Sunac Services Holdings Limited — Proxy Solicitation & Information Statement 2008

Dec 18, 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 you should take, 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 Shun Cheong Holdings Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or the bank, stockbroker or other registered dealer or other agent whom the sale or transfer was affected 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.

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Shun Cheong Holdings Limited 順昌集團有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock code: 650)

VERY SUBSTANTIAL ACQUISITION

A notice convening a special general meeting of the Company to be held at Suite 2302, Wing On Centre, 111 Connaught Road, Central Hong Kong on 5 January 2009 at 10:00 a.m. is set out on pages 132 to 133 of this circular. Whether or not you are able to attend the special general meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited, at 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the special general meeting or any adjourned meeting. Completion and delivery of the form of proxy will not preclude you from attending and voting in person at the special general meeting if you so wish.

19 December 2008

• For identification purposes only

CONTENTS

	Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Appendix I – Financial information on the Group. . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Appendix II – Financial information on the Target Group. . . . . . . . . . . . . . . . . . . . .	63
Appendix III – Unaudited pro forma financial information on the Enlarged Group. .	106
Appendix IV – Property valuation of the Enlarged Group . . . . . . . . . . . . . . . . . . . . . .	116
Appendix V – General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	127
Notice of SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	132

• i -

DEFINITIONS

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

• “Acquisition”

the proposed acquisition of the Sale Capital by the Purchaser pursuant to the terms and conditions of the Agreements

• “Agreements”

the Sale and Purchase Agreement and the Debt Restructuring Agreement (as supplemented by the Supplemental Agreements)

• “Announcements” the announcements dated 2 September 2008, 23 September 2008, 27 October 2008 and 5 December 2008 made by the Company in relation to the Acquisition

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

• “Board”

the board of Directors

• “Company” Shun Cheong Holdings Limited, a company incorporated in Bermuda with limited liability which shares are listed on the Main Board of the Stock Exchange

• “Completion” the completion of the Acquisition

• “connected persons” has the meaning as ascribed in the Listing Rules

• “Consideration” the consideration of RMB148,230,000 payable by the Company to the Vendors for the Sale Capital, the particulars of which are set out in the paragraphs headed “Consideration” under the section “Sale and Purchase Agreement” above

• “Debt Restructuring Agreement” the debt restructuring agreement dated 19 August 2008 entered into between the Purchaser, Yinhe and the Target Company in relation to the settlement of Hotel’s Payables (as supplemented by the Supplemental Debt Restructuring Agreement)

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

• “Enlarged Group” the Group and the Target Group

• “Group” the Company and its subsidiaries

• “Hotel” 廣西沃頓國際大酒店 (Guangxi Wharton International Hotel), a five-star hotel located at Nanning, Guangxi Zhuang Autonomous Region, the PRC and the relevant land use right

• 1 -

DEFINITIONS

• “Hotel Bank Loan”

• the bank loan applied by the Target Company from The Guangxi Branch of The Bank of China of which the amount will be reference to the amount of bank loan payable by Yinhe to The Bank of China

• “Hotel’s Payables” the amount payable by the Target Company to Yinhe or relevant parties amounted to RMB411,770,000 (subject to adjustments) as at 31 July 2008

• “Latest Practicable Date” 16 December 2008, being the latest practicable date prior to the issue of this circular for ascertaining certain information contained herein

• “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

• “Management Transfer Date” the date of transfer of management right of the Target Company, which should be a day after the Purchaser deposits RMB18,230,000 into an account which is jointly controlled by the Purchaser and Yinhe

• “PRC” the People’s Republic of China

• “Purchaser” Open Land Holdings Limited, a company incorporated in Hong Kong and is wholly-owned by the Company

• “Sale and Purchase Agreement” the sale and purchase agreement dated 19 August 2008 entered into between the Purchaser and the Vendors in relation to the sale and purchase of Sale Capital (as supplemented by the Supplemental Sale and Purchase Agreement)

• “Sale Capital” the entire equity capital of the Target Company

• “SGM” special general meeting of the Company to be convened to consider and, if thought fit, approve the resolution in respect of the Acquisition

• “Share(s)” ordinary share(s) of HK$0.01 each in the share capital of the Company

• “Shareholders” the holder(s) of the Share

• “Stock Exchange” The Stock Exchange of Hong Kong Limited

• 2 -

DEFINITIONS

“Supplemental Agreements”	the Supplemental Sale and Purchase Agreement and the
	Supplemental Debt Restructuring Agreement
“Supplemental Debt	the supplemental debt restructuring agreement dated 3
Restructuring Agreement”	December 2008 entered into between the Purchaser, Yinhe and
	the Target Company to amend certain terms and conditions of
	the Debt Restructuring Agreement
“Supplemental Sale and	the supplemental sale and purchase agreement dated 3
Purchase Agreement”	December 2008 entered into between the Purchaser, Yinhe and
	Mr. Gao Jian to amend certain terms and conditions of the Sale
	and Purchase Agreement
“Target Company”	廣西沃頓國際大酒店有限公司(Guangxi Wharton International
	Hotel Limited#), a company incorporated in the PRC
“Target Group”	the Target Company and its subsidiaries
“Vendors”	Yinhe and Mr. Gao Jian
“Yinhe”	北海銀河高科技產業股份有限公司(Beihai Yinhe Hi-Tech
	Industrial Co., Ltd#), a company incorporated in the PRC, of
	which shares are listed on the Shenzhen Stock Exchange
“HK$”	Hong Kong dollar(s), the lawful currency of Hong Kong
“RMB”	Renminbi, the lawful currency of PRC
“%”	per cent.

(For the purpose of illustration only, the exchange rate of RMB1 to HK$1.14 is adopted.)

• for identification purposes only

• unofficial translation

• 3 -

LETTER FROM THE BOARD

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Shun Cheong Holdings Limited 順昌集團有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock code: 650)

Executive Directors: Ms. Cao Jing (Executive Chairman) Mr. Zhang Shaohua (Managing Director)

Non-executive Director: Mr. Mo Tianquan

Independent non-executive Directors: Professor Ye Jianping Mr. Derek Palaschuk Mr. Yao Xusheng

Registered Office: Canon’s Court 22 Victoria Street Hamilton HM 12 Bermuda

Head office and principal place of business: Suite 2302, Wing On Centre 111 Connaught Road Central Hong Kong

19 December 2008

To the Shareholders,

Dear Sir or Madam,

VERY SUBSTANTIAL ACQUISITION

INTRODUCTION

As disclosed in the Announcements, the Purchaser entered into the Agreements, pursuant to which the Purchaser has conditionally agreed to (i) purchase the Sale Capital, representing the entire issued share capital of the Target Company, for a consideration of RMB148,230,000 (equivalent to approximately HK$168,982,200); and (ii) assume the Hotel’s Payables amounted to RMB411,770,000 (equivalent to approximately HK$469,417,800).

The purpose of this circular is to provide you with further information in relation to the Acquisition and to give you the notice of the SGM.

• For identification purposes only

• 4 -

LETTER FROM THE BOARD

THE SALE AND PURCHASE AGREEMENT

Date : 19 August 2008 (supplemented by the Supplemental Sale and Purchase Agreement on 3 December 2008)

Parties:

Vendors : Yinhe and Mr. Gao Jian Purchaser : the Purchaser

The Purchaser is a wholly-owned subsidiary of the Company. To the best knowledge of the Directors having made reasonable enquiries, Yinhe and its substantial shareholder and Mr. Gao Jian are parties independent of and not connected with the Company and its connected persons.

As at the Latest Practicable Date, the Target Company is owned as to 95% and 5% by Yinhe and Mr. Gao Jian respectively.

Assets to be acquired

Under the Sale and Purchase Agreement, the Purchaser has conditionally agreed to acquire from the Vendors the Sale Capital, representing the entire equity capital of Target Company.

Further details of the Target Company are set out in the section headed “Information on the Target Group” below.

Consideration

The consideration for the Sale Capital is RMB148,230,000 (equivalent to approximately HK$168,982,200) which is payable by cash.

A deposit of RMB20,000,000 has been paid to Yinhe and the deposit will form part of the Consideration upon completion of the Acquisition. Provided that the Acquisition cannot be completed before 20 January 2009 and the delay is not caused by the Purchaser, Yinhe shall refund the deposit. In addition, a deposit delay penalty of RMB200,000 in refund which is equivalent to 1% of the amount of deposit will be charged to Yinhe for each day of delay.

Within three business days after the satisfaction of the conditions to the Agreements, including (i) entering into of the agreement in relation to the Hotel Bank Loan by The Bank of China and the Target Company; (ii) having completed the change of business registration of the Target Company; and (iii) having obtained the approval of the State Administration of Foreign Exchange in relation to the amount payable by the Purchaser, the Purchaser will deposit or will procure another party to deposit RMB18,230,000 into an account which is jointly controlled by the Purchaser and Yinhe.

• 5 -

LETTER FROM THE BOARD

As the planning of use of approximately 30 mou of land which is included in the land use right owned by the Hotel has not been confirmed and/or approved by the parties concerned and the regulatory authorities, the Purchaser and Yinhe will decide the amount of remaining balance of the Consideration (at a maximum of RMB110,000,000) for that piece of land after the planning has been settled.

The Consideration will be financed by internal resources of the Group.

In addition to the Consideration, pursuant to the Debt Restructuring Agreement (detail of which is set out in the section “Debt Restructuring Agreement” below), the Purchaser is required to assume the Hotel’s Payables amounted to RMB411,770,000 (subject to adjustments as disclosed in the paragraph “Debt Restructuring” under the section “Debt Restructuring Agreement” below).

Basis of Consideration

The Consideration was determined after arm’s length negotiations between the Purchaser and the Vendors, and taking into consideration of (i) the registered capital of the Target Company as at 31 July 2008 amounted to RMB87,814,000 based on the management account prepared in accordance with PRC accounting standard; (ii) the amount payable by the Target Company as at 31 July 2008 amounted to RMB411,770,000 (subject to adjustments); (iii) the preliminary estimated value of the Hotel by an independent valuation firm, BMI Appraisals Limited, which is approximately RMB600,000,000; and (iv) the net asset value and the registered capital of the Target Company as at 31 July 2008 amounted to RMB18,691,000 and RMB87,814,000 respectively based on the audited account prepared in accordance with Hong Kong accounting standard. The valuation has been prepared on the basis of market value which is defined as “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”. The final valuation report issued by BMI Appraisals Limited which indicated that the aggregate value of the Hotel including two phases of land parcel are amounted to RMB600,000,000 is set out in Appendix IV to this circular. The Directors are of the view that the Consideration is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Conditions Precedent

Completion of the Sale and Purchase Agreement is subject to the following conditions precedent:

• (1) having obtained the approval by the board of directors and the shareholder of the Purchaser of the Sale and Purchase Agreement and the transactions contemplated thereunder;

• (2) having obtained the approval by the shareholders of Yinhe of the Sale and Purchase Agreement and the transactions contemplated thereunder;

• (3) having obtained the approval by The Bank of China for the debt restructuring plan of the Target Company pursuant to the Debt Restructuring Agreement;

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LETTER FROM THE BOARD

• (4) entering into of the agreement in relation to the Hotel Bank Loan by The Bank of China and the Target Company;

• (5) having completed the change of business registration of the Target Company;

• (6) having obtained the approval of the State Administration of Foreign Exchange in relation to the amount payable by the Purchaser; and

• (7) completion of the Debt Restructuring Agreement.

As at the Latest Practicable Date, none of the conditions above has been fulfilled.

Long Stop Date

The Sale and Purchase Agreement is conditional upon completion of the Debt Restructuring Agreement. Unless otherwise agreed by the parties, the Agreements will be terminated if the Hotel Bank Loan has not been approved by the Bank of China within 20 business days after the signing of the Supplemental Debt Restructuring Agreement on 3 December 2008.

Break-up fee

The Purchaser and Vendors agreed that (i) if condition (1) to the Sale and Purchase Agreement cannot be fulfilled, the Purchaser shall pay to the Vendors a break-up fee of RMB10,000,000 (equivalent to approximately HK$11,400,000); and (ii) if condition (2) to the Sale and Purchase Agreement cannot be fulfilled, the Vendors shall pay to the Purchaser a break-up fee of RMB10,000,000 (equivalent to approximately HK$11,400,000), within five days upon the relevant general meeting of shareholders.

Delay penalty

Upon satisfaction of all conditions to the Sale and Purchase Agreement, in the event that either party fails to fulfill its obligations under the Sale and Purchase Agreement without the consent of the non-breaching party, then from the date of such breach, the breaching party must pay to the other party an amount of RMB148,230, equivalent to 0.1% of the Consideration, for each day of delay.

Others

If the Acquisition does not completed before 20 January 2009 and Yinhe fails to repay the deposit of RMB20,000,000 and delay penalty within one month, Yinhe will procure the Hotel to provide the Purchaser a consumption facility for the use of facilities provided by the Hotel, including food and beverage and room charges, at a specified and agreed rate for 5 years which amount is equivalent to the aggregate amount repayable by Yinhe. It is further agreed that if the Hotel terminates or changes its principal business and as such services cannot be provided to the Purchaser for consumption, Yinhe should pay the Purchaser in cash for the outstanding amount of consumption facility.

• 7 -

LETTER FROM THE BOARD

THE DEBT RESTRUCTURING AGREEMENT

• Date : 19 August 2008 (supplemented by the Supplemental Debt Restructuring Agreement on 3 December 2008)

Parties:

• (a) Yinhe;

• (b) the Purchaser; and

• (c) the Target Company

Debt Restructuring:

Pursuant to the Debt Restructuring Agreement, the parties agreed the following:

• (i) the total payables of the Target Company amounted to RMB411,770,000 as at 31 July 2008 will be payable by the Target Company (or the Purchaser) to Yinhe or relevant parties (Out of RMB411,770,000 payables, about RMB390 million was due to Yinhe and related party);

• (ii) the receivables and payables (stated in (i) above) of the Target Company incurred before the Management Transfer Date will be settled by Yinhe (it is expected that all the receivables and payables of the Target Company will be generated from the hotel operating activities. After the Management Transfer Date, (a) the amount of outstanding payables will be used to offset the amount payable by the Target Company (or the Purchaser) to Yinhe as stated in (i) above; (b) the amount of outstanding receivables will continued to be collected by Yinhe and all receipt will belong to Yinhe;

• (iii) an tax exemption of approximately RMB7,000,000 has been applied for by Yinhe but has not been approved. Yinhe shall provide the evidence of relevant tax exemption or settlement of the relevant tax before the Management Transfer Date. Before Yinhe providing such evidence, the relevant amount will be deducted from the amount payable by the Target Company to Yinhe as stated in (i) above. Within 10 business days upon Yinhe providing the evidence on the finalized tax exemption amount, the relevant tax will be paid directly to the taxation authorities and the outstanding balance will be paid by the Target Company to Yinhe.

The Target Company has applied for the Hotel Bank Loan from The Guangxi Branch of The Bank of China of which the amount will be reference to the amount of bank loan payable by Yinhe to The Bank of China. The Hotel Bank Loan, if approved by The Bank of China, is expected to be at a minimum of approximately RMB320,000,000 with a term of 10 years at an interest rate of approximately 7% per annum. The Hotel Bank Loan will be used to partially settle the Hotel’s Payables as stated in (i) above and the settlement of the remaining balance of the Hotel’s Payables, after deduction of

• 8 -

LETTER FROM THE BOARD

the abovementioned adjustments and other adjustments (if any) pursuant to the finalized financial statement of the Target Group agreed by the parties, (the “Remaining Payables”) will be payable by the Target Company or the Purchaser.

Conditions Precedent

Within five business days after the satisfaction of the following conditions, the Purchaser shall deposit the Remaining Payables into an account which is jointly controlled by the Purchaser, the Target Company and Yinhe:

• (1) having obtained the approval by the shareholder of the Purchaser of the Agreements and the transactions contemplated thereunder;

• (2) having obtained the approval by the shareholders of Yinhe of the Agreements and the transactions contemplated thereunder;

• (3) having obtained the approval by The Bank of China for the debt restructuring plan of the Target Company;

• (4) entering into of the agreement in relation to the Hotel Bank Loan by The Bank of China and the Target Company;

• (5) having completed the change of business registration of the Target Company; and

• (6) having obtained the approval of the State Administration of Foreign Exchange in relation to the Remaining Payables.

The Remaining Payables shall be transferred from the jointly controlled account to the bank account of Yinhe in The Bank of China on the Management Transfer Date.

As at the Latest Practicable Date, none of the conditions above has been fulfilled.

Long Stop Date

The parties agreed that unless otherwise agreed by the parties, the Agreements and the Supplemental Agreements will be terminated if the Hotel Bank Loan has not been approved by the Bank of China within 20 business days after the signing of the Supplemental Debt Restructuring Agreement on 3 December 2008.

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LETTER FROM THE BOARD

Delay penalty

Upon satisfaction of all conditions to the Debt Restructuring Agreement, in the event that either party fails to fulfill its obligations under the Debt Restructuring Agreement without the consent of the non-breaching party, then from the date of such breach, the breaching party must pay to the other party an amount of RMB411,770, equivalent to approximately 0.1% of the Hotel’s Payables, for each day of delay.

INFORMATION ON YINHE

Yinhe is a company incorporated in the PRC which shares are listed on the Shenzhen Stock Exchange. It is principally engaged in (i) manufacturing and marketing of electric power system automation equipment and electronic components; and (ii) providing computer system integration services and development of computer software.

INFORMATION ON THE TARGET GROUP

The Target Company is a company incorporated in the PRC and is principally engaged in the owning and management of the Hotel. The Hotel is a five-star hotel located at No. 88, East Minzu Avenue, Nanning, Guangxi Zhuang Autonomous Region, the PRC. There are 338 rooms in the Hotel with total gross floor area of approximately 46,000 square metres.

The financial information on the Target Group is set out in Appendix II to this circular. The valuation report issued by BMI Appraisals Limited which indicated that the aggregate value of the Hotel and two phases of land parcel are amounted to RMB600,000,000 is set out in Appendix IV to this circular.

REASONS FOR THE ACQUISITION

The Group is principally engaged in the provision of building related maintenance services. The Directors have been seeking suitable investment opportunities from time to time to broaden the Group’s source of income.

Pursuant to the National Bureau of Statistics of China, the nominal gross domestic products of Guangxi Zhuang Autonomous Region are as follows:

Year	2003	2004	2005	2006	2007
Nominal gross	273.3	332.0	406.3	480.2	586.5
domestic products
(in RMB billion)
Increase from previous year	22.5%	21.5%	22.4%	18.2%	22.1%

Source: the website of the government of Guangxi Zhuang Autonomous Region

• 10 -

LETTER FROM THE BOARD

Recognizing the efforts of the PRC government in promoting the economies of the less developed regions and the rapid development of local tourism industry in the second tier cities in the PRC, the Directors consider that increasing number of investors as well as overseas and local travellers and tourists would be attracted to these cities in the PRC, thereby creating demand for hotel services and enhancing the value of Hotel. The Directors are confident that the Acquisition will enable the Group to capture the results of economic boom in Guangxi Zhuang Autonomous Region.

After entering into of the original Sale and Purchase Agreement and Debt Restructuring Agreement on 19 August 2008 and upon conducting certain due diligence on the Target Group, the Company noted that the planning of use of approximately 30 mou of land which is included in the land use right owned by the Hotel has not been confirmed and/or approved by the parties concerned and regulatory authorities. Therefore the Supplemental Agreements were entered to amend certain terms and conditions of the original Sale and Purchase Agreement and Debt Restructuring Agreement, in particular the adjustment of the payment terms of the Consideration for that piece of land. No other irregularities have been identified by the Directors during the course of the due diligence.

The increase in the Consideration for the Sale Capital under the Supplemental Sale and Purchase Agreement is the result of the corresponding decrease in the payables of the Target Group to be assumed by the Purchaser pursuant to the Supplemental Debt Restructuring Agreement.

The Directors consider that the terms and conditions of the Agreements are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

FINANCIAL EFFECT OF THE ACQUISITION

Earnings

Upon completion of Acquisition, the results of the Target Group will be consolidated by the Group. As noted from the unaudited pro forma financial information on the Enlarged Group set out in Appendix III to this circular, the unaudited pro forma consolidated net loss after tax of the Enlarged Group for the year ended 31 March 2008 would have amounted to approximately HK$11.5 million as compared to the audited consolidated net loss of the Group for the year ended 31 March 2008 of approximately HK$8.7 million.

Net asset value

As noted from the unaudited pro forma financial information on the Enlarged Group set out in Appendix III to this circular, the unaudited pro forma consolidated net asset value of the Enlarged Group as at 31 March 2008 would have amounted to approximately HK$126.1 million. As compared to the audited consolidated net asset value of the Group as at 31 March 2008 of approximately HK$106.6 million, this represents an increase of approximately 18.3%.

• 11 -

LETTER FROM THE BOARD

Gearing

According to the audited consolidated balance sheet of the Group as at 31 March 2008, the Group had a gearing ratio, calculated as total liabilities over total assets, of approximately 55.5%. Based on the unaudited pro forma financial information of the Enlarged Group set out in Appendix III to this circular, the gearing ratio of the Enlarged Group, calculated as total liabilities over total assets, would increase to approximately 83.6%.

IMPLICATIONS OF THE LISTING RULES

As the applicable percentage ratio as defined in the Listing Rules of the Acquisition exceeds 100%, the Acquisition constitutes a very substantial acquisition for the Company under the Listing Rules and are subject to the approval of Shareholders. A SGM will be held to consider and, if thought fit, approve the resolution in respect of the Acquisition. As no Shareholder has any material interest in the Acquisition, no Shareholder is required to abstain from voting in the SGM in respect of the resolution to approve the Acquisition.

SGM

Set out on pages 132 to 133 is a notice convening the SGM to be held at Suite 2302, Wing On Centre, 111 Connaught Road, Central Hong Kong on 5 January 2009 at 10:00 a.m. at which relevant resolution will be proposed to the Shareholders to consider and, if thought fit, approve the Acquisition.

A form of proxy for use at the SGM is enclosed with this circular. Whether or not you are able to attend the special general meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited, at 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the special general meeting or any adjourned meeting. Completion and delivery of the form of proxy will not preclude you from attending and voting in person at the special general meeting if you so wish.

Pursuant to the amendments to the Listing Rules which will be effective on 1 January 2009, the vote of Shareholders at the SGM must be taken by poll.

• 12 -

LETTER FROM THE BOARD

RECOMMENDATION

The Board considers that the terms of the Acquisition are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Shareholders to vote in favour of the resolution as set out in the notice of SGM.

ADDITIONAL INFORMATION

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

By order of the Board Shun Cheong Holdings Limited Cao Jing Executive Chairman

• 13 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

SUMMARY OF FINANCIAL RESULTS

An unqualified opinion in respect of the audit of the financial statements of the Group has been issued for each of the three years ended 31 March 2008. The following is a summary of the audited consolidated results for the three years ended 31 March 2008 extracted from the annual reports of the Group:

		Year ended 31	March
	2006	2007	2008
	HK$’000	HK$’000	HK$’000
Revenue	195,871	210,512	130,682
Gross profit	21,516	16,409	6,141
Profit/(Loss) for the year	(11,323 )	(2,726 )	(8,704 )
Net profit/(loss) attributable to
equity holders of the Company	(11,102 )	(2,508 )	(8,361 )
Earnings/(loss) per share attributable
to equity holders of the Company	(9.58) cents	(2.16) cents	(6.51) cents

The following is a summary of the audited consolidated assets and liabilities as at 31 March 2006, 31 March 2007 and 31 March 2008 extracted from the annual reports of the Company:

		As at 31 March
	2006	2007	2008
	HK$’000	HK$’000	HK$’000
Total non-current assets	2,742	2,614	2,488
Total current assets	122,170	118,539	236,983
Total non-current liabilities	0	0	76,359
Total current liabilities	68,374	67,341	56,516
Total equity attributable to equity
holders of the Company	55,312	52,804	105,931

• 14 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

AUDITED FINANCIAL INFORMATION FOR THE YEAR ENDED 31 MARCH 2008

Set out below are the audited consolidated financial statements of the Company for the year ended 31 March 2008 as extracted from the 2008 annual report of the Company. Reference to page numbers in the audited financial statements of the Group is to the page numbers of the 2008 annual report of the Company.

CONSOLIDATED INCOME STATEMENT

Year ended 31 March 2008

Notes REVENUE 6 Cost of maintenance 7 Gross profit Other income 6 Administrative expenses Other operating expenses 7 Finance costs 8 LOSS BEFORE TAX 7 Tax 11 LOSS FOR THE YEAR ATTRIBUTABLE TO: Equity holders of the parent 12 Minority interests LOSS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT 13 Basic Diluted	2008 HK$’000 130,682 (124,541 ) 6,141 1,577 (14,467 ) (1,666 ) (229 ) (8,644 ) (60 ) (8,704 ) (8,361 ) (343 ) (8,704 ) (6.51) cents N/A	2007 HK$’000 210,512 (194,103 ) 16,409 1,225 (17,632 ) (2,517 ) (175 ) (2,690 ) (36) (2,726 ) (2,508 ) (218 ) (2,726 ) (2.16) cents N/A

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

CONSOLIDATED BALANCE SHEET

31 March 2008

Notes NON-CURRENT ASSETS Property, plant and equipment 14 CURRENT ASSETS Gross amount due from contract customers 16 Trade receivables 17 Retention money receivables 16 Prepayments, deposits and other receivables 18 Cash and cash equivalents 19 Total current assets CURRENT LIABILITIES Gross amount due to contract customers 16 Trade payables 20 Retention money payables 16 Other payables and accruals 21 Tax payable Total current liabilities NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Convertible bonds 22 Net assets EQUITY Equity attributable to equity holders of the parent Issued capital 23 Equity component of convertible bonds 22 Reserves 24(a) Minority interests Total Equity	2008 HK$’000 2,488 28,147 26,428 171 16,846 165,391 236,983 15,014 20,929 696 19,877 – 56,516 180,467 182,955 76,359 106,596 1,389 43,272 61,270 105,931 665 106,596	2007 HK$’000 2,614
		28,446 32,986 652 23,136 33,319
		118,539
		13,213 17,341 1,552 35,221 14
		67,341
		51,198
		53,812 –
		53,812
		1,159 – 51,645
		52,804 1,008
		53,812

• 16 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Year ended 31 March 2008

At 1 April 2006 Loss for the year At 31 March 2007 and 1 April 2007 Issue of shares_(notes 23) Issue of convertible bonds(note 22)_ Loss for the year At 31 March 2008		Attributable to equity holders of theparent	Attributable to equity holders of theparent	Total HK$’000 55,312 (2,508 ) 52,804 18,216 43,272 (8,361 ) 105,931	Minority interests HK$’000 1,226 (218 ) 1,008 – – (343 ) 665	Total equity HK$’000 56,538 (2,726 )
	Issued capital HK$’000 1,159 – 1,159 230 – – 1,389	Equity component Share of Capital premium Contributed convertible redemption account surplus bonds reserve HK$’000 HK$’000 HK$’000 HK$’000 – 46,909 – 132 – – – – – 46,909 – 132 17,986 – – – – – 43,272 – – – – – 17,986 46,909 43,272 132 *	Retained profits/ (losses) HK$’000 7,112 (2,508 ) 4,604 – – (8,361 ) (3,757 )*
						53,812 18,216 43,272 (8,704 )
						106,596

• These reserve accounts comprise the consolidated reserves of HK$61,270,000 (2007: HK$51,645,000) in the consolidated balance sheet.

• 17 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

CONSOLIDATED CASH FLOW STATEMENT

Year ended 31 March 2008

Notes CASH FLOWS FROM OPERATING ACTIVITIES Loss before tax Adjustments for: Finance costs 8 Interest income 6 Depreciation 7 Impairment of trade receivables 7 Impairment of other receivables 7 Impairment of retention money receivables 7 Loss on disposal of items of property, plant and equipment 7 Decrease/(increase) in the gross amount due from contract customers Decrease/(increase) in trade receivables Decrease in retention money receivables Decrease/(increase) in prepayments, deposits and other receivables Increase in the gross amount due to contract customers Increase/(decrease) in trade payables Decrease in retention money payables Increase/(decrease) in other payables and accruals Cash used in operations Interest paid Hong Kong profits tax paid Net cash outflow from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Interest received Purchases of items of property, plant and equipment 14 Proceeds from disposal of items of property, plant and equipment Net cash inflow from investing activities – page 25	2008 HK$’000 (8,644 ) 229 (1,321 ) 209 1,650 – – 16 (7,861 ) 299 4,908 481 6,290 1,801 3,588 (856 ) (15,344 ) (6,694 ) (229 ) (74 ) (6,997 ) 1,321 (118 ) 19 1,222	2007 HK$’000 (2,690 ) 175 (1,225 ) 236 2,007 255 255 – (987 ) (435 ) (2,166 ) 445 (499 ) 380 (3,938 ) – 2,645 (4,555 ) (175 ) (156 ) (4,886 ) 1,225 (108 ) – 1,117

• 18 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes Net cash inflow from investing activities – page 24 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue shares 23 Proceeds from issue convertible bond 22 Net cash inflow from financing activities NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year CASH AND CASH EQUIVALENTS AT END OF YEAR ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances 19 Non-pledged time deposits with original maturity of less than three months when acquired 19	2008 HK$’000 1,222 18,216 119,631 137,847 132,072 33,319 165,391 13,909 151,482 165,391	2007 HK$’000 1,117 – – – (3,769 ) 37,088 33,319 2,131 31,188 33,319

• 19 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

BALANCE SHEET

31 March 2008

Notes NON-CURRENT ASSETS Property, plant and equipment 14 Interests in subsidiaries 15 Total non-current assets CURRENT ASSETS Prepayments, deposits and other receivables 18 Cash and cash equivalents 19 Total current assets CURRENT LIABILITIES Other payables and accruals 21 NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Convertible bonds 22 Net assets EQUITY Issued capital 23 Equity component of convertible bonds 22 Reserves 24(b) Total equity	2008 HK$’000 63 19,162 19,225 2,924 152,606 155,530 1,820 153,710 172,935 76,359 96,576 1,389 43,272 51,915 96,576	2007 HK$’000 91 7,328
		7,419
		368 31,856
		32,224
		1,017
		31,207
		38,626
		–
		38,626
		1,159 – 37,467
		38,626

• 20 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

NOTES TO FINANCIAL STATEMENTS

31 March 2008

1. CORPORATE INFORMATION

The Company was incorporated in Bermuda as an exempted company with limited liability on 20 August 1992 and its shares are listed on The Stock Exchange of Hong Kong Limited.

During the year, the Group’s principal activities were involved in the provision of building related maintenance services.

In the opinion of the directors, the holding company and the ultimate holding company of the Company is Upsky Enterprises Limited, which is incorporated in the British Virgin Islands.

2.1 BASIS OF PREPARATION

These financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) (which include all Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“HKASs”) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants, accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. They have been prepared under the historical cost convention. These financial statements are presented in Hong Kong dollars (“HK$”) and all values are rounded to the nearest thousand except when otherwise indicated.

Basis of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries (collectively referred to as the “Group”) for the year ended 31 March 2008. The results of subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. All significant intercompany transactions and balances within the Group are eliminated on consolidation.

Minority interests represent the interests of outside shareholders not held by the Group in the results and net assets of the Company’s subsidiaries.

2.2 IMPACT OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

The Group has adopted the following new and revised HKFRSs for the first time for the current year’s financial statements. Except for in certain cases, giving rise to new and revised accounting policies and additional disclosures, the adoption of these new and revised standards and interpretations has had no material effect on these financial statements.

HKFRS 7 Financial Instruments: Disclosures HKAS 1 Amendment Capital Disclosures HK(IFRIC)-Int 8 Scope of HKFRS 2 HK(IFRIC)-Int 9 Reassessment of Embedded Derivatives HK(IFRIC)-Int 10 Interim Financial Reporting and Impairment HK(IFRIC)-Int 11 HKFRS 2 – Group and Treasury Share Transactions

• 21 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The principal effects of adopting these new and revised HKFRSs are as follows:

(a) HKFRS 7 Financial Instruments: Disclosures

This standard requires disclosures that enable users of the financial statements to evaluate the significance of the Group’s financial instruments and the nature and extent of risks arising from those financial instruments. The new disclosures are included throughout the financial statements. While there has been no effect on the financial position or results of operations of the Group, comparative information has been included/revised where appropriate.

(b) Amendment to HKAS 1 Presentation of Financial Statements – Capital Disclosures

This amendment requires the Group to make disclosures that enable users of the financial statements to evaluate the Group’s objectives, policies and processes for managing capital. These new disclosures are shown in note 29 to the financial statements.

(c) HK(IFRIC)-Int 8 Scope of HKFRS 2

This interpretation requires HKFRS 2 to be applied to any arrangement in which the Group cannot identify specifically some or all of the goods or services received, for which equity instruments are granted or liabilities (based on a value of the Group’s equity instruments) are incurred by the Group for a consideration, and which appears to be less than the fair value of the equity instruments granted or liabilities incurred. As the Group did not issue any equity instruments for the goods or services received, the interpretation has had no effect on these financial statements.

(d) HK(IFRIC)-Int 9 Reassessment of Embedded Derivatives

This interpretation requires that the date to assess whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative is the date that the Group first becomes a party to the contract, with reassessment only if there is a change to the contract that significantly modifies the cash flows. As the Group has no embedded derivative requiring separation from the host contract, the interpretation has had no effect on these financial statements.

(e) HK(IFRIC)-Int 10 Interim Financial Reporting and Impairment

The Group has adopted this interpretation as of 1 January 2007, which requires that an impairment loss recognised in a previous interim period in respect of goodwill or an investment in either an equity instrument classified as available-for-sale or a financial asset carried at cost is not subsequently reversed. As the Group had no impairment losses previously reversed in respect of such assets, the interpretation has had no impact on the financial position or results of operations of the Group.

(f) HK(IFRIC)-Int 11 HKFRS 2 – Group and Treasury Share Transactions

This interpretation requires arrangements whereby an employee is granted rights to the Group’s equity instruments, to be accounted for as an equity-settled scheme, even if the Group acquires the instruments from another party, or the shareholders provide the equity instruments needed. HK(IFRIC)-Int 11 also addressed the accounting for share-based payment transactions involving two or more entities within the Group. As the Group currently does not have such transactions, the interpretation has had no impact on the Group.

• 22 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

2.3 IMPACT OF ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS

The Group has not applied the following new and revised HKFRSs, that have been issued but are not yet effective, in these financial statements.

HKAS 1 (Revised) Presentation of Financial Statements[1] HKAS 23 (Revised) Borrowing Costs[1] HKAS 27 (Revised) Consolidated and Separate Financial Statements[4] HKAS 32 and HKAS 1 Amendments to HKAS 3 2 Financial Instruments: Amendments Presentation and HKAS 1 Presentation of Financial Statements – Puttable Financial Instruments and Obligations Arising on Liquidation[1] HKFRS 2 Amendments Amendments to HKFRS 2 Share-based Payment-Vesting Conditions and Cancellations[1] HKFRS 3 (Revised) Business Combinations[4] HKFRS 8 Operating Segments[1] HK(IFRIC)-Int 12 Service Concession Arrangements[3] HK(IFRIC)-Int 13 Customer Loyalty Programmes[2] HK(IFRIC)-Int 14 HKAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction[3]

• 1 Effective for annual periods beginning on or after 1 January 2009 2 Effective for annual periods beginning on or after 1 July 2008 3 Effective for annual periods beginning on or after 1 January 2008 4 Effective for annual periods beginning on or after 1 July 2009

The revised HKAS 1 separates owner and non-owner changes in equity. The statement of changes in equity will include only details of transactions with owners, with all non-owner changes in equity presented as a single line. In addition, the Standard introduces the statement of comprehensive income: it presents all items of income and expense recognised in profit or loss, together with all other items of recognised income and expense, either in one single statement, or in two linked statements. The Group is still evaluating whether it will have one or two statements.

HKAS 23 has been revised to require capitalisation of borrowing costs when such costs are directly attributable to the acquisition, construction or production of a qualifying asset. As the Group’s current policy for borrowing costs aligns with the requirements of the revised standard, the revised standard is unlikely to have any financial impact on the Group.

The revised HKAS 27 requires that a change in the ownership interest of a subsidiary is accounted for as an equity transaction. Therefore, such a change will have no impact on goodwill, nor will it give rise to a gain or loss. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary. The changes introduced by the revised HKAS 27 must be applied prospectively and will affect future acquisitions and transactions with minority interests.

The amendments to HKAS 32 and HKAS 1 allow a limited scope exception for puttable financial instruments to be classified as equity if they fulfil a number of specified criteria. As the Group currently has no such financial instruments, the amendments are unlikely to have any financial impact on the Group.

• 23 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The amendments to HKFRS 2 restrict the definition of “vesting condition” to a condition that includes an explicit or implicit requirement to provide services. Any other conditions are non-vesting conditions, which have to be taken into account to determine the fair value of the equity instruments granted. In the case that the award does not vest as the result of a failure to meet a non-vesting condition that is within the control of either the entity or the counterparty, this must be accounted for as a cancellation. The Group has not entered into share-based payment schemes with non-vesting conditions attached and, therefore, does not expect significant implications on its accounting for share-based payments.

The revised HKFRS 3 introduces a number of changes in the accounting for business combinations that will have impact on the amount of goodwill recognised, the reported results in the period that an acquisition occurs, and future reported results. The changes introduced by the revised HKFRS 3 must be applied prospectively and will affect future acquisitions and transactions with minority interests.

HKFRS 8, which will replace HKAS 14 Segment Reporting , specifies how an entity should report information about its operating segments, based on information about the components of the entity that is available to the chief operating decision maker for the purposes of allocating resources to the segments and assessing their performance. The standard also requires the disclosure of information about the products and services provided by the segments, the geographical areas in which the Group operates, and revenue from the Group’s major customers. The Group expects to adopt HKFRS 8 from 1 April 2009.

HK(IFRIC)-Int 12 requires an operator under public-to-private service concession arrangements to recognise the consideration received or receivable in exchange for the construction services as a financial asset and/or an intangible asset, based on the terms of the contractual arrangements. HK(IFRIC)-Int 12 also addresses how an operator shall apply existing HKFRSs to account for the obligations and the rights arising from service concession arrangements by which a government or a public sector entity grants a contract for the construction of infrastructure used to provide public services and/or for the supply of public services. As the Group currently has no such arrangements, the interpretation is unlikely to have any financial impact on the Group.

HK(IFRIC)-Int 13 requires that loyalty award credits granted to customers as part of a sales transaction are accounted for as a separate component of the sales transaction. The consideration received in the sales transaction is allocated between the loyalty award credits and the other components of the sale. The amount allocated to the loyalty award credits is determined by reference to their fair value and is deferred until the awards are redeemed or the liability is otherwise extinguished.

HK(IFRIC)-Int 14 addresses how to assess the limit under HKAS 19 Employee Benefits , on the amount of a refund or a reduction in future contributions in relation to a defined benefit scheme that can be recognised as an asset, in particular, when a minimum funding requirement exists.

As the Group currently has no customer loyalty award credits and defined benefit scheme, HK(IFRIC)-Int 13 and HK(IFRIC)-Int 14 are not applicable to the Group and therefore are unlikely to have any financial impact on the Group.

The Group is in the process of making an assessment of the impact of these new and revised HKFRSs upon initial application. So far, it has concluded that while the adoption of HKFRS 8 may result in new or amended disclosures, these new and revised HKFRSs are unlikely to have a significant impact on the Group’s results of operations and financial position.

• 24 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Subsidiaries

A subsidiary is an entity whose financial and operating policies the Company controls, directly or indirectly, so as to obtain benefits from its activities.

The results of subsidiaries are included in the Company’s income statement to the extent of dividends received and receivable. The Company’s interests in subsidiaries are stated at cost less any impairment losses.

Impairment of non-financial assets other than goodwill

Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than construction contract assets, deferred tax assets and financial assets), the asset’s recoverable amount is estimated. An asset’s recoverable amount is calculated as the higher of the asset’s or cash-generating unit’s value in use and its fair value less costs to sell, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to the income statement in the period in which it arises, unless the asset is carried at a revalued amount, in which case the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset other than goodwill and certain financial assets is reversed only if there has been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in prior years. A reversal of such impairment loss is credited to the income statement in the period in which it arises, unless the asset is carried at a revalued amount, in which case the reversal of the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

Property, plant and equipment and depreciation

Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to the income statement in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of an item of property, plant and equipment and the cost of the item can be measured reliably, the expenditure is capitalised as an additional cost of that asset or as a replacement.

• 25 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Depreciation is calculated on the straight-line basis to write off the cost of each item of property, plant and equipment to its residual value over its estimated useful life. The principal annual rates used for this purpose are as follows:

Land and buildings	2%
Furniture and office equipment	20%
Motor vehicles	20%
Leasehold improvements	3 years or over the lease terms, whichever is shorter

Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is depreciated separately.

Residual values, useful lives and the depreciation method are reviewed, and adjusted if appropriate, at each balance sheet date.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognised in the income statement in the year the asset is derecognised is the difference between the net sales proceeds and the carrying amount of the relevant asset.

Leases

Leases that transfer substantially all the rewards and risks of ownership of assets to the Group, other than legal title, are accounted for as finance leases. At the inception of a finance lease, the cost of the leased asset is capitalised at the present value of the minimum lease payments and recorded together with the obligation, excluding the interest element, to reflect the purchase and financing. Assets held under capitalised finance leases are included in property, plant and equipment, and depreciated over the shorter of the lease terms and the estimated useful lives of the assets. The finance costs of such leases are charged to the income statement so as to provide a constant periodic rate of charge over the lease terms.

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Where the Group is the lessee, rentals payable under the operating leases net of any incentives received from the lessor are charged to the income statement on the straight-line basis over the lease terms.

Prepaid land lease payments under operating leases are initially stated at cost and subsequently recognised on the straight-line basis over the lease terms. When the lease payments cannot be allocated reliably between the land and buildings elements, the entire lease payments are included in the cost of the land and buildings as a finance lease in property, plant and equipment.

Investments and other financial assets

Financial assets in the scope of HKAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, and available-for-sale financial assets, as appropriate. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

The Group assesses whether a contract contains an embedded derivative when the Group first becomes a party to it and assesses whether an embedded derivative is required to be separated from the host contract when the analysis shows that the economic characteristics and risks of the embedded derivative are not closely related to those of the host contract. Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required under the contract.

• 26 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The Group determines the classification of its financial assets after initial recognition and, where allowed and appropriate, re-evaluates this designation at the balance sheet date.

All regular way purchases and sales of financial assets are recognised on the trade date, that is, the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are subsequently carried at amortised cost using the effective interest method less any allowance for impairment. Amortised cost is calculated taking into account any discount or premium on acquisition and includes fees that are an integral part of the effective interest rate and transaction costs. Gains and losses are recognised in the income statement when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

Impairment of financial assets

The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset or a group of financial assets is impaired.

Assets carried at amortised cost

If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly or through the use of an allowance account. The amount of the impairment loss is recognised in the income statement. Loans and receivables together with any associated allowances are written off when there is no realistic prospect of future recovery.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed by adjusting the allowance account. Any subsequent reversal of an impairment loss is recognised in the income statement, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

In relation to trade receivables, a provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor and significant changes in the technological, market economic or legal environment that have an adverse effect on the debtor) that the Group will not be able to collect all of the amounts due under the original terms of an invoice. The carrying amount of the receivables is reduced through the use of an allowance account. Impaired debts are derecognised when they are assessed as uncollectible.

• 27 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Derecognition of financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised where:

• the rights to receive cash flows from the asset have expired;

• the Group retains the rights to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a “pass-through” arrangement; or

• the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Where the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Where continuing involvement takes the form of a written and/or purchased option (including a cashsettled option or similar provision) on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that the Group may repurchase, except in the case of a written put option (including a cash-settled option or similar provision) on an asset measured at fair value, where the extent of the Group’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.

Financial liabilities at amortised cost

Financial liabilities including trade and other payables are initially stated at fair value less directly attributable transaction costs and are subsequently measured at amortised cost, using the effective interest method unless the effect of discounting would be immaterial, in which case they are stated at cost. The related interest expense is recognised within “finance costs” in the income statement.

Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the amortisation process.

Convertible bonds

The component of convertible bonds that exhibits characteristics of a liability is recognised as a liability in the balance sheet, net of transaction costs. On issuance of convertible bonds, the fair value of the liability component is determined using a market rate for an equivalent non-convertible bond; and this amount is carried as a long term liability on the amortised cost basis until extinguished on conversion or redemption. The remainder of the proceeds is allocated to the conversion option that is recognised and included in shareholders’ equity, net of transaction costs. The carrying amount of the conversion option is not remeasured in subsequent years. Transaction costs are apportioned between the liability and equity components of the convertible bonds based on the allocation of proceeds to the liability and equity components when the instruments are first recognised.

Derecognition of financial liabilities

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

• 28 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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

Construction contracts

Contract revenue comprises the agreed contract amount and appropriate amounts from variation orders, claims and incentive payments. Contract costs incurred comprise direct materials, the costs of subcontracting, direct labour and an appropriate proportion of variable and fixed installation and maintenance overheads.

Revenue from fixed price installation and maintenance contracts is recognised by the percentage of completion method, measured by reference to the percentage of certified work performed to date to the estimated total contract sum of the relevant contracts. When the outcome of the contracts cannot be estimated reliably, revenue is recognised only to the extent of certified work performed that is probable to be recoverable.

Provision is made for foreseeable losses as soon as they are anticipated by management.

Where contract costs incurred to date plus recognised profits less recognised losses exceed progress billings, the surplus is treated as an amount due from contract customers.

Where progress billings exceed contract costs incurred to date plus recognised profits less recognised losses, the surplus is treated as an amount due to contract customers.

Income tax

Income tax comprises current and deferred tax. Income tax is recognised in the income statement, or in equity if it relates to items that are recognised in the same or a different period directly in equity.

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities.

Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

• where the deferred tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carryforward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax credits and unused tax losses can be utilised, except:

• where the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• 29 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

• in respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Conversely, previously unrecognised deferred tax assets are reassessed at each balance sheet date and are recognised to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Foreign currencies

These financial statements are presented in Hong Kong dollars, which is the Company’s functional and presentation currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Foreign currency transactions are initially recorded using the functional currency rates ruling at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rates of exchange ruling at the balance sheet date. All differences are taken to the income statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

The functional currencies of certain overseas subsidiaries are currencies other than the Hong Kong dollar. As at the balance sheet date, the assets and liabilities of these entities are translated into the presentation currency of the Company at exchange rates ruling at the balance sheet date, and their income statements are translated into Hong Kong dollars at the weighted average exchange rates for the year. The resulting exchange differences are included in the exchange fluctuation reserve. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the income statement.

For the purpose of the consolidated cash flow statement, the cash flows of overseas subsidiaries are translated into Hong Kong dollars at the exchange rates ruling at the dates of the cash flows. Frequently recurring cash flows of overseas subsidiaries and the associate which arise throughout the year are translated into Hong Kong dollars at the weighted average exchange rates for the year.

Other employee benefits – Retirement benefits schemes

The Group operates two defined contribution retirement benefits schemes, including an Occupational Retirement Schemes Ordinance retirement benefits scheme (the “ORSO Scheme”) and a Mandatory Provident Fund retirement benefits scheme (the “MPF Scheme”) under the Mandatory Provident Fund Schemes Ordinance, for all of its employees (including executive directors).

• 30 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The ORSO Scheme is managed by an independent trustee. The Group makes monthly contributions to the scheme at 5% to 15% of the employees’ basic salaries while the employees are not required to make any contributions. The employees are entitled to receive 100% of the contributions made by the Group together with the accrued earnings thereon upon retirement or leaving the Group after completing 10 years of service or at a reduced scale of 30% to 90% after completing three to nine years of service. Forfeited contributions and related earnings are used to reduce the contributions payable by the Group.

Under the MPF Scheme, contributions are made based on a percentage of the employees’ basic salaries and are charged to the income statement as they become payable in accordance with the rules of the MPF Scheme. The Group’s employer contributions vest fully with the employees when contributed into the MPF Scheme, except for the Group’s employer voluntary contributions, which are refunded to the Group when the employee leaves employment prior to the contributions vesting fully, in accordance with the rules of the MPF Scheme.

The assets of both schemes are held separately from those of the Group in independently administered funds.

Cash and cash equivalents

For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments which are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Group’s cash management.

For the purpose of the balance sheets, cash and cash equivalents comprise cash on hand and at banks, including term deposits, which are not restricted as to use.

Related parties

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

• (a) the party, directly or indirectly through one or more intermediaries, (i) controls, is controlled by, or is under common control with, the Group; (ii) has an interest in the Group that gives it significant influence over the Group; or (iii) has joint control over the Group;

• (b) the party is an associate;

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

• (d) the party is a close member of the family of any individual referred to in (a) or (c);

• (e) the party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (c) or (d); or

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

• 31 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Revenue recognition

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

• (a) from construction contracts, on the percentage of completion basis, as further explained in the accounting policy for “Construction contracts” above; and

• (b) interest income, on an accrual basis using the effective interest method by applying the rate that discounts the estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset.

4. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

Judgements

The preparation of the Group’s financial statements requires the use of estimates and assumptions about future events and conditions. In this connection, the directors consider the significant areas where management’s judgement is necessary are those in relation to (i) the provision for foreseeable losses on the amounts due from contract customers; and (ii) the recognition of losses on the Group’s trade receivables and retention money receivables.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are considered to be reasonable. It should be noted that actual results could differ from those estimates.

Estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

The Group tests annually whether property, plant and equipment have suffered any impairment, in accordance with the accounting policy for property, plant and equipment stated in note 3. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates such as future revenue and discount rates.

5. SEGMENT INFORMATION

(a) Business segments

The Group’s revenue is principally derived from the provision of building related maintenance services. The Group has only one business segment.

(b) Geographical segments

No geographical segment information is presented as over 90% of the Group’s revenue is derived from customers based in Hong Kong, and over 90% of the Group’s assets are located in Hong Kong.

• 32 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

6. REVENUE AND OTHER INCOME

Revenue, which is also the Group’s turnover, represents the net invoiced value of services rendered of contract revenue from building services contracting and maintenance businesses during the year.

An analysis of the Group’s revenue and other income is as follows:

Revenue Building services contracting and maintenance businesses Other income Bank interest income Others	Group 2008 2007 HK$’000 HK$’000 130,682 210,512 1,321 1,225 256 – 1,577 1,225	Group 2008 2007 HK$’000 HK$’000 130,682 210,512 1,321 1,225 256 – 1,577 1,225
		1,225 –
		1,225

7. LOSS BEFORE TAX

The Group’s loss before tax is arrived at after charging/(crediting):

Employee benefits expense (including directors’ remuneration_(note 9)) Wages, salaries and bonuses Pension scheme contributions Less: Amount capitalised in contract costs Amounts charged to administrative expenses Auditors’ remuneration Cost of maintenance Depreciation(note 14) Minimum lease payments under operating leases in respect of land and buildings Other operating expenses Impairment of trade receivables(note 17)_ Impairment of other receivables Impairment of retention money receivables Loss on disposal of items of property, plant and equipment	Group 2008 2007 HK$’000 HK$’000 18,525 27,646 1,148 1,350 19,673 28,996 (10,248 ) (16,275 ) 9,425 12,721 680 561 124,541 194,103 209 236 556 620 1,650 2,007 – 255 – 255 16 – 1,666 2,517	Group 2008 2007 HK$’000 HK$’000 18,525 27,646 1,148 1,350 19,673 28,996 (10,248 ) (16,275 ) 9,425 12,721 680 561 124,541 194,103 209 236 556 620 1,650 2,007 – 255 – 255 16 – 1,666 2,517
		28,996 (16,275 )
		12,721
		561 194,103 236 620 2,007 255 255 –
		2,517

• 33 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

• As at 31 March 2008, the Group did not have significant forfeited contributions available to reduce its contributions to the pension schemes in future years (2007: Nil).

8. FINANCE COSTS

Interest on bank loans, overdrafts and other loans wholly repayable within five years Other	Group 2008 2007 HK$’000 HK$’000 129 92 100 83 229 175	Group 2008 2007 HK$’000 HK$’000 129 92 100 83 229 175
		175

No interest was capitalised by the Group in the current and prior years.

9. DIRECTORS’ REMUNERATION

Directors’ remuneration for the year, disclosed pursuant to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and Section 161 of the Hong Kong Companies Ordinance, is as follows:

Fees: Executive directors Non-executive director Independent non-executive directors Other emoluments to executive directors: Salaries, allowances and benefits in kind Performance related payments Pension scheme contributions	Group 2008 2007 HK$’000 HK$’000 60 – 350 – 168 231 578 231 – 314 – – – 12 – 326 578 557	Group 2008 2007 HK$’000 HK$’000 60 – 350 – 168 231 578 231 – 314 – – – 12 – 326 578 557
		231
		314 – 12
		326
		557

• 34 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(a)

Independent non-executive directors

The fees paid to independent non-executive directors during the year were as follows:

Ye Jianping Derek Palaschuk (appointed on 25 February 2008) Yao Xusheng (appointed on 6 March 2008) Zhang Shaohua (redesignation to executive director on 6 March 2008) Yu Hon To, David (resigned on 24 October 2007) Ho Hin Kwan, Edmund (resigned on 1 August 2006) Chan Chok Ki (resigned on 2 May 2006)	2008 HK$’000 73 17 8 – 70 – – 168	2007 HK$’000 30 – – 30 120 40 11
		231

There were no other emoluments payable to the independent non-executive directors during the year (2007: Nil).

(b) Executive directors and a non-executive director

2008 Executive directors: Cao Jing (appointed on 2 May 2006) Zhang Shaohua (redesignation on 6 March 2008) Non-executive directors: Mo Tianquan (redesignation to non executive director on 6 March 2008)	Fees HK$’000 – 60 60 350	Salaries, allowances and benefits in kind HK$’000 – – – –	Performance Pension related scheme Total payments contributions remuneration HK$’000 HK$’000 HK$’000 – – – – – 60 – – 60 – – 350	Performance Pension related scheme Total payments contributions remuneration HK$’000 HK$’000 HK$’000 – – – – – 60 – – 60 – – 350
				60
				350

• 35 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Fees HK$’000 2007 Executive directors: Cao Jing (appointed on 2 May 2006) – Mo Tianquan (appointed on 2 May 2006) – Au Shiu Wai, Frank (resigned on 1 February 2006) – Au Yu Fai, Patrick (resigned on 19 July 2006) – Chan Yuen Keung, Zuric (resigned on 19 July 2006) – Hong Yiu (resigned on 19 July 2006) – Yu Sek Kee, Stephen (resigned on 16 September 2006) – –	Salaries, allowances and benefits in kind HK$’000 – – – 134 180 – – 314	Performance Pension related scheme Total payments contributions remuneration HK$’000 HK$’000 HK$’000 – – – – – – – – – – 10 144 – 2 182 – – – – – – – 12 326	Performance Pension related scheme Total payments contributions remuneration HK$’000 HK$’000 HK$’000 – – – – – – – – – – 10 144 – 2 182 – – – – – – – 12 326
			326

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

10. FIVE HIGHEST PAID EMPLOYEES

The five highest paid employees of the Group did not include any directors (2007: included two directors), details of whose remuneration are set out in note 9 above. Details of the remuneration of the five (2007: three) non-director, highest paid employees for the year are as follows:

Salaries, allowances and benefits in kind Pension scheme contributions	Group 2008 2007 HK$’000 HK$’000 3,161 2,916 176 189 3,337 3,105	Group 2008 2007 HK$’000 HK$’000 3,161 2,916 176 189 3,337 3,105
		3,105

The remuneration of the five (2007: three) non-director, highest paid employees fell within the band of HK$1 to HK$1,500,000.

• 36 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

11. TAX

The Company is exempt from tax in Bermuda until 2016. Hong Kong profits tax has been provided at the rate of 17.5% (2007: 17.5%) on the estimated assessable profits arising in Hong Kong during the year.

Current – Hong Kong Charge for the year Overprovision in prior years Total tax charge for the year	Group 2008 2007 HK$’000 HK$’000 60 56 – (20 ) 60 36

A reconciliation of the tax credit applicable to loss before tax using the statutory rate in Hong Kong to the tax charge for the year is as follows:

Loss before tax Tax at the statutory tax rate 17.5% (2007: 17.5%) Adjustments in respect of current tax of previous years Income not subject to tax Expenses not deductible for tax Tax losses utilised from previous years Tax losses not recognised Others Tax charge for the year	Group 2008 2007 HK$’000 HK$’000 (8,644 ) (2,690 ) (1,513 ) (471 ) – (20 ) (231 ) (214 ) 860 407 – (76 ) 921 430 23 (20 ) 60 36

The Group has tax losses arising in Hong Kong of approximately HK$20,987,000 (2007: HK$15,722,000) that are available indefinitely for offsetting against future taxable profits of the companies in which the losses arose. Deferred tax assets have not been recognised in respect of these losses as they have arisen in subsidiaries that have been lossmaking for some time and it is not considered probable that future taxable profits will be available against which the tax losses can be utilised.

12. LOSS ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT

The loss attributable to equity holders of the parent for the year ended 31 March 2008 includes a loss of HK$3,538,000 (2007: HK$1,095,000) which has been dealt with in the financial statements of the Company (note 24(b)).

• 37 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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

The calculation of basic loss per share is based on the loss for the year attributable to equity holders of the parent, and the weighted average number of ordinary shares in issue during the year.

The calculation of diluted loss per share amounts is based on the loss for the year attributable to equity holders of the parent, adjusted to reflect the interest on the convertible bonds of the Company and the dilution effect on loss assuming there is a full conversion of the convertible bonds of the Company, where applicable (see below). The number of ordinary shares used in the calculation is the weighted average number of ordinary shares in issue during the year, as used in the basic loss per share calculation.

The calculations of basic loss and diluted loss per share are based on:

Loss Loss attributable to equity holders of the parent Shares Weighted average number of shares in issue during the year used in the basic loss per share calculation Effect of dilution of the convertible bonds on the weighted average number of shares	Group 2008 2007 HK$’000 HK$’000 8,361 2,508 Number of shares 2008 2007 128,470,126 115,930,400 1,643,836 – 130,113,962 115,930,400	Group 2008 2007 HK$’000 HK$’000 8,361 2,508 Number of shares 2008 2007 128,470,126 115,930,400 1,643,836 – 130,113,962 115,930,400
		115,930,400

• Because the diluted loss per share amount is decreased when taking convertible bonds of the Company into account, the convertible bonds of the Company had anti-dilutive effect on the basic loss per share for the year. Therefore, no diluted loss per share amount is disclosed.

No diluted loss per share for the year ended 31 March 2007 was computed as there was no diluting event during that year.

• 38 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

14. PROPERTY, PLANT AND EQUIPMENT

Group

31 March 2008 At 31 March 2007 and at 1 April 2007: Cost Accumulated depreciation Net carrying amount At 1 April 2007, net of accumulated depreciation Additions Disposal Depreciation provided during the year At 31 March 2008, net of accumulated depreciation At 31 March 2008: Cost Accumulated depreciation Net carrying amount	Land and buildings HK$’000 3,086 (792 ) 2,294 2,294 – – (62 ) 2,232 3,086 (854 ) 2,232	Furniture and office equipment HK$’000 849 (663 ) 186 186 7 – (73 ) 120 856 (736 ) 120	Motor vehicles HK$’000 271 (216 ) 55 55 – (35 ) (11 ) 9 194 (185 ) 9	Leasehold improvements HK$’000 323 (244 ) 79 79 111 – (63 ) 127 434 (307 ) 127	Total HK$’000 4,529 (1,915 ) 2,614 2,614 118 (35 ) (209 ) 2,488 4,570 (2,082 ) 2,488

• 39 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Group

31 March 2007 At 1 April 2006: Cost Accumulated depreciation Net carrying amount At 1 April 2006, net of accumulated depreciation Additions Depreciation provided during the year At 31 March 2007, net of accumulated depreciation At 31 March 2007: Cost Accumulated depreciation Net carrying amount	Land and buildings HK$’000 3,086 (730 ) 2,356 2,356 – (62 ) 2,294 3,086 (792 ) 2,294	Furniture and office equipment HK$’000 798 (557 ) 241 241 51 (106 ) 186 849 (663 ) 186	Motor vehicles HK$’000 271 (193 ) 78 78 – (23 ) 55 271 (216 ) 55	Leasehold improvements HK$’000 266 (199 ) 67 67 57 (45 ) 79 323 (244 ) 79	Total HK$’000 4,421 (1,679 ) 2,742 2,742 108 (236 ) 2,614 4,529 (1,915 ) 2,614

The Group’s land and buildings are located in Hong Kong and are held under medium term leases.

• 40 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Company

31 March 2008 At 1 April 2007: Cost Accumulated depreciation Net carrying amount At 1 April 2007, net of accumulated depreciation Additions Depreciation provided during the year At 31 March 2008, net of accumulated depreciation At 31 March 2008: Cost Accumulated depreciation Net carrying amount	Furniture and office equipment HK$’000 46 (4 ) 42 42 1 (9 ) 34 47 (13 ) 34	Leasehold improvements HK$’000 57 (8 ) 49 49 – (20 ) 29 57 (28 ) 29	Total HK$’000 103 (12 ) 91 91 1 (29 ) 63 104 (41 ) 63

• 41 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Company

31 March 2007 At 1 April 2006: Cost Accumulated depreciation Net carrying amount At 1 April 2006, net of accumulated depreciation Additions Depreciation provided during the year At 31 March 2007, net of accumulated depreciation At 31 March 2007: Cost Accumulated depreciation Net carrying amount 15. INTERESTS IN SUBSIDIARIES Unlisted shares, at cost Due from subsidiaries Due to subsidiaries	Furniture and office equipment HK$’000 – – – – 46 (4 ) 42 46 (4 ) 42		Leasehold improvements Total HK$’000 HK$’000 – – – – – – – – 57 103 (8 ) (12 ) 49 91 57 103 (8 ) (12 ) 49 91 Company 2008 2007 HK$’000 HK$’000 2 1 19,319 7,486 (159 ) (159 ) 19,162 7,328

The amounts advanced to the subsidiaries included in the interests in subsidiaries above are unsecured, interestfree, and are not repayable within one year. In the opinion of the Company’s directors, these advances are considered as quasi-equity loans to the subsidiaries. The amount due to subsidiaries are unsecured, interest-free and are not repayable within one year.

The carrying amounts of balances with subsidiaries approximate to their fair values.

• 42 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Particulars of the principal subsidiaries at the balance sheet date are as follows:

		Nominal value	Percentage
	Place of	of issued	of equity
	incorporation	ordinary	attributable to	Principal
Name	and operations	share capital	the Company*	activities
Ever Billion	Hong Kong	HK$100	100.00*	Provision of building
Engineering				and electrical
Limited				maintenance
				services
Shun Cheong Real	Hong Kong	HK$10,000	100.00*	Property holding
Estates Limited
Tinhawk Company	Hong Kong	HK$2,000,000	90.00*	Installation and
Limited				maintenance of
				water pumps
				and fire
				prevention and
				fighting systems
Aykens Holdings	British Virgin	US$100	100.00	Investment holding
Limited	Islands
Hopland Enterprises	British Virgin	US$100	100.00	Investment holding
Limited	Islands

• These subsidiaries are held indirectly by the Company.

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

16. GROSS AMOUNTS DUE FROM/(TO) CONTRACT CUSTOMERS

Gross amount due from contract customers Gross amount due to contract customers Contract costs incurred plus recognised profits less recognised losses and foreseeable losses to date Less: Progress billings	Group 2008 2007 HK$’000 HK$’000 28,147 28,446 (15,014 ) (13,213 ) 13,133 15,233 1,056,585 928,003 (1,043,452 ) (912,770 ) 13,133 15,233

• 43 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

At 31 March 2008, the retentions held by customers for contract works included in retention money receivables included in the current assets of the Group amounted to approximately HK$171,000 (2007: HK$652,000).

At 31 March 2008, the retentions held by the Group for contract works included in retention money payables included in current liabilities of the Group amounted to approximately HK$696,000 (2007: HK$1,552,000).

17. TRADE RECEIVABLES

Trade receivables Impairment	Group 2008 2007 HK$’000 HK$’000 30,520 36,522 (4,092 ) (3,536 ) 26,428 32,986	Group 2008 2007 HK$’000 HK$’000 30,520 36,522 (4,092 ) (3,536 ) 26,428 32,986
		32,986

The Group grants to its trade customers credit periods normally ranging from cash on delivery to 60 days. A longer credit period is granted to a few customers with long business relationships with the Group and with strong financial positions. The Group seeks to maintain strict control over its outstanding receivables to minimise credit risk. Overdue balances are reviewed regularly by senior management. In view of the aforementioned and the fact that the Group’s trade receivables relate to a large number of diversified customers, there is no significant concentration of credit risk. Trade receivables are non-interest-bearing.

An aged analysis of the trade receivables as at the balance sheet date, based on the invoice date and net of impairment of trade receivables, is as follows:

0 to 30 days 31 to 60 days 61 to 90 days Over 90 days	Group 2008 2007 HK$’000 HK$’000 7,942 10,385 4,269 3,630 2,733 2,659 11,484 16,312 26,428 32,986	Group 2008 2007 HK$’000 HK$’000 7,942 10,385 4,269 3,630 2,733 2,659 11,484 16,312 26,428 32,986
		32,986

The movements in provision for impairment of trade receivables are as follows:

At 1 January Impairment losses recognised_(note 7)_ Amounts written off as uncollectible	Group 2008 2007 HK$’000 HK$’000 3,536 1,529 1,650 2,007 (1,094 ) – 4,092 3,536	Group 2008 2007 HK$’000 HK$’000 3,536 1,529 1,650 2,007 (1,094 ) – 4,092 3,536
		3,536

• 44 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The above provision for impairment of trade receivables represented provision for individually impaired trade receivables which related to customers that were in default or delinquency in payments. The Group does not hold any collateral or other credit enhancements over these balances.

The aged analysis of the trade receivables that are neither individually nor collectively considered to be impaired is as follows:

Neither past due nor impaired Less than 30 days past due 31 to 90 days past due Past due over 90 days	Group 2008 2007 HK$’000 HK$’000 1,411 1,061 6,531 9,324 6,921 6,353 11,565 16,248 26,428 32,986	Group 2008 2007 HK$’000 HK$’000 1,411 1,061 6,531 9,324 6,921 6,353 11,565 16,248 26,428 32,986
		32,986

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

Receivables that were past due but not impaired relate to a number of independent customers that have a good track record with the Group. Based on past experience, the directors of the Company are of the opinion that no provision for impairment 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 or other credit enhancements over these balances.

18 PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES

Prepayment Deposits and other receivables	Group 2008 2007 HK$’000 HK$’000 236 123 16,610 23,013 16,846 23,136	Company 2008 2007 HK$’000 HK$’000 142 123 2,782 245 2,924 368	Company 2008 2007 HK$’000 HK$’000 142 123 2,782 245 2,924 368
			368

None of the above assets are either past due or impaired. The financial assets included in the above balances relate to receivables for which where was no recent history of default.

• 45 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

19. CASH AND CASH EQUIVALENTS

Cash and bank balances Time deposits Cash and cash equivalents	Group 2008 2007 HK$’000 HK$’000 13,909 2,131 151,482 31,188 165,391 33,319	Company 2008 2007 HK$’000 HK$’000 1,124 668 151,482 31,188 152,606 31,856	Company 2008 2007 HK$’000 HK$’000 1,124 668 151,482 31,188 152,606 31,856
			31,856

Cash at banks earns interest at floating rates based on daily bank deposit rates. Short term time deposits are made for varying periods of between one week and one month depending on the immediate cash requirements of the Group, and earn interest at the respective short term time deposit rates. The bank balances are deposited with creditworthy banks with no recent history of default. The carrying amounts of the cash and bank balances and the time deposits approximate to their fair values.

20. TRADE PAYABLES

An aged analysis of the trade payables as at the balance sheet date, based on the invoice date, is as follows:

Current to 30 days 31 to 60 days Over 60 days	Group 2008 2007 HK$’000 HK$’000 10,852 5,742 610 368 9,467 11,231 20,929 17,341	Group 2008 2007 HK$’000 HK$’000 10,852 5,742 610 368 9,467 11,231 20,929 17,341
		17,341

The trade payables are non-interest-bearing and are normally settled on 60-day terms.

21. OTHER PAYABLES AND ACCRUALS

Other payables Accruals	Group 2008 2007 HK$’000 HK$’000 12,444 24,590 7,433 10,631 19,877 35,221	Company 2008 2007 HK$’000 HK$’000 581 562 1,239 455 1,820 1,017	Company 2008 2007 HK$’000 HK$’000 581 562 1,239 455 1,820 1,017
			1,017

Except for an outstanding other payable balance of the Group of HK$1,074,000 (2007: HK$1,263,000) which bears interest at the Hong Kong dollar prime rate per annum, other payables are non-interest-bearing and are payable on demand or to be settled within three months.

• 46 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

22. CONVERTIBLE BONDS

On 28 March 2008, the Company issued convertible bonds with a nominal value of HK$120,000,000 (the “Bonds”). There was no movement in the number of the Bonds during the year. The Bonds have a five-year term and were issued at par, resulting in total proceeds of HK$120,000,000. Interest is payable half yearly in arrears at a nominal annual interest rate of 1%. Each bond is convertible at any time from the first anniversary of the issue date to the maturity date, at the holder’s option, into 200,000,000 ordinary shares of the Company at an initial conversion price of HK$0.6 per share, subject to adjustments in certain events. The Bonds may be redeemed at the option of the Company in whole or in part, upon the written confirmation has been obtained from the bondholder in accordance with the terms of the Bonds.

The fair value of the liability component was estimated at the issuance date using an equivalent market interest rate for a similar bond without a conversion option. The residual amount is assigned as the equity component and is included in shareholders’ equity.

The Bonds issued during the year have been split as to the liability and equity components, as follow:

Nominal value of the Bonds issued during the year Equity component* Direct transaction costs attributable to the liability component Liability component at the issuance date and at 31 March 2008	2008 HK$’000 120,000 (43,405 ) (236 )
	76,359

The effective interest rate of the Bonds was 10.5% per annum. The fair value of the liability component of the Bonds was estimated using an equivalent market interest rate for a similar convertible bond. The carrying amounts of the Bonds approximate to their fair values.

• The direct transaction costs attributable to the equity component of the Bonds amounted to HK$133,000.

23. SHARE CAPITAL

Authorised: 8,000,000,000 ordinary shares of HK$0.01 each (2007: 8,000,000,000 ordinary shares of HK$0.01 each) Issued and fully paid: 138,930,400 ordinary shares of HK$0.01 each (2007: 115,930,400 ordinary shares of HK$0.01 each)	Company 2008 2007 HK$’000 HK$’000 80,000 80,000 1,389 1,159	Company 2008 2007 HK$’000 HK$’000 80,000 80,000 1,389 1,159
		1,159

On 15 September 2007, the Company allotted and issued 23,000,000 ordinary shares of HK$0.01 each at the price of HK$0.792 per share to two new investors, resulting in total proceeds of HK$18,216,000. The purpose of the issue was to provide additional working capital.

• 47 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

A summary of the transactions during the year with reference to the above movement in the Company’s issued share capital is as follows:

At 1 April 2006, 31 March 2007 and 1 April 2007 Issue of shares As at 31 March 2008	Number of shares in issue 115,930,400 23,000,000 138,930,400	Issued capital HK$’000 1,159 230 1,389	Share premium account HK$’000 – 17,986 17,986	Total HK$’000 1,159 18,216
				19,375

24. RESERVES

(a) Group

The amounts of the Group’s reserves and the movements therein for the current and prior years are presented in the consolidated statement of changes in equity on page 23 of the financial statements.

(b) Company

At 1 April 2006 Loss for the year At 31 March 2007 and 1 April 2007 Issue of shares Loss for the year At 31 March 2008	Share premium account HK$’000 – – – 17,986 – 17,986	Contributed surplus* HK$’000 60,918 – 60,918 – – 60,918	Capital redemption reserve HK$’000 132 – 132 – – 132	Accumulated losses HK$’000 (22,488 ) (1,095 ) (23,583 ) – (3,538 ) (27,121 )	Total HK$’000 38,562 (1,095 )
					37,467 17,986 (3,538 )
					51,915

• Under the Companies Act 1981 of Bermuda (as amended), the contributed surplus is distributable to shareholders in certain circumstances.

• 48 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

25. RELATED PARTY TRANSACTIONS

• (a) In addition to the transactions detailed elsewhere in these financial statements, the Group had the following material transactions with related parties during the year ended 31 March 2007:

		Group
		2007
	Notes	HK$’000
Billing of building maintenance
works and building services installation works to
Chinney Construction Company Limited
(“Chinney Construction”)	(i)	121,999
Billing of electrical and mechanical maintenance works and
payment of management fees to Shun Cheong Electrical
Engineering Limited (“SCEE”) and Westco
Airconditioning Limited (“WAL”)	(ii)	85,490
Project management fees paid to SCEE and WAL	(iii)	2,471

Notes:

• (i) Chinney Construction is a company of which Chan Yuen Keung, Zuric, is also a director and had an indirect beneficial interest therein. The services were provided by Chinney Construction to Ever Billion Engineering Limited. Yu Sek Kee, Stephen is a common director of both companies. Both Chan Yuen Keung, Zuric and Yu Sek Kee, Stephen resigned as directors of the Company on 19 July 2006.

As at 31 March 2007, included in the Group’s trade receivables balance were amounts due from Chinney Construction, of approximately HK$1,709,000. The balance was unsecured, interest-free and repayable within normal credit terms of 60 days.

As at 31 March 2007, the Group also had amounts payable to Chinney Construction of HK$10,500,000 included in other payables and accruals. The balance was unsecured, interestfree and had no fixed terms of repayment.

• (ii) The amount was charged to SCEE and WAL by Tinhawk Company Limited. Mr. Chan Yuen Keung, Zuric, and Mr. Yu Sek Kee, Stephen are common directors of Tinhawk Company Limited, SCEE and WAL.

• (iii) The amount was charged by SCEE and WAL to Tinhawk Company Limited.

In the opinion of the directors, the above transactions were conducted at mutually agreed rates.

Chinney Construction, SCEE and WAL are no longer the related parties to the Group upon the resignation of both Chan Yuen Keung, Zuric and Yu Sek Kee, Stephen as directors of the Company on 19 July 2006. During the year ended 31 March 2008, the Group continued to have the above transactions with these former related parties.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

• (b) Other transaction with a related party:

On 29 October 2007, the Company (as issuer), Tanisca Investments Limited (“Tanisca”– subscriber) entered into a subscription agreement pursuant to which the Company conditionally agreed to issue and Tanisca conditionally agreed to subscribe for the redeemable convertible bonds (the “Bonds”) in an aggregate principal amount of HK$120 million. The Bonds bear an interest of 1% per annum, being payable semi-annually, and will mature on the fifth anniversary of the date of its issue. The conversion price of the Bonds was set at HK$0.60 per conversion share (subject to adjustments in certain events). Tanisca is wholly owned by Mr. Mo Tianquan (“Mr. Mo”), who is a director and also interested in approximately 50.51% of the total issued share capital of the Company as at 31 March 2008. Mr. Mo is thus a connected person (as defined under the Listing Rules) of the Company and therefore the issue of the Bonds constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. Details of the transaction were disclosed in a circular dated 21 November 2007 to all shareholders of the Company. The ordinary resolution approving the connected transaction and subscription agreement was duly passed by the independent shareholders at the Special General Meeting by way of poll on 7 December 2007. The issue of the Bonds was completed on 28 March 2008.

• (c) Outstanding balances with related parties:

• (i) Details of the Company’s balances with subsidiaries are included in note 15 to the financial statements.

• (d) Compensation of key management personnel of the Group:

The executive directors are the key management personnel of the Group. Details of their remuneration are disclosed in note 9 to these financial statements.

26. OPERATING LEASE ARRANGEMENTS

As lessee, the Group leases certain of its office properties under operating lease arrangements. Leases for properties are negotiated for terms ranging from one to two years (2007: one to four years).

At 31 March 2008, the Group had total future minimum lease payments under non-cancellable operating leases falling due as follows:

Within one year In the second to fifth years, inclusive	2008 HK$’000 547 203 750	2007 HK$’000 890 730
		1,620

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

27. COMMITMENT

In addition to the operating lease commitments detailed in note 26 above, the Group had the following capital commitment at the balance sheet date:

	2008	2007
	HK$’000	HK$’000
Contracted, but not provided for, capital contribution
payable to a jointly-controlled entity	14,040	–

28. FINANCIAL INSTRUMENTS BY CATEGORY

The carrying amounts of each of the categories of financial instruments as at the balance sheet date are as follows:

Group

Financial assets

Trade receivables Retention money receivables Financial assets included in prepayments, deposits and other assets_(note 18)_ Cash and cash equivalents	Loan and receivables 2008 2007 HK$’000 HK$’000 26,428 32,986 171 652 16,610 23,013 165,391 33,319 208,600 89,970	Loan and receivables 2008 2007 HK$’000 HK$’000 26,428 32,986 171 652 16,610 23,013 165,391 33,319 208,600 89,970
		89,970

Financial liabilities

Trade payables Retention money payables Financial liabilities included in other payables and accruals_(note 21)_ Convertible bonds	Financial liabilities at amortised cost 2008 2007 HK$’000 HK$’000 20,929 17,341 696 1,552 12,444 24,590 76,359 – 110,428 43,483	Financial liabilities at amortised cost 2008 2007 HK$’000 HK$’000 20,929 17,341 696 1,552 12,444 24,590 76,359 – 110,428 43,483
		43,483

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Company

Financial assets

Financial assets included in prepayments, deposits and other receivables_(note 18)_ Cash and cash equivalents	Loans and receivables 2008 2007 HK$’000 HK$’000 2,782 245 152,606 31,856 155,388 32,101	Loans and receivables 2008 2007 HK$’000 HK$’000 2,782 245 152,606 31,856 155,388 32,101
		32,101

Financial liabilities

Financial liabilities included in other payables and accruals_(note 21)_ Convertible bonds	Financial liabilities at amortised cost 2008 2007 HK$’000 HK$’000 581 562 76,359 – 76,940 562	Financial liabilities at amortised cost 2008 2007 HK$’000 HK$’000 581 562 76,359 – 76,940 562
		562

29. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s principal financial instruments are cash and bank balances, and short-term deposits. The main purpose of these financial instruments is to raise finance for the Group’s operations. The Group has various other financial assets and liabilities such as trade and other receivables, trade and other payables, retention money receivables and payables which arise directly from the Group’s operations.

The main risks arising from the Group’s financial instruments are interest rate risk, credit risk and liquidity risk. The management meet periodically to analyse and formulate measures to manage the Group’s exposure to these risks. Generally, the Group introduces conservative strategies on its risk management. As the Group’s exposure to these risks is kept to a minimum, the Group has not used any derivatives and other instruments for hedging purposes. The Group does not hold or issue derivative financial instruments for trading purposes. The directors review and agree policies for managing each of these risks and they are summarised as follows:

Interest rate risk

Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

Cash and bank balances, short-term time deposits and an interest-bearing balance included in other payables are stated at cost and are not revalued on a periodic basis. Interest income and expenses at floating rates are charged to the consolidated income statement as incurred.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The nominal interest rates of the financial instruments approximate to their respective effective interest

rates.

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group’s loss before tax (through the impact on floating rate borrowings) and the Group’s and the Company’s equity.

		Group			Company	Company
		(Increase)/			Increase/
	Increase/	decrease	Increase/		(decrease)	Increase/
	(decrease) in	in loss	(decrease)		in basis	(decrease)
	basis points	before tax	in equity		points	in equity
		HK$’000	HK$’000			HK$’000
2008
Hong Kong dollar	50	497		410	50	380
Hong Kong dollar	(50 )	(497 )		(410 )	(50 )	(380 )
2007
Hong Kong dollar	50	176		145	50	138
Hong Kong dollar	(50 )	(176 )		(145 )	(50 )	(138 )

Credit risk

The Group maintains various credit policies for business operations as detailed in note 17. In addition, all receivable balances are closely monitored on an ongoing basis to minimise the Group’s exposure to bad debts.

With respect to credit risk arising from the other financial assets of the Group, which mainly comprise cash and cash equivalents, trade receivables, retention money receivables and deposits and other receivables, the Group’s exposure to credit risk arises from default of the counterparties, with a maximum exposure equal to the carrying amounts of these instruments.

Further quantitative data in respect of the Group’s exposure to credit risk arising from trade receivables are disclosed in note 17 to the financial statements.

Liquidity risk

The Group monitors its risk to a shortage of funds using a recurring liquidity planning tool. This tool considers the maturity of both its financial instruments and financial assets (e.g. trade receivables) and projected cash flows from operations.

The Group’s objective is to maintain a continuity of funding for the Group operations. The Group’s policy is to maintain the Group at net current asset position.

The Group’s overall risk management policy focuses on monitoring all potential financial risks to the Group. Whenever necessary, the Group will reduce the risk exposure.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The maturity profile of the Group’s financial liabilities as at the balance sheet date, based on the contracted undiscounted payments, is as follows:

Group 2008 Trade payables Retention money payables Other payables Convertible bonds Group 2007 Trade payables Retention money payables Other payables Company 2008 Other payables Convertible bonds 2007 Other payables	On demand HK$’000 – – 11,989 – 11,989 On demand HK$’000 – – 13,690 13,690 On demand HK$’000 551 – 551 On demand HK$’000 551	Less than 12 months HK$’000 20,929 696 455 – 22,080 Less than 12 months HK$’000 17,341 1,552 10,900 29,793 Less than 12 months HK$’000 30 – 30 Less than 12 months HK$’000 11	1 to 5 years HK$’000 – – – 120,000 120,000 1 to 5 years HK$’000 – – – – 1 to 5 years HK$’000 – 120,000 120,000 1 to 5 years HK$’000 –	Total HK$’000 20,929 696 12,444 120,000
				154,069
				Total HK$’000 17,341 1,552 24,590
				43,483
				Total HK$’000 581 120,000
				120,581
				Total HK$’000 562

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Capital management

The primary objective of the Group’s capital management is to safeguard the Group’s ability to continue as a going concern and to maintain healthy capital ratios in order to support its business and maximise shareholder value.

The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Group may return capital to shareholders, or issue new shares. No changes were made in the objectives, policies or processes during the years ended 31 March 2008 and 31 March 2007.

The Group monitors capital using a gearing ratio, which is net debt divided by the total capital plus net debt. Net debt includes trade payables, retention money payables, other payables and accruals, less cash and cash equivalents. Capital includes convertible bonds and equity attributable to equity holders of the parent. As at 31 March 2008, the Group’s cash and cash equivalents are in excess of the Group’s debts. As such, the gearing ratio as at 31 March 2008 has not been shown. The gearing ratio as at 31 March 2007 was as follows:

Group Trade payables Retention money payables Other payables and accruals Less: Cash and cash equivalents Net debt Convertible bonds, the liability component Equity attributable to equity holders Total adjusted capital Capital and net debt Gearing ratio	2007 HK$’000 17,341 1,552 35,221 (33,319 ) 20,795 – 52,804 52,804 73,599 28%

30. POST BALANCE SHEET EVENTS

On 29 April 2008, the Company made an announcement of the proposal to raise approximately HK$101 million, by way of rights issue of 208,395,600 rights shares at HK$0.5 each on the basis of three rights shares for every two existing shares held on the record date.

On 19 May 2008, the Company made an announcement that the ordinary resolution in relation to the rights issue, the underwriting agreement and the transactions contemplated thereunder was duly approved by the independent shareholders by way of poll at the Special General Meeting on 19 May 2008.

The rights issue had been completed on 12 June 2008, there were 254 valid applications for 178,837,813 rights shares received, representing approximately 85.82% of the total number of 208,395,600 rights shares offered under the

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

rights issue. Based on the above, the rights issue was under-subscribed and therefore the Group’s holding company, as the underwriter, has performed its obligation under the underwriting agreement and taken up the remaining balance of 29,557,787 rights shares.

Pursuant to the terms of the Company’s Bonds which were issued on 28 March 2008 (note 22 to the financial statements), the conversion price of the Bonds has been adjusted from HK$0.60 per share to HK$0.3695 per share and the number of shares falling to be issued upon full conversion of the Bonds has been adjusted from 200,000,000 to 324,763,193 shares as a result of the above rights issue.

31. COMPARATIVE AMOUNTS

Certain comparative amounts in the consolidated balance sheet, consolidated cash flow statement and notes to the financial statements have been reclassified to confirm with the current year’s presentation.

32. APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the board of directors on 25 July 2008.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

INDEBTEDNESS

Borrowings

As at the close of business at 31 October 2008, (being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular), the Enlarged Group has the following borrowings:

	31 October 2008
	HK$’000
Unsecured borrowings from ultimate holding company	1,815
Unsecured borrowings from immediate holding company	442,537
Unsecured borrowings from a minority shareholder	1,140
Unsecured borrowings from a fellow subsidiary	74
	445,566

As at October 2008, the Enlarged Group had outstanding convertible bonds amounted to HK$120,000,000. Interest is payable half yearly in arrears at 1% annum.

Pledged of Assets

As at 31 October 2008, the hotel buildings and land use rights with net book amounts of HK$248,504,000 and HK$12,699,000, respectively were pledged as collateral to a bank for the ultimate holding company’s borrowings.

Commitments and contingent liabilities

As at 31 October 2008, the Enlarged Group had capital commitments have been contracted but not provided for of approximately HK$14,554,000.

As at 31 October 2008, the Enlarged Group did not have any significant contingent liabilities.

Saved as aforesaid or as otherwise disclosed herein and apart from intra-group liabilities, the Enlarged Group did not have any other outstanding bank or other borrowings, mortgages, charges, debentures or other loan capital, bank overdrafts, loans or other similar indebtedness, guarantees, liabilities under acceptances, acceptable credits, hire purchase or other finance lease commitments or other contingent liabilities.

Saved as disclosed above, the Directors have confirmed that there has been no material change in the indebtedness and contingent liabilities of the Enlarged Group since 31 October 2008.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

WORKING CAPITAL

The Directors, after due and careful enquiry, are of the opinion that, taking into account of the financial resources available to the Enlarged Group including internally generated funds and the credit facilities, the Enlarged Group, after the completion of the Acquisition, will not have sufficient working capital for its present requirements and for a period of 12 months from the date of this circular. The Directors will seek other financing in order to fulfil the future working capital requirements of the Enlarged Group if necessary.

FINANCIAL AND TRADING PROSPECTS OF THE GROUP

In view of (i) the tightening of the labour market in Hong Kong; (ii) the price volatility of metals and oil remains high; (iii) the weakening of the US and Hong Kong dollars combined with the sharp appreciation of Renminbi, the Board expects these factors will result in continued pressure on controlling the costs of business. Although the Company intends to carry on the existing building related maintenance services business, the Board is also looking to business opportunities in the PRC for development and expansion. In order to expand into the PRC, the Group has carried out the fund raising activities including private placement of introducing two shareholders and convertible bond issue to strengthen the Group’s capital base.

In order to broaden the Group’s source of income, the Board herby propose the Acquisition. For the establishment of the new joint venture company in Guangxi Nanning, the Group is in the process of obtaining trading license from the relevant PRC government authorities.

MANAGEMENT DISCUSSION AND ANALYSIS ON THE BUSINESS OF THE GROUP

The following are the management discussion and analysis on the business of the Group for the three years ended 2008 extracted from the 2006, 2007 and 2008 annual reports of the Company.

For the year ended 31 March 2008

Business review

The Group recorded revenue of HK$130.7 million for the year ended 31 March 2008 (2007: HK$210.5 million) and loss for the year of HK$8.7 million (2007: HK$2.7 million). Consolidated revenue of HK$130.7 million for the year ended 31 March 2008, showing a 37.9% decrease from HK$210.5 million for the previous year. The decrease in business volume was primarily due to the decrease in work orders received from the Hong Kong Government and the Hong Kong Housing Authority during the year.

The loss for the year was mainly attributable to the decrease in gross profit where higher subcontracting charges and material costs were incurred.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Liquidity and financial resources

The Group’s cash and bank balances are mostly in Hong Kong dollars. As at 31 March 2008, the Group had unpledged cash and bank deposit balances of approximately HK$165.4 million (2007: HK$33.3 million). As at 31 March 2008, the Group had no outstanding bank borrowings (2007: Nil). The gearing ratio of the Group, which represented the total bank borrowings to the equity attributable to equity holders of the parent, was nil (2007: Nil). As the Group’s transactions are mostly settled in Hong Kong dollars, the use of financial instruments for hedging purposes is not considered necessary.

Treasury and funding policy

The assets and liabilities of the Group are mainly denominated in Hong Kong dollars. Accordingly, the Group has minimal exposure to foreign exchange fluctuation. However, the Group will closely monitor the overall currency and interest rate exposures. When considered appropriate, the Group will hedge against currency exposure as well as interest rate exposure.

Pledge of assets

The Group did not have any pledged assets as at 31 March 2008 (2007: Nil) to secure general banking facilities.

Employees and remuneration policy

The Group employed approximately 65 employees as at 31 March 2008 (2007: 132). Remuneration is determined by reference to market terms and the qualifications and experience of the staff concerned. Salaries are reviewed annually depending on individual merits. The Group also provides other benefits including retirement benefits scheme, medical insurance and educational subsidies to all eligible staff.

For the year ended 31 March 2007

Business review

The Group recorded turnover of HK$210.5 million for the year ended 31 March 2007 (2006: HK$195.9 million) and loss for the year of HK$2.7 million (2006: HK$11.3 million comprising of HK$2.9 million from a continuing operation and HK$8.4 million from discontinued operations).

In March 2006, the Group disposed of Shun Cheong Investments Limited and its subsidiaries engaging in building related contracting services for both the public and private sectors (the “Contracting Group”). For the purposes of disclosure in the financial statements, the businesses of the Contracting Group were regarded as discontinued operations. After the disposal, the business operations of the Group were basically building related maintenance services (the “Maintenance Services”).

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The loss for the year was mainly attributable to the decrease in gross profit where higher subcontracting charges and material costs were incurred. On the other hand, the Group’s staff costs reduced by HK$3 million as a result of the reduction of staff in the last quarter of 2005/06. The interest expenses were also reduced by HK$1 million followed by the decrease in interest-bearing borrowings. Such decreases in expenses were partly off-set by the increase in impairment loss of trade debts of HK$1.5 million.

Liquidity and financial resources

The Group’s cash and bank balances are mostly in Hong Kong dollars. As at 31 March 2007, the Group had unpledged cash and bank deposit balances of approximately HK$33.3 million (2006: HK$37.1 million). As at 31 March 2007, the Group had no outstanding bank borrowings (2006: Nil). The gearing ratio, which represented the total bank borrowings to the equity attributable to equity holders of the parent, was nil (2006: Nil). As the Group’s transactions are mostly settled in Hong Kong dollars, the use of financial instruments for hedging purposes is not considered necessary.

Treasury and funding policy

The assets and liabilities of the Group are mainly denominated in Hong Kong dollars. Accordingly, the Group has minimal exposure to foreign exchange fluctuation. However, the Group will closely monitor the overall currency and interest rate exposures. When considered appropriate, the Group will hedge against currency exposure as well as interest rate exposure.

Pledge of assets

The Group did not have any pledged assets as at 31 March 2007 (2006: Nil) to secure general banking facilities.

Employees and remuneration policy

The Group employed approximately 132 employees as at 31 March 2007 (2006: 150). Remuneration is determined by reference to market terms and the qualifications and experience of the staff concerned. Salaries are reviewed annually depending on individual merits. The Group also provides other benefits including retirement benefits scheme, medical insurance and educational subsidies to all eligible staff.

For the year ended 31 March 2006

Business review

The Group recorded turnover of HK$195.9 million for the year ended 31 March 2006 (2005: HK$123.8 million) and loss for the year of HK$11.3 million (2005: HK$34.6 million).

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The Group disposed of Shun Cheong Investments Limited and its subsidiaries engaging in building related contracting services for both the public and private sectors (the “Contracting Group”) to CAG, which was a then 29.93% shareholder of the Company. For the purposes of disclosure in the financial statements, the businesses of the Contracting Group were regarded as discontinued operations. The disposal was approved by the independent shareholders of the Company on 27 March 2006 and was completed on 31 March 2006. After the disposal, the business operations of the Group were basically building related maintenance services (the “Maintenance Services”). Due to the adoption of new and revised accounting standards issued by the Hong Kong Institute of Certified Public Accountants, the net result of the discontinued operations is presented separately in the consolidated income statement for the current year and the consolidated income statement for the previous year is restated accordingly to conform with current year’s presentation. Consolidated turnover of HK$195.9 million for the year ended 31 March 2006 was entirely attributable to the Maintenance Services, showing a 58.2% increase from HK$123.8 million for the previous year. Gross profit grew almost 2.8 times to HK$21.5 million from HK$7.7 million. The increase in business volume and gross profit was primarily attributable to the increase in work orders received from the Hong Kong Government and the Hong Kong Housing Authority under the 3-year term maintenance contracts previously awarded. The Maintenance Services, however showed a loss of HK$2.9 million for the year (2005: HK$14.4 million), which was due to the inclusion of a loss of HK$2.8 million arising from disposal of the Contracting Group. If this loss was excluded, the Maintenance Services would have shown a small loss of HK$0.1 million for the year, a considerable improvement from the previous year.

Liquidity and financial resources

The Group’s cash and bank balances are mostly in Hong Kong dollar. As at 31 March 2006, the Group had unpledged cash and bank deposit balances of approximately HK$37.1 million (2005: HK$8.3 million). The increase in the unpledged cash and bank deposit balances was mainly due to the cash consideration of HK$35 million received upon the completion of the disposal of the Contracting Group on 31 March 2006. Last year, the Group had pledged bank deposits of HK$26.8 million. As at 31 March 2006, the Group had no outstanding bank borrowings (2005: HK$46.9 million). The decrease in bank borrowings and pledged bank deposits was mainly due to the disposal of the Contracting Group. The gearing ratio, which represented the total bank borrowings to the equity attributable to equity holders of the parent, was nil (2005: 71%). As the Group’s transactions are mostly settled in Hong Kong dollar, the use of financial instruments for hedging purposes is not considered necessary.

Funding and treasury policy

The assets and liabilities of the Group are mainly denominated in Hong Kong dollar. Accordingly, the Group has minimal exposure to foreign exchange fluctuation. However, the Group will closely monitor the overall currency and interest rate exposures. When considered appropriate, the Group will hedge against currency exposure as well as interest rate exposure.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Pledge of assets

The Group did not have any pledged assets as at 31 March 2006. As at 31 March 2005, certain of the Group’s land and buildings with an aggregate net book value of HK$15.7 million and bank deposits of HK$26.8 million were pledged to secure general banking facilities granted to the Group.

Employees and remuneration policy

The Group employed approximately 150 employees as at 31 March 2006 (2005: 260). Remuneration is determined by reference to market terms and the qualifications and experience of the staff concerned. Salaries are reviewed annually depending on individual merits. The Group also provides other benefits including retirement benefits scheme, medical insurance and educational subsidies to all eligible staff.

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FINANCIAL INFORMATION ON THE TARGET GROUP

APPENDIX II

The following is the text of a report, prepared for the sole purpose of incorporation in this circular, received from the reporting accountant, CCIF CPA Limited, Certified Public Accountants, Hong Kong.

==> picture [88 x 62] intentionally omitted <==

19 December 2008

The Board of Directors

Shun Cheong Holdings Limited

Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) of Guangxi Wharton International Hotel Company Limited (“Guangxi Wharton”) and its subsidiary, (hereinafter collectively referred to as the “Guangxi Wharton Group”) set out in Sections I to III below, for inclusion in the circular of Shun Cheong Holdings Limited (the “Company”) dated 19 December 2008 (the “Circular”) in connection with the proposed acquisition of the entire issued share capital of Guangxi Wharton (the “Acquisition”). The Financial Information comprises the consolidated balance sheets of Guangxi Wharton Group as at 31 December 2005, 2006 and 2007 and 31 July 2008, the balance sheets of Guangxi Wharton as at 31 December 2005, 2006, and 2007 and 31 July 2008, and the consolidated income statements, the consolidated statements of changes in equity and the consolidated cash flow statements of Guangxi Wharton Group for each of the years ended 31 December 2005, 2006 and 2007 and the seven months ended 31 July 2007 and 2008 (the “Relevant Periods), and a summary of significant accounting policies and other explanatory notes.

Guangxi Wharton was established on 2 September 1992 under the name of 廣西南寧國際大酒 店有限公司 in the People’s Republic of China (the “PRC”) as a sino-foreign joint venture under the Company Law of the PRC. On 14 May 2003, Guangxi Wharton was transformed into a joint stock limited company in the PRC and was renamed as its current name following the acquisition by 廣西 銀河集團有限公司 in June 2003.

Guangxi Wharton is principally engaged in hotel and restaurant operations in the PRC. Details of its subsidiary are set out in note 1 of Section II below.

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FINANCIAL INFORMATION ON THE TARGET GROUP

APPENDIX II

Guangxi Wharton and its subsidiary have adopted 31 December as their financial year end date for statutory reporting and management reporting purposes. Their statutory audited financial statements were prepared in accordance with accounting principles and relevant financial regulations applicable to enterprises established in the PRC. The audited statutory financial statements for each of the years ended 31 December 2005, 2006 and 2007 of Guangxi Wharton and its subsidiary were audited by 深圳南方民和會計師事務所.

For the purpose of this report, the directors of Guangxi Wharton have prepared the consolidated financial statements of the Guangxi Wharton Group for the Relevant Periods in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) (the “Underlying Financial Statements”). We have audited the Underlying Financial Statements for each of the years ended 31 December 2005, 2006 and 2007 and for the seven months ended 31 July 2008 in accordance with Hong Kong Standards on Auditing.

The Financial Information has been prepared based on the Underlying Financial Statements with no adjustments made thereon.

DIRECTORS’ RESPONSIBILITY

The directors of Guangxi Wharton during the Relevant Periods are responsible for the preparation and the true and fair presentation of the Underlying Financial Statements for the Relevant Periods in accordance with HKFRSs.

For the financial information for each of the years ended 31 December 2005, 2006 and 2007 and the seven months ended 31 July 2008, the directors of the Company are responsible for the preparation and the true and fair presentation of the Financial Information in accordance with HKFRSs. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of the Underlying Financial Statements and Financial Information that are 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.

For the financial information for the seven months ended 31 July 2007, the directors of the Company are responsible for the preparation and the presentation of the financial information in accordance with the accounting policies set out in note 3 of Section II below which are in conformity with HKFRSs.

REPORTING ACCOUNTANT’S RESPONSIBILITY

For the Financial Information for each of the years ended 31 December 2005, 2006 and 2007 and the seven months ended 31 July 2008, our responsibility is to express an opinion on the Financial Information based on our examination and to report our opinion to you. We examined the consolidated financial statements and carried out such additional procedures as are necessary in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA.

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FINANCIAL INFORMATION ON THE TARGET GROUP

APPENDIX II

For the financial information for the seven months ended 31 July 2007, it is our responsibility to form an independent conclusion, based on our review, on the financial information and to report our conclusion to you. We conducted our review on the financial information in accordance with Hong Kong Standard on Review Engagements 2400 “Engagements to review financial statements” issued by the HKICPA. Our review consisted of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the financial information for the seven months ended 31 July 2007.

OPINION AND REVIEW CONCLUSION

In our opinion, for the purpose of this report, the Financial Information for a true and fair view of the state of affairs of the Guangxi Wharton Group and Guangxi Wharton as at 31 December 2005, 2006 and 2007 and 31 July 2008 and of the Guangxi Wharton Group’s consolidated results and cash flows for the years and period then ended.

Based on our review, for the purpose of this report, nothing has come to our attention that causes us to believe that the financial information for the seven months ended 31 July 2007 is not prepared, in all material respects, in accordance with the accounting policies set out in note 3 of Section II below which are conformity with HKFRSs.

EMPHASIS OF MATTER

Without qualifying our opinion, we draw attention to note 2 of Section II to the Financial Information concerning the adoption of the going concern basis on which the Financial Information has been prepared. As at 31 December 2005, 2006 and 2007 and 31 July 2008, Guangxi Wharton Group had net current liabilities of RMB370,074,000, RMB330,484,000, RMB316,020,000 and RMB400,794,000, respectively. The immediate holding company, 北海銀河高科技產業股份有限公 司 (“Yinhe”), to which Guangxi Wharton owed RMB390,382,000 at 31 July 2008, has undertaken not to demand repayment of debts due from Guangxi Wharton until such time when repayment will not affect Guangxi Wharton’s ability to repay other creditors in the normal course of business. These conditions, along with other matters as disclosed in note 2 of Section II to the Financial Information, indicates the existence of a material uncertainty which may cast doubt about Guangxi Wharton Group’s ability to continue as a going concern.

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FINANCIAL INFORMATION ON THE TARGET GROUP

APPENDIX II

I. FINANCIAL INFORMATION

(a) Consolidated income statements

Note Turnover 6(a) Direct operating costs Gross profit Other revenue and income 7 Distribution costs Administrative expenses Impairment of trade receivables Impairment of other receivables Operating profit/(loss) 8 Finance costs 8(d) Profit/(loss) before income tax Income tax expense 10 Profit for the year/period for continuing operations Profit/(loss) from discontinued operation 11 Profit/(loss) for the year/period Attributable to: Guangxi Wharton Minority interest Dividends 12		Year ended 31 December	2007 RMB’000 103,090 (62,787 ) 40,303 254 (7,304 ) (17,820 ) (175 ) (431 ) 14,827 (23,533 ) (8,706 ) – (8,706 ) 74 (8,632 ) (8,632 ) – (8,632 ) –	Seven months ended 31 July	Seven months ended 31 July
	2005 RMB’000 95,242 (58,078 ) 37,164 215 (7,426 ) (17,020 ) (869 ) (881 ) 11,183 (1,031 ) 10,152 – 10,152 1 10,153 10,153 – 10,153 –	2006 RMB’000 99,861 (60,537 ) 39,324 383 (7,782 ) (19,599 ) (294 ) (417 ) 11,615 – 11,615 – 11,615 34 11,649 11,647 2 11,649 –		2007 RMB’000 (unaudited) 49,365 (32,240 ) 17,125 158 (4,154 ) (9,900 ) (175 ) (431 ) 2,623 (13,723 ) (11,100 ) – (11,100 ) – (11,100 ) (11,100 ) – (11,100 ) –	2008 RMB’000 50,090 (35,222 )
					14,868 62 (4,453 ) (16,644 ) (56 ) –
					(6,223 ) (13,793 )
					(20,016 ) –
					(20,016 ) –
					(20,016)
					(20,016 ) –
					(20,016)
					–

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APPENDIX II

(b) Consolidated balance sheets

Note Non current assets Property, plant and equipment 13 Land use rights 14 Current assets Inventories 17 Land use rights 14 Trade receivables 18 Other receivables 18 Amounts due from fellow subsidiaries 26(c) Amount due from ultimate holding company 22 Amount due from a related company 26(d) Cash and bank balances 19 Current liabilities Trade payables 21 Other payables 21 Short–term bank loan 20 Amount due to immediate holding company 22 Amount due to ultimate holding company 22 Amounts due to fellow subsidiaries 26(c) Amount due to a minority shareholder 26(e) Net current liabilities Net assets Capital and reserves Paid up capital 23(a) Reserves Equity attributable to equity holders of Guangxi Wharton Minority interest Total equity	As at 31 December 2005 2006 2007 RMB’000 RMB’000 RMB’000 394,185 366,563 343,640 11,725 11,406 11,087 405,910 377,969 354,727 4,157 4,009 3,442 319 319 319 3,082 4,336 4,446 1,398 2,004 5,357 3,652 7,776 14,779 12,095 13,608 200 111 211 211 4,362 3,235 5,782 29,176 35,498 34,536 4,569 5,713 5,924 8,790 12,035 12,394 – – 4,000 350,553 313,563 293,207 – – – 34,338 33,671 34,031 1,000 1,000 1,000 399,250 365,982 350,556 (370,074 ) (330,484 ) (316,020 ) 35,836 47,485 38,707 87,814 87,814 87,814 (52,122 ) (40,475 ) (49,107 ) 35,692 47,339 38,707 144 146 – 35,836 47,485 38,707	As at 31 December 2005 2006 2007 RMB’000 RMB’000 RMB’000 394,185 366,563 343,640 11,725 11,406 11,087 405,910 377,969 354,727 4,157 4,009 3,442 319 319 319 3,082 4,336 4,446 1,398 2,004 5,357 3,652 7,776 14,779 12,095 13,608 200 111 211 211 4,362 3,235 5,782 29,176 35,498 34,536 4,569 5,713 5,924 8,790 12,035 12,394 – – 4,000 350,553 313,563 293,207 – – – 34,338 33,671 34,031 1,000 1,000 1,000 399,250 365,982 350,556 (370,074 ) (330,484 ) (316,020 ) 35,836 47,485 38,707 87,814 87,814 87,814 (52,122 ) (40,475 ) (49,107 ) 35,692 47,339 38,707 144 146 – 35,836 47,485 38,707	As at 31 July 2008 RMB’000 408,585 10,900 419,485 3,517 319 2,430 3,453 14 – 211 1,032 10,976 4,631 14,737 – 390,382 1,020 – 1,000 411,770 (400,794 ) 18,691 87,814 (69,123 ) 18,691 – 18,691
	2005 RMB’000 394,185 11,725 405,910 4,157 319 3,082 1,398 3,652 12,095 111 4,362 29,176 4,569 8,790 – 350,553 – 34,338 1,000 399,250 (370,074 ) 35,836 87,814 (52,122 ) 35,692 144 35,836	2006 RMB’000 366,563 11,406 377,969 4,009 319 4,336 2,004 7,776 13,608 211 3,235 35,498 5,713 12,035 – 313,563 – 33,671 1,000 365,982 (330,484 ) 47,485 87,814 (40,475 ) 47,339 146 47,485

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APPENDIX II

(b) Balance sheets

Balance sheets
Note Non current assets Property, plant and equipment 13 Land use rights 14 Investment in a subsidiary 15 Current assets Inventories 17 Land use rights 14 Trade receivables 18 Other receivables 18 Amount due from a subsidiary 22 Amounts due from fellow subsidiaries 26(c) Amount due from ultimate holding company 22 Amount due from a related company 26(d) Cash and bank balances 19 Current liabilities Trade payables 21 Other payables 21 Short-term bank loan 20 Amount due to immediate holding company 22 Amount due to a subsidiary Amount due to ultimate holding company 22 Amounts due to fellow subsidiaries 26(c) Amount due to a minority shareholder 26(e) Net current liabilities Net assets Capital and reserves Paid up capital 23(a) Reserves Total equity	As at 31 December 2005 2006 2007 RMB’000 RMB’000 RMB’000 394,185 366,563 343,640 11,725 11,406 11,087 2,850 2,850 – 408,760 380,819 354,727 4,157 4,009 3,442 319 319 319 3,082 4,336 4,446 1,398 2,004 5,357 820 – – 3,652 7,776 14,779 8,153 10,941 200 111 211 211 4,362 3,235 5,782 26,054 32,831 34,536 4,569 5,713 5,924 8,556 11,607 12,394 – – 4,000 350,553 313,563 293,207 – 683 – – – – 34,338 33,671 34,031 1,000 1,000 1,000 399,016 366,237 350,556 (372,962 ) (333,406 ) (316,020 ) 35,798 47,413 38,707 87,814 87,814 87,814 (52,016 ) (40,401 ) (49,107 ) 35,798 47,413 38,707		As at 31 July 2008 RMB’000 408,585 10,900 – 419,485 3,517 319 2,430 3,453 – 14 – 211 1,032 10,976 4,631 14,737 – 390,382 – 1,020 – 1,000 411,770 (400,794 ) 18,691 87,814 (69,123 ) 18,691
	2005 RMB’000 394,185 11,725 2,850 408,760 4,157 319 3,082 1,398 820 3,652 8,153 111 4,362 26,054 4,569 8,556 – 350,553 – – 34,338 1,000 399,016 (372,962 ) 35,798 87,814 (52,016 ) 35,798	2006 RMB’000 366,563 11,406 2,850 380,819 4,009 319 4,336 2,004 – 7,776 10,941 211 3,235 32,831 5,713 11,607 – 313,563 683 – 33,671 1,000 366,237 (333,406 ) 47,413 87,814 (40,401 ) 47,413

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APPENDIX II

(c) Consolidated cash flow statements

Operating activities Profit/(loss) before taxation Discontinued operation Adjustments for: Amortisation of land use rights Depreciation Loss on disposal of property, plant and equipment Interest income Interest expense Impairment on other receivables Impairment on trade receivables Operating profit before changes in working capital Decrease/(increase) in inventories (Increase)/decrease in trade receivables Decrease/(increase) in other receivables Decrease/(increase) in amounts due from fellow subsidiaries Decrease/(increase) in amount due from ultimate holding company (Increase)/decrease in amounts due from related companies (Decrease)/increase in trade payables Increase in other payables Cash generated from operations Interest received Net cash generated from operating activities	Year ended 31 December 2005 2006 2007 RMB’000 RMB’000 RMB’000 10,152 11,615 (8,706 ) 1 34 74 319 319 319 28,375 30,016 30,597 688 1,025 4,640 (24 ) (25 ) (22 ) 1,031 – 23,533 881 417 431 869 294 175 42,292 43,695 51,041 204 148 567 (177 ) (1,548 ) (285 ) 5,199 (1,023 ) (3,784 ) 6,105 (4,124 ) (7,003 ) 19,009 (1,513 ) 13,408 (111 ) (100 ) – (1,507 ) 1,144 211 162 3,245 213 71,176 39,924 54,368 24 25 22 71,200 39,949 54,390	Year ended 31 December 2005 2006 2007 RMB’000 RMB’000 RMB’000 10,152 11,615 (8,706 ) 1 34 74 319 319 319 28,375 30,016 30,597 688 1,025 4,640 (24 ) (25 ) (22 ) 1,031 – 23,533 881 417 431 869 294 175 42,292 43,695 51,041 204 148 567 (177 ) (1,548 ) (285 ) 5,199 (1,023 ) (3,784 ) 6,105 (4,124 ) (7,003 ) 19,009 (1,513 ) 13,408 (111 ) (100 ) – (1,507 ) 1,144 211 162 3,245 213 71,176 39,924 54,368 24 25 22 71,200 39,949 54,390	Seven months ended 31 July 2007 2008 RMB’000 RMB’000 (unaudited) (11,100 ) (20,016 ) – – 187 187 21,081 23,871 4,640 3,569 (10 ) (10 ) 13,723 13,793 431 – 175 56 29,127 21,450 205 (75 ) (4,572 ) 1,960 1,216 1,904 (8,837 ) 14,765 5,851 200 211 – (2,300 ) (1,293 ) 8,820 2,343 29,721 41,254 10 10 29,731 41,264
	2005 RMB’000 10,152 1 319 28,375 688 (24 ) 1,031 881 869 42,292 204 (177 ) 5,199 6,105 19,009 (111 ) (1,507 ) 162 71,176 24 71,200	2006 RMB’000 11,615 34 319 30,016 1,025 (25 ) – 417 294 43,695 148 (1,548 ) (1,023 ) (4,124 ) (1,513 ) (100 ) 1,144 3,245 39,924 25 39,949	2007 RMB’000 (unaudited) (11,100 ) – 187 21,081 4,640 (10 ) 13,723 431 175 29,127 205 (4,572 ) 1,216 (8,837 ) 5,851 211 (2,300 ) 8,820 29,721 10 29,731

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FINANCIAL INFORMATION ON THE TARGET GROUP

APPENDIX II

Investing activities Purchase of property, plant and machinery Net cash used in investing activities Financing activities Increase/(decrease) in amount due to immediate holding company Increase/(decrease) in amounts due to fellow subsidiaries (Decrease)/increase in amount due to ultimate holding company Interest paid Increase in short term loan Repayment of short term loan Net cash used in financing activities Increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year/period Cash and cash equivalents at end of the year/period	Year ended 31 December 2005 2006 2007 RMB’000 RMB’000 RMB’000 (38,770 ) (3,419 ) (12,314 ) (38,770 ) (3,419 ) (12,314 ) 350,553 (36,990 ) (20,356 ) 30,380 (667 ) 360 (381,006 ) – – (1,031 ) – (23,533 ) – – 4,000 (30,000 ) – – (31,104 ) (37,657 ) (39,529 ) 1,326 (1,127 ) 2,547 3,036 4,362 3,235 4,362 3,235 5,782	Year ended 31 December 2005 2006 2007 RMB’000 RMB’000 RMB’000 (38,770 ) (3,419 ) (12,314 ) (38,770 ) (3,419 ) (12,314 ) 350,553 (36,990 ) (20,356 ) 30,380 (667 ) 360 (381,006 ) – – (1,031 ) – (23,533 ) – – 4,000 (30,000 ) – – (31,104 ) (37,657 ) (39,529 ) 1,326 (1,127 ) 2,547 3,036 4,362 3,235 4,362 3,235 5,782	Seven months ended 31 July 2007 2008 RMB’000 RMB’000 (unaudited) (12,314 ) (92,385 ) (12,314 ) (92,385 ) (8,908 ) 97,175 16 (34,031 ) – 1,020 (13,723 ) (13,793 ) 4,000 – – (4,000 ) (18,615 ) 46,371 (1,198 ) (4,750 ) 3,235 5,782 2,037 1,032
	2005 RMB’000 (38,770 ) (38,770 ) 350,553 30,380 (381,006 ) (1,031 ) – (30,000 ) (31,104 ) 1,326 3,036 4,362	2006 RMB’000 (3,419 ) (3,419 ) (36,990 ) (667 ) – – – – (37,657 ) (1,127 ) 4,362 3,235	2007 RMB’000 (unaudited) (12,314 ) (12,314 ) (8,908 ) 16 – (13,723 ) 4,000 – (18,615 ) (1,198 ) 3,235 2,037

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APPENDIX II

(d) Consolidated statements of changes in equity

At 1 January 2005 Purchase of subsidiary Profit for the year At 31 December 2005 and 1 January 2006 Profit for the year At 31 December 2006 and 1 January 2007 De-registration of subsidiary Loss for the year At 31 December 2007 and 1 January 2008 Loss for the period At 31 July 2008 At 1 January 2007 Loss for the period (unaudited) At 31 July 2007 (unaudited)	Attributable to equity holder of Guangxi Wharton Paid–up Capital Accumulated capital reserve losses Subtotal RMB’000 RMB’000 RMB’000 RMB’000 87,814 227 (62,502 ) 25,539 – – – – – – 10,153 10,153 87,814 227 (52,349 ) 35,692 – – 11,647 11,647 87,814 227 (40,702 ) 47,339 – – – – – – (8,632 ) (8,632 ) 87,814 227 (49,334 ) 38,707 – – (20,016 ) (20,016 ) 87,814 227 (69,350 ) 18,691 87,814 227 (40,702 ) 47,339 – – (11,100 ) (11,100 ) 87,814 227 (51,802 ) 36,239	Attributable to equity holder of Guangxi Wharton Paid–up Capital Accumulated capital reserve losses Subtotal RMB’000 RMB’000 RMB’000 RMB’000 87,814 227 (62,502 ) 25,539 – – – – – – 10,153 10,153 87,814 227 (52,349 ) 35,692 – – 11,647 11,647 87,814 227 (40,702 ) 47,339 – – – – – – (8,632 ) (8,632 ) 87,814 227 (49,334 ) 38,707 – – (20,016 ) (20,016 ) 87,814 227 (69,350 ) 18,691 87,814 227 (40,702 ) 47,339 – – (11,100 ) (11,100 ) 87,814 227 (51,802 ) 36,239	Attributable to equity holder of Guangxi Wharton Paid–up Capital Accumulated capital reserve losses Subtotal RMB’000 RMB’000 RMB’000 RMB’000 87,814 227 (62,502 ) 25,539 – – – – – – 10,153 10,153 87,814 227 (52,349 ) 35,692 – – 11,647 11,647 87,814 227 (40,702 ) 47,339 – – – – – – (8,632 ) (8,632 ) 87,814 227 (49,334 ) 38,707 – – (20,016 ) (20,016 ) 87,814 227 (69,350 ) 18,691 87,814 227 (40,702 ) 47,339 – – (11,100 ) (11,100 ) 87,814 227 (51,802 ) 36,239	Minority interest RMB’000 – 144 – 144 2 146 (146 ) – – – – 146 – 146	Total RMB’000 25,539 144 10,153
	Paid–up capital RMB’000 87,814 – – 87,814 – 87,814 – – 87,814 – 87,814 87,814 – 87,814	Capital reserve RMB’000 227 – – 227 – 227 – – 227 – 227 227 – 227	Accumulated losses RMB’000 (62,502 ) – 10,153 (52,349 ) 11,647 (40,702 ) – (8,632 ) (49,334 ) (20,016 ) (69,350 ) (40,702 ) (11,100 ) (51,802 )
					35,836 11,649
					47,485 (146 ) (8,632 )
					38,707 (20,016 )
					18,691
					47,485 (11,100 )
					36,385

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FINANCIAL INFORMATION ON THE TARGET GROUP

APPENDIX II

II. NOTES TO THE FINANCIAL INFORMATION

1. CORPORATION INFORMATION

• (a) Guangxi Wharton was established on 2 September 1992 under the name of 廣西南寧國際大酒店有限 公司 in the People’s Republic of China (the “PRC”) as a sino-foreign joint venture under the Company law of the PRC. On 14 May 2003, Guangxi Wharton was transformed into a joint stock limited company in the PRC and was renamed as its current name following the acquisition by 廣西銀河集團有限公司 in June 2003. Guangxi Wharton is principally engaged in hotel and restaurant operations in the PRC.

• (b) 廣西南洋國際旅行社有限公司 (“國旅”) was the only subsidiary of Guangxi Wharton and was 95% and 5% beneficially owned by Guangxi Wharton and the minority investor, respectively. 國旅 was engaged in the travel and related services and was de-registered on 21 December 2007.

• (c) On 19 August 2008 and 3 December 2008, a sale and purchase agreement, supplemental sale and purchase agreement, a debt restructuring agreement and supplemental debt restructuring agreement (the “Agreements”) were entered into between 北海銀河高科技產業有限公司 Beihai Yinhe Hi-Tech Industrial Co., Ltd (“Yinhe”) and Mr Gao Jian and the Company, whereby the Company, through its wholly owned subsidiary, Open Land Holdings Limited (the “Purchaser”), will (i) acquire from Yinhe its entire interest in Guangxi Wharton for a cash consideration RMB148,230,000; will (ii) pay total payables of Guangxi Wharton of RMB411,700,000 as at 31 July 2008.

2. BASIS OF PRESENTATION

As at 31 December 2005, 2006, 2007 and 31 July 2008, Guangxi Wharton Group had net current liabilities of approximately RMB370,074,000, RMB330,484,000, RMB316,020,000 and RMB400,794,000, respectively.

In preparing the Financial Information, the directors of the Company have given careful consideration to the future liquidity of Guangxi Wharton and have taken consideration of the following events:

• (a) On 3 December 2008, Yinhe and Open Land Holdings Limited entered into a debt supplemental restructuring agreement whereby the Purchaser will pay the total payables of RMB411,700,000 of Guangxi Wharton as at 31 July 2008.

• (b) The immediate holding company, Yinhe, to which Gauangxi Wharton owed RMB390,382,000 as at 31 July 2008, has undertaken not to demand repayment of debts due from Guangxi Wharton until such time when repayment will not affect Guangxi Wharton’s ability to repay other creditors in the normal course of business, should the proposed acquisition under the Agreements, as referred to note 1(c) above, was not to proceed further.

• (c) Guangxi Wharton is currently in negotiations with a PRC bank for a Hotel Bank Loan of approximately RMB320,000,000 with a term of 10 years at an interest rate of approximately 7.8% per annum.

• (d) Upon completion of the Agreements, as referred to note 1(c) above, the Company will provide financial support to Guangxi Wharton to enable it to meet its financial obligations as they fall due for the foreseeable future.

Consequently, the directors of the Company are satisfied that Guangxi Wharton will be able to obtain the necessary fundings so as to meet its debts when they fall due for the foreseeable future. Accordingly, the Financial Information has been prepared on a going concern basis.

Should the going concern basis not been used, adjustments would have to be made to reclassify non-current assets as current assets and non-current liabilities as current liabilities, reduce the value of assets to their recoverable amounts and provide for further liabilities which might arise.

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APPENDIX II

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of compliance

The Financial Information set out in this report have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”), which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“HKASs”) and Interpretations issued by the HKICPA and the disclosure requirements of the Hong Kong Companies Ordinance. The Financial Information also complies with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange Limited.

Guangxi Wharton has adopted all the new and amended HKFRSs which are relevant to and effective for the accounting periods beginning on 1 January 2007, issued by the HKICPA in the preparation of the Financial Information throughout the Relevant Period. HKFRS 1 “First-time Adoption of HKFRS” has been applied in preparing the Financial Information. The Financial Information is the first set of financial statements prepared in accordance with HKFRSs by Guangxi Wharton.

At the date of this report, the following HKFRSs have been issued but are not yet effective:

HKAS 1 (Revised)	Presentation of Financial Statements1
HKAS 23 (Revised)	Borrowing costs1
HKAS 27 (Revised)	Consolidated and Separate Financial Statements4
HKAS 32 & HKAS 1	Puttable Financial Instruments and Obligations Arising on Liquidation1
(Amendment)
HKFRS 2 (Amendment)	Share-based Payment-Vesting Conditions and Cancellations1
HKFRS 3 (Revised)	Business Combinations4
HKFRS 8	Operating Segments1
HK(IFRIC) - Int 11	HKFRS 2 - Group and Treasury Share Transactions2
HK(IFRIC) - Int 12	Service Concession Arrangements3
HK(IFRIC) - Int 13	Customers Loyalty Programmes4
HK(IFRIC) - Int 14	HKAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding
	Requirements and their Interaction1
HK(IFRIC) - Int 15	Agreements for the Construction of Real Estate1
HK(IFRIC) - Int 16	Hedges of a Net Investment in a Foreign Operations5

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

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

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

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

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

(b) Basis of preparation of the Financial Information

The directors of Guangxi Wharton anticipate that the adoption of these standards, amendments and interpretations in future periods will have no material impact on the results of operations and financial position of Guangxi Wharton Group.

The preparation of the Financial Information in conformity with HKRFSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Guangxi Wharton’s accounting policies. The areas involving a high degree of judgement or complexity, or areas where assumptions and estimates are significant to the Financial Information, are disclosed in note 5 to the Financial Information.

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APPENDIX II

(c) Subsidiaries

A subsidiary is an entity controlled by Guangxi Wharton. Control exists when Guangxi Wharton 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.

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

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

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 Guangxi Wharton’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 Guangxi Wharton Group’s interest is allocated all such profits until the minority’s share of losses previously absorbed by the Guangxi Wharton Group has been recovered.

In Guangxi Wharton’s balance sheet, an investment in a subsidiary is stated at cost less impairment losses, unless the investment is classified as held for sale (or included in a disposal group that is classified as held for sales).

(d) Segment reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and return that are different from those of segments operating in other economic environments.

(e) Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statements of each of the Guangxi Wharton Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Renminbi (“RMB”), which is the Guangxi Wharton Group’s functional and presentation currency.

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APPENDIX II

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges or qualifying net investment hedges.

Translation differences on non-monetary items, such as equity instruments held at fair value through profit or loss, are reported as part of the fair value gain or loss. Translation difference on nonmonetary items, such as equities classified as available-for-sale financial assets, are included in the investment revaluation reserve in equity.

(iii) Guangxi Wharton Group companies

The results and financial position of all the Guangxi Wharton Group’s entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• (a) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

• (b) income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transaction); and

• (c) all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign operation is sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

(f) Property, plant and equipment

Buildings mainly comprise hotel properties. All property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

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

Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated residue value, using the straight-line method over their estimated useful lives as follows:

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APPENDIX II

Hotel buildings Lower of underlying land lease term or 30 years Furniture and fixtures 8 years Leasehold improvements 8 years Equipment and machinery 12 years Motor vehicles 5 years

Construction in progress includes hotel buildings, equipment and machinery in the course of installation, and is stated at cost less impairment losses. Cost comprises direct and indirect costs of construction incurred during the period of construction. Construction in progress is transferred to hotel buildings, equipment and machinery when the asset is substantially ready for its intended use. No depreciation is provided for construction in progress.

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

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gain or loss on disposal of an item of property, plant and equipment is the difference between the net sale proceed and the carrying amount to the relevant asset, and is recognised in the income statement.

(g) Land use rights

Prepaid leasehold payments or land use rights for hotel buildings are stated at amortised cost less impairment, and amortised over the period of the lease on a straight-line basis to the income statement.

(h) Impairment on investments in subsidiaries and non-financial assets

Assets that have an indefinite useful life or have not been available for use are not subject to amortisation and are tested annually for impairment. Assets that subject to depreciation and amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

(i) Financial assets

The Guangxi Wharton Group classified its financial assets in the following categories: financial assets at fair value through profit or loss, loans and receivables and available-for-sale financial assets. The classification depends on the purpose for which the financial assets were acquired. Management determined the classification of its financial assets at initial recognition and re-evaluated this designation at every reporting date.

• Financial assets at fair value through profit or loss

This category has two sub-categories: financial assets held for trading, and those designated at fair value through profit or loss at inception. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management. Derivatives were categorized as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if they are either for trading or are expected to be realised within 12 months of the balance sheet date.

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• Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. Loans and receivables are classified as long-term receivables and account receivables in the balance sheet.

• Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designed in this category or not classified in any of the other categories. They are included in non-current assets unless the management intends to dispose of the investment with 12 months of the balance sheet date.

Purchases and sales of investments are recognised on trade-date, the date on which the Guangxi Wharton Group commits to purchase or sell the asset. Investments are initially recognised at cost for all financial assets. Investments are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Guangxi Wharton Group has transferred substantially all risks and rewards of ownership. Financial assets held for trading are substantially carried at fair value based on current market closing prices with realised and unrealised gains and losses arising from change in fair value included in the income statement in the period in which they arise. Loans and receivables are carried at amortised cost using the effective interest method less impairment changes in carrying value to be recognised in the income statement. Available-for-sale financial assets are stated at cost less impairment as the fair value of these financial assets cannot be reliably measured.

The Guangxi Wharton Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of loans and receivables and available-forsale financial assets, a significant or prolonged decline in the expected recoverable value of the asset below its cost is considered in determining whether the asset is impaired. If any such evidence exists, the carrying value is reduced to its estimated recoverable amount.

(j) Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment of trade and other receivables is established when there is objective evidence that the Guangxi Wharton Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the income statement. Subsequent recoveries of amount previously written off are credited against administrative expenses in the income statement.

(k) Impairment of assets

• (i) Impairment of trade and other receivables

Trade and other receivables are stated 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 recognized as follows:

• a significant financial difficulty of the debtor;

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

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

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

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

• For trade receivables and other financial assets carried at amortised cost, the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets), where the effect of discounting is material.

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 recognized, 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 recognized 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 case of goodwill, may have decreased.

• property, plant and equipment;

• land use rights; and

• investment in a subsidiary

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 the 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. cash-generating unit).

Recognition of impairment losses

An impairment loss is recognized 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 recognized in respect of cash-generating units are allocated to reduce the carrying amount of the assets in the unit (or group or units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs to sell, or value in use, if determinable.

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–

Reversals of impairment losses

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

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

(l) Inventories

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

Cost, being cost of purchase, is determined on weight average basis. Net realised value is the estimated selling price in the ordinary course of business, less applicable variable selling expense.

(m) Cash and cash equivalents

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

(n) 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.

(o) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost, any difference between the amount initially recognised (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings, using the effective interest method.

Borrowings are classified as current liabilities unless the Guangxi Wharton Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

(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 the income statement except to the extent that they relate to items recognised 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.

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Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, if the deferred income tax arises from initial recognition of an asset or liabilities in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Guangxi Wharton Group and it is probable that the temporary difference will not reverse in the foreseeable future.

(q) Borrowing costs

Borrowing costs are expensed in income statement 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 it 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.

(r) Provisions and contingent liabilities

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

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability or outflow of economic benefit is remote.

(s) Employee retirement benefits

Contributions to appropriate local defined contribution retirement schemes pursuant to the relevant labour rules and regulations in the PRC based on certain percentage of the relevant employees’ monthly salaries. The municipal and provincial government undertakes to assume the retirement benefit obligations payable to all existing and future retired employees under these plans and Guangxi Wharton has no further obligation for post-retirement benefits beyond the contributions made. The Guangxi Wharton Group’s contributions to these plans are expensed as incurred.

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(t) Recognition of revenue

Revenue comprises the fair value of the sale of goods and services net of value-added tax, rebates and discounts. Revenue is recognised as follows:

• (i) Hotel revenue from room rentals, food and beverage sales and other ancillary services is recognised when the services are rendered.

• (ii) Income from tour and travel services is recognised when the services are rendered. Revenue from sale of air tickets is recognised when the tickets are delivered.

• (iii) Revenue from sales of goods is recognised when goods are delivered and title has been passed.

• (iv) Rental revenue from properties is recognised on a straight-line basis over the periods of the respective leases.

• (v) Interest income is recognised as it accrues using the effective interest method.

(u) Operating leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.

(v) Discontinued operation

A discontinued operation is a component of the Guangxi Wharton that may be a major line of business or geographical area of operations that has been disposed of or is held for sale. The results of that component are separately reported as (“discontinued operation”) in the income statement. The comparative income statement and cash flow statement are restated as if the operation had been discontinued from the start of the comparative period. The assets and liabilities of such component classified as “discontinued operation” or “held for sale” is presented separately in the assets and liabilities, respectively, of the balance sheet, from the date it is first determined to be discontinued or held for sale.

(w) Related parties

Parties are considered to be related to the Guangxi Wharton Group if:

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

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

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

• (iv) the party is a member of the key management personnel of the Guangxi Wharton Group or its 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;

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• (v) the party is a close member of the family of any individual 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 Guangxi Wharton Group, or of any entity that is a related party of the Guangxi Wharton 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.

4. FINANCIAL RISK MANAGEMENT

(a) Financial risk factors

The Guangxi Wharton Group’s activities expose it to a variety of financial risks: foreign exchange risk, credit risk, liquidity risk, interest rate risk arises in the normal course of the Guangxi Wharton Group’s business.

(i) Foreign currency risk

Guangxi Wharton Group’s business are located in the PRC and all transactions are conducted in RMB, except for certain cash balances denominated in Hong Kong dollars, amounted to HK$18,000 and HK$17,000 as at years ended 31 December 2005 and 2006. In addition, there are no purchases and payments made in foreign currencies. In the opinion of the directors of Guangxi Wharton, fluctuations of the exchange rates of RMB against foreign currencies are not expected to have significant impacts on the results of the Guangxi Wharton Group.

(ii) Credit risk

The Guangxi Wharton Group has no significant concentrations of credit risk. It has policies in place to ensure that sale of rooms to wholesalers are made to customers with an appropriate credit history. Sales to retail customers are made via credit cards to a significant extend. Sales to corporate customers are made to customers with good credit history.

The maximum exposure of credit risk at each of the balance sheet dates in respect of each class of financial assets is disclosed in the notes to the Financial Information of the relevant financial assets.

(iii) Liquidity risk

The Guangxi Wharton Group has exposure to liquidity risk in view of its net current liabilities position. As the Guangxi Wharton Group will be able to obtain external financing from potential acquirer of the Guangxi Wharton Group subsequent to 31 July 2008, the exposure to liquidity risk is significantly reduced.

The following liquidity table set out the remaining contractual maturities at the balance sheet date of the Guangxi Wharton Group’s financial liabilities based on contractual undiscounted cash flows and the earliest date the Guangxi Wharton Group is required to pay:

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Trade payables Other payables Short-term bank loan Amount due to immediate holding company Amount due to ultimate holding company Amounts due to fellow subsidiaries Amount due to a minority shareholder	2005 RMB’000 4,569 8,790 – 350,553 – 34,338 1,000 399,250	As at 31 December	2007 RMB’000 5,924 12,394 4,000 293,207 – 34,031 1,000 350,556	As at 31 July 2008 RMB’000 4,631 14,737 – 390,382 1,020 – 1,000
		2006 RMB’000 5,713 12,035 – 313,563 – 33,671 1,000 365,982
				411,770

(iv) Interest rate risk

The interest rates on the Guangxi Wharton Group’s interest-bearing loan and the amount due to immediate holding company are on fixed rate basis. No sensitivity analysis is prepared accordingly. The interest rates on the bank deposits and bank loans are disclosed in notes 19 and 20.

As at 31 July 2008, it is estimated that a general increase/decrease of 100 basic points in bank deposit interest rates for RMB, with all other variables held constant, would increase/decrease the Guangxi Wharton Group’s profit/(loss) after tax and retained earnings by approximately RMB3,000, RMB2,000, RMB4,000 and RMB1,000 as at 31 December 2005, 2006, 2007 and 31 July 2008.

The sensitive analysis above has been determined assuming that the change in interest rates had occurred at the balance sheet dates and had been applied to the exposure to interest rate risk for non-derivative financial instruments in existence at that date. The 100 basis point increase or decrease represents the management’s assessment of a reasonable possible change in respective interest rates over the period until the next annual balance sheet date.

(b) Fair value estimation

The carrying amounts of significant financial assets and liabilities approximate their respective fair values as at 31 December 2005, 2006, 2007 and 31 July 2008.

• (i) Cash and cash equivalents, trade and other receivables, trade and other payables, amounts due from/(to) fellow subsidiaries, amount due from/(to) ultimate holding company, amounts due from related companies, amount due to immediate holding company, and amount due to a minority shareholder.

The carrying values approximate their fair values because of the short maturities of these items.

• (ii) Short-term bank loan

The carrying amount of loan approximates its fair value based on the borrowing rate currently available for bank loans with similar terms and maturities.

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5. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements used in preparing the Financial Information are evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are discussed below.

(i) Useful lives of the property, plant and equipment

The Guangxi Wharton Group’s management determines the estimated useful lives and the related depreciation charges for its property, plant and equipment. This estimate is based on the historical experience of the actual useful lives of the property, plant and equipment of similar nature and functions. It could change significantly as a result of technical innovations and competitor actions in response to severe industry cycles. Management will increase the depreciation charges where useful lives are less than previously estimated lives, or it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold.

(ii) Depreciation of hotel properties

The Guangxi Wharton Group’s carrying amount of hotel properties as at 31 December 2005, 2006, 2007 and 31 July 2008 was approximately RMB242,981,000, RMB234,160,000, RMB225,339,000 and RMB220,193,000. The Guangxi Wharton Group depreciates the hotel properties on a straight-line basis over their remaining unexpired terms of the leases. It reflects the directors’ estimate of the periods that the Guangxi Wharton Group intends to derive economic benefits from the use of the Guangxi Wharton Group’s hotel properties. During the Relevant Periods, the useful lives of the hotel properties have been reviewed and these estimates are considered to be appropriate. Guangxi Wharton has been granted the rights to operate and manage the hotel in Guangxi, the PRC for a period of 40 years and subject to certain conditions to be fulfilled by Guangxi Wharton. Should the conditions not be fulfilled, the depreciation period of the hotel properties would be adjusted. During the Relevant Periods, the estimated useful life of 40 years of these hotel properties has been reviewed, and these estimates are considered to be appropriate.

(iii) Impairment of property, plant and equipment and land use rights

Property, plant and equipment and land use rights are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The recoverable amounts are determined based on value-in-use calculations or market valuations. These calculations require the use of judgements and estimates.

(iv) Impairment of trade receivables and other receivables

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

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6. TURNOVER AND SEGMENT INFORMATION

The Guangxi Wharton Group owns and operates hotel and related services. Sales recognised during the Relevant Periods are as follows:

(a) Turnover

Hotel operation: – Room rentals – Food and beverage sales – Rendering of ancillary services		Year ended 31 December 2006 2007 RMB’000 RMB’000 40,310 40,155 50,431 53,604 9,120 9,331 99,861 103,090	Seven months ended 31 July	Seven months ended 31 July
	2005 RMB’000 38,595 47,223 9,424 95,242	2006 RMB’000 40,310 50,431 9,120 99,861	2007 RMB’000 (unaudited) 21,880 21,685 5,800 49,365	2008 RMB’000 22,049 23,841 4,200
				50,090

(b) Segment information

No segment of analysis for business segment is presented as the Guangxi Wharton Group principally operates in one business segment, which is the hotel operations and hotel related services in the PRC.

No segment analysis for geographical segment is presented as substantially all of the Guangxi Wharton Group’s sales, operating results, assets and liabilities were located in the PRC.

7. OTHER REVENUE AND INCOME

Interest income Rebate from suppliers Sundry income		Year ended 31 December 2006 2007 RMB’000 RMB’000 25 22 277 230 81 2 383 254	Seven months ended 31 July	Seven months ended 31 July
	2005 RMB’000 24 173 18 215	2006 RMB’000 25 277 81 383	2007 RMB’000 (unaudited) 10 148 – 158	2008 RMB’000 10 52 –
				62

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8. OPERATING PROFIT/(LOSS)

(a) Direct operating costs

Business tax Depreciation Direct materials Direct wages Utilities		Year ended 31 December	2007 RMB’000 5,925 18,425 21,977 7,841 8,619 62,787	Seven months ended 31 July	Seven months ended 31 July
	2005 RMB’000 5,957 18,156 19,053 6,530 8,382 58,078	2006 RMB’000 6,129 18,278 20,212 7,255 8,663 60,537		2007 RMB’000 (unaudited) 3,297 10,748 9,306 4,072 4,817 32,240	2008 RMB’000 2,957 10,810 10,094 5,443 5,918
					35,222

(b) Employee benefit expenses (excluding directors’ remuneration)

Wages and salaries Pension costs-statutory pensions Staff welfare and benefits		Year ended 31 December	2007 RMB’000 10,171 1,238 2,632 14,041	Seven months ended 31 July	Seven months ended 31 July
	2005 RMB’000 8,342 800 2,129 11,271	2006 RMB’000 9,370 968 2,296 12,634		2007 RMB’000 (unaudited) 5,214 843 877 6,934	2008 RMB’000 7,319 904 1,882
					10,105

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(c) Other items

Auditor’s remuneration Directors’ remuneration Depreciation of property, plant and equipment_(note 13) Amortisation of land use rights(note 14)_ Cost of inventories consumed in operation Loss on disposal of property, plant and equipment Impairment on trade receivables Impairment on other receivables Property tax	Year ended 31 December 2005 2006 2007 RMB’000 RMB’000 RMB’000 – – – – – – 28,375 30,016 30,597 319 319 319 19,053 20,212 21,977 4,563 1,025 4,640 869 294 175 3,194 417 431 12 1,189 38	Seven months ended 31July
		2007 2008 RMB’000 RMB’000 (unaudited) – – – – 21,081 23,871 187 187 9,306 10,095 4,640 3,569 175 56 431 – 25 4

(d) Finance costs

Interest expense on – Bank borrowings wholly repayable within five years – Amount due to immediate holding company	Year ended 31 December	Year ended 31 December	2007 RMB’000 320 23,213 23,533	Seven months ended 31 July	Seven months ended 31 July
	2005 RMB’000 1,031 – 1,031	2006 RMB’000 – – –		2007 RMB’000 (unaudited) 182 13,541 13,723	2008 RMB’000 66 13,727
					13,793

(e) Property tax

The property tax rate levied on the rental income and hotel buildings (restricted to 70% of the cost of the buildings) applicable to Guangxi Wharton is 12% and 1.2%, respectively. According to the “supplementary provision of policies on property tax of Guangxi Province”, Guangxi Wharton is entitled to the exemption of property tax and land tax on the hotel buildings for the year ended 31 December 2005, 2006 and 2007 of approximately RMB1,136,000, RMB1,304,000 and RMB3,207,000, respectively.

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9. DIRECTOR’ AND SENIOR MANAGEMENT’S EMOLUMENTS

(a) Directors’ emoluments

No directors remuneration were paid during the Relevant Periods

(b) Five highest paid individuals

During the Relevant Periods, none of the five highest paid individuals is a director of Guangxi Wharton.

Salaries Bonuses Pension costs	Year ended 31 December	Year ended 31 December	2007 RMB’000 744 – – 744	Seven months ended 31 July	Seven months ended 31 July
	2005 RMB’000 718 – – 718	2006 RMB’000 780 – – 780		2007 RMB’000 (unaudited) 455 – – 455	2008 RMB’000 455 – –
					455

The emoluments paid to each of the above non-director individual throughout the Relevant Periods fell within the banding of nil to HK$1,000,000 (equivalents to RMB940,000).

• (c) During the Relevant Periods, no emoluments was paid by Guangxi Wharton to the director of any of the five highest paid individuals as an inducement to join or upon joining Guangxi Wharton or as compensation for loss of office.

10. INCOME TAX EXPENSES

No Hong Kong Profits Tax has been provided as Guangxi Wharton did not have any assessable profits derived from Hong Kong during the Relevant Periods.

No PRC Enterprise Income Tax has been provided as Guangxi Wharton has accumulated losses brought forward to set off the assessable profits derived during the Relevant Periods.

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

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Profit/(loss) before income tax Calculated at the PRC enterprise income rate of 33%/25% Income not subject to tax Expenses not deductible for tax Tax losses utilised Tax effect of tax loss not recognised Income tax expense	Year ended 31 December	Year ended 31 December	2007 RMB’000 (8,632 ) (2,849 ) (461 ) 11 – 3,299 –	Seven months ended 31 July	Seven months ended 31 July
	2005 RMB’000 10,153 3,350 (10 ) 3,554 (6,894 ) – –	2006 RMB’000 11,649 3,844 (25 ) 8 (3,827 ) – –		2007 RMB’000 (unaudited) (11,100 ) (3,663 ) (458 ) 9 – 4,112 –	2008 RMB’000 (20,016 )
					(5,004 ) (2 ) 16 – 4,990
					–

In March 2007, the Fifth Plenary Session of the Tenth National People’s Congress passed the Corporate Income Tax Law of the People’s Republic of China which will take effect from 1 January 2008. From 1 January 2008, the statutory income tax applicable to Guangxi Wharton is 25%.

11.

DISCONTINUED OPERATION

Guangxi Wharton Group’s provision of travel agency and related services was discontinued upon the de-registration of the subsidiary on 21 December 2007.

(a) The results of the discontinued operation during the Relevant Periods were as follows:

Commission from air ticketing Other income Selling and distribution expenses Administrative expenses Profit from operations Gain on de-registration of the subsidiary_(note c)_ Profit before income tax Income tax Profit for the year Attributable to: Guangxi Wharton Minority interest	Year ended 31 December	Year ended 31 December	2007 RMB’000 – – – – – 74 74 – 74 74 –	Seven months ended 31 July	Seven months ended 31 July
	2005 RMB’000 154 18 (79 ) (92 ) 1 – 1 – 1 1 –	2006 RMB’000 93 – (7 ) (52 ) 34 – 34 – 34 32 2		2007 RMB’000 (unaudited ) – – – – – – – – – – –	2008 RMB’000 – – – –
					– –
					– –
					–
					– –

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(b) Net assets attributable to Guangxi Wharton

Other payables Amount due from ultimate holding company Amount due (to)/from Guangxi Wharton Net assets Net assets attributable to Guangxi Wharton Net assets attributable to minority interest	2005 RMB’000 (232) 3,942 (822) 2,888 2,744 144	As at 31 December	2007 RMB’000 – – – – – –	As at 31 July 2008 RMB’000 – – –
		2006 RMB’000 (428) 2,667 683 2,922 2,776 146
				–
				– –

(c) Gain on de-registration was determined as follow:

Other receivables Other payables Less: minority interest disposed of Net liabilities disposed of Gain on de-registration	As at 21 December 2007 RMB’000 111 (39 )
	72 (146 )
	(74 ) 74
	–

12. DIVIDENDS

No dividend was declared or paid during the Relevant Periods.

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13. PROPERTY, PLANT AND EQUIPMENT- GUANGXI WHARTON GROUP AND GUANGXI WHARTON

Cost At 1 January 2005 Additions Transfer from CIP Disposals At 31 December 2005 and 1 January 2006 Additions Transfer from CIP Disposals At 31 December 2006 and 1 January 2007 Additions Transfer from CIP Disposals At 31 December 2007 and 1 January 2008 Additions Transfer from CIP Disposals At 31 July 2008 Accumulated depreciation and impairment losses At 1 January 2005 Charge for the year Written back on disposal At 31 December 2005 and 1 January 2006 Charge for the year Written back At 31 December 2006 and 1 January 2007 Charge for the year Written back on disposal At 31 December 2007 and 1 January 2008 Charge for the period Written back on disposal At 31 July 2008 Net book value At 31 December 2005 At 31 December 2006 At 31 December 2007 At 31 July 2008		Hotelproperties	Hotelproperties	Furniture and fixtures RMB’000 37,687 5,298 – (313) 42,672 1,009 3,897 (170) 47,408 2,804 3,868 (80) 54,000 5,149 130 (88) 59,191 15,197 4,842 (301) 19,738 5,284 (161) 24,861 5,244 (73) 30,032 3,706 (83) 33,655 22,934 22,547 23,968 25,536	Motor vehicles RMB’000 2,602 – – (342 ) 2,260 – – (480 ) 1,780 – – – 1,780 – – (315 ) 1,465 2,602 – (342 ) 2,260 – (480 ) 1,780 – – 1,780 – (315 ) 1,465 – – – –	Total RMB’000 451,227 38,770 – (1,331 ) 488,666 3,419 – (1,863 ) 490,222 12,314 – (7,318 ) 495,218 92,385 – (5,448 ) 582,155 66,749 28,375 (643 ) 94,481 30,016 (838 ) 123,659 30,597 (2,678 ) 151,578 23,871 (1,879 ) 173,570 394,185 366,563 343,640 408,585
	Hotel buildings RMB’000 244,618 28,359 2,693 – 275,670 – – – 275,670 – – – 275,670 – – – 275,670 24,696 7,993 – 32,689 8,821 – 41,510 8,821 – 50,331 5,146 – 55,477 242,981 234,160 225,339 220,193	Leasehold improvements RMB’000 1,911 – 61,568 (676 ) 62,803 138 2,357 (1,213 ) 64,085 3,971 615 (7,238 ) 61,433 84,419 1 (3,468 ) 142,385 390 7,595 – 7,985 7,913 (197 ) 15,701 8,467 (2,605 ) 21,563 10,284 (1,408 ) 30,439 54,818 48,384 39,870 111,946	Equipment Construction and in progress machinery (“CIP”) RMB’000 RMB’000 99,084 65,325 293 4,820 – (64,261 ) – – 99,377 5,884 – 2,272 1,024 (7,278 ) – – 100,401 878 1,590 3,949 168 (4,651 ) – – 102,159 176 – 2,817 – (131 ) (1,577 ) – 100,582 2,862 23,864 – 7,945 – – – 31,809 – 7,998 – – – 39,807 – 8,065 – – – 47,872 – 4,735 – (73 ) – 52,534 – 67,568 5,884 60,594 878 54,287 176 48,048 2,862

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As at 31 December 2005, 2006, 2007 and 31 July 2008, all the hotel buildings with net book amounts totaling RMB242,981,000, RMB234,160,000, RMB225,339,000 and RMB220,193,000 were pledged as collateral to a bank for the ultimate holding company’s borrowings, respectively.

The hotel properties, together with the land use rights as referred to note 14 below, were revalued at RMB600,000,000 by an independent firm of professional valuers, BMI Appraisals Limited, by reference to the market vale at existing state as at 31 October 2008. The revalued amount has not been incorporated in the Financial Information.

14. LAND USE RIGHTS – GUANGXI WHARTON GROUP AND GUANGXI WHARTON

Cost Accumulated amortisation Balance at 1 January Charge for the year/period Net book value	2005 RMB’000 12,779 416 319 735 12,044	As at 31 December	2007 RMB’000 12,779 1,054 319 1,373 11,406	As at 31 July 2008 RMB’000 12,779
		2006 RMB’000 12,779 735 319 1,054 11,725
				1,373 187
				1,560
				11,219

Land use rights represent lease payments for acquiring rights to use land, which is all located in the PRC, for own-used hotel properties as referred to note 13 above.

Pursuant to the land use rights certificate, Nan Ning Guo Yong (2005) No 429198 (the “Land Certificate”), issued by Nanning City People’s Government dated 28 February 2005, the land use rights of the property with a site of 41,426 sq.m. have been granted to Guangxi Wharton for a term of 40 years expiring on 29 May 2043 for hotel and catering purposes. The validity of the Land Certificate will expire on 10 October 2009. As advised by the Group and its legal adviser in the PRC, the tenure of the Land Certificate can be renewed on an annual basis until 29 May 2043 at no extra land premium or other payments.

As at 31 December 2005, 2006, 2007 and 31 July 2008, prepaid lease payments with net book amounts totaling RMB12,044,000, RMB11,725,000, RMB11,406,000 and RMB11,219,000 were pledged as collateral to a bank for the ultimate holding company’s borrowings, respectively.

15. INVESTMENT IN A SUBSIDIARY – GUANGXI WHARTON

Unlisted equity interests, at cost	2005 RMB’000 2,850	As at 31 December	2007 RMB’000 –	As at 31 July 2008 RMB’000 –
		2006 RMB’000 2,850

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Particulars of the Company’s subsidiary prior to 21 December 2007 as follows:

	Place of	Nominal value of issued	Percentage of	Percentage of
	incorporation/	and fully paid share	attributable		Principal
Name	operation	capital/paid in capital	equity	interest	activities
			Direct	Indirect
廣西南洋國際	The People’s Republic	RMB 3,000,000	95%	–	Travel and
旅行社有限公司	of China (the “PRC”)				related services

The subsidiary was de-registered on 21 December 2007.

16. DEFERRED TAXATION

Guangxi Wharton had unutilised tax losses approximately RMB30,690,000, RMB19,093,000, RMB29,091,000 and RMB49,053,000 as at 31 December 2005, 31 December 2006, 31 December 2007 and 31 July 2008 respectively, that can be carried forward for five years from the year/period in which the losses arose for offsetting against future taxable profits of the tax entity in which the losses arose. Deferred tax assets are recognised for tax losses carried forward only to the extent that the realisation of related benefits through future taxable profits is probable. Guangxi Wharton did not recognise deferred tax assets of approximately RMB10,128,000, RMB6,301,000, RMB9,600,000 and RMB12,263,000 as at 31 December 2005, 31 December 2006, 31 December 2007 and 31 July 2008, respectively, in respect of such unutilised tax losses due to unpredictability of future profit streams.

17. INVENTORIES – GUANGXI WHARTON GROUP AND GUANGXI WHARTON

Raw materials Low value consumables	2005 RMB’000 946 3,211 4,157	As at 31 December	2007 RMB’000 910 2,532 3,442	As at 31 July 2008 RMB’000 931 2,586
		2006 RMB’000 1,169 2,840 4,009
				3,517

18. TRADE AND OTHER RECEIVABLES – GUANGXI WHARTON GROUP AND GUANGXI WHARTON

Trade receivables Less: provision for impairment Trade receivables – net Other receivables Prepayments Less: provision for impairment	2005 RMB’000 3,951 (869 ) 3,082 1,470 809 (881 ) 1,398 4,480	As at 31 December	2007 RMB’000 5,784 (1,338 ) 4,446 5,929 1,157 (1,729 ) 5,357 9,803	As at 31 July 2008 RMB’000 3,824 (1,394
		2006 RMB’000 5,499 (1,163 ) 4,336 1,748 1,554 (1,298 ) 2,004 6,340
				2,430
				2,232 1,221 –
				3,453
				5,883

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Other receivables mainly represent fundings to third parties, which are unsecured, interest free and have no fixed repayment terms.

There is no concentration of credit risk with respect to trade receivables, as Guangxi Wharton has a large number of customers, dispersed over the country.

• (a) As at 31 December 2005, 2006, 2007 and 31 July 2008, the fair value of trade receivables of Guangxi Wharton approximated their carrying amounts.

• (b) A significant part of Guangxi Wharton’s sales are by credit cards or against payment of deposits. The remaining amounts are with general credit term of 90 days. Guangxi Wharton has a defined credit policy. The ageing analysis of the trade receivables after provision of impairment is as follows:

31- 60 days 61- 90 days Over 90 days	2005 RMB’000 1,840 159 1,083 3,082	As at 31 December	2007 RMB’000 2,983 348 1,115 4,446	As at 31 July 2008 RMB’000 1,843 236 351
		2006 RMB’000 3,566 182 588 4,336
				2,430

Trade receivables that are less than three months past due are not considered impaired. As at 31 December 2005, 2006, 2007 and 31 July 2008, trade receivables of RMB1,083,000, RMB588,000, RMB1,115,000 and RMB351,000 were past due but not impaired. These relate to a number of independent customers for whom no recent history of default.

Over 90 days	2005 RMB’000 1,083 1,083	As at 31 December	2007 RMB’000 1,115 1,115	As at 31 July 2008 RMB’000 351
		2006 RMB’000 588 588
				351

As at 31 December 2005, 2006, 2007 and 31 July 2008, trade receivables of RMB869,000, RMB1,163,000, RMB1,338,000, RMB1,394,000 were considered impaired. Guangxi Wharton does not hold any collateral over these balances.

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APPENDIX II

Movements in the provision for impairment of trade receivables during the Relevant Periods are as follows:

Beginning of the year/period Provision for impairment At end of the year/period	2005 RMB’000 – 869 869	As at 31 December	2007 RMB’000 1,163 175 1,338	As at 31 July 2008 RMB’000 1,338 56
		2006 RMB’000 869 294 1,163
				1,394

Movements in the provision for impairment of other receivables during the Relevant Periods are as follows:

Beginning of the year/period Provision for impairment At end of the year/period	2005 RMB’000 – 881 881	As at 31 December	2007 RMB’000 1,298 431 1,729	As at 31 July 2008 RMB’000 1,729 –
		2006 RMB’000 881 417 1,298
				1,729

The creation of provision of impaired receivables have been included in administrative expenses in the consolidated income statement.

19. CASH AND CASH EQUIVALENTS – GUANGXI WHARTON GROUP AND GUANGXI WHARTON

Cash at bank and in hand	2005 RMB’000 4,362	As at 31 December	2007 RMB’000 5,782	As at 31 July 2008 RMB’000 1,032
		2006 RMB’000 3,235

All the Guangxi Wharton’s bank balances are denominated in RMB were placed with banks in the PRC. RMB is not a freely convertible currency and the remittance of funds out of the PRC is subject to the exchange restriction imposed by the PRC government.

The effective annual interest rate on bank deposits as at 31 December 2005, 2006, 2007 and 31 July 2008 was 1.52%, 3.3%, 3.05% and 1.83%, respectively.

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20. SHORT-TERM BANK LOAN – GUANGXI WHARTON GROUP AND GUANGXI WHARTON

Short term bank loan – Unsecured		As at 31 December	2007 RMB’000 4,000 4,000	As at 31 July 2008 RMB’000 –
	2005 RMB’000 – –	2006 RMB’000 – –
				–

The effective interest rates of short-term bank loan at each of the balance sheet dates of the Relevant Periods were as follows:

Bank loan	As at As at 31 December 31 July 2005 2006 2007 2008 RMB’000 RMB’000 RMB’000 RMB’000 – – 5.19% –

The short-term bank loan was guaranteed by the ultimate holding company and was repaid in March 2008.

21. TRADE AND OTHER PAYABLES

Guangxi Wharton Group Trade payables Receipts in advance Other taxes payable Deposits received Other payables		As at 31 December	2007 RMB’000 5,924 6,287 744 1,048 4,315 18,318	As at 31 July 2008 RMB’000 4,631 6,901 568 1,145 6,123
	2005 RMB’000 4,569 5,514 711 893 1,672 13,359	2006 RMB’000 5,713 5,533 679 940 4,883 17,748
				19,368

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Guangxi Wharton Trade payables Receipts in advance Other taxes payable Deposits received Other payables		As at 31 December	2007 RMB’000 5,924 6,287 744 1,048 4,315 18,318	As at 31 July 2008 RMB’000 4,631 6,901 568 1,145 6,123
	2005 RMB’000 4,569 5,514 711 893 1,438 13,125	2006 RMB’000 5,713 5,533 679 940 4,455 17,320
				19,368

The ageing analysis of trade payables as at 31 December 2005, 2006, 2007 and 31 July 2008 is as follows:

31-60 days 61-90 days Over 90 days		As at 31 December	2007 RMB’000 4,135 1,045 744 5,924	As at 31 July 2008 RMB’000 2,761 698 1,172
	2005 RMB’000 2,868 272 1,429 4,569	2006 RMB’000 3,959 918 836 5,713
				4,631

The carrying amounts of trade payables approximated their fair values.

22. AMOUNT DUE FROM/(TO) ULTIMATE HOLDING COMPANY/AMOUNT DUE TO IMMEDIATE HOLDING COMPANY/AMOUNT DUE FROM A SUBSIDIARY

The amounts due from/(to) ultimate holding company, immediate holding company and a subsidiary are unsecured, interest-free and repayable on demand except for the amount of RMB293,207,000 and RMB390,382,000 due to the immediate holding company which borne interest of 7.68% and 7.47% per annum at 31 December 2007 and 31 July 2008 respectively.

23. CAPITAL AND RESERVES

(a) Share capital

Paid-up capital	As at As at 31 December 31 July 2005 2006 2007 2008 RMB’000 RMB’000 RMB’000 RMB’000 87,814 87,814 87,814 87,814

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(b) Capital reserve

Capital reserve mainly represents the book value of assets injected by the investors of Guangxi Wharton in excess of their share of the registered capital.

(c) Distribution of reserves

In the opinion of directors of Guangxi Wharton, Guangxi Wharton did not have any reserve available for distribution to equity shareholders during the Relevant Periods.

(d) Capital management

Guangxi Wharton’s primary objectives when managing capital are to safeguard the company’s ability to continue as a going concern, so that it can fund its development, management of hotel operations, and continue to provide returns for shareholders, by pricing hotel operations commensurately with the level of risk and by securing access to finance at a reasonable cost.

Guangxi Wharton 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 advantage and security afforded by a sound capital position, and makes adjustments to the capital structure in light of changes in economic conditions.

Guangxi Wharton monitors its capital structure on the basis of a gearing ratio, being the total of bank and interest bearing borrowings divided by the total assets. As at 31 December 2005, 2006, 2007 and 31 July 2008, the gearing ratios of Guangxi Wharton were 81%,77%, 80% and 110%, respectively.

Guangxi Wharton is not subject to externally imposed capital requirements.

24. PLEDGE OF ASSETS

As at 31 December 2005, 2006, 2007 and 31 July 2008, bank borrowings of the ultimate holding company were secured on Guangxi Wharton’s hotel properties and land use rights as follows:

Hotel buildings Land use rights	2005 RMB’000 242,981 12,044 255,025	As at 31 December	2007 RMB’000 225,339 11,406 236,745	As at 31 July 2008 RMB’000 220,193 11,219
		2006 RMB’000 234,160 11,725 245,885
				231,412

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25. COMMITMENTS

• (a) Capital commitments outstanding at each of the balance sheet date not provided for in the Financial Information were as follows:

Contracted for, in respect of leasehold improvements Authorised but not contracted for, in respect of leasehold improvements	2005 RMB’000 7,920 – 7,920	As at 31 December	2007 RMB’000 4,345 – 4,345	As at 31 July 2008 RMB’000 1,377 –
		2006 RMB’000 8,047 – 8,047
				1,377

• (b) Guangxi Wharton Group had future aggregate minimum lease rental receivable under non-cancellable operating leases in respect of land and buildings as follows:

Not later than one year Later than one year and not later than five years	2005 RMB’000 96 272 368	As at 31 December	2007 RMB’000 1,413 513 1,926	As at 31 July 2008 RMB’000 1,341 24
		2006 RMB’000 1,229 1,876 3,105
				1,365

26. RELATED PARTY TRANSACTIONS

(a) Key management personnel remuneration

Remuneration for key management personnel of Guangxi Wharton is set out in note 9 of this section.

(b) Transactions with related parties

During the Relevant Periods, Guangxi Wharton’s directors are of the view that the following companies/ parties are related parties of the Guangxi Wharton Group:

廣西銀河集團有限公司

A majority shareholder of 北海銀河高科技產業股份有限公司, the ultimate holding company of Guangxi Wharton

北海銀河高科技產業股份有限公司 The immediate holding company of Guangxi Wharton

北海銀河開關設備有限公司

A subsidiary of 北海銀河高科技產業股份有限公司, the immediate holding company of Guangxi Wharton

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南寧銀河南方軟件有限公司	A subsidiary of北海銀河高科技產業股份有限公司, the immediate
	holding company of Guangxi Wharton
四州銀河汽車集團有限公司	A subsidiary of北海銀河高科技產業股份有限公司, the immediate
	holding company of Guangxi Wharton
江西變壓器科技股份有限公司	A subsidiary of北海銀河高科技產業股份有限公司, the immediate
	holding company of Guangxi Wharton
柳州特種變壓器有限責任公司	A subsidiary of北海銀河高科技產業股份有限公司, the immediate
	holding company of Guangxi Wharton
貴州遵義銀河長征科技	A subsidiary of北海銀河高科技產業股份有限公司, the immediate
有限責任公司	holding company of Guangxi Wharton
北海銀河科技變壓器有限公司	A subsidiary of北海銀河高科技產業股份有限公司, the immediate
	holding company of Guangxi Wharton
北海銀河電子有限公司	A subsidiary of北海銀河高科技產業股份有限公司, the immediate
	holding company of Guangxi Wharton
北海銀河科技電氣有限責任公司	A subsidiary of北海銀河高科技產業股份有限公司, the immediate
	holding company of Guangxi Wharton
西安開元電力自動化有限公司	A subsidiary of北海銀河高科技產業股份有限公司, the immediate
	holding company of Guangxi Wharton
貴州長征電器股份有限公司	An associate of廣西銀河集團有限公司, the ultimate holding
	company of Guangxi Wharton
Gao Jian	A minority shareholder of Guangxi Wharton

Guangxi Wharton had the following significant transactions with related parties in accordance with the terms mutually agreed by the respective parties. The directors of Guangxi Wharton are of the opinion that such transactions were conducted in the ordinary and usual course of business and on normal commercial terms.

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Sales of services To parties under common control: fellow subsidiaries –北海銀河開關設備有限公司 –南寧銀河南方軟件有限公司 –四州銀河汽車集團有限公司 –江西變壓器科技股份有限公司 –柳州特種變壓器有限責任公司 immediate holding company –北海銀河高科技產業股份有限公司 ultimate holding company –廣西銀河集團有限公司 To parties under common significant influence related company –貴州長征電器股份有限公司 Purchase of computer equipment fellow subsidiary –南寧銀河南方軟件有限公司		As at 31 December	2007 RMB’000 20 54 41 158 50 323 2,392 249 – –	As at 31 July 2008 RMB’000 18 10 – – –
	2005 RMB’000 – 68 – 72 29 169 – 2,632 111 47	2006 RMB’000 – 64 – 113 39 216 364 2,522 100 61
				28
				1,966
				143
				–
				–

(c) Amounts due from/(to) fellow subsidiaries

Parties under common control: Amounts due from fellow subsidiaries –北海銀河開關設備有限公司 –貴州遵義銀河長征科技有限責任公司 –四州銀河汽車集團有限公司 –江西變壓器科技股份有限公司 –柳州特種變壓器有限責任公司 –北海銀河科技變壓器有限公司		As at 31 December	2007 RMB’000 17 – 7,000 262 6,000 1,500 14,779	As at 31 July 2008 RMB’000 14 – – – – –
	2005 RMB’000 – 2,000 54 69 29 1,500 3,652	2006 RMB’000 – – 54 182 6,040 1,500 7,776
				14

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Amounts due to fellow subsidiaries –南寧銀河南方軟件有限公司 –北海銀河電子有限公司 –北海銀河科技電氣有限責任公司 –西安開元電力自動化有限公司		As at 31 December	2007 RMB’000 4,408 29,123 – 500 34,031	As at 31 July 2008 RMB’000 – – – –
	2005 RMB’000 4,337 28,801 700 500 34,338	2006 RMB’000 4,370 28,801 – 500 33,671
				–

The balances due from/(to) fellow subsidiaries at 31 December 2005, 2006, 2007 and 31 July 2008 are unsecured, interest free and repayable on demand.

(d) Amount due from a related company

Party under significant influence –貴州長征電器股份有限公司	As at As at 31 December 31 July 2005 2006 2007 2008 RMB’000 RMB’000 RMB’000 RMB’000 111 211 211 211

The balance due from a related company at 31 December 2005, 2006, 2007 and 31 July 2008 is unsecured, interest free and repayable on demand.

(e) Amount due to a minority shareholder

– Gao Jian		As at 31 December	2007 RMB’000 1,000	As at 31 July 2008 RMB’000 1,000
	2005 RMB’000 1,000	2006 RMB’000 1,000

The balance due from a minority shareholder at 31 December 2005, 2006, 2007 and 31 July 2008 is unsecured, interest free and repayable on demand.

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III SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by Guangxi Wharton in respect of any period subsequent to 31 July 2008.

Yours faithfully

CCIF CPA Limited Certified Public Accountants Hong Kong

Leung Chun Wa

Practising Certificate Number P04963

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APPENDIX II

MANAGEMENT DISCUSSION AND ANALYSIS ON THE BUSINESS OF THE TARGET GROUP

Business review

The Target Group recorded turnovers of approximately RMB95.2 million, RMB99.9 million, RMB103.1 million and RMB50.1 million for the three years ended 31 December 2005, 2006 and 2007 and seven months ended 31 July 2008 respectively. The gross profits of the Target Group were approximately RMB37.2 million, RMB39.3 million, RMB40.3 million and RMB14.9 million for the three years ended 31 December 2005, 2006 and 2007 and seven months ended 31 July 2008 respectively. The increases in turnovers and gross profits over these three years were primarily attributable to the improvement in food and beverage sales and sales of goods.

The Target Group recorded net profits of approximately RMB10.2 million and RMB11.6 million for the two years ended 31 December 2005 and 2006 respectively. However for the year ended 31 December 2007 and seven months ended 31 July 2008, the Target Group turned to net losses of approximately RMB8.6 million and RMB20.0 million respectively. The turnaround for the year ended 31 December 2007 was primarily due to the interest expense on amount due to Yinhe of approximately RMB 23.2 million. Such interest expense was arisen from the loan due to Yinhe of amounted to approximately RMB293.2 million at 31 December 2007 which borne interest of 7.68% per annum. The net losses for the seven months ended 31 July 2008 further increased due to the reduction in customer’s consumption under the unfavourable economic condition.

Liquidity and financial resources

The Target Group had cash and bank balances of approximately RMB4.4 million, RMB3.2 million, RMB5.8 million and RMB1.0 million as at 31 December 2005, 2006 and 2007 and 31 July 2008 respectively. All the Target Group’s cash and bank balances are denominated in RMB and were placed with banks in the PRC.

The Target Group had no outstanding bank borrowings as at 31 December 2005 and 2006 and 31 July 2008 respectively. The short-term bank loan of approximately RMB4.0 million as at 31 December 2007 which bore an effective interest of 5.19% was repaid in March 2008.

The major liabilities of the Target Group were the amounts due to Yinhe which amounted to approximately RMB350.6 million, RMB313.6 million, RMB293.2 million and RMB390.4 million as at 31 December 2005, 2006 and 2007 and 31 July 2008 respectively, of which the amounts due to Yinhe at 31 December 2007 and 31 July 2008 bore an interest of 7.68% and 7.47% per annum. The borrowing from Yinhe by the Target Group was the result of building, redecoration and refurbishment of the Hotel.

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APPENDIX II

As a result, the gearing ratio, which represented the total liabilities to the total assets, reached approximately 91.8%, 88.5%, 90.1% and 95.7% as at 31 December 2005, 2006 and 2007 and 31 July 2008 respectively.

Funding and treasury policy

The Target Group’s business are located in the PRC and all transactions are conducted in RMB, except for certain cash balances denominated in Hong Kong dollars, amounted to HK$18,000 and HK$17,000 as at years ended 31 December 2005 and 2006. In addition, there are no purchases and payments made in foreign currencies. It is considered that fluctuations of the exchange rates of RMB against foreign currencies are not expected to have significant impacts on the results of the Target Group. In addition, as all the borrowings of the Target Group were on fixed rate basis, it is considered that the interest rate risk of the Target Group is minimal.

Pledge of assets

As at 31 December 2005, 2006, 2007 and 31 July 2008, the hotel buildings and land use rights of the Target Group with net book amounts totaling RMB255.0 million, RMB245.9 million, RMB236.7 and RMB231.4 were pledged as collateral to a bank for Yinhe’s borrowings, respectively. The Vendors undertake to the Purchaser that their pledges will be discharged before the Management Transfer Date and the pledges will be assumed by the Purchaser amounted to the loan approved by the Bank of China which is currently intended to be RMB320 million.

Employees and remuneration policy

The Target Group employed approximately 601, 532, 569 and 589 employees as at 31 December 2005, 2006, 2007 and 31 July 2008 respectively. Remuneration is determined by reference to market terms and the qualifications and experience of the staff concerned. The Target Group also provides other benefits including medical allowance and educational subsidies to all eligible staff.

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APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

A. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Introduction

The accompanying unaudited pro forma financial information (the “Unaudited Pro Forma Financial Information”) of the Enlarged Group, comprising the unaudited pro forma consolidated balance sheet, the unaudited pro forma consolidated income statement and cash flow statement of the Enlarged Group, have been prepared by the directors in accordance with paragraph 4.29 of The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, to illustrate the effect of the proposed acquisition of the entire issued share capital (the “Sale Capital”) of Guangxi Wharton International Hotel Company Limited and the total payables of Guangxi Wharton as at 31 July 2008 (the “Acquisition”) on the results of operations, financial position and cash flows of the Group as if the Acquisition had been completed on (i) 1 April 2007 in respect of the unaudited pro forma income statement and cash flow statement of the Enlarged Group; and (ii) 31 March 2008 in respect of the unaudited pro forma balance sheet of the Enlarged Group.

The unaudited pro forma consolidated income statement and unaudited pro forma consolidated cash flow statement of the Enlarged Group have been prepared based upon the audited consolidated income statement and audited consolidated cash flow statement of the Group for the year ended 31 March 2008 as set out in Appendix I to this Circular and the audited income statement and audited cash flow statement of Guangxi Wharton Group for the period ended 31 July 2008 as set out in Appendix II to this Circular, after incorporating the unaudited pro forma adjustments described in the accompanying notes. The unaudited pro forma consolidated balance sheet of the Enlarged Group is prepared based on the audited consolidated balance sheet of the Group as at 31 March 2008 as set out in Appendix I to this Circular and the audited balance sheet of Guangxi Wharton Group as at 31 July 2008 as set out in Appendix II to this Circular, after incorporating the unaudited pro forma adjustments described in the accompanying notes. A narrative description of the unaudited pro forma adjustments of the Acquisition that are (i) directly attributable to the transaction concerned; (ii) expected to have a continuing impact on the Enlarged Group; and (ii) factually supportable, are summarised in the accompanying notes.

The Unaudited Pro Forma Financial Information of the Enlarged Group is based on a number of assumptions, estimates, uncertainties and currently available information. As a result of these assumptions, estimates and uncertainties, the accompanying Unaudited Pro Forma Financial Information of the Enlarged Group does not purport to describe the actual financial position of the Enlarged Group that would have been attained had the Acquisition been completed on 31 March 2008, or the results and cash flows of the Enlarged Group that would have been attained had the Acquisition been completed on 1 April 2007. Further, the accompanying Unaudited Pro Forma Financial Information of the Enlarged Group does not purport to predict the Enlarged Group’s future financial position, results or cash flows.

The Unaudited Pro Forma Financial Information of the Enlarged Group should be read in conjunction with the financial information of the Group as set out in Appendix I to this Circular, the financial information of Guangxi Wharton Group as set out in Appendix II to this Circular and other financial information included elsewhere in this Circular.

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APPENDIX III

• A. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Unaudited pro forma consolidated income statement for the year ended 31 March 2008

Guangxi The Group Wharton for the Group for the year ended period ended 31 March 2008 31 July 2008 Note (1) Note (2) HK$’000 HK$’000 Revenue 130,682 55,876 Cost of maintenance (124,541 ) (39,292 ) Gross profit 6,141 16,584 Other income 1,577 69 Selling and distribution expenses – (4,967 ) Administrative expenses (14,467 ) (18,567 ) Other operating expenses (1,666 ) (62 ) Discount on acquisition – – Finance costs (229 ) (15,386 ) Loss before tax (8,644 ) (22,329 ) Tax (60 ) – Loss for the year/period (8,704 ) (22,329 ) Attributable to: Equity holders of the parent (8,361 ) (22,329 ) Minority interest (343 ) – (8,704 ) (22,329 )

Pro forma consolidated income statement of the Enlarged Group for the Combined Pro forma year ended total adjustments Note 31 March 2008 HK$’000 HK$’000 HK$’000 186,558 186,558 (163,833 ) (163,833 ) 22,725 22,725 1,646 1,646 (4,967 ) (4,967 ) (33,034 ) (33,034 ) (1,728 ) (1,728 ) – 19,542 4 19,542 (15,615 ) (15,615 ) (30,973 ) (11,431 ) (60 ) (60 ) (31,033 ) (11,491 ) (30,690 ) 19,542 4 (11,148 ) (343 ) (343 ) (31,033 ) (11,491 )

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APPENDIX III

Unaudited pro forma consolidated balance sheet as at 31 March 2008

The Group as at 31 March 2008 Note (1) HK’000 Non-current assets Property, plant and equipment 2,488 Prepaid lease payments – Interests in subsidiaries – 2,488 Current assets Gross amount due from contract customers 28,147 Inventories – Trade receivables 26,428 Retention money receivables 171 Prepayments, deposits and other receivables 16,846 Amount due from a fellow subsidiary – Amounts due from related companies – Cash and cash equivalents 165,391 Total current assets 236,983 Current liabilities Gross amount due to contract customers 15,014 Trade payables 20,929 Retention money payables 696 Other payables and accruals 19,877 Amount due to ultimate holding company – Amount due to immediate holding company – Amount due to a shareholder – Advance from a controlling shareholder – Total current liabilities 56,516 Net current assets/(liabilities) 180,467 Total assets less current liabilities 182,955 Non-current liabilities Hotel Bank Loan – Convertible bonds 76,359 Deferred tax liabilities – Net Assets 106,596 Equity Issued capital 1,389 Equity component of convertible bonds 43,272 Reserves 61,270 105,931 Minority interests 665 Total Equity 106,596	Guangxi Wharton Group as at 31 July 2008 Note (2) HK$’000 466,577 12,812 – 479,389 – 4,016 2,775 – 3,943 16 241 1,178 12,169 – 5,288 – 16,828 1,165 445,791 1,142 – 470,214 (458,045 ) 21,344 – – – 21,344 100,986 – (79,642 ) 21,344 – 21,344	Pro forma consolidated balance sheet of the Enlarged Combined Pro forma Group as at total adjustments Note 31 March 2008 HK$’000 HK$’000 HK$’000 469,065 – 469,065 12,812 204,611 4 217,423 (21,344 ) 10 – 21,344 4 – 481,877 686,488 28,147 28,147 4,016 4,016 29,203 29,203 171 171 20,789 20,789 16 16 241 241 166,569 (165,391 ) 4 1,178 249,152 83,761 15,014 – 15,014 26,217 (5,288 ) 8 20,929 696 – 696 36,705 (16,828 ) 8 19,877 1,165 (1,165 ) 8 – 445,791 (445,791 ) 8 – 1,142 (1,142 ) 8 – 3,873 4 – 104,806 8 108,679 526,730 165,195 (277,578 ) (81,434 ) 204,299 605,054 – 365,408 8 365,408 76,359 76,359 – 37,149 4 37,149 127,940 126,138 102,375 102,375 43,272 43,272 (21,344 ) 10 19,542 4 (18,372 ) (1,802 ) (20,174 ) 127,275 125,473 665 665 127,940 126,138

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APPENDIX III

Unaudited pro forma consolidated cash flow statement for the year ended 31 March 2008

Loss before tax Adjustments for: Finance costs Interest income Depreciation and amortisation Impairment of trade receivables Discount on acquisition Loss of disposal of property, plant and equipment Decrease/(increase) in the gross amount due from contract customers Decrease in inventories Decrease in trade receivables Decrease in retention money receivables Decrease in prepayments, deposits and other receivables Decrease in amounts due from fellow subsidiaries Decrease in amount due from ultimate holding company Increase in gross amount due to contract customers Increase in amount due to immediate holding company Decrease in amounts due to fellow subsidiaries Increase/(decrease) in trade payables Decrease in retention money payables Increase/(decrease) in other payables and accruals Cash (used in)/generated from operations Interest paid Hong Kong profits tax paid Net cash (outflow)/inflow from operating activities Investing activities Payment for the Acquisition Interest received Purchase of properties, plant and equipment Disposal of property, plant and equipment Net cash inflow/(outflow) from investing activities	The Group for the year ended 31 March 2008 Note (1) HK$’000 (8,644 ) 229 (1,321 ) 209 1,650 – 16 (7,861 ) 299 – 4,908 481 6,290 – – 1,801 – – 3,588 (856 ) (15,344 ) (6,694 ) (229 ) (74 ) (6,997 ) – 1,321 (118 ) 19 1,222	Guangxi Wharton Group for the period ended 31 July 2008 Note (2) HK$’000 (22,329 ) 15,386 (11 ) 26,837 62 – 3,981 23,928 – (84 ) 2,186 – 2,124 16,471 1,361 – 108,400 (37,962 ) (1,442 ) – 2,614 117,596 (15,386 ) – 102,210 – 11 (103,057 ) – (103,046 )	Pro forma consolidated cash flow statement of the Enlarged Group Combined Pro forma for the year ended total adjustments Note 31 March 2008 HK$’000 HK$’000 HK$’000 (30,973 ) 19,542 4 (11,431 ) 15,615 15,615 (1,331 ) (1,331 ) 27,047 27,047 1,712 1,712 – (19,542 ) 4 (19,542 ) 3,997 3,997 16,067 16,067 299 299 (84 ) (84 ) 7,094 7,094 481 481 8,414 8,414 16,471 16,471 1,361 1,361 1,801 1,801 108,400 108,400 (37,962 ) (37,962 ) 2,146 2,146 (856 ) (856 ) (12,730 ) (12,730 ) 110,902 110,902 (15,615 ) (15,615 ) (74 ) (74 ) 95,213 95,213 – (639,478 ) 8 (639,478 ) 1,332 1,332 (103,175 ) (103,175 ) 19 19 (101,824 ) (741,302 )

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APPENDIX III

Financing activities Hotel Bank Loan Advance from a controlling shareholder Repayment of short term loan Proceeds from issue shares Proceeds from issue convertible bond Net cash inflow/(outflow) from financing activities Net increase/(decrease) in cash and cash equivalents Effect of exchange rate changes Cash and bank balances at beginning of year Cash and bank balances at end of year	The Group for the year ended 31 March 2008 Note (1) HK$’000 – – – 18,216 119,631 137,847 132,072 – 33,319 165,391	Guangxi Wharton Group for the period ended 31 July 2008 Note (2) HK$’000 – – (4,462 ) – – (4,462 ) (5,298 ) 26 6,450 1,178	Pro forma consolidated cash flow statement of the Enlarged Group Combined Pro forma for the year ended total adjustments Note 31 March 2008 HK$’000 HK$’000 HK$’000 – 365,408 8 365,408 – 108,679 8 108,679 (4,462 ) (4,462 ) 18,216 18,216 119,631 119,631 133,385 607,472 126,774 (38,617 ) 26 26 39,769 39,769 166,569 (165,391 ) 8 1,178

Notes to the Unaudited Pro Forma Financial Information

• (1) The balances are extracted from the audited financial information of the Group for the year ended 31 March 2008 as set out in Appendix I to this Circular.

• (2) The balances are extracted from the audited financial information of Guangxi Wharton Group for the period ended 31 July 2008 as set out in Appendix II to this Circular and were translated to Hong Kong dollars at translation rates of RMB100=HK$114 in respect of unaudited pro forma balance sheet and RMB100=HK$111 in respect of the unaudited pro forma income statement and cash flow statement.

• (3) Pursuant to the terms of the Supplemental Sale and Purchase Agreement dated 3 December 2008, the cash consideration paid for the entire issued share capital of Guangxi Wharton of RMB148,230,000 (equivalent to approximately HK$169,264,000) was satisfied by way of cash of RMB148,230,000 and pay the total payables of Guangxi Wharton of RMB411,770,000 (equivalent to approximately HK$470,214,000) as at 31 July 2008 The estimated fair value adjustment on hotel properties and land use rights is determined by reference to the valuation report by BMI Appraisals Limited of 19 December 2008 and the hotel properties and land use rights were valued of RMB600,000,000 (equivalent to approximately HK$684,000,000) at 31 October 2008.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

• (4) Under Hong Kong Financial Reporting Standard 3 Business Combinations issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”), the Group will apply the purchase method to account for the acquisition of Guangxi Wharton Group in the consolidated financial statements of the Group and the calculation is as follows:

Net assets of Guangxi Wharton Group acquired Estimated fair value adjustment on hotel properties and land use rights_(note 5) Deferred tax liabilities recognised in respect of fair value adjustment(note 6) Fair value of net assets of Guangxi Wharton Group acquired Cash consideration(note 7)_ Discount on acquisition	HK$’000 21,344 204,611 (37,149 )
	188,806 169,264
	19,542

On completion, the fair value of the consideration and the net identifiable assets and liabilities of the Guangxi Wharton Group will have to be assessed. As a result, the amount of discount on acquisition may be different from that estimated based on the basis stated above for the purpose of preparation of the unaudited pro forma financial information. Accordingly, the actual discount on acquisition at the date of completion may be different from that presented above.

• (5) The fair value of hotel properties and land use rights acquired is as follows:

Net book value as at 31 July 2008 – Hotel properties – Land use rights Revalued amount_(note 3)_ Fair value adjustment of hotel properties and land use rights	HK$’000 466,577 12,812
	479,389 684,000
	204,611

• (6) The adjustment represented the deferred tax liabilities attributable to the fair value adjustment of the hotel properties and land use rights of RMB44,870,000 (equivalent to approximately HK$51,152,000) after netting off the tax losses brought forward of RMB49,053,000 (equivalent to approximately HK$56,015,000) of Guangxi Wharton.

• (7) The cash consideration of RMB148,230,000 (equivalent to approximately HK$169,264,000) for the Acquisition would be financed by internal resources of the Group.

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APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

• (8) This represents the adjustments on the cash position of the Group as a result of the Acquisition and this is analysed as follows:

Cash outflows

Cash consideration is to be paid on the Completion as shown in_(note 4)above Total payables of Guangxi Wharton Group as at 31 July 2008(note 3)_ Total cash payments	HK$’000 169,264 470,214
	639,478

The above cash payments are to be partially financed from a possible Hotel Bank Loan for a principal amount of RMB320,000,000 (equivalent to approximately HK$365,408,000) for a term of 10 years at an interest rate of approximately 7.8% per annum in accordance with the indicative terms offered by the Guangxi Branch of the Bank of China. Pursuant to the Announcement of the Company dated 5 December 2008 in relation to the Acquisition, the consideration for the Sale Capital will be RMB148,230,000 (equivalent to HK$169,264,000) the total payables of the Guangxi Wharton Group as at 31 July 2008 of RMB411,770,000 (equivalent to HK$470,214,000) and Guangxi Wharton has applied for the Hotel Bank Loan of approximately RMB320,000,000 (equivalent to approximately HK$365,408,000) and the Hotel Bank Loan will be used to partially settle Guangxi Wharton’s total payables. The cash position of the Group arising from the bank loan and advance from a controlling shareholder is summarised as follows:

Cash inflows

Cash and cash equivalents as at 31 March 2008 Hotel Bank Loan drawdown Advance from a controlling shareholder Cash position	HK$’000 165,391 365,408 108,679
	639,478

• (9) No adjustment has been made to reflect the costs of Acquisition as such costs are not considered to be material.

• (10) This reflects the adjustment on the elimination of interests in subsidiaries and the respective pre-acquisition reserves.

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APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

B. ACCOUNTANTS’ REPORT ON THE UNAUDITED PROFORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

The following is the text of a report, prepared for the sole purpose of inclusion in this circular, received from CCIF CPA Limited. As described in the paragraph headed “Documents available for inspection” in Appendix V, a copy of the following accountants’ report is available for inspection.

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19 December 2008

The Board of Directors

Shun Cheong Holdings Limited

We report on the unaudited pro forma financial information (the “Unaudited Pro Forma Financial Information”) of (the “Company”) and its subsidiaries (collectively referred to as the “Group”) as set out in Appendix III to the circular dated 19 December 2008 (the “Circular”) of the Company, in connection with the acquisition of the entire issued share capital of Guangxi Wharton International Hotel Company Limited. The Unaudited Pro Forma Financial Information has been prepared by the directors of the Company, for illustrative purposes only, to provide information about how the Acquisition might have affected the relevant financial information of the Group. The basis of preparation of the Unaudited Pro Forma Financial Information is set out on in Section A of Appendix III to the Circular.

Respective responsibilities of directors of the Company and the reporting accountants

It is solely the responsibility of the directors of the Company to prepare the Unaudited Pro Forma Financial Information in accordance with Paragraph 29 of Chapter 4 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

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APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

It is our responsibility to form an opinion, as required by Paragraph 4 (7) of Chapter 4 of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owned to those to whom those reports were addressed by us at the dates of their issue.

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.

We planned and performed our work so as to obtain the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to Paragraph 29 (1) of Chapter 4 of the Listing Rules.

The Unaudited Pro Forma Financial Information is for 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 as at 31 March 2008 or any future date; or

• the results and cash flows of the Enlarged Group for the year ended 31 March 2008 or any future periods.

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APPENDIX III

Opinion

In our opinion:

• (a) the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated;

• (b) such basis is consistent with the accounting policies of the Group; and

• (c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to Paragraph 29 (1) of Chapter 4 of the Listing Rules.

CCIF CPA Limited Certified Public Accountants Hong Kong

Leung Chun Wa Practising Certificate Number P04963

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PROPERTY VALUATION OF THE ENLARGED GROUP

APPENDIX IV

The following is the text of a letter, summary of values and valuation certificates, prepared for the purpose of incorporation in this circular received from BMI Appraisals Limited, an independent valuer, in connection with its valuations of the properties located in the PRC and Hong Kong.

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19 December 2008

The Directors

Shun Cheong Holdings Limited

Suite 2302 Wing On Centre 111 Connaught Road Central Hong Kong

Dear Sirs,

INSTRUCTIONS

We refer to your instructions for us to value the property to be acquired by Shun Cheong Holdings Limited (the “Company”) and/or its subsidiaries (hereinafter referred to as the “Group”) located in the People’s Republic of China (the “PRC”) and the properties owned/leased by the Group in Hong Kong. We confirm that we have conducted inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market values of the properties as at 31 October 2008 (the “date of valuation”).

BASIS OF VALUATION

Our valuations of the properties have been based on the Market Value, which is defined as “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.”

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APPENDIX IV

PROPERTY CATEGORIZATION

In the course of our valuations, the valued properties are categorized into the following groups:–

Group I – Property to be acquired by the Group in the PRC Group II – Property owned by the Group in Hong Kong Group III – Property leased by the Group in Hong Kong

VALUATION METHODOLOGIES

Groups I and II

In valuing the properties in Groups I and II, we have valued them on an open market basis by the Comparison Approach assuming sale in their existing states with the benefit of vacant possession and by making reference to comparable sales evidence as available in the relevant market. Adjustments are then made to take into account the differences between the properties and the comparables in order to arrive at a fair comparison of values. In addition, we have also considered the Profits Method based in valuing the property in Group I on capitalization of the historical hotel’s operating profits in previous years. Allowances for outgoings have been made in arriving at the net operating profit.

Group III

In valuing the property in Group III, which is leased by the Group, we are of the opinion that it has no commercial value either because of its non-assignability in the open market or there are prohibitions against subletting and/or assignment contained in the tenancy agreement or the lack of marketable and substantial profit rent.

TITLE INVESTIGATION

For the property in Group I, we have been provided with extracts of title documents and have been advised by the Group that no further relevant documents have been produced. Moreover, due to the nature of the land registration system in the PRC, we have not been able to examine the original documents to verify ownership or to ascertain the existence of any amendment documents, which may not appear on the copies handed to us. Therefore, in the course of our valuation, we have relied on the advice and information given by the Group and its PRC legal adviser, 歐亞嘉華律師事務所, regarding the title of the property in the PRC. All documents have been used for reference only.

For the property in Group II, we have caused land searches to be made at the Land Registry and have been provided with extracts of title documents. We have been advised by the Group that no further relevant documents have been produced. However, we have neither examined the original documents to verify ownership nor to ascertain the existence of any amendments, which do not appear on the copies handed to us. All documents have been used for reference only.

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APPENDIX IV

We have not searched the title of the property in Group III and have not scrutinized the original title documents to verify ownership or to ascertain the existence of any amendments, which do not appear on the copies handed to us. However, we have been given a copy of the tenancy agreement of the property. All documents have been used for reference only.

In valuing the properties, we have relied on the advice given by the Group that the owners of the properties have valid and enforceable titles to the properties which are freely transferable, and have free and uninterrupted rights to use the same, for the whole of the unexpired terms granted subject to the payment of annual government rents/land use fees and all requisite land premium/purchase considerations payable have been fully settled.

VALUATION ASSUMPTIONS

Our valuations have been made on the assumption that the properties are sold in the open market without the benefit of deferred terms contract, leaseback, joint venture, management agreement or any similar arrangement which would serve to affect the values of the properties.

In addition, no account has been taken of any option or right of pre-emption concerning or effecting the sale or purchase of the properties and no forced sale situation in any manner is assumed in our valuations.

VALUATION CONSIDERATIONS

We have inspected the exterior and wherever possible, the interior of the properties. During the course of our inspections, we did not note any serious defects. However, no structural surveys have been made nor have any tests been carried out on any of the services provided in the properties. We are, therefore, unable to report that the properties are free from rot, infestation or any other structural defects.

We have relied to a considerable extent on the information provided by the Group and have accepted advice given to us by the Group in such matters as approvals or statutory notices, easements, tenure, particulars of occupancy, identification of the properties and other relevant information.

We have not carried out detailed on-site measurements to verify the correctness of the site/floor areas in respect of the properties but have assumed that the site/floor areas shown on the documents handed to us are correct.

Except otherwise stated, all dimensions, measurements and areas included in the valuation certificates are based on the information contained in the documents provided to us by the Group and are therefore approximations.

We have no reason to doubt the truth and accuracy of the information provided to us by the Group and the Group has also advised us that no material facts have been omitted from the information so supplied. We consider that we have been provided with sufficient information for us to reach an informed view.

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APPENDIX IV

No allowance has been made in our valuations for any charges, mortgages or amounts owing on the properties or for any expenses or taxation, which may be incurred in effecting a sale or purchase.

Unless otherwise stated, it is assumed that the properties are free from encumbrances, restrictions and outgoings of an onerous nature, which could affect their values.

Our valuations have been prepared in accordance with the HKIS Valuation Standards on Properties (First Edition 2005) published by the Hong Kong Institute of Surveyors.

Our valuations have been prepared under the generally accepted valuation procedures and are in compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

REMARKS

Unless otherwise stated, all money amounts stated herein are in Renminbi (RMB) for the property in the PRC and Hong Kong Dollars (HK$) for the properties in Hong Kong. No allowances have been made for any exchange transfers.

Our Summary of Values and the Valuation Certificates are attached herewith.

Yours faithfully, For and on behalf of

BMI APPRAISALS LIMITED

Dr. Tony C.H. Cheng Joannau W.F. Chan BSc, MUD, MBA (Finance), MSc (Eng), PhD (Econ), BSc. MSc. MRICS MHKIS RPS(GP) MHKIS, MCIArb, AFA, SCIFM, FCIM, Director MASCE, MIET,MIEEE, MASME, MIIE Director

Notes:

Dr. Tony C.H. Cheng is a member of the Hong Kong Institute of Surveyors who has over 15 years’ experience in valuations of properties in Hong Kong and the People’s Republic of China.

Ms. Joannau W.F. Chan is a Chartered Surveyor who has over 15 years’ experience in valuations of properties in Hong Kong and over 9 years’ experience in valuations of properties in the People’s Republic of China.

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APPENDIX IV

SUMMARY OF VALUES

• No. Property

Market Value in existing state as at 31 October 2008

Group I – Property to be acquired by the Group in the PRC

1. A hotel project located at RMB390,000,000 No. 88 Min Zu Avenue East, Nanning City, Guangxi Zhuang Autonomous Region, the PRC Total: RMB390,000,000

Group II – Property owned by the Group in Hong Kong

1. Unit A, 9[th] Floor, HK$3,680,000 Chiap Luen Industrial Building, Nos. 30-32 Kung Yip Street, Kwai Chung, New Territories, Hong Kong Total: HK$3,680,000

Group III – Property leased by the Group in Hong Kong

1. Suite 2302, 23[rd] Floor, No Commercial Value Wing On Centre, No. 111 Connaught Road Central, Hong Kong Total: Nil

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APPENDIX IV

VALUATION CERTIFICATE

Group I – Property to be acquired by the Group in the PRC

• No. Property Description and tenure 1. A hotel project The property comprises a located at hotel project to be developed No. 88 Min under two phases on a land Zu Avenue parcel with a site area of East, Nanning approximately 41,426.70 sq.m. City, Guangxi (or about 445,917 sq.ft.). Zhuang Phase 1 of the hotel project Autonomous (“Phase 1”) comprises a hotel Region, the complex known as Guangxi PRC Wharton International Hotel (廣西沃頓國際大酒店), completed in about 2000, erected on portion of the land parcel. Phase 2 of the hotel project (“Phase 2”), comprising office, apartment and ancillary buildings and car parking spaces, will be developed on the remaining portion of the land parcel. According to 2 Area Calculation Forms registered in 南寧市國土 資源信息中心 provided by the Group, the site areas of Phase 1 and Phase 2 land parcels of the hotel project are approximately 20,762.69 sq.m. (or about 223,489.60 sq.ft.) and 20,664.01 sq.m. (or about 222,427.40 sq.ft.) respectively.

Market Value Particulars of in existing state occupancy as at 31 October 2008 RMB The hotel 390,000,000 complex (Phase 1) is owner(the market value occupied for includes Phase 1 only, hotel and and please see Note 11 ancillary for details) purposes.

The remaining portion of the land parcel is owner-occupied for temporary car parking and ancillary uses.

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APPENDIX IV

No. Property

Description and tenure

Market Value Particulars of in existing state occupancy as at 31 October 2008 RMB

The hotel complex (Phase 1) has a gross floor area (“GFA”) of approximately 46,409.36 sq.m. (or about 499,550.35 sq.ft.). The hotel complex provides 338 guest rooms, two Chinese restaurants, a western restaurant, a lobby bar, a multi-function hall, a luxury banquet hall, seven meeting rooms, a night club, a sauna centre and other ancillary facilities.

The Phase 2 will have a planned total GFA of approximately 119,608.60 sq.m. (or about 1,287,466.97 sq.ft.).

The land use rights of the property have been granted for a term of 40 years expiring on 29 May 2043 for catering and hotel uses. (see Note 2)

Notes:

1. Pursuant to a State-owned Land Use Rights Grant Contract, Nan Guo Tu He Zi 2003 No. 7 (南國土合字20037號), entered into between the People’s Republic of China Guangxi Zhuang Autonomous Region Nanning City Land and Resources Bureau (中華人民共和國廣西壯族自治區南寧市國土資源局) and Guangxi Nanning International Hotel Company Limited (廣西南寧國際大酒店有限公司) dated 30 May 2003, the land use rights of the property with a site area of 41,426.7 sq.m. have been granted to Guangxi Nanning International Hotel Company Limited at a land premium of RMB81,513,200 for a term of 40 years for catering and hotel uses.

2. Pursuant to a State-owned Land Use Rights Certificate, Nan Ning Guo Yong (2005) Di No. 429198 (南寧國用(2005) 第429198號) (the “Land Certificate”), issued by Nanning City People’s Government (南寧市人民政府) dated 28 February 2005, the land use rights of the property with a site area of 41,426.7 sq.m. have been granted to Guangxi Wharton International Hotel Company Limited (廣西沃頓國際大酒店有限公司) (“Guangxi Wharton”) for a term of 40 years expiring on 29 May 2043 for catering and hotel uses. Validity of he Land Certificate will expire on 10 October 2009. As advised by the Group and its PRC legal adviser, the tenure of Land Certificate can be renewed on an annual basis until 29 May 2043 at no extra land premium or other payments.

3. Pursuant to a Building Ownership Certificate, Yong Fang Quan Zheng Zi Di No. 01483395 (邕房權證字第01483395 號）, issued by Nanning City Real Estate Bureau (南寧市房產管理局) dated 25 March 2005, the hotel complex (Phase 1) of the property with a GFA of 46,409.36 sq.m. is legally owned by Guangxi Wharton.

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APPENDIX IV

1. Pursuant to a Master Layout Plan (總平面圖) issued by Nanning Institute of Architecture Design (南寧市建築設計院) dated 8 November 2002 and approved by Nanning City Planning Administrative Bureau (南寧市規劃管理局) (審批號 2002-234) dated 5 December 2002, the proposed development under Phase 2 for apartment, office and ancillary room uses with a total GFA of 119,608.6 sq.m. and additional 80 car parking spaces is permitted to be developed on the Phase 2 portion of the land parcel of the property.

2. Pursuant to a Business License (企業法人營業執照), Registration No. Qi 4500001001576 issued by Guangxi Zhuang Autonomous Region Industry and Commerce Administrative Bureau (廣西壯族自治區工商行政管理局) (the “Bureau”) dated 1 November 2007, Guangxi Wharton was incorporated with a registered capital of RMB87,814,000 for the businesses of hotel and catering services, sales of consumer goods and air passenger agency services.

3. Pursuant to a Mortgage Contract, 2005 Nian Bei Zhong Yin Di Zi Di No. 002 (2005年北中銀抵字第002號), dated 22 March 2005, entered into between Guangxi Wharton and Bank of China – Beihai Branch (中國銀行北海分行), the former has mortgaged the property to the latter as security for various loans up to a maximum amount of RMB420,000,000 valid until all the loans have been repaid.

4. Pursuant to a Mortgage Contract, 2007 Nian Bei Zhong Yin Di Zi Di No. 001 (2007年北中銀抵字第001號), dated 10 January 2007, entered into between Guangxi Wharton and Bank of China Limited – Beihai Branch (中國銀行股份有 限公司北海分行), the former has mortgaged the property to the latter as security for various loans up to a maximum amount of RMB262,500,000 valid until all the loans have been repaid.

5. Pursuant to a Mortgage Contract, No.2007010901 Di Zi 01 (2007010901抵字01), dated 19 January 2007, entered into between Guangxi Wharton and 北海市城市建設投資發展有限公司, the former has mortgaged the hotel complex (Phase 1) of the property to the latter as security for a loan amount of RMB52,000,000.

6. The status of title and grant of major approvals and licenses in accordance with the information provided by the Group are as follows:

State-owned Land Use Rights Grant Contract	Yes
State-owned Land Use Rights Certificate	Yes
Building Ownership Certificate	Yes
Business License	Yes
Mortgage Contracts	Yes

1. The opinion of the PRC legal adviser, 歐亞嘉華律師事務所, to the Group contains, inter alia, the following:

2. a. Guangxi Nanning International Hotel Company Limited is the former name of Guangxi Wharton;

3. b. The property is legally vested in Guangxi Wharton and all the land premium and other costs of ancillary utility services have been settled in full and Guangxi Wharton has the rights to occupy, self-use, lease, mortgage and dispose of the property to both local and overseas purchasers with prior consents of the mortgagees;

4. c. There exist no legal impediments for Guangxi Wharton to obtain annual renewal of the Land Certificate until the expiry of the existing term of land use rights or until the completion of the procedure to divide the land parcel into Phase 1 and Phase 2 land parcels and the obtaining of the relevant land use rights certificates for the divided land parcels;

5. d. The planning scheme for Phase 2 land parcel is legally valid and is in compliance with the relevant regulations of the planning authority;

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PROPERTY VALUATION OF THE ENLARGED GROUP

APPENDIX IV

• e. Upon obtaining the consents from the relevant mortgagees and the compliance with the relevant planning regulations, there exist no legal impediments for the division of the land parcel into Phase 1 and Phase 2 land parcels and the obtaining of the relevant land use rights certificates for the divided land parcels;

• f. There exist no legal impediments for obtaining the relevant approvals for the construction of development on Phase 2 land parcel;

• g. Upon completion of the construction of development on Phase 2 land parcel, there exist no legal impediments for Guangxi Wharton to obtain the relevant title certificates and upon obtaining the consents from the relevant mortgagees, Guangxi Wharton has the rights to occupy, use, lease, mortgage and dispose of the Phase 2 property to both local and overseas purchasers within the term of the land use rights of Phase 2 land parcel; and

• h. Apart from the aforementioned mortgages in Notes 7 to 9, the property is not subject to any other mortgages or material encumbrances.

• Our valuation of the captioned amount in the sum of RMB390,000,000 attributes to Phase 1 of the property (i.e. the hotel complex constructed upon Phase 1 land parcel) only. Having considered the PRC legal opinion in Note 11 and the advice given by the Group, for your internal reference purpose, as at the date of valuation, the market value of the Phase 2 land parcel assuming that all the required planning permits, construction permits and land use rights certificate for the relevant uses can be obtained for the development of the Phase 2 land parcel without extra land premium or onerous payments payable to the government and that the Phase 2 land can be freely transferred in the open market to both local and overseas purchasers would be in the sum of approximately RMB210,000,000.

• We have prepared our valuations based on the following assumptions:–

• a. Guangxi Wharton is in possession of a proper legal title to the property and is entitled to transfer the property within its residual term of land use rights at no extra land premium or other onerous payment payable to the government;

• b. All land premium and other costs of ancillary utility services have been settled in full;

• c. The property is not subject to any material encumbrances;

• d. The existing use, design, planning and construction of the property are in compliance with the local planning regulations and have been approved by the relevant government authorities; and

• e. The property can be freely sublet, transferred or disposed of to both local and overseas purchasers.

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PROPERTY VALUATION OF THE ENLARGED GROUP

APPENDIX IV

Group II – Property owned by the Group in Hong Kong

• Market Value

• Particulars in existing state

• No. Property Description and tenure of occupancy as at 31 October 2008 HK$

• 1. Unit A, 9[th] The property comprises an As advised 3,680,000 Floor, Chiap industrial unit on 9[th] floor by the Group, Luen Industrial in a 19-storey industrial the property Building, building known as Chiap is subject to Nos. 30-32 Luen Industrial Building a tenancy at a Kung Yip which was completed in monthly rent Street, Kwai 1978. at HK$30,000 Chung, New exclusive of Territories, The salable area of the management Hong Kong property is approximately fee for 4,330 sq.ft. (or about 402.27 workshop

• 51/1,724[th] sq.m.) as scaled from the and ancillary equal and registered floor plan. office uses. undivided shares of and The property is held under in Kwai Chung New Grant No. 5354 for a Town Lot No. term of 99 years less the 282 last 3 days commencing on 1 July 1898 which had been extended upon expiry until 30 June 2047 with a revised annual rent at 3% of the rateable value from the date of extension.

Notes:

1. The registered owner of the property is Shun Cheong Real Estates Limited (formerly known as Whole Grand Limited and Shun Cheong (Guangzhou) Limited) vide Memorial No. TW984172 dated 24 November 1994.

2. The property is subject to the following material encumbrances:

3. a. The property is subject to an Order No. UBZ/U04-30/0007/05 by the Building Authority under S.24(1) of the Buildings Ordinance vide Memorial No. 07042700960956 dated 24 July 2006.

4. b. The property is subject to an Order No. DBZ/U04-30/0008/05 by the Building Authority under S.26 of the Buildings Ordinance vide Memorial No. 07061101230196 dated 24 July 2006.

5. In our valuation, we have assumed that the works stipulated in the Orders in Notes 2a and 2b have been complied with to the satisfaction of the Building Authority.

6. Shun Cheong Real Estates Limited is a wholly-owned subsidiary of the Group.

7. As advised by the Group, the tenant of the property is Tinhawk Company Limited, which is a 90%-owned subsidiary of the Group.

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PROPERTY VALUATION OF THE ENLARGED GROUP

APPENDIX IV

Group III – Property leased by the Group in Hong Kong

No. Property Description and tenure

1. Suite 2302, 23[rd] The property comprises Floor, Wing an office unit on 23[rd] floor On Centre, No. in a 31-storey commercial 111 Connaught building known as Wing On Road Central, Centre which was completed Hong Kong in 1977.

Market Value Particulars in existing state of occupancy as at 31 October 2008 HK$

The property No Commercial Value is occupied by the Group for office use.

The gross floor area of the property is approximately 1,900 sq.ft. (or about 176.51 sq.m.).

The property is rented by Shun Cheong Holdings Limited under a tenancy agreement dated 7 August 2006 for a term of 3 years commencing on 15 August 2006 and expiring on 14 August 2009 at a monthly rent of HK$45,600 exclusive of management fee for commercial office use.

Note:

The tenant of the property is the Company.

• 126 -

GENERAL INFORMATION

APPENDIX V

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 jointly 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, opinions expressed in this circular have been arrived at after due and careful consideration and there are no other facts the omission of which would make any statement in this circular misleading.

DISCLOSURE OF INTERESTS BY DIRECTORS

As at the Latest Practicable Date, the interests or short positions of each director and chief executive of the Company in the shares, debentures or underlying shares in the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he is taken or deemed to have under such provisions of the SFO), or which were required, pursuant to Section 352 of the SFO, to be entered in the register maintained by the Company referred to therein, or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules, to be notified to the Company and the Stock Exchange, were as follows:

Long positions in ordinary shares of the Company:

		Number of ordinary	Percentage of the
Name of	Nature of	shares directly	Company’s issued
Director	interests	beneficially owned	share capital
Mo Tianquan	Corporate	208,113,409_(Note 1)_	59.92
		324,763,193_(Note 2)_	93.50
Cao Jing	Family	208,113,409_(Note 3)_	59.92
		324,763,193_(Note 3)_	93.50

Notes:

• (1) These Shares are held by Upsky Enterprises Limited, a company wholly-owned by Mr. Mo Tianquan.

• (2) These Shares represent the Shares to be allotted and issued to Tanisca Investments Limited, a company wholly-owned by Mr. Mo Tianquan, upon exercise in full of its conversion rights under a convertible bond.

• (3) Ms. Cao Jing is interested in the Shares held by Upsky Enterprises Limited and Tanisca Investments Limited by virtue of her marital relationship with Mr. Mo Tianquan.

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GENERAL INFORMATION

APPENDIX V

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and chief executive of the Company or their respective associates (within the meaning of the Listing Rules) had any interests and short positions in the shares, debentures or underlying shares of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he or she was taken or deem to have under such provisions of the SFO), or which were required, pursuant to section 352 of the SFO, to be entered in the registered maintained by the Company referred to therein, or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules to be notified to the Company and the Stock Exchange.

DISCLOSURE OF INTERESTS BY SUBSTANTIAL SHAREHOLDERS

So far as is known to any Director or chief executive of the Company, as at the Latest Practicable Date, persons (other than a Director or chief executive of the Company) who had an interest or a short position in the shares, debentures or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who were, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other members of the Company were as follows:

			Percentage of the
Name of	Capacity and nature	Number of	Company’s issued
shareholder	of interests	Shares owned	share capital
			(Note 1)
Upsky Enterprises	Directly beneficially owned	208,113,409	59.92
Limited
Tanisca Investments	Directly beneficially owned	324,763,193	93.50_(Note 2 )_
Limited
Mo Tianquan	Attributable interest of	208,113,409	59.92_(Note 3)_
	controlled corporation	324,763,193	93.50_(Note 3)_

Notes:

• (1) All interests stated above represent long position.

• (2) These Shares represent the Shares to be allotted and issued to Tanisca Investments Limited, a company wholly-owned by Mr. Mo Tianquan, upon exercise in full of its conversion rights under a convertible bond.

• (3) The entire issued share capital of Upsky Enterprises Limited and Tanisca Investments Limited are legally and beneficially owned by Mr. Mo Tianquan who is therefore deemed to have an interest in the Shares in which Upsky Enterprises Limited and Tanisca Investments Limited are interested. Accordingly, the interest held by each of Upsky Enterprises Limited, Tanisca Investments Limited and Mr. Mo Tianquan refers to the same parcel of shares.

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GENERAL INFORMATION

APPENDIX V

Save as disclosed above, the Directors and chief executive of the Company were not aware of any other persons who, as at the Latest Practicable Date, had an interest or short position in the shares, debentures or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, who had, 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 members of the Company or had any options in respect of such Shares.

DIRECTOR’S SERVICE CONTRACTS

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

DIRECTORS’ INTERESTS IN THE GROUP’S ASSETS OR CONTRACTS OR ARRANGEMENTS SIGNIFICANT TO THE GROUP

As at the Latest Practicable Date, none of the Directors had any interests, either directly or indirectly, in any assets which have been, since 31 March 2008 (being the date to which the latest published audited financial statements of the Company were made up), acquired or disposed of or leased to any members of the Group, or are proposed to be acquired or disposed of or leased to any members of the Group.

As at the Latest Practicable Date, none of the Directors were materially interested in any contracts or arrangement, subsisting at the date of this circular, which are significant to the business of the Enlarged Group.

DIRECTORS’ INTERESTS IN COMPETING BUSINESS

As at the Latest Practicable Date, none of the Directors nor their respective associates had any business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

MATERIAL CONTRACTS

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

• (i) the Sale and Purchase Agreement, the Debt Restructuring Agreement and the Supplemental Agreements;

• (ii) the underwriting agreement dated 7 April 2008 entered into by the Company and Upsky Enterprises Limited pursuant to which Upsky Enterprises Limited agreed to underwrite 103,128,227 Shares which are issued under a rights issue;

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GENERAL INFORMATION

APPENDIX V

• (iii) a subscription agreement dated 29 October 2007 entered into by the Company and Tanisca Investments Limited in relation to the issue of HK$120,000,000 convertible bond;

• (iv) a subscription agreement dated 14 August 2007 in relation to the subscription of 11,500,000 Shares by IDG Technology Venture Investment III, LP; and

• (v) a subscription agreement dated 14 August 2007 in relation to the subscription of 11,500,000 Shares by Digital Link Investment Limited.

MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 March 2008, being the date to which the latest published audited accounts of the Group were made up.

LITIGATION

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries was engaged in any litigation or arbitration of material importance and no litigation or claim of material importance was known to the Directors to be pending or threatened against the Company or any of its subsidiaries.

QUALIFICATIONS AND CONSENTS OF EXPERTS

The following are the qualifications of the experts who have made statements in this circular:

Name Qualifications BMI Appraisals Limited Professional valuer CCIF CPA Limited Certified Public Accountants

BMI Appraisals Limited and CCIF CPA Limited have given and have not withdrawn their written consents to the issue of this circular with the inclusion of the copies of their reports and the references to their names in the form and context they respectively appear therein.

As at the Latest Practicable Date, BMI Appraisals Limited and CCIF CPA Limited were not beneficially interested in the share capital of any members of the Group or had any rights, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any members of the Group.

BMI Appraisals Limited and CCIF CPA Limited did not have any interests, either directly or indirectly, in any assets which have been, since 31 March 2008 (being the date to which the latest published audited financial statements of the Company were made up), acquired or disposed of or leased to any members of the Group, or are proposed to be acquired or disposed of or leased to any members of the Group.

• 130 -

GENERAL INFORMATION

APPENDIX V

GENERAL

• (a) The company secretary and the qualified accountant of the Company is Mr. Poon Yan Wai (“Mr. Poon”), who is a fellow member of the Hong Kong Institute of Certified Public Accountants. Mr. Poon also holds a Bachelor’s degree in Accountancy and Master’s degree in Corporate Finance from the Hong Kong Polytechnic University.

• (b) The principal share registrar and transfer office of the Company is Butterfield Fund Services (Bermuda) Limited whose address is Rosebank Centre, 11 Bermudiana Road, Pembroke, Bermuda.

• (c) The Hong Kong share registrars and transfer office of the Company is Computershare Hong Kong Investor Services Limited whose address is at 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong

• (d) The English text of this circular shall prevail over their respective Chinese texts.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the office of the principal place of business of the Company at Suite 2302, Wing On Centre, 111 Connaught Road Central, Hong Kong during normal business hours on any weekdays other than public holidays, from the date of this circular up to and including the date of the SGM:

• (i) the memorandum and articles of association the Company and Bye-Laws;

• (ii) the annual reports of the Company for the two years ended 31 March 2007 and 31 March 2008;

• (iii) all the agreements as referred to in the paragraph headed “Material Contracts” in this appendix;

• (iv) the written consents of the experts referred to in the paragraph headed “Qualifications and Consents of Experts” in this appendix;

• (v) the accountants’ report on the Target Group prepared by CCIF CPA Limited, the text of which is set out in Appendix II to this circular;

• (vi) the accountants’ report from CCIF CPA Limited on the unaudited pro forma financial information on the Enlarged Group, the text of which is set out in Appendix III to this circular;

• (vii) the property valuation report of the Enlarged Group, the text of which is set out in Appendix IV to this circular; and

• (viii) this circular.

• 131 -

NOTICE OF SGM

==> picture [73 x 62] intentionally omitted <==

Shun Cheong Holdings Limited 順昌集團有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock code: 650)

NOTICE IS HEREBY GIVEN t hat a special general meeting (the “SGM”) of the shareholders of Shun Cheong Holdings Limited (the “Company”) will be held at Suite 2302, Wing On Centre, 111 Connaught Road, Central Hong Kong on 5 January 2009 at 10:00 a.m. for the purpose of considering and, if thought fit, passing with or without amendments, the following resolution of the Company:

ORDINARY RESOLUTION

“ THAT

• (i) the Acquisition (as defined in the circular dated 19 December 2008 despatched to the shareholders of the Company (the “Circular”)) which is governed by, including not limited to, the Sale and Purchase Agreement, the Debt Restructuring Agreement, the Supplemental Sale and Purchase Agreement and the Supplemental Debt Restructuring Agreement (as defined in the Circular respectively) (copies of which has been produced to this meeting marked “A”, “B”, “C” and “D” respectively and signed by the Chairman hereof for the purpose of identification) and all the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;

• (ii) the directors of the Company be and are hereby authorized to sign, execute, perfect, deliver and do all such documents, deeds, acts, matters and things, as the case may be, as they may in their discretion consider necessary desirable or expedient to carry and implement the Acquisition (as defined in the Circular) and all the transactions contemplated thereunder into full effect.”

By order of the Board Shun Cheong Holdings Limited Cao Jing Executive Chairman

Hong Kong, 19 December 2008

• For identification purposes only

• 132 -

NOTICE OF SGM

Registered Office: Canon’s Court 22 Victoria Street Hamilton HM 12 Bermuda

Head office and principal place of business: Suite 2302, Wing On Centre 111 Connaught Road Central Hong Kong

Notes:

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

2. A form of proxy for use at the SGM is enclosed. Whether or not you intend to attend the SGM in person, you are encouraged to complete and return the enclosed form of proxy in accordance with the instructions printed thereon. Completion and return of a form of proxy will not preclude a member from attending in person and voting at the SGM or any adjournment thereof, should he so wish.

3. In order to be valid, the form of proxy, together with a power of attorney or other authority, if any, under which it is signed, or a certified copy of such power or authority must be deposited at Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited, at 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the SGM or any adjournment thereof.

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

5. 133 -