50,000 50,000

1 share of US$1 100 shares of US$1	2005 HK$ 8 – 8	At 31 December 2006 HK$ 8 – 8	2007 HK$ – 781
			781

– 101 –

APPENDIX II ACCOUNTANTS’ REPORT ON OCT INVESTMENTS

OCT Investments was incorporated on 6 September 2005 with an authorised capital of US$50,000 divided into 50,000 shares of US$1 each. On 6 September 2005, 1 share of US$1 in OCT Investments was issued. On 2 August 2007, 99 shares of US$1 in OCT Investments were issued.

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 OCT Investments. All ordinary shares rank equally with regard to OCT Investments’ residual assets.

14 Distributable reserve

There was no reserve available for distribution to equity shareholders by OCT Investments as at 31 December 2005, 2006 and 2007.

15 Material related party transactions

In addition to the related party information disclosed elsewhere in the Financial Information, the OCT Investments Group entered into the following material related party transactions.

During the Track Record Period, the directors are of the view that related parties of the OCT Investments Group include the following companies:

Relationship with the OCT Name of related party Investments Group OCT (HK) Parent company OCT (Asia) 49% equity shareholder

(a) Balances with related parties

As at each balance sheet date, the OCT Investments Group had the following balances with related parties:

(i) Other receivables

OCT (HK) (ii) Other payables OCT (HK) OCT (Asia)	2005 HK$ 8 2005 HK$ 95,908,870 – 95,908,870	At 31 December 2006 HK$ 8 At 31 December 2006 HK$ 95,908,870 – 95,908,870	2007 HK$ 780

			2007 HK$ 48,913,524 46,996,846
			95,910,370

– 102 –

APPENDIX II ACCOUNTANTS’ REPORT ON OCT INVESTMENTS

16 Financial instruments

Exposure to liquidity risk arises in the normal course of the group’s business. These risks are limited by the group’s financial management policies and practices described below:

(a) Liquidity risk and capital management

Individual operating entities within the OCT Investments Group are responsible for their own cash management, including the raising of loans to cover expected cash demands. The parent company has agreed to provide continuing financial support to the OCT Investments Group for its existing and future investments.

(b) Exchange rate risk

Given that the entire investment in its associate is denominated in RMB, OCT Investments is exposed to the risk from the exchange rate of RMB against Hong Kong dollars.

(c) Fair values

Financial assets and liabilities include other receivables, cash and cash equivalents and other payables.

The other receivables and payables are due from and to related parties which are unsecured, interest-free and have no fixed terms of repayment. Given these terms, it is not practical to estimate and meaningful to disclose its fair value.

The cash and cash equivalents are stated at amounts not materially different from their fair values due to the nature of the instruments.

17 Immediate and ultimate holding party

At 31 December 2005, 2006 and 2007, the directors consider the immediate parent and ultimate controlling party of the OCT Investments Group to be OCT (HK) and Overseas Chinese Town Enterprises Corporation respectively, which are incorporated in Hong Kong and the PRC respectively. Both entities do not produce financial statements available for public use.

18 Possible impact of amendments, new standards and interpretations issued but not yet effective for the Track Record Period

Up to the date of issue this report, the HKICPA has issued a number of amendments, new standards and interpretations which are not yet effective for the Track Record Period and which have not been adopted in the Financial Information.

The OCT Investments 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 these standards is unlikely to have a significant impact on the OCT Investments Group’s results of operations and financial position.

– 103 –

APPENDIX II ACCOUNTANTS’ REPORT ON OCT INVESTMENTS

C BALANCE SHEET OF OCT INVESTMENTS

The balance sheet of OCT Investments as at 31 December 2007 was as follows:

Note Non-current assets Investment in a subsidiary Current assets Amount due from parent company (a) Amount due from a subsidiary (a) Cash and cash equivalents Current liabilities Amount due to parent company (a) Amount due to a shareholder (a) Amount due to a subsidiary (a) Equity Share capital (b) Capital reserve (b) Accumulated losses (b)	At 31 December 2007 HK$ 1 781 106,791,968 10 48,913,524 46,995,346 1 781 10,888,469 (5,361)

(a) The amounts are unsecured, non-interest bearing and have no fixed terms of repayment.
(b) Share capital and reserves

At 1 January 2007 Shares issued during the year Loss for the year Gain on disposal of an associate to a subsidiary At 31 December 2007	Share capital HK$ 8 773 – – 781	Capital reserve Accumulated losses HK$ HK$ – (5,360) – – – (1) 10,888,469 – 10,888,469 (5,361)	Total HK$ (5,352) 773 (1) 10,888,469 10,883,889

– 104 –

APPENDIX II ACCOUNTANTS’ REPORT ON OCT INVESTMENTS

D SUBSEQUENT EVENTS

Pursuant to a share transfer agreement dated 2 June 2008 and the supplemental agreement dated 4 June 2008 entered between OCT (HK) and the Company, the Company will acquire from OCT (HK) its 51% equity interest in OCT Investments.

Upon completion of the above transaction, which is subject to the approval by the Company’s shareholders in a special general meeting to be held on 10 July 2008 and various other conditions as set out in section headed “Conditions precedent of the Share Transfer Agreement” in the letter from the Board of the Company contained in the Circular, the Company will wholly own OCT Investments.

E SUBSEQUENT FINANCIAL STATEMENTS

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

Yours faithfully,

KPMG

Certified Public Accountants Hong Kong

– 105 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

For illustrative purpose only, set out below is the unaudited pro forma financial information of the Enlarged Group as at 31 December 2007, being the latest financial reporting date of the Company, to show the effect of the Acquisition.

A. UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

(1) Introduction to the unaudited pro forma financial information

The accompanying unaudited pro forma combined balance sheet of the Enlarged Group as at 31 December 2007 has been prepared to illustrate the effect to the Group as if the Acquisition had been completed on 31 December 2007. Details of the Acquisition are set out in the section headed “The Acquisition” in the Letter from the Board contained in this circular.

The unaudited pro forma combined balance sheet of the Enlarged Group has been prepared in accordance with Rule 4.29(1) and Rule 14.67(4)(a)(ii) of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited. It has been prepared by the Directors of the Company for illustrative purposes only.

The unaudited pro forma combined balance sheet of the Enlarged Group is based upon the audited consolidated balance sheet of the Group as at 31 December 2007, which has been extracted from the Company’s annual report for the year then ended as set out in Appendix I to this circular, the audited financial information of OCT Investments as extracted from the accountants’ report thereon set out in Appendix II to this circular, and after giving effect to the unaudited pro forma financial information adjustments described in Section A (2). These unaudited pro forma financial information adjustments of the Acquisition are (i) directly attributable to the Acquisition and not relating to other future events and decision and (ii) factually supportable based on the terms of the Acquisition.

The unaudited pro forma combined balance sheet of the Enlarged Group is based on a number of assumptions, estimates and uncertainties. As a result of these assumptions, estimates and uncertainties, the unaudited pro forma combined balance sheet of the Enlarged Group does not purport to describe the true picture of the financial position or results of the Enlarged Group that would have been attained had the Acquisition been completed on 31 December 2007. Further, the unaudited pro forma combined balance sheet of the Enlarged Group does not purport to predict the future financial position of the Enlarged Group.

The unaudited pro forma combined balance sheet of the Enlarged Group should be read in conjunction with the historical financial information of the Group as set out in the annual report of the Company for the year ended 31 December 2007 and other financial information included elsewhere in this circular.

– 106 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

(2) Unaudited pro forma combined balance sheet as at 31 December 2007

The Group RMB’000 191,468 921 24,937 72,169 89,907 6,444	OCT Investments RMB’000 (Notes 1, 2) – – – – 95,986 –	Pro forma combined Pro forma adjustments RMB’000 RMB’000 RMB’000 RMB’000 (Notes 1, 3) (Note 4) (Note 5) 191,468 921 24,937 72,169 185,893 114,835 (6,177) 6,444	The Enlarged Group RMB’000 191,468 921 24,937 72,169 294,551 6,444
385,846 - - - - - - - 12,361 91,866 210,296 119,292 433,815 - - - - - - - (259,789) (32,735) (4,333)	95,986 - - - - - - - – – 1 1 2 - - - - - - - (89,811) – –	481,832 - - - - - - - 12,361 91,866 210,297 45,803 (89,811) 119,293 (46,820) (1,750) 433,817 - - - - - - - (349,600) 89,811 (32,735) (4,333)	590,490 - - - - - - - 12,361 91,866 166,289 70,723
			341,239 - - - - - - - (259,789 (32,735 (4,333
(296,857) - - - - - - - 136,958 - - - - - - - 522,804 - - - - - - - (11,986) - - - - - - - (11,986) - - - - - - - 510,818	(89,811) - - - - - - - (89,809) - - - - - - - 6,177 - - - - - - - – - - - - - - - – - - - - - - - 6,177	(386,668) - - - - - - - 47,149 - - - - - - - 528,981 - - - - - - - (11,986) - - - - - - - (11,986) - - - - - - - 516,995	(296,857 - - - - - - -
			44,382 - - - - - - -
			634,872 - - - - - - - (11,986 - - - - - - -
			(11,986 - - - - - - -
			622,886

25,260 485,558	1 6,176	25,261 4,682 (1) 491,734 107,386 (6,176)	29,942 592,944
510,818	6,177	516,995	622,886

– 107 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Notes:

For the purpose of the unaudited pro forma combined balance sheet, amounts expressed in HK$ are translated into RMB, being the presentation currency of the Group, at rate of HK$1 to RMB0.9364, which represents the rate ruling at 31 December 2007.
The figures are extracted from the accountants’ report on OCT Investments as set out in Appendix II to this circular and are translated from HK$ to RMB at exchange rate set out in note 1.
OCT Investments was a 49% owned associate of the Group at 31 December 2007. On 2 June 2008, the Company entered into the Share Transfer Agreement with the Vendor, whereby it has conditionally agreed to further acquire the remaining 51% equity interest of OCT Investments together with a shareholder’s loan of RMB45,803,000 owed by OCT Investments to the Vendor at an aggregate consideration of HK$170,000,000 (equivalent to approximately RMB159,188,000). Estimated transaction costs directly attributable to the Acquisition of RMB1,450,000 are incurred.

The Directors consider that this will constitute a step acquisition of the subsidiary to the Group. The adjustment represents the recognition of the acquired identifiable assets and liabilities assumed at their estimated fair value as if the Acquisition had taken place on 31 December 2007.

Under the settlement method set out in the Share Transfer Agreement, the aggregate consideration shall be partially satisfied by cash of HK$50,000,000 (approximately RMB46,820,000 and the remaining HK$120,000,000 (equivalent to approximately RMB112,368,000) shall be satisfied by issuance of 50,000,000 Shares to the Vendor. The value of the shares issued, net of nominal value of HK$5,000,000 (equivalent to approximately RMB4,682,000) and issuing cost of RMB300,000, is credited to reserves.

Pursuant to the Supplemental Agreement dated 4 June 2008, the Vendor has agreed that the consideration of HK$170,000,000 (equivalent to approximately RMB159,188,000) will instead be satisfied by cash of HK$83,000,000 (equivalent to approximately RMB77,721,000) and issuance of 36,250,000 Shares if the issued share capital of the Company held by the public is less than 25% immediately upon the issuance of 50,000,000 Shares pursuant to the Share Transfer Agreement. For the purpose of the unaudited pro forma combined balance sheet, the Directors assume that the settlement method under the Share Transfer Agreement will be carried out. Should the settlement method under the Supplemental Agreement be carried out instead, the unaudited pro forma net assets of the Enlarged Group as at 31 December 2007 would be reduced by RMB30,901,000 (equivalent to approximately HK$33,000,000).

The adjustment reflects the elimination of share capital and pre-acquisition reserves of OCT Investments in preparing the unaudited pro forma combined balance sheet.
The adjustment reflects the elimination of intercompany balance between the Group and OCT Investments.

– 108 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

B. LETTER FROM INDEPENDENT REPORTING ACCOUNTANTS ON UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is the text of a report, prepared for the sole purpose of incorporation in this circular, received from the independent reporting accountants, KPMG, Certified Public Accountants, Hong Kong. As described in the section headed “Documents available for inspection” in Appendix V to this circular, a copy of this report is available for inspection.

8th Floor Prince’s Building 10 Chater Road Central Hong Kong

24 June 2008

The Directors

Overseas Chinese Town (Asia) Holdings Limited

Dear Sirs,

We report on the unaudited pro forma financial information of the Enlarged Group (as defined below) as set out in Section A of Appendix III to the shareholders’ circular issued by Overseas Chinese Town (Asia) Holdings Limited (the “Company”) dated 24 June 2008 (the “Unaudited Pro Forma Financial Information of the Enlarged Group”), which has been prepared by the directors of the Company solely for illustrative purposes to provide information about how the proposed acquisition of 51% equity interest in OCT Investments Limited (“OCT Investments”), as described in the accompanying introduction and notes to the Unaudited Pro Forma Financial Information, might have affected the historical financial information of the Company and its subsidiaries (including OCT Investments and its subsidiary) (hereinafter collectively referred as the “Enlarged Group”) presented therein. The basis of preparation of the Unaudited Pro Forma Financial Information is set out in the accompanying introduction thereto.

Responsibilities

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 with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

It is our responsibility to form an opinion, as required by Rule 4.29 of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any 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.

– 109 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Basis of opinion

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

Our work did not constitute an audit or review made in accordance with Hong Kong Standards on Auditing or Hong Kong Standards on Review Engagements issued by the HKICPA, and accordingly, we do not express any such audit or review assurance on the Unaudited Pro Forma Financial Information.

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

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, it does not provide any assurance or indication that any event will take place in the future and may not be indicative of the financial position of the Enlarged Group had the acquisition of OCT Investments actually completed on 31 December 2007 or any future date.

Opinion

In our opinion:

(a) the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated;
(b) such basis is consistent with the accounting policies of the Group, and
(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to Rule 4.29(1) of the Listing Rules.

Yours faithfully,

KPMG

Certified Public Accountants Hong Kong

– 110 –

PROPERTY VALUATION

APPENDIX IV

The following is the text of a letter and valuation certificate, prepared for the purpose of incorporation in this circular and received from Savills Valuation and Professional Services Limited, an independent property valuer, in connection with the valuation as at 30 April 2008 of the property held by Chengdu OCT.

==> picture [84 x 84] intentionally omitted <==

==> picture [106 x 101] intentionally omitted <==

The Directors

Overseas Chinese Town (Asia) Holdings Limited Suites 3203-4, Tower 6 The Gateway, Harbour City Canton Road, Tsim Sha Tsui Kowloon Hong Kong

24 June 2008

Dear Sirs,

In accordance with the instructions from Overseas Chinese Town (Asia) Holdings Limited (the “Company”) for us to value the property held by Chengdu Tianfu OCT Industry Development Co., Ltd (“Chengdu OCT”) in the People’s Republic of China (the “PRC”), we confirm that we have carried out an inspection, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of value of the property as at 30 April 2008 for the incorporation in a public circular.

Our valuation of the property is our opinion of its 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”.

– 111 –

APPENDIX IV

PROPERTY VALUATION

The market value is the best price reasonably obtainable in the market by the seller and the most advantageous price reasonably obtainable in the market by the buyer. This estimate specifically excludes an estimated price inflated or deflated by specifically terms or circumstances such as atypical financing, sale and leaseback arrangements, joint ventures, management agreements, special considerations or concessions granted by anyone associated with the sale, or any element of special value. The market value of a property is also estimated without regard to costs of sale and purchase, and without offset for any associated taxes.

In the course of our valuation, we have valued the property held by Chengdu OCT (portion of the property is under construction and the remaining portion is for future development) on the basis that it will be developed and completed in accordance with the latest development proposals provided to us. We have assumed that all consents, approvals and licenses from relevant government authorities for the proposals have been granted without onerous conditions or delay. In arriving at our opinion of value, we have adopted the direct comparison approach by making reference to the comparable market transactions as available in the markets and also have taken into account the construction costs to be expended to reflect the quality of the completed developments.

We have been provided with copies of title documents relating to the property, such as State-owned Land Use Rights Grant Contract and Planning Permits, etc. However, we have not inspected the original documents to verify ownership or to ascertain the existence of any amendments which may not appear on the copies handed to us. In the course of our valuation, we have relied to a considerable extent on the information given by the Company and its PRC legal adviser, Win & Sun Law Firm, regarding the title to the property. We have also accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, particulars of occupancy, site and floor areas and all other relevant matters. Dimensions, measurements and areas included in the valuation certificate are based on information contained in the documents provided to us and are therefore only approximations. No on-site measurements have been taken. We have had no reason to doubt the truth and accuracy of the information provided to us by the Company which is material to our valuation. We have also sought confirmation from the Company that no material facts have been omitted from the information supplied.

We have inspected the property. In the course of our inspection, we have not carried out investigations on site to determine the suitability of the ground conditions and the services etc for any future development. Our valuation is prepared on the assumption that these aspects are satisfactory and no extraordinary expenses or delay will be incurred during the development period.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on the property nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that all the property is free from encumbrances, restrictions and outgoings of an onerous nature which could affect its value.

– 112 –

PROPERTY VALUATION

APPENDIX IV

In valuing the property, we have complied with the requirements set out in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities issued by The Stock Exchange of Hong Kong Limited and the Valuation Standards on Properties (First Edition January 2005) published by the Hong Kong Institute of Surveyors.

Unless otherwise stated, all money amounts stated in our report are in Renminbi (RMB).

We enclose herewith our valuation certificate.

Yours faithfully,

For and on behalf of

Savills Valuation and Professional Services Limited

Charles C K Chan

MSc FRICS FHKIS MCIArb RPS(GP)

Managing Director

Note: Charles C K Chan, MSc, FRICS, FHKIS, MCIArb, RPS (GP), is a qualified valuer and has about 24 years’ experience in the valuation of properties in Hong Kong and has about 19 years’ experience in the valuation of properties in the PRC.

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PROPERTY VALUATION

APPENDIX IV

VALUATION CERTIFICATE

Market value in existing state

Property

Description and tenure

Particulars of as at occupancy 30 April 2008

Chengdu OCT Project located at both sides of Shaxi line of Outer Sanhuan Road, Jinniu District, Chengdu, the PRC

The property comprises four parcels of land with a total site area of approximately 2,036,779.18 sq.m. (21,923,891 sq.ft.), the breakdown of which is as follows:

Construction works on No commercial Land A, B and C have value commenced whilst Land D of the property is vacant.

Land A B C D Total	Area (sq.m.) 200,000.00 393,979.53 800,000.00 642,799.65 2,036,779.18	Use (sq.ft.) 2,152,800 Culture and Entertainment 4,240,796 Residential and Commercial 8,611,200 Theme Park 6,919,095 Residential and Commercial 21,923,891

As advised by the Company, the property is proposed to be developed into a metropolitan composite area which shall contain modern theme parks, metropolitan entertainments and residential buildings in various phases namely Chengdu OCT Project. Upon completion, the proposed development will provide a total gross floor area of approximately 1,800,000 sq.m. (19,375,200 sq.ft.). The whole development of the property is scheduled for completion in around 2015.

The land use rights of the property have been granted for terms of 40 and 70 years commencing on 9 September 2006 for commercial & theme park and residential uses.

Notes:

Pursuant to State-owned Land Use Rights Grant Contract No. 5101 Jinniu (2006) Chu Rang He Tong Di 47 entered into between Chengdu State-owned Land Resources Bureau (the “Grantor”) and Chengdu OCT on 29 September 2006, the Grantor has agreed to grant the land use rights of four parcels of land with a total site area of approximately 2,036,779.18 sq.m. to Chengdu OCT at a total consideration of RMB1,833,101,280. The salient conditions of the said contract are, inter-alia, as follows:

Usage : Cultural and entertainment, theme park, residential and kindergarten and other ancillary facilities Land use term : 40 years for commercial and theme park uses and 70 years for residential use Plot ratio : Land A : not exceeding 1.8 Land B : not exceeding 1.8 for residential use Land C : not exceeding 0.25 Land D : not exceeding 1 for residential use

Based on the aforesaid Contract and advice from the Company, Lands A and C are not transferable.

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PROPERTY VALUATION

APPENDIX IV

Pursuant to the Article of Association, the shareholders of Chengdu Tianfu OCT Industry Development Co., Ltd include Shenzhen OCT Properties Co., Ltd. (Party A), Shenzhen OCT Holding Co., Ltd. (Party B), Bantix International Limited (Party C) and Overseas Chinese Town Enterprises Co. Ltd. (Party D). The salient conditions as stipulated in the said document are as follows:

(i) Period of operation: 40 years commencing on 31 October 2005 and expiring on 30 October 2045 (ii) Total investment amount: RMB780,000,000 (iii) Registered capital: RMB400,000,000

Pursuant to Business Licence No. Qi He Chuan Rong Zong Fu Zi Di 003774 issued by Chengdu industrial and Commercial Administration Bureau on 2 October 2007, Chengdu OCT was established with a registered capital of RMB400,000,000 for an operation period of 40 years from 31 October 2005 to 30 October 2045.
Pursuant to Construction Land Planning Permit No. Cheng Gui Yong Di [2007] 241 issued by Chengdu Urban Planning Administration Bureau on 12 June 2007, portion of the four parcels of land with a total site area of approximately 1,527,259.90 sq.m. is permitted for use.
Pursuant to Construction Project Planning Permit No. Cheng Gui Jian Zhu [2007] 378 issued by Chengdu Urban Planning Administration Bureau on 30 October 2007, the approved construction scale of portion of the property is approximately 205,363.20 sq.m..
Pursuant to three Construction Works Commencement Permits all issued by Chengdu Construction Committee, construction of portion of the property was permitted to commence and the approved construction scale is approximately 205,363.20 sq.m.. Details of such permits are as follows:

			Construction
No.	Permit No.		Scale	Construction Period	Issuance Date
			(sq.m.)
i.	No. 510100200801030101		5,316.53	30 November 2007	3 January 2008
				– 30 April 2008
ii.	No. 510100200801090201		88,169.16	19 December 2007	9 January 2008
				– 30 May 2009
iii.	No. 510100200801110401		111,877.51	29 December 2007	11 January 2008
				– 30 April 2009
		Total:	205,363.20

As advised by the Company, the construction cost expended as at the date of valuation was approximately RMB189,593,000.
The capital value of the property as if completed as of 30 April 2008 was RMB9,147,000,000.
We have been provided with a legal opinion on the title to the property issued by the Company’s PRC legal adviser, Win & Sun Law Firm, which contains, inter alia, the following information:
i. Chengdu OCT has entered into State-owned Land Use Rights Grant Contract with relevant government land authorities and the land premium as stated in Note (1) have been fully paid;
ii. there will be no legal impediment for Chengdu OCT to obtain the State-owned Land Use Certificate for the property;
iii. the land use rights of the property is not subject to any transfer, lease, mortgage or forfeiture;

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PROPERTY VALUATION

APPENDIX IV

iv. Chengdu OCT has obtained relevant planning permits for portion of the land of the property as stated in Note 6 and is entitled to commence construction under relevant planning permits; and
v. Chengdu OCT has the rights to transfer, lease, mortgage or dispose of by any other legal means of the property (except for Lands A and C) throughout the residual term of its land use rights once the Stated-owned Land Use Certificate is obtained.
We have assigned no commercial value to the property as Chengdu OCT has not obtained the State-owned Land Use Certificate.
Had a valid State-owned Land Use Certificate been obtained by Chengdu OCT, the market value of the property as at 30 April 2008 would be RMB2,612,000,000. We have assigned no commercial value to Lands A and C as they are not transferable.

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GENERAL INFORMATION

APPENDIX V

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular, and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading.

2. SHARE CAPITAL

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

Authorised share capital: 2,000,000,000 Shares as at the Latest Practicable Date Issued and fully paid, or credited as fully paid, share capital: 251,790,000 Shares as at the Latest Practicable Date	HK$ 200,000,000

	25,179,000

All the issued Shares rank pari passu in all respects with each other.

No part of the share capital of the Company is listed or dealt in on any stock exchange other than the Stock Exchange and no application is being made or is currently proposed or sought for the Shares to be listed or dealt in on any other stock exchange.

3. DISCLOSURE OF INTERESTS

(a) Interests of Directors

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executives of the Company in the Shares, underlying shares and debentures of the Company and any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be (i) notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which the Directors and the chief executives were taken or deemed to have under such provisions of the SFO); or (ii) entered in the register kept by the Company pursuant to

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GENERAL INFORMATION

APPENDIX V

section 352 of the SFO; or (iii) notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) contained in the Listing Rules were as follows:

Long positions in ordinary shares of the Company

				Approximate
				% of issued
	Number of			share capital
	ordinary		Nature of	of the
Name of Directors	shares held	Capacity	interest	Company
Ni Zheng	600,000	Beneficial owner	Personal	0.24%
Zhou Guangneng	510,000	Beneficial owner	Personal	0.20%

Long positions in underlying shares of the Company

				Approximate
				% of issued
	Number of			share capital
	underlying		Nature of	of the
Name of Directors	shares	Capacity	interest	Company
Ni Zheng (Note 1)	1,400,000	Beneficial owner	Personal	0.56%
Zhou Guangneng	1,190,000	Beneficial owner	Personal	0.47%
(Note 2)

Notes:

(1) Ni Zheng is taken to be interested as a grantee of options to subscribed for 1,400,000 Shares under the share option scheme of the Company.
(2) Zhou Guangneng is taken to be interested as a grantee of options to subscribed for 1,190,000 Shares under the share option scheme of the Company.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executives of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept by the Company under section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.

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GENERAL INFORMATION

APPENDIX V

(b) Interests and short positions of substantial Shareholders and other persons

As at the Latest Practicable Date, as far as is known to the Directors, the following persons (not being a Director or chief executive of the Company) had interests or short positions in the shares or underlying shares of the Company which fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO as recorded in the register required to be kept by the Company pursuant to section 336 of the SFO:

Long Position in the Ordinary Shares of the Company

			Approximate
			shareholding
Name	Capacity/Nature	No. of Shares	percentage
Substantial Shareholders
Pacific Climax (Note 1)	Beneficial owner	160,370,000	63.69%
Overseas Chinese Town (HK)	Interest of a controlled	160,370,000	63.69%
Company Limited	corporation (Note 3)
(“OCT (HK)”) (Note 2)	Beneficial owner (Note 3)	50,000,000	19.86%
Shenzhen OCT Holding Co.	Interest of a controlled	210,370,000	83.55%
Ltd.	corporation (Note 4)
OCT Group (Note 5)	Interest of a controlled	210,370,000	83.55%
	corporation (Note 6)
Others
Polyfairz Group Limited	Beneficial owner	15,630,000	6.21%
Zhang Zhilin	Interest of a controlled	15,630,000	6.21%
	corporation (Note 7)
Tang Qinmei	Interest of spouse (Note 8)	15,630,000	6.21%

Notes:

(1) Mr. Ni Zheng and Mr. Zhou Guangneng, Directors, are also directors of Pacific Climax.
(2) Mr. Zheng Fan, a Director, is the chairman of the board of directors of OCT (HK). Ms. Xie Mei and Mr. Zhou Guangneng, Directors, are the deputy general managers of OCT (HK). Mr. Ni Zheng is also a director of OCT (HK).
(3) OCT (HK) is the beneficial owner of all the issued share capital in Pacific Climax. Therefore OCT (HK) is deemed, or taken to be interested in these shares which are beneficially owned by Pacific Climax for the purpose of the SFO. OCT (HK) is also deemed, or taken to be interested in the 50,000,000 Consideration Shares (being the maximum number of Shares) that may be issued to it (or its nominee) upon Completion.
(4) OCT Group entered into a state-assets transfer agreement on 6 June 2008 with (Shenzhen OCT Holding Co., Ltd.) (“OCT Holding”), pursuant to
which OCT Group conditionally agreed to sell, and OCT Holding conditionally agreed to purchase, inter alia, the entire issued share capital of OCT (HK). The said state-assets transfer agreement is yet to be completed. For the purposes of the SFO, OCT Holding is deemed, or taken

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GENERAL INFORMATION

APPENDIX V

to be, interested in the 160,370,000 Shares which are beneficially owned by Pacific Climax, and the Consideration Shares which OCT (HK) is deemed, or taken to be interested. OCT Holding is a company incorporated in the PRC, the shares of which are listed on the Shenzhen Stock Exchange. As at the Latest Practicable Date, OCT Group held 1,250,292,696 shares of OCT Holding, representing approximately 47.70% of the issued share capital of OCT Holding. As advised by OCT Group, OCT Holding is a subsidiary of OCT Group. Mr Zheng Fan, a Director, is also a director of OCT Holding.

(5) Mr. Zheng Fan, a Director, is a vice president of OCT Group.
(6) OCT Group is the beneficial owner of all the issued shares in OCT (HK) (OCT Group holds 454,999,998 shares in OCT (HK) in its own name. Mr. Zheng Fan, an executive Director, and Mr. Guo Yubin hold one share each in OCT (HK) on trust for OCT Group) and which is in turn the beneficial owner of all the issued share capital in Pacific Climax and therefore OCT Group is deemed, or taken to be, interested in the 160,370,000 Shares which are beneficially owned by Pacific Climax for the purposes of the SFO, and the Consideration Shares which OCT (HK) is deemed, or taken to be interested.
(7) Polyfairz Group Limited is beneficially owned as to 90% by Mr. Zhang Zhilin and thus a controlled corporation of Mr. Zhang Zhilin, and Mr. Zhang Zhilin is deemed, or taken to be, interested in the 15,630,000 shares which are beneficially owned by Polyfairz Group Limited for the purpose of the SFO.
(8) Ms. Tang Qinmei is the spouse of Mr. Zhang Zhilin. Therefore, Ms. Tang Qinmei is deemed, or taken to be, interested in all the Shares in which Mr. Zhang Zhilin is interested for the purpose of the SFO.

So far as was known to the Directors, as at the Latest Practicable Date, the Vendor owned 51% equity interest in OCT Investments, and OCT Investments owned 100% equity interest in Bantix International.

Save as disclosed above, as at the Latest Practicable Date, so far as was known to the Directors or chief executive of the Company, no person, other than a Director or chief executive of the Company, had an interest or short position in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, and no person was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Enlarged Group.

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors or proposed Directors had any existing or proposed service contracts with the Company or any member of the Enlarged Group (excluding contracts expiring or determinable by the Company within one year without payment of compensation other than statutory compensation).

5. LITIGATION

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

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GENERAL INFORMATION

APPENDIX V

6. COMPETING INTERESTS OF DIRECTORS AND ASSOCIATES

As at the Latest Practicable Date, so far as the Directors are aware, none of the Directors and their respective associates were considered to have interests in any business which competes or may compete, either directly or indirectly, with the businesses of the Group or have or may have any other conflicts of interest with the Group pursuant to the Listing Rules.

7. DIRECTORS’ INTERESTS IN ASSETS/CONTRACTS OR ARRANGEMENT

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

None of the Directors was materially interested in any contract or arrangement subsisting at the Latest Practicable Date which was significant in relation to the business of the Group.

8. MATERIAL CONTRACTS

As at the Latest Practicable Date, the following contracts (not being contracts entered into in the ordinary course of business) were entered into by members of the Enlarged Group within the two years immediately preceding the date of this circular and are, or may be, material:

(a) the Share Transfer Agreement dated 2 June 2008 entered into between the Company and the Vendor, pursuant to which the Company agreed to acquire 51% equity interest and the Shareholder’s Loan in OCT Investments from the Vendor at an aggregate consideration of HK$170 million;
(b) the Supplemental Agreement dated 4 June 2008 entered between the Company and the Vendor to amend and supplement certain terms of the Share Transfer Agreement;
(c) an agreement dated 21 August 2007 entered into between the Vendor and the Company pursuant to which the Company agreed to acquire 49% equity interest and a shareholder’s loan of HK$46,995,346 in OCT Investments from the Vendor at an aggregate consideration of HK$140,000,000;
(d) a placing and subscription agreement dated 21 August 2007 entered into between the Company, Pacific Climax and China Merchants Securities (HK) Co., Ltd. in relation to a placing and subscription of an aggregate of 20,000,000 Shares at a placing price of HK$3.40 per placing share, by which China Merchants Securities (HK) Co., Ltd. would receive a placing commission of 2.5% on the gross proceeds of the said placing;
(e) a sale and purchase agreement dated 11 July 2007 entered into between Shenzhen Huali Packing & Trading Co., Ltd. (as vendor) and Overseas Chinese Town Real

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GENERAL INFORMATION

APPENDIX V

Estate Company Limited (as purchaser) for the sale of certain properties with a total gross floor area of 21,985.37 sq.m. located at Huaqiaocheng, Nanshan District, Shenzhen, the PRC at a consideration of RMB50,600,000;

(f) an agreement dated 8 May 2007 entered into between Max Surplus Limited (as vendor) and Mr. Liu (a third party independent of and not connected with the Group and the connected persons of the Company) pursuant to which Max Surplus Limited transferred 100% equity interest in Mission Holdings Services Limited to Mr. Liu at a consideration of HK$9,920,000; and
(g) a sale and purchase agreement dated 19 March 2007 entered into between Guangdong Yonghe Pharmaceuticals Development Limited (as vendor) and Huizhou Huali Packing Co., Ltd. (as purchaser) for the sale of a piece of industrial-use land with a total site area of approximately 220,000 square metres situated at Hangcheng Industrial Park, Xinqiao Village, Danshui Town, Huiyang District, Guangdong Province, the PRC at a consideration of RMB64,460,000 (subject to adjustment).

9. EXPERTS’ QUALIFICATION AND CONSENTS

The following are the qualifications of the experts who have given opinion or advice contained in this circular:

Name Qualification

Hantec

a licensed corporation permitted to carry on type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO

KPMG

Certified Public Accountants

Savills Valuation and Professional Independent property valuer Services Limited Win and Sun Law Firm Practising lawyers in the PRC

Each of the above experts has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its advice, report and the reference to its name in the form and context in which they appear.

As at the Latest Practicable Date, each of the above experts did not have any shareholding, direct or indirect, in any member of the Enlarged Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Enlarged Group, nor did they have any direct or indirect interest in any assets which had been, since 31 December 2007, being the date of the latest published audited accounts of the Company were made up, acquired or disposed of by or leased to any member of the Enlarged Group, or were proposed to be acquired or disposed of by or leased to any member of the Enlarged Group.

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GENERAL INFORMATION

APPENDIX V

10. MISCELLANEOUS

(a) The registered office of the Company is at Clifton House, PO Box 1350 GT, 75 Fort Street, Grand Cayman, Cayman Islands. The principal place of business of the Company in Hong Kong is located at suites 3203-3204, Tower 6, the Gateway, Harbour City, Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong.
(b) The company secretary and qualified accountant of the Company is Mr. Fong Fuk Wai, a fellow member of the Association of Chartered Certified Accountants and the Hong Kong Institute of Certified Public Accountants and is also an associate member of the Institute of Chartered Accountants in England and Wales.
(c) The branch share registrar and transfer office of the Company in Hong Kong is Computershare Hong Kong Investor Services Limited, Shops 1712-16, 17/F, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(d) The English text of this circular shall prevail over the Chinese text in the case of inconsistency.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours at the head office and principal place of business of the Company in Hong Kong at suites 3203-3204, Tower 6, the Gateway, Harbour City, Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong up to and including the date of the extraordinary general meeting to be held on 10 July 2008:

(a) the memorandum and articles of association of the Company;
(b) the annual reports of the Company for the two years ended 31 December 2006 and 31 December 2007;
(c) the letter of advice from Hantec, the text of which is set out on pages 24 to 41;
(d) the accountants’ report on OCT Investments, the text of which is set out in Appendix II to this circular;
(e) the report regarding the Unaudited Pro Forma Financial Information of the Enlarged Group, the text of which is set out in Appendix III to this circular;
(f) the valuation report on OCT Investments, the text of which is set out in Appendix IV to this circular;
(g) the written consents referred to in the paragraph headed “Experts’ qualification and consents” in this appendix;
(h) the material contracts referred to in the section headed “Material contracts” in this Appendix; and
(i) this circular.

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NOTICE OF EXTRAORDINARY GENERAL MEETING

==> picture [194 x 50] intentionally omitted <==

OVERSEAS CHINESE TOWN (ASIA) HOLDINGS LIMITED

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 3366)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “Meeting”) of Overseas Chinese Town (Asia) Holdings Limited (the “Company”) will be held on 10 July 2008 (Thursday) at 11:00 a.m. at suites 3203-3204, Tower 6, The Gateway, Harbour City, Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong for considering and, if thought fit, passing, with or without amendments, the following resolution as ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT

(a) the share transfer agreement entered into between Overseas Chinese Town (Asia) Holdings Limited (as purchaser) and Overseas Chinese Town (HK) Company Limited (as vendor) dated 2 June 2008 (the “Share Transfer Agreement”) in relation to the acquisition of 51% equity interest and shareholder’s loan of HK$48,913,524 in OCT Investments Limited (the “Acquisition”) (a copy of which has been produced to the Meeting marked “A” and initialled by the Chairman of the Meeting for the purpose of identification) and the transaction contemplated therein be and is hereby approved, confirmed and ratified;
(b) the supplemental agreement entered into between Overseas Chinese Town (Asia) Holdings Limited and Overseas Chinese Town (HK) Company Limited dated 4 June 2008 (the “Supplemental Agreement”) to amend and supplement certain terms of the Share Transfer Agreement (a copy of which has been produced to the Meeting marked “B” and initialled by the Chairman of the Meeting for the purpose of identification) and the transaction contemplated therein be and is hereby approved, confirmed and ratified;
(c) the issue by the Company of a maximum of 50,000,000 shares of HK$0.10 each in the capital of the Company to Overseas Chinese Town (HK) Company Limited (or to such other person or persons as it may nominate) credited as fully paid which shall rank pari passu in all respects with the existing shares of the Company in issue at the date of allotment of such new shares as part of the consideration under the Share Transfer Agreement (as amended and supplemented by the Supplemental Agreement) be and is hereby approved; and

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NOTICE OF EXTRAORDINARY GENERAL MEETING

(d) each of the directors of the Company be and is hereby authorised to do all such further acts and things, negotiate, approve, agree, sign, initial, ratify and/or execute such further documents and take all steps which may be in his/her opinion necessary, desirable or expedient to implement and/or give effect to the terms of the Share Transfer Agreement (as amended and supplemented by the Supplemental Agreement) and the transaction contemplated thereunder.”

By Order of the Board Overseas Chinese Town (Asia) Holdings Limited FONG Fuk Wai

Company Secretary

Hong Kong, 24 June 2008

Notes:

Any member of the Company entitled to attend and vote at the Meeting shall be entitled to appoint another person as his proxy to attend and vote instead of him. A member who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf at the Meeting. A proxy need not be a member of the Company. On a poll, votes may be given either personally or by proxy.
The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of an officer, attorney or other person authorized to sign the same.
To be valid, the instrument appointing a proxy and (if required by the Board) the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of such power or authority, shall be delivered to the principal place of business of the Company at suites 3203-3204, Tower 6, The Gateway, Harbour City, Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong not less than 48 hours before the time appointed for holding the Meeting or any adjournment thereof.
No instrument appointing a proxy shall be valid after expiration of 12 months from the date named in it as the date of its execution, except at an adjourned meeting or on a poll demanded at the Meeting or any adjournment thereof in cases where the Meeting was originally held within 12 months from such date.
Where there are joint holders of any shares, any one of such joint holders may vote at the Meeting, either in person or by proxy, in respect of such share as if he/she were solely entitled thereto, but if more than one of such joint holders be present at the Meeting, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose, seniority shall be determined by the order in which the names stand in the Register of Members of the Company in respect of the joint holding.
Completion and delivery of an instrument appointing a proxy shall not preclude a member from attending and voting in person at the Meeting if the member so wish and in such event, the instrument appointing a proxy should be deemed to be revoked.
The transfer books and Register of Members of the Company will be closed from 9 July 2008 to 10 July 2008, both days inclusive. During such period, no share transfers will be effected. In order to qualify for attending the Meeting, all transfer documents, accompanied by the relevant share certificates, must be lodged with the Company’s branch share registrars in Hong Kong, Computershare Hong Kong Investor Services Limited whose share registration public offices are located at Shops 1712-16, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration no later than 4:30 p.m. on 8 July 2008.

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AI assistant

RemeGen Co., Ltd. — Proxy Solicitation & Information Statement 2008

51206_rns_2008-06-23_999592dc-b5fd-4d1a-b9f6-64c703e4b636.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

OVERSEAS CHINESE TOWN (ASIA) HOLDINGS LIMITED

MAJOR AND CONNECTED TRANSACTION

Hantec Capital Limited

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

OVERSEAS CHINESE TOWN (ASIA) HOLDINGS LIMITED

To the Shareholders

MAJOR AND CONNECTED TRANSACTION

Acquisition of 51% equity interest and the shareholder’s loan in OCT Investments Limited

INTRODUCTION

LETTER FROM THE BOARD

THE ACQUISITION

1. Principal terms of the Share Transfer Agreement (as amended and supplemented by the Supplemental Agreement)

Date

Parties

Subject matter of the Share Transfer Agreement

The consideration of the Acquisition

Conditions precedent of the Share Transfer Agreement

Completion

2. Consideration Shares

3. Special mandate

4. Listing application

INFORMATION ON OCT INVESTMENTS AND CHENGDU OCT

LETTER FROM THE BOARD

LETTER FROM THE BOARD

REASONS FOR AND THE BENEFITS OF THE ACQUISITION

CHANGES IN THE SHAREHOLDING INTERESTS OF THE COMPANY

MANAGEMENT DISCUSSION AND ANALYSIS OF OCT INVESTMENTS

Business review for the period from 6 September 2005 to 31 December 2005

Financial review, business review and prospects

Capital structure, liquidity, financial resources and gearing ratio

Capital commitment

Treasury policies

Exchange rate exposure

Contingent liabilities

Business review for the year ended 31 December 2006

Capital structure, liquidity, financial resources and gearing ratio

Capital commitment

Treasury policies

Exchange rate exposure

Contingent liabilities

Pledged of assets

Business review for the year ended 31 December 2007

Capital commitment

Treasury policies

Exchange rate exposure

Contingent liabilities

VALUATION OF THE LAND

FINANCIAL EFFECTS OF THE ACQUISITION

LETTER FROM THE BOARD

FINANCIAL AND PROSPECTS OF THE ENLARGED GROUP

EXTRAORDINARY GENERAL MEETING

PROCEDURES FOR DEMANDING A POLL

RECOMMENDATION

LETTER FROM THE BOARD

FURTHER INFORMATION

OVERSEAS CHINESE TOWN (ASIA) HOLDINGS LIMITED ZHENG FAN

OVERSEAS CHINESE TOWN (ASIA) HOLDINGS LIMITED

MAJOR AND CONNECTED TRANSACTION

Acquisition of 51% equity interest and the shareholder’s loan in OCT Investments Limited

Hantec Capital Limited

MAJOR AND CONNECTED TRANSACTION: ACQUISITION OF 51% EQUITY INTEREST AND THE SHAREHOLDER’S LOAN IN OCT INVESTMENTS LIMITED

INTRODUCTION

BASIS OF OUR ADVICE

PRINCIPAL FACTORS TAKEN INTO ACCOUNT

1. Background

(a) Information on the Group

(b) Information on OCT Investments

(c) Information on Chengdu OCT

2. Reasons for the Acquisition

3. Terms of the Acquisition

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

4. Dilution of the shareholding interests in the Company

RemeGen Co., Ltd. Proxy Solicitation & Information Statement 2008