Weiye Holdings Limited - Proxy Solicitation & Information Statement 2007

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

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

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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UNITED POWER INVESTMENT LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 674)

MAJOR AND CONNECTED TRANSACTION

Financial adviser to the Company

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Independent financial adviser

FIRST SHANGHAI CAPITAL LIMITED

A letter from the independent board committee of the Company is set out on page 20 of this circular. A letter from First Shanghai Capital Limited containing its advice to the independent board committee and the independent shareholder of the Company is set out on pages 21 to 37 of this circular.

A notice convening the special general meeting of the Company to be held at Golden Island Bird’s Nest Chiu Chau Restaurant, 2nd Floor, East Wing, Star House, Salisbury Road, Tsimshatsui, Kowloon, Hong Kong on 23 November 2007 at 3:00 p.m. is set out on pages 159 and 160 of this circular. Whether or not you are able to attend the meeting in person, please complete and return the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company’s principal office at 2810-11, 28th Floor Shun Tak Centre, West Tower, 200 Connaught Road Central, Hong Kong as soon as practicable but in any event not less than 48 hours before the time appointed for the holding of the meeting. Completion and return of the accompanying from of proxy will not preclude you from attending and voting at the meeting should you so wish.

7 November 2007

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Letter from First Shanghai. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
Appendix I — Accountants’ Report of the Wellrich Group. . . . . . . . . . . . . . . . . . .	38
Appendix II — Financial Information on the Group. . . . . . . . . . . . . . . . . . . . . . . . . .	64
Appendix III — Unaudited Pro Forma
Financial Information of the Enlarged Group . . . . . . . . . . . . . . .	133
Appendix IV — Property Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	138
Appendix V — General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	149
Notice of SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	159

— i —

DEFINITIONS

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

“Acquisition”	the acquisition of the Sale Shares and the benefits of the
	Loan from the Vendor pursuant to the Agreement
“Agreement”	the conditional sale and purchase agreement dated 15
	October 2007 between the Company and the Vendor,
	pursuant to which the Purchaser agreed to acquire from
	the Vendor the Sale Shares and the benefits of the Loan
“associates”	has the meaning ascribed to it in the Listing Rules
“Board”	the board of Directors, including independent non-
	executive Directors
“BVI”	the British Virgin Islands
“Company” or “Purchaser”	United Power Investment Limited, a company
	incorporated in Bermuda with limited liability, the shares
	of which are listed on the Stock Exchange
“Completion Date”	date of completion of the sale and purchase under the
	Agreement
“Consideration Shares”	new Shares to be issued, allotted and credited as fully
	paid pursuant to the Agreement
“Director(s)”	the director(s), including the independent non-executive
	directors, of the Company
“Enlarged Group”	the Group enlarged by the Acquisition
“First Shanghai”	First Shanghai Capital Limited, a licensed corporation
	to carry out type 6 (advising on corporate finance)
	regulated activities under the SFO, being the independent
	financial adviser to the Independent Board Committee
	and the Independent Shareholders in relation to the
	Acquisition
“Group”	the Company and its subsidiaries
“Hong Kong”	the Hong Kong Special Administrative Region of the
	PRC

— 1 —

	DEFINITIONS
“Independent Board Committee”	the independent board committee of the Company
	comprising the independent non-executive Directors,
	namely Messrs. Chan Lai Mei, Lee Wai Loun and Lee
	Yuk Sang, Angus
“Independent Shareholders”	Shareholders other than World Possession, Madam Ma,
	Mr. Yeung, Ms. Yeung and their respective associates
“JV Company”	肇慶星湖俱樂部(Star-Lake Club Zhaoqing)
“Latest Practicable Date”	5 November 2007, being the latest practicable date prior
	to the printing of this circular for ascertaining certain
	information in this circular
“Listing Rules”	the Rules Governing the Listing of Securities on the
	Stock Exchange
“Loan”	all interest free unsecured loans advanced by the Vendor
	to Wellrich as at the Completion Date
“Madam Ma”	Madam Ma Shuk Kam, an executive Director
“Mr. Yeung”	Mr. Yeung Chi Hang, the Chairman of the Company and
	an executive Director
“Ms. Yeung”	Ms. Yeung Kit Yu, Kitty, an executive Director
“PRC”	the People’s Republic of China, which, for the purpose
	of the this circular, excludes Hong Kong, Taiwan and
	Macau
“Properties”	Property I and Property II
“Property I”	No. 9 Duan Zhou Wu Road, Zhaoqing, Guangdong
	Province, the PRC
“Property II”	the land portion of a car repairing workshop located to
	the north of Yingbin Dadao, Zhaoqing, Guangdong
	Province, the PRC
“Sale Shares”	the 100 issued shares of US$1 each in the capital of
	Wellrich beneficially owned by the Vendor

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	DEFINITIONS
“SFO”	the Securities and Futures Ordinance (Chapter 571 of
	the laws of Hong Kong)
“SGM”	the special general meeting of the Company to be held
	at 3:00 p.m. on 23 November 2007 for approving the
	Agreement, notice of which is set out on pages 159 and
	160 of this circular
“Share(s)”	share(s) of HK$0.05 each in the share capital of the
	Company
“Shareholder(s)”	holders of Share(s)
“Shenzhen Land Acquisition”	the Group’s acquisition of (i) the entire issued share
	capital of Shenzhen Land Company Limited from Mr.
	Yeung and the Vendor pursuant to the sale and purchase
	agreement dated 13 April 2007 and (ii) benefits of loan
	from the Vendor pursuant to the loan assignment
	agreement dated 13 April 2007, details of which are set
	out in the announcement of the Company dated 16 April
	2007
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Valuer”	Vigers Appraisal & Consulting Limited, an independent
	qualified property surveyor appointed by the Company
“Vendor”	Well Harvest Enterprises Limited, a company
	incorporated in BVI with limited liability and wholly
	and beneficially owned by Madam Ma
“Wellrich”	Wellrich Investments Limited, a company incorporated
	in BVI with limited liability and wholly and beneficially
	owned by the Vendor
“Wellrich Group”	Wellrich and the JV Company
“World Possession”	World Possession Assets Limited, a company
	incorporated in BVI with limited liability and the
	controlling Shareholder interested in approximately
	52.74% of the issued share capital of the Company as at
	the Latest Practicable Date. Madam Ma, Mr. Yeung and
	Ms. Yeung , all being executive Directors, hold the entire
	issued share capital of World Possession in equal shares

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	DEFINITIONS
“HK$”	Hong Kong dollar(s), the lawful currency of Hong Kong
“US$”	United States dollar(s)
“RMB”	Renminbi, the lawful currency of the PRC
“sq.m.”	square meter(s)
“%”	percentage

For the purpose of this circular, all amounts in RMB are translated into HK$ at an exchange rate of RMB1:HK$1.0402 and all amounts in US$ are translated into HK$ at an exchange rate of US$:HK$7.8 unless otherwise stated.

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LETTER FROM THE BOARD

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UNITED POWER INVESTMENT LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 674)

Executive Directors: Yeung Chi Hang (Chairman) Ma Shuk Kam Liu Yu Mo (Chief Executive Officer) Chung Siu Wah Yeung Kit Yu, Kitty Au Edmond Wah Chik To Pan

Independent Non-Executive Directors: Chan Lai Mei Lee Wai Loun Lee Yuk Sang, Angus

Registered Office: Clarendon House Church Street Hamilton HM 11 Bermuda

Head office and principal place of business: 2810-11 28th Floor Shun Tak Centre West Tower 200 Connaught Road Central Hong Kong

7 November 2007

To the Shareholders,

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTION

INTRODUCTION

On 17 October 2007, the Board announced that on 15 October 2007, the Company entered into the Agreement with the Vendor, pursuant to which the Company as purchaser agreed to acquire the entire issued share capital of, and the benefits of all loans advanced to, Wellrich from the Vendor for an aggregate consideration of HK$355.6 million, HK$120 million of which shall be paid in cash and the balance of HK$235.6 million to be satisfied by the issue and allotment of the 699,109,792 Consideration Shares, representing an issue price of HK$0.337 per Share.

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LETTER FROM THE BOARD

As the aggregate applicable percentage ratio for the Acquisition and the Shenzhen Land Acquisition under the Listing Rules is more than 25% and less than 100%, the Acquisition constitutes a major transaction for the Company under the Listing Rules. The Acquisition also constitutes a connected transaction for the Company under the Listing Rules as the Vendor is a company wholly and beneficially owned by Madam Ma, an executive Director, and is subject to the approval of the Independent Shareholders at a general meeting with vote to be taken on a poll. Save for the Shenzhen Land Acquisition, there is no transaction with the Vendor which requires aggregation under Rules 14.22 and 14A.25 of the Listing Rules.

The Independent Board Committee has been appointed by the Board to give recommendation to the Independent Shareholders on the terms of the Agreement and voting in respect of the Acquisition. First Shanghai has been appointed as the independent financial adviser to advise the Independent Board Committee and the Shareholders in this regard.

The purpose of this circular is to give you further information on the Acquisition, the accountants’ report of the Wellrich Group, the recommendation from the Independent Board Committee, the advice of First Shanghai to the Independent Board Committee and the Independent Shareholders and a notice to convene the SGM to consider and, if thought fit, pass the necessary resolution to approve the Agreement.

THE AGREEMENT DATED 15 OCTOBER 2007

Parties

Vendor: Well Harvest Enterprises Limited, a company incorporated in BVI with limited liability and wholly and beneficially owned by Madam Ma, an executive Director. It is an investment holding company.

Purchaser: the Company

Assets to be acquired

Sale Shares: the 100 issued shares of US$1 each in the capital of Wellrich beneficially owned by the Vendor, representing the entire issued share capital of Wellrich

Loan: all interest free unsecured loans advanced by the Vendor to Wellrich as at the Completion Date. As at 30 June 2007, the loans advanced by the Vendor amounted to HK$254,243,407

The Agreement was entered into between the Vendor and the Purchaser further to their memorandum of understanding dated 28 August 2007, details of which are contained in the Company’s announcement dated 28 August 2007.

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LETTER FROM THE BOARD

Consideration and payment

The total consideration for the Sale Shares and the Loan of HK$355.6 million was arrived at after arm’s length negotiations between the Company and the Vendor and represents a discount of approximately 12.04% to the sum of (i) the net liabilities attributable to equity holder of Wellrich of HK$37,579,589 as at 30 June 2007; (ii) the revaluation surplus of the Properties attributable to Wellrich of approximately HK$187,625,815, which is determined by the valuation of the Properties by the Valuer as at 31 August 2007; and (iii) HK$254,243,407, being the loans advanced by the Vendor as at 30 June 2007.

Upon completion of the Agreement, HK$120 million of the total consideration for the Acquisition shall be paid in cash and HK$235.6 million to be satisfied by the issue and allotment of the 699,109,792 Consideration Shares, credited as fully paid and each ranking pari passu with the existing shares of the Company in all respects, representing an issue price of HK$0.337 per Share. The HK$120 million will be financed by internal resources of the Company.

Consideration Shares

The issue price of HK$0.337 per Consideration Share represents:

(a) a premium of approximately 2.12% over the closing price of HK$0.33 per Share as quoted on the Stock Exchange on 15 October 2007 (being the last trading day in the Shares prior to the suspension of trading in the Shares pending the issue of the announcement of the Company dated 17 October 2007);
(b) the average closing price of HK$0.337 per Share based on the daily closing prices as quoted on the Stock Exchange for the 5 trading days up to and including 15 October 2007;
(c) a discount of approximately 1.89% to the average closing price of HK$0.3435 per Share based on the daily closing prices as quoted on the Stock Exchange for the 10 trading days up to and including 15 October 2007;
(d) a premium of approximately 99.41% over the audited net asset value per Share of the Company of approximately HK$0.169 as at 31 March 2007;
(e) a premium of approximately 36.99% over the audited consolidated net asset value per Share of approximately HK$0.246 as at 31 March 2007; and
(f) a premium of approximately 12.33% over the closing price of HK$0.30 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

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LETTER FROM THE BOARD

The issue price of HK$0.337 per Consideration Share was arrived at after arm’s length negotiations. The Directors are of the view that the issue price is fair and reasonable.

Based on 2,699,121,600 Shares in issue as at the Latest Practicable Date, the 699,109,792 Consideration Shares represent approximately 25.90% of the existing issued share capital of the Company and approximately 20.57% of the issued share capital of the Company as enlarged by the issue of the Consideration Shares. There is no restriction to the subsequent sale of the Consideration Shares. The issue of the Consideration Shares will not result in a change of control of the Company.

On 28 September 2007, the Shareholders granted a general mandate to the Directors to issue up to 539,824,320 new Shares. No shares had been issued under such general mandate up to the Latest Practicable Date and the Consideration Shares will not be issued pursuant thereto. Instead the approval of the Independent Shareholders to the Agreement and the allotment and issue of the Consideration Shares will be sought at the SGM. Application has been made by the Company to the Listing Committee of the Stock Exchange for the granting of the listing of and permission to deal in the Consideration Shares.

Conditions and completion

Completion of the agreement is conditional upon:

(a) the passing at a general meeting of the Company of resolutions to approve the Agreement and the issue and allotment of the Consideration Shares;
(b) the granting by the Listing Committee of the Stock Exchange of a listing of and permission to deal in the Consideration Shares;
(c) the Company completing a review of the financial, trading and legal position of Wellrich and such review not revealing any breach of the representations, warranties or undertakings of the Vendor in respect of Wellrich Group under the Agreement; and
(d) the Company being reasonably satisfied that the JV Company has good marketable title to the Properties.

If the conditions are not fulfilled on or before 31 January 2008 (or such other date as the parties may agree), the Agreement will lapse. None of the above conditions can be waived by the parties to the Agreement.

Completion of the Acquisition shall take place on the fifth business day after the above conditions have been fulfilled (or such other date as may be agreed by the parties).

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LETTER FROM THE BOARD

Other arrangements

The parties have agreed to the following arrangements after completion of the Agreement:

The Company shall procure the JV Company to proceed to apply to the relevant PRC authorities for approval for the redevelopment of Property I into a commercial/residential complex (the “Redevelopment”).
If the relevant PRC authorities approve the Redevelopment and determine that a premium and/or other monies are payable by the JV Company to any PRC authorities therefor (the “Premium”), the parties shall jointly appoint the Valuer (or such other independent valuer as may be agreed by the parties hereto) to make a valuation of the market value of Property I on the basis of the Redevelopment subject to the terms of approval thereof by the relevant PRC authorities as at the date of such approval (the “Valuation”).
If the Valuation is less than the aggregate of RMB360 million (approximately HK$374,472,000) (being the valuation of Property I as at 31 August 2007 referred to in the section headed “the Properties” below) and the Premium, the Vendor shall:
(a) pay 94% of the shortfall in cash to the Purchaser; or
(b) repurchase the Sale Shares and the Loan at the total cash consideration of HK$355.6 million (being equal to the consideration which will have been paid pursuant to the Agreement) plus a sum equal to the interest on HK$120 million at the rate of 4% per annum from the Completion Date to the date of completion of such repurchase (the “Interest”).
If (a) the application for the Redevelopment is rejected by the relevant PRC authorities; or (b) all necessary approvals for the Redevelopment are not granted by the relevant PRC authorities within five years from the Completion Date, the Vendor shall repurchase the Sale Shares and the Loan at the consideration equal to HK$355.6 million (being equal to the consideration to paid pursuant to the Agreement) plus the Interest.

INFORMATION ON WELLRICH AND THE JV COMPANY

Wellrich is a company incorporated in BVI on 21 June 1993 with a total issued share capital of US$100. It is beneficially wholly owned by the Vendor. The major asset of Wellrich is its 94% interest in the JV Company. The remaining 6% interest in the JV Company is owned by a PRC party. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the PRC party and its ultimate beneficial owners are third parties independent of the Company and connected persons (as defined in the Listing Rules) of the Company.

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LETTER FROM THE BOARD

The JV Company is a sino-foreign cooperative joint venture established in the PRC on 8 December 1993 with an operation period up to 7 December 2043. The registered capital and the total investment amount of the JV Company are US$12,142,400 (approximately HK$94,710,720), which has been fully paid, and US$30,355,900 (approximately HK$236,776,020) respectively. The major assets of the JV Company are the Properties.

The Vendor acquired the Wellrich Group in 1999. The total original purchase cost of the assets to the Vendor was about HK$254,243,407, which is equal to the total amount of loans advanced by the Vendor to Wellrich as at 30 June 2007.

THE PROPERTIES

The Properties consist of Property I and Property II.

Property I is located at No. 9 Duan Zhou Wu Road, Zhaoqing, Guangdong Province, the PRC and comprises a site having a total site area of approximately 26,198 sq.m. with various buildings completed in 1994 and 2001. It is occupied and operated as a hotel under the business name of 皇朝酒店 (Dynasty Hotel) with a total gross floor area of approximately 53,843 sq.m. The land lot is currently held with land use rights for a 70 year term expiring on 14 September 2064 for commercial and services uses.

As the Company plans to redevelop Property I into a commercial/residential complex, Property I has been valued by the Valuer based on the special assumptions that it had been granted with a term of 70 years for residential uses and 40 years for commercial uses from the date of valuation with a total redevelopment plot ratio of 3; and that the land use rights premium and other relevant fees for that had been fully settled and the grantee had free and uninterrupted rights to use the property and was entitled to transfer the property interest with the residual terms without payment of any further premium or onerous fee to the government. The land of Property I was valued by the Valuer, based on the direct comparison approach and the aforesaid assumptions, at the amount of RMB360 million (approximately HK$374,472,000) as at 31 August 2007.

Property II is the land portion of a car repairing workshop located to the north of Yingbin Dadao, Zhaoqing, Guangdong Province, the PRC with a total site area of approximately 10,446 sq. m. The JV Company has land use rights of Property II from 17 March 2000 to 16 March 2050. It is leased to 肇田汽車服務有限公司 (Zhaotian Automobile Service Company Limited) for a term of 5 years from 1 May 2005 at a monthly rental of RMB25,314. Property II was valued by the Valuer, based on the direct comparison approach, at the amount of RMB3,700,000 (approximately HK$3,848,740) as at 31 August 2007.

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LETTER FROM THE BOARD

FINANCIAL REVIEW OF THE WELLRICH GROUP

The accountants’ report of the Wellrich Group is set out in Appendix I to this circular. All the financial statements of the Wellrich Group have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards.

For the year ended 31 December 2004

Turnover

The Wellrich Group owns and operates the hotel under the business name of Dynasty Hotel (the “Hotel”) in Zhaoqing, the PRC. Revenue was about HK$65 million. The Wellrich Group recorded profits after extraordinary items and (i) before and (ii) after taxation for the year ended 31 December 2004 of about (i) HK$3.2 million and (ii) HK$1.9 million respectively. Other than the operation of the Hotel, there were no new business introduced; no material acquisitions and disposals of subsidiaries and associates companies of Wellrich; and no material investments for the year.

Cost of operations

Cost of operations (inclusive of cost of operation and administrative expenses) for the year was about HK$44 million. Administrative expenses of about HK$18.6 million and operating expense of about HK$25.4 million were recorded for this year.

Property, plant and equipment

Property, plant and equipment amounted to about HK$192 million as of 31 December 2004 which included the hotel property.

Liquidity and capital resources

As at 31 December 2004, the Wellrich Group’s current ratio was 0.098 with currents assets of about HK$26.6 million against current liabilities of about HK$271 million (which essentially represented amount due to a shareholder of about HK$246 million.) Cash and cash equivalents totalled about HK$14 million. The Wellrich Group had bank borrowing of about HK$4.9 million during the year. The gearing ratio of Wellrich Group as at 31 December 2004 was approximately 1.15 with total liabilities of about HK$271 million and total assets of about HK$237 million.

As at 31 December 2004, part of the Group’s hotel building having a net book value of approximately HK$108.3 million has been charged to secure the general banking facilities granted to the Group.

The Wellrich Group did not have any contingent liabilities as at 31 December 2004.

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LETTER FROM THE BOARD

Dividend

The Wellrich Group did not pay any dividend for the year ended 31 December 2004.

Employees and remuneration policies

As at 31 December 2004, the Wellrich Group employed a full-time workforce of about 881. Total staff costs amounted to about HK$8.8 million. Employees were remunerated according to their education background, professional qualification, if any, the nature of their jobs and market trend with built-in merit components incorporated in the annual increment to reward and motivate individual performance. No bonus was paid and there was no share option scheme or similar incentive scheme for the Wellrich Group.

Exposures to fluctuations in exchange rate

The Hotel received Renminbi from trading and paid Renminbi to creditors. There was no exchange risk.

For the year ended 31 December 2005

Turnover

The Wellrich Group owns and operates the Hotel in Zhaoqing, PRC. Revenue was about HK$65.6 million. The Wellrich Group recorded profits after extraordinary items and (i) before and (ii) after taxation for the year ended 31 December 2005 of about (i) HK$2.3 million and (ii) HK$1.5 million respectively. Other than the operation of the Hotel, there were no new business introduced; no material acquisitions and disposals of subsidiaries and associates companies of Wellrich; and no material investments for the year.

Cost of operations

Cost of operations (inclusive of cost of operation and administrative expenses) for the year was about HK$46 million. Administrative expenses of about HK$18.5 million and operating expense of about HK$27.5 million were recorded for this year.

Property, plant and equipment

Property, plant and equipment amounted to about HK$193.1 million as of 31 December 2005 which included the hotel property.

Liquidity and capital resources

As at 31 December 2005, the Wellrich Group’s current ratio was 0.069 with currents assets of about HK$18 million against current liabilities of about HK$262 million (which essentially represented amount due to a shareholder of about HK$242.2 million.) Cash and cash equivalents totalled about HK$7.3 million. The Wellrich Group had no bank borrowing during the year. No assets has been charged as at 31 December 2005.

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LETTER FROM THE BOARD

The Wellrich Group did not have any contingent liabilities as at 31 December 2005.

Dividend

The Wellrich Group did not pay any dividend for the year ended 31 December 2005.

Employees and remuneration policies

As at 31 December 2005, the Wellrich Group employed a full-time workforce of about 864. Total staff costs amounted to about HK$9.7 million. Employees were remunerated according to their education background, professional qualification, if any, the nature of their jobs and market trend with built-in merit components incorporated in the annual increment to reward and motivate individual performance. No bonus was paid and there was no share option scheme or similar incentive scheme for the Wellrich Group.

Exposures to fluctuations in exchange rate

The Hotel received Renminbi from trading and paid Renminbi to creditor. There was no exchange risk.

For the year ended 31 December 2006

Turnover

The Wellrich Group owns and operates the Hotel in Zhaoqing, PRC. Revenue was about HK$71 million. The Wellrich Group recorded profits after extraordinary items and (i) before and (ii) after taxation for the year ended 31 December 2006 of about (i) HK$2.5 million and (ii) HK$1.5 million respectively. Other than the operation of the Hotel, there were no new business introduced; no material acquisitions and disposals of subsidiaries and associates companies of Wellrich; and no material investments for the year.

Cost of operations

Cost of operations (inclusive of cost of operation and administrative expenses) for the year was about HK$49.3 million. Administrative expenses of about HK$20.3 million and operating expense of about HK$29 million were recorded for this year.

Property, plant and equipment

Property, plant and equipment amounted to about HK$184.2 million as of 31 December 2006 which included the hotel property.

Liquidity and capital resources

As at 31 December 2006, the Wellrich Group’s current ratio was 0.098 with currents assets of about HK$25.3 million against current liabilities of about HK$257.8 million (which essentially

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LETTER FROM THE BOARD

represented amount due to a shareholder of about HK$239.8 million.) Cash and cash equivalents totalled about HK$9.9 million. The Wellrich Group had no bank borrowing during the year. No assets has been charged as at 31 December 2006.

The Wellrich Group did not have any contingent liabilities as at 31 December 2006.

Dividend

The Wellrich Group did not pay any dividend for the year ended 31 December 2006.

Employees and remuneration policies

As at 31 December 2006, the Wellrich Group employed a full-time workforce of about 820. Total staff costs amounted to about HK$10.4 million. Employees were remunerated according to their education background, professional qualification, if any, the nature of their jobs and market trend with built-in merit components incorporated in the annual increment to reward and motivate individual performance. No bonus was paid and there was no share option scheme or similar incentive scheme for the Wellrich Group.

Exposures to fluctuations in exchange rate

The Hotel received Renminbi from trading and paid Renminbi to creditor. There was no exchange risk.

For the six months ended 30 June 2007

Turnover

The Wellrich Group owns and operates the Hotel in Zhaoqing, PRC. Revenue was about HK$35.6 million. The Wellrich Group recorded profit after extraordinary items and before taxation for the period of about HK$27,000 and the loss after extraordinary items and taxation for the period of about HK$46,000. Other than the operation of the Hotel, there were no new business introduced; no material acquisitions and disposals of subsidiaries and associates companies of Wellrich; and no material investments for the period.

Cost of operations

Cost of operations (inclusive of cost of operation and administrative expenses) for the year was about HK$25.5 million. Administrative expenses of about HK$10.5 million and operating expense of about HK$15 million were recorded for this period.

Property, plant and equipment

Property, plant and equipment amounted to about HK$182 million as of 30 June 2007 which included the hotel property.

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LETTER FROM THE BOARD

Liquidity and capital resources

As at 30 June 2007, the Wellrich Group’s current ratio was 0.144 with currents assets of about HK$39 million against current liabilities of about HK$270.1 million (which essentially represented amount due to a shareholder of about HK$254.2 million.) Cash and cash equivalents totalled about HK$25 million. The Wellrich Group had no bank borrowing during the period. No assets has been charged as at 30 June 2007.

The audited net liabilities attributable to the equity holder of Wellrich was about HK$37.6 million as at 30 June 2007.

The Wellrich Group did not have any contingent liabilities as at 30 June 2007.

Dividend

The Wellrich Group did not pay any dividend for the period ended 30 June 2007.

Employees and remuneration policies

As at 30 June 2007, the Wellrich Group employed a full-time workforce of about 801. Total staff costs amounted to about HK$5.8 million. Employees were remunerated according to their education background, professional qualification, if any, the nature of their jobs and market trend with built-in merit components incorporated in the annual increment to reward and motivate individual performance. No bonus was paid and there was no share option scheme or similar incentive scheme for the Wellrich Group.

Exposures to fluctuations in exchange rate

The Hotel received Renminbi from trading and paid Renminbi to creditor. There was no exchange risk.

CHANGES IN THE SHAREHOLDING STRUCTURE OF THE COMPANY

World Possession, Madam Ma, Mr. Yeung and Ms. Yeung and their respective associates 3 executive Directors other than those mentioned above_(Note)_ Public Shareholders Total	As at the Latest Practicable Date Number of Shares % 1,489,550,686 55.186 3,048,000 0.113 1,206,522,914 44.701 2,699,121,600 100.000	Upon completion of the Acquisition Number of Shares % 2,188,660,478 64.406 3,048,000 0.090 1,206,522,914 35.504 3,398,231,392 100.000	Upon completion of the Acquisition Number of Shares % 2,188,660,478 64.406 3,048,000 0.090 1,206,522,914 35.504 3,398,231,392 100.000
			100.000

Note: Messrs. Liu Yu Mo, Chung Siu Wah and Chik To Pan hold 1,048,000 Shares, 1,000,000 Shares and 1,000,000 Shares respectively.

— 15 —

LETTER FROM THE BOARD

REASONS FOR THE ACQUISITION

The Company and its subsidiaries are principally engaged in property investment, restaurant operations, provision of wedding services, entertainment business and retail trading of watches and wine.

Subsequent to completion of the disposal of 95% registered capital of Waldorf Holding Limited and the benefits of loan advanced to Waldorf Holding Limited in December 2006 as detailed in the announcement of the Company dated 3 November 2006, the Company has been looking for investment opportunities in the Greater China region with an objective to expand the business portfolio of the Group. As mentioned in an announcement of the Company dated 28 August 2007 in respect of a memorandum of understanding of the same date relating to the proposed acquisition, the Company intends to expand its property portfolio in the PRC and considers Property I has good redevelopment potential for commercial and residential uses. Property II will continue to be used for rental purpose. The Directors are of the opinion that the Acquisition is in line with the corporate strategy of the Group which includes property investment in the PRC and provides an opportunity for the Company to broaden its business scope. The Directors consider that the terms of the Agreement are normal commercial terms, fair and reasonable and the Acquisition is conducted in the ordinary course of business and in the interests of the Company and the Shareholders as a whole.

FINANCIAL AND TRADING PROSPECTS OF THE GROUP

As mentioned in the 2007 annual report of the Company, the turnover of the Group for the year ended 31 March 2007 was about HK$202.1 million, representing a decrease of 4.3% as compared to that of last year. The decrease was mainly due to the wedding services operations. The Group achieved a profit of HK$50.8 million for the year, an increase of 19.8% as compared to last year. The profit was mainly attributable to the gain of HK$81.5 million arising on the disposal of the hotel operations in Macau, rental income of HK$4 million from investment properties, and income of HK$2 million from Chiu Chow restaurant operations. However the wedding services business recorded a loss of about HK$33.9 million, HK$19 million of which related to an impairment loss of goodwill. The profit was further reduced by a loss of HK$6.1 million from the business of collection of fees for licensing of copyright to karaoke music products to karaoke operators in the PRC, a loss of about HK$3.6 million from entertainment operations and a loss of HK$5.9 million from Japanese restaurant operations.

The Group will continue its current principal activities of provision of wedding services, property investment, restaurant operations, retail of watches and wine, collection of fees for licensing of karaoke music products in the PRC and entertainment business. The Group’s financial position is strong with a net asset value of about HK$646 million.

Currently, the Group has 2 shops in Kowloon Tong and Tsimshatsui which provide wedding services. It has implemented cost control measures to ensure that the business will be back on

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LETTER FROM THE BOARD

track after closing down the loss making branches. The Group believes the new operation relating to collection of fees for licensing of copyright to karaoke music products to karaoke operators in the PRC will broaden the income source of the Group and facilitate the Group to build up a distribution network of karaoke operators in the PRC for future expansion of the Group’s business. In May 2007, the Group completed the acquisition of Shenzhen Land Company Limited, which holds interest in Levels 1 to 3 of Yidong Building in Yuexiu District, Guangzhou, the PRC with a gross floor area of about 4,042.77 sq.m. for a term expiring on 31 January 2040 for a cash consideration of HK$48 million. The Group plans to hold this property as investment property for steady rental income.

The Group is seeking new direction in respect of its entertainment business in Hong Kong. It plans to invest in production of films and television series in the PRC and has entered into a joint venture agreement with an independent PRC party with a view to explore the entertainment market in the PRC. The management will look for suitable investment opportunities to expand the business of the Group, including hotel operations.

Financial Review

Liquidity and financial resources

The Group finances its operations with internally generated resources. The Group maintains good business relationship with banks and has banking facilities available for future business development.

As at 31 March 2007, the Group had no bank borrowings. The gearing ratio of the Group, based on total bank borrowings to shareholders’ equity, was 0% (2006: 23.5%) as at 31 March 2007.

The Group was able to generate sufficient cash flow from its operations to fulfil its repayment obligations and meet the cash requirements for its day-to-day operations for the year. No financial instrument was used for hedging.

Charges

At 31 March 2007, the carrying value of investment properties, leasehold land and buildings, interests in leasehold land for own use under operating leases and land premium charged as security for the Group’s bank facilities of HK$52 million (2006: HK$252 million) amounted to HK$156 million (2006: HK$622.7 million).

Emolument Policy

As at 31 March 2007, the Group had a total of 318 employees. The Group remunerates its employees based on their performance, experience and prevailing industry practices.

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LETTER FROM THE BOARD

The Group periodically reviews its remuneration package in order to attract, motivate and retain its employees. Discretionary bonuses are rewarded to staffs and directors based on the Group’s profit and their performance.

The Company had a share option scheme for the employees and directors of the Group as incentive for them to contribute to the business and operation of the Group. The Group also provides in-house and external training courses for its staff to improve their skill and services.

FINANCIAL EFFECTS OF THE ACQUISITION ON THE GROUP

Upon completion of the Agreement, Wellrich will become a wholly owned subsidiary of the Company and the accounts of which will be consolidated into those of the Company.

As at 31 March 2007, the audited consolidated total assets of the Group amounted to approximately HK$786.5 million. Based on the unaudited pro forma assets and liabilities statement of the Enlarged Group as set out in Appendix III to this circular, the unaudited pro forma adjusted consolidated total assets of the Enlarged Group will be approximately HK$1,144.8 million. As at 31 March 2007, the audited consolidated total liabilities of the Group amounted to approximately HK$139.8 million. Based on the statement of unaudited pro forma assets and liabilities of the Enlarged Group set out in Appendix III to this circular, the unaudited pro forma adjusted consolidated total liabilities of the Enlarged Group will be approximately HK$195.8 million. It is expected that there will be no material adverse financial effect on the earnings of the Enlarged Group upon completion of the Agreement.

SGM

A notice convening the SGM to be held at Golden Island Bird’s Nest Chiu Chau Restaurant, 2nd Floor, East Wing, Star House, Salisbury Road, Tsimshatsui, Kowloon, Hong Kong on 23 November 2007 at 3:00 p.m. is set out on pages 159 and 160 of this circular at which an ordinary resolution will be proposed to consider, and if thought fit, to approve the Agreement, voting of which will be taken on a poll. Whether or not you are able to attend the meeting in person, please complete and return the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company’s principal office at 2810-11, 28th Floor Shun Tak Centre, West Tower, 200 Connaught Road Central, Hong Kong as soon as practicable but in any event not less than 48 hours before the time appointed for the holding of the meeting. Completion and return of the accompanying from of proxy will not preclude you from attending and voting at the meeting should you so wish.

World Possession (the controlling Shareholder interested in 1,423,550,686 Shares, representing approximately 52.74% of the issued share capital of the Company as at the Latest Practicable Date), Madam Ma, Mr. Yeung and Ms. Yeung (all executive Directors, who hold the entire issued share capital of World Possession in equal shares and each of them interested in 22,000,000 Shares, in aggregate representing approximately 2.45% of the issued share capital of the Company as at the Latest Practicable Date), and their respective associates will abstain from voting at the SGM.

— 18 —

LETTER FROM THE BOARD

PROCEDURES TO DEMAND A POLL

According to the Bye-laws of the Company, before or on the declaration of the result of voting on a show of hands on a resolution by the chairman of a general meeting, a poll may be demanded by:

(a) at least three members present in person (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy entitled to vote at the meeting; or
(b) any member or members present in person (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy and representing not less than 10% of total voting rights of all the members having the right to vote at the meeting; or
(c) any member or members present in person (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy and holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than 10% of the total sum paid up on all the shares conferring that right.

RECOMMENDATIONS

Your attention is drawn to the letters from the Independent Board Committee and First Shanghai which set out their recommendations in respect of the Acquisition and the principal factors considered by them in arriving at their recommendations.

ADDITIONAL INFORMATION

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

By order of the board of

United Power Investment Limited

Liu Yu Mo

Chief Executive Officer

— 19 —

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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UNITED POWER INVESTMENT LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 674)

7 November 2007

To the Independent Shareholders,

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTION

We refer to the letter from the Board set out on pages 5 to 19 of the circular dated 7 November 2007 (the “Circular”) of which this letter forms part. Capitalised terms used herein shall have the same meanings as those defined in the Circular unless the context otherwise requires.

We have been appointed as members of the Independent Board Committee to consider the terms of the Agreement and to advise the Independent Shareholders as to whether the terms of the Agreement are fair and reasonable and the Acquisition is in the interests of the Company and the Shareholders as a whole; and whether to vote in favour of the ordinary resolution to be proposed at the SGM to approve the Agreement. First Shanghai has been appointed to advise the Independent Board Committee and the Independent Shareholders in this regard.

We wish to draw your attention to the letter from the Board and the letter of advice from First Shanghai to the Independent Board Committee and the Independent Shareholders which contains its advice in relation to the Agreement as set out in the Circular.

Having taken into account the principal factors and reasons considered and the opinion and recommendation given by First Shanghai as stated in its letter of advice as set out on pages 21 to 37 of the Circular, we consider that the terms of the Agreement are of normal commercial terms and are fair and reasonable and the Acquisition, entered into in the ordinary and usual course of business, is in the interests of the Company and the Shareholders as a whole. We therefore recommend the Independent Shareholders to vote in favour of the ordinary resolution approving the Agreement to be proposed at the SGM.

Yours faithfully,

Independent Board Committee

Chan Lai Mei

Lee Wai Loun

Lee Yuk Sang, Angus

Independent Non-executive Directors

— 20 —

LETTER FROM FIRST SHANGHAI

The following is the text of a letter received from First Shanghai setting out its advice to the Independent Board Committee and the Independent Shareholders in respect of the proposed major and connected transaction regarding the acquisition of the entire issued share capital of, and the benefit of all loans advanced to, Wellrich from the Vendor pursuant to the Agreement (the “Acquisition”) for inclusion in this circular.

==> picture [132 x 40] intentionally omitted <==

FIRST SHANGHAI CAPITAL LIMITED

19th Floor, Wing On House 71 Des Voeux Road Central Hong Kong

7 November 2007

To the Independent Board Committee and the Independent Shareholders

United Power Investment Limited 2810-11, 28th Floor Shun Tak Centre West Tower 200 Connaught Road Central Hong Kong

Dear Sirs,

MAJOR AND CONNECTED TRANSACTION

INTRODUCTION

We refer to our engagement to advise the Independent Board Committee and the Independent Shareholders in respect of the Acquisition, details of which are set out in the circular of the Company dated 7 November 2007 (the “Circular”) to the Shareholders, of which this letter forms a part. Unless the context otherwise requires, terms used in this letter shall have the same meanings as those defined in the Circular.

As disclosed in the announcement of the Company dated 17 October 2007, on 15 October 2007, the Company entered into the Agreement with the Vendor, pursuant to which the Company as purchaser agreed to acquire the entire issued share capital of, and the benefit of all loans advanced to, Wellrich from the Vendor for an aggregate consideration of HK$355.6 million, of which, HK$120 million shall be paid in cash and the balance of HK$235.6 million to be satisfied by the issue and allotment of the 699,109,792 Consideration Shares, representing an issue price of HK$0.337 per Consideration Share.

— 21 —

LETTER FROM FIRST SHANGHAI

As the aggregate applicable percentage ratio for the Acquisition and the Shenzhen Land Acquisition under the Listing Rules is more than 25% and less than 100%, the Acquisition constitutes a major transaction for the Company under Rule 14.08 of the Listing Rules. Save as the Shenzhen Land Acquisition, there is no other transaction with the Vendor which requires aggregation under Rule 14A.25 of the Listing Rules. As the Vendor is a company wholly and beneficially owned by Madam Ma, an executive Director, the Acquisition also constitutes a connected transaction for the Company under the Listing Rules and is subject to the approval of the Independent Shareholders at a general meeting with vote to be taken on a poll. World Possession (the controlling Shareholder interested in 1,423,550,686 Shares, representing approximately 52.74% of the issued share capital of the Company as at the date of the Circular), Madam Ma, Mr. Yeung, Ms. Yeung (all executive Directors, who hold the entire issued share capital of World Possession in equal shares and each of them interested in 22,000,000 Shares, in aggregate representing approximately 2.45% of the issued share capital of the Company as at the date of the Circular), and their respective associates will be required to abstain from voting at the SGM.

An independent board committee, comprising all the three independent non-executive Directors, namely Ms. Chan Lai Mei, Mr. Lee Wai Loun and Mr. Lee Yuk Sang, Angus, has been established to consider the Acquisition and the transactions contemplated under the Agreement and to advise the Independent Shareholders on the fairness and reasonableness in relation to the terms of the Acquisition and the transactions contemplated thereunder. As the independent financial adviser to the Independent Board Committee and the Independent Shareholders, our role is to give an independent opinion to the Independent Board Committee and the Independent Shareholders as to (i) whether the transactions are conducted on normal commercial terms and in the ordinary and usual course of business; (ii) whether the entering into of the Agreement is in the interests of the Company and the Shareholders as a whole; (iii) whether the terms of the Acquisition pursuant to the Agreement are fair and reasonable; and (iv) how the Shareholders should vote in respect of the resolution to approve the Agreement and the transactions contemplated thereunder at the SGM.

BASIS OF OUR OPINION

In putting forth our opinion and recommendations, we have relied on the accuracy of the information and representations included in the Circular and provided to us by the Directors and the Company, and have assumed that all such information and representations made or referred to in the Circular and provided to us by the Directors and the Company were true at the time they were made and continued to be true as at the date hereof. We have also relied on the information and representations provided to us regarding (i) the audited consolidated financial statements of the Wellrich Group; (ii) the unaudited pro forma financial information of the Enlarged Group prepared by BDO McCabe Lo Limited as set out in Appendices I and III to the Circular respectively; and (iii) the valuation report of the land and property prepared by Vigers Appraisal & Consulting Limited, an independent valuer, as set out in Appendix IV to the Circular. We have also assumed that all statements of belief, opinion and intention

— 22 —

LETTER FROM FIRST SHANGHAI

made by the Directors in the Circular were reasonably made after due enquiry. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors and have been advised by the Directors that no material facts have been withheld or omitted from the information provided and referred to in the Circular.

We consider that we have reviewed sufficient information to reach an informed view and to justify reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our advice. We have not, however, conducted any independent verification of the information included in the Circular and provided to us by the Directors nor have we conducted any form of investigation into the business, affairs or future prospects of the Group and the Enlarged Group. We have taken reasonable steps as required under Rule 13.80 of the Listing Rules in forming our opinion.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion and recommendations as to the fairness and reasonableness of the terms of the Acquisition pursuant to the Agreement, we have taken into account the following principal factors and reasons:

1. Background of the Group

The Group is principally engaged in property investment, restaurant operations, provision of wedding services, entertainment business and retail trading of watches and wine.

According to the annual report of the Company for the year ended 31 March 2007 (the “Annual Report 2007”), revenue of the Group for the year ended 31 March 2007 was approximately HK$202.1 million, representing a decrease of approximately 4.3% as compared to that of approximately HK$211.2 million of the previous financial year. The decrease was mainly attributable to the wedding services operations. Nevertheless, the Group achieved a profit of approximately HK$50.8 million for the year ended 31 March 2007, representing an increase of approximately 19.8% as compared to that of approximately HK$42.4 million of the last year. The increase in profit was mainly attributable to the gain of approximately HK$81.5 million arising on the disposal of the hotel operations in Macau, rental income of approximately HK$4.0 million from investment properties, and income of approximately HK$2.0 million from Chiu Chow restaurant operations. However the wedding services business recorded a loss of approximately HK$33.9 million, HK$19.0 million of which related to an impairment loss of goodwill. The profit was further reduced by a loss of approximately HK$6.1 million from the business of collection of fees for licensing of copyright to karaoke music products to karaoke operators in the PRC, a loss of approximately HK$3.6 million from entertainment operations and a loss of approximately HK$5.9 million from the Japanese restaurant operations.

— 23 —

LETTER FROM FIRST SHANGHAI

As at 31 March 2007, the Group had consolidated net asset value of approximately HK$646.7 million, net current assets of approximately HK$447.6 million and cash and cash equivalents of approximately HK$438.2 million; whilst it had no interest-bearing borrowings and hence a gearing ratio of zero, which therefore showed that the Group’s financial position was healthy.

In May 2007, the Group completed the acquisition of Shenzhen Land Company Limited, which holds interest in Levels 1 to 3 of Yidong Building in Yuexiu District, Guangzhou, the PRC with a gross floor area of about 4,042.77 sq.m. for a term expiring on 31 January 2040. The Group has planned to hold this property as investment property for steady rental income. As stated in the Annual Report 2007, the Directors would look for suitable investment opportunities to expand the business of the Group, including hotel operations.

2. Reasons for and benefits of the Acquisition

As mentioned in the “Letter from the Board” of the Circular, subsequent to completion of the disposal of 95% registered capital of Waldorf Holding Limited and the benefits of loan advanced to Waldorf Holding Limited in December 2006 as detailed in the announcement of the Company dated 3 November 2006, the Company has been looking for investment opportunities in the Greater China region with an objective to expand the business portfolio of the Group. As further mentioned in an announcement of the Company dated 28 August 2007 in respect of a memorandum of understanding of the same date relating to the Acquisition, the Company intended to expand its property portfolio in the PRC and considered that Property I has good redevelopment potential for commercial and residential uses. Property II will continue to be used for rental purpose. The Directors are of the opinion that the Acquisition is in line with the corporate strategy of the Group which includes property investment in the PRC and provides an opportunity for the Company to broaden its business scope. The Directors also consider that the terms of the Agreement are of normal commercial terms and are fair and reasonable and the Acquisition is in the interests of the Company and the Shareholders as a whole.

Based on our understanding, the upward trend in the China property industry is evidenced by the growth of revenues from the sale of properties in the PRC. According to the statistical information published by the廣東省統計局 (Bureau of Statistics of Guangdong Province), Guangdong Province had a population of approximately 93.0 million as at 31 December 2006 and had experienced a substantial economic growth in the past ten years. The real GDP growth rate of Guangdong Province exceeded the average national growth rate for each of the past ten years and the per capita GDP of Guangdong Province was significantly higher than the national average. According to中華人民共和國國家統計局 (the National Bureau of Statistics of China) and 廣東省統計局 (Bureau of Statistics of Guangdong Province), in 2006, the gross domestic product (“GDP”) of

— 24 —

LETTER FROM FIRST SHANGHAI

Guangdong Province reached RMB2,596.86 billion which represented an approximate 14.1% growth when compared to that in 2005, whereas the GDP of China as a whole showed an approximate 10.7% increase during the same period. Further, people residing in urban and rural areas of Guangdong Province enjoyed a considerable increase in their per capita disposable income of approximately 8.4% and 8.3% respectively. Guangzhou is the largest city and commercial centre in Southern China and the capital of Guangdong Province, and it serves as a transportation hub for the Southern China region. According to the information published by 廣州市統計局 (Bureau of Statistics of Guangzhou City), Guangzhou had a population of approximately 9.8 million as at 31 December 2006. Guangzhou had experienced a high GDP growth rate for the seven years from 2000 to 2006. In 2006, Guangzhou’s GDP reached approximately RMB606.8 billion, representing a per capita GDP of RMB62,210.8. Based on the same source of information, Guangzhou’s GDP and per capita disposable income of urban residents had increased by approximately 14.7% and 7.3% respectively in 2006 when compared with that in 2005.

As also stated by the National Bureau of Statistics of China, foreign direct investment in Guangdong Province rose by approximately 17.4% in 2006. On the other hand, the number of overseas and local tourists visiting Guangdong Province increased by approximately 12.8% and 10.3% respectively. On this basis, we concur with the Directors’ view that demand for commercial/residential properties in Guangdong Province, the PRC, is expected to be promising in the coming few years. Based on our discussion with the management of the Company, we understand that the PRC government imposed a series of austere measures targeted at rectifying the overheating of the property market. Because of these measures, the pace of growth in the PRC property market is expected to slow down in the short term. However, having considered the continuous growth on the economy in Guangdong Province as reflected by the growth of GDP and per capita disposable income as stated above, we share with the Directors’ view that future demand in the commercial/residential property market in Guangdong Province, the PRC will continue to grow at a steady and healthy pace.

Having considered the reasons for the Acquisition and the prospects of the property market in the PRC and Guangdong Province in particular, we are of the view that the Acquisition is (i) in line with the business strategy of the Group; (ii) entered into in the ordinary and usual course of business of the Group as it is principally engaged in, among others, property investment; and (iii) in the interests of the Company and the Shareholders as a whole in the long run as it could better secure the Group’s fixed asset investments for its future business expansion.

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LETTER FROM FIRST SHANGHAI

3. Background of the Wellrich Group

Wellrich is a company incorporated in BVI on 21 June 1993 with a total issued share capital of US$100. As at the date of the Circular, Wellrich is beneficially and wholly owned by the Vendor. The major asset of Wellrich is its 94% interest in the JV Company. The remaining 6% interest in the JV Company is owned by a PRC party. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the PRC party and its ultimate beneficial owners are third parties independent of the Company and connected persons (as defined in the Listing Rules) of the Company.

The audited net profit of the Wellrich Group after extraordinary items and (i) before and (ii) after taxation for the year ended 31 December 2005 were approximately (i) HK$2,328,055 and (ii) HK$1,504,632 respectively. The audited net profit of the Wellrich Group after extraordinary items and (i) before and (ii) after taxation for the year ended 31 December 2006 were approximately (i) HK$2,496,257 and (ii) HK$1,539,719 respectively. The audited net liabilities attributable to equity holder of Wellrich was HK$37,579,589 as at 30 June 2007. Financial statements of the Wellrich Group have been prepared in accordance with the applicable Hong Kong Financial Reporting Standards.

The Vendor acquired the Wellrich Group in 1999. The total original purchase cost of the assets to the Vendor was approximately HK$254,243,407, which is equal to the total amount of loans advanced by the Vendor to Wellrich as at 30 June 2007.

4. Information of the Properties

The Properties consist of Property I and Property II.

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LETTER FROM FIRST SHANGHAI

As mentioned in the “Letter from the Board” of the Circular, the Company plans to redevelop Property I into a commercial/residential complex, Property I has been valued by the Valuer based on the special assumptions that it had been granted with a term of 70 years for residential uses and 40 years for commercial uses from the date of valuation with a total redevelopment plot ratio of 3; and that the land use rights premium and other relevant fees for that had been fully settled and the grantee had free and uninterrupted rights to use the property and was entitled to transfer the property interest with the residual terms without payment of any further premium or onerous fee to the government. Property I was valued by the Valuer, based on the direct comparison approach and the aforesaid assumptions, at the amount of RMB360 million (approximately HK$374,472,000) as at 31 August 2007.

5. Consideration and valuation of the Consideration Shares

Basis for determining the consideration

The total consideration for the Sale Shares and the Loan of HK$355.6 million was arrived at after arm’s length negotiations between the Company and the Vendor and represents a discount of approximately 12.04% to the sum of (i) the net liabilities attributable to equity holder of Wellrich of HK$37,579,589 as at 30 June 2007; (ii) the revaluation surplus of the Properties attributable to Wellrich of approximately HK$187,625,815, which is determined by the valuation of the Properties valued by the Valuer as at 31 August 2007; and (iii) HK$254,243,407, being the loans advanced by the Vendor as at 30 June 2007 (the “Sum Amount”).

The Loan would be transferred from the Vendor to the Purchaser at its face value as at the Completion Date. If the amount of the Loan is deducted from the total consideration of HK$355,600,000, the net consideration for the Sale Shares only would be HK$101,356,593 which represents a considerable discount of approximately 32.45% to the adjusted net asset value of HK$150,046,226 (the “Adjusted NAV”), being the sum of (i) the net liabilities attributable to equity holder of Wellrich of HK$37,579,589 as at 30 June 2007; and (ii) the revaluation surplus of the Properties attributable to Wellrich of approximately HK$187,625,815, which is determined by the valuation of the Properties

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LETTER FROM FIRST SHANGHAI

valued by the Valuer as at 31 August 2007. The Board considers that the terms of the Agreement are of normal commercial terms and fair and reasonable and the Acquisition is in the interests of the Company and the Shareholders as a whole.

As discussed with the Valuer, we understand that the Property I is currently used and operated as a hotel and is to be acquired by the Purchaser for future redevelopment purpose. The Property II is being leased for rental purpose. The Company shall procure the JV Company to proceed to apply to the relevant PRC authorities for approval for the redevelopment of Property I into a commercial/residential complex, details of the arrangements are set out below under the heading of “Other arrangements”. In view of this, the Property I was valued by the Valuer on an open market basis by making reference to comparable market transactions in the localities with an assumption of a total redevelopment plot ratio of 3. We consider that the valuation methodology adopted by the Valuer is in line with the common market practice.

Although the Wellrich Group had been operating profitably for the three full financial years ended 31 December 2006, it had recorded a loss of HK$45,623 for the six months ended 30 June 2007 mainly because of the increases in depreciation charges of approximately HK$0.5 million, cost of sales of approximately HK$1.4 million and staff costs of approximately HK$1.0 million when compared with those incurred for the corresponding period in the previous financial year, which was partially off-set by the increase in rental income of approximately HK$1.5 million for the same period. Accordingly, it is not appropriate for us to estimate its profit for the full year ending 31 December 2007. Given earnings of the Wellrich Group for the full financial year ending 31 December 2007 are not available, we consider that comparison in terms of priceearnings ratio with other similar business is not practicable. As the Wellrich Group’s assets substantially consist of the Properties, we consider that it would be more meaningful for us to consider the Adjusted NAV rather than to make reference to the past financial and operating performance of the Wellrich Group.

Based on the above analysis, we are of the view that the basis for determining the consideration is on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and is in the interests of the Company and the Shareholders as a whole.

The Loan

In addition, upon the Completion Date, the Loan advanced by the Vendor to Wellrich as at the Completion Date (balance of which was HK$254,243,407 as at 30 June 2007) will be assigned to the Purchaser.

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LETTER FROM FIRST SHANGHAI

Since the assignment of the Loan is based on the face value of the balance of the amount due to the Vendor by Wellrich which is part and parcel of the transactions contemplated under the Agreement, we are of the view that the assignment of the Loan under the Acquisition is fair and reasonable, and the terms of which are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and is in the interests of the Company and the Shareholders as a whole.

Upon completion of the Agreement, HK$120 million of the total consideration for the Acquisition shall be paid in cash and HK$235.6 million shall be satisfied by the issue and allotment of the 699,109,792 Consideration Shares, credited as fully paid and each ranking pari passu with the existing shares of the Company in all respects, representing an issue price of HK$0.337 per Consideration Share. The HK$120 million cash portion will be financed by the internal resources of the Company.

Having considered that (i) the total consideration is at a discount of approximately 12.04% to the Sum Amount; (ii) the net consideration attributable to the Sale Shares only of HK$101,356,593 is at a considerable discount of approximately 32.45% to the Adjusted NAV of approximately HK$150,046,226 of the Wellrich Group as at 30 June 2007; (iii) the methodologies adopted by the Valuer in valuing the relevant properties are in line with market practices; (iv) the Acquisition is in line with the Group’s business strategy of future development; and (v) the Loan will be assigned by the Vendor to the Company at the face value at the Completion Date pursuant to the Agreement as being part and parcel of the transactions contemplated under the Agreement, we are of the view that the basis for determining the consideration is on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and is in the interests of the Company and the Shareholders as a whole.

Valuation of the Consideration Shares

Part of the consideration of HK$235.6 million will be satisfied by the issue and allotment of 699,109,792 Consideration Shares at an issue price of HK$0.337 (the “Issue Price”) per Consideration Share, being the average closing price for the five trading days up to 15 October 2007, being the date of the Agreement (the “Last Trading Day”).

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LETTER FROM FIRST SHANGHAI

(a) Comparison with historical trading price of the Shares

The Issue Price represents:

		Price/value	Premium/
		per Share	(discount)
		approximately	approximately
		HK$	%
(i)	Closing price per Share as quoted
	on the Stock Exchange on the
	Last Trading Day	0.330	2.12
(ii)	Average closing price per Share as quoted
	on the Stock Exchange for the last five
	trading days to the Last Trading Day	0.337	0.00
(iii)	Average closing price per Share as quoted
	on the Stock Exchange for the last ten
	trading days to the Last Trading Day	0.3435	(1.89)
(iv)	The audited consolidated net asset value
	per Share as at 31 March 2007	0.246	36.99
(v)	Closing price per Share as quoted
	on the Stock Exchange as at the
	Latest Practicable Date	0.300	12.33

As indicated in the above, we noted that the Issue Price (i) is equivalent to the average closing price of HK$0.337 per Share for the last five trading days up to 15 October 2007; (ii) generally represents a similar level to the recent trading price of the Shares as quoted from the Stock Exchange; and (iii) represents a considerable premium of approximately 36.99% over the audited consolidated net asset value per Share of approximately HK$0.246 as at 31 March 2007. Set out below is the average monthly closing prices of the Shares from 1 October 2006 to the Last Trading Day:

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LETTER FROM FIRST SHANGHAI

(b) Share price performance

	Month/period end	Month/period end	Average daily
	closing price		closing price
		HK$	HK$
2006
October		0.290	0.285
November		0.340	0.313
December		0.290	0.310
2007
January		0.275	0.283
February		0.360	0.314
March		0.365	0.331
April		0.465	0.434
May		0.560	0.482
June		0.470	0.534
July		0.445	0.462
August		0.415	0.389
September		0.375	0.376
October (up to the Last Trading Day)		0.330	0.344

Source: Bloomberg

Based on the above, the average daily closing price of the Shares had risen from approximately HK$0.283 in January 2007 to approximately HK$0.534 in June 2007, but it started to drop thereafter to approximately HK$0.344 prior to the Last Trading Day. Accordingly, the Issue Price represents a similar level to the recent trading price of the Shares and it is at a slight premium of approximately 2.12% over the closing price of the Shares on the Last Trading Day. In respect of the considerable premium of approximately 36.99% over the Group’s consolidated net asset value per Share as at 31 March 2007, we are of the view that the Issue Price of HK$0.337 is fair and reasonable and is in the interests of the Company and the Shareholders as a whole.

(c) Comparison with similar transactions

In assessing the fairness and reasonableness of the Issue Price, we have identified, on a best effort basis, 23 transactions (the “Consideration Shares Comparables”) announced during the period from 3 July 2007 (i.e. being the first trading day since the second half of 2007) to the Last Trading Day by companies listed on the Main Board of the Stock Exchange involving (i) acquisition of assets and/or

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LETTER FROM FIRST SHANGHAI

equity interests in target companies and (ii) allotment and issue of shares to satisfy all or part of the consideration for the relevant acquisitions, details of which are as follows:

				Premium/(discount) of issue	Premium/(discount) of issue
				price over/to the closing
				price/average	closing price
				immediately before the
				suspension of trading in the
				shares pending for the
Date of				release of announcement
announcement	Company name (stock code)	Issue price		Closing price	5-day average
			HK$	%	%
15/10/2007	Hua Yi Copper Holdings Limited (559)		1.100	(6.36)	(1.82)
11/10/2007	Peking Apparel International Group
	Limited (761)		0.600	(63.19)	(59.13)
10/10/2007	Karce International Holdings Company		0.330	(38.90)	(36.50)
	Limited (1159)
9/10/2007	Chitaly Holdings Limited (1198)		1.700	(4.50)	(4.28)
2/10/2007	China Renji Medical Group Limited (648)		0.250	53.37	50.42
18/9/2007	Shanghai Allied Cement Limited (1060)		1.000	(76.70)	(75.00)
14/9/2007	Regent Pacific Group Limited (575)		1.070	(11.57)	(3.95)
12/9/2007	Sino Union Petroleum & Chemical		1.440	6.70	5.40
	International Limited (346)
11/9/2007	Chi Cheung Investment Company Limited (112)		2.660	(10.10)	(12.80)
30/8/2007	Vantage International (Holdings) Limited (15)		0.230	(14.81)	(14.81)
28/8/2007	Hycomm Wireless Limited (499)		0.100	(23.67)	(12.28)
24/8/2007	Huali Holdings (Group) Limited (3366)		3.400	(10.05)	(7.15)
15/8/2007	Orient Resources Group Company Limited (467)		1.610	(8.52)	(17.00)
6/8/2007	Vitop Bioenergy Holdings Limited (1178)		0.350	(2.78)	(6.17)
31/7/2007	Greater China Holdings Limited (431)		0.746	(0.53)	(0.53)
30/7/2007	Culturecom Holdings Limited (343)		0.213	(10.13)	(14.53)
27/7/2007	Fortune Telecom Holdings Limited (110)		2.191	(21.77)	(3.93)
24/7/2007	Uni-Bio Science Group Limited (690)		5.500	(17.40)	(8.50)
20/7/2007	Aurora Global Investment Holdings Limited (353)		0.500	(41.18)	(41.18)
16/7/2007	Paliburg Holdings Limited (617)		0.375	1.40	(0.30)
13/7/2007	Geely Automobile Holdings Limited (175)		1.250	(14.38)	(5.30)
11/7/2007	Texhong Textile Group Limited (2678)		1.450	3.57	0.00
4/7/2007	China Resources Power Holdings		17.110	(8.30)	(2.50)
	Company Limited (836)
	Highest			53.37	50.42
	Lowest			(76.70)	(75.00)
	Average			(13.90)	(11.82)
	The Company		0.337	2.12	0.00

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LETTER FROM FIRST SHANGHAI

Based on the above table, the premium/(discounts) represented by the issue prices of the Consideration Shares Comparables over/(to) their respective closing prices on the last trading day before the suspension of trading in the shares pending for the release of announcement range from a discount of approximately 76.70% to a premium of approximately 53.37%. Upon comparison, we note that the relevant premium of the Company represented by the Issue Price per Consideration Share over the closing price of HK$0.330 per Share on the Last Trading Day of approximately 2.12% ranks the fourth highest as represented by the Consideration Shares Comparables. Further, the Issue Price is equivalent to the 5-day average closing price per Share up to the Last Trading Day which falls within the relevant range of the Consideration Shares Comparables. It is observable that the premium/ (discount) represented by the issue prices of the Consideration Shares Comparables over/(to) their respective 5-day average closing prices prior to the relevant announcements demonstrate a similar phenomenon to that of the respective closing prices on the last trading day before the suspension of trading in the shares.

Based on the above, we consider that the Issue Price of the Consideration Shares is on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole.

6. Other arrangements

The parties have agreed to the following arrangements after completion of the Agreement:

(i) The Company shall procure the JV Company to proceed to apply to the relevant PRC authorities for approval for the redevelopment of Property I into a commercial/ residential complex (the “Redevelopment”).
(ii) If the relevant PRC authorities approve the Redevelopment and determine that a premium and/or other monies are payable by the JV Company to any PRC authorities therefor (the “Premium”), the parties shall jointly appoint the Valuer (or such other independent valuer as may be agreed by the parties hereto) to make a valuation of the market value of Property I on the basis of the Redevelopment subject to the terms of approval thereof by the relevant PRC authorities as at the date of such approval (the “Valuation”).

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LETTER FROM FIRST SHANGHAI

(iii) If the Valuation is less than the aggregate of RMB360 million (approximately HK$374,472,000) (being the valuation of Property I as at 31 August 2007 referred to in the sub-paragraph headed “Information of the Properties” above) and the Premium, the Vendor shall:
(a) pay 94% of the shortfall in cash to the Purchaser; or
(b) repurchase the Sale Shares and the Loan at the total cash consideration of HK$355.6 million (being equal to the consideration which will have been paid pursuant to the Agreement) plus a sum equal to the interest on HK$120 million at the rate of 4% per annum from the Completion Date to the date of completion of such repurchase (the “Interest”).
(iv) If (a) the application for the Redevelopment is rejected by the relevant PRC authorities; or (b) all necessary approvals for the Redevelopment are not granted by the relevant PRC authorities within five years from the Completion Date, the Vendor shall repurchase the Sale Shares and the Loan at the consideration equal to HK$355.6 million (being equal to the consideration to paid pursuant to the Agreement) plus the Interest.

Given that the above arrangements would compensate or allow the Purchaser to sell back the Sale Shares and the Loan to the Vendor at the original consideration of HK$355.6 million plus the Interest, as the case might be, we consider that the above arrangements are fair, reasonable and in the interests of the Company and the Shareholders as a whole.

7. Financial effects of the Acquisition on the Group

Earnings

Based on our discussion with the management of the Company, we understand that the Company plans to redevelop the Property I into a commercial/residential complex and Property II will continue to be used for rental purpose. Upon completion of the Acquisition, Wellrich will become a wholly owned subsidiary of the Company and the financial results of Wellrich will be consolidated into the Group after completion of the Acquisition. The Directors consider that the Acquisition will further contribute to the earnings base of the Group in the long run, but the quantification of such impact will depend on the future performance of the Wellrich Group after the redevelopment of the Property I. Since part of the aggregate consideration will be satisfied at the Completion Date by the issue and allotment of 699,109,792 Consideration Shares, the number of Shares in issue will increase from 2,699,121,600 Shares to 3,398,231,392 Shares. As a result, the earnings per share will drop from approximately 2.17 HK cents per Share to approximately 1.72 HK cents per Share immediately after completion of the Acquisition, based on the profit attributable to equity holders of the Company for the year ended 31 March 2007.

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LETTER FROM FIRST SHANGHAI

Net asset value

According to the Annual Report 2007, the audited consolidated net asset value of the Group was approximately HK$646.7 million as at 31 March 2007. Since the Company intends to finance the cash portion of the consideration under the Acquisition of approximately HK$120 million by internal resources, upon completion of the Acquisition, the current assets of the Group will be reduced by the payment of the cash consideration which will be offset by the corresponding increase in the assets and liabilities of Wellrich immediately following the completion as a result of the Acquisition because Wellrich will become a wholly owned subsidiary of the Company, and the assets and liabilities of which will be fully consolidated into the Enlarged Group.

According to the unaudited pro forma financial information of the Enlarged Group in Appendix III to the Circular, the unaudited pro forma consolidated net asset value of the Enlarged Group will increase from approximately HK$646.7 million as at 30 June 2007 to HK$937.0 million upon completion of the Acquisition, taking into consideration the assets and liabilities of the Wellrich Group as at 30 June 2007 and other pro forma adjustments. In addition, since the Issue Price is at a considerable premium of approximately 36.99% over the Group’s consolidated net asset value per Share as at 31 March 2007, the net asset value per Share will likely increase upon completion of the Acquisition.

Working capital

Part of the aggregate consideration, being HK$120 million, will be financed by internal resources of the Company and the remaining balance of HK$235.6 million will be satisfied by the issue and allotment of the Consideration Shares. According to the Annual Report 2007, the Group had cash and cash equivalents of approximately HK$438.2 million, current assets of approximately HK$570.8 million and current liabilities of approximately HK$123.1 million as at 31 March 2007. This represents a current ratio of approximately 4.64 times (which is calculated as total current assets divided by total current liabilities of the Group) as at 31 March 2007. The Acquisition would have resulted in a decrease in net current assets by approximately HK$120 million if part of the total consideration would be settled by the Group’s internal cash resources. As a result, the current ratio would be reduced to 3.66, representing a decrease of approximately 21.1%. Furthermore, taking into account the financial resources available to the Enlarged Group, including internally generated funds and the available banking facilities, the Directors are of the opinion that the Enlarged Group will have sufficient working capital to satisfy its present requirement for the next twelve months from the date of the Circular. Based on the unaudited pro forma balance sheet of the Enlarged Group as set out in Appendix III to the Circular, we noted that the working capital of the Enlarged Group will decrease from approximately HK$447.6 million to approximately HK$350.8 million upon completion of the Acquisition, taking into consideration the assets and liabilities of the Wellrich Group as at 30 June 2007 and other pro forma adjustments.

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LETTER FROM FIRST SHANGHAI

Gearing

As at 31 March 2007, the Group had no interest-bearing borrowings and hence a gearing ratio (which is calculated as total bank loans divided by the net assets value of the Group) of zero. Based on the unaudited pro forma financial information of the Enlarged Group following completion of the Acquisition as set out in Appendix III to the Circular, the pro forma gearing ratio would remain unchanged as zero upon completion of the Acquisition.

In light of the foregoing effect of the Acquisition on the earnings, net asset value, working capital as well as gearing position of the Group and the Enlarged Group, we are of the view that the Acquisition would have no significant adverse impact on the Group’s financial position save and except for the reduction in working capital which is inevitable as the Group intends to finance the a considerable part of the aggregate consideration of HK$355.6 million under the Acquisition by its internal cash resources. Therefore, we are of the view that while the Group’s cash resources would be reduced, the Acquisition is an effective utilisation of its cash resources which is aimed at positioning the Group for better growth in the future which, in the long run, is expected to benefit the Company and the Shareholders as a whole.

8. Dilution effect to the public Shareholders

The table below shows the shareholding structure of the Company as at the Latest Practicable Date and the assumed shareholding structure of the Company upon completion of the Acquisition:

World Possession, Madam Ma, Mr. Yeung and Ms. Yeung and their respective associates 3 executive Directors other than those mentioned above Public Shareholders Total	Issued Shares as at the Latest Practicable Date Approximate No. of Shares % 1,489,550,686 55.19 3,048,000 0.11 1,206,522,914 44.70	Issued Shares as at the Latest Practicable Date Approximate No. of Shares % 1,489,550,686 55.19 3,048,000 0.11 1,206,522,914 44.70	Issued Shares upon full completion of the Acquisition Approximate No. of Shares % 2,188,660,478 64.41 3,048,000 0.09 1,206,522,914 35.50	Issued Shares upon full completion of the Acquisition Approximate No. of Shares % 2,188,660,478 64.41 3,048,000 0.09 1,206,522,914 35.50
	2,699,121,600	100.00	3,398,231,392	100.00

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LETTER FROM FIRST SHANGHAI

Part of the aggregate consideration of HK$235.6 million will be satisfied at the Completion Date by the allotment and issue of 699,109,792 Consideration Shares at the issue price of HK$0.337 per Consideration Share. The Consideration Shares represent (i) approximately 25.90% of the existing issued share capital of the Company; and (ii) approximately 20.57% of the issued share capital of the Company as enlarged by the issue and allotment of the Consideration Shares. As at the Latest Practicable Date, the public Shareholders were interested in 1,206,522,914 Shares or approximately 44.70% of the issued share capital of the Company. Assuming there is no change in the issued share capital during the period from the Latest Practicable Date to the Completion Date, such corresponding shareholding will be diluted to approximately 35.50% after completion of the Acquisition. While the dilution effect on earnings per Share and shareholding is inevitable for issuance of new Shares to satisfy part of the aggregate consideration under the Acquisition, we consider that (i) the Acquisition corresponds with the overall business objective of the Group and may enhance its future development; (ii) the net asset value per Share would be enhanced as mentioned in the sub-paragraph headed “Net asset value” above; and (iii) by satisfying considerable part of the aggregate consideration by issue of Consideration Shares to the Vendor, the Group can, to certain extent, lessen its cash outflow and preserve its cash position while at the same time strengthen its equity and shareholder base, we consider that the benefits of the issue of the Consideration Shares might outweigh the dilution effect on the shareholding of the Company. Overall, we consider that such dilution effect to the public Shareholders is acceptable.

RECOMMENDATION

Having taken into account the above principal factors, in particular, (i) the long-term benefits of the Acquisition to the Group; (ii) the basis for determination of the aggregate consideration; (iii) the overall financial effects of the Acquisition to the Group; and (iv) the Acquisition is entered into in the ordinary and usual course business of the Group and that the terms of the Agreement are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned, we are of the view that the Acquisition is in the interests of the Company and the Shareholders as a whole. We therefore recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the ordinary resolution to approve the Acquisition and the transactions contemplated under or in connection with the Agreement at the SGM.

Yours faithfully, For and on behalf of

First Shanghai Capital Limited Helen Zee Eric Lee Managing Director Executive Director

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ACCOUNTANTS’ REPORT OF THE WELLRICH GROUP

APPENDIX I

==> picture [96 x 64] intentionally omitted <==

==> picture [141 x 60] intentionally omitted <==

7 November 2007

The Directors

United Power Investment Limited

Dear Sirs,

We set out below our report on the financial information relating to Wellrich Investments Limited (“Wellrich”) and its subsidiary (hereafter collectively referred to as the “Wellrich Group”), including the consolidated income statements, consolidated statements of changes in equity and consolidated cash flow statements for the three years ended 31 December 2004, 2005 and 2006 and the six months period ended 30 June 2007 (the “Relevant Periods”) and the balance sheets and consolidated balance sheets as at 31 December 2004, 2005, 2006 and 30 June 2007 together with the notes thereto (the “Financial Information”), for inclusion in the circular of the United Power Investment Limited (the “Company”) dated 7 November 2007, issued in connection with the proposed acquisition of the entire issued share capital of, and the benefits of all shareholder’s loans to, Wellrich.

Wellrich was incorporated in the British Virgin Islands with limited liability on 21 June 1993 and has not carried out any business since the date of its incorporation save for its 94% equity investment in 肇慶星湖俱樂部 (“Star-Lake Club Zhaoqing”), a sino-foreign cooperative joint venture established in the People’s Republic of China (“PRC”) on 8 December 1993. The subsidiary has paid up registered capital of US$12,142,400, and is principally engaged in the ownership and management of a hotel property.

For the purpose of this report, the directors of the Wellrich have prepared its consolidated financial statements for the Wellrich Group in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) for the Relevant Periods (the “Underlying Financial Statements”). We have carried out an independent audit on the Underlying Financial Statements in accordance with the Hong Kong Standards on Auditing issued by the HKICPA.

The Financial Information of Wellrich Group has been prepared by the directors of Wellrich based on the Underlying Financial Statements, with no adjustments made thereon, and on the basis set out in Section B below.

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ACCOUNTANTS’ REPORT OF THE WELLRICH GROUP

APPENDIX I

Directors’ responsibility for the Financial Information

The directors of Wellrich are responsible for the preparation and the true and fair presentation of the Financial Information in accordance with HKFRSs issued by the HKICPA. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of 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.

Reporting accountants’ responsibility

Our responsibility is to express an opinion on the Financial Information based on our audit. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the HKICPA. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the Financial Information are free from material misstatement. In addition, we have carried out such additional procedures as we considered necessary in accordance with the Auditing Guideline “Prospectuses and the Reporting Accountant” (Statement 3.340) issued by the HKICPA.

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

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

We have not audited any financial information of companies comprising the Wellrich Group in respect of any period subsequent to 30 June 2007.

Opinion

In our opinion, for the purpose of this report and on the basis of presentation set out in Section B below, the Financial Information gives a true and fair view of Wellrich’s and the Wellrich Group’s state of affairs as at 31 December 2004, 2005 and 2006 and 30 June 2007 and of the Wellrich Group’s results and cash flows for the Relevant Periods.

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ACCOUNTANTS’ REPORT OF THE WELLRICH GROUP

APPENDIX I

For the purpose of this report, we have also reviewed the unaudited financial information of the Wellrich Group including the unaudited consolidated income statement, unaudited consolidated statements of changes in equity and cash flow for the six months period ended 30 June 2006 (the “30 June 2006 Corresponding Information”), together with the notes thereon, for which the directors are responsible, in accordance with Hong Kong Standard on Review Engagements 2400 “Engagements to Review Financial Statements” issued by the HKICPA. A review consists principally of making enquiries of management and applying analytical procedures to the 30 June 2006 Corresponding Information and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. We have not performed an audit, and accordingly, we do not express an audit opinion on the 30 June 2006 Corresponding Information.

On the basis of our review of the 30 June 2006 Corresponding Information which does not constitute an audit, nothing has come to our attention that cause us to believe that the 30 June 2006 Corresponding Information is not prepared, in all material respects, in accordance with HKFRSs.

Without qualifying our opinion, we draw attention to note 2 to the Financial Information concerning its basis of preparation. At 30 June 2007, the Wellrich Group had net current liabilities of HK$231,094,537 and net liabilities of HK$33,774,654. As the Company has conditionally agreed to provide continuing financial support to the Wellrich Group after the Acquisition, the Financial Information has been prepared on a going concern basis, the validity of which is dependent on whether continuing financial support from the Company is forthcoming. The Financial Information does not include any adjustments that may be necessary if such financial support is not forthcoming. We consider that appropriate disclosures have been made in this respect.

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ACCOUNTANTS’ REPORT OF THE WELLRICH GROUP

APPENDIX I

A. FINANCIAL INFORMATION

Consolidated Income Statements

Note Turnover 6 Cost of sales Gross profit Other income 8 Operating expenses Administrative expenses Other expenses Profit from operations 9 Finance costs 11 Profit before income tax expense Income tax expense 12 Profit/(loss) for the year/period Attributable to: Equity holders of Wellrich Minority interests	Year ended 31 December 2004 2005 2006 HK$ HK$ HK$ 65,056,150 65,619,848 71,001,170 (17,514,498) (16,997,916) (18,472,937) 47,541,652 48,621,932 52,528,233 379,108 143,191 119,162 (25,446,018) (27,544,736) (29,016,136) (18,588,829) (18,484,035) (20,291,438) (166,207) (42,381) (527,705) 3,719,706 2,693,971 2,812,116 (531,776) (365,916) (315,859) 3,187,930 2,328,055 2,496,257 (1,239,265) (823,423) (956,538) 1,948,665 1,504,632 1,539,719 1,818,785 1,406,365 1,424,063 129,880 98,267 115,656 1,948,665 1,504,632 1,539,719	Unaudited six months ended 30 June 2006 HK$ 34,098,942 (8,586,809) 25,512,133 45,698 (13,792,521) (9,861,095) (9,478) 1,894,737 (155,431) 1,739,306 (641,170) 1,098,136 1,020,611 77,525 1,098,136	Six months ended 30 June 2007 HK$ 35,561,629 (9,940,103) 25,621,526 90,863 (15,016,505) (10,494,811) (3,090) 197,983 (170,551) 27,432 (73,055) (45,623) (54,523) 8,900 (45,623)

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ACCOUNTANTS’ REPORT OF THE WELLRICH GROUP

APPENDIX I

Consolidated Balance Sheets

Note Assets Non-current assets Intangible assets 15 Property, plant and equipment 16 Deferred tax assets 19 Current assets Inventories 20 Trade and other receivables 21 Cash and cash equivalents Liabilities Current liabilities Trade and other payables 22 Bank borrowings 23 Shareholders’ loans 24 Net current liabilities Net liabilities Capital and reserves attributable to equity holders of Wellrich Share capital 25 Reserves Equity attributable to equity holders of Wellrich Minority Interests Capital deficiency	2004 HK$ 15,182,123 192,198,862 2,573,887 209,954,872 ------------- 4,015,402 8,478,850 14,096,831 26,591,083 ------------- (19,916,310) (4,901,961) (246,643,747) (271,462,018) ------------- (244,870,935) ------------- (34,916,063) 780 (38,498,955) (38,498,175) 3,582,112 (34,916,063)	As at 31 December 2005 2006 HK$ HK$ 15,078,778 14,810,142 193,117,571 184,213,897 1,759,060 786,392 209,955,409 199,810,431 ------------- ------------- 4,201,056 4,560,791 6,503,815 10,870,816 7,260,239 9,872,751 17,965,110 25,304,358 ------------- ------------- (19,698,561) (18,051,385) — — (242,238,634) (239,810,376) (261,937,195) (257,861,761) ------------- ------------- (243,972,085) (232,557,403) ------------- ------------- (34,016,676) (32,746,972) 780 780 (37,697,835) (36,543,787) (37,697,055) (36,543,007) 3,680,379 3,796,035 (34,016,676) (32,746,972)	As at 30 June 2007 HK$ 14,599,668 182,006,640 713,575 197,319,883 ------------- 4,328,080 9,653,428 25,076,003 39,057,511 ------------- (15,908,641) — (254,243,407) (270,152,048) ------------- (231,094,537) ------------- (33,774,654) 780 (37,580,369) (37,579,589) 3,804,935 (33,774,654)

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ACCOUNTANTS’ REPORT OF THE WELLRICH GROUP

APPENDIX I

Balance Sheets

Note Assets Non-current assets Property, plant and equipment 17 Investment in a subsidiary 18 Current assets Amount due from a subsidiary 18 Cash and cash equivalents Liabilities Current liabilities Shareholders’ loans 24 Net current liabilities Net liabilities Capital and reserves Capital 25 Reserves	2004 HK$ 690,000 93,365,116 94,055,116 ----------------- 145,933,703 6,265,708 152,199,411 -------------- 246,643,747 (94,444,336) -------------- (389,220) 780 (390,000) (389,220)	As at 31 December 2005 2006 HK$ HK$ 1,658,311 1,270,419 95,232,419 96,194,362 96,890,730 97,464,781 ----------------- ----------------- 144,587,534 141,425,173 238,001 10,161 144,825,535 141,435,334 -------------- -------------- 242,238,634 239,810,376 (97,413,099) (98,375,042) -------------- -------------- (522,369) (910,261) 780 780 (523,149) (911,041) (522,369) (910,261)	As at 30 June 2007 HK$ 1,076,473 97,175,938 98,252,411 ----------------- 154,553,569 333,220 154,886,789 -------------- 254,243,407 (99,356,618) -------------- (1,104,207) 780 (1,104,987) (1,104,207)

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ACCOUNTANTS’ REPORT OF THE WELLRICH GROUP

APPENDIX I

Consolidated Statements of Changes in Equity

At 1 January 2004 Profit for the year Translation difference At 31 December 2004 and 1 January 2005 Profit for the year Translation difference At 31 December 2005 and 1 January 2006 Profit for the year Translation difference At 31 December 2006 and 1 January 2007 Profit for the period Translation difference At 30 June 2007 At 1 January 2006 Profit for the period (unaudited) Translation difference (unaudited) At 30 June 2006	Share capital HK$ 780 — — 780 — — 780 — — 780 — — 780 780 — — 780	Exchange reserve HK$ (3,790,010) — 2,459,279 (1,330,731) — (605,245) (1,935,976) — (270,015) (2,205,991) — (982,059) (3,188,050) (1,935,976) — (2,645,843) (4,581,819)	Retained deficit HK$ (38,987,009) 1,818,785 — (37,168,224) 1,406,365 — (35,761,859) 1,424,063 — (34,337,796) (54,523) — (34,392,319) (35,761,859) 1,020,611 — (34,741,248)	Sub-total HK$ (42,776,239) 1,818,785 2,459,279 (38,498,175) 1,406,365 (605,245) (37,697,055) 1,424,063 (270,015) (36,543,007) (54,523) (982,059) (37,579,589) (37,697,055) 1,020,611 (2,645,843) (39,322,287)	Minority interests HK$ 3,452,232 129,880 — 3,582,112 98,267 — 3,680,379 115,656 — 3,796,035 8,900 — 3,804,935 3,680,379 77,525 — 3,757,904	Total HK$ (39,324,007) 1,948,665 2,459,279 (34,916,063) 1,504,632 (605,245) (34,016,676) 1,539,719 (270,015) (32,746,972) (45,623) (982,059) (33,774,654) (34,016,676) 1,098,136 (2,645,843) (35,564,383)

— 44 —

ACCOUNTANTS’ REPORT OF THE WELLRICH GROUP

APPENDIX I

Consolidated Cash Flow Statements

Cash flows from operating activities Profit before income tax expense Adjustments for: Interest expense Interest income Depreciation Amortisation Loss on disposal of property, plant and equipment Exchange difference Operating profit before working capital changes (Increase)/decrease in inventories (Increase)/decrease in trade and other receivables Decrease/(increase) in trade and other payables (Decrease)/increase in shareholders’ loans Cash flow from operations Income tax paid Net cash flow from operating activities Investing activities Purchase of property, plant and equipment Purchase of intangible assets Proceeds from disposal of property, plant and equipment Interest received Net cash used in investing activities Financing activities Interest paid Inception of bank loans Repayment of bank loans Net cash from/(used in) 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	Year ended 31 December 2004 2005 2006 HK$ HK$ HK$ 3,187,930 2,328,055 2,496,257 282,082 102,560 — (68,259) (83,874) (115,508) 10,649,000 11,134,715 11,539,204 381,352 396,109 406,539 2,040 6,016 14,450 (6,220,190) (4,153,780) (1,930,026) 8,213,955 9,729,801 12,410,916 (128,332) (185,654) (359,735) (4,028,130) 1,975,035 (4,367,001) 40,340 (217,749) (1,647,176) (854,000) (4,405,113) (2,428,258) 3,243,833 6,896,320 3,608,746 (92,222) — — 3,151,611 6,896,320 3,608,746 --------------- --------------- --------------- (3,300,375) (9,357,094) (6,174,534) (74,120) (9,750) — 281,996 554,579 5,062,792 68,259 83,874 115,508 (3,024,240) (8,728,391) (996,234) --------------- --------------- --------------- (282,082) (102,560) — 4,901,961 — — (4,901,961) — 4,619,879 (5,004,521) — --------------- --------------- --------------- 4,747,250 (6,836,592) 2,612,512 9,349,581 14,096,831 7,260,239 14,096,831 7,260,239 9,872,751	Unaudited six months ended 30 June 2006 HK$ 1,739,306 — (42,593) 5,653,742 201,455 9,478 800,000 8,361,388 274,639 (4,363,838) (88,856) (4,038,205) 145,128 — 145,128 --------------- (1,203,036) — 4,522,146 42,593 3,361,703 --------------- — — — — --------------- 3,506,831 7,260,239 10,767,070	Six months ended 30 June 2007 HK$ 27,432 — (90,863) 6,145,011 211,160 3,090 (1,002,367) 5,293,463 232,711 1,217,388 (2,142,744) 14,433,031 19,033,849 — 19,033,849 --------------- (3,993,114) — 71,654 90,863 (3,830,597) --------------- — — — — --------------- 15,203,252 9,872,751 25,076,003

— 45 —

ACCOUNTANTS’ REPORT OF THE WELLRICH GROUP

APPENDIX I

B. NOTES TO THE FINANCIAL INFORMATION

1. General

Wellrich was incorporated in the British Virgin Islands as a limited liability company on 21 June 1993. Wellrich has not carried out any business since its date of incorporation save for its 94% equity interest in 肇慶星湖俱樂部 (“Star-Lake Club Zhaoqing”), a sino-foreign cooperative joint venture.

This subsidiary was established in the People’s Republic of China (“PRC”) on 8 December 1993 with an operation period up to 7 December 2043. The principal place of business is located at No. 9 Duanzhou Wu Road, Zhaoqing, Guangdong, PRC. The subsidiary is principally engaged in the ownership and management of hotel. Other particulars of this subsidiary are set out on note 18 to the Financial Information.

2. Basis of preparation of Financial Information

The Financial Information have been prepared on a going concern basis notwithstanding that the Wellrich Group had recorded net current liabilities of HK$231,094,537 and net liabilities of HK$33,774,654 as at 30 June 2007 because the Company has conditionally agreed to provide continuing financial support to the Wellrich Group after the Acquisition. On this basis, the directors consider that the Wellrich Group will have sufficient working capital to finance its operations in the foreseeable future. Accordingly, the directors are satisfied that it is appropriate to prepare the Financial Information on a going concern basis. If the going concern basis is not appropriate, adjustments would have to be made to restate the values of the Wellrich Group’s assets to their recoverable amounts, to provide for further liabilities which might arise and to reclassify their noncurrent assets as current assets.

3. Adoption of recently issued accounting standards

Potential impact arising on the new accounting standards not yet effective

The Wellrich Group has not yet applied the following new standards, amendment or interpretations that have been issued but are not yet effective. The directors of Wellrich anticipate that the application of these new HKFRSs will have no material impact on the Financial Information of the Wellrich Group.

HKAS 23 (Revised) Borrowing Cost [4] HKFRS 8 Operating Segments [4] HK(IFRIC) — Interpretation 11 Company and Treasury Share Transactions [1] HK(IFRIC) — Interpretation 12 Service Concession Arrangements [2] HK(IFRIC) — Interpretation 13 Customer Loyalty Programmes [3] HK(IFRIC) — Interpretation 14 HKAS 19 — The Limit on a Demand Benefit Asset, Minimum Funding Requirements and their Interaction [2]

1 Effective for annual periods beginning on or after 1 March 2007 2 Effective for annual periods beginning on or after 1 January 2008 3 Effective for annual periods beginning on or after 1 July 2008
4 Effective for annual periods beginning on or after 1 January 2009

— 46 —

ACCOUNTANTS’ REPORT OF THE WELLRICH GROUP

APPENDIX I

4. Significant accounting policies

The Financial Information has been prepared in accordance with HKFRSs issued by the HKICPA and the disclosure requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. The measurement basis used in the preparation of the Financial Information is historical cost, a summary of significant accounting policies adopted and consistently applied by the Wellrich Group in the preparation of the Financial Information is set out below.

Basis of consolidation and subsidiaries

Where Wellrich has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated Financial Information present the results of Wellrich and its subsidiaries as if they formed a single entity, inter-company balances and transactions and any unrealised profits arising from intra-company transactions are eliminated in full in preparing the consolidated Financial Information. Unrealised losses resulting from intra-company transactions are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment.

Minority interests at the balance sheet date, being the portion of the net assets of subsidiaries attributable to equity interests that are not owned by the Wellrich Group, whether directly or indirectly through subsidiaries, are presented in the consolidated balance sheets and statements of changes in equity within equity, separately from equity attributable to the equity shareholders of Wellrich.

Minority interests in the results of the Wellrich Group are presented on the face of the income statements as an allocation of the total profit or loss for the year between minority interests and the equity holders of Wellrich.

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

In Wellrich’s balance sheet, investment in subsidiaries are stated at cost less impairment loss, if any.

Revenue recognition

Hotel revenue is recognised when hotel rooms are occupied. Food and beverage revenues are recognised when the goods are consumed.

Rental income under operating leases is recognised on a straight-line basis over the term of the relevant lease.

Interest income is accrued on a time basis on the principal outstanding at the applicable interest rate.

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ACCOUNTANTS’ REPORT OF THE WELLRICH GROUP

APPENDIX I

Foreign currency

Transactions entered into by group companies in currencies other than the currency of the primary economic environment in which it operates (the “functional currency”) are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are similarly recognised immediately in the income statement, except for foreign currency borrowings qualifying as a hedge of a net investment in a foreign operation.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in the income statement in the period in which they arise. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in the income statement for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity, in which cases, the exchange differences is also recognised directly in equity.

On consolidation, the results of foreign operation are translated into the presentation currency of the Wellrich Group (i.e. Hong Kong dollars) at the average rates for the year/period, unless exchange rates fluctuate significantly during the period, in which case, the rates approximating to those ruling when the transactions took place are used. All assets and liabilities of overseas operations are translated at the rate ruling at the balance sheet date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised directly in equity, the foreign exchange reserve. Exchange differences recognised in the income statement of group entities’ separate financial information on the translation of long-term monetary items forming part of the Wellrich Group’s net investment in the overseas operation concerned are reclassified to the foreign exchange reserve.

Income taxes

Income taxes for the year comprise current tax and deferred tax.

Current tax is based on the profit or loss from ordinary activities adjusted for items that are nonassessable or disallowable for income tax purposes and is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date.

Deferred tax arises from temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for tax purposes and is accounted for using the balance sheet liability method. Except for recognised assets and liabilities that affect neither accounting nor taxable profits, deferred tax liabilities are recognised for all temporary differences. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax is measured at the tax rates expected to apply in the period when the liability is settled or the asset is realised based on tax rates that have been enacted or substantively enacted at the balance sheet date.

— 48 —

ACCOUNTANTS’ REPORT OF THE WELLRICH GROUP

APPENDIX I

Externally acquired intangible assets

Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-line basis over their estimated useful lives. The amortisation charge is included in administrative expenses. Their estimate useful lives are as follows:

Land use rights 50 years Computer software 5 years

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, if any.

Property, plant and equipment are depreciated at rates sufficient to write off their cost net of expected residual value over their estimated useful lives on a straight-line basis. The depreciation method, useful lives and residual value are reviewed at each balance sheet date. The principal annual rates are as follows:

Hotel property
— Building	2%
— Leasehold improvements	5% — 20%
Machinery	4.5% — 9%
Furniture and fixtures	6% — 18%
Motor vehicles	18%
Other equipment	6% — 18%

The gain or loss arising on disposal of an item of property, plant and equipment is the difference between the net sale proceeds and the carrying amount, and is recognised in the income statement on disposal.

Impairment of non-financial assets

At each balance sheet date, the Wellrich Group reviews the carrying amounts of property, plant and equipment and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss or an impairment loss previously recognised no longer exists or may have decreased:

If the recoverable amount (i.e. the greater of the fair value less costs to sell and value in use) of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.

Inventories

Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Cost is calculated using the first-in first-out method. Net realisable value represents the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

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ACCOUNTANTS’ REPORT OF THE WELLRICH GROUP

APPENDIX I

Financial instruments

(i) Financial assets

The Wellrich Group classified its financial assets as loans and receivables. These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers (trade debtors), but also incorporate other types of contractual monetary asset. At each balance sheet date subsequent to initial recognition, they are carried at amortised cost using the effective interest method, less any identified impairment losses.

An impairment loss is recognised in the income statement when there is objective evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. Impairment losses are reversed in subsequent periods when an increase in the asset’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to a restriction that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

(ii) Financial liabilities

The Wellrich Group classified its financial liabilities as trade and other short-term monetary liabilities, which are recognised at amortised costs.

(iii) Derecognition

The Wellrich Group derecognises a financial asset where the contractual rights to the future cash flows in relation to the investment expire or where the financial asset has been transferred and the transfer meets the criteria for derecognition in accordance with HKAS 39. Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Employee benefits

Defined contribution retirement plans

Contributions to defined contribution retirement plans are recognised as an expense in the income statement when the services are rendered by the employees.

Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Wellrich Group has a legal or constructive obligation arising as a result of a past event, which will probably result in an outflow of economic benefits than can be reasonably estimated.

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

— 50 —

ACCOUNTANTS’ REPORT OF THE WELLRICH GROUP

APPENDIX I

5. Critical judgements and key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet dates, 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.

Useful lives and impairment assessment of property, plant and equipment

Property, plant and equipment are stated on the balance sheet at cost less accumulated depreciation and identified impairment losses. The estimation of their useful lives impacts the level of annual depreciation expense recorded. Property, plant and equipment are evaluated for possible impairment on a specific asset basis or in a group of similar assets, as applicable. This process requires management’s estimate of future cash flows generated by each asset or group of assets. For any instance where this evaluation process indicates impairment, the appropriate asset’s carrying values are written down to the recoverable amount and the amount of the write-down is charged against the results of operations.

6. Revenue

Revenue principally represents the income from hotel operations, provision of food and beverage and rental income from letting of shops in the hotel and property under operating leases and is summarised as follows:

Income from hotel operations Provision of food and beverage Rental income	Year ended 31 December 2004 2005 2006 HK$ HK$ HK$ 19,386,533 20,870,586 22,875,570 35,383,492 32,937,726 35,814,744 10,286,125 11,811,536 12,310,856 65,056,150 65,619,848 71,001,170	Unaudited six months ended 30 June 2006 HK$ 11,288,019 17,701,024 5,109,899 34,098,942	Six months ended 30 June 2007 HK$ 11,025,999 17,878,599 6,657,031
			35,561,629

7. Segment information

No geographical segment information is presented as the entire operations of the Wellrich Group during the Relevant Periods were carried out in PRC.

No business segment information is presented as the principal business activity of the Wellrich Group is the operation of a hotel, which includes provision of food and beverage and letting of shops within the hotel property.

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ACCOUNTANTS’ REPORT OF THE WELLRICH GROUP

APPENDIX I

8. Other income

Gains on disposal of property, plant and equipment Income from other receivables Interest income from bank deposits	Year ended 31 December 2004 2005 2006 HK$ HK$ HK$ 118 28,000 — 310,731 31,317 3,654 68,259 83,874 115,508 379,108 143,191 119,162	Unaudited six months ended 30 June 2006 HK$ — 3,105 42,593 45,698	Six months ended 30 June 2007 HK$ — — 90,863
			90,863

9. Profit from operations

Profit from operations is stated after charging:

				Unaudited
				six months	Six months
				ended	ended
	Year ended 31		December	30 June	30 June
	2004	2005	2006	2006	2007
	HK$	HK$	HK$	HK$	HK$
Depreciation	10,649,000	11,134,715	11,539,204	5,653,742	6,145,011
Amortisation	381,352	396,109	406,539	201,455	211,160
Cost of inventories recognised
as expenses	17,514,498	16,997,916	18,472,937	8,586,809	9,940,103
Staff costs	11,438,059	12,471,450	13,800,147	6,825,189	7,779,830

10. Directors’ and employees’ emoluments

Details of directors’ emoluments for the Relevant Periods are as follows:

Year ended 31 December 2004 2005 2006 HK$ HK$ HK$ Directors — fee — — — — salaries and other benefits — — — — — —	Unaudited six months ended 30 June 2006 HK$ — — —	Six months ended 30 June 2007 HK$ — —
		—

— 52 —

ACCOUNTANTS’ REPORT OF THE WELLRICH GROUP

APPENDIX I

The emoluments paid or payable to the five highest paid individuals during the Relevant Periods are as follows:

Year ended 31 December 2004 2005 2006 HK$ HK$ HK$ Employees — salaries and other benefits 268,741 286,291 302,024 — bonus — — — — — —	Unaudited six months ended 30 June 2006 HK$ 149,664 — 149,664	Six months ended 30 June 2007 HK$ 157,685 —
		157,685

Their emoluments are within the following bands:

Nil to HK$1,000,000 11. Finance costs	2004 HK$ 5	Number of Employees As at 31 December At 30 June 2005 2006 2006 HK$ HK$ HK$ 5 5 5	At 30 June 2007 HK$ 5

Interest on: — secured bank borrowings on short term loans Bank charges	Year ended 31 December 2004 2005 2006 HK$ HK$ HK$ 282,082 102,560 — 249,694 263,356 315,859 531,776 365,916 315,859	Unaudited six months ended 30 June 2006 HK$ — 155,431 155,431	Six months ended 30 June 2007 HK$ — 170,551
			170,551

— 53 —

ACCOUNTANTS’ REPORT OF THE WELLRICH GROUP

APPENDIX I

12. Income tax expense

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

Current tax: — underprovision for prior years Deferred tax: — PRC	Year ended 31 December 2004 2005 2006 HK$ HK$ HK$ 92,222 — — 1,147,043 823,423 956,538 1,239,265 823,423 956,538	Unaudited six months ended 30 June 2006 HK$ — 641,170 641,170	Six months ended 30 June 2007 HK$ — 73,055
			73,055

No provision for PRC Enterprise Income Tax has been made as the Wellrich Group had accumulated tax losses available to offset against taxable profits.

The income tax expense for the Relevant Periods can be reconciled to the profit per the income statement as follows:

Year ended 31 December 2004 2005 2006 HK$ HK$ HK$ Profit before income tax expense 3,187,930 2,328,055 2,496,257 Tax calculated at the applicable tax rate 33% 1,052,017 768,258 823,765 Tax effect of expenses not deductible for tax purposes 95,026 55,165 132,773 Underprovision for prior years 92,222 — — Income tax expense 1,239,265 823,423 956,538	Unaudited six months ended 30 June 2006 HK$ 1,739,306 573,971 67,199 — 641,170	Six months ended 30 June 2007 HK$ 27,432

		9,053 64,002 —
		73,055

13. Dividends

No dividends have been paid or declared during the Relevant Periods.

14. (Loss)/earnings per share

No earnings per share information have been presented as such information is not meaningful for the purpose of this report.

— 54 —

ACCOUNTANTS’ REPORT OF THE WELLRICH GROUP

APPENDIX I

15. Intangible assets — Wellrich Group

Cost At 1 January 2004 Additions Exchange difference At 31 December 2004 Additions Exchange difference At 31 December 2005 Additions Exchange difference At 31 December 2006 Additions Exchange difference At 30 June 2007 Accumulated amortisation At 1 January 2004 Charge for the year Exchange difference At 31 December 2004 Charge for the year Exchange difference At 31 December 2005 Charge for the year Exchange difference At 31 December 2006 Charge for the period Exchange difference At 30 June 2007 Net book value At 30 June 2007 At 31 December 2006 At 31 December 2005 At 31 December 2004	Land use rights HK$ 17,155,324 — 750,504 17,905,828 — 358,117 18,263,945 — 184,484 18,448,429 — — 18,448,429 ----------------- 2,300,414 376,603 115,866 2,792,883 379,884 75,641 3,248,408 389,887 46,629 3,684,924 202,511 (659) 3,886,776 ----------------- 14,561,653 14,763,505 15,015,537 15,112,945	Computer software HK$ — 74,120 — 74,120 9,750 1,481 85,351 — 862 86,213 — — 86,213 ----------------- — 4,749 193 4,942 16,225 943 22,110 16,652 814 39,576 8,649 (27) 48,198 ----------------- 38,015 46,637 63,241 69,178	Total HK$ 17,155,324 74,120 750,504 17,979,948 9,750 359,598 18,349,296 — 185,346 18,534,642 — — 18,534,642 ----------------- 2,300,414 381,352 116,059 2,797,825 396,109 76,584 3,270,518 406,539 47,443 3,724,500 211,160 (686) 3,934,974 ----------------- 14,599,668 14,810,142 15,078,778 15,182,123

The amortisation charges for the Relevant Periods are included in “Administrative expenses” in the income statements.

The above land is held under long-term lease and is located in PRC.

— 55 —

APPENDIX I

ACCOUNTANTS’ REPORT OF THE WELLRICH GROUP

16. Property, plant and equipment — Wellrich Group

Cost At 1 January 2004 Additions during the year Written off during the year Translation difference At 31 December 2004 Additions during the year Written off during the year Translation difference At 31 December 2005 Additions during the year Written off during the year Translation difference At 31 December 2006 Additions during the period Written off during the period Translation difference At 30 June 2007 Accumulated depreciation At 1 January 2004 Charge for the year Written off for the year Translation difference At 31 December 2004 Charge for the year Written off for the year Translation difference At 31 December 2005 Charge for the year Written off for the year Translation difference At 31 December 2006 Charge for the period Written off for the period Translation difference At 30 June 2007 Net book value At 30 June 2007 At 31 December 2006 At 31 December 2005 At 31 December 2004	Hotel property HK$ 137,191,891 — — 6,001,821 143,193,712 — — 2,863,875 146,057,587 — — 1,475,329 147,532,916 — — — 147,532,916 ----------------- 17,690,600 2,835,314 — 888,570 21,414,484 2,860,018 — 577,233 24,851,735 2,935,332 — 355,050 28,142,117 1,524,641 — (4,963) 29,661,795 ----------------- 117,871,121 119,390,799 121,205,852 121,779,228	Machinery HK$ 48,408,321 1,167,225 — 2,117,751 51,693,297 41,552 — 1,033,865 52,768,714 763,452 — 533,018 54,065,184 55,831 — — 54,121,015 ----------------- 11,957,423 2,335,545 — 617,548 14,910,516 2,385,418 — 422,438 17,718,372 2,488,459 — 267,160 20,473,991 1,306,387 — (4,253) 21,776,125 ----------------- 32,344,890 33,591,193 35,050,342 36,782,781	Furniture and fixtures HK$ 6,517,376 — — 285,119 6,802,495 — — 136,050 6,938,545 18,391 (64,848) 70,086 6,962,174 — — — 6,962,174 ----------------- 2,295,393 392,316 — 116,282 2,803,991 395,734 — 76,689 3,276,414 408,252 (34,864) 46,327 3,696,129 210,670 — (686) 3,906,113 ----------------- 3,056,061 3,266,045 3,662,131 3,998,504	Motor vehicles HK$ 4,277,161 278,725 — 139,868 4,695,754 1,621,460 (1,071,722) 72,316 5,317,808 — — 34,124 5,351,932 239,784 (329,857) — 5,261,859 ----------------- 1,851,661 841,912 — 98,703 2,792,276 823,763 (673,534) 61,538 3,004,043 466,260 — 30,281 3,500,584 238,260 (297,840) 823 3,441,827 ----------------- 1,820,032 1,851,348 2,313,765 1,903,478	Other Leasehold equipment improvements HK$ HK$ 16,125,360 36,019,302 477,685 1,376,740 (771,743) — 705,446 1,575,759 16,536,748 38,971,801 317,275 7,376,807 (1,852,234) — 330,734 779,436 15,332,523 47,128,044 262,371 5,317,256 (1,443,998) (4,875,630) 154,874 476,041 14,305,770 48,045,711 789,086 2,908,413 (417,494) — — — 14,677,362 50,954,124 ----------------- ----------------- 7,980,582 15,039,562 1,354,202 2,889,711 (468,673) — 384,939 774,793 9,251,050 18,704,066 1,237,755 3,432,027 (1,584,521) — 166,962 552,814 9,071,246 22,688,907 1,058,179 4,182,722 (1,227,135) — 85,641 377,409 8,987,931 27,249,038 540,778 2,324,275 (376,973) — (533) (7,566) 9,151,203 29,565,747 ----------------- ----------------- 5,526,159 21,388,377 5,317,839 20,796,673 6,261,277 24,439,137 7,285,698 20,267,735	Construction in progress HK$ 173,833 — — 7,605 181,438 — — 3,629 185,067 — (186,936) 1,869 — — — — — ----------------- — — — — — — — — — — — — — — — — — ----------------- — — 185,067 181,438	Total HK$ 248,713,244 3,300,375 (771,743) 10,833,369
							262,075,245 9,357,094 (2,923,956) 5,219,905
							273,728,288 6,361,470 (6,571,412) 2,745,341
							276,263,687 3,993,114 (747,351) —
							279,509,450 ----------------- 56,815,221 10,649,000 (468,673) 2,880,835
							69,876,383 11,134,715 (2,258,055) 1,857,674
							80,610,717 11,539,204 (1,261,999) 1,161,868
							92,049,790 6,145,011 (674,813) (17,178)
							97,502,810 -----------------
							182,006,640

							184,213,897

							193,117,571

							192,198,862

— 56 —

ACCOUNTANTS’ REPORT OF THE WELLRICH GROUP

APPENDIX I

17. Property, plant and equipment — Wellrich

Cost
At 1 January 2004
Additions during the year
Written off during the year
At 1 January 2005
Additions during the year
Written off during the year
At 1 January 2006
Additions during the year
Written off during the year
At 1 January 2007
Additions during the period
Written off during the period
At 30 June 2007
Accumulated depreciation
At 1 January 2004
Charge for the year
Written off for the year
At 1 January 2005
Charge for the year
Written off for the year
At 1 January 2006
Charge for the year
Written off for the year
At 1 January 2007
Charge for the period
Written off for the period
At 30 June 2007
Net book value
At 30 June 2007
At 31 December 2006
At 31 December 2005
At 31 December 2004

Motor
Vehicles
HK$
1,080,000
—
—
1,080,000
1,459,460
(600,000)
1,939,460
—
—
1,939,460
—
—
1,939,460
-----------------
174,000
216,000
—
390,000
161,149
(270,000)
281,149
387,892
—
669,041
193,946
—
862,987
-----------------
1,076,473
1,270,419
1,658,311
690,000

— 57 —

ACCOUNTANTS’ REPORT OF THE WELLRICH GROUP

APPENDIX I

18. Investment in a subsidiary

Unlisted shares, at cost Amount due from a subsidiary	2004 HK$ 93,365,116 145,933,703	*Wellrich* As at 31 December 2005 2006 HK$ HK$ 95,232,419 96,194,362 144,587,534 141,425,173	At 30 June 2007 HK$ 97,175,938

			154,553,569

The amounts due from a subsidiary is unsecured, interest free and repayable on demand.

The following is the details of the subsidiary held during the Relevant Period:

	Place of		Particulars		Percentage	of
	incorporation		of paid-up		equity interest held
Name	and operation	Principal activity	capital	2004	2005	2006	2007
*Held directly*
(“Star-Lake	PRC	Hotel operations	RMB101,425,044	94%	94%	94%	94%
Club
Zhaoqing”)

19. Deferred tax assets — Wellrich Group

The movements of deferred tax assets during the Relevant Periods are as follows:

At beginning of year/period Charged for the year Exchange difference At end of year/period	2004 HK$ 3,609,409 (1,147,043) 111,521 2,573,887	As at 31 December At 30 June 2005 2006 2007 HK$ HK$ HK$ 2,573,887 1,759,060 786,392 (823,423) (956,538 ) (73,055 8,596 (16,130 ) 238 1,759,060 786,392 713,575	As at 31 December At 30 June 2005 2006 2007 HK$ HK$ HK$ 2,573,887 1,759,060 786,392 (823,423) (956,538 ) (73,055 8,596 (16,130 ) 238 1,759,060 786,392 713,575
			713,575

Deferred income tax assets are recognised for tax losses carried forward to the extent that realisation of the related tax benefit through future taxable profits is probable.

20. Inventories — Wellrich Group

		As at 31 December	As at 31 December	At 30 June
	2004	2005	2006	2007
	HK$	HK$	HK$	HK$
Food, beverage and supplies	4,015,402	4,201,056	4,560,791	4,328,080

— 58 —

ACCOUNTANTS’ REPORT OF THE WELLRICH GROUP

APPENDIX I

21. Other financial assets

Wellrich Group

Trade receivables Deposits, prepayments and other receivables Amount due from a related company 加美學校(“Jia Mei Xue Xiao”) Amount due from a director Tsang Suet Fu Wellrich Amount due from subsidiary	2004 HK$ 778,673 7,695,152 5,025 — 8,478,850 2004 HK$ 145,933,703	As at 31 December 2005 2006 HK$ HK$ 626,329 2,180,000 5,872,260 8,683,211 552 4,471 4,674 3,134 6,503,815 10,870,816 As at 31 December 2005 2006 HK$ HK$ 144,587,534 141,425,173	At 30 June 2007 HK$ 1,325,078 6,197,176 2,123,011 8,163
			9,653,428

			At 30 June 2007 HK$ 154,553,569

Trade receivables relate to the provision of hotel services to third parties. The average credit period is between 30 to 90 days. The directors consider that the carrying amounts of trade receivables approximates to their fair values.

The directors consider that the carrying amounts of other receivables and prepaid expense approximate to their fair values at the respective balance sheet dates.

At 31 December 2004, included in other receivables was an amount of HK$4,916,635 that bore interest at 6.903% per annum and repayable within one year. The amount was settled in 2005. The remaining receivables do not bear interest.

The amounts due from a related company and a director are unsecured, non-interest bearing and are repayable on demand. The directors consider that the carrying amounts approximate their fair value at the respective balance sheet dates.

Mr. Tsang Suet Fu is the common director of both companies.

Amount due from a related company:		As at 31 December	As at 31 December	At 30 June
加美學校(“Jia Mei Xue Xiao”)	2004	2005	2006	2007
	HK$	HK$	HK$	HK$
Maximum balance outstanding
during the year/period	5,025	5,025	4,471	2,123,011

— 59 —

ACCOUNTANTS’ REPORT OF THE WELLRICH GROUP

APPENDIX I

Amount due from a director:		As at 31 December	As at 31 December	At 30 June
Tsang Suet Fu	2004	2005	2006	2007
	HK$	HK$	HK$	HK$
Maximum balance outstanding
during the year/period	—	4,674	4,676	8,163

The following is an aged analysis of trade receivables at the respective balance sheet dates:

Trade receivables Up to 30 days 31 — 60 days 61 — 90 days Over 90 days	2004 HK$ 493,563 66,930 57,647 160,533 778,673	As at 31 December 2005 2006 HK$ HK$ 572,043 879,587 8,850 1,133,398 1,188 20,424 44,248 146,591 626,329 2,180,000	At 30 June 2007 HK$ 1,118,819 40,927 49,987 115,345
			1,325,078

Credit Risk

The Wellrich Group’s principal financial assets are bank balances and cash, trade and other receivables and amount due from a related company.

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

The amounts due from a related company and a director are unsecured, non-interest bearing and are repayable on demand. The directors consider that the carrying amount approximates their fair value at the respective balance sheet dates.

22. Other financial liabilities

Wellrich Group Trade payables (up to 30 days) Other payables and accruals Amount due to a director	2004 HK$ 2,336,607 15,807,608 1,772,095 19,916,310	As at 31 December 2005 2006 HK$ HK$ 2,242,722 3,528,898 16,881,866 14,522,487 573,973 — 19,698,561 18,051,385	At 30 June 2007 HK$ 3,544,105 12,364,536 —
			15,908,641

Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs.

The amount due to a director is unsecured, non-interest bearing and repayable on demand. The directors consider that the carrying amount approximates fair value at the respective balance sheet dates.

— 60 —

ACCOUNTANTS’ REPORT OF THE WELLRICH GROUP

APPENDIX I

23. Secured bank borrowings — Wellrich Group

Secured bank borrowings are repayable as follows: Within one year In the second year In the third to fifth years After five years _Less:_Amount due within one year shown under current liabilities Amount due after one year	2004 HK$ 4,901,961 — — — 4,901,961 4,901,961 —	As at 31 December 2005 2006 HK$ HK$ — — — — — — — — — — — — — —	At 30 June 2007 HK$ — — — —
			— —
			—

For the year ended 31 March 2004, the average interest rate paid was 5.7525% per month. At 31 December 2004, the bank borrowings were secured by a part of the hotel building with a carrying amount of HK$108,307,177.

The directors consider that the carrying amounts of the bank borrowings approximate fair value.

24. Shareholders’ loans — Wellrich and Wellrich Group

The amounts are unsecured, non-interest bearing and are repayable on demand. The directors consider that the carrying amounts approximate fair value at the respective balance sheet dates.

25. Share capital

Authorised shares 100 ordinary shares of US$1 each Issued and fully paid 100 ordinary shares of US$1 each	2004 HK$ 780 780	As at 31 December 2005 2006 HK$ HK$ 780 780 780 780	As at 30 June 2007 HK$ 780

			780

— 61 —

ACCOUNTANTS’ REPORT OF THE WELLRICH GROUP

APPENDIX I

26. Operating leases

Operating leases – lessor

The Wellrich Group’s leasehold land and buildings are leased to a number of tenants for varying terms. As at 31 December 2004, 2005, 2006 and 30 June 2007, the total future minimum rentals receivable under non-cancellable operating leases in respect of the Wellrich Group’s leasehold land and buildings are as follows:

							At as
			As at 31 December				30 June
		2004		2005		2006	2007
		HK$		HK$		HK$	HK$
Not later than one year	6,245,217			6,059,961	7,420,052		6,936,955
Later than one year and not later
than five years	1,988,522			7,916,063	8,238,743		4,454,885
	8,233,739		13,976,024		15,658,795		11,391,840

Related party transactions
Significant related party transactions during the year were:
					Unaudited
					six	months	Six months
						ended	ended
	Year ended		31 December			30 June	30 June
	2004	2005		2006		2006	2007
	HK$	HK$		HK$		HK$	HK$
Purchased from ultimate
holding company
Well Harvest Enterprises
Limited	113,401	645,888		576,556		285,704	—

27. Related party transactions

28. Capital management

The Wellrich Group manages its capital to safeguard its ability to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. Net debt is calculated as total borrowings less cash and cash equivalents. Total capital is calculated as issued capital and reserves.

The directors of Wellrich review the capital structure on an annual basis. As a part of this review, the directors consider the cost of capital and other sources of funds other than issuance of shares, including advances from the shareholders of Wellrich. Based on the recommendation of the directors, Wellrich balances its overall capital structure through raising or repayment of borrowings. Wellrich’s overall strategy remains unchanged during the Relevant Periods.

— 62 —

APPENDIX I ACCOUNTANTS’ REPORT OF THE WELLRICH GROUP

C. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of the Company have been prepared in respect of any period subsequent to 30 June 2007.

Yours faithfully,

BDO McCabe Lo Limited

Certified Public Accountants Tong Yuk Tung Chan Practising Certificate number P04654 Hong Kong

— 63 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

1. SUMMARY OF AUDITED FINANCIAL STATEMENTS

Set out below is a summary of the audited consolidated results and assets and liabilities of the Group for each of the three years ended 31 March 2007 as extracted from the respective published audited financial statements. The auditors’ report in respect of the Company’s audited accounts for the there years ended 31 March 2007 did not contain any qualification.

Consolidated Income Statement

Continuing operations
Turnover
Cost of sales
Gross profit
Other revenue
Net operating expenses
Operating (loss)/profit
Increase in fair value of investment
properties
Finance costs
(Loss)/profit before taxation
Taxation
(Loss)/profit for the year from
continuing operations
Discontinued operations
Profit for the year from
discontinued operations
Profit for the year
Attributable to:
Equity holders of the Company
Minority interests
Dividends

For the year ended
2007
2006
2005
HK$
HK$
HK$
(Restated)
202,150,157
211,195,227
143,650,259
(96,669,711)
(100,341,727)
(35,672,933)
105,480,446
110,853,500
107,977,326
7,895,945
4,541,799
597,009
(151,999,844)
(112,539,203)
(88,917,499)
(38,623,453)
2,856,096
19,656,836
—
4,500,000
9,000,000
(176,119)
(29,970)
(28,479)
(38,799,572)
7,326,126
28,628,357
1,055,059
(3,555,356)
(5,386,078)
(37,744,513)
3,770,770
23,242,279
88,525,876
38,608,750
—
50,781,363
42,379,520
23,242,279
57,132,114
45,491,787
23,242,279
(6,350,751)
(3,112,267)
—
50,781,363
42,379,520
23,242,279
Nil
Nil
Nil

— 64 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Earnings/(loss) per share From continuing operations Basic_(HK cents) Diluted(HK cents) From discontinued operations Basic(HK cents) Diluted(HK cents) From continuing and discontinued operations Basic(HK cents) Diluted(HK cents)_	For the year ended 2007 2006 2005 HK$ HK$ HK$ (1.18) 0.39 2.12 N/A 0.39 N/A 3.35 2.05 N/A 3.28 2.04 N/A 2.17 2.44 2.12 2.13 2.43 N/A	For the year ended 2007 2006 2005 HK$ HK$ HK$ (1.18) 0.39 2.12 N/A 0.39 N/A 3.35 2.05 N/A 3.28 2.04 N/A 2.17 2.44 2.12 2.13 2.43 N/A

		N/A

		N/A

		N/A

		2.12

		N/A

— 65 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Consolidated Balance Sheet

Non-current assets Goodwill Property, plant and equipment Investment properties Interests in leasehold land for own use under operating leases Deferred expenditure Land premium Interest in an associate Held-to-maturity investments Deferred tax asset Total non-current assets Current assets Inventories Trade and other receivables Interests in leasehold land for own use under operating leases Deferred expenditure Cash and cash equivalents Total current assets Current liabilities Trade and other payables Amounts due to minority shareholders Secured bank borrowings Provision for taxation Total current liabilities Net current assets Total assets less current liabilities	2007 HK$ — 105,594,731 100,500,000 — 3,988,251 — — — 5,616,256 215,699,238 ----------------- 27,594,127 59,731,426 — 45,267,624 438,160,876 570,754,053 ----------------- 55,717,421 66,875,269 — 518,984 123,111,674 ----------------- 447,642,379 ----------------- 663,341,617 -----------------	As at 31 March 2006 HK$ 19,003,140 314,948,192 100,500,000 72,884,182 — 183,994,620 — — 3,189,521 694,519,655 ----------------- 22,944,562 19,205,832 1,765,225 — 114,781,497 158,697,116 ----------------- 27,071,859 35,480,374 28,122,176 324,708 90,999,117 ----------------- 67,697,999 ----------------- 762,217,654 -----------------	2005 HK$ 18,988,140 100,736,979 93,000,000 — — — — — 4,438,687
			217,163,806 ----------------- 1,729,001 6,471,545 — — 24,470,296
			32,670,842 ----------------- 14,431,322 — — —
			14,431,322 -----------------
			18,239,520 -----------------
			235,403,326 -----------------

— 66 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Non-current liabilities Secured bank borrowings Provision for long service payments Deferred tax liabilities Total non-current liabilities Net assets Capital and reserves Share capital Reserves Total equity attributable to equity holders of the Company Minority interests Total equity	2007 HK$ — 2,262,353 14,427,686 16,690,039 ----------------- 646,651,578 131,506,080 524,437,444 655,943,524 (9,291,946) 646,651,578	As at 31 March 2006 HK$ 112,106,558 2,307,157 41,783,548 156,197,263 ----------------- 606,020,391 131,506,080 465,356,507 596,862,587 9,157,804 606,020,391	2005 HK$ — 2,815,402 10,485,156
			13,300,558 -----------------
			222,102,768

			54,794,200 167,308,568
			222,102,768 —
			222,102,768

— 67 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

2. AUDITED FINANCIAL STATEMENTS

Set out below are the audited financial statements together with the relevant notes to the financial statements as extracted from the annual reports of the Company for the year ended 31 March 2007.

Consolidated Income Statement

For the year ended 31 March 2007

Notes Continuing operations Turnover 4 Cost of sales Gross profit Other revenue 4 Net operating expenses Operating (loss)/profit Increase in fair value of investment properties Finance costs 8 (Loss)/profit before taxation Taxation 9 (Loss)/profit for the year from continuing operations Discontinued operations Profit for the year from discontinued operations 6 Profit for the year 6, 10 Attributable to: Equity holders of the Company Minority interests Dividends 11	2007 HK$ 202,150,157 (96,669,711) 105,480,446 7,895,945 (151,999,844) (38,623,453) — (176,119) (38,799,572) 1,055,059 (37,744,513) 88,525,876 50,781,363 57,132,114 (6,350,751) 50,781,363 Nil	2006 HK$ 211,195,227 (100,341,727) 110,853,500 4,541,799 (112,539,203) 2,856,096 4,500,000 (29,970) 7,326,126 (3,555,356) 3,770,770 38,608,750 42,379,520 45,491,787 (3,112,267) 42,379,520 Nil

— 68 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Notes Earnings/(loss) per share 12 From continuing operations Basic_(HK cents) Diluted(HK cents) From discontinued operations Basic(HK cents) Diluted(HK cents) From continuing and discontinued operations Basic(HK cents) Diluted(HK cents)_	2007 HK$ (1.18) N/A 3.35 3.28 2.17 2.13	2006 HK$ 0.39

		0.39

		2.05

		2.04

		2.44

		2.43

— 69 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Consolidated Balance Sheet

As at 31 March 2007

Notes Non-current assets Goodwill 14 Property, plant and equipment 15 Investment properties 16 Interests in leasehold land for own use under operating leases 17 Deferred expenditure 19 Land premium 18 Interest in an associate 21 Held-to-maturity investments 22 Deferred tax asset 23 Total non-current assets Current assets Inventories 24 Trade and other receivables 25 Interests in leasehold land for own use under operating leases 17 Deferred expenditure 19 Cash and cash equivalents 26 Total current assets Current liabilities Trade and other payables 27 Amounts due to minority shareholders 28 Secured bank borrowings 29 Provision for taxation Total current liabilities Net current assets Total assets less current liabilities	2007 HK$ — 105,594,731 100,500,000 — 3,988,251 — — — 5,616,256 215,699,238 ------------------- 27,594,127 59,731,426 — 45,267,624 438,160,876 570,754,053 ------------------- 55,717,421 66,875,269 — 518,984 123,111,674 ------------------- 447,642,379 ------------------- 663,341,617 -------------------	2006 HK$ 19,003,140 314,948,192 100,500,000 72,884,182 — 183,994,620 — — 3,189,521
		694,519,655 ------------------- 22,944,562 19,205,832 1,765,225 — 114,781,497
		158,697,116 ------------------- 27,071,859 35,480,374 28,122,176 324,708
		90,999,117 -------------------
		67,697,999 -------------------
		762,217,654 -------------------

— 70 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Notes Non-current liabilities Secured bank borrowings 29 Provision for long service payments 33 Deferred tax liabilities 23 Total non-current liabilities Net assets Capital and reserves Share capital 30 Reserves Total equity attributable to equity holders of the Company Minority interests Total equity 32	2007 HK$ — 2,262,353 14,427,686 16,690,039 ------------------- 646,651,578 131,506,080 524,437,444 655,943,524 (9,291,946) 646,651,578	2006 HK$ 112,106,558 2,307,157 41,783,548
		156,197,263 -------------------
		606,020,391

		131,506,080 465,356,507
		596,862,587 9,157,804
		606,020,391

— 71 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Balance Sheet

As at 31 March 2007

Notes Non-current assets Investments in subsidiaries 20 Total non-current assets Current assets Amounts due from subsidiaries 20 Trade and other receivables 25 Cash and cash equivalents 26 Total current assets Current liabilities Trade and other payables 27 Amounts due to subsidiaries 20 Total current liabilities Net current assets Net assets Capital and reserves Share capital 30 Reserves Total equity 32	2007 HK$ 52,084,559 52,084,559 401,549,586 23,928 148,964 401,722,478 ------------------- 1,150,990 7,295,550 8,446,540 ------------------- 393,275,938 ------------------- 445,360,497 131,506,080 313,854,417 445,360,497	2006 HK$ 52,084,060
		52,084,060 406,757,870 23,928 176,596
		406,958,394 ------------------- 516,290 7,295,518
		7,811,808 -------------------
		399,146,586 -------------------
		451,230,646

		131,506,080 319,724,566
		451,230,646

— 72 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Consolidated Statement of Changes in Equity

For the year ended 31 March 2007

Notes Total equity at beginning of year Net income recognised directly in equity: Surplus on revaluation of other properties revaluation reserve, net of deferred tax Profit for the year: — attributable to equity shareholders of the Company — minority interests Profit for the year Total recognised income and expense for the year Movements in equity arising from capital transactions Issue of shares Increase in share premium from issue of shares Employee share option benefits Exchange reserve arising from subsidiary in the PRC Minority interests Total equity Attributable to: Equity holders of the Company 32 Minority interests	2007 HK$ 606,020,391 1,827,911 ------------------- 57,132,114 (6,350,751) 50,781,363 ------------------- 52,609,274 ------------------- — — — ------------------- — ------------------- 120,912 ------------------- (12,098,999) ------------------- 646,651,578 655,943,524 (9,291,946) 646,651,578	2006 HK$ 222,102,768 1,815,536 ------------------- 45,491,787 (3,112,267) 42,379,520 ------------------- 44,195,056 ------------------- 76,711,880 246,806,222 323,518,102 ------------------- 3,934,394 ------------------- — ------------------- 12,270,071 ------------------- 606,020,391 596,862,587 9,157,804 606,020,391

— 73 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Consolidated Cash Flow Statement

For the year ended 31 March 2007

Notes Operating activities Cash generated from operations 36 Interest paid Interest received Tax paid Net cash generated from operating activities Investing activities Disposal of subsidiaries, net of cash disposed of 35 Acquisition of subsidiaries, net of cash acquired 34 Acquisition of equity interest from minority interests Purchases of property, plant and equipment Deferred expenditure paid Net cash generated from/(used in) investing activities Financing activities Repayment of bank loans Advances from minority shareholders Capital contribution by minority shareholders Proceeds from issue of shares Share issue expenses Net cash (used in)/generated from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of year Cash and cash equivalents at the end of year 26	2007 HK$ 23,526,833 (7,735,721) 7,533,232 (1,282) 23,323,062 ------------------- 370,960,802 — — (7,789,647) (50,000,000) 313,171,155 ------------------- (64,509,764) 51,394,895 31 — — (13,114,838) ------------------- 323,379,379 114,781,497 438,160,876	2006 HK$ 29,660,133 (3,384,886) 3,273,315 — 29,548,562 ------------------- — (251,000,802) (29) (7,387,263) — (258,388,094) ------------------- (11,303,468) 6,840,210 95,889 328,765,200 (5,247,098) 319,150,733 ------------------- 90,311,201 24,470,296 114,781,497

— 74 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Notes to the Financial Statements

For the year ended 31 March 2007

1. General

The Company is a public limited company incorporated in Bermuda and its shares are listed on The Stock Exchange of Hong Kong Limited. Its parent and ultimate holding company is World Possession Assets Limited (incorporated in British Virgin Islands). The Company’s registered office and principal place of business are at Clarendon House, Church Street, Hamilton HM 11, Bermuda and Room 2810-11, 28th Floor, Shun Tak Centre, West Tower, 200 Connaught Road Central, Hong Kong respectively.

The Company is engaged in investment holding. The principal activities of the subsidiaries are set out in note 20. During the year, the Group ceased its hotel operations via the disposal of interests in several subsidiaries as set out in note 35.

The financial statements are presented in Hong Kong dollars, which is the functional currency of the Group.

2. Application of Hong Kong financial reporting standards

(a) In the current year, the Group has applied all the new and revised standards, amendments and interpretations (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) that are relevant to its operation and effective for its accounting period beginning on 1 April 2006. The adoption of the new HKFRSs had no material effect on how the results for the current or prior accounting periods have been prepared and presented.
(b) Potential impact arising on the new accounting standards not yet effective

The Group has not yet applied the following new standards, amendment or interpretations that have been issued but are not yet effective. The directors of the Company anticipate that the application of these new HKFRSs will have no material impact on the financial statements of the Group.

HKAS 1 Amendment Capital Disclosures [4] HKFRS 7 Financial Instrument: Disclosures [4] HKFRS 8 Operating Segments [1] HKAS 23 (Revised) Borrowing Costs [1] HK(IFRIC) — Interpretation 8 Scope of HKFRS 2 [7] HK(IFRIC) — Interpretation 9 Reassessment of Embedded Derivatives [6] HK(IFRIC) — Interpretation 10 Interim Financial Reporting and Impairment [5] HK(IFRIC) — Interpretation 11 Group and Treasury Share Transactions [3] HK(IFRIC) — Interpretation 12 Service Concession Arrangements [2]

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 March 2007. 4 Effective for annual periods beginning on or after 1 January 2007. 5 Effective for annual periods beginning on or after 1 November 2006. 6 Effective for annual periods beginning on or after 1 June 2006. 7 Effective for annual periods beginning on or after 1 May 2006.

— 75 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

3. Principal accounting policies

(a) Statement of compliance

The financial statements have been prepared in accordance with all applicable HKFRSs, Hong Kong Accounting Standards (“HKASs”) and Interpretations (“HKAS-INT”) (hereinafter collectively referred to as the “new HKFRSs”) issued by HKICPA. In addition, the financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and by the Hong Kong Companies Ordinance.

(b) Basis of preparation

The financial statements have been prepared under the historical cost basis except for certain properties and financial instruments, which are measured at fair values or revalued amounts as explained in the accounting policies set out below.

The preparation of financial statements in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity or areas where assumptions and estimates are significant to the financial statements are disclosed in note 40.

(c) Basis of consolidation

Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the results of the Company and its subsidiaries as if they formed a single entity. Inter-company transactions and balances between group companies are therefore eliminated in full in preparing the consolidated financial statements.

On acquisition, the assets and liabilities of the relevant subsidiaries are measured at their fair values at the date of acquisition. The interest of minority shareholders is stated at their proportion of the fair values of the assets and liabilities recognised.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective dates of acquisition or up to the effective dates of disposal, as appropriate.

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

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

In the Company’s balance sheet, investments in subsidiaries are stated at cost less impairment loss, if any.

(d)

Associate

Where the Group has the power to participate in (but not control) the financial and operating policy decisions of another entity, it is classified as an associate. Associates are accounted for using the equity method except when the investment is classified as held for sale (in which case it is accounted for in accordance with HKFRS 5 Non-Current Assets Held for Sale and Discontinued Operations.) or when the investment is designated as at fair value through profit or loss upon initial recognition or is classified as held for trading (in which case it is accounted for under HKAS 39 Financial Instruments Recognition and Measurement) to whereby they are initially recognised in the consolidated balance sheet at cost and thereafter, they are accounted under the equity method their earnings values are adjusted for the Group’s share of the post-acquisition change in the Group’s share of the associates’ net assets - except that losses in excess of the Group’s interest in the associate are not recognised unless there is an obligation to make good those losses.

Profits and losses arising on transactions between the Group and its associates are recognised only to the extent of unrelated investors’ interests in the associate. The investor’s share in the associate’s profits and losses resulting from these transactions is eliminated against the carrying value of the associate.

Any premium paid for an associate above the fair value of the Group’s share of the identifiable assets, liabilities and contingent liabilities acquired is capitalised and included in the carrying amount of the associate and subject to impairment in the same way as goodwill arising on a business combination.

(e) Joint ventures

A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity which is subject to joint control and none of the participating parties has unilateral control over the economic activity.

Assets that the Group controls and liabilities that it incurs in relation to jointly controlled operations are recognised in the Group’s balance sheet on an accrual basis and classified according to the nature of the item. The Group’s share of income that it earns from jointly controlled operations together with the expenses that it incurs are included in the Group’s income statement when it is probable that economic benefits associated with the transaction will flow to/from the Group.

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(f) Goodwill

Goodwill represents the excess of the cost of a business combination over the interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired. Cost comprises the fair values of assets given, liabilities assumed and equity instruments issued, plus any direct costs of acquisition.

Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the income statement.

Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is credited in full to the income statement.

For the purpose of impairment testing, goodwill arising from an acquisition is allocated to each of the relevant cash-generating units that are expected to benefit from the synergies of the acquisition. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, and whenever there is an indication that the unit may be impaired.

For goodwill arising on an acquisition in a financial year, the cash-generating unit to which goodwill has been allocated is tested for impairment before the end of that financial year. When the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated to reduce the carrying amount of any goodwill allocated to the unit first, and then to the other assets of the unit pro rata on the basis of the carrying amount to each asset in the unit. Any impairment loss for goodwill is recognised directly in the income statement. An impairment loss for goodwill is not reversed in subsequent periods.

(g) Investment properties

Investment properties are properties held for long-term rental yields or for capital appreciation and not occupied by the Group. Investment properties are carried at fair value, representing open-market value determined annually by independent qualified valuer. Changes in fair value are recognised in the income statement.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use or no future economic benefits are expected from its disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement in the year in which the item is derecognised.

(h) Property, plant and equipment

Leasehold land and buildings, other than hotel property, are stated at valuation less accumulated depreciation as the fair value of the land cannot be measured separately from the fair value of a building situated thereon at the inception of the lease and is accounted for as being held under a finance lease. Fair value is determined by the directors of the Company based on independent valuations which are performed periodically. The valuations are on the basis of open market value. The directors of the Company review the carrying value of the leasehold buildings and adjustment is made where they consider that there has been a

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APPENDIX II

material change. Increases in valuation are credited to the other properties revaluation reserve. Decreases in valuation are first offset against increases on earlier valuations in respect of the same property and are thereafter charged to the income statement. Any subsequent increases are credited to the income statement up to the amount previously charged and thereafter to other property revaluation reserve.

The building component of the owner-occupied leasehold hotel property and other property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.

Property, plant and equipment are depreciated at rates sufficient to write off their cost net of expected residual value over their estimated useful lives on a straight-line basis. The useful lives and residual value are reviewed, and adjusted if appropriate, at each balance sheet date. The useful lives are as follows:

Hotel property
— Building	Over the term of the land lease
— Leasehold improvements, furniture and fixtures	2 — 10 years
Leasehold land	Over the term of the lease
Buildings	40 years
Leasehold improvements	2 — 5 years
Wardrobe	1 year
Furniture, fixtures and equipment	3 — 5 years
Motor vehicles	5 years

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

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

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset.

Upon disposal of leasehold land and buildings, the relevant portion of the revaluation reserve realised in respect of previous valuations is released from the other properties revaluation reserve to retained earnings. Any gain or loss arising on derecognition of assets other than leasehold land and buildings is the difference between the net sale proceeds and the carrying amount of the relevant asset, and is recognised in the income statement.

(i) Interests in leasehold land held for own use under operating leases

Interests in leasehold land held for own use under operating leases represent up-front payments to acquire long-term interests in lessee-occupied properties. These payments are stated at cost and are amortised over the period of the lease on a straight-line basis to the income statement.

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(j) Land premium

Land premium represents the fair value of land acquired less the fair value of land at inception of lease and is amortised over the period of the lease on a straight-line basis to the income statement.

(k) Deferred expenditure

Deferred expenditure represents prepayment to a co-operation venturer for its share of operating profits from the co-operation business to collect licence fees from karaoke operators in the People’s Republic of China (the “PRC”). The deferred expenditure is initially recognised at cost. Subsequent to initial recognition, deferred expenditure is carried at cost less accumulated amortisation and any accumulated impairment losses. Amortisation for deferred expenditure is provided on a straight-line basis over the co-operation period.

(l) Impairment

At each balance sheet date, the Group reviews the carrying amounts of the following assets to determine whether there is any indication that those assets have suffered an impairment loss or an impairment loss previously recognised no longer exists or may have decreased:

property, plant and equipment (other than properties carried at revalued amounts);
interests in leasehold land held for own use under operating lease;
investments in subsidiaries, associates and joint ventures; and
deferred expenditure.

If the recoverable amount (i.e. the greater of the net selling price and value in use) of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount under another HKFRS, in which case the impairment loss is treated as a revaluation decrease under that HKFRS.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount under another HKFRS, in which case the reversal of the impairment loss is treated as a revaluation increase under that other HKFRS.

(m) Inventories

Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value.

Cost, which comprises the purchase prices of inventories and direct expenses, is calculated using the first-in first-out method.

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

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APPENDIX II

(n) Financial instruments

(i) Financial assets

The Group classifies its financial assets into one of the following categories, depending on the purpose for which the asset was acquired. The Group’s accounting policy for each category is as follows:

Financial assets at fair value through profit or loss: include financial assets held for trading and financial assets designated upon initial recognition as at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of sale in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments or financial guarantee contracts. Gains or losses on investments held for trading or these financial assets are recognised in the income statement.

Where a contract contains one or more embedded derivatives, the entire hybrid contract may be designated as a financial asset at fair value through profit or loss, except where the embedded derivative does not significantly modify the cash flows or it is clear that separation of the embedded derivative is prohibited.

Financial assets may be designated upon initial recognition as at fair value through profit or loss if the following criteria are met: (i) the designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the assets or recognising gains or loss on them on a different basis; (ii) the assets are part of a group of financial assets which is managed and its performance evaluated on a fair value basis according to a documented management strategy; or (iii) the financial asset contains an embedded derivative that would need to be separately recorded.

At each balance sheet date subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value, with changes in fair value recognised directly in the income statement in the period in which they arise.

Loans and receivables: These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers (trade debtors), but also incorporate other types of contractual monetary asset. At each balance sheet date subsequent to initial recognition, they are carried at amortised cost using the effective interest method, less any identified impairment losses.

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Held-to-maturity investments: These assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group’s management has the positive intention and ability to hold to maturity. At each balance sheet date subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method, less any identified impairment losses.

Available-for-sale financial assets: Non-derivative financial assets not included in the above categories are classified as available-for-sale and comprise the Group’s strategic investments in entities not qualifying as subsidiaries, associates or jointly controlled entities. They are carried at fair value with changes in fair value recognised directly in equity. Where a decline in the fair value of an available-for-sale financial asset constitutes objective evidence of impairment, the amount of the loss is removed from equity and recognised in the income statement.

Any impairment losses on available-for-sale financial assets are recognised in the income statement on available-for-sale investments, impairment losses are subsequently reversed if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

For available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity instruments, they are measured at cost less any identified impairment losses at each balance sheet date subsequent to initial recognition. An impairment loss is recognised in the income statement when there is objective evidence that the asset is impaired. The amount of the impairment loss is measured as the difference between the carrying amount of the asset and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses will not be reversed in subsequent periods.

(ii) Financial liabilities

The Group classifies its financial liabilities into one of two categories, depending on the purpose for which the liabilities were incurred. The Group’s accounting policy for each category is as follows:

Financial liabilities at fair value through profit or loss: Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.

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Financial liabilities are classified as held for trading if they are acquired for the purpose of sale in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in the income statement.

Where a contract contains one or more embedded derivatives, the entire hybrid contract may be designated as a financial liability at fair value through profit or loss, except where the embedded derivative does not significantly modify the cash flows or it is clear that separation of the embedded derivative is prohibited.

Financial liabilities may be designated upon initial recognition as at fair value through profit or loss if the following criteria are met: (i) the designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the liabilities or recognising gains or losses on them on a different basis; (ii) the liabilities are part of a group of financial liabilities which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management strategy; or (iii) the financial liability contains an embedded derivative that would need to be separately recorded.

Other financial liabilities: Other financial liabilities include the following items:

Trade payables and other short-term monetary liabilities, which are recognised at amortised cost.
Bank borrowings, certain preference shares and the debt element of convertible debt issued by the Group, which are initially recognised at the amount advanced net of any transaction costs directly attributable to the issue of the instrument. Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the balance sheet. “Interest expense” in this context includes initial transaction costs and premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding.

(iii) Derecognition

The Group derecognises a financial asset where the contractual rights to the future cash flows in relation to the investment expire or where the financial asset has been transferred and the transfer meets the criteria for derecognition in accordance with HKAS 39.

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires. The difference between the carrying amount of the financial liability derecognised and the consideration paid is recognised in profit or loss.

(iv) Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

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(o) Income taxes

Income taxes for the year comprise current tax and deferred tax.

Current tax is based on the profit or loss from ordinary activities adjusted for items that are non-assessable or disallowable for income tax purposes and is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date.

Income taxes are recognised in the income statement except when they relate to items directly recognised to equity in which case the taxes are also directly recognised in equity.

(p) Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Group has a legal or constructive obligation arising as a result of a past event, which will probably result in an outflow of economic benefits that can be reasonably estimated. Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, the existence of which will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(q) Revenue recognition

Revenue from restaurant operations is recognised when food and beverages are sold and services are provided.

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease.

Revenue from licence fee collection business is recognised on an accrual basis when it is probable that the economic benefits will flow to the Group.

Revenue from provision of wedding and entertainment services is recognised when contracts are signed.

Hotel room revenue is recognised when hotel rooms are occupied.

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FINANCIAL INFORMATION ON THE GROUP

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Revenue from goods sold is recognised when title of goods sold has passed to the purchaser, which is at the time of delivery.

Interest income is accrued on a time basis on the principal outstanding at the applicable interest rate.

(r) Foreign currencies

Transactions entered into by Group entities in currencies other than the currency of the primary economic environment in which it operates (the “functional currency”) are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are similarly recognised immediately in the income statement, except for foreign currency borrowings qualifying as a hedge of a net investment in a foreign operation.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in the income statement in the period in which they arise, except for exchange differences arising on a monetary item that forms part of the Group’s net investment in a foreign operation, in which case, such exchange differences are recognised in equity in the financial statements. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in the income statement for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity, in which cases, the exchange differences are also recognised directly in equity.

On consolidation, the results of foreign operations are translated into the presentation currency of the Group at the average exchange rates for the year, unless exchange rates fluctuate significantly during the period, in which case, the rate approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations are translated at the rate ruling at the balance sheet date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised directly in equity (the “foreign exchange reserve”). Exchange differences recognised in the income statement of Group entities’ separate financial statements on the translation of long-term monetary items forming part of the Group’s net investment in the overseas operation concerned are reclassified to the foreign exchange reserve if the item is denominated in the functional currency of the Group or the overseas operation concerned.

On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the income statement as part of the profit or loss on disposal.

Goodwill and fair value adjustments on identifiable assets acquired arising on an acquisition of a foreign operation on or after 1 January 2005 are treated as assets and liabilities of that foreign operation and translated at the rate of exchange prevailing at the balance sheet date. Exchange differences arising are recognised in the foreign exchange reserve.

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(s) Employee benefits

(i) Employee leave entitlements

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

Employee entitlements to sick leave and maternity leave are not recognised until the time of leave.

(ii) Profit-sharing and bonus plans

The expected costs of profit sharing and bonus payments are recognised as a liability when the Group has a present legal or constructive obligation as a result of services rendered by employees and a reliable estimate of the obligation can be made.

Liabilities for profit-sharing and bonus plans are expected to be settled within 12 months and are measured at the amounts expected to be paid when they are settled.

(iii) Post-employment benefits

Retirement benefits to employees are provided through several defined contribution plans.

The Group adopts a defined contribution Mandatory Provident Fund retirement benefits scheme (the “MPF Scheme”) under the Mandatory Provident Fund Schemes Ordinance of Hong Kong for all employees of its subsidiaries operating in Hong Kong. Contributions are made based on a percentage of the employees’ basic salaries but subject to a cap in accordance with the statutory requirement and are charged to the income statement as they become payable in accordance with the rules of the MPF Scheme.

The Group has recorded provisions for long service payments for employees who had completed the required number of years of service under Hong Kong’s Employment Ordinance for whom the Group is obligated to pay long service payment on termination of their employment.

The obligations for long service payments are assessed using the projected unit credit method, under which the provision for long service payment is charged to the income statement so as to spread the cost over the service lives of employees. The obligations are determined based on actuarial assumptions that are the Group’s best estimates of the variables that will determine the ultimate cost of providing postemployment benefits. The provisions are calculated as the present values of the estimated future cash outflows for each employee using interest rates of high quality corporate bonds that have terms to maturity approximating the terms of the related liabilities, less the fair value of the Group’s contributions to MPF for that employee. Plan assets are measured at fair values. Actuarial gains and losses are recognised over the average remaining service lives of employees.

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The employees of the Group’s subsidiary that operates in Macau are required to participate in a government-managed retirement benefit scheme. This subsidiary is required to contribute a fixed cost per employee to the government-managed retirement benefit scheme. The contributions are charged to the income statement as they become payable.

(t) Share based payments

Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the income statement over the vesting period with a corresponding increase in the employee share based compensation reserve within equity. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.

Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the income statement over the remaining vesting period.

Where equity instruments are granted to persons other than employees, the income statement is charged with the fair value of goods or services received unless the goods or services qualify for recognition as assets. A corresponding increase in equity is recognised. For each-settled share based payments, a liability is recognised at the fair value of the goods or services received.

(u) Leases

For leases where substantially all of the risks and rewards incidental to ownership are retained by the lessor (an “operating lease”), the total rentals payable under the lease are charged to the income statement on a straight-line basis over the lease term.

(v) Borrowing costs

All borrowing costs are recognised as and included in finance costs in the income statement in the period in which they are incurred.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

(w) Discontinued operations

A discontinued operation is a component of the Group’s business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which represents a separate major line of business.

Classification as a discontinued operation occurs upon disposal. When an operation is classified as discontinued, a single amount is presented on the income statement, which comprises:

the post-tax profit or loss of the discontinued operation;

the post-tax gain or loss recognised on the disposal of the disposal group constituting the discontinued operation; and
the excess of fair value of net assets acquired over cost of acquisition of the disposal group.

(x) Segment reporting

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

In accordance with its internal financial reporting, the Group has determined that business segments be presented as the primary reporting format and geographical segment as the secondary reporting format.

Segment revenue, expenses, results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis to that segment.

Unallocated costs represent corporate income and expenses. Segment assets consist primarily of goodwill, property, plant and equipment, inventories and receivables, and exclude cash and cash equivalents. Segment liabilities comprise operating liabilities and exclude accruals for corporate expenses and certain corporate borrowings. Segment capital expenditure is the total cost incurred during the year to acquire segment assets that are expected to be used for more than one year.

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APPENDIX II

4. Revenue

An analysis of the Group’s revenue for the year, for both continuing and discontinued operations, is as follows:

TURNOVER Continuing operations: Sales of food and beverages from restaurant operations Gross rental income from investment properties Provision of wedding services Revenue from talent management and entertainment operations Revenue from trading of watches and wine Revenue from licence fee collection business Discontinued operations: Revenue from hotel operations — Rooms rental — Food and beverages OTHER REVENUE Continuing operations: Bank interest income Others Discontinued operations: Bank interest income Others TOTAL REVENUE	2007 HK$ 39,253,682 5,403,700 89,732,139 2,530,068 65,164,602 65,966 202,150,157 ------------------- 50,980,911 20,486,695 71,467,606 ------------------- 273,617,763 ------------------- 7,533,232 362,713 7,895,945 ------------------- 1,082,955 1,326,176 2,409,131 ------------------- 10,305,076 ------------------- 283,922,839	2006 HK$ 37,661,004 5,118,419 97,284,421 2,638,713 68,492,670 —
		211,195,227 ------------------- 35,947,466 19,628,697
		55,576,163 -------------------
		266,771,390 ------------------- 2,844,068 1,697,731
		4,541,799 ------------------- 429,247 1,250,139
		1,679,386 -------------------
		6,221,185 -------------------
		272,992,575

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

5. Business and geographical segment

Business segments

For management purposes, the Group is currently organised into six operating divisions — restaurant operations, property investment, wedding services business, entertainment business, retail operations and licence fee collection business. These divisions are the basis on which the Group reports its primary segment information.

Principal activities are as follows:

Restaurant operations	—	sales of food and beverages
Property investment	—	leasing investment properties
Wedding services business	—	provision of wedding services
Entertainment business	—	provision of talent management and entertainment business
Retail operations	—	trading of watches and wine
Others	—	collection of licence fee from karaoke operators in the PRC

The Group was also involved in hotel operations. That operations were discontinued in November 2006 (see note 35) .

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

An analysis of the Group’s business segments is set out as follows:

		2007	2007	2007
		Continuing operations				Sub-total HK$ 202,150,157 (40,367,776) 325,057,940 (111,226,622) 7,543,334 5,693,585 19,003,140 744,125 — —	Discontinued operations Hotel operations HK$ 71,467,606 5,993,836 — — 237,313 24,024,398 — — 864,827 2,102,957
Restaurant operations HK$ 39,253,682 (604,234) 100,517,910 (8,531,414) 108,970 2,729,833 — — — —	Property investment HK$ 5,403,700 4,004,121 100,589,256 (2,053,911) — — 15,000 — — —	Wedding services HK$ 89,732,139 (33,928,408) 11,304,338 (10,226,282) 5,532,836 2,370,072 18,988,140 — — —	Entertainment operations HK$ 2,530,068 (3,611,430) 71,232 (4,759,064) — 80,177 — — — —	Retail operations HK$ 65,164,602 (75,930) 32,693,849 (22,198,239) 1,710,170 503,622 — — — —	Licence fee collection business HK$ 65,966 (6,151,895) 79,881,355 (63,457,712) 191,358 9,881 — 744,125 — —			Total HK$ 273,617,763 (34,373,940 81,504,515 8,562,043 (5,965,032
								49,727,586 1,053,777
								50,781,363 325,057,940 461,395,351
								786,453,291 (111,226,622 (28,575,091
								(139,801,713 7,780,647 9,000
								7,789,647 29,717,983 3,320
								29,721,303 19,003,140 744,125 864,827 2,102,957

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

		200	200	6
		Continuing operations			Sub-total HK$ 211,195,227 10,365,818 254,041,435 (33,331,139) 7,033,680 4,559,078 1,370,121 — —	Discontinued operations Hotel operations HK$ 55,576,163 8,163,628 481,139,357 (171,299,845) 349,783 20,571,983 — 719,165 1,801,856
Restaurant operations HK$ 37,661,004 1,551,809 103,400,990 (8,222,689) 2,412,901 2,543,877 920,493 — —	Property investment HK$ 5,118,419 7,967,180 100,653,345 (1,957,500) — — — — —	Wedding services HK$ 97,284,421 5,882,315 28,330,596 (7,773,462) 3,888,996 1,897,782 — — —	Entertainment operations HK$ 2,638,713 (6,932,323) 1,811,388 (4,870,237) 372,428 54,705 449,628 — —	Retail operations HK$ 68,492,670 1,896,837 19,845,116 (10,507,251) 359,355 62,714 — — —			Total HK$ 266,771,390

							18,529,446 29,760,397 4,621,678 (7,260,624)
							45,650,897 (3,271,377)
							42,379,520

							735,180,792 118,035,979
							853,216,771

							(204,630,984) (42,565,396)
							(247,196,380)

							7,383,463 3,800
							7,387,263

							25,131,061 2,568
							25,133,629

							1,370,121

							719,165

							1,801,856

— 92 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

An analysis of the Group’s geographical segments is set out as follows:

Sales revenue Segment assets Capital expenditure		2007
	Hong Kong Continuing Discontinued operations operations HK$ HK$ 186,618,871 — 723,894,357 — 4,040,393 —	Macau Continuing Discontinued operations operations HK$ HK$ 15,465,320 71,467,606 22,121,015 — 3,320,583 237,313	PRC Continuing Discontinued operations operations Total HK$ HK$ HK$ 65,966 — 273,617,763 40,437,919 — 786,453,291 191,358 — 7,789,647

Sales revenue Segment assets Capital expenditure		2006
	Hong Kong Continuing Discontinued operations operations HK$ HK$ 211,195,227 — 372,077,414 — 7,037,480 —	Macau Continuing Discontinued operations operations HK$ HK$ — 55,576,163 — 481,139,357 — 349,783	PRC Continuing Discontinued operations operations Total HK$ HK$ HK$ — — 266,771,390 — — 853,216,771 — — 7,387,263

— 93 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

6. Profit for the year

Profit for the year has been arrived at after charging/(crediting):

	2007	2006
	HK$	HK$
Depreciation of property, plant and equipment	29,721,303	25,133,629
Cost of inventories recognised as an expense	81,387,364	86,250,312
Direct operating expenses from investment properties
that generated rental income during the year	170,205	625,321
Property tax on rental income	364,385	452,445
Operating lease rentals in respect of land and buildings
— Land and buildings	20,927,622	14,222,897
— Interests in leasehold land for own use under
operating leases	864,827	719,165
Amortisation of land premium	2,102,957	1,801,856
Amortisation of deferred expenditure	744,125	—
Amortisation of pre-paid licence fee	2,500,000	—
Impairment loss of goodwill	19,003,140	1,370,121
Auditors’ remuneration (recognised in net operating expenses)
— Audit services	873,900	730,000
— Non-audit services_(note a)_	310,000	27,000

Note a: Auditors’ remuneration for non-audit services for 2006 excluded an amount of HK$200,000 which was capitalised in cost of acquisition of Waldorf Holding Limited.

— 94 —

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

During the year, the Group disposed of its 95% interests in Waldorf Holding Limited (“Waldorf”), which operated a hotel in Macau. The sales, results, cash flows and net assets of Waldorf were as follows:

Profit for the year from discontinued operations: Sales Cost of sales Gross profit Other revenue Net operating expenses Operating profit Finance costs Profit before taxation Taxation Profit after taxation Gain on disposal of hotel operations Excess of fair value of net assets acquired over cost of acquisition of subsidiaries Cash flows from discontinued operations: Operating cash flows Investing cash flows Financing cash flows Total cash flows	2007 HK$ 71,467,606 (52,895,513) 18,572,093 2,409,131 (6,398,979) 14,582,245 (7,559,602) 7,022,643 (1,282) 7,021,361 81,504,515 — 88,525,876 34,523,135 1,130,417 (63,406,574) (27,753,022)	2006 HK$ 55,576,163 (41,060,210) 14,515,953 1,679,386 (4,276,049) 11,919,290 (3,354,916) 8,564,374 283,979 8,848,353 — 29,760,397 38,608,750 21,770,348 (450,559) (11,077,286) 10,242,503

The carrying amounts of the assets and liabilities of Waldorf at the date of disposal were HK$471,163,759 and HK$223,698,655 respectively.

A profit of HK$81.5 million arose on the disposal of the Group’s interests in Waldorf, being the net sale proceeds of disposal less the carrying amount of the Group’s interests in the subsidiary’s net assets and the shareholder’s loan assigned. No tax charge or credit arose from the disposal.

— 95 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

7. Staff costs

Staff costs (including directors) comprise: Salaries and bonuses Contribution to defined contribution pension plans Share options granted to directors Other post-employment benefits Other short term monetary benefits 8. Finance costs Interest on — long-term bank loans — other borrowings	Continuing 2007 HK$ 51,165,107 2,817,429 — 135,074 1,449,338 55,566,948 Continuing 2007 HK$ 18,300 157,819 176,119	operations 2006 HK$ 49,529,978 2,517,812 3,934,394 162,115 1,253,002 57,397,301 operations 2006 HK$ 29,970 — 29,970	Discontinued operations 2007 2006 HK$ HK$ 13,614,010 9,430,284 462,718 212,241 — — — — 1,551,834 1,197,408 15,628,562 10,839,933 Discontinued operations 2007 2006 HK$ HK$ 7,559,602 3,354,916 — — 7,559,602 3,354,916	Total 2007 2006 HK$ HK$ 64,779,117 58,960,262 3,280,147 2,730,053 — 3,934,394 135,074 162,115 3,001,172 2,450,410 71,195,510 68,237,234 Total 2007 2006 HK$ HK$ 7,577,902 3,384,886 157,819 — 7,735,721 3,384,886	Total 2007 2006 HK$ HK$ 64,779,117 58,960,262 3,280,147 2,730,053 — 3,934,394 135,074 162,115 3,001,172 2,450,410 71,195,510 68,237,234 Total 2007 2006 HK$ HK$ 7,577,902 3,384,886 157,819 — 7,735,721 3,384,886
					3,384,886

9. Taxation

The amount of taxation in the income statement represents:

Hong Kong profits tax Macau tax Deferred tax_(note 23)_	Continuing 2007 HK$ 194,276 — 194,276 (1,249,335) (1,055,059)	operations 2006 HK$ 324,708 — 324,708 3,230,648 3,555,356	Discontinued operations 2007 2006 HK$ HK$ — — 1,282 — 1,282 — — (283,979) 1,282 (283,979)	Total 2007 2006 HK$ HK$ 194,276 324,708 1,282 — 195,558 324,708 (1,249,335) 2,946,669 (1,053,777) 3,271,377	Total 2007 2006 HK$ HK$ 194,276 324,708 1,282 — 195,558 324,708 (1,249,335) 2,946,669 (1,053,777) 3,271,377
					324,708 2,946,669
					3,271,377

Hong Kong profits tax has been provided for certain subsidiaries within the Group and is calculated at 17.5% on the estimated assessable profits for the year.

No provision for Hong Kong profits tax has been made for other subsidiaries within the Group as those subsidiaries have sufficient tax losses brought forward to offset against the estimated profits for the year on an individual basis.

The Macau statutory tax rate is set at 12% on the estimated assessable profits for the year.

No provision for PRC Enterprise Income Tax has been made as the Group has incurred a loss during the year.

— 96 —

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

The tax expense for the year can be reconciled to the profit per the income statement as follows:

Profit before taxation — Continuing operations — Discontinued operations Tax calculated at Hong Kong profits tax rate of 17.5% (2006: 17.5%) Effect of different tax rates of subsidiaries operating in other jurisdictions Deferred tax not recognised Tax effect of non-deductible expenses Tax effect of non-taxable revenue Others Income tax expense	2007 HK$ (38,799,572) 88,527,158 49,727,586 8,702,327 (4,868,994) 2,000,950 5,110,850 (11,939,485) (59,425) (1,053,777)	2006 HK$ 7,326,126 38,324,771 45,650,897 7,988,907 (471,041) 2,220,498 1,480,171 (7,947,874) 716 3,271,377

In addition to the amount charged to the income statement, deferred tax relating to the revaluation of the Group’s certain leasehold land and buildings during the year has been charged directly to equity.

10. Profit for the year

Included in profit for the year is a loss of HK$5,870,149 (2006: loss of HK$5,544,218) that has been dealt with in the financial statements of the Company.

11. Dividends

The board of directors does not recommend the payment of interim or final dividend in respect of the year ended 31 March 2007 (2006: Nil).

— 97 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

12. Earnings/(Loss) per share

The calculation of the basic and diluted earnings/(loss) per share attributable to the ordinary equity holders of the Company is based on the following data:

Earnings/(loss) for the purpose of basic and diluted earnings/(loss) per share Profit/(loss) for the year attributable to equity holders of the Company — from continuing operations — from discontinued operations — from continuing and discontinued operations Number of shares Weighted average number of ordinary shares for the purpose of basic earnings per share Effect of dilutive potential ordinary shares: — Share options Weighted average number of ordinary shares for the purpose of diluted earnings per share	2007 HK$ (31,036,169) 88,168,283 57,132,114 2,630,121,600 58,091,574 2,688,213,174	2006 HK$ 7,345,679 38,146,108
		45,491,787

		1,863,903,527 5,581,227
		1,869,484,754

No diluted loss per share from continuing operations has been presented for the year ended 31 March 2007 as the conversion of the share options was anti-dilutive.

— 98 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

13. Directors and senior management emoluments

(a) Directors’ emoluments

The aggregate amounts of the directors’ emoluments, disclosed pursuant to Section 161 of the Companies Ordinance, are as follows:

2007 Fees HK$ Executive directors Yeung Chi Hang — Ma Shuk Kam — Liu Yu Mo — Chung Siu Wah 96,000 Yeung Kit Yu, Kitty — Au Edmond Wah 96,000 Chik To Pan — Independent non-executive directors Chan Lai Mei 96,000 Lee Wai Loun 96,000 Lee Yuk Sang, Angus 96,000 480,000 2006 Fees HK$ Executive directors Yeung Chi Hang — Ma Shuk Kam — Liu Yu Mo — Chung Siu Wah 88,000 Yeung Kit Yu, Kitty — Au Edmond Wah 88,000 Chik To Pan — Independent non-executive directors Chan Lai Mei 96,000 Lee Wai Loun 96,000 Lee Yuk Sang, Angus 96,000 464,000	Salaries and other benefits HK$ 1,830,000 — 1,700,000 — 426,400 — 660,000 — — — 4,616,400 Salaries and other benefits HK$ 1,550,000 — 1,425,000 — 426,400 — 390,000 — — — 3,791,400	Discretionary bonuses HK$ 720,000 — 330,000 — 32,800 — 30,000 — — — 1,112,800 Discretionary bonuses HK$ 720,000 — 330,000 — 32,800 — 30,000 — — — 1,112,800	Share options HK$ — — — — — — — — — — — Share options HK$ 1,236,524 1,236,524 56,205 56,206 1,236,524 56,206 56,205 — — — 3,934,394	Retirement scheme contributions HK$ 11,863 — 11,863 4,800 11,863 4,800 11,863 — — — 57,052 Retirement scheme contributions HK$ 11,863 — 11,863 4,400 13,160 3,995 11,880 — — — 57,161	Total HK$ 2,561,863 — 2,041,863 100,800 471,063 100,800 701,863 96,000 96,000 96,000
					6,266,252

					Total HK$ 3,518,387 1,236,524 1,823,068 148,606 1,708,884 148,201 488,085 96,000 96,000 96,000
					9,359,755

— 99 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

No directors waived their emoluments in respect of the year ended 31 March 2007 (2006: HK$Nil).

The above emoluments include the value of share options granted to all executive directors under the Company’s share option scheme as estimated at the date of grant. The details of these benefits-in-kind are disclosed in note 31.

(b) Five highest paid individuals

The five individuals whose emoluments, excluding share options, were the highest in the Group for the year include three directors (2006: two directors). The emoluments payable to the remaining two highest paid individuals during the year are as follows:

Basic salaries, housing allowances, other allowances and benefits in kind Retirement scheme contributions	2007 HK$ 1,228,521 24,000 1,252,521	2006 HK$ 2,065,470 36,000
		2,101,470

All the emoluments fell within the band between nil to HK$1,000,000.

(c) Share options

The value of share options granted to the directors under the share option scheme of the Company represents the fair value of these options charged to the income statement in 2006 in accordance with HKFRS 2.

— 100 —

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

14. Goodwill and impairment

Cost: At 1 April 2005 Opening balance adjustment to eliminate accumulated amortisation Additions via acquisition At 31 March 2006 and 31 March 2007 Impairment At 1 April 2005 Eliminated against cost at 1 April 2005 Impairment loss At 31 March 2006 and 1 April 2006 Impairment loss At 31 March 2007 Carrying value At 31 March 2007 At 31 March 2006 Notes:	HK$ 20,075,566 (1,087,426) 1,385,121 20,373,261 1,087,426 (1,087,426) 1,370,121 1,370,121 19,003,140 20,373,261 ------------------- — 19,003,140

(a) With effect from 1 April 2005 the Group no longer amortises goodwill. In accordance with the transitional provisions set out in HKFRS 3, the accumulated amortisation of goodwill as at 1 April 2005 has been eliminated against the cost of goodwill as at that date.
(b) Goodwill includes an amount of HK$19,003,140 that arose from the acquisition of Golden Island Catering Group Company Limited and World Honour Investments Limited which are engaged in the operations of restaurant, wedding services business and property investment respectively. As these subsidiaries incurred significant operating losses since the date of acquisition and it is expected the recoverable amount will be less than the carrying amount of goodwill, full impairment losses on the goodwill have been provided during the year.

— 101 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

(c) For the purpose of impairment testing, goodwill acquired through business combinations are allocated to the Group’s various cash-generating units (“CGU”) as follows:

Wedding services Entertainment operations Restaurant operations Others Total	2007 HK$ 18,988,140 — — 15,000 19,003,140	2006 HK$ 18,988,140 449,627 920,494 15,000
		20,373,261

In accordance with HKAS 36 “Impairment of assets”, the Group completed its annual impairment test for goodwill to the Group’s various CGU by comparing their recoverable amounts to their carrying amounts at the balance sheet date. The recoverable amount of a CGU is determined based on a value-in-use calculation. These calculations use cashflow projections based on financial forecasts covering a five-year period. The key assumptions used in the value-in-use calculation are based on the best estimates of discount rates and nil growth rate.

Impairment was provided as there was evidence of impairment on goodwill from wedding services business and other operations.

— 102 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

15. Property, plant and equipment

Hote	l property in Ma	Total HK$ 105,103,321 250,000 7,387,263 229,756,929
Building HK$ — — — 129,162,972 129,162,972 — — (129,162,972) — — ---------------- — 1,246,808 — 1,246,808 1,467,761 — (2,714,569) — — ---------------- — 127,916,164	Leasehold improvements HK$ — — 56,047 63,220,046 63,276,093 — — (62,835,689) (440,404) — ---------------- — 16,083,634 — 16,083,634 18,768,585 — (34,852,219) — — ---------------- — 47,192,459
		342,497,513 260,000 7,789,647 (228,823,563) (7,239,668)
		114,483,929 ---------------- 4,366,342 25,133,629 (1,950,650) 27,549,321 29,721,303 (1,955,650) (44,250,265) (2,175,511)
		8,889,198 ----------------
		105,594,731

		314,948,192

— 103 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

The analysis of the net book value or valuation of the above assets at 31 March 2007 is as follows:

Hotel property in Macau HK$ At cost — At 2007 professional valuation — — The analysis of the net book value or follows: Hotel property in Macau HK$ At cost 204,627,439 At 2006 professional valuation — 204,627,439	Leasehold Furniture, land and Leasehold fixtures and Motor buildings improvements equipment vehicles Total HK$ HK$ HK$ HK$ HK$ — 3,487,925 2,067,502 3,479,304 9,034,731 96,560,000 — — — 96,560,000 96,560,000 3,487,925 2,067,502 3,479,304 105,594,731 valuation at of the above assets at 31 March 2006 is as Leasehold Furniture, land and Leasehold fixtures and Motor buildings improvements equipment vehicles Total HK$ HK$ HK$ HK$ HK$ — 3,957,769 4,931,441 5,131,543 218,648,192 96,300,000 — — — 96,300,000 96,300,000 3,957,769 4,931,441 5,131,543 314,948,192	Total HK$ 9,034,731 96,560,000
		105,594,731

		314,948,192

The Group’s leasehold land and buildings and hotel property are located in Hong Kong and Macau respectively and are analysed at their carrying values as follows:

Properties located in Hong Kong Leases of over 50 years Leases of between 10 to 50 years Property located in Macau Leases of between 10 to 50 years	2007 HK$ 95,000,000 1,560,000 96,560,000 —	2006 HK$ 95,000,000 1,300,000
		96,300,000

		204,627,439

The leasehold land and buildings were revalued at 31 March 2007 on the open market value basis by Vigers Appraisal and Consulting Limited, an independent firm of professional valuers. A revaluation surplus of HK$1,827,911 was credited to other properties revaluation reserve, after net of applicable deferred income taxes of HK$387,739.

The carrying amount of leasehold land and buildings of the Group would have been HK$19,362,515 (2006: HK$20,085,435) had they been stated at cost less accumulated depreciation.

— 104 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

At 31 March 2006, the Group pledged leasehold land and building with a carrying value of HK$95,000,000, the hotel property in Macau, two investment properties (note 16) , interests in leasehold land for own use under operating leases (note 17) and land premium (note 18) as security for the Group’s banking facilities of HK$252,000,000.

During the 2007 financial year, certain of the pledged assets, comprising the hotel property, one of the investment properties, interests in leasehold land for own use under operating leases and land premium, were released upon the settlement of the bank borrowings on the disposal of Waldorf. The Group’s banking facilities decreased simultaneously from HK$252,000,000 to HK$52,100,000.

At 31 March 2007, the Group pledged leasehold land and building with a carrying value of HK$95,000,000 and one investment property (note 16) as security for the Group’s banking facilities of HK$52,100,000.

At 31 March 2007, the Group did not utilise any banking facilities (2006: HK$140,228,734 (note 29) ).

16. Investment properties

Group At beginning of year, at fair value Additions via acquisition Change in fair value At end of year, at fair value	2007 HK$ 100,500,000 — — 100,500,000	2006 HK$ 93,000,000 3,000,000 4,500,000
		100,500,000

Investment properties were revalued at 31 March 2007 on an open market value basis by Vigers Appraisal and Consulting Limited, an independent firm of professional valuers.
At 31 March 2007, one investment property with a carrying value of HK$61,000,000 (2006: two investment properties with total carrying value of HK$64,500,000) was pledged to secure the banking facilities granted to the Group.
Gross rental income from investment properties amounted to HK$5,403,700 (2006: HK$5,118,419).
The Group’s investment properties are located in Hong Kong and are analysed at their carrying values as follows:

Leases of over 50 years Leases of between 10 to 50 years	2007 HK$ 61,000,000 39,500,000 100,500,000	2006 HK$ 61,000,000 39,500,000
		100,500,000

— 105 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

17. interests in leasehold land held for own use under operating leases Group Cost Acquired via acquisition and as at 31 March 2006 Written off on the disposal of subsidiaries At 31 March 2007 Accumulated amortisation Amortisation for the year and as at 31 March 2006 Amortisation Written off on the disposal of subsidiaries At 31 March 2007 Carrying value At 31 March 2007 At 31 March 2006	Amount HK$ 75,368,572 (75,368,572
	—

	719,165 864,827 (1,583,992
	—

	—

	74,649,407

The above land is held under medium-term lease and is located in Macau.

Analysis of the carrying value of interests in leasehold land held for own use under operating lease is as follows:

Non-current portion Current portion	2007 HK$ — — —	2006 HK$ 72,884,182 1,765,225
		74,649,407

At 31 March 2006, the interests in leasehold land for own use under operating leases were pledged as part of the security for the Group’s banking facilities (note 15 and 29) . In 2007, this pledge was released upon the settlement of the bank borrowings on the disposal of Waldorf.

— 106 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

18. Land premium

Group

Cost: Acquired via acquisition and as at 31 March 2006 Written off on the disposal of subsidiaries At 31 March 2007 Accumulated amortisation Amortisation for the year and as at 31 March 2006 Amortisation Written off on the disposal of subsidiaries At 31 March 2007 Carrying value At 31 March 2007 At 31 March 2006	Land premium HK$ 185,796,476 (185,796,476) — 1,801,856 2,102,957 (3,904,813) — ------------------- — 183,994,620

At 31 March 2006, the land premium was pledged as part of the security for the Group’s banking facilities (notes 15 and 29) . In 2007, this pledge was released upon the settlement of the bank borrowings on the disposal of Waldorf.

— 107 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

19. Deferred Expenditure

Group

*Group*
	Advance on
	licence fee profit
	HK$
Cost
As at 1 April 2005 and 31 March 2006	—
Amount paid during the year	50,000,000
As at 31 March 2007	50,000,000
	-------------------
Accumulated amortisation
As at 1 April 2005 and 31 March 2006	—
Amortisation for the year	744,125
As at 31 March 2007	744,125
	-------------------
Carrying amount
At 31 March 2007	49,255,875
At 31 March 2006	—
Shown in the financial statements as:
Deferred expenditure — current portion (to be amortised within one year)	45,267,624
Deferred expenditure — non-current portion	3,988,251
	49,255,875

During the year, Well Allied Investments Limited (“Well Allied”), an indirect non-wholly owned subsidiary of the Company, entered into a co-operation agreement with a copyright holder for the business of collecting licence fees from karaoke operators in the PRC for their use of licenced audio-visual works on behalf of the copyright holder. As a condition of the agreement, the Group agreed to advance the sum of HK$95 million to the copyright holder as its guaranteed share of the expected profit on the licence fees that will be earned. In accordance with the terms of the agreement, HK$50 million was paid on the completion date of the agreement (“Completion Date”) and the remainder was paid 30 days after the Completion Date.

The agreement is effective for the period commencing on the Completion Date and end on 30 April 2009. Accordingly, the advance on licence fee profit is considered as a deferred expenditure and amortised over the term of the agreement.

Subsequent to the year end, the remaining HK$45 million was paid to the copyright holder in accordance with the agreement.

— 108 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

20. Investments in subsidiaries

Unlisted shares, at cost _Less:_Impairment loss Amounts due from subsidiaries _Less:_Impairment for bad and doubtful debts Amounts due to subsidiaries	Company 2007 2006 HK$ HK$ 53,284,559 53,284,060 (1,200,000) (1,200,000) 52,084,559 52,084,060 686,896,042 692,104,326 (285,346,456) (285,346,456) 401,549,586 406,757,870 (7,295,550) (7,295,518)	Company 2007 2006 HK$ HK$ 53,284,559 53,284,060 (1,200,000) (1,200,000) 52,084,559 52,084,060 686,896,042 692,104,326 (285,346,456) (285,346,456) 401,549,586 406,757,870 (7,295,550) (7,295,518)
		52,084,060

		692,104,326 (285,346,456)
		406,757,870

		(7,295,518)

The amounts due from/(to) subsidiaries are unsecured, interest free and repayable on demand.

The following is a list of the principal subsidiaries as at 31 March 2007:

		Principal activities	Particulars	Percentage of	Percentage of
	Place of	and place of	of issued/share	equity interest held
Name	incorporation	operation	capital	2007	2006
Held directly
Athenian Investments	The British	Investment holding	1 ordinary share	100	100
Limited	Virgin Islands	in Hong Kong	of US$1
	(the “BVI”)
Golden Island Bird’s	Hong Kong	Investment holding	100 ordinary shares	100	100
Nest Chiu Chau		in Hong Kong	of HK$100 each
Restaurant (Star			and 240,000
House) Limited			deferred shares
			of HK$100 each
Golden Island Catering	Hong Kong	Restaurant operations	2 ordinary shares	100	100
Group Company		and provision of	of HK$1 each
Limited		wedding services
		in Hong Kong
Golden Island	Hong Kong	Provision of	10,000 ordinary	100	100
(Management) Limited		management	shares of
		services to group	HK$1 each
		companies in
		Hong Kong

— 109 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

		Principal activities	Particulars	Percentage of	Percentage of
	Place of	and place of	of issued/share	equity interest held
Name	incorporation	operation	capital	2007	2006
Worldaim Enterprises	BVI	Investment holding	1 ordinary share	100	100
Limited		in Hong Kong	of US$1
Well Prime International	BVI	Investment holding	1 ordinary share	100	100
Limited		in Hong Kong	of US$1
Winkler Profits Limited	BVI	Investment holding	1 ordinary share	100	100
		in Hong Kong	of US$1
Widelead Group Limited	BVI	Investment holding	1 ordinary share	100	100
		in Hong Kong	of US$1
Win Big Profits Limited	BVI	Investment holding	1 ordinary share	100	100
		in Hong Kong	of US$1
Welly Champ	BVI	Investment holding	100 ordinary share	60	60
International Limited		in Hong Kong	of US$1 each
Held indirectly
Golden Island Bird’s	Hong Kong	Property holding	12,000 ordinary	100	100
Nest Chiu Chau		in Hong Kong	shares of
Restaurant (Causeway			HK$100 each
Bay) Limited
Reli-a-bo Entertainment	Hong Kong	Talent management	1,000 ordinary shares	60	60
Limited			of HK$1 each
Wellprecise Limited	Hong Kong	Restaurant operation	100 ordinary shares	80	80
		in Hong Kong	of HK$1 each
Witty Ventures Limited	Hong Kong	Retail of watches	100 ordinary shares	51	51
			of HK$1 each
World Honour	Hong Kong	Property holding	100 ordinary share	100	100
Investments Limited		in Hong Kong	of HK$1 each
Cite Du Louvre Limited	Macau	Provision of	Quota capital	100	51
		wedding services	of MOP100,000
Le Caveau Limited	Macau	Retail of wines	Quota capital	51	51
		and beverage	of MOP100,000
HMS Watches	Macau	Retail of watches	Quota capital	51	51
Company Limited			of MOP100,000

— 110 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

		Principal activities	Particulars	Percentage of	Percentage of
	Place of	and place of	of issued/share	equity interest held
Name	incorporation	operation	capital	2007	2006
Well Allied Investments	BVI	License fee collection	100 ordinary share	30.6	30.6
Limited		business in PRC	of HK$1 each
中音傳播（深圳）	PRC	License fee collection	Registered capital of	30.6	—
有限公司		operations in PRC	HK$10,000,000

The above list includes 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.

None of the subsidiaries had any debt securities outstanding at the end of the year or at any time during the year.

21. Interest in an associate

The principal associates are dormant and financial results of the principal associates are immaterial to the Group. Accordingly, no disclosure was made.

22. Held-to-maturity investments

Unlisted investment, at cost _Less:_Impairment loss	Group 2007 2006 HK$ HK$ 78,000,000 78,000,000 (78,000,000) (78,000,000) — —	Group 2007 2006 HK$ HK$ 78,000,000 78,000,000 (78,000,000) (78,000,000) — —
		—

The investment was a convertible note (the “Note”) of Opal Technologies Inc. (“Opal”) for a principal amount of US$10 million. Opal was engaged in the manufacturing, trading and distribution of organic fertilisers and its shares were traded on the NASDAQ Bulletin Board in the United States of America. The Note was unsecured, interest bearing at 4% per annum payable quarterly in arrears.

The Note was convertible, in whole or in part, into fully paid shares of common stock of Opal (par value US$0.001) at US$0.20 per share (subject to adjustment) after 10 October 2000. The Group did not exercise the right to convert the Note into shares of Opal. The Note matured on 9 April 2003.

Trading of shares of Opal on NASDAQ Bulletin Board has been suspended since 23 May 2001 due to its failure to file audited financial statements for the year ended 31 December 2000 and subsequent financial years with the Securities and Exchange Commission of the United States of America. The directors were of the opinion that the recoverability of the Note was doubtful and a full provision on the Note was made in 2001.

Legal action was taken by the Group against Opal in 2002. The court adjudged that Opal had to pay the Group, inter alia, a sum of US$10,300,000 representing the principal and interest accrued on the Note up to 7 January 2002 (the “Judgement Debts”).

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

On 19 January 2004, the Group entered into a deed of settlement (the “Settlement Deed”) with Opal. Under the Settlement Deed, the Group agreed to accept Opal’s payment of US$2,500,000 as full settlement of the Judgement Debts. The first instalment of the settlement of US$1,420,000 (HK$11,051,860) was received on 19 January 2004 in accordance with the terms of the Settlement Deed.

The second instalment of US$1,080,000 was scheduled to be received on 19 October 2004. However, Opal has requested a further extension and thus, the second instalment of the settlement is still outstanding. As the financial position of Opal was unknown, it would be difficult and costly to take legal action to enforce the payment immediately, and the Company agreed to grant the extension as requested by Opal. There is no fixed timetable for the repayment of the second instalment of the settlement.

23. Deferred taxation

Group

The movements on the net deferred tax liabilities during the year are as follows:

At 1 April Tax arising from acquisition of subsidiaries Tax eliminated on disposal of subsidiaries Tax (credited)/charged to income statement_(note 9) Tax charged to equity(note 32)_ At 31 March	Group 2007 2006 HK$ HK$ 38,594,027 6,046,469 — 29,215,775 (28,921,001) — (1,249,335) 2,946,669 387,739 385,114 8,811,430 38,594,027	Group 2007 2006 HK$ HK$ 38,594,027 6,046,469 — 29,215,775 (28,921,001) — (1,249,335) 2,946,669 387,739 385,114 8,811,430 38,594,027
		38,594,027

Deferred income tax assets are recognised for tax losses carried forward to the extent that realisation of the related tax benefit through future taxable profits is probable. At 31 March 2007, the Group and the Company had estimated unutilised tax losses of HK$118,200,000 (2006: HK$129,300,000) and HK$6,100,000 (2006: HK$4,100,000) respectively. A deferred tax has been recognised in respect of HK$89,700,000 (2006: HK$80,900,000) of such losses. No deferred tax assets has been recognised in respect of the remaining tax losses due to unpredictability of future profit streams.

The unrecognised deferred tax mainly represented the deferred tax asset in respect of the unutilised tax losses.

— 112 —

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

The movement in deferred tax assets and liabilities (prior to offsetting of balances within the same taxation jurisdiction) during the year is as follows:

Deferred tax assets At the beginning of the year (Charged)/credited to income statement At the end of the year Deferred tax liabilities At the beginning of the year Acquisition of subsidiaries Disposal of subsidiaries Charged/(credited) to income statement Charged to equity At the end of the year	Accelerated accounting depreciation 2007 2006 HK$ HK$ 167,309 37,244 (202,874) 130,065 (35,565) 167,309 Property revaluation 2007 2006 HK$ HK$ 14,528,929 14,428,464 — — — — — (284,649) 387,739 385,114 14,916,668 14,528,929	Tax losses Total 2007 2006 2007 2006 HK$ HK$ HK$ HK$ 14,152,000 16,928,213 14,319,309 16,965,457 1,536,938 (2,776,213) 1,334,064 (2,646,148) 15,688,938 14,152,000 15,653,373 14,319,309 Depreciation allowances Total 2007 2006 2007 2006 HK$ HK$ HK$ HK$ 38,384,407 8,583,462 52,913,336 23,011,926 — 29,215,775 — 29,215,775 (28,921,001) — (28,921,001) — 84,729 585,170 84,729 300,521 — — 387,739 385,114 9,548,135 38,384,407 24,464,803 52,913,336	Tax losses Total 2007 2006 2007 2006 HK$ HK$ HK$ HK$ 14,152,000 16,928,213 14,319,309 16,965,457 1,536,938 (2,776,213) 1,334,064 (2,646,148) 15,688,938 14,152,000 15,653,373 14,319,309 Depreciation allowances Total 2007 2006 2007 2006 HK$ HK$ HK$ HK$ 38,384,407 8,583,462 52,913,336 23,011,926 — 29,215,775 — 29,215,775 (28,921,001) — (28,921,001) — 84,729 585,170 84,729 300,521 — — 387,739 385,114 9,548,135 38,384,407 24,464,803 52,913,336
			52,913,336

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. The following amounts, determined after appropriate offsetting, are shown in the Group’s balance sheet:

Deferred tax assets Deferred tax liabilities	Group 2007 2006 HK$ HK$ (5,616,256) (3,189,521) 14,427,686 41,783,548 8,811,430 38,594,027	Group 2007 2006 HK$ HK$ (5,616,256) (3,189,521) 14,427,686 41,783,548 8,811,430 38,594,027
		38,594,027

24. Inventories Food, beverages and wine Watches	Group 2007 2006 HK$ HK$ 4,023,988 3,884,492 23,570,139 19,060,070 27,594,127 22,944,562	Group 2007 2006 HK$ HK$ 4,023,988 3,884,492 23,570,139 19,060,070 27,594,127 22,944,562
		22,944,562

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APPENDIX II

25. Trade and other receivables

Amount due from related company Trade receivables Deposits, prepayments and other receivables	Group 2007 2006 HK$ HK$ — 1,739,197 2,136,332 11,179,321 57,595,094 6,287,314 59,731,426 19,205,832	Company 2007 2006 HK$ HK$ — — — — 23,928 23,928 23,928 23,928

The Group’s general credit terms granted to its customers range from 30 to 60 days.

Amount due from related company of the Group disclosed pursuant to Section 161B of the Companies Ordinance are as follows:

Name of borrower

Waldo Entertainment Limited

Director who is related

Yeung Chi Hang

	Balance of the
	outstanding amount
	HK$
At 31 March 2007	—
At 1 April 2006	1,739,197
Maximum balance outstanding during the year	1,739,197

The amount due from related company is unsecured, interest free and has a credit term of 30 days. The Company and the related company have common director.

The directors consider that the carrying amount of trade and other receivables approximate their fair values.

— 114 —

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APPENDIX II

At the balance sheet date, the ageing analysis of the trade receivables was as follows:

Within 30 days 31 to 60 days Over 60 days	Group 2007 2006 HK$ HK$ 1,765,363 10,317,015 106,563 337,729 264,406 524,577 2,136,332 11,179,321	Group 2007 2006 HK$ HK$ 1,765,363 10,317,015 106,563 337,729 264,406 524,577 2,136,332 11,179,321
		11,179,321

Included in trade and other receivables in the consolidated balance sheet are the following significant amounts denominated in a currency other than the functional currency of the Group:

	2007	2006
	MOP	MOP
Macau Pataca	5,089,189	11,892,421
	RMB	RMB
Renminbi	30,001,231	—

26. Cash and cash equivalents

Cash at banks and in hand Short-term bank deposits	Group 2007 2006 HK$ HK$ 398,089,757 30,475,537 40,071,119 84,305,960 438,160,876 114,781,497	Company 2007 2006 HK$ HK$ 148,964 176,596 — — 148,964 176,596	Company 2007 2006 HK$ HK$ 148,964 176,596 — — 148,964 176,596
			176,596

The effective interest rate of short-term bank deposits is 3.5% (2006: 3.5%). The deposits have a maturity of 7 days and are eligible for immediate cancellation without receiving any interest for the last deposit period.

Included in cash and cash equivalents in the consolidated balance sheet are the following significant amounts denominated in a currency other than the functional currency of the Group:

	2007	2006
	MOP	MOP
Macau Pataca	2,322,162	40,273,705
	RMB	RMB
Renminbi	6,782,896	—

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

27. Trade and other payables

Trade payables Other payables and accruals Deposits received	Group 2007 2006 HK$ HK$ 5,033,601 7,121,305 21,095,162 17,697,168 29,588,658 2,253,386 55,717,421 27,071,859	Company 2007 2006 HK$ HK$ — — 1,150,990 516,290 — — 1,150,990 516,290	Company 2007 2006 HK$ HK$ — — 1,150,990 516,290 — — 1,150,990 516,290
			516,290

At the balance sheet date, the ageing analysis of the trade creditors was as follows:

Within 30 days 31 to 60 days 61 to 90 days Over 90 days	2007 HK$ 3,924,636 600,205 88 508,672 5,033,601	2006 HK$ 5,939,181 738,134 14,420 429,570
		7,121,305

Trade and other payables are expected to be settled within one year. The fair values of trade and other payables approximate their respective carrying amounts at the balance sheet date.

Included in trade and other payables in the consolidated balance sheet are the following amounts denominated in a currency other than the functional currency of the Group:

	2007	2006
	MOP	MOP
Macau Pataca	4,561,811	11,403,244
	RMB	RMB
Renminbi	32,711,723	—

28. Amounts due to minority shareholders

The amounts due to minority shareholders are unsecured and repayable on demand.

An amount of HK$13,948,802 bears interest at prime rate quoted by Chiyu Banking Corporation.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

29. Secured bank borrowings

Group

Secured bank borrowings are repayable as follows:

Within one year After one year but within two years After two years but within five years Amount due within one year included in current liabilities Amount due after one year	2007 HK$ — — — — — —	2006 HK$ 28,122,176 29,784,959 82,321,599 140,228,734 (28,122,176) 112,106,558

At 31 March 2006, the bank borrowings were secured by:

(i) the hotel property (note 15) in Macau, the interests in leasehold land for own use under operating leases (note 17) and land premium (note 18) with an aggregate carrying value of HK$463,271,466;
(ii) corporate guarantee by the Company in the amount of HK$230,000,000; and
(iii) one of the investment properties in Hong Kong with a carrying value of HK$3,500,000.

The directors consider that the carrying values of the bank borrowings as at 31 March 2006 approximate their fair values.

During the 2007 financial year, the bank borrowings were settled upon the disposal of Waldorf and the above securities were released.

Interest was charged on the bank borrowings at prime rate less 2% per annum during the period up to the settlement date (2006: at a range of prime rates less 1.5% to 2% per annum).

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APPENDIX II

30. Share capital

Authorised: Ordinary shares of HK$0.05 each At 1 April Increase in authorised ordinary shares At 31 March Issued and fully paid: At 1 April New shares issued — placing New shares issued At 31 March	2007 Number of shares 3,800,000,000 — 3,800,000,000 2,630,121,600 — — 2,630,121,600	2007 HK$ 190,000,000 — 190,000,000 131,506,080 — — 131,506,080	2006 Number of shares 2,000,000,000 1,800,000,000 3,800,000,000 1,095,884,000 219,176,800 1,315,060,800 2,630,121,600	2006 HK$ 100,000,000 90,000,000
				190,000,000

				54,794,200 10,958,840 65,753,040
				131,506,080

By a special resolution dated 3 October 2005, the authorised share capital of the Company was increased from HK$100 million divided into 2,000,000,000 ordinary shares of HK$0.05 each to HK$190 million by the creation of a further 1,800,000,000 shares of HK$0.05 each ranking pari passu in all respects with the existing shares of the Company.

On 25 May 2005, the Company issued 219,176,800 shares to its major shareholder pursuant to a top-up placing agreement entered into on 11 May 2005 at a placing price of HK$0.6 per share.

On 24 October 2005, the Company issued 1,315,060,800 shares at HK$0.15 per share pursuant to an open offer to its shareholders. The shares were issued to fund the acquisition of Waldorf and its subsidiaries, a group of companies principally engaged in the ownership and operation of a hotel in Macau.

31. Share options

On 30 August 2002, the Company adopted a share option scheme (the “Scheme”) for the purpose of attracting and retaining quality personnel and other persons who may contribute to the business and operation of the Group. Options may be granted without any initial payment to persons including directors, employees or consultants of the Group. Presently the maximum number of shares issuable under the Scheme is 109,588,400 shares (being 10% of the issued share capital of the Company at 30 August 2002). The maximum number of shares in respect of which options may be granted to any one person in any 12-month period is 1% of the issued share capital of the Company on the last date of such 12-month period unless with shareholders’ approval. The option period shall not be more than 10 years from the date of grant of an option, and may include a minimum period an option must be held before it can be exercised. The exercise price is the highest of (i) the nominal value of one share of the Company; (ii) the closing price per share as stated in the daily quotation sheets of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) on the date of the grant of the option; and (iii) the average closing price per share as stated in the Stock Exchange’s daily quotation sheets for the 5 business days immediately preceding the date of the grant of the option. The Scheme will remain in force until 29 August 2012.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

On 13 December 2005, options to subscribed for a total of 70,000,000 shares of the Company were granted to the executive directors of the Company at the exercise price of HK$0.2254 per share. The options may be exercised from the date of grant to 30 August 2012.

No option was exercised during the year and thus the total number of shares under outstanding options as at 31 March 2007 was 70,000,000 (2006: 70,000,000).

The following information is relevant in the determination of the fair value of the outstanding options.

32.

Option pricing model used Weighted average share price at grant date Exercise price Date of expiry Expected volatility Expected dividend growth rate Risk-free interest rate Option expense Capital and reserves	2007 Binomial lattice HK$0.215 HK$0.2254 30 August 2012 80% 0% 4.354% 2007 2006 HK$ HK$ — 3,934,394	2007 Binomial lattice HK$0.215 HK$0.2254 30 August 2012 80% 0% 4.354% 2007 2006 HK$ HK$ — 3,934,394

(a) Group

2006 At 1 April 2005 Issue of shares at premium Share issue expenses Acquisition of subsidiaries Capital contribution from minority interests Surplus on revaluation Revaluation — tax effect Employee share option benefits Profit for the year At 31 March 2006	Share capital HK$ 54,794,200 76,711,880 — — — — — — —	Share premium HK$ 293,365,856 252,053,320 (5,247,098) — — — — — —	Contributed surplus HK$ 28,784,000 — — — — — — — —	Employee share-based compen- sation reserve HK$ — — — — — — — 3,934,394 —	Other properties revaluation reserve HK$ 70,875,218 — — — — 2,200,650 (385,114) — —	Foreign exchange reserve HK$ — — — — — — — — —	Accu- mulated losses HK$ (225,716,506) — — — — — — — 45,491,787	Equity attributable to equity holders of the Company HK$ 222,102,768 328,765,200 (5,247,098) — — 2,200,650 (385,114) 3,934,394 45,491,787	Minority interests HK$ — — — 12,174,182 95,889 — — — (3,112,267)	Total equity HK$ 222,102,768 328,765,200 (5,247,098) 12,174,182 95,889 2,200,650 (385,114) 3,934,394 42,379,520
	131,506,080	540,172,078	28,784,000	3,934,394	72,690,754	—	(180,224,719)	596,862,587	9,157,804	606,020,391

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APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

2007 At 1 April 2006 Capital contribution from minority interests Translation reserve Disposal of subsidiaries Surplus on revaluation Revaluation — tax effect Profit for the year At 31 March 2007	Share capital HK$ 131,506,080 — — — — — —	Share premium HK$ 540,172,078 — — — — — —	Contributed surplus HK$ 28,784,000 — — — — — —	Employee share-based compen- sation reserve HK$ 3,934,394 — — — — — —	Other properties revaluation reserve HK$ 72,690,754 — — — 2,215,650 (387,739) —	Foreign exchange reserve HK$ — — 120,912 — — — —	Accu- mulated losses HK$ (180,224,719) — — — — — 57,132,114	Equity attributable to equity holders of the Company HK$ 596,862,587 — 120,912 — 2,215,650 (387,739) 57,132,114	Minority interests HK$ 9,157,804 31 274,225 (12,373,255) — — (6,350,751)	Total equity HK$ 606,020,391 31 395,137 (12,373,255) 2,215,650 (387,739) 50,781,363
	131,506,080	540,172,078	28,784,000	3,934,394	74,518,665	120,912	(123,092,605)	655,943,524	(9,291,946)	646,651,578

(b) Company

At 1 April 2005 Issue of shares at premium Share issue expenses Employee share option benefits Loss for the year At 31 March 2006 Loss for the year At 31 March 2007	Share capital HK$ 54,794,200 76,711,880 — — — 131,506,080 — 131,506,080	Share premium HK$ 293,365,856 252,053,320 (5,247,098) — —	Contributed surplus HK$ 28,784,000 — — — — 28,784,000 — 28,784,000	Employee share-based compensation reserves HK$ — — — 3,934,394 —	Accumulated losses HK$ (247,621,688) — — — (5,544,218) (253,165,906) (5,870,149) (259,036,055)	Total HK$ 129,322,368 328,765,200 (5,247,098) 3,934,394 (5,544,218)
		540,172,078 —		3,934,394 —		451,230,646 (5,870,149)
		540,172,078		3,934,394		445,360,497

The contributed surplus represents the difference between the consolidated shareholders’ funds of the subsidiaries at the date when they were acquired by the Company and the nominal amount of the Company’s shares issued for the acquisition at the time of the group reorganisation prior to the listing of the Company’s shares in 1991. Under the Companies Act 1981 of Bermuda (as amended), the contributed surplus is available for distribution to the shareholders provided that the Company is able to pay its liabilities as they become due after distribution and the realisable value of the Company’s assets would not be less than the aggregate of its liabilities, issued share capital and share premium accounts.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

33. Provision for long service payments

The Group has recorded provisions for long service payment obligations for employees who had completed the required number of years of service under Hong Kong’s Employment Ordinance. The provisions are calculated based on the Group’s best estimates using the projected unit credit method.

The amounts recognised in the balance sheet are as follows:

Present value of funded obligations The amounts recognised in the consolidated income statement ar Current service cost Interest cost Net actuarial gains recognised during the year	Group 2007 2006 HK$ HK$ 2,262,353 2,307,157 e as follows: Group 2007 2006 HK$ HK$ 1,049,236 773,467 252,726 175,537 (470,030) (229,871) 831,932 719,133	Group 2007 2006 HK$ HK$ 2,262,353 2,307,157 e as follows: Group 2007 2006 HK$ HK$ 1,049,236 773,467 252,726 175,537 (470,030) (229,871) 831,932 719,133
		719,133

Movements in the provision for long service payments are as follows:

At beginning of year Total expense recognised in the income statement Payments made during the year: — MPF contributions — Long service payments At end of year	Group 2007 2006 HK$ HK$ 2,307,157 2,815,402 831,932 719,933 (831,932) (681,649) (44,804) (546,529) 2,262,353 2,307,157	Group 2007 2006 HK$ HK$ 2,307,157 2,815,402 831,932 719,933 (831,932) (681,649) (44,804) (546,529) 2,262,353 2,307,157
		2,307,157

The principal actuarial assumptions used were as follows:


	2007	2006
Discount rate	5.5%	4.4%
Expected rate of future salary increases	1.2%	1.2%

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

34. Acquisition of subsidiaries in the prior year

In the 2006 financial year, the Group made a series of acquisitions, details of which are as follows:

(a) On 12 May 2005, the Company’s wholly-owned subsidiary, Well Prime International Limited (“Well Prime”), subscribed for 600 ordinary shares in Reli-a-bo Entertainment Limited (“Reli-a-bo”), representing 60% equity interest in Reli-a-bo, for a consideration of HK$600. At the date of acquisition, Reli-a-bo had not commenced operations since incorporation but had incurred pre-operating costs. Reli-a-bo carries on the business of talent management in the entertainment industry.
(b) On 12 July 2005, the Company’s wholly owned subsidiary, Winkler Profits Limited (“Winkler”) subscribed for 51% of the issued shares of Witty Ventures Limited (“Witty”) for a consideration of HK$51. Witty is engaged in the retail trading of watches.

The above businesses contributed revenues of HK$71,131,000 and a net loss of HK$5,715,000 for the year ended 31 March 2006.

A summary of the total net assets acquired and goodwill from the acquisitions mentioned in (a) to (b) above are as follows:

Purchase consideration for shares acquired: — cash paid for the consideration Purchase consideration for loan assumed Fair value of net liabilities assumed (see below) Fair value of loan Goodwill	HK$ 651 8,160,000 448,976 (8,160,000)
	449,627

The total assets and liabilities arising from these acquisitions are as follows:

Cash and cash equivalents Property, plant and equipment Inventories Trade and other receivables Trade and other payables Payable to shareholders Net liabilities assumed Minority interests Net liabilities Purchase consideration settled in cash Cash and cash equivalents in subsidiaries acquired Cash outflow on acquisition	Acquirees’ carrying amounts HK$ 1,102,323 355,497 14,541,420 101,764 (49,120) (16,800,164) (748,280)	Fair value HK$ 1,102,323 355,497 14,541,420 101,764 (49,120 (16,800,164
		(748,280 299,304
		(448,976)

		8,160,651 (1,102,323
		7,058,328

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

(c) On 3 and 6 June 2005, the Company’s wholly owned subsidiary, Worldaim Enterprise Limited (“Worldaim”), subscribed for 51 shares in Wellprecise Limited (“Wellprecise”), representing 51% equity interest in Wellprecise, for a consideration of HK$51.

On 19 January 2006 and 20 March 2006, Worldaim further acquired a total of 29% equity interest in Wellprecise from a minority shareholder at a total consideration of HK$29. At the dates of acquisition, the fair value of 29% of the net liabilities assumed was HK$920,465, resulting in goodwill of HK$920,494.

(d) On 28 October 2005, the Company’s wholly-owned subsidiary, Widelead Group Limited (“Widelead”) acquired 95% of the registered capital of Waldorf, a group of companies principally engaged in the ownership and operation of a hotel in Macau SAR, for a total cash consideration of MOP191,442,400 (approximately HK$185,866,408) from two related companies, Wealth Access Holdings Limited (“Wealth Access”) and Sunling Resources Limited. In addition, Widelead acquired the rights and benefits of unsecured interest-free loan of MOP90,557,600 (approximately HK$87,920,000) advanced by Wealth Access to Waldorf for a total cash consideration of MOP90,557,600. The Company and the related companies have common directors and beneficial shareholders.

A summary of the total net assets acquired and goodwill from this acquisition is as follows:

Purchase consideration for shares: — Cash paid — Direct costs relating to the acquisition Purchase consideration for loan assumed Total purchase consideration Fair value of net assets acquired — as shown below Fair value of loan	HK$ 185,866,408 3,880,587 189,746,995 87,920,000 277,666,995 (219,507,392) (87,920,000)

Excess of fair value of net assets acquired over cost of acquisition of subsidiaries (29,760,397)

— 123 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

The assets and liabilities arising from the acquisition are as follows:

Cash and cash equivalents Goodwill Property, plant and equipment Interests in leasehold land for own use under operating leases Land premium Investment properties Inventories Trade and other receivables Trade and other payables Payable to shareholders Bank borrowings Net deferred tax liabilities Net assets Minority interests Net assets acquired Purchase consideration settled in cash Cash and cash equivalents in subsidiary acquired Cash outflow on acquisition	Acquirees’ carrying amounts HK$ 33,724,521 15,000 172,136,225 75,368,572 — 3,000,000 2,309,674 11,527,886 (21,415,171) (107,920,000) (151,532,202) — 17,214,505	Fair value HK$ 33,724,521 15,000 229,401,432 75,368,572 185,796,476 3,000,000 2,309,674 11,527,886 (21,415,171) (107,920,000) (151,532,202) (29,215,775) 231,060,413 (11,553,021) 219,507,392 277,666,995 (33,724,521) 243,942,474

Since the date of acquisition, the above business contributed revenues of HK$55,628,000 and a net profit of HK$9,252,000. Had the acquisition been completed on 1 April 2005, the total revenue and profit for the year ended 31 March 2006 would have been HK$132,439,000 and HK$22,151,000 respectively.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

35. Disposal of subsidiaries

During the year, the Group disposed of its subsidiaries, Waldorf and its subsidiaries (the “Waldorf Group”) and discontinued the hotel operations. The net assets of the Waldorf Group at the date of disposal were as follows:

Investment — unlisted Property, plant and equipment Interests in leasehold land for own use under operating leases Land premium Inventories Trade and other receivables Cash and cash equivalents Trade and other payables Bank borrowings Shareholders’ loan Deferred tax liabilities Minority interests Net assets disposed of Gain on disposal Shareholder’s loan assigned Total consideration Satisfied by: Cash received Deferred consideration Net cash inflow arising on disposal:* Cash consideration Cash and cash equivalents disposed of	2007 HK$ — 184,573,298 73,784,580 181,891,663 1,426,930 13,469,270 16,018,018 (11,138,684) (75,718,970) (107,920,000) (28,921,001) 247,465,104 (12,373,255) 235,091,849 81,504,515 87,920,000 404,516,364 386,978,820 17,537,544 404,516,364 386,978,820 (16,018,018) 370,960,802	2006 HK$ 100 209,179,232 74,649,407 183,994,620 1,825,904 13,360,940 43,771,041 (10,996,111) (139,125,544) (107,920,000) (28,921,001) 239,818,588

The Group received the deferred consideration on 16 May 2007.

— 125 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

36. Note to the consolidated cash flow statement

Reconciliation of profit for the year to net cash generated from operations:

Profit for the year Income tax expense Interest income Gain on disposal of subsidiaries Increase in fair value of investment properties Impairment loss of goodwill Amortisation of deferred expenditure Amortisation of pre-paid licence fee Operating lease rental in respect of interests in leasehold land for own use Excess of fair value of net assets acquired over cost of acquisition of subsidiaries Amortisation of land premium Share option expenses Property, plant and equipment written off Depreciation of property, plant and equipment Interest expenses Net exchange difference Operating profit before working capital changes Increase in inventories Increase in trade and other receivables Increase/(decrease) in trade and other payables Payment for licence fee Decrease in provision for long service payments Net cash generated from operations	2007 HK$ 50,781,363 (1,053,777) (7,533,232) (81,504,515) — 19,003,140 744,125 2,500,000 864,827 — 2,102,957 — 5,064,157 29,721,303 7,735,721 395,137 28,821,206 (6,076,495) (28,957,320) 39,784,246 (10,000,000) (44,804) 23,526,833	2006 HK$ 42,379,520 3,271,377 (3,273,315 — (4,500,000 1,370,121 — — 719,165 (29,760,397 1,801,856 3,934,394 — 25,133,629 3,384,886 —
		44,461,236 (4,364,467 (1,104,637 (8,823,754) — (508,245
		29,660,133

37. Commitments

(a) Operating lease commitments

At the balance sheet date, the Group had future aggregate minimum lease payments under non-cancellable operating leases in respect of office premises, shops and warehouse premises as follows:

Within one year Within two to five years	Group 2007 2006 HK$ HK$ 12,411,560 7,669,248 8,846,190 4,249,565 21,257,750 11,918,813	Group 2007 2006 HK$ HK$ 12,411,560 7,669,248 8,846,190 4,249,565 21,257,750 11,918,813
		11,918,813

The Company did not have any commitments under operating leases at 31 March 2007 (2006: Nil).

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

(b) Operating lease rental receivables

At the balance sheet date, the Group’s future aggregate minimum rental receivables under non-cancellable operating leases are as follows:

Within one year Within two to five years Over five years	Group 2007 2006 HK$ HK$ 2,982,000 38,295,482 1,235,000 69,107,161 — 1,080,000 4,217,000 108,482,643	Group 2007 2006 HK$ HK$ 2,982,000 38,295,482 1,235,000 69,107,161 — 1,080,000 4,217,000 108,482,643
		108,482,643

The Company did not have any operating lease rental receivables at 31 March 2007 (2006: Nil).

(c) Capital commitments

The Group and the Company did not have any capital commitments at 31 March 2007 (2006: Nil).

38. Related party transactions

Significant related party transactions during the year were:

			Group
		2007	2006
	Notes	HK$	HK$
Acquisition of subsidiary from related companies	(a)	—	185,866,408
Hotel revenue, food and beverage revenues	(b)	5,941,756	1,573,130
Reimbursement of salaries and other allowances	(b)	24,306,230	7,897,061
Reimbursement of administrative expenses	(b)	1,211,140	392,332
Rental expenses to related companies	(c)	3,019,170	2,854,200
Service income from related company	(d)	—	1,327,285
Sponsorship income from related company	(e)	150,000	—

(a) On 28 October 2005, the Company’s wholly-owned subsidiary, Widelead acquired 95% of the registered capital of Waldorf, the holding company of a group of companies principally engaged in the ownership and operation of a hotel in Macau, for a total cash consideration of MOP191,442,400 (approximately HK$185,866,408) from Wealth Access and Sunling Resources Limited, both related companies. In addition, Widelead acquired the rights and benefits of unsecured interest-free loans of MOP90,557,600 (approximately HK$87,920,000) advanced by Wealth Access to Waldorf for a total cash consideration of MOP90,557,600. The Company and the related companies have common directors and beneficial shareholders.

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APPENDIX II

(b) One of the subsidiaries of the Group, Waldo Hotel Limited (“Waldo Hotel”) entered into a memorandum dated 25 August 2005 (as amended on 29 August 2005) (the “Memorandum”) with Waldo Entertainment Limited (“Waldo Entertainment”) of which Yeung Chi Hang, a director of the Company, is a director and has beneficial interest. Waldo Entertainment is a service provider for a casino located in the hotel property of the Group. Pursuant to the Memorandum, Waldo Hotel agreed to provide certain services and facilities to the casino and its customers commencing from the date of the Memorandum up to 31 March 2008. Related services included serving of food and beverages, provision of cleaning services and hotel accommodation services to Waldo Entertainment. Hotel revenue, food and beverage revenue were charged to Waldo Entertainment and the transactions were carried out at terms by reference to market prices of similar transactions.

Salaries, other allowances and certain administrative expenses were reimbursed by Waldo Entertainment at cost in accordance with the terms of the Memorandum.

(c) Rental expenses were charged by related companies which are associates of two directors of the Company, Ma Shuk Kam and Yeung Chi Hang, and a director of certain subsidiaries, Cheng Kwee, based on the tenancy agreements signed between the parties. The transactions were carried out at terms by reference to market prices of similar transactions.
(d) Service income was charged to Great China Limited, an associate of Yeung Chi Hang and Cheng Kwee.
(e) Sponsorship income was received from Grand Waldo Hotel Limited, an associate of Yeung Chi Hang, by Cite Du Louvre Limited, which is located in Macau for its grand opening.
(f) On 14 July 2006, Well Allied, an indirect non-wholly owned subsidiary of the Company, and PLD International Co. Ltd. (“PLD”) entered into an agreement (the “Agreement”) pursuant to which Well Allied and PLD agreed to co-operate to realise the benefits of the following agreements entered by 中音傳播（深圳）有限公司 (China Music Video Broadcast (Shenzhen) Company Limited) (a wholly owned subsidiary of Well Allied) relating to licensing of copyright to karaoke music products to karaoke operators in the PRC (the “Cooperation Agreements”):
(i) a copyright co-operation agreement with 中國音像集體管理協會(China Music Video Collective Management Association) (in the course of formation) (the “Association”) dated 8 May 2006;
(ii) a copyright business operation co-operation agreement with the Association and 北京天語同聲信息技術有限公司 (Song Labs, Limited) (“Song Labs”) dated 8 May 2006; and
(iii) a co-operation agreement with Song Labs relating to market development and sharing of expenses and income dated 12 June 2006.

PLD has entered into contracts with various licensors (the “Contracts”) whereby PLD acquires the exclusive rights to, inter alia, grant licence to karaoke operators the rights to replicate and play audio-visual works for providing vocal accompaniment to customers (the “Licence Rights”) and promotion of such works in karaoke operation premises in the PRC.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

In order to realise the benefits of the Co-operation Agreements, Well Allied and PLD agreed to the following arrangements in respect of the Co-operation Agreements pursuant to the Agreement:

(i) Well Allied shall exclusively manage and develop the business of licensing to karaoke operators in the PRC the rights to, inter alia, replicate and play the Audio-visual works pursuant to the Contracts on behalf of PLD;
(ii) as directed by Well Allied, PLD shall appoint China Music as its exclusive agent in the PRC under the Contracts responsible for sourcing licencees and collection of fees pursuant to the terms of the Co-operation Agreements;
(iii) PLD shall procure that all the Licence Rights be subject to the collective management of the Association through China Music on the terms and conditions of the Cooperation Agreements;
(iv) PLD shall do all things necessary to enable China Music to fulfil its obligations under the Co-operation Agreements;
(v) Well Allied shall procure China Music to duly fulfil its obligations under the Cooperation Agreements; and
(vi) the operation fees (being portion of the licence fees to be paid by the karaoke operators in the PRC) to be received by China Music pursuant to the terms of the Co-operation Agreements in respect of the Licence Rights during the period from the completion date of the Agreement up to 30 April 2009 (both dates inclusive) shall be shared by PLD and Well Allied as to (i) up to HK$95 million to PLD; and (ii) the balance to Well Allied and China Music.

As guarantee for the payment of PLD’s share of the operation fees, Well Allied agrees to pay HK$95 million to PLD in cash.

39. Financial risk management

The Group is exposed through its operations to the certain financial risks. The directors analysed these risks and consider that appropriate management and controls are in place to mitigate these risks.

(a) Liquidity risk

The Group financial position is strong with cash and cash equivalents of HK$438 million and available banking facilities of HK$52 million. The Group maintains good business relationships with banks and has banking facilities for future business development. Therefore, the directors consider liquidity risk to be minimal.

(b) Credit Risk

Credit sales are limited to certain long-standing and reliable customers. There have been few incidents of bad debt write-offs in the Group’s history. The directors consider credit risk to be minimal.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

(c) Foreign currency risk

There is little foreign exchange risk because the Group’s operations are located in Hong Kong, Macau and the PRC. As the Macau Pataca trades within a narrow band around Hong Kong dollars and the directors consider appropriate monitoring controls are in place to mitigate the foreign currency risk relating to the Renminbi, the directors consider foreign currency risk to be minimal.

(d) Cash flow and interest rate risk

Cash flow risk is limited as the Group is able to generate sufficient cash flows from operations to meet the cash requirements for its day-to-day operations.

Interest rate risk is the risk that the position of the Group may be adversely affected by the change in market interest rates. The Group has no bank borrowings and is not exposed to interest rate risk.

Therefore, the directors consider the Group’s exposure to cash flow and interest rate risk to be minimal.

40. Critical accounting judgement and key sources of estimation uncertainty

Estimates and judgements are evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The key assumptions and judgments used in preparing the financial statements that have a significant effect on the carrying amounts of assets and liabilities are discussed below:

(a) Distinction between owner-managed properties and investment properties

The Group determines whether a property qualifies as investment property. The hotel property comprises a portion that is held to earn rental income and a portion held for use in the production or supply of goods and services or for administrative purposes. If these portions can be sold separately (or leased out separately under a finance lease), the Group accounts for the portions separately. If the portions cannot be sold separately, the property is accounted for as investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes. Judgement is applied in determining whether the ancillary services are so significant that a property does not qualify as investment property.

(b) Fair value of investment properties and land and buildings

The fair value of the investment properties and land and buildings are determined by independent valuers on an open market for existing use basis. In making their judgement, consideration has been given to assumptions that are mainly based on market conditions existing at the balance sheet date, by reference to recent market transactions and appropriate capitalisation rates based on an estimation of the rental income. These estimates are regularly compared to actual market data and actual transactions entered into by the Group.

The fair value of the hotel property at the date of acquisition is determined by independent valuers on an open market for existing use basis. The apportionment between the value of land and building of the hotel property is determined by making an assessment of the net replacement cost of the building as at the date of valuation and deducting this from the valuation of the property.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

(c) Useful lives of property, plant and equipment

Management determines the estimated useful lives of the property, plant and equipment. Management will revise depreciation charges when useful lives differ from previous estimates.

(d) Impairment test of goodwill

The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows.

(e) Share option

The fair value of share option granted is estimated by independent professional valuers based on various assumptions on volatility, life of options, dividends paid out rate and annual risk-free rate which generally represent the best estimate of the fair value of the share option at date of grant.

(f) Provision for long service payments

The obligations for long service payments are assessed using the projected unit credit method. The provisions are calculated as the present values of the estimated future cash outflows for each employee. To estimate the future cash flows, management uses the best estimates for suitable discount rates and expected rates of future salary increases.

41. Post balance sheet events

(a) On 13 April 2007, Wise Mark Group Limited (“Wise Mark”), a wholly owned subsidiary of the Company, entered into an agreement with Mr. Yeung Chi Hang (the Chairman of the Company) and Madam Ma Shuk Kam (an executive director of the Company) (the “Vendors”) whereby Wise Mark agreed to purchase from the Vendors the entire issue share capital of Shenzhen Land Company Limited (“Shenzhen Land”) for a total consideration of HK$31,565,901.
(b) On 13 April 2007, Golden Islands (Management) Limited (“GI Management”), a wholly owned subsidiary of the Company, entered into an agreement with Well Harvest Enterprises Limited (the “Assignor”), a company wholly owned by Madam Ma Shuk Kam, whereby GI Management agreed to acquire from the Assignor all the benefits of an interest free unsecured loan of HK$16,434,099 advanced to Shenzhen Land for a consideration of HK$16,434,099.
(c) In June 2007, the Company issued 22 million shares to each of Messrs. Yeung Chi Hang, Ma Shuk Kam and Yeung Kit Yu, Kitty and 1 million shares to each of Messrs. Liu Yu Mo, Chung Siu Wah and Chik To Pan on their exercise of options at the price of HK$0.2254 per share.
(d) On 18 June 2007, 中音傳播（深圳）有限公司 , an indirect non-wholly owned subsidiary of the Company, entered into a joint operation co-operation agreement with 北京天語同聲信息技術有限公司 (Song Labs., Ltd.) and 北京中文發數字科技有限公司 (Beijing CD Digital Technology Co., Ltd.) relating to charge of license fee for copyright to contents of karaoke music products on an on-demand basis implemented through the national management service system for contents of karaoke music to be established by 文化部文化市場發展中心 (Culture

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Market Development Centre of the Culture Division) as appointed by 文化部 (Culture Division) in the PRC for a term of 10 years for the business of licensing of copyright to karaoke music products to karaoke operators in the PRC (except Taiwan, Hong Kong and Macau).

(e) On 4 July 2007 Well Allied, an indirect non-wholly owned subsidiary of the Company, entered into a loan agreement for the advance of a loan of HK$9 million to PLD at the interest rate of 8% per annum and repayable within 1 year from the date of the loan agreement. Well Allied is a 51% subsidiary of Welly Champ International Limited, which is a 60% owned subsidiary of the Company. The balance of 49% interest in Well Allied is owned by Tak Full Group Limited (“Tak Full”). 55% of the issued share capital of Tak Full is owned by Messrs. Lee Tien-Yung, Li Deh-Sheng and Philip Lu Yueh-Wei, who also own the entire issued share capital of PLD.

42. Approval of financial statements

The financial statements were approved and authorised for issue by the board of directors of the Company on 11 July 2007.

3. INDEBTEDNESS

As at the close of business on 31 August 2007, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Enlarged Group had no outstanding borrowings.

Save as aforesaid and apart from intra-group liabilities, none of the companies in the Enlarged Group had outstanding at the close of business on 31 August 2007 any mortgages, charges or debentures, loan capital, bank overdrafts, loans, debt securities or other similar indebtedness or any finance lease commitments, liabilities under acceptances or acceptance credits or any guarantees or other material contingent liabilities.

Except as disclosed above, the directors are not aware of any material changes in the Enlarged Group’s indebtedness and contingent liabilities at the close of business on 31 August 2007.

4. MATERIAL CHANGE

The Directors are not aware of any material adverse changes in the financial or trading position or prospects of the Group since 31 March 2007, being the date to which the latest audited consolidated financial statements of the Group were made up.

5. WORKING CAPITAL

As at the Latest Practicable Date, after taking into account the consideration to be paid for the Acquisition, the present available banking facilities and the Enlarged Group’s internally generated funds, the Directors are satisfied after due and careful enquiry that the Enlarged Group has sufficient working capital to satisfy its requirement for the next twelve months from the date of this circular.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

1. STATEMENT OF UNAUDITED PRO FORMA ASSETS AND LIABILITIES OF THE ENLARGED GROUP

Introduction

The unaudited pro forma statement of assets and liabilities of the Enlarged Group has been prepared to illustrate the effect of the acquisition of 100% interest in the Wellrich Group.

The unaudited pro forma statement of assets and liabilities of the Enlarged Group has been prepared on the basis of the notes set out below and in accordance with the principal accounting policies adopted by the Group for the purpose of illustrating the effect of the Acquisition as if the Acquisition took place on 31 March 2007.

The unaudited pro forma statement of assets and liabilities of the Enlarged Group is based upon the audited consolidated balance sheet of the Group as at 31 March 2007, which has been extracted from the annual report of the Group for the year ended 31 March 2007 set out in Appendix II to this circular, after making pro forma adjustments resulting from the Acquisition.

The unaudited pro forma statement of assets and liabilities of the Enlarged Group is based on a number of assumptions, estimates and uncertainties. Accordingly, the accompanying unaudited pro forma statement of assets and liabilities 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 2007. The unaudited pro forma statement of assets and liabilities of the Enlarged Group does not purport to predict the future financial position of the Enlarged Group.

The unaudited pro forma statement of assets and liabilities of the Enlarged Group has been prepared by the Directors for illustrative purposes only and because of its nature, it may not give a true picture of financial position of the Enlarged Group following completion of the Acquisition.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Audited balance sheet of Wellrich the Group as at Group as at 31 March 2007 30 June 2007 HK$ HK$ Non-current assets Intangible assets — 14,599,668 Property, plant and equipment 105,594,731 182,006,640 Investment properties 100,500,000 — Deferred expenditure 3,988,251 — Deferred tax asset 5,616,256 713,575 Total non-current assets 215,699,238 197,319,883 ---------------- ---------------- Current assets Inventories 27,594,127 4,328,080 Trade and other receivables 59,731,426 9,653,428 Deferred expenditure 45,267,624 — Cash and cash equivalents 438,160,876 25,076,003 Total current assets 570,754,053 39,057,511 ---------------- ---------------- Current liabilities Trade and other payables 55,717,421 15,908,641 Amounts due to minority shareholders 66,875,269 — Provision for taxation 518,984 — Shareholders’ loan 254,243,407 Total current liabilities 123,111,674 270,152,048 ---------------- ---------------- Net current assets 447,642,379 (231,094,537) ---------------- ---------------- Total assets less current liablities 663,341,617 (33,774,654) ---------------- ---------------- Non-current liabilities Secured bank borrowings — — Provision for long service payments 2,262,353 — Deferred tax liabilities 14,427,686 — Total non-current liabilities 16,690,039 — ---------------- ---------------- Minority Interest Net assets 646,651,578 (33,774,654)	Proforma adjustments in relation to the The Enlarged Total Acquisition Group HK$ HK$ Notes HK$ 14,599,668 14,599,668 287,601,371 241,941,734 1 529,543,105 100,500,000 — 100,500,000 3,988,251 — 3,988,251 6,329,831 — 6,329,831 413,019,121 241,941,734 654,960,855 ---------------- ---------------- ---------------- 31,922,207 — 31,922,207 69,384,854 — 69,384,854 45,267,624 — 45,267,624 463,236,879 (120,000,000) 2 343,236,879 609,811,564 (120,000,000) 489,811,564 ---------------- ---------------- ---------------- 71,626,062 — 71,626,062 66,875,269 — 66,875,269 518,984 — 518,984 254,243,407 (254,243,407) 3 — 393,263,722 (254,243,407) 139,020,315 ---------------- ---------------- ---------------- 216,547,842 134,243,407 350,791,249 ---------------- ---------------- ---------------- 629,566,963 376,185,141 1,005,752,104 ---------------- ---------------- ---------------- — — — 2,262,353 — — 14,427,686 42,339,804 1 56,767,490 16,690,039 42,339,804 56,767,490 ---------------- ---------------- ---------------- 11,976,116 4 11,976,116 612,876,924 321,869,221 937,008,498	Proforma adjustments in relation to the The Enlarged Total Acquisition Group HK$ HK$ Notes HK$ 14,599,668 14,599,668 287,601,371 241,941,734 1 529,543,105 100,500,000 — 100,500,000 3,988,251 — 3,988,251 6,329,831 — 6,329,831 413,019,121 241,941,734 654,960,855 ---------------- ---------------- ---------------- 31,922,207 — 31,922,207 69,384,854 — 69,384,854 45,267,624 — 45,267,624 463,236,879 (120,000,000) 2 343,236,879 609,811,564 (120,000,000) 489,811,564 ---------------- ---------------- ---------------- 71,626,062 — 71,626,062 66,875,269 — 66,875,269 518,984 — 518,984 254,243,407 (254,243,407) 3 — 393,263,722 (254,243,407) 139,020,315 ---------------- ---------------- ---------------- 216,547,842 134,243,407 350,791,249 ---------------- ---------------- ---------------- 629,566,963 376,185,141 1,005,752,104 ---------------- ---------------- ---------------- — — — 2,262,353 — — 14,427,686 42,339,804 1 56,767,490 16,690,039 42,339,804 56,767,490 ---------------- ---------------- ---------------- 11,976,116 4 11,976,116 612,876,924 321,869,221 937,008,498
		56,767,490 ---------------- 11,976,116
		937,008,498

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Notes:

This is to record the fair value adjustments arising from the Acquisition. The fair value adjustments included (i) the difference of the book value of the Properties of RMB131,108,446 (approximately HK$136,379,006) as at 30 June 2007 and the revaluation of the Properties of RMB363,700,000 (approximately HK$378,320,740) which have been valued by the Valuer as at 31 August 2007 as set out in Appendix IV to this circular and (ii) the corresponding estimated deferred income tax liabilities.
This is to record the settlement of the cash consideration of HK$120 million. The total consideration for the Sale Shares and the Loan is HK$355.6 million, HK$120 million of which shall be paid in cash and HK$235.6 million to be satisfied by the issue and allotment of 699,109,792 Consideration Shares at the issue price of HK$0.337 per Share.
This is to record the settlement of the unsecured loans advanced by the Vendor to Wellrich as at the Completion Date. As at 30 June 2007, the loans advanced by the Vendor amounted to HK$254,243,407.
This is to record the 6% minority interest in the JV Company (after taking into consideration of the fair value adjustments in Note 1 above i.e. 6% of the sum of the revaluation surplus of HK$241,941,734 and deferred tax liabilities of HK$42,339,804) arising from the Acquisition. The basis of the calculation of the minority interest is set out under note 3(c) of the financial statements of the Group on page 76 of this circular.

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APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

2. LETTER FROM THE AUDITORS ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is the text of a report from BDO McCabe Lo Limited in respect of the unaudited pro forma financial information of the Enlarged Group for the sole purpose of incorporation in this circular.

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The Directors United Power Investment Limited Room 2801-11 28/F Shun Tak Centre West Tower 200 Connaught Road Central Hong Kong

7 November 2007

Dear Sirs,

We report on the statement of unaudited pro forma statement of assets and liabilities (the “Unaudited Pro Forma Financial Information”) of United Power Investment Limited (the “Company”) and its subsidiaries (collectively the “Group”) set out in Appendix III to the circular dated 7 November 2007 (the “Circular”) in connection with the proposed acquisition of the entire issued share capital of, and the benefits of all shareholder’s loans to, Wellrich Investment Limited. The basis of preparation of the Unaudited Pro Forma Financial Information is set out on pages 133 of the Circular. 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 financial information presented.

Responsibilities

It is the responsibility solely of the directors of the Company to prepare the Unaudited Pro Forma Financial Information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”). It is our responsibility to form an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Basis of opinion

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

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

The Unaudited Pro Forma Financial Information is for illustrative purposes only, based on the judgements and assumptions of the directors of the Company, and, because of its hypothetical nature, 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 2007 or any future date.

Opinion

In our opinion:

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

Yours faithfully,

BDO McCABE Lo Limited Certified Public Accountants Tony Yuk Tung Chan Practising Certificate Number P04654

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PROPERTY VALUATION

APPENDIX IV

Vigers Appraisal & Consulting Limited

International Asset Appraisal Consultants 10th Floor, The Grande Building 398 Kwun Tong Road Kowloon Hong Kong

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7 November 2007

The Directors

United Power Investment Limited Rooms 2810-2811, 28th Floor West Tower Shun Tak Centre 200 Connaught Road Central Hong Kong

Dear Sirs,

In accordance with your instructions for us to value the property interest held by 肇慶星湖俱樂部 for investment purpose in the People’s Republic of China (the “PRC”), we confirm that we have carried out inspection, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market value of such property interest as at 31 August 2007 (the “date of valuation”) for the purpose of incorporation in the circular of United Power Investment Limited (the “Company”) dated 7 November 2007.

Our valuation is our opinion of the market value of the property interest which we would define as intended to mean “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.

We have been provided with certain extracts of title documents relating to the property. However, we have not scrutinized the original documents to verify the ownership, encumbrances or the existence of any subsequent amendments which may not appear on the copies handed to us. In undertaking our valuation for the property interest, we have relied on the legal opinion (the “PRC Legal Opinion”) provided by the Company’s PRC legal adviser, Hills & Co.

We have estimated the value of the property by the Comparison Approach via making reference to comparable sales evidences in the relevant market and the standard land prices of the city assuming sale subject to the existing tenancy.

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PROPERTY VALUATION

APPENDIX IV

Our valuation has been made on the assumption that the owners sell the property interest on the market without the benefit of deferred term contracts, leasebacks, joint ventures, management agreements or any similar arrangements which would serve to increase the value of the property interest. In addition, no forced sale situation in any manner is assumed in our valuation. Unless otherwise stated, the valuation represents the value of the entire property interest described in the valuation certificate and not the value of a share of it. Other assumptions in respect of the property, if any, have been set out in the footnotes of the valuation certificate.

We have relied to a considerable extent on information provided by the Company and have accepted advice given to us on such matters as planning approvals, statutory notices, easements, tenure, occupation, lettings, site and floor areas, development plans, construction costs, identification of the property and other relevant matters. We have also been advised by the Company that no material facts had been concealed or omitted in the information provided to us. All documents have been used for reference only.

All dimensions, measurements and areas included in the valuation certificate are based on information contained in the documents provided to us by the Company and are approximations only. No on-site measurement has been taken. It is assumed that all applicable zoning and use regulations and restrictions have been complied with. Moreover, it is assumed that the utilization of the land and improvements is within the boundaries of the property described and that no encroachment or trespass exists.

We have carried out inspection on the property. However, no structural survey has been made and we are therefore unable to report whether the property is free from rot, infestation or any other structural defects. No tests were carried out on any of the services.

We have not carried out investigations on site to determine the suitability of ground conditions and services etc. for any future development, nor have we undertaken any ecological or environmental surveys. Our valuation is prepared on the assumption that these aspects are satisfactory and that no extraordinary expenses or delays will be incurred during construction period.

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

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Our valuation is prepared in accordance with the HKIS Valuation Standards on Properties (First Edition 2005) published by the Hong Kong Institute of Surveyors(HKIS) and the requirement set out in Chapter 5 and Practice Note 12 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

We enclosed herewith the valuation certificate.

Yours faithfully, For and on behalf of

Vigers Appraisal & Consulting Limited Raymond Ho Kai Kwong Registered Professional Surveyor(GP) MRICS MHKIS MSc(e-com) Executive Director

Note:

Raymond K. K. Ho, Chartered Surveyor, MRICS, MHKIS, has over nineteen years’ experience in undertaking valuations of properties in Hong Kong and Macau and has over twelve years’ experience in valuations of properties in the PRC. Mr. Ho has been working with Vigers Group since 1989.

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APPENDIX IV

VALUATION CERTIFICATE

Property

Description Particulars of Capital value and tenure occupancy in existing state as at 31 August 2007

The land portion of a car repairing workshop located to the north of Yingbin Dadao, Zhaoqing, Guangdong Province, the PRC

The property The land is leased to comprises a parcel of 肇田汽車服務有限 land having a total 公司 for a term of site area of 5 years from 1 May approximately 10,446 2005 at a monthly sq.m. rental of RMB25,314. The tenant has been There are a 5-storey granted a workshop and a 5- pre-emption right storey dormitory to purchase the block having a total property. gross floor area of approximately 5,125 sq.m. completed in 2002 erected on it. According to the Company, the buildings are built by the tenant and therefore excluded from the valuation.

RMB3,700,000

The land is held with land use rights for a term expiring on 16 March 2050.

Notes:

i. According to the State-owned Land Use Rights Certificate No. Zhao Guo Yong (2002) 00543 issued by the People’s Government of Zhaoqing City, the land use rights of the property having a total site area of 10,446.28 sq.m have been granted to 肇慶星湖俱樂部 (the “JV”) for a term expiring on 16 March 2050 for car repairing workshop uses.

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ii. The PRC legal opinion states, inter alia, the following:
The JV is a joint venture established on 8 December 1993 for an operating period up to 7 December 2043(Business Registration No. Qi Zuo Yue Zhao Zong Zi No.001489). The investors comprises 偉富投資有限公司 (Party A) and 肇慶市粵西園林建築工程公司 (Party B). Party A and Party B have interest in 94% and 6% of the registered capital of the JV respectively. Party B injected capital in the form of land use rights to the JV. According to the joint venture contract and Articles of Association as amended on 20 January 1997, Party A should be entitled to all after-tax profit after the payment of a fix yearly sum of RMB1,100,000 (from the year 1995) to Party B which payment is to be increased by 5% every two years.
The JV is legally established in the PRC. It has obtained/completed the approvals, licences, registrations and consents from the relevant bureau of the government which are necessary for its establishment and operation. The interest of the joint venture partners in the JV are valid, legal and effective. The interests and obligations of the partners are protected and governed by the PRC laws. According to the relevant requirements, the partners may transfer all or part of its rights and obligations in the JV to other investors. However, the transfer is subject to the consent of the other partners and the approval of and registration with the relevant government bureaus.
According to the State-owned Land Use Rights Certificate No. Zhao Guo Yong (2002) 00543 issued by the People’s Government of Zhaoqing City on 7 August 2002 and a Reply on Land Registration Enquiry issued by the State Land and Resources Bureau of Zhaoqing City on 21 September 2007, the JV is the owner of the land use rights for a term expiring on 16 March 2050 for car repairing workshop uses. The land has a site area of 10,446.28 sq.m.
The JV has obtained the land use rights certificate for the property. According to the title document, the land use rights held by the JV is legal and valid. During the term stated in the certificate, the JV has the right to occupy the piece of land and is entitled to assign, lease and mortgage the land use rights in accordance with the relevant regulations.
The JV has obtained the building ownership certificates for the buildings erected on the site. According to the title document, the title of the buildings held by the joint venture is legal and valid. The JV has the rights to occupy the buildings and is entitled to assign, lease and mortgage the buildings in accordance with the relevant regulations.
The tenancy agreement the JV entered into has not been registered with the relevant government authorities. The validity of the agreement is not affected by the non-registration.

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Vigers Appraisal & Consulting Limited

International Asset Appraisal Consultants 10th Floor, The Grande Building 398 Kwun Tong Road Kowloon Hong Kong

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7 November 2007

The Directors United Power Investment Limited Rooms 2810-2811, 28th Floor West Tower Shun Tak Centre 200 Connaught Road Central Hong Kong

Dear Sirs,

In accordance with your instructions for us to value a property interest held and operated by 肇慶星湖俱樂部 as hotel in the People’s Republic of China (the “PRC”), with certain special assumptions made on its alternative use and redevelopment potential, we confirm that we have carried out inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market value of such property interests as at 31 August 2007 (the “date of valuation”) for the purpose of incorporation in the circular of United Power Investment Limited (the “Company”) dated 7 November 2007.

The property is currently held and operated by 肇慶星湖俱樂部 as a hotel. However, in accordance with the instructions from the Company, the property has been valued with the special assumptions that it had been granted with a term of 70 years for residential uses and 40 years for commercial uses from the date of valuation with a total redevelopment plot ratio of 3. It was further assumed that the land use rights premium and other relevant fees for that had been fully settled and the grantee had free and uninterrupted rights to use the property and was entitled to transfer the property interest with the residual terms without payment of any further premium or onerous fee to the government. According to the Company, there has not been any development plan on the redevelopment of the property submitted to or approved by the authority. In the absence of any relevant approvals, we are unable to verify whether such proposed alternative uses are permissible or could be realized. However, in valuing the property, it was assumed that the planning and development approvals for the mentioned alternative uses and density would be obtained without undue time delay.

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The valuation is our opinion of the market value of the property interest which we would define as intended to mean “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.

In arriving at our opinion of value, we have adopted the direct comparison approach by making reference to comparable sales evidences as available in the relevant market.

Our valuation has been made on the assumption that the owners sell the property interest on the market without the benefit of deferred term contracts, leasebacks, joint ventures, management agreements or any similar arrangements which would serve to increase the value of it. In addition, no forced sale situation in any manner is assumed in our valuation. The valuation represents the value of the entire property interest described in the valuation certificate and not the value of a share of it.

We have not caused title searches to be made for the property interest at the relevant government bureau in the PRC. We have been provided with certain extracts of title documents relating to the property. However, we have not scrutinized the original documents to verify the ownership, encumbrances or the existence of any subsequent amendments which may not appear on the copies handed to us. In undertaking our valuation for the property interest, we have relied on the legal opinion (the “PRC Legal Opinion”) provided by the Company’s PRC legal adviser, Hills & Co.

We have relied to a considerable extent on the information provided by the Company and have accepted advice given to us on such matters as planning approvals, statutory notices, easements, tenure, occupation, lettings, site and floor areas, development plans, identification of the property and other relevant matters. We have also been advised by the Company that no material facts had been concealed or omitted in the information provided to us. All documents have been used for reference only.

All dimensions, measurements and areas included in the valuation certificate are based on information contained in the documents provided to us by the Company and are approximations only. No on-site measurement has been taken. It is assumed that all applicable zoning and use regulations and restrictions have been complied with unless nonconformity has been stated, defined, and considered in the valuation certificate. Moreover, it is assumed that the utilization of the land and improvements is within the boundaries of the property described and that no encroachment or trespass exists, unless noted in the report.

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APPENDIX IV

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

We enclosed herewith the valuation certificate.

Yours faithfully, For and on behalf of Vigers Appraisal & Consulting Limited Raymond Ho Kai Kwong Registered Professional Surveyor(GP) MRICS MHKIS MSc(e-com) Executive Director

Note:

Raymond K. K. Ho, Chartered Surveyor, MRICS, MHKIS, has over nineteen years’ experience in undertaking valuations of properties in Hong Kong and Macau, and has over twelve years’ experience in valuations of properties in the PRC. Mr. Ho has been working with Vigers Group since 1989.

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APPENDIX IV

VALUATION CERTIFICATE

Property

The site occupied as Dynasty Hotel, No.9 Duan Zhou Wu Road, Zhaoqing, Guangdong Province, the PRC

Description and tenure

Particulars of Capital value occupancy on alternative use value with special assumptions made on its redevelopment potential as at 31 August 2007

The property comprises a site having a total site area of approximately 26,198 sq.m with various buildings completed in 1994 and 2001. The property is occupied and operated as a hotel under the business name of Dynasty Hotel.

The property is RMB360,000,000 currently used (see note (i) and operated as below) hotel.

The property is A portion of the occupied and operated as a property having a hotel under the business total gross floor name of Dynasty Hotel. area of about 8,420 sq.m. are It accommodates 350 guest leased out to rooms, various shops, separate tenants Chinese restaurant, Western for various terms restaurant, Japanese expiring on or restaurant, banquet room, before 30 June health club, staff quarters, 2012. The total facilities houses, together monthly rental is with amenities including approximately tennis court and swimming RMB598,000, pool. The property has a exclusive of total gross floor area of management fee approximately 53,844 sq.m. and service charges.

The land lot is currently held with land use rights for a year term expiring on 14 September 2064 for commercial and services uses.

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Notes:

i. The property is currently held and operated by 肇慶星湖俱樂部 (the “JV”) as a hotel. However, in accordance with the instructions from the Company, the property has been valued with the special assumptions that it had been granted with a term of 70 years for residential uses and 40 years for commercial uses from the date of valuation with a total redevelopment plot ratio of 3. It was further assumed that the land use rights premium and other relevant fees for that had been fully settled and the grantee had free and uninterrupted rights to use the property and was entitled to transfer the property interest with the residual terms without payment of any further premium or onerous fee to the government. According to the Company, there has not been any development plan on the redevelopment of the property submitted to or approved by the authority. In the absence of any relevant approvals, we are unable to verify whether the proposed alternative uses are permissible or could be realized. It was assumed that the planning and development approvals for the mentioned alternative uses and density would be obtained without undue time delay.
ii. According to 8 Realty Title Certificates, the property having a total gross floor area of approximately 53,844sq.m. is vested in the JV for a year term expiring on 14 September 2064 for commercial and services uses. Further details are as follows:

Certificate No.	Building	Gross Floor Area	Site Area
		(approximate in sq.m.)	(in sq.m.)
Yue Fang Di Zheng Zi No.0151672	Comprehensive Building	9,899	2,125.58
Yue Fang Di Zheng Zi No.0151668	Comprehensive Building	11,809	2,289.87
Yue Fang Di Zheng Zi No.0151670	Comprehensive Building	7,438	2,640.89
Yue Fang Di Zheng Zi No.0151666	Staff Quarters	3,966	404.37
Yue Fang Di Zheng Zi No.0151667	Boiler House	148	148.15
Yue Fang Di Zheng Zi No.0151665	Facility Block	980	230.46
Yue Fang Di Zheng Zi No.C1099705	—	3,212	26,197.50
Yue Fang Di Zheng Zi No.0151669	Comprehensive Building	16,390	2996.19

Total:

53,844

iii. The PRC legal opinion states, inter alia, the follows:

肇慶星湖俱樂部 is a joint venture established on 8 December 1993 for an operating period up to 7 December 2043(Business Registration No. Qi Zuo Yue Zhao Zong Zi No.001489). The investors comprises 偉富投資有限公司 (Party A) and 肇慶市粵西園林建築工程公司 (Party B). Party A and Party B have interest in 94% and 6% of the registered capital of the JV respectively. Party B injected capital in the form of land use rights to the JV. According to the joint venture contract and Articles of Association as amended on 20 January 1997, Party A should be entitled to all after-tax profit after the payment of a fix yearly sum of RMB1,100,000 (from the year 1995) to Party B, which payment is to be increased by 5% every two years.
The JV is legally established in the PRC. It has obtained/completed the approvals, licences, registrations and consents from the relevant bureau of the government which are necessary for its establishment and operation. The interest of the joint venture partners in the JV are valid, legal and effective. The interests and obligations of the partners are protected and governed by the PRC laws. According to the relevant requirements, the partners may transfer all or part of its rights and obligations in the JV to other investors. However, the transfer is subject to the consent of the other partners and the approval of and registration with the relevant government bureaus.

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According to the State-owned Land Use Rights Certificate No. Zhao Guo Yong (1996) 00231 issued from the People’s Government of Zhaoqing City on 1 July 1996 and a Reply on Land Registration Enquiry issued by the State Land and Resources Bureau of Zhaoqing City on 21 September 2007, the JV is the owner of the land use rights for a term from 15 September 1994 to 14 September 2064 for commercial and service uses. The land has a site area of 26,197.5 sq.m.
The JV has obtained the land use rights certificate for the property. According to the title document, the land use rights held by the JV is legal and valid. During the term stated in the certificate, the joint venture has the right to occupy the piece of land and is entitled to assign, lease and mortgage the land use rights in accordance with the relevant regulations.
The JV may apply for the change of land use to a residential and commercial complex or other uses in compliance with the local land use planning from the State Land and Resources Bureau and Town Planning Bureau of the Zhaoqing City. Having obtained approvals and the entering of a land use rights contract, with the adjustment on land premium and the registration of the land use rights, the JV may use the land in the changed use.
The JV has obtained the building ownership certificates for the buildings erected on the site. According to the title document, the title of the buildings held by the joint venture is legal and valid. The JV has the rights to occupy the buildings and is entitled to assign, lease and mortgage the buildings in accordance with the relevant regulations.
For the redevelopment of the site, approvals and consents have to be obtained from the relevant government departments for project approval, demolition, construction and completion registration of any new building. After that, the JV may occupy, use, lease, assign or mortgage the buildings.
The tenancy agreements the JV entered into are binding, valid and enforceable. The effectiveness of agreements is not affected by their non-registration with the relevant government authorities.

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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 collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable inquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

SHARE CAPITAL OF THE COMPANY

Authorised and issued share capitals

As at the Latest Practicable Date, the authorised and issued share capitals of the Company were as follows:

Number of Shares Nominal amount Authorised: 10,000,000,000 Shares HK$500,000,000.00 Issued and fully paid: 2,699,121,600 Shares in issue as at the Latest Practicable Date HK$134,956,080.00 699,109,792 Consideration Shares to be issued HK$34,955,489.60

All of the Shares currently in issue or to be issued rank pari passu in all respects with each other, including, in particular, as to dividends, voting rights and return of capital.

DISCLOSURE OF INTERESTS

Interests of Directors

As at the Latest Practicable Date, the interests of the Directors in the share capital of the Company (except the Consideration Shares) 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 which they were taken or deemed to have under such provisions of the SFO), or were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein,

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APPENDIX V

GENERAL INFORMATION

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

			Percentage of
Name	Number of Shares	Nature of interest	shareholding
Ma Shuk Kam	1,445,550,686	Corporate and personal_(Note 1)_	53.560
Yeung Chi Hang	1,445,550,686	Corporate and personal_(Note 1)_	53.560
Yeung Kit Yu, Kitty	1,445,550,686	Corporate and personal_(Note 1)_	53.560
Liu Yu Mo	1,048,000	Personal	0.039
Chung Siu Wah	1,000,000	Personal	0.037
Au Edmond Wah	1,000,000	Personal_(Note 2)_	0.037
Chik To Pan	1,000,000	Personal	0.037

Notes:

1,423,550,686 Shares are owned by World Possession, the entire issued share capital of which is beneficially owned by Madam Ma, Mr. Yeung and Ms. Yeung in equal shares. Each of them also holds 22,000,000 Shares personally. Madam Ma and Mr. Yeung are directors of World Possession.
This is an option to subscribe for 1,000,000 Shares granted under the share option scheme of the Company at the exercise price of HK$0.2254 per Share which may be exercised from 13 December 2005 to 30 August 2012.

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

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APPENDIX V

Interests of other persons in the share capital of the Company

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

			Percentage of
Name	Number of Shares	Nature of interest	shareholding
World Possession	1,423,550,686	Beneficial owner	52.74

Save as disclosed above, as at the Latest Practicable Date, according to the register of interests required to be kept by the Company under section 336 of the SFO, there was no person who had any interest or short position in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

Interests in other members of the Group

As at the Latest Practicable Date, so far as is known to the Directors, the following persons (other than a Director or chief executive of the Company) were, directly or indirectly, interested in 10% or more of the nominal value of the share capital carrying rights to vote in all circumstances at general meetings of the following subsidiaries of the Company:

(a) Mr. Poon Tak Yip was interested in (i) 25% of the issued share capital of Reli-a-bo Entertainment Limited (“Reli-a-bo”) and (ii) 20% of the issued share capital of Wellprecise Limited through Nation Group Limited;
(b) Mr. Wong Chor Ming was interested in 10% of the issued share capital of Reli-a-bo;
(c) Mr. Yuen Tak Yau, Daniel was interested in 40% of the issued share capital of Witty Ventures Limited and HMS Watches Company Limited respectively;
(d) each of Long Sincere International Limited and Rise Jumbo Limited was interested in 20% of the issued share capital of Welly Champ International Limited (“Welly Champ”);
(e) Tak Full Group Limited (“Tak Full”) was interested in 49% of the issued share capital of Well Allied Investment Limited (“Well Allied”);

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APPENDIX V

(f) Impeccable Group Limited (“IGL”) was interested in 49% of the issued share capital of Le Caveau Limited (“LCL”);
(g) Smooth Luck Investments Limited was interested in 40% of the issued share capital of Genius Star International Limited;
(h) Mr. Ng Lok Shing Ronald was interested in 49% of the issued share capital of Baron Productions and Artiste Management Company Limited; and
(i) Mr. Chan Siu Kei (“Mr. Chan”) and Ms. Wong Oi Kwan Jenny Natalie, the spouse of Mr. Chan, were interested in 30% and 10% of the issued share capital of Chance Music Limited respectively.

Save as disclosed above, as at the Latest Practicable Date, the Directors were not aware of any person (other than a Director or chief executive of the Company) who was interested, directly or indirectly, in 10% or more of the issued shares of any subsidiary of the Company or any options in respect of such capital.

Interests of experts in the Group

None of the experts named in the paragraph headed “Consents” in this appendix has any shareholding in any company in the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any company in the Group.

Service contracts

There is no existing or proposed service contract between any member of the Group and any Director or proposed Director (excluding contracts expiring or determinable by the Company within one year without payment of compensation (other than statutory compensation)).

Competing business

None of the Directors or any of their respective associates has any interest in any business which competes or is likely to compete, either directly or indirectly, with the Group’s business.

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APPENDIX V

Interests in assets, contract or arrangement

Since 31 March 2007, the date of the latest published audited financial statements of the Group, none of the Directors has any direct or indirect interest in any assets acquired or disposed of by or leased to or proposed to be acquired or disposed of by or leased to any member of the Group except the Agreement and the following:

(a) the following tenancy agreements were entered into between associates of Mr. Yeung and Madam Ma as landlords and Golden Island Catering Group Company Limited, a wholly owned subsidiary of the Company, as tenant:

1. Tenancy agreement dated 30 November 2006 relating to No. 135, Waterloo Road, Kowloon, Hong Kong

Landlord	Term	Monthly rent
West Global	1 December 2006 to	HK$180,000 (exclusive of
Investments	30 November 2008	rates, management fees
Limited (an	(with an option to	and government rent
associate of	renew for a further	which are payable to
Mr. Yeung	term of 1 year at the	independent third parties)
and Madam Ma)	then prevailing
	market rent)

2. Tenancy agreement dated 18 November 2005 relating to Workshop Space B on the 2nd Floor, Fung Wah Factorial Building, Nos. 646, 648 and 648A Castle Peak Road, Kowloon, Hong Kong

Landlord	Term	Monthly rent
Source Expand	1 January 2006 to	HK$9,000 (exclusive of
Development	31 December 2007	rates, management fees
Limited (an		and government rent
associate of		which are payable to
Mr. Yeung		independent third parties)
and Madam Ma)

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APPENDIX V

3. Tenancy agreement dated 21 June 2006 relating to Unit 2811 on the 28th Floor of West Tower, Shun Tak Centre, Nos. 168-200 Connaught Road Central, Hong Kong

Landlord	Term	Monthly rent
High Brand	1 July 2006 to	HK$51,100 from
Limited (an	30 June 2008	1 February 2005 to
associate of		30 June 2006, and
Madam Ma)		HK$66,430 from
		1 July 2006 to
		30 June 2008
		(both exclusive of rates,
		management fees and
		government rent which
		are payable to
		independent third parties)

(b) the following tenancy agreements were entered into between Great China Limited, an associate of Mr. Yeung, as landlord and various subsidiaries of the Company as tenants:

1. Tenancy agreement dated 1 May 2006 (as amended on 21 June 2006) relating to Shop Unit No. 1F8A on the First Floor of Grand Waldo Hotel (the “Hotel”)

		Monthly rent,
		management fee and
Tenant	Term	air conditioning charges
HMS Watches	1 May 2006 to	HK$19,228
Company Limited	30 April 2009

2. Tenancy agreement dated 1 May 2006 relating to Shop Unit No. GF6 on the Ground Floor of the Hotel

		Monthly rent,
		management fee and
Tenant	Term	air conditioning charges
LCL	1 May 2006 to	HK$49,938
	30 April 2009

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APPENDIX V

(c) on 13 April 2007, Wise Mark Group Limited (“Wise Mark”), a wholly owned subsidiary of the Company, entered into an agreement with Mr. Yeung and the Vendor (the “Share Vendors”) whereby Wise Mark agreed to purchase from the Share Vendors the entire issue share capital of Shenzhen Land Company Limited (“Shenzhen Land”) for a total consideration of HK$31,565,901 (the “Shenzhen Land Share Sale Agreement”); and
(d) on 13 April 2007, Golden Islands (Management) Limited (“GI Management”), a wholly owned subsidiary of the Company, entered into an agreement with the Vendor whereby GI Management agreed to acquire from the Vendor all the benefits of an interest free unsecured loan of HK$16,434,099 advanced to Shenzhen Land for a consideration of HK$16,434,099 (the “Shenzhen Land Loan Sale Agreement”).

Save as disclosed above, none of the Directors is materially interested in any contract or arrangement subsisting at the date of this circular which is significant in relation to the business of the Group taken as a whole.

LITIGATION

Neither the Company nor any of its subsidiaries is engaged in any litigation or arbitration of material importance and no litigation or claim of material importance is known to the Directors to be pending or threatened against the Company or any of its subsidiaries.

QUALIFICATION OF EXPERTS

The qualifications of the experts who have given opinions in this circular are as follows:

Name Qualification First Shanghai a licensed corporation to carry out type 6 (advising on corporate finance) regulated activities under the SFO the Valuer professional property valuers BDO McCabe Lo Limited (“BDO”) certified public accountants

CONSENTS

First Shanghai, the Valuer and BDO have given and have not withdrawn their respective written consents to the issue of this circular with copies of their reports, valuation or letters (as the case may be) and the references to their names included herein in the form and context in which they are respectively included.

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APPENDIX V

MATERIAL CONTRACTS

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

(a) a shareholders’ agreement dated 21 March 2006 between (i) Win Big Profits Limited (“Win Big”), a wholly owned subsidiary of the Company; and (ii) IGL in respect of a joint venture relating to LCL;
(b) a loan agreement dated 21 March 2006 between (i) Win Big; (ii) IGL; and (iii) LCL pursuant to which Win Big and IGL advanced loans of HK$3,060,000 and HK$2,940,000 respectively to LCL;
(c) a copyright co-operation agreement dated 8 May 2006 between (i) China Music Video Broadcast (Shenzhen) Company Limited (“China Music”) (a subsidiary of the Company); and (ii) China Music Video Collective Management Association (in the course of formation) (the “Association”) relating to licensing of copyright to karaoke music products to karaoke operators in the PRC;
(d) a copyright business operation co-operation agreement dated 8 May 2006 between (i) China Music; (ii) the Association; and (iii) Song Labs, Ltd. (“Song Labs”) relating to licensing of copyright to karaoke music products to karaoke operators in the PRC;
(e) a co-operation agreement dated 12 June 2006 between (i) China Music; and (ii) Song Labs in respect of market development and sharing of expenses and income relating to licensing of copyright to karaoke music products to karaoke operators in the PRC;
(f) a shareholders’ agreement dated 12 June 2006 (as amended on 3 August 2006) between (i) the Company; (ii) Wang Wei; and (iii) Li Bin in respect of a joint venture relating to Welly Champ;
(g) a shareholders’ agreement dated 12 June 2006 (as amended on 14 July 2006 and 3 August 2006) between (i) Welly Champ; and (ii) Tak Full in respect of a joint venture relating to Well Allied;
(h) an agreement dated 14 July 2006 between (i) Well Allied; and (ii) PLD International Co., Ltd. (“PLD”) for co-operation to realise the benefits of the agreements mentioned in items (c), (d) and (e) above;

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GENERAL INFORMATION

APPENDIX V

(i) an agreement dated 26 October 2006 between (i) Waldorf Holding Limited (“Waldorf”) (as vendor); and (ii) Golden Island Bird’s Nest Chiu Chau Restaurant (Causeway Bay) Limited, a wholly owned subsidiary of the Company, (as purchaser) relating to the sale and purchase of the entire issued share capital of, and the benefits of shareholder’s loans, to World Honour Investments Limited for a total consideration of HK$3,418,980;
(j) an agreement dated 1 November 2006 between (i) Widelead Group Limited (“Widelead”) (a wholly owned subsidiary of the Company), G.I. Management and Sentosa Resources Limited; and (ii) Many Wealth Group Limited whereby, inter alia, Widelead and GI Management agreed to sell 95% of the registered capital of Waldorf and Widelead agreed to sell the rights and benefits of shareholder’s loan due from Waldorf for a total consideration of HK$475 million;
(k) a supplemental agreement dated 8 November 2006 between (i) Well Allied and (ii) PLD to extend the deadline for the fulfilment of the conditions under the agreement referred to in item (h) above;
(l) the Shenzhen Land Share Sale Agreement;
(m) the Shenzhen Land Loan Sale Agreement;
(n) a joint operation co-operation agreement dated 18 June 2007 between (i) China Music; (ii) Song Labs; and (iii) 北京中文發數字科技有限公司 (Beijing CD Digital Technology Co., Ltd.) relating to charge of license fee for copyright to contents of karaoke music products on an on-demand basis implemented through the national management service system for contents of karaoke music to be established by 文化部文化市場發展中心 (Culture Market Development Centre of the Culture Division) as appointed by 文化部 (Culture Division) in the PRC for a term of 10 years for the business of licensing of copyright to karaoke music products to karaoke operators in the PRC;
(o) a loan agreement dated 4 July 2007 between (i) Well Allied; and (ii) PLD whereby Well Allied agreed to advance a loan of HK$9 million to PLD at the interest rate of 8% per annum and repayable within 1 year from the date of the loan agreement;
(p) the Agreement;
(q) an agreement dated 14 August 2007 between (i) Ng Lok Shing Ronald (as vendor); and (ii) Win Fame Limited, a wholly owned subsidiary of the Company, (as purchaser) relating to the sale and purchase of 51% of the issued share capital of Baron Productions and Artiste Management Company Limited; and
(r) an agreement dated 24 October 2007 between (i) Chan Siu Kei (as vendor); and (ii) Wave High International Limited, a wholly owned subsidiary of the Company, (as purchaser) relating to the sale and purchase of 60% of the issued share capital of Chance Music Limited for a consideration of HK$5 million.

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GENERAL INFORMATION

APPENDIX V

GENERAL

(a) The secretary of the Company is Ms. Cheung Mei Ha, Jennifer. She is a solicitor practising in Hong Kong.
(b) The qualified accountant of the Company is Mr. Liu Yu Mo. He is a certified practising accountant (Aust.) and a fellow member of the Hong Kong Institute of Certified Public Accountants.
(c) The Hong Kong share registrar of the Company is Tricor Secretaries Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the offices of Jennifer Cheung & Co. at Unit A, 19th Floor, Two Chinachem Plaza, 68 Connaught Road Central, Hong Kong during normal business hours up to and including 23 November 2007:

(a) the Memorandum of Association and the Bye-laws of the Company;
(b) the annual reports of the Company for the two years ended 31 March 2007;
(c) the circular of the Company issued pursuant to Chapters 14 and 14A of the Listing Rules since 31 March 2007, being the date of the latest published audited accounts;
(d) the letter from First Shanghai to the Independent Board Committee and the Independent Shareholders, the text of which is set out on pages 21 to 37 of this circular;
(e) the accountants’ report of the Wellrich Group, the text of which is set out in Appendix I;
(f) the letters and valuation certificates relating to the Properties prepared by the Valuer, the texts of which are set out in Appendix IV;
(g) the material contracts referred to in the paragraph headed “Material contracts” in this appendix; and
(h) the written consents referred to in the paragraph headed “Consents” in this appendix.

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NOTICE OF SGM

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UNITED POWER INVESTMENT LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 674)

NOTICE OF SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that a special general meeting of the abovementioned company (the “Company”) will be held at Golden Island Bird’s Nest Chiu Chau Restaurant, 2nd Floor, East Wing, Star House, Salisbury Road, Tsimshatsui, Kowloon, Hong Kong on 23 November 2007 at 3:00 p.m. for the purpose of considering and, if thought fit, passing the following resolution as an ordinary resolution:

ORDINARY RESOLUTION

“ THAT the agreement dated 15 October 2007 between (i) Well Harvest Enterprises Limited (the “Vendor”) and (ii) the Company whereby the Company agreed to acquire from the Vendor the entire issued share capital of, and the benefits of all shareholder’s loans to, Wellrich Investments Limited for a total consideration of HK$355.6 million, HK$120 million of which shall be paid in cash and the balance to be satisfied by the issue of 699,109,792 shares of HK$0.05 each of the Company (the “Consideration Shares”) to the Vendor or its nominee(s) (a copy of which is tabled at the meeting and signed by the Chairman for the purpose of identification) be and is hereby approved and that the directors of the Company be and are hereby authorised to implement the same (with any amendments to the terms of such agreement as may be approved by the directors of the Company) and to issue and allot the Consideration Shares pursuant thereto.”

By Order of the Board Cheung Mei Ha Jennifer

Company Secretary

Hong Kong, 7 November 2007

Principal Office:

2810-11, 28th Floor Shun Tak Centre West Tower 200 Connaught Road Central

Hong Kong

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NOTICE OF SGM

Notes:

A member entitled to attend and vote at the meeting convened by the above notice is entitled to appoint more than one proxy to attend and vote in his stead. A proxy need not be a member of the Company.
In order to be valid, a form of proxy must be deposited at the Company’s principal office together with a power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power of attorney or authority, not less than 48 hours before the time for holding the meeting or adjourned meeting.

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AI assistant

Weiye Holdings Limited — Proxy Solicitation & Information Statement 2007

50009_rns_2007-11-06_a9cc79ed-310d-463b-b63f-e4b7213ab81e.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

UNITED POWER INVESTMENT LIMITED

MAJOR AND CONNECTED TRANSACTION

Financial adviser to the Company

Independent financial adviser

FIRST SHANGHAI CAPITAL LIMITED

CONTENTS

DEFINITIONS

UNITED POWER INVESTMENT LIMITED

(Stock Code: 674)

MAJOR AND CONNECTED TRANSACTION

INTRODUCTION

LETTER FROM THE BOARD

THE AGREEMENT DATED 15 OCTOBER 2007

Parties

Assets to be acquired

Consideration and payment

Consideration Shares

LETTER FROM THE BOARD

Conditions and completion

LETTER FROM THE BOARD

Other arrangements

INFORMATION ON WELLRICH AND THE JV COMPANY

LETTER FROM THE BOARD

THE PROPERTIES

FINANCIAL REVIEW OF THE WELLRICH GROUP

For the year ended 31 December 2004

Turnover

Cost of operations

Property, plant and equipment

Liquidity and capital resources

Dividend

Employees and remuneration policies

Exposures to fluctuations in exchange rate

For the year ended 31 December 2005

Turnover

Cost of operations

Property, plant and equipment

Liquidity and capital resources

LETTER FROM THE BOARD

Dividend

Employees and remuneration policies

Exposures to fluctuations in exchange rate

For the year ended 31 December 2006

Turnover

Cost of operations

Property, plant and equipment

Liquidity and capital resources

LETTER FROM THE BOARD

Dividend

Employees and remuneration policies

Exposures to fluctuations in exchange rate

For the six months ended 30 June 2007

Turnover

Cost of operations

Property, plant and equipment

LETTER FROM THE BOARD

Liquidity and capital resources

Dividend

Employees and remuneration policies

Exposures to fluctuations in exchange rate

CHANGES IN THE SHAREHOLDING STRUCTURE OF THE COMPANY

LETTER FROM THE BOARD

REASONS FOR THE ACQUISITION

FINANCIAL AND TRADING PROSPECTS OF THE GROUP

LETTER FROM THE BOARD

Financial Review

Liquidity and financial resources

Charges

Emolument Policy

LETTER FROM THE BOARD

FINANCIAL EFFECTS OF THE ACQUISITION ON THE GROUP

SGM

LETTER FROM THE BOARD

PROCEDURES TO DEMAND A POLL

RECOMMENDATIONS

ADDITIONAL INFORMATION

Weiye Holdings Limited Proxy Solicitation & Information Statement 2007