Weiye Holdings Limited — Proxy Solicitation & Information Statement 2009

Mar 5, 2009

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

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

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

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UNITED POWER INVESTMENT LIMITED (Incorporated in Bermuda with limited liability) (Stock Code: 674)

VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION RELATING TO THE ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF, AND THE BENEFITS OF THE SHAREHOLDERS’ LOANS TO, HUA RONG SHENG SHI HOLDING LIMITED AND AN INCREASE IN AUTHORIZED SHARE CAPITAL

Financial Adviser to United Power Investment Limited

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

Piper Jaffray

A letter from the Independent Board Committee is set out on page 13 of this circular.

A letter from Piper Jaffray containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 14 to 43 of this circular.

A notice of a special general meeting to be held at Golden Island Bird’s Nest Chiu Chau Restaurant at 2nd Floor, East Wing, Star House, 3 Salisbury Road, Tsimshatsui, Kowloon, Hong Kong on 23 March 2009 at 3.30 p.m. is set out on pages 240 to 246 of this circular. Whether or not you are able to attend the meeting, please complete and return the form of proxy to the principal office of the Company in accordance with the instructions printed thereon not less than 48 hours before the time fixed for holding the meeting. Completion and return of the form of proxy will not prevent you from attending and voting in person should you so wish.

6 March 2009

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Letter from the IFA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Appendix I — Financial information of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	44
Appendix II — Accountants’ report on the HR Group . . . . . . . . . . . . . . . . . . . . . . . . . . .	123
Appendix III — Management discussion and analysis of the financial position
of the Group and the HR Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	162
Appendix IV — Unaudited Pro forma financial information
of the Enlarged Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	176
Appendix V — Property valuation of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	192
Appendix VI — General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	230
Notice of SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	240

— i —

DEFINITIONS

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

“Acquisition”	the acquisition of the Sale Shares and the Sale Loans by the
	Company from the Vendors pursuant to the Agreement
“Agreement”	an agreement dated 13 February 2009 between the Vendors
	and the Company relating to the sale and purchase of the Sale
	Shares and the Sale Loans
“Announcement”	an announcement dated 13 February 2009 of the Company
	relating to the Acquisition
“Associations”	中國音像協會(China Audio-Video Association),中國音像
	集體管理協會(China Music Video Collective Management
	Association) and中國音像協會卡拉OK版權運營中心(Karaoke
	Copyright Operation Centre of China Audio and Video
	Association)
“Board”	board of Directors
“Business Day”	a day (excluding Saturdays) on which licence banks are
	generally open for business in Hong Kong
“CCDDT”	北京中文發數字科技有限公司(China Culture Development
	Digital Technology Co., Ltd.), a sino-foreign joint venture
	established in the PRC, which owns 50% equity interest in
	Tian He
“Company”	United Power Investment Limited, a company incorporated
	in Bermuda with limited liability and the shares of which are
	listed on the Main Board of the Stock Exchange
“Completion”	completion of the Acquisition
“Consideration Shares”	4,568,181,818 Shares to be issued to the Vendors pursuant to
	the Agreement
“Conversion Ratio”	ratio applicable for converting the Convertible Preference
	Shares into Shares and initially being a “one on one” basis

— ii —

	DEFINITIONS
“Convertible Preference	convertible preference shares of HK$0.05 each to be created
Shares”	in the share capital of the Company and having the rights
	and benefits and subject to the restrictions set out in the
	Resolution
“Converted Shares”	Shares that will be issued on exercise of the conversion rights
	attaching to the Convertible Preference Shares
“Director(s)”	director(s) of the Company
“Enlarged Group”	the Group immediately after completion of the Acquisition
“Group”	the Company and its subsidiaries
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“HK$” and “cent(s)”	Hong Kong dollar(s) and cent(s) respectively
“Hua Rong”	Hua Rong Sheng Shi Holding Limited, a company
	incorporated in the British Virgin Islands with limited liability
“HR Group”	Hua Rong and its subsidiaries and associated companies
“Independent Board	an independent committee of the Board comprising Ms. Chan
Committee”	Lai Mei, Mr. Lee Wai Loun and Mr. Lee Yuk Sang, Angus,
	established for the purpose of advising the Independent
	Shareholders regarding the Acquisition
“Independent Financial	Piper Jaffray Asia Limited, a licensed corporation for types 1
Adviser” or “IFA” or “Piper	(dealing in securities), 4 (advising on securities), 6 (advising
Jaffray”	on corporate financial) and 9 (asset management) regulated
	activities under the SFO, and the independent financial adviser
	to the Independent Board Committee and the Independent
	Shareholders
“Independent Shareholders”	Shareholders other than Mr. Yeung and his associates
“Independent Third	a third party who is, to the best of the Directors’ knowledge,
Party(ies)”	information and belief having made all reasonable enquiry,
	independent of the Company and connected persons (as
	defined in the Listing Rules) of the Company

— iii —

	DEFINITIONS
“IP Owners”	the owners of the intellectual property rights of music videos,
	songs or other similar music products played or used in
	karaoke venues
“Latest Practicable Date”	2 March 2009, being the practicable date prior to printing of
	this circular for ascertaining certain information for inclusion
	in this circular
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“Ms. Ma”	Ms. Ma Shuk Kam, the non-executive chairperson of the
	Company
“Mr. Chu”	Mr. Chu Ying Man, an Independent Third Party
“Mr. Yeung”	Mr. Yeung Chi Hang, an executive Director and the chief
	executive officer of the Company
“Ms. Yeung”	Ms. Yeung Kit Yu, Kitty
“PRC”	People’s Republic of China, excluding Hong Kong, Taiwan and
	Macau Special Administrative Region
“Provincial JVs”	provincial-level joint ventures established in the PRC between
	Tian He and local partners in which Tian He holds a majority
	interest or has the right to nominate a majority of directors to
	their boards
“Resolution”	the resolution to be proposed at the SGM in relation to, inter
	alia, the creation of the Convertible Preference Shares
“RMB”	Renminbi, the lawful currency of the PRC
“Sale Loans”	the benefits of loans of about HK$60,070,522 advanced to Hua
	Rong as at the date of the Agreement and all further loan(s)
	as may be advanced by the Vendors or either of them to any
	member of the HR Group up to the date of Completion
“Sale Shares”	100 shares of Hua Rong owned by Mr. Yeung and Mr. Chu as
	to 70 shares and 30 shares respectively

— iv —

	DEFINITIONS
“SFO”	Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)
“SGM”	the special general meeting of the Company to be held on
	23 March 2009 at Golden Island Bird’s Nest Chiu Chau
	Restaurant at 2nd Floor, East Wing, Star House, 3 Salisbury
	Road, Tsimshatsui, Kowloon, Hong Kong at 3.30 p.m., notice
	of which is set out on pages 240 to 246 of this circular
“Share(s)”	ordinary share(s) of HK$0.05 each in the share capital of the
	Company
“Shareholders”	holders of Shares
“Shenzhen Hua Rong”	深圳市華融盛世投資管理有限公司(Shenzhen Hua Rong
	Sheng Shi Investment Management Company Limited), a
	company established in Shenzhen, the PRC
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Tian He”	天合文化集團有限公司(Tian He Culture Holding Co., Ltd.), a
	company established in the PRC
“Valuer”	Savills Valuation and Professional Services Limited
“Vendors”	Mr. Yeung and Mr. Chu
“World Possession”	World Possession Assets Limited, a company incorporated in
	the British Virgin Islands with limited liability

— v —

LETTER FROM THE BOARD

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UNITED POWER INVESTMENT LIMITED

(Incorporated in Bermuda with limited liability) (Stock Code: 674)

Directors:

Ma Shuk Kam (Non-executive Chairperson) Yeung Chi Hang (Chief Executive Officer) Liu Yu Mo Au Edmond Wah Chan Lai Mei Lee Wai Loun Lee Yuk Sang, Angus *

Principal Office:

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

6 March 2009

* Independent non-executive Directors

To the Shareholders,

Dear Sir or Madam,

VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION RELATING TO THE ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF, AND THE BENEFITS OF SHAREHOLDERS’ LOANS TO, HUA RONG SHENG SHI HOLDING LIMITED AND AN INCREASE IN AUTHORIZED SHARE CAPITAL

INTRODUCTION

Reference is made to the Company’s announcement dated 13 February 2009 in relation to the Acquisition. The Company entered into the Agreement with the Vendors on 13 February 2009, pursuant to which the Company conditionally agreed to purchase and the Vendors conditionally agreed to sell the entire issued share capital of Hua Rong and assign the Sale Loans to the Company at a total consideration of HK$750,000,000, of which HK$90,000,000 is to be paid in cash, HK$157,500,000 is to be satisfied by the allotment and issue of 1,431,818,182 Convertible Preference Shares credited as fully paid at HK$0.11 each, and the balance of HK$502,500,000 is to be satisfied by the allotment and issue of 4,568,181,818 Consideration Shares credited as fully paid at HK$0.11 each. It was also proposed to increase the authorized share capital of the Company from HK$500,000,000 to HK$1,000,000,000.

— 1 —

LETTER FROM THE BOARD

As the relevant applicable percentage ratios of the Acquisition pursuant to Rule 14.07 of the Listing Rules exceed 100%, the Acquisition constitutes a very substantial acquisition of the Company pursuant to Rule 14.06(5) of the Listing Rules. By virtue of Mr. Yeung being the chief executive officer, an executive director and a substantial shareholder of the Company, Mr. Yeung is a connected person of the Company within the meanings of the Listing Rules. Accordingly, the Acquisition also constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules. The Company is subject to the requirements of reporting, announcement and Independent Shareholders’ approval at the SGM under the Listing Rules.

The purpose of this circular is to provide you with, among others, (i) further details of the Acquisition, the Agreement and the increase of the authorised share capital of the Company; (ii) a letter of advice from the Independent Board Committee to the Independent Shareholders in relation to the Acquisition; (iii) a letter of advice from the IFA to the Independent Board Committee and the Independent Shareholders in relation to the Acquisition; and (iv) a notice convening the SGM.

THE AGREEMENT DATED 13 FEBRUARY 2009

Parties:

Vendors: Mr. Yeung and Mr. Chu

Purchaser: the Company

Assets acquired:

The Sale Shares (representing the entire issued share capital) and the Sale Loans.

Consideration:

The total consideration for the Acquisition amounts to HK$750,000,000, of which HK$90,000,000 is to be paid in cash, HK$157,500,000 is to be satisfied by the allotment and issue of 1,431,818,182 Convertible Preference Shares credited as fully paid at HK$0.11 each, and the balance of HK$502,500,000 is to be satisfied by the allotment and issue of 4,568,181,818 Consideration Shares, credited as fully paid at HK$0.11 each.

— 2 —

LETTER FROM THE BOARD

After arm’s length negotiations between the Company and the Vendors, the allocation basis of the total consideration to each of Mr. Yeung and Mr. Chu is as follow:

Mr. Yeung Mr. Chu Total	Cash (HK$) — 90,000,000 90,000,000	Consideration Shares Value No. of Consideration Shares (HK$) (unit) 415,000,000 3,772,727,273 87,500,000 795,454,545 502,500,000 4,568,181,818	Convertible Preference Shares Value No. of Convertible Preference Shares (HK$) (unit) 110,000,000 1,000,000,000 47,500,000 431,818,182 157,500,000 1,431,818,182

The issue price of the Consideration Shares represents:

• (a) a discount of about 38.9% to the closing price of HK$0.18 per Share quoted on the Stock Exchange on 2 March 2009, being the Latest Practicable Date;

• (b) a premium of about 8.9% over the closing price of HK$0.101 per Share quoted on the Stock Exchange on 12 February 2009, being the last trading day before the date of the Announcement;

• (c) a premium of about 6.4% over the average closing price of HK$0.1034 per Share quoted on the Stock Exchange for the last 5 Business Days prior to 13 February 2009, the date of the Announcement, including 6 February 2009;

• (d) a premium of about 0.5% over the average closing price of HK$0.1095 per Share quoted on the Stock Exchange for the last 30 Business Days prior to 13 February 2009, the date of the Announcement, including 29 December 2008;

• (e) a premium of about 2.7% over the average closing price of HK$0.1071 per Share quoted on the Stock Exchange for the last 60 Business Days prior to 13 February 2009, the date of the Announcement, including 12 November 2008; and

• (f) a premium of about 3.4% over the average closing price of HK$0.1064 per Share quoted on the Stock Exchange for the last 90 Business Days prior to 13 February 2009, the date of the Announcement, including 29 September 2008.

The Consideration Shares represent about 134.4% of the existing issued share capital of the Company or about 57.3% of the issued share capital of the Company as enlarged by the issue of the Consideration Shares.

— 3 —

LETTER FROM THE BOARD

The Convertible Preference Shares represent about 42.1% of the existing issued share capital of the Company or about 17.9% of the issued share capital of the Company as enlarged by the issue of the Consideration Shares and full conversion of Convertible Preference Shares to the extent permissible under its terms.

The Convertible Preference Shares are convertible into Shares on a one on one basis (subject to adjustment in the event of a consolidation or subdivision of Shares but not otherwise). Further details on the terms and rights of the Convertible Preference Shares are set out in the section headed “Effects of the Acquisition on the Company — Share capital” below.

The consideration was arrived based on recent relevant transaction (i.e. the acquisition of Grand Promise International Limited, which holds 50% indirect stake in Tian He, by China Vanguard Group Ltd, a company with its shares listed on the Growth Enterprise Market of the Stock Exchange (Stock code: 8156), in April 2008) and market trading comparables. The Directors have also taken into account the following factors in arriving at such consideration:

• Current market environment

• Current financial position and historical financial performance of the HR Group

• Potential revenue generation of the HR Group.

In view of the above, the Directors (excluding the independent non-executive Directors) consider the consideration for the Acquisition is fair and reasonable and on normal commercial terms and is in the interests of the Company and the Shareholders as a whole.

The consideration for the Acquisition shall be payable by the Company to the Vendors at Completion.

The Consideration Shares, when allotted and issued, shall rank pari passu in all respects with the Shares then in issue including the right to all dividends, distributions and other payments made or to be made, on or after the date of the Agreement.

There is no restriction on subsequent sale of (i) the Consideration Shares; (ii) the Convertible Preference Shares; and (iii) the Shares to be converted under the Convertible Preference Shares upon Completion.

Funding:

The cash portion of the consideration will be funded from internal resources and available banking facilities of the Company.

— 4 —

LETTER FROM THE BOARD

Conditions precedent of the Agreement:

Completion of the Agreement is conditional upon the fulfilment or waiver of the following conditions precedent:

• (a) the passing at the SGM of resolutions to approve the Agreement, to create the Convertible Preference Shares and to authorize the issue and allotment of the Consideration Shares, the Convertible Preference Shares and the Converted Shares pursuant to the Agreement;

• (b) the granting by the Listing Committee of the Stock Exchange of a listing of and permission to deal in the Consideration Shares and the Converted Shares;

• (c) the Company completing a review of the financial trading and legal position of the HR Group and such review not revealing any breach of the representations, warranties or undertakings of the Vendors in respect of the HR Group;

• (d) all consents, approvals, licences, registrations, filings and other actions from all governmental, regulatory or other official authorities necessary for the transactions contemplated by the Agreement having been obtained in form and substance satisfactory to the Company and remaining in full force and effect; and

• (e) a legal opinion in relation to the legal status of Shenzhen Hua Rong, Tian He and its subsidiaries and the validity of various material agreements entered into by members of the HR Group in form and substance satisfactory to the Company having been issued by the PRC legal advisers to the Company.

If any of the conditions precedent are not fulfilled on or before 30 April 2009, or any such later date as may be agreed between the Company and the Vendors, the Agreement shall lapse and no party to the Agreement shall have any claim against other parties except in respect of any antecedent breach.

Application has been made to the Stock Exchange for the listing of and permission to deal in the Consideration Shares and the Converted Shares. No part of the Convertible Preference Shares will be listed on the Stock Exchange.

Completion date:

Completion will take place on the 2nd Business Day following the Agreement becoming unconditional (or such other date as may be agreed between the Company and the Vendors).

— 5 —

LETTER FROM THE BOARD

INFORMATION ON THE HR GROUP

Hua Rong, a company incorporated in the British Virgin Islands on 25 July 2007 with limited liability, is an investment holding company. As at the date of the Agreement, Mr. Yeung and Mr. Chu hold 70% and 30% interest in Hua Rong, respectively.

Shenzhen Hua Rong, a company established in the PRC on 14 June 2007, is a wholly owned subsidiary of Hua Rong. It has a registered capital of RMB50,000,000 which has been fully paid up. Shenzhen Hua Rong is an investment holding company.

Tian He is a joint venture company established in the PRC on 27 August 2007. As of the date of the Agreement, Tian He is owned as to 50% equity interest by Shenzhen Hua Rong and 50% equity interest by CCDDT, an Independent Third Party. Tian He has a registered capital of RMB100,000,000 which has been fully paid up. It is principally engaged in the provision of copyright transaction settlement services relating to karaoke venues.

On 15 July 2007, Tian He and CCDDT entered into a licensing agreement (subsequently supplemented on 12 May 2008), pursuant to which Tian He was granted an exclusive right to use a nationwide karaoke content management service system in the PRC developed by CCDDT (the “Karaoke CMS”) to provide copyright transaction settlement services and the right to develop related value-added services in the PRC for a term of 10 years from the date of the licensing agreement.

The Karaoke CMS is an information system that connects the Karaoke CMS data centre to karaoke venues to supervise and keep track of karaoke music videos played in these venues. This information system can be utilized to provide copyright transaction settlement services and other value-added services for karaoke venues such as product advertisement and promotion services.

On 27 December 2007, Tian He entered into a service agreement with the Associations (subsequently supplemented on 21 April 2008), pursuant to which Tian He was appointed as the exclusive service provider of the Associations to provide, amongst other services, copyright licence fees settlement and collection services in respect of the karaoke music products and videos managed and administered by the Associations for a term of 10 years from its date of execution. Tian He has established wholly-owned subsidiaries and Provincial JVs with local partners to provide the settlement and collection services in the PRC. As of the date of the Agreement, Tian He had established a total of 9 wholly-owned subsidiaries and 21 Provincial JVs. Pursuant to the service agreement, Tian He, together with the Provincial JVs, is entitled to a service fee equivalent to 25% of the fee income collected (after tax) from the karaoke operators.

— 6 —

LETTER FROM THE BOARD

中國音像著作權集體管理協會 (China Audio-Video Copyright Association), which succeeded 中國音像集體管理協會 (China Music Video Collective Management Association), is the only organization authorized by the relevant PRC authorities to administer the copyrights of audio-videos and music videos or other similar music products owned by IP Owners in the PRC. It is authorized to enter into audio-video copyright collective management contracts with IP Owners, to enter into licence agreements with copyright users, including karaoke operators, and to collect licence fees/royalties from the copyright users for distribution to the IP Owners. It has endorsed the service agreement between the Associations and Tian He.

Tian He is responsible for coordinating between the Associations and karaoke operators for the administration and settlement of copyright transactions. Its services include the following:

• act as an interface between the Associations and karaoke operators;

• manage and provide song database and programmes to authorized karaoke operators;

• carry out copyright transaction settlement services between the Associations and karaoke operators based on data collected on the number of times which karaoke tracks are played and transfer the licence fees collected to the Associations;

• manage its wholly-owned subsidiaries and Provincial JVs; and

• develop value-added services, such as using the Karaoke CMS to advertise and promote products after obtaining appropriate government authorization.

For the period from 14 June 2007 (the date of incorporation of Shenzhen Hua Rong) to 31 March 2008 and the six months ended 30 September 2008, the unaudited consolidated loss of the HR Group after taxation was HK$15,036,583 and HK$4,293,853, respectively. There was no extraordinary item during the period from 14 June 2007 (the date of incorporation of Shenzhen Hua Rong) to 30 September 2008.

The HR Group had net liabilities of about HK$20,604,923 as at 30 September 2008.

The total original cost of the 70 shares of Hua Rong to Mr. Yeung was RMB35,000,000 (about HK$39,800,000).

REASONS FOR, AND BENEFITS OF, THE ACQUISITION

The Group is principally engaged in hotel and restaurant operations, property investment, provision of wedding services, entertainment business and collection of fees for licensing of karaoke music products in the PRC.

— 7 —

LETTER FROM THE BOARD

The Directors are optimistic about the future prospects of the entertainment industry in the PRC. They consider that the Acquisition will enable the Group to quickly scale up and become a platform to consolidate operations for collection of copyright fees for both content distribution and infrastructure in respect of karaoke music products in the PRC. The Directors believe that the Acquisition will enhance the future growth of the Group’s business activities and enable it to maximise returns to the Shareholders. The Directors (excluding independent non-executive Directors) consider that the terms of the Acquisition are fair and reasonable and in the interest of the Shareholders as a whole.

CHANGES IN THE SHAREHOLDING STRUCTURE OF THE COMPANY

Mr. Yeung and his associates Mr. Liu Yu Mo (Note 1) Mr. Chu Public Shareholders Total	As at the Latest Practicable Date Number of Shares % 2,188,660,478 64.4 1,048,000 0.03 — — 1,208,522,914 35.6 3,398,231,392 100.0	Upon completion of the Acquisition and prior to any conversion of Convertible Preference Shares Number of Shares % Number of Convertible Preference Shares % 5,961,387,751 74.8 1,000,000,000 69.8 1,048,000 0.01 — — 795,454,545 9.99 431,818,182 30.2 1,208,522,914 15.2 — — 7,966,413,210 100.0 1,431,818,182 100.0	Upon completion of the Acquisition and post full conversion of Convertible Preference Shares Number of Shares % 6,961,387,751 74.07 (Note 2) 1,048,000 0.01 1,227,272,727 13.06 (Note 2) 1,208,522,914 12.86 9,398,231,392 100.0	Upon completion of the Acquisition and post full conversion of Convertible Preference Shares Number of Shares % 6,961,387,751 74.07 (Note 2) 1,048,000 0.01 1,227,272,727 13.06 (Note 2) 1,208,522,914 12.86 9,398,231,392 100.0
				100.0

Note 1: Mr. Liu Yu Mo is an executive Director.

Note 2: According to the terms of the Convertible Preference Shares, the conversion of the Convertible Preference Shares is conditional upon, among others, the Company’s minimum public float is maintained.

— 8 —

LETTER FROM THE BOARD

EFFECTS OF THE ACQUISITION ON THE COMPANY

Share capital

On Completion, the share capital of the Company will comprise Shares and Convertible Preference Shares. The Convertible Preference Shares would only carry limited voting rights, have no right to dividend payment by the Company but can be converted into Shares on a one on one basis. This Conversion Ratio will only be adjusted where there is an alteration to the nominal value of a Share as a result of a consolidation or subdivision of the Shares. It will not be adjusted for other changes to the share capital of the Company or any dilutive events.

The rights of the Convertible Preference Shares are set out in the Resolution, and a summary of which is set out below:

Par Value:	HK$0.05
Issue Price:	HK$0.11
Conversion Ratio:	Each Convertible Preference Share carries the right to convert into
	one Share (subject to adjustment only in the event of an alternation
	to the nominal value of the Shares as a result of consolidation or
	subdivision of the Shares and not otherwise).
Dividends:	Holders of Convertible Preference Shares are not entitled to any
	dividend payment.
Conversion:	Holders shall have the right to convert, in whole or in part, during
	the Conversion Period, each Convertible Preference Share into one
	Share provided that the public float of the Shares shall not be less
	than 25% (or any specific percentage as required by the Listing
	Rules) immediately following the exercise of such conversion right.
Conversion Period:	Perpetual as from the date of issue.
Redemption:	Non-redeemable.
Transferability:	Convertible Preference Shares are freely transferable from the date
	of issue.

— 9 —

LETTER FROM THE BOARD

Voting Rights: Holders of Convertible Preference Shares shall be entitled to receive notices of and attend any Shareholders’ meetings but shall not be entitled to vote at any Shareholders’ meeting by reason only of being holders of Convertible Preference Shares save where the resolutions in question relate to the dissolution or winding up of the Company or variation or abrogation of the rights attaching to the Convertible Preference Shares in which cases the holders of the Convertible Preference Shares will have the same voting rights as those attaching to the Shares on an as-converted basis.

Ranking:

Rank in priority to the Shares as to a return of capital on a winding up or otherwise. The Converted Shares shall rank pari passu in all respect with all other Shares in issue upon liquidation or dissolution of the Company.

Neither issue nor conversion of the Convertible Preference Shares will result in any change of control of the Company.

Financial effects

Upon Completion, Hua Rong will become a wholly-owned subsidiary of the Company and its assets and liabilities will be included in the Company’s consolidated balance sheet, and Tian He will be accounted for as a jointly controlled entity and will be proportionately consolidated into the Group’s financial statements.

As at 30 September 2008, the unaudited consolidated total assets of the Group amounted to approximately HK$1,222.09 million. Based on the unaudited pro forma consolidated balance sheet of the Enlarged Group as set out in Appendix IV to this circular, the unaudited pro forma adjusted consolidated total assets of the Enlarged Group would be approximately HK$1,913.98 million. As at 30 September 2008, the unaudited consolidated total liabilities of the Group amounted to approximately HK$272.39 million. Based on the unaudited pro forma consolidated balance sheet of the Enlarged Group set out in Appendix IV to this circular, the unaudited pro forma adjusted consolidated total liabilities of the Enlarged Group would be approximately HK$304.28 million. As the HR Group is still at the introductory stage of its business, it is expected that the Acquisition initially may have adverse effects on the earnings of the Enlarged Group. However the Directors believe the HR Group will be profitable in the longer run and contribute to the earnings of the Enlarged Group.

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LETTER FROM THE BOARD

PROPOSED INCREASE IN AUTHORIZED SHARE CAPITAL

As at the Latest Practicable Date, the existing authorized share capital of the Company is HK$500,000,000 divided into 10,000,000,000 Shares, of which 3,398,231,392 Shares have been issued and are fully paid or credited as fully paid. As such, most of the unissued 6,601,768,608 Shares in the existing authorized share capital of the Company will be used for the allotment and issue of the Consideration Shares and Convertible Preference Shares.

The Board proposed to increase the authorized share capital of the Company from HK$500,000,000 to HK$1,000,000,000. The proposed increase in the authorized share capital of the Company is conditional upon the Shareholders’ approval at the SGM. The Directors have no present intention of issuing any part of the increased authorised share capital of the Company.

IMPLICATIONS UNDER THE LISTING RULES

As the relevant applicable percentage ratios of the Acquisition pursuant to Rule 14.07 of the Listing Rules exceed 100%, the Acquisition constitutes a very substantial acquisition of the Company pursuant to Rule 14.06(5) of the Listing Rules. The Acquisition also constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules. The Company is subject to the requirements of reporting, announcement and the Independent Shareholders’ approval at the SGM under the Listing Rules.

The Independent Board Committee comprising Ms. Chan Lai Mei, Mr. Lee Wai Loun and Mr. Lee Yuk Sang, Angus (all independent non-executive Directors) has been established to advise the Independent Shareholders as to whether or not the terms of the Agreement are fair and reasonable, on normal commercial terms and in the interests of the Company and the Independent Shareholders as a whole. An independent financial adviser, Piper Jaffray, has been appointed to advise the Independent Board Committee and the Independent Shareholders in this regard. The Independent Board Committee has approved the appointment of the IFA.

THE SGM

You will find on pages 240 to 246 of this circular a notice of the SGM to be held at Golden Island Bird’s Nest Chiu Chau Restaurant at 2nd Floor, East Wing, Star House, 3 Salisbury Road, Tsimshatsui, Kowloon, Hong Kong on 23 March 2009 at 3.30 p.m. during which an ordinary resolution will be proposed to consider, and, if thought fit, to approve the Acquisition and the increase in the authorized share capital of the Company. Voting in the SGM will be taken by poll in accordance with the Listing Rules.

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LETTER FROM THE BOARD

There is enclosed a form of proxy for use at the SGM. You are requested to complete the form of proxy and return it to the principal office of the Company in accordance with the instructions printed thereon not less than 48 hours before the time fixed for holding the meeting, whether or not you intend to be present at the meeting. The completion and return of the form of proxy will not prevent you from attending and voting in person should you so wish.

As at the Latest Practicable Date, to the extent that the Company is aware having made all reasonable enquiries, Mr. Yeung and his associates had beneficial interests in a total of 2,144,600,478 Shares. They will be required to abstain from voting in respect of the resolution approving the Agreement at the SGM under the Listing Rules.

RECOMMENDATION

The Independent Board Committee, having taken into account the advice of Piper Jaffray considers that the Acquisition are fair and reasonable so far as the Independent Shareholders are concerned and in the interest of the Company and the Shareholders as a whole. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM to approve the Acquisition.

The Directors consider that the Acquisition is fair and reasonable to the Company and in the interest of the Shareholders as a whole. Accordingly, the Directors recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM to approve the Acquisition.

ADDITIONAL INFORMATION

The letter from the Independent Board Committee containing its recommendation is set out on page 13 of this circular. The letter from Piper Jaffray containing its advice and recommendation to the Independent Board Committee and the Independent Shareholders is set out on pages 14 to 43 of this circular.

Your attention is drawn to the letters from the Independent Board Committee and Piper Jaffray, and the information set out in the appendices of this circular.

Yours faithfully,

Liu Yu Mo

Executive Director

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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UNITED POWER INVESTMENT LIMITED (Incorporated in Bermuda with limited liability) (Stock Code: 674)

6 March 2009

To the Independent Shareholders

Dear Sir or Madam,

VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION

We refer to the circular of the Company dated 6 March 2009 (the “Circular”), of which this letter forms part. Terms defined in the Circular shall bear the same meanings when used herein unless the context requires otherwise.

We have been appointed as the Independent Board Committee to consider the Acquisition and Piper Jaffray has been appointed as the independent financial adviser to advise us in this respect.

Your attention is drawn to the letter from the Board and the letter from the IFA containing its advice to us as set out in the Circular respectively.

Taking into account the advice from the IFA, we consider that the terms of the Agreement are fair and reasonable so far as the Independent Shareholders are concerned and the Acquisition is in the interests of the Company and its Shareholders as a whole, and so recommend the Independent Shareholders to vote for the resolution to be proposed at the SGM.

Yours faithfully,

Chan Lai Mei Lee Wai Loun Lee Yuk Sang, Angus Independent Board Committee

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LETTER FROM IFA

The following is the text of a letter from Piper Jaffray Asia Limited setting out its advice to Independent Board Committee and the Independent Shareholders for the purpose of inclusion in this circular.

3902B, 39th Floor, Tower 1 Lippo Centre 89 Queensway Hong Kong 6 March 2009

To: the Independent Board Committee and the Independent Shareholders

Dear Sirs,

VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION

INTRODUCTION

We refer to our appointment to advise the Independent Board Committee and the Independent Shareholders in respect of the Acquisition as contemplated under the Agreement. Details of the above transaction are set out in the letter from the Board (the “ Letter from the Board ”) contained in the circular dated 6 March 2009 issued by the Company to the Shareholders (the “ Circular ”), of which this letter forms part. Unless the context requires otherwise, capitalised terms used herein shall have the same meanings as those defined in the Circular.

On 13 February 2009, the Company and the Vendors entered into the Agreement pursuant to which the Company conditionally agreed to purchase and the Vendors conditionally agreed to sell the entire issued share capital of Hua Rong and assign the Sale Loans to the Company at an aggregate consideration of HK$750,000,000 (the “ Consideration ”). HK$90,000,000 of the Consideration is to be paid in cash, the balance of HK$157,500,000 to be satisfied by the allotment and issue of 1,431,818,182 Convertible Preference Shares credited as fully paid at HK$0.11 each, and the balance of HK$502,500,000 to be satisfied by the allotment and issue of 4,568,181,818 Consideration Shares credited as fully paid at HK$0.11 each.

The Acquisition constitutes a very substantial acquisition for the Company under the Listing Rules. As Mr. Yeung, one of the Vendors, is the chief executive officer, an executive Director and the substantial shareholder (Mr. Yeung and his associates directly and indirectly hold approximately 64.4% of the existing issued share capital of the Company as at the Latest Practicable Date) of the Company, Mr. Yeung is a connected person of the Company and the

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LETTER FROM IFA

Acquisition constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules. As the relevant percentage ratios for the Acquisition are greater than 2.5% and the Consideration is more than HK$10 million, the Acquisition is subject to the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

The Independent Board Committee comprising three independent non-executive Directors, namely Madam Chan Lai Mei, Messrs. Lee Wai Loun and Lee Yuk Sang, Angus has been formed to advise the Independent Shareholders in respect of the Agreement and the Acquisition.

BASIS OF OPINION

In formulating our opinions and recommendations, we have relied on the statements, information, opinions and representations (other than those about, of or given by us) contained or referred to in the Circular (together, the “ Relevant Information ”). We have discussions with the Directors regarding their view on the reasons for the Acquisition, the factors considered and the bases and assumptions in determining the consideration of the Acquisition. We have also discussed with the management of Tian He regarding the overall karaoke industry in the PRC, the operation and the business outlook of Tian He. We have also discussed with representatives from CMVCCMA (as defined below) regarding the general information of CMVCCMA. We have assumed that all such statements, information, opinions and representations contained or referred to in the Circular or given during the discussion with us were true, complete and accurate in all respects at the time they were made and/or given and continue to be true in all respects as at the date of this letter of advice (the “ Letter ”). We have also assumed that all statements of belief, opinion, assumptions and intention made by the Directors in the Circular were reasonably made after due and careful enquiry and were honestly made. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us and the statements made by the Directors in connection with the Circular or the truth, accuracy and completeness of any other Relevant Information and we have been advised by the Directors that no material facts in respect of the Company and/or the Group have been omitted from the information and representations provided and referred to in the Circular.

We consider that we have been provided with sufficient information to enable us to reach an independent view to justify our reliance on the truth, accuracy and completeness of the Relevant Information and to provide a reasonable basis for our recommendations. We have no reason to suspect that any relevant information has been withheld, nor are we aware of any facts or circumstances which would render the Relevant Information untrue, inaccurate or misleading. We have not, however, carried out any independent verification of the Relevant Information, nor have we conducted any independent investigation into any related transactions referred to in the Circular, or into the businesses, affairs or prospects of the Company.

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LETTER FROM IFA

We are a licensed securities dealer and corporate finance adviser under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) and together with our affiliates provide a full range of financial advisory and broking services. In the course of normal trading activities, we and our affiliates may from time to time effect transactions and hold securities, including derivative securities, of the Company for our own account or the accounts of our customers.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion and recommendation to the Independent Board Committee and the Independent Shareholders in relation to the Agreement and the Acquisition, we have taken into consideration the following principal factors and reasons:

A. Overview of the karaoke industry and the Karaoke CMS in the PRC

We have reviewed certain recent official economic statistics published by the PRC Government. Over the past decade, China was one of the fastest growing economies in the world. GDP in the PRC increased from about RMB8,440 billion in 1998 to about RMB24,953 billion in 2007, representing a compound annual growth rate of approximately 12.8% and a total increase of approximately 195.7%. During this period, the standards of living of the PRC residents had improved in accordance with the economic growth. As a result, the karaoke business had developed rapidly in the PRC. According to the statistics in 中國文化文物統計年鑒 (Statistical Yearbook of China Culture), there were approximately 51,742 and 56,722 dedicated and non-dedicated karaoke venues (including pubs or discos which also provided karaoke services) across the PRC in 2006 and 2007, respectively, representing a year-to-year growth of 9.6%.

Over the past years, the PRC Government has established a series of industry standards, laws and regulations to protect intellectual property ownership and to promote the karaoke industry, including 著作權集體管理條例 (the Regulations on the Collective Management of Copyright, effective from 1 March 2005), 娛樂場所管理 條例 (the Regulations on the Administration of Entertainment Venues, effective from 1 March 2006) and 卡拉OK節目製作規範 (the Producing Specifications of Karaoke Programmes, effective from 1 December 2007). Under such regulations, only legal copies and versions of karaoke music videos are to be used in PRC entertainment venues.

However, in the PRC, there are still a significant number of karaoke venues using copyright materials for their commercial activities without acquiring the copyright authorisation and paying related fees to the IP Owners. The PRC Government and the IP Owners recognise the need to establish an effective and integrated management

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LETTER FROM IFA

system to serve as a unified channel to manage the copyright transactions in the karaoke industry. In light of this, 文化部文化市場發展中心 (Market Development Center of Ministry of Culture) exclusively appointed CCDDT to establish and operate the Karaoke CMS in November 2006, with an attempt to facilitate the management of the karaoke industry in the PRC regarding the protection of the intellectual properties.

The Karaoke CMS developed by CCDDT is an information system that connects the Karaoke CMS data center to karaoke venues nationwide to supervise and keep track of karaoke music videos played in these venues. Karaoke music videos are uploaded to the Karaoke CMS and the IP Owners can grant the rights of use of karaoke music videos to karaoke operators by proper authorisation for them to gain access to the Karaoke CMS. The IP Owners can then utilise the Karaoke CMS data to facilitate copyright transactions settlement. The Karaoke CMS can also provide other value-added services for karaoke venues such as product advertisements and promotion services.

The Directors believed the Karaoke CMS has demonstrated its mechanism to protect the intellectual properties in the karaoke industry by offering a centralised platform on copyright transactions settlement between IP Owners and karaoke operators, in which the frequency of karaoke music videos played in the venues is tracked. The roll-out of the Karaoke CMS helps to implement the relevant copyright regulations, in which the Associations and Tian He have utilised the Karaoke CMS as the channel to carry out copyright transaction settlements for karaoke venues.

We consider that in the long run the karaoke industry in the PRC would perform favourably along with the economic growth and the increase in the living standard of the people in the PRC. With the established laws and regulations, the PRC Government is committed to protect intellectual properties in the karaoke industry. The set up of CCDDT and the development of the Karaoke CMS provide a centralised platform to facilitate the copyright transactions in the karaoke industry.

B. Background information of the Acquisition

1. Information on the Group

The Group is principally engaged in hotel and restaurant operations, property investment, provision of wedding services, entertainment business and karaoke licensing business in the PRC.

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LETTER FROM IFA

Tabularised below is a summary of the audited consolidated financial information on the Group as extracted from the annual report of the Group for the year ended 31 March 2008 (the “ Annual Report ”):

	For the year	For the year
	ended	ended	Year on year
	31 March 2008	31 March 2007	change
	HK$	HK$	%
Turnover	276,016,114	202,150,157	36.5
Gross profit	124,676,206	105,480,446	18.2
Profit/(loss) for the year from continuing
operations	32,952,696	(37,744,513)	N/A
Profit for the year attributable to equity holders
of the Company_(Note)_	31,901,584	57,132,114	(44.2)
		As at	As at
		31 March 2008	31 March 2007
		HK$	HK$
Net asset value		966,006,035	646,651,578
Note:

In November 2006, the Group disposed of its hotel operations in Macau and recorded the gain on disposal of hotel operations of approximately HK$81.5 million for the year ended 31 March 2007 (the “Disposal Gain”). Profit for the year attributable to equity holders of the Company for the year ended 31 March 2007 included the net operating profit for the year from discontinued operations of HK$7.0 million and the Disposal Gain, which in aggregate amounted to approximately HK$88.5 million.

Turnover of the Group for the year ended 31 March 2008 was about HK$276.0 million, representing an increase of about 36.5% as compared to that of the previous year. The increase was mainly contributed by the watch retail business of about HK$112.5 million and the acquisition of the hotel operations in the PRC, which achieved a turnover of about HK$30.1 million. Excluding the effect from the discontinued operations, the Group achieved a profit for the year from continuing operations of about HK$33.0 million for the year ended 31 March 2008, as compared to a loss of about HK$37.7 million for the year ended 31 March 2007. The profit in 2008 was mainly attributable to the excess of the Group’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of about HK$59.3 million and fair value gain of investment properties of about HK$27.2 million. Without such gains, the Group would have recorded a loss of about HK$53.5 million for the year ended 31 March 2008.

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LETTER FROM IFA

In early 2007, the Group through its non-wholly-owned subsidiary, China Music Video Broadcast (Shenzhen) Company Limited (“ China Music ”), commenced the business of the collection of fees for licensing of copyright to karaoke operators. Such new business incurred a loss of about HK$56 million for the year ended 31 March 2008, which was mainly due to an amortization of deferred expenditure of about HK$45.3 million.

2. Information on Hua Rong

Overview

Hua Rong is an investment holding company incorporated in the British Virgin Islands on 25 July 2007 with limited liability. As at the date of the Letter, Mr. Yeung and Mr. Chu hold 70% and 30% interest in Hua Rong respectively.

Shenzhen Hua Rong, a company established in the PRC on 14 June 2007, is a wholly owned subsidiary of Hua Rong. It has a registered capital of RMB50,000,000 which has been fully paid up.

Tian He is a joint venture company established in the PRC on 27 August 2007. As of the date of the Letter, Tian He is owned as to 50% equity interest by Shenzhen Hua Rong and 50% equity interest by CCDDT. Tian He has a registered capital of RMB100 million which has been fully paid up. Pursuant to the joint venture agreement dated 15 July 2007 entered into between Shenzhen Hua Rong and CCDDT, Tian He is principally engaged in the provision of copyright transactions settlement services relating to karaoke venues through the Karaoke CMS.

The Associations comprise 中國音像協會 (China Audio-Video Association, “CAVA”), 中國音像集體管理協會 (China Music Video Collective Management Association, “CMVCMA”) and 中國音像協會卡拉OK版權運營中心 (Karaoke Copyright Operation Centre of China Audio and Video Association, the “Operation Centre”). Set out below is a summary of their background information.

According to its website, CAVA was established on 29 April 1994, approved by 新聞出版總署 (General Administration of Press and Publication) and 民 政部 (Ministry of Civil Affairs) in the PRC. It has currently more than 520 members that are engaged in audio-video production, duplication, distribution and marketing. Pursuant to 2006年1號公告 (Year 2006 Announcement No. 1) issued by 國家版權局 (National Copyright Bureau), before CAVA has formally established 中國音像著作權集體管理協會 (China Music Video Copyright Collective Management Association, “CMVCCMA”), the function of the

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LETTER FROM IFA

centralised management of the copyright transactions in the PRC was carried out by CAVA. Upon the incorporation of the CMVCCMA in June 2008, CMVCCMA has taken up the said function.

CMVCCMA (which succeeded CMVCMA) is the only organization authorized by 國家版權局 (National Copyright Bureau) and under 著作權集體管理條例 (the Regulations on the Collective Management of Copyright) to administer the copyrights of audio-videos and music videos or other similar music products owned by IP Owners in the PRC. As a procedure to apply for membership, the members of CMVCCMA, which the Directors believe, represents most of the active practitioners in the Chinese language music in the PRC, entrusted CMVCCMA for the management of the intellectual property rights. CMVCCMA is authorized to enter into audio-video copyright collective management contracts with IP Owners, to enter into licence agreements on behalf of the IP Owners with copyright users, including karaoke operators to distribute the licences, and to collect licence fees from the copyright users for distribution to the IP Owners. CMVCCMA has endorsed the Service Agreement (as defined below) between the Associations and Tian He. We did not have access to the management of CMVCCMA, however, we have discussed with representatives from CMVCCMA via its enquiry hotline stated in its website regarding the above information of CMVCCMA.

Pursuant to the cooperation agreement dated 8 May 2006 (subsequently supplemented on 17 December 2006), China Music and an Independent Third Party have agreed to collectively operate the Operation Centre, to execute the copyright transactions among karaoke operators in the PRC.

On 15 July 2007, Tian He and CCDDT entered into a licensing agreement (subsequently supplemented on 12 May 2008), pursuant to which Tian He was granted an exclusive right to use the Karaoke CMS to provide copyright transactions settlement services and the right to develop related value-added services in the PRC for a term of 10 years from the date of the licensing agreement.

On 27 December 2007, Tian He entered into a service agreement with the Associations (subsequently supplemented on 21 April 2008) (the “Service Agreement”), pursuant to which Tian He was appointed as the exclusive service provider of the Associations to provide, amongst other services, copyright licence fees settlement and collection services in respect of the karaoke music products and videos managed and administered by the Associations for a term of 10 years from its date of execution.

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LETTER FROM IFA

Tian He is responsible for coordinating between the Associations and karaoke operators for the administration and settlement of copyright transactions. Its services include the following:

• act as an interface between the Associations and karaoke operators;

• manage and provide song database and programmes to authorized karaoke operators;

• carry out copyright transaction settlement services between the Associations and karaoke operators based on data collected on the number of times which karaoke tracks are played and transfer the licence fees collected to the Associations;

• manage its wholly-owned subsidiaries and Provincial JVs; and

• develop value-added services, such as using the Karaoke CMS to advertise and promote products after obtaining appropriate government authorisation.

Pursuant to the Service Agreement, Tian He is authorised to receive from the karaoke venues copyright licence fees, which will be subsequently distributed among the IP Owners, the Operation Centre, CCDDT and Tian He on a predetermined ratio. Pursuant to the Service Agreement, Tian He (together with its wholly-owned subsidiaries and the Provincial JVs) are entitled to a service fee equivalent to 25% of the licence fee income collected (after business tax) from the karaoke operators. Such licence fee is charged based on the frequency of the copyrighted karaoke music products being played in such venues, which will be tracked via the Karaoke CMS, and will be payable on a monthly basis. In the venues where the Karaoke CMS has yet to be installed, the copyright licence fees will be calculated at certain daily rates per karaoke room basis, which vary in different provinces ranging from RMB8 to RMB11.1, with reference to the rate stipulated in 2008年1號公告 (Year 2008 Announcement No. 1) issued by CMVCCMA.

As of the date of the Letter, Tian He has established a total of nine wholly owned subsidiaries and 21 Provincial JVs with local partners to provide the settlement and collection services in the PRC.

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LETTER FROM IFA

Financial information

Based on the audited consolidated financial statements of the HR Group prepared in accordance with Hong Kong Financial Reporting Standards as set out in Appendix II to the Circular, the consolidated turnover and net loss for the period from 14 June 2007 (being the earliest date of incorporation of entities now comprising the HR Group) to 31 March 2008 and the six months ended 30 September 2008 were as follow:

Turnover Cost of sales Gross profit Other revenue and gain Net operating expenses Loss before income tax expenses Income tax (expenses)/credit Loss for the period	14 June 2007 Six months to ended 31 March 2008 30 September 2008 HK$ HK$ — 553,417 — (165,121) — 388,296 1,575,662 562,820 (16,610,180) (5,313,111) (15,034,518) (4,361,995) (2,065) 68,142 (15,036,583) (4,293,853)

Hua Rong indirectly holds its principal jointly-controlled entity, Tian He, through its wholly-owned subsidiary, Shenzhen Hua Rong. Tian He launched its operations in the third quarter of 2008. During the six months ended 30 September 2008, Tian He was still in the introductory stage to gradually roll out and establish its Provincial JVs or subsidiaries and only minimal turnover was recorded up to 30 September 2008. Net loss of the HR Group for the six months ended 30 September 2008 was mainly attributable to the staff costs, depreciation expenses and amortisation of the exclusive right for using the Karaoke CMS.

Significant net loss of the HR Group for the period from 14 June 2007 to 31 March 2008 was mainly attributable to the impairment loss of the exclusive right for using the Karaoke CMS of approximately HK$13.4 million for the period.

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LETTER FROM IFA

Set out below is the summary of the consolidated balance sheets of the HR Group as at 31 March 2008 and 30 September 2008:

Non-current assets Property, plant and equipment Intangible assets Deferred tax assets Total non-current assets Current assets Other receivables Cash and cash equivalents Total current assets Total assets Current liabilities Trade and other payables Amounts due to the former shareholders Amount due to a shareholder Amounts due to related companies Total current liabilities Net current assets/(liabilities) Total assets less current liabilities Net assets/(liabilities) Capital and reserves Share capital Reserves Total equity/(deficit)

At 31 March 2008 At 30 September 2008 HK$ HK$ 1,941,638 2,878,027 8,024,859 7,757,290 30,314 98,443 9,996,811 10,733,760 13,814,706 1,151,745 52,179,662 48,793,407 65,994,368 49,945,152 75,991,179 60,678,912 79,212 1,118,358 30,280,706 79,994,784 19,454 62,432 5,606,000 108,261 35,985,372 81,283,835 30,008,996 (31,338,683) 40,005,807 (20,604,923) 40,005,807 (20,604,923) 780 780 40,005,027 (20,605,703) 40,005,807 (20,604,923)

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LETTER FROM IFA

Intangible assets

The intangible assets mainly represented the exclusive right for using the Karaoke CMS from CCDDT and it was amortised on a straight line basis for the useful economic life of 10 years.

Cash and borrowings

As at 30 September 2008, there were cash and cash equivalents of approximately HK$48.8 million and no bank and other borrowings.

Other receivables

The amounts represented receivables from a debtor that was an Independent Third Party of Hua Rong. The balance decreased significantly as at 30 September 2008, due to the arrangement that such receivables were offset against the amount due to the former shareholders of Shenzhen Hua Rong.

Amounts due to the former shareholders

The balance represented the amount advanced to the HR Group from the former shareholders of Shenzhen Hua Rong, for the purpose of the capital injection in Tian He. The balance is unsecured, interest-free and repayable on demand.

C. Reasons for the Acquisition

According to the Annual Report, the Directors believe the operations of the collection of fees for licensing of copyright to karaoke operators in the PRC will broaden the income source of the Group and facilitate the Group for future expansion of its business in the PRC. Also, as mentioned in the Letter from the Board, the Directors are optimistic about the future prospects of the entertainment industry in the PRC. The Directors consider that the Acquisition will enable the Group to quickly scale up and become a platform to consolidate operations for collection of copyright fees for both content distribution and carrying out copyright transactions settlement business through the infrastructure of Karaoke CMS in respect of karaoke music products in the PRC. The Directors are optimistic about the karaoke industry and the Karaoke CMS in the PRC and in turn the revenue growth potential of Tian He in the long run. The Directors believe that the Acquisition will enhance the future growth of the Group’s business activities and enable it to maximise returns to the Shareholders.

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LETTER FROM IFA

With the utilisation of the Karaoke CMS by the Associations and Tian He to serve as a unified channel to manage the copyright transactions in the karaoke industry, the Directors feel optimistic on the future development of the Karaoke CMS.

As mentioned in the Letter from the Board, Tian He, together with the Provincial JVs, is entitled to a service fee equivalent to 25% of the licence fee income collected (after business tax) from the karaoke operators. With the Karaoke CMS gradually rolling out to more provinces and cities, Tian He is expected to generate more income as a result. Following the Completion, it is also expected that Tian He should broaden the distribution network of the Group’s existing business of licensing of copyright to karaoke operators, which in turn will pose positive impact on the Group’s financial performance.

In addition to the copyright transactions settlement business, related value-added businesses can be provided through the Karaoke CMS by Tian He. We are of the view that such value-added businesses to be provided through the Karaoke CMS can serve as potential business opportunities for the Group to leverage on the Karaoke CMS to generate high growth income source in future.

The Directors have considered the loss-making status of the HR Group, which recorded a net loss of approximately HK$4.3 million for the six months ended 30 September 2008. The Directors have also taken into account of the potential adverse impact on the karaoke industry by the recent global financial crisis and the possibility that the rollout plan of the collection of copyright licence fees from the karaoke operators in the PRC cannot be achieved as scheduled.

We have discussed with the management of Tian He and we understand that since the roll-out of its business in the third quarter in 2008, Tian He has secured over 1,000 contracts with the karaoke venues in the PRC by the end of 2008. According to the management account of Tian He, total unaudited copyright licence fees already collected by Tian He up to the end of 2008 amounted to approximately RMB30 million, excluding any accrued copyright licence fees payable by the karaoke operators during that period. We also notice that the roll-out schedule of Tian He’s business has been slower than expected. According to the management of Tian He, such delay of roll-out will directly affect the timing of contribution to the financial performance of Tian He. Going forward, and the efficiency of the roll-out will be determined by a number of factors including, among others, (i) the rate of full compliance of the relevant copyright rules are in different provinces; (ii) the efforts of the marketing and promotion campaigns conducted by Tian He regarding its copyright licence fees collection; and (iii) the willingness of the karaoke operators in the PRC to abide by the relevant copyright rules and regulations. The management of Tian He, however, expected that the roll-out process to accelerate in time and aim at securing contracts with over 50,000 karaoke venues by this year, with the increasing marketing efforts by Tian He and the expected enhanced implementation of utilising the Karaoke CMS by the Associations.

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LETTER FROM IFA

After considering (i) the outlook of karaoke industry and the Karaoke CMS in the PRC in the long run; (ii) the Karaoke CMS is supported by the PRC Government with an attempt to facilitate the management of the karaoke industry in the PRC regarding the protection of the intellectual properties; (iii) the Acquisition enables the Group to strengthen the business and to broaden the Group’s sharing in the copyright licence fees; and (iv) Tian He can provide potentially value-added businesses through the Karaoke CMS in the PRC, the Directors believe that the HR Group is able to turn profit-making in the long run, and brings positive financial impact to the Group. Therefore, the Directors are of the view that the Acquisition is fair and reasonable and is in the interest of the Company and the Shareholders as a whole.

As discussed in section A above, we have noted the economic growth and the increase in the number of karaoke venues in the PRC. With the anticipated continued economic growth and the improvement in living standards in the PRC, the outlook of the karaoke industry is expected to be positive in the long run. We have also noted the increasing awareness of the protection of intellectual properties in the karaoke industry in the PRC, as supported by the enactment of certain government policies and regulations in respect of the management of copyright.

Accordingly, we concur with the view that the PRC karaoke industry, and therefore the revenue growth potential of Tian He’s licence fee collection business, has a positive outlook. Based on the information set out in Section B.2, Tian He is the exclusive service provider authorised by the Associations to collect copyright license fees for the IP Owners from karaoke venues and a direct beneficiary of the growth in the PRC karaoke industry. We, therefore, are of the view that the Acquisition represents a unique investment opportunity. Assuming the roll-out of the business in accordance with internal plans and no significant downward adjustment in copyright licence fees, we are of the view that Tian He is able to turn profit-making in the long run. We have not been provided any business plans in relation to the value-added businesses of the Karaoke CMS and although it seems to have potential conceptually, we could not assess its real potential. However, from our discussion with the Directors, the potential contribution from such value-added businesses is considered peripheral at this stage and did not carry much weight in the Directors’ determination of the Consideration.

D. Terms of the Agreement

Details of the terms of the Agreement are set out in the section headed “The Agreement dated 13 February 2009” in the Letter from the Board of the Circular. The Directors consider that the terms of the Agreement (i) are determined on an arm’s length basis and on normal commercial terms; and (ii) are fair and reasonable so far as the Independent Shareholders are concerned.

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LETTER FROM IFA

Basis of consideration

As set out in the Letter from the Board, the Consideration was arrived based on a recent relevant transaction (i.e. the acquisition of Grand Promise International Limited (“ Grand Promise ”), which holds 50% indirect stake in Tian He, by China Vanguard Group Ltd. (“ Vanguard ”), a company with its shares listed on the Growth Enterprise Market of the Stock Exchange (stock code: 8156), in April 2008 (the “ Vanguard Acquisition ”)) and market trading comparables. The Directors have also taken into account the following factors in arriving at such consideration:

• Current market environment.

• Current financial position and historical financial performance of the HR Group.

• Potential revenue generation of the HR Group.

Reference is made to the circular (the “ Vanguard Circular ”) of Vanguard dated 14 March 2008 regarding the Vanguard Acquisition. On 17 January 2008, Vanguard entered into a share purchase agreement to acquire the entire issued share capital of Grand Promise at a consideration of US$200,000,000 (equivalent to HK$1,560,900,000). Grand Promise is an investment holding company, indirectly holding 49% equity interests in CCDDT, CCDDT in turns owns 50% of Tian He and 100% of CCD Beijing China Cultural Development Video Music Culture Broadcasting Co., Ltd. (“ CCD Video ”). CCD Video serves as the editing and production arm for CCDDT.

As stated in the Vanguard Circular, the consideration of the Vanguard Acquisition of US$200,000,000 was arrived at after arm’s length negotiation between the parties and was the same as the base equity price of US$200,000,000 on the basis at which two independent professional investors (the “ Investors ”) purchased certain convertible notes of Grand Promise (“ Grand Promise CN ”) dated 30 November 2007 issued by Grand Promise. According to the Vanguard Circular, the directors of Vanguard had determined the consideration of the Vanguard Acquisition with reference to then available market comparables, namely, the base equity price at which the two Investors purchased the Grand Promise CN, as the subject matter of the Vanguard Acquisition was the same as the subject matter of the Grand Promise CN and particularly in view of the proximity in time between the issue of the Grand Promise CN and the Vanguard Acquisition. According to the Vanguard Circular, such Investors, as professional investors, arrived at such base equity price independently. In addition, the directors of Vanguard had also taken into account the fact that the business of the Grand Promise Group was a new business area in the PRC and has significant growth potential. Based on the above, the directors of Vanguard considered the consideration of the Vanguard Acquisition to be fair and reasonable. We also notice from the Vanguard Circular that the independent board committee of Vanguard, having considered the advice given by the independent financial adviser and the principal factors and reasons taken into

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LETTER FROM IFA

consideration by them in arriving at their advice, was of the opinion that the Vanguard Acquisition was fair and reasonable, on normal commercial terms and was in the interests of Vanguard and its shareholders as a whole and as far as the independent shareholders of Vanguard were concerned that the terms of the Vanguard Acquisition (including the consideration) were fair and reasonable and were in the interests of Vanguard and its shareholders as a whole.

The subject asset of the Vanguard Acquisition, Grand Promise, which holds 49% equity interests in CCDDT, which in turns owns 50% of Tian He and 100% of CCD Video. We are given the understanding that CCDDT, CCD Video and Tian He collectively derive their income from sharing of the copyright licence fees collected via the Karaoke CMS. In addition, we also noted that CCDDT, at the time of the Vanguard Acquisition, did not have any material assets other than the Karaoke CMS and its interest in Tian He and CCD Video.

We have not been able to discuss with Vanguard or the Investors regarding their bases in arriving at the consideration of the Vanguard Acquisition, nor have we been given any further information regarding the Vanguard Acquisition other than that contained in the Vanguard Circular. As such we could not perform any individual assessment as to the fairness and reasonableness of the consideration of the Vanguard Acquisition. However, as the consideration of the Vanguard Acquisition was arrived at based on and equal to a valuation assigned by two independent third parties of Vanguard, we consider that the consideration for the Vanguard Acquisition should serve as a meaningful reference to the basis of consideration for the Acquisition.

Pursuant to the service agreement dated 27 December 2007 (subsequently supplemented on 21 April 2008) between Tian He and the Associations, 25% of the copyright licence fees collected on behalf of the IP Owners from the karaoke operators would be allocated to Tian He. Given, after the Completion, the Company will directly hold 50% equity interests in Tian He, the effective fee sharing on the copyright licence fees by the Group will be 12.5% (25% x 50%). Based on the copyright licence fee arrangement pursuant to the Service Agreement, the subject assets of the Vanguard Acquisition (being the effective interests of 49% and 24.5% in CCDDT and Tian He, respectively) effectively share 10.045% of the copyright licence fees from the karaoke operators while the Acquisition would enable the Company to share 12.5% of the copyright license fees. Using the consideration of the Vanguard Acquisition of US$200 million for the 10.045% effective sharing in the copyright licence fees collected the implied valuation of Hua Rong, which has an effective sharing of 12.5% of copyright licence fees, should be approximately US$248.9 million, or HK$1,928.8 million. Therefore, the Consideration of HK$750 million represents a discount of approximately 61.1% discount to the implied valuation based on the Vanguard Acquisition.

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When valuing assets, it is a common approach in the market to make reference to terms of recent comparable transactions and the valuation of comparable companies. We have discussed with the Directors regarding their bases of determining the Consideration. The Vanguard Acquisition is considered by the Directors to be a direct comparable transaction for the Acquisition. However, in view of the different timing in determining the consideration of the Vanguard Acquisition and the Consideration, the Vanguard Acquisition cannot be applied directly to the Acquisition. The implied projection, to certain extent, will be affected by the variance on the respective sentiment in the stock market and in carrying out merger and acquisition activities between the time when performing the Vanguard Acquisition and the Acquisition. Therefore, in assessing the fairness of the Consideration, the Directors have also considered, among others, the share price performance of companies engaged in similar businesses as the HR Group (the “Comparable Companies” ). We are advised by the Directors that the Karaoke CMS is the first-of-its-kind in the PRC and Tian He is the only service provider for the Associations regarding copyright transactions settlement in the PRC. Therefore, we concur with the Directors that there are no direct comparables in the market engaging in businesses similar to Tian He in the PRC. Instead, the Comparable Companies conduct similar business, namely operation of copyright fee collection platform, but in other media, such as Internet, mobile telephony, music rentals and video rentals in various countries. Therefore, in addition to Vanguard, we have identified, to the best of our knowledge, nine Comparable Companies. Set out below are the stock price changes of the Comparable Companies, and also the changes in Hang Seng Index and Hang Seng China Enterprise Index between 17 January 2008 (being the date of the share and purchase agreement of the Vanguard Acquisition) and 13 February 2009 (the date of the

Agreement). Details are summarised as follows:

		Stock	Stock
		price at	price at
	Stock	17 January	13 February	Price			EV/
Company name	code	2008	2009	change	P/E 2	P/B 2	EBITDA 2
Vanguard	8156.HK	HK$0.82 1	HK$0.28	-65.85%	N/A	0.40	N/A
Codinus Co., Ltd.	068760.KS	KRW12,150	KRW6,640	-45.35%	N/A	0.90	25.59
One Media Holdings Plc.	OMHO.PZ	GBP1.00	GBP0.88	-12.00%	N/A	0.78	N/A
Tencent Holdings Ltd.	700.HK	HK$50.10	HK$48.70	-2.79%	35.93	12.52	34.56
Blockbuster Inc.	BBI.US	USD2.96	USD1.25	-57.77%	6.88	0.51	4.54
Hollywood Media Corp.	HOLL.US	USD2.92	USD0.80	-72.60%	N/A	0.55	N/A
Google Inc.	GOOG.US	USD600.79	USD357.68	-40.47%	21.66	3.99	9.97
Time Warner Inc.	TWX.US	USD15.49	USD8.67	-44.03%	8.50	0.74	3.79
Sina Corporation	SINA.US	USD37.91	USD21.44	-43.45%	16.12	2.03	N/A
Sohu.com Inc.	SOHU.US	USD42.39	USD47.39	11.80%	11.73	4.70	12.92
Average				-37.25%	16.80	2.71	15.23

Average

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LETTER FROM IFA

		Stock	Stock
		price at	price at
	Stock	17 January	13 February	Price					EV/
Company name	code	2008	2009	change	P/E	2	P/B	2	EBITDA 2
Hang Seng Index	HSI	25,115	13,555	-46.03%	—		—		—
Hang Seng China
Enterprise Index	HSCEI	14,481	7,569	-47.73%	—		—		—

1. The shares of Vanguard have been suspended on 17 January 2008 pending the release of the announcement in relation to the Vanguard Acquisition. The stock price represented the closing price of the shares of Vanguard as quoted on the Stock Exchange as at 10 January 2008.

2. P/E, P/B and EV/EBITDA represent “price to earnings” ratio, “price to book” ratio and “enterprise value to earnings before interest, tax, depreciation and amortization (“ EBITDA ”)” ratio, respectively. P/E and EV/EBITDA marked with “N/A” represents the Comparable Companies recording negative earnings or EBITDA for the respective financial year

Note:

Codinus Co. Ltd. develops, designs and markets entertainment software. It provides downloadable music, text, telephone ring tones via application service provider (ASP) services. It also offers music, photo and karaoke contents through its network contents services. Its principal place of business is in Korea.

One Media Holdings Plc. acquires and exploits audio and visual copyright within the field of mainstream music genres through new distribution technologies, by Internet downloading and mobile telephony. It also acquires other companies within that sector as well. Its principal place of business is in the United Kingdom.

Tencent Holdings Limited provides internet value-added services, mobile and telecommunications valueadded services and online advertising services in the PRC. Its Internet value-added services enable users to communicate and interact with friends and families, and to make new friends, as well as to purchase virtual commodities. It also offers club memberships, personal spaces and communities, online music, and dating services.

Blockbuster Inc. operates and franchises entertainment-related stores. It offers pre-recorded videos, as well as video games for in-store rental, sale, and trade, and also sells other entertainment-related merchandise. It also offers rental and retail movie entertainment through the internet and by mail in the United States.

Hollywood Media Corp. provides information, data, news and other content, and ticketing services to consumers and businesses covering the entertainment, Internet, and media industries in the United States, Canada, and the United Kingdom. It operates in four segments: Broadway Ticketing, Ad Sales, Cable TV, and Intellectual Properties. The Intellectual Properties segment owns, controls, and licenses the rights to certain intellectual properties created by authors and media celebrities, as well as includes a book development business.

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LETTER FROM IFA

Google Inc. a technology company, maintains index of websites and other online content for users, advertisers, Google network members, and other content providers. Its automated search technology helps users to obtain instant access to relevant information from its online index.

Time Warner Inc. operates as a media and entertainment company in the United States and internationally. It operates in five segments: AOL, Cable, Filmed Entertainment, Networks, and Publishing.

SINA Corporation is a global internet media company operating Chinese-language destination sites. It offers a network of branded content and services targeting people of Chinese descent worldwide. SINA. com offers online news, entertainment, community and commerce through web sites that are produced and updated by local teams in China, Hong Kong Taiwan and North America.

Sohu.com, Inc. provides a range of online products and services to consumers and businesses in the PRC. Its products and services comprise brand advertising, sponsored search, online game, and wireless services. The company’s products and services to users include aggregated content on various topics, including news, business and finance, entertainment, sports, information technology, automobile, real estate, and women; online video products and services, etc.

Source: Bloomberg and Capital IQ

As shown in the above table, the change in share prices of the Comparable Companies, Hang Seng Index and Hang Seng China Enterprise Index ranged from a rise of 11.8% to a drop of 72.6% between 17 January 2008 and 13 February 2009. The Consideration of HK$750 million, being a 61.1% discount to the implied projection based on the Vanguard Acquisition falls within such range. We are given the understanding from the Directors that, save for the net loss of approximately HK$4.3 million incurred during its start-up stage by the HR Group for the six months ended 30 September 2008, subsequent to the completion of the Vanguard Acquisition, there have not been any material adverse change in the business of Tian He. Instead, there was an increase in the number of contracts signed with karaoke operators for the collection of copyright licence fees since the Vanguard Acquisition and over 1,000 contracts were secured by Tian He as at the end of 2008.

We have also compared the consideration of the Vanguard Acquisition with the Grand Promise Group’s net asset value (net of the amount due to its shareholder) as at 31 October 2007 (the “ Grand Promise Group NAV ”). According to the Vanguard Circular, the Grand Promise Group NAV was HK$43.2 million, and the consideration of the Vanguard Acquisition of HK$1,560.9 million represents approximately 36.1 times the Grand Promise Group NAV. Based on the Circular, the consideration-to-net asset value (net of the amount due to the former shareholders of Shenzhen Hua Rong) ratio of the Acquisition is approximately 12.6 times, which is substantially lower than that of the Vanguard Acquisition.

We understand that in addition to having reference to the Vanguard Acquisition, the Directors also had regard to other factors including (i) the expected growth in the karaoke industry; (ii) the exclusive right granted to Tian He by CCDDT to use the Karaoke CMS to provide copyright transactions settlement services; and (iii)

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the potentially high growth value-added businesses through the Karaoke CMS to be developed by Tian He. We understand that Tian He has just recently rolled out its business and recorded just minimal turnover and is loss making. Therefore, we are not able to make a meaningful analysis of the Consideration with respect to common valuation multiples such as price-to-earnings ratios, price-to-sales ratios, enterprise value (“EV”)-to-earnings before interest, tax, depreciation and amortization (“EBITDA”) ratios, against the Comparable Companies. We are resolved to compare the Consideration with that of the Vanguard Acquisition, which is the most direct comparable transaction available. Having considered the share price drop in the Comparable Companies and the decline of the overall stock markets in Hong Kong, we consider that the discount of around 61.1% applied to the Consideration to the implied valuation of the HR Group based on the Vanguard Acquisition to be fair and reasonable so far as the Company and the Independent Shareholders are concerned as a whole. We are of the view that the Consideration of the Acquisition from the Vendors is no worse than that offered to Independent Third Parties.

Mode of settlement of the Consideration

Pursuant to the Agreement, the Consideration of the Acquisition was HK$750,000,000, of which HK$90,000,000 is to be paid in cash, HK$157,500,000 to be satisfied by the allotment and issue of 1,431,818,182 Convertible Preference Shares credited as fully paid at HK$0.11 each, and the balance of HK$502,500,000 to be satisfied by the allotment and issue of 4,568,181,818 Consideration Shares credited as fully paid at HK$0.11 each. As for using a combination of cash, Convertible Preference Shares and Consideration Shares to satisfy the Consideration, the Directors have considered the compliance of the minimum public float requirement under the Listing Rules and to ensure sufficient cash balance required for normal operation of the Company.

• (1) Cash portion of the Consideration

The Directors confirmed that the cash portion of the Consideration will be funded from internal resources and available banking facilities of the Company. According to the interim report of the Company for the six months ended 30 September 2008 (the “ Interim Report ”), the unaudited cash and cash equivalents of the Group as at 30 September 2008 amounted to approximately HK$241.0 million. Based on the above, we consider that the Company should be able to rely on the internal funds to settle the cash portion of the Consideration.

• (2) Issue of the Convertible Preference Shares

Pursuant to the Agreement, the Company will issue 1,431,818,182 Convertible Preference Shares at the issue price of HK$0.11 to satisfy HK$157,500,000 of the Consideration.

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LETTER FROM IFA

As set out in the Letter from the Board, the Convertible Preference Shares are convertible into Shares and issued on a one on one basis (subject to adjustment in the event of a consolidation or subdivision of Shares but not otherwise). A summary of the principle terms of the Convertible Preference Shares is set out below:

Par Value: HK$0.05

Issue Price: HK$0.11

• Conversion Ratio: Each Convertible Preferences Share carries the right to convert into one Share (subject to adjustment only in the event of an alternation to the nominal value of the Shares as a result of consolidation or subdivision or subdivision of the Shares and not otherwise)

• Dividends: Holders of Convertible Preference Share are not entitled to any dividend payment

• Conversion: Holders shall have the right to convert, in whole or in part, during the Conversion Period, each Convertible Preference Share into one Share provided that the public float of the Shares shall not be less than 25% (or any specific percentage as required by the Listing Rules) immediately following the exercise of such conversion right

Conversion Period: Perpetual as from the date of issue

Redemption: Non-redeemable

Transferability: Convertible Preference Shares are freely transferable from the date of issue

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LETTER FROM IFA

Voting Rights:

Holders of Convertible Preference Shares shall be entitled to receive notices of and attend any Shareholders’ meetings but shall not be entitled to vote at any Shareholders’ meeting by reason only of being holders of Convertible Preference Shares save where the resolutions in question relate to the dissolution or winding up of the Company or variation or abrogation of the rights attaching to the Convertible Preference Shares in which cases the holders of the Convertible Preference Shares will have the same voting rights as those attaching to the Shares on an as-converted basis

Ranking:

Rank in priority to the Shares as to a return of capital on a winding up or otherwise. The Converted Shares shall rank pari passu in all respect with all other Shares in issue upon liquidation or dissolution of the Company

Comparison with other issuers of non-redeemable convertible preference shares

In order to evaluate the terms of the Convertible Preference Shares, we have identified, to the best of our knowledge and as far as we are aware of, five transactions involving the issue of non-redeemable convertible preference shares by companies listed on the Stock Exchange (the “ CPS Comparables ”) during the period from February 2008 to the date of the Announcement (the “ Last Trading Day ”). The key terms of these convertible preference shares are set out in the following table:

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LETTER FROM IFA

						Premium/(Discount)	Premium/(Discount)
						of the conversion	of the conversion
						price over/to the	price over/to the
						closing price of	average closing
						the shares	price of the shares
	Stock		Date of	Principal	Dividend	as at the last	for the last ten
Company name	Code	Announcement		Amount	Rate	trading day	trading days
				(HK$ million)		%	%
Ocean Grand Chemicals Holdings
Limited#	2882		9 Jul 2008	149	5%	(77.42)	(77.42)
China Railway Logistics Limited	8089		9 Sep 2008	20	—	(44.50)	(41.37)
Enric Energy Equipment
Holdings Limited#	3899	10 Sep 2008		5,343	—	36.10	40.75
Chaoyue Group Limited	147		20 Oct 2008	575	—	99.00	32.00
Minmetals Land Limited#	230		7 Nov 2008	1,608	—	23.26	39.47
Maximum						99.00	40.75
Minimum						(77.42)	(77.42)
Average						7.29	(1.31)
The Company					—	8.91	7.11

The convertible preference shares were issued to the connected persons of the CPS Comparables

Source: the Stock Exchange web-site (www.hkex.com.hk)

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LETTER FROM IFA

Conversion price

We note from the above table that the conversion price of the CPS Comparables ranged from a discount of approximately 77.42% to a premium of 99% over the respective closing prices of their shares at the last trading days prior to the release of the relevant announcements, and for a discount of approximately 77.42% to a premium of approximately 40.75% over the respective average closing prices of their shares for the last ten trading days up to the date of relevant announcements. The conversion price of the Convertible Preference Shares, which is equivalent to a premium of about 8.91% and 7.11% over the Last Trading Day and the average closing price per Share for the last ten trading days up to 13 February 2009 respectively, thus falls within the said market ranges.

Dividend rate

Holders of the Convertible Preference Shares are not entitled to any dividend payment, while the CPS Comparables have the dividend rate ranged from nil to 5%. Therefore, the Convertible Preference Shares are at the minimum of the said market range.

To conclude, we have reviewed the above and other terms of the Convertible Preference Shares. We are not aware of any terms which are uncommon to normal market practice and we consider those terms are fair and reasonable so far as the Independent Shareholders are concerned.

• (3) Issue of the Consideration Shares

Pursuant to the Agreement, the Company will issue 4,568,181,818 Consideration Shares at the issue price of HK$0.11 to satisfy HK$502,500,000 of the Consideration. As set out in the Letter from the Board, the Consideration Shares represent about 134.4% of the existing issued share capital of the Company or about 57.3% of the issued share capital of the Company as enlarged by the issue of the Consideration Shares.

The Issue price of HK$0.11 per Consideration Share represents:

• (a) a premium of approximately 8.9% over the closing price of HK$0.101 per Share as quoted on the Stock Exchange as at the Last Trading Day;

• (b) a premium of approximately 6.8% over the average closing price of HK$0.103 per Share as quoted on the Stock Exchange for the last five trading days up to and including the Last Trading Day;

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• (c) a premium of approximately 7.1% over the average closing price of HK$0.1027 per Share as quoted on the Stock Exchange for the last ten trading days up to and including the Last Trading Day; and

• (d) a discount of approximately 38.9% to the closing price of HK$0.18 per Share as quoted on the Stock Exchange as at the Latest Practicable Date.

The Directors also confirmed that the Issue Price was determined after arm’s length negotiations between the Company and the Vendors with reference to the recent trading performance of the Shares.

Review on historical price of the Shares

The following chart illustrates the closing prices of the Company during the period commencing from 14 February 2008 up to and including the Last Trading Day (the “ Review Period ”):

==> picture [352 x 172] intentionally omitted <==

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

0.33
0.28
0.23
0.18
issue price: HK$0.11
0.13
0.08
SEHK: 674 - Share Pricing
2/14/082/28/083/13/083/27/084/10/084/24/08 5/8/08 5/22/086/5/086/19/08 7/3/08 7/17/08 7/31/088/14/088/28/089/11/089/25/0810/9/0810/23/0811/6/0811/20/0812/4/0812/18/081/1/091/15/091/29/092/12/09
----- End of picture text -----

Source: Capital IQ

We note that throughout the Review Period, the closing price of the Shares exhibited a falling trend. The highest and lowest closing prices of the Shares over the Review Period as quoted on the Stock Exchange were HK$0.32 per Share recorded on 30 April 2008 and HK$0.09 on both 27 October 2008 and 25 November 2008, respectively. The average daily closing price of the Shares as quoted on the Stock Exchange during the Review Period ranged from HK$0.102 to HK$0.290 per Share and the Issue Price falls within such market range.

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Comparison with other transactions involving the issue of shares

To further evaluate the fairness and reasonableness of the Issue Price, we have identified the Vanguard Acquisition and, to the best of our knowledge and as far as we are aware of, 29 other transactions involving the issue of shares by companies listed on the Stock Exchange from February 2008 up to the Last Trading Day (the “ Consideration Share Comparables ”). To the best of our knowledge and as far as we aware of, the selected Consideration Share Comparables are exhaustive, fair and representative samples for the Issue Price. However, Independent Shareholders should note that the businesses, operations and prospects of the Company are not the same as the Consideration Share Comparables and we have not conducted any in-depth investigation into the businesses and operations of the Consideration Share Comparables. The Consideration Share Comparables are hence only used to provide a general reference for the common market practice of companies listed on the Stock Exchange in transactions which involved the issue of shares. The table below summarized our relevant findings:

				Premium/
			Premium/	(Discount) of the
			(Discount) of the	issue price over/
			issue price over/	to the average
			to the closing	closing price
			price of the	of the shares
		Date of	shares as at the	for the last ten
Company name	Stock Code	announcement	last trading day	trading days
			%	%
China Vanguard Group Limited#	8156	17 January 2008	(2.40)	9.4
Mandarin Entertainment (Holdings) Limited	9	6 February 2008	(27.27)	(27.40)
Wang Sing International Holdings Group
Limited#	2389	25 March 2008	(16.00)	(9.58)
Willie International Holdings Limited	273	15 April 2008	—	(0.47)
TravelSky Technology Limited#	696	26 May 2008	(4.91)	(4.13)
Kasen International Holdings Limited#	496	30 May 2008	(3.97)	(1.88)
Franshion Properties (China) Ltd.#	817	5 June 2008	(3.65)	(0.09)
China Resources Land Ltd.#	1109	6 June 2008	(2.06)	(0.67)
Alltronics Holdings Ltd.#	833	12 June 2008	8.11	8.50
China Electronics Corporation Holdings Co.
Ltd.#	85	20 June 2008	28.87	25.06
Continental Holdings Limited#	513	9 July 2008	3.13	1.79
C Y Foundation Group Ltd.#	1182	17 July 2008	(9.68)	(11.39)
Shanghai Industrial Holdings Ltd.#	363	21 July 2008	(0.37)	1.66
Top Form International Ltd.#	333	30 July 2008	21.79	24.00
China Haidian Holdings Ltd#	256	25 August 2008	3.45	(1.64)
China Chief Cable TV Group Limited	8153	2 September 2008	0.22	(4.00)

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LETTER FROM IFA

				Premium/
			Premium/	(Discount) of the
			(Discount) of the	issue price over/
			issue price over/	to the average
			to the closing	closing price
			price of the	of the shares
		Date of	shares as at the	for the last ten
Company name	Stock Code	announcement	last trading day	trading days
			%	%
Mexan Limited#	22	11 September 2008	(9.40)	(0.13)
Jian ePayment Systems Limited	8165	5 September 2008	6.99	6.94
Willie International Holdings Limited	273	9 September 2008	6.87	(5.15)
Sino Union Petroleum & Chemical International
Limited#	346	18 September 2008	—	5.93
Sino Prosper Holdings Limited#	766	19 September 2008	3.23	12.36
New Heritage Holdings Limited#	95	25 September 2008	6.38	(9.09)
Melco LottVentures Limited	8198	28 September 2008	27.05	28.04
Sunny Gloval Holdings Limited	1094	6 October 2008	(19.67)	(8.17)
Argos Enterprise (Holdings) Limited	8022	15 October 2008	20.00	13.21
China Chengtong Development Group Limited#	217	30 October 2008	(2.78)	(2.64)
China Best Group Holding Limited	370	3 December 2008	31.58	66.67
Golife Concepts Holdings Limited	8172	8 December 2008	(18.03)	(53.23)
Hua Lien International (Holdings) Company
Limited	969	16 December 2008	7.10	12.60
China Fortune Holdings Ltd.#	110	7 January 2009	243.75	223.53
Maximum			243.75	223.53
Minimum			(27.27)	(53.23)
Average			9.94	10.00
The Company			8.91	7.11

The consideration shares were issued to the connected persons of the Consideration Share Comparables

We note from the above table that the issue prices of the Consideration Share Comparables ranged from a discount of approximately 27.27% to a premium of approximately 243.75% to/over the respective closing prices of their shares as at the last trading days prior to the release of the relevant announcements while the issue prices of the Consideration Share Comparables ranged from a discount of approximately 52.23% to a premium of approximately 223.53% to/over the respective average closing prices of their shares for the last ten trading days up to the date of the relevant announcements. The Issue Price, which is equivalent to 8.91% premium over the closing price of the Shares as at the Last Trading Day and 7.11% premium over the average closing price of the Shares for the last ten trading days, thus falls within the said market ranges.

— 39 —

LETTER FROM IFA

To conclude, in light of (i) the Issue Price being fall within the range of the daily closing prices of the Shares during the Review Period; (ii) the Issue Price representing a premium over the closing price of the Share as quoted on the Stock Exchange as at the Last Trading Day; and (iii) such premium represented by the Issue Price to the closing price of the Shares on the Last Trading Day being fall within the range of that of the Consideration Share Comparables, we are of the view that the Issue Price is fair and reasonable so far as the Independent Shareholders are concerned and is in the interests of the Company and the Shareholders as a whole.

• (4) Other terms of the Agreement

We have also reviewed the other terms of the Agreement and are not aware of any terms which are uncommon. Consequently, we consider that the terms of the Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned.

E. Dilution of the shareholding interests of the public Shareholders

The table below demonstrates the Company’s shareholding structure (i) as at the Latest Practicable Date; and (ii) upon completion of the Acquisition after conversion of the Convertible Preference Shares to the extent permission under its terms:

Mr. Yeung and his associates Mr. Liu Yu Mo_(Note 1)_	As at the Latest Practicable Date Number of Shares % 2,188,660,478 64.4 1,048,000 —	As at the Latest Practicable Date Number of Shares % 2,188,660,478 64.4 1,048,000 —	Upon completion of the Acquisition and after conversion of the Convertible Preference Shares to the extent permissable under its terms Number of Number of Shares % Convertible % Preference Shares 5,961,387,751 74.8 1,000,000,000 69.8 1,048,000 0.01 — —	Upon completion of the Acquisition and after conversion of the Convertible Preference Shares to the extent permissable under its terms Number of Number of Shares % Convertible % Preference Shares 5,961,387,751 74.8 1,000,000,000 69.8 1,048,000 0.01 — —	Upon completion of the Acquisition and after conversion of the Convertible Preference Shares to the extent permissable under its terms Number of Number of Shares % Convertible % Preference Shares 5,961,387,751 74.8 1,000,000,000 69.8 1,048,000 0.01 — —	Upon completion of the Acquisition and after conversion of the Convertible Preference Shares to the extent permissable under its terms Number of Number of Shares % Convertible % Preference Shares 5,961,387,751 74.8 1,000,000,000 69.8 1,048,000 0.01 — —	Upon completion of the Acquisition and after conversion of the Convertible Preference Shares to the extent permissable under its terms Number of Number of Shares % Convertible % Preference Shares 5,961,387,751 74.8 1,000,000,000 69.8 1,048,000 0.01 — —
Mr. Chu Other public Shareholders	— 1,208,522,914	— 35.6	795,454,545 1,208,522,914	9.99 15.2	431,818,182 —	30.2 —
Subtotal for all public Shareholders 1,208,522,914 35.6 Total 3,398,231,392 100.00 Note 1: Mr. Liu Yu Mo is an Executive Director			2,003,977,459 7,966,413,210	25.19 100.00	431,818,182 1,431,818,182	30.2
						100.00

— 40 —

LETTER FROM IFA

From the above table, we note that the shareholding interests of the public Shareholders will be diluted from approximately 35.6% to approximately 15.2% immediately after the issue of the Consideration Shares upon the Completion. Although the shareholding interests of the public Shareholders would be diluted in the aforementioned extent as a result of the issue of the Consideration Shares, given that (i) the Acquisition as concluded is in the interests of the Company and the Shareholders as a whole; (ii) the terms of the Agreement (including the Issue Price) are fairly and reasonably set and the Issue Price is in the interests of the Company and the Shareholders as a whole, and (iii) the growth potential and future prospect of the business of Tian He, we are of the view that such dilution to the shareholding interests of the public Shareholders is acceptable.

F. Financial effects of the Acquisition

Effects on net assets value and net tangible assets value

According to the Interim Report, the consolidated net assets value (“ NAV ”) and net tangible assets value (“ NTAV ”) attributable to the equity holders of the Company were approximately HK$934.6 million and HK$934.0 million as at 30 September 2008, respectively. According to the unaudited pro forma consolidated balance sheet of the Enlarged Group set out in Appendix IV to the Circular, based on the assumption that the Acquisition took place at 30 September 2008, the pro forma NAV and NTAV of the Enlarged Group was approximately HK$1,594.6 million and HK$865.1 million, respectively. The pro forma NAV of the Enlarged Group included goodwill arsing from the Acquisition and intangible assets of approximately HK$598.6 million and HK$130.4 million, respectively, which are subject to annual impairment assessment by the Directors and any impairment loss will be directly affected the profit and loss accounts of the Group for that year.

The NAV and NTAV per Share amounted to HK$0.275 respectively, while pro forma NAV and NTAV per Share after the Completion and prior to any conversion of the Convertible Preference Shares were HK$0.2 and HK$0.109, respectively. Accordingly, the NAV and NTAV per Share will decrease upon the Completion.

— 41 —

LETTER FROM IFA

Effects on earnings

The Group had recorded a consolidated net profit of HK$33.0 million for the year ended 31 March 2008, representing the earnings per Share of 0.97 HK cents. Upon the Completion, Hua Rong will become the wholly-owned subsidiary of the Group and the respective accounts will be consolidated in the financial statements of the Company. According to the unaudited pro forma consolidated income statement of the Enlarged Group set out in Appendix IV to the Circular, based on the audited consolidated accounts of the HR Group for the period from 14 June 2007 to 31 March 2008, the pro forma consolidated net profit of the Enlarged Group amounted to approximately HK$7.7 million, representing a decrease of approximately HK$25.3 million from that for the year ended 31 March 2008. The pro forma earnings per Share after the Completion and prior to any conversion of the Convertible Preference Shares will decrease to 0.10 HK cents. The decrease in the net profit and earnings per share was mainly attributable to the loss-making position of the HR Group during its introductory stage, the amortisation of the intangible assets upon the Completion and the dilution effect of the Consideration Shares. Having taken into account of (i) the outlook of karaoke industry and the Karaoke CMS in the PRC, (ii) the Acquisition enables the Group to strengthen the business and to broaden the Group’s sharing in the copyright licence fees; and (iii) Tian He can provide potentially value-added businesses through the Karaoke CMS in the PRC, the Directors believe that the HR Group is able to turn profit-making in the long run, and brings positive financial impact to the Group.

Effects on liquidity

According to the Interim Report, the Group had consolidated net current assets of approximately HK$244.5 million as at 30 September 2008. According to the unaudited pro forma consolidated balance sheet of the Enlarged Group set out in Appendix IV to the Circular, the pro forma consolidated net current assets of the Enlarged Group amounted to approximately HK$203.2 million. However, we noted that the Directors are of the opinion that the Enlarged Group has sufficient working capital for its present requirements for at least 12 months from the date of the Circular after taking into account its internal resources, available banking facilities of the Group and loans from minority shareholders of the Company.

It should be noted that the aforementioned analyses are for illustrative purpose only and does not purport to represent how the financial position of the Company will be upon the Completion.

— 42 —

LETTER FROM IFA

RECOMMENDATION

We note that the Agreement is subject to a number of conditions, including approval of the Acquisition by the Independent Shareholders at the SGM.

Having considered the above principal factors and reasons, we consider that the terms of the Agreement are on normal commercial terms and in the ordinary and usual course of business of the Group. The Acquisition is in the interests of the Company and the Shareholders as a whole and fair and reasonable. Accordingly, we advise the Independent Board Committee to recommend to the Independent Shareholders to vote in favour of the resolution to be proposed at the SGM. We also advise the Independent Shareholders to vote in favour of the resolution to be proposed at the SGM.

Yours faithfully, For and on behalf of Piper Jaffray Asia Limited Steven Chiu Principal

— 43 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL SUMMARY

Set out below is a summary of the audited financial information of the Group for the three years ended 31 March 2008 and the unaudited financial information on the Group for the six months ended 30 September 2008 and six months ended 30 September 2007 extracted from the relevant annual reports and interim reports of the Company.

No extraordinary items or exceptional items were recorded for each of the three years ended 31 March 2008. No qualified opinion or modified audit opinion had been issued by the Company’s auditor, BDO McCabe Lo Limited, for each of the three years ended 31 March 2008.

Results of the Group

Revenue Cost of sales Gross Profit Other Revenue Increase in fair value of investment properties Net operating expenses Excess of the Group’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost Finance costs Profit/(loss) Before Tax Taxation

For the year ended 31 March For the six months ended 30 September 2008 2007 2006 2008 2007 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Unaudited) (Unaudited) 276,016 202,150 211,195 102,936 60,669 (151,340) (96,670) (100,341) (26,664) (17,250) 124,676 105,480 110,854 76,272 43,419 16,015 7,896 4,541 2,295 8,467 27,163 — 4,500 — 4,101 (187,665) (152,000) (112,539) (110,286) (71,343) 59,319 — — — — (517) (176) (30) — (263) 38,991 (38,800) 7,326 (31,719) (15,619) (6,039) 1,055 (3,555) (4,065) (1,805)

— 44 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Profit/(Loss) for the year from continuing operations Profit/(Losses) for the year from a discontinued operation Profit/(Loss) for the year Earnings/(Loss) per share attributable to ordinary equity holders of the Company Basic — For continuing and discontinued operation — For profit/ (loss) from continuing operations (HK cents) — For profit/ (loss) from discontinued operations (HK cents)	For the year ended 31 March For the six months ended 30 September 2008 2007 2006 2008 2007 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Unaudited) (Unaudited) 32,952 (37,745) 3,771 (35,784) (17,424) — 88,526 38,609 (472) (39) 32,952 50,781 42,380 (36,256) (17,463) 1.09 2.17 2.44 (0.64) 0.10 1.09 (1.18) 0.39 (0.63) 0.10 N/A 3.35 2.05 (0.01) —

— 45 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Diluted — For continuing and discontinued operations — For profit/ (loss) from continuing operations (HK cents) — For profit/ (loss) from discontinued operations (HK cents)	For the year ended 31 March For the six months ended 30 September 2008 2007 2006 2008 2007 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Unaudited) (Unaudited) 1.09 2.13 2.43 (0.64) 0.10 1.09 N/A 0.39 (0.63) 0.10 N/A 3.28 2.04 (0.01) —	For the year ended 31 March For the six months ended 30 September 2008 2007 2006 2008 2007 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Unaudited) (Unaudited) 1.09 2.13 2.43 (0.64) 0.10 1.09 N/A 0.39 (0.63) 0.10 N/A 3.28 2.04 (0.01) —
		0.10
		—

— 46 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Financial Position of the Group

Assets and liabilities Non-current assets Current assets Assets classified as held for sale Total assets Liabilities directly associated with assets as held for sale Current liabilities Non-current liabilities Total liabilities Equity attributable to equity Holders of the Company	For the year ended 31 March For the six months ended 30 September 2008 2007 2006 2008 2007 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Unaudited) (Unaudited) 805,229 215,699 694,519 798,143 290,179 424,638 570,754 158,697 395,067 518,952 — — — 28,883 — 1,229,867 786,453 853,216 1,222,093 809,131 — — — 23,914 — 170,937 123,112 90,999 155,559 144,982 92,924 16,690 156,197 92,918 17,514 263,861 139,802 247,196 272,391 162,496 966,006 646,651 606,020 949,702 646,635	For the year ended 31 March For the six months ended 30 September 2008 2007 2006 2008 2007 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Unaudited) (Unaudited) 805,229 215,699 694,519 798,143 290,179 424,638 570,754 158,697 395,067 518,952 — — — 28,883 — 1,229,867 786,453 853,216 1,222,093 809,131 — — — 23,914 — 170,937 123,112 90,999 155,559 144,982 92,924 16,690 156,197 92,918 17,514 263,861 139,802 247,196 272,391 162,496 966,006 646,651 606,020 949,702 646,635
		— 144,982 17,514
		162,496
		646,635

— 47 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. UNAUDITED FINANCIAL STATEMENTS OF THE GROUP FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2008

The following is a reproduction of the text of the unaudited condensed consolidated financial statements of the Group together with the accompanying notes contained on page 8 to 25 of the interim report of the Company for the six months ended 30 September 2008.

Condensed consolidated balance sheet

As at 30 September 2008

Notes Non-current assets Goodwill Property, plant and equipment 8 Investment properties Payments for leasehold land held for own use under operating leases Deferred expenditure Interest in an associate 9 Held-to-maturity investment 10 Deferred tax assets Total non-current assets Current assets Inventories Trade and other receivables 11 Amount due from a related company 12 Deferred expenditure Cash and cash equivalents Total current assets Assets classified as held for sale 5 Total assets	As at 30 September 2008 (Unaudited) HK$ 560,000 218,741,657 180,642,000 395,196,120 — — — 3,002,770 798,142,547 8,530,265 93,017,917 26,200,000 26,354,439 240,964,957 395,067,578 28,882,853 1,222,092,978	As at 31 March 2008 (Audited) HK$ 560,000 214,484,148 180,642,000 398,799,949 3,720,627 — — 7,022,274
		805,228,998
		36,037,072 82,163,533 9,000,000 45,267,624 252,170,278
		424,638,507
		—
		1,229,867,505

— 48 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes Current liabilities Trade and other payables 13 Amounts due to minority shareholders Current tax liabilities Total current liabilities Liabilities directly associated with assets classified as held for sale Net current assets Total assets less current liabilities Non-current liabilities Provision for long service payments Deferred tax liabilities Total non-current liabilities Total liabilities Net assets Capital and reserves Share capital 14 Reserves Total equity attributable to equity holders of the Company Minority interests Total equity	As at 30 September 2008 (Unaudited) HK$ 54,644,037 100,459,254 455,887 155,559,178 23,913,668 244,477,585 1,042,620,132 2,159,770 90,757,968 92,917,738 272,390,584 949,702,394 169,911,570 764,693,130 934,604,700 15,097,694 949,702,394	As at 31 March 2008 (Audited) HK$ 51,711,961 117,378,195 1,846,886
		170,937,042
		—
		253,701,465
		1,058,930,463
		2,159,770 90,764,658
		92,924,428
		263,861,470
		966,006,035
		169,911,570 780,783,788
		950,695,358 15,310,677
		966,006,035

— 49 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Condensed consolidated statement of changes in equity For the six months ended 30 September 2008

Total equity at the beginning of the period Net loss recognised directly in equity: (Loss)/profit for the period: — attributable to equity holders of the Company — minority interests Loss for the period Surplus on revalutaion on other properties, net of deferred tax Exchange differences arising from subsidiaries in the People’s Republic of China (the “PRC”) Total recognised income and expense for the period Issue of shares on exercise of share options Increase in share premium from issue of shares Decrease in employee share-based compensation reserve due to exercise of share options Capital injection by minority interests Total movements in equity arising from capital transactions Total equity at the end of the period Attributable to: Equity holders of the Company Minority interests

Six months ended 30 September 2008 2007 (Unaudited) (Unaudited) HK$ HK$ 966,006,035 646,651,578 (21,844,295) 2,738,568 (14,412,907) (20,202,126) (36,257,202) (17,463,558) — 808,851 6,579,959 (24,544) (29,677,243) (16,679,251) — 3,450,000 — 15,980,788 — (3,878,188) 13,373,602 1,109,804 13,373,602 16,662,404 949,702,394 646,634,731 934,604,700 675,018,999 15,097,694 (28,384,268) 949,702,394 646,634,731

— 50 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Condensed consolidated cash flow statement

For the six months ended 30 September 2008

Net cash inflow from operating activities Continuing operations Discontinued operations Net cash outflow from investing activities Continuing operations Discontinued operations Net cash inflow from financing activities Continuing operations Discontinued operations Net decrease in cash and cash equivalents Effect of foreign exchange rate changes Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Cash and cash equivalents presented under: Cash and cash equivalents Assets classified as held for sale

Six months ended 30 September 2008 2007 (Unaudited) (Unaudited) HK$ HK$ (10,490,265) (2,376,378) (1,401,347) 3,088,480 (11,891,612) 712,102 (12,486,422) (94,888,738) 4,309 (264,386) (12,482,113) (95,153,124) 13,373,602 55,132,055 — — 13,373,602 55,132,055 (11,000,123) (39,308,967) 1,038,894 154,500 252,170,278 438,160,876 242,209,049 399,006,409 240,964,957 399,006,409 1,244,092 — 242,209,049 399,006,409

— 51 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes to the condensed consolidated financial statements

For the six months ended 30 September 2008

1. Basis of preparation and significant accounting policies

The condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

The condensed consolidated financial statements have been prepared under the historical cost basis except for certain investment properties, which are measured at fair value.

The accounting polices used in the condensed consolidated financial statements are consistent with those followed in the preparation of the Group’s consolidated financial statements for the year ended 31 March 2008.

In the current period, the Group has applied, for the first time, new interpretations and amendments to HKFRS issued by the HKICPA, which are effective for the Group’s financial year beginning on 1 April 2008. The adoption of these new interpretations and amendments had no material effect on the results and financial position of the Group for the current or prior accounting periods. Accordingly, no prior period adjustment has been recognised.

The Group has not early applied the following new and revised standards or interpretations that have been issued but are not yet effective. The directors of the Company anticipate that the application of these standards or interpretations will have no material impact on the results and the financial position of the Group, except the adoption of HKFRS 3 (Revised) may affect the accounting for business combination for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. HKAS 27 (Revised) will affect the accounting treatment on changes in a parent’s ownership interest in a subsidiary that do not result in a loss of control, which will be accounted for as equity transactions.

HKAS 1 and HKAS Puttable Financial Instruments and Obligations Arising on Liquidation2 32 Amendments HKAS 1 (Revised) Presentation of Financial Statements2 HKAS 23 (Revised) Borrowing Costs2 HKAS 27 (Revised) Consolidated and Separate Financial Statements1 HKFRS 2 Amendment Share-based Payment — Vesting Conditions and Cancellation2 HKFRS 3 (Revised) Business Combinations1 HKFRS 8 Operating Segments2 HK(IFRIC) — Int 13 Customer Loyalty Programmes3 HK(IFRIC) — Int 15 Agreements for the Construction of Real Estate2 HK(IFRIC) — Int 16 Hedges of a Net Investment in a Foreign Operation4

1 Effective from annual periods beginning on or after 1 July 2009.

2 Effective from annual periods beginning on or after 1 January 2009.

3 Effective from annual periods beginning on or after 1 July 2008.

4 Effective from annual periods beginning on or after 1 October 2008.

— 52 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. Turnover, revenue and segment information

For management purposes, the Group is currently organised into six operating divisions — restaurant operations, property investment, wedding services, entertainment business, licence fee collection business and hotel operations. 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 of investment properties
Wedding services	— provision of wedding services
Entertainment business	— provision of talent management and entertainment business
License fee collection business	— collection of licence fee from karaoke operators in the PRC
Hotel operations	— ownership, operation and management of hotel

The Group was also involved in retail operations of watches and wines. The retail of wines ceased in August 2008 and the retail of watches was disposed of as detailed in note 5.

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

Turnover External sales Inter-segment sales Segment results Unallocated income Unallocated costs Finance costs Loss before taxation Taxation Loss for the period				Six months ended 30 September 2008(Unaudited)	Six months ended 30 September 2008(Unaudited)	Six months ended 30 September 2008(Unaudited)
				Continuing operations				Sub-total HK$ 102,935,921 — 102,935,921 (30,744,992) 1,889,473 (2,863,808) — (31,719,327) (4,065,492) (35,784,819)	Discontinued operations Retail operations HK$ 77,035,716 — 77,035,716 (201,491) — — (244,143) (445,634) (26,749) (472,383)	Total HK$ 179,971,637 —
	Restaurant operations HK$ 18,302,462 — 18,302,462 166,866	Property investment HK$ 2,854,419 2,720,000 5,574,419 3,323,721	Wedding services HK$ 36,041,050 — 36,041,050 284,147	Entertainment business HK$ 4,807,364 — 4,807,364 (1,015,703)	Licence fee collection business HK$ 1,127,244 — 1,127,244 (26,259,337)	Hotel operations HK$ 39,803,382 — 39,803,382 (7,244,686)	Inter- segment elimination HK$ — (2,720,000) (2,720,000) —
										179,971,637
										(30,946,483) 1,889,473 (2,863,808) (244,143)
										(32,164,961) (4,092,241)
										(36,257,202)

— 53 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The inter-segment sales were charged at prevailing market rates.

Restaurant operations HK$ Turnover External sales 19,376,826 Inter-segment sales — 19,376,826 Segment results 1,771,555 Unallocated income Increase in fair value of investment properties — Unallocated costs Finance costs Loss before taxation Taxation Loss for the period The inter-segment sales wer		Six months ended 30 September 2007(Unaudited)	Six months ended 30 September 2007(Unaudited)			Total HK$ 115,525,108 —
		Continuing operations		Sub-total HK$ 60,668,727 — 60,668,727 (26,283,223) 8,307,201 4,100,949 (1,480,473) (263,471) (15,619,017) (1,805,359) (17,424,376)	Discontinued operations Retail operations HK$ 54,856,381 — 54,856,381 (37,167) — — — — (37,167) (2,015) (39,182)
	Property investment HK$ 2,843,800 2,628,000 5,471,800 3,704,621 4,100,949 e charged	Wedding services Entertainment business Licence fee collection business HK$ HK$ HK$ 37,325,851 54,107 1,068,143 — — — 37,325,851 54,107 1,068,143 (2,218,713) (413,590) (29,127,096) — — — at prevailing market rates.	Inter- segment elimination HK$ — (2,628,000) (2,628,000) — —
						115,525,108
						(26,320,390) 8,307,201 4,100,949 (1,480,473) (263,471)
						(15,656,184) (1,807,374)
						(17,463,558)

3. Loss for the period

Loss for the period from continuing and discontinued operations has been arrived at after crediting and charging:

Crediting Bank interest income Interest income on loan receivable Increase in fair value of investment properties Charging Cost of inventories recognised as an expense Depreciation of property, plant and equipment Amortisation of deferred expenditure Loss on disposal of property, plant and equipment Operating lease rentals in respect of land and buildings Staff costs — wages and salaries	Six months ended 30 September 2008 2007 (Unaudited) (Unaudited) HK$ HK$ 1,171,573 8,131,968 717,900 175,233 — 4,100,949 95,744,192 58,943,835 12,134,656 2,804,132 22,633,812 22,571,802 87,547 35,560 5,783,355 6,124,160 34,408,368 23,223,060

— 54 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. Taxation

Taxation in the condensed consolidated income statement represents:

	Continuing	operations	Discontinued operations	Discontinued operations	Total	Total
	Six months ended		Six months ended		Six months ended
	30 September		30 September		30 September
	2008	2007	2008	2007	2008	2007
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
	HK$	HK$	HK$	HK$	HK$	HK$
Under-provision in
prior year:
Profits tax in Macau	—	—	6,756	1,708	6,756	1,708
Income tax
in the PRC	24,742	—	—	—	24,742	—
Deferred tax	4,040,750	1,805,359	19,993	307	4,060,743	1,805,666
	4,065,492	1,805,359	26,749	2,015	4,092,241	1,807,374

No provision for Hong Kong profits tax has been made for subsidiaries within the Group as these subsidiaries have either sufficient tax losses brought forward to offset against the estimated assessable profits or no material estimated assessable profits for the period on an individual basis. Overseas tax is calculated at the rates applicable in the respective jurisdictions.

No provision for Macau Tax has been made as the subsidiaries operating in Macau incurred tax losses for the period.

5. Discontinued operations in the current period

The retail operation of wine was discontinued subsequent to the closure of retail outlet in Macau. The retail operation of watches ceased upon the disposal of interests in subsidiaries, Witty Ventures Limited and HMS Watches Company Limited (collective referred as “WV Group”). On 30 September 2008, the Group signed an agreement with the minority shareholder of WV Group to dispose of the Group’s 51% interests in the WV Group and the benefit of loans of HK$5,941,241 advanced to WV Group at a total consideration of HK$9,870,982. The disposal was completed on 10 November 2008.

— 55 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The turnover and results of the retail operations of wine and watches were as follows:

	Six months ended 30 September	Six months ended 30 September
	2008	2007
	(Unaudited)	(Unaudited)
	HK$	HK$
Loss for the period from discontinued operations:
Turnover	77,035,716	54,856,381
Cost of sales	(71,349,277)	(50,491,777)
Gross profit	5,686,439	4,364,604
Other revenue	11,399	45,073
Net operating expenses	(5,899,329)	(4,446,844)
Finance costs	(244,143)	—
Loss before taxation	(445,634)	(37,167)
Taxation	(26,749)	(2,015)
Loss after taxation	(472,383)	(39,182)

The net assets of the retail operations of wine and watches as at the balance sheet date were as follows:

Property, plant and equipment Inventories Trade and other receivables Cash and cash equivalents Assets classified as held for sale Trade and other payables Amounts due to minority shareholders Current tax liabilities Deferred tax liabilities Liabilities directly associated with assets classified as held for sale	As at 30 September 2008 (Unaudited) HK$ 328,842 26,655,994 653,925 1,244,092
	28,882,853
	6,041,011 17,343,638 509,026 19,993
	23,913,668

— 56 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

6. (Loss)/earnings per share

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

(Loss)/earnings for the purpose of basic and diluted (loss)/ earnings per share (Loss)/profit for the period 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 (loss)/earnings per share Effect of dilutive potential ordinary shares: — Share options Weighted average number of ordinary shares for the purpose of diluted (loss)/earnings per share

Six months ended 30 September 2008 2007 (Unaudited) (Unaudited) HK$ HK$ (21,371,912) 2,777,750 (472,383) (39,182) (21,844,295) 2,738,568 3,398,231,392 2,673,460,398 1,000,000 13,330,651 3,399,231,392 2,686,791,049

7. Dividends

No dividend was paid or proposed during the period, nor has any dividend been proposed since the balance sheet date (2007: Nil).

8. Property, plant and equipment

During the period 30 September 2008, the Group acquired property, plant and equipment at cost of HK$16,008,435 (30 September 2007: HK$2,836,853).

9. Interest in an associate

The associate is dormant and the financial result of the associate is immaterial to the Group. Accordingly, no disclosure was made.

10. Held-to-maturity investment

The investment was a convertible note of Opal Technologies Inc. (the “Note”) for a principal amount of US$10 million. The directors of the Company were of the opinion that the recoverability of the Note was doubtful and a full provision on the Note was made in 2001. For details please refer to note 24 to the consolidated financial statements for the year ended 31 March 2008 as contained in the 2008 annual report.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

11. Trade and other receivables

The Group generally grants no credit period to its customers, all invoices are due on presentation.

Included in trade and other receivables of the Group are trade receivables of HK$2,431,598 (31 March 2008: HK$9,566,334). The aging analysis of trade receivables at the balance sheet date is as follows:

Current Less than 1 month past due 1 to 3 months past due Amount past due at balance sheet date but not impaired_(Note)_	As at 30 September 2008 (Unaudited) HK$ — 1,663,787 767,811 2,431,598 2,431,598	As at 31 March 2008 (Audited) HK$ —
		8,678,299 888,035
		9,566,334
		9,566,334

Note: The balances that were past due but not impaired related to a number of customers that have a good track record with the Group. Based on past experience, management estimated that the carrying amounts could be fully recovered.

12. Amount due from a related company

The amount due from a related company is unsecured, interest-bearing at 5.25% to 8% per annum and repayable within one year. Two directors of Well Allied Investments Limited (“Well Allied”), a subsidiary of the Company, Mr. Lee Tien-Yung and Mr. Lu Yueh-Wei, Philip, have beneficial interests in the related company, PLD International Limited (“PLD”).

13. Trade and other payables

Included in trade and other payables are trade payables of HK$7,465,293 (31 March 2008: HK$7,046,819). The ageing analysis of trade payables at the balance sheet date is as follows:

Within 30 days 31 to 60 days 61 to 90 days Over 90 days	As at 30 September 2008 (Unaudited) HK$ 5,363,263 527,849 346,560 1,227,621 7,465,293	As at 31 March 2008 (Audited) HK$ 4,446,536 1,637,205 41,170 921,908
		7,046,819

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

14. Share capital

Authorised: Ordinary shares of HK$0.05 each At beginning of period/year Increase in authorised ordinary shares At end of period/year Issued and fully paid: At beginning of period/year Exercise of share options New shares issued At end of period/year	As at 30 September 2008 (Unaudited) Number of shares HK$ 10,000,000,000 500,000,000 — — 10,000,000,000 500,000,000 3,398,231,392 169,911,570 — — — — 3,398,231,392 169,911,570	As at 31 March 2008 (Audited) Number of shares HK$ 3,800,000,000 190,000,000 6,200,000,000 310,000,000 10,000,000,000 500,000,000 2,630,121,600 131,506,080 69,000,000 3,450,000 699,109,792 34,955,490 3,398,231,392 169,911,570	As at 31 March 2008 (Audited) Number of shares HK$ 3,800,000,000 190,000,000 6,200,000,000 310,000,000 10,000,000,000 500,000,000 2,630,121,600 131,506,080 69,000,000 3,450,000 699,109,792 34,955,490 3,398,231,392 169,911,570
			500,000,000
			131,506,080 3,450,000 34,955,490
			169,911,570

— 59 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

15. Equity

At 1 April 2007 (Audited) Issue of share on exercise of share options Acquisition of subsidiaries Translation differences Revaluation gain Deferred tax on revaluation gain Profit/(loss) for the period At 30 September 2007 (Unaudited) At 1 April 2008 (Audited) Capital injection by minority interests Translation differences Loss for the period At 30 September 2008 (Unaudited)	Share capital HK$ 131,506,080 3,450,000 — — — — —	Share premium HK$ 540,172,078 15,980,788 — — — — —	Other reserves HK$ — — — — — — —	Contributed surplus HK$ 28,784,000 — — — — — —	Employee share-based compensation reserve HK$ 3,934,394 (3,878,188) — — — — —	Other properties revaluation reserve HK$ 74,518,665 — — — 980,425 (171,574) —	Foreign exchange reserve HK$ 120,912 — — (24,544) — — —	Accumulated losses HK$ (123,092,605) — — — — — 2,738,568	Equity attributable to equity holders of the Company HK$ 655,943,524 15,552,600 — (24,544) 980,425 (171,574) 2,738,568	Minority interests HK$ (9,291,946) — 930,760 179,044 — — (20,202,126)	Total equity HK$ 646,651,578 15,552,600 930,760 154,500 980,425 (171,574) (17,463,558)
	134,956,080	556,152,866	—	28,784,000	56,206	75,327,516	96,368	(120,354,037)	675,018,999	(28,384,268)	646,634,731
	169,911,570 — — —	723,939,216 — — —	(2,370,305) — — —	28,784,000 — — —	56,206 — — —	90,001,447 — — —	31,564,245 — 5,753,637 —	(91,191,021) — — (21,844,295)	950,695,358 — 5,753,637 (21,844,295)	15,310,677 13,373,602 826,322 (14,412,907)	966,006,035 13,373,602 6,579,959 (36,257,202)
	169,911,570	723,939,216	(2,370,305)	28,784,000	56,206	90,001,447	37,317,882	(113,035,316)	934,604,700	15,097,694	949,702,394

16. Commitments

(a) Operating lease commitments

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

Not later than one year Later than one year and not later than five years	30 September 2008 (Unaudited) HK$ 10,531,400 4,431,875 14,963,275	31 March 2008 (Audited) HK$ 13,043,938 2,635,604
		15,679,542

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(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:

Not later than one year Later than one year and not later than five years (c) Capital commitments Commitments for the acquisition of plant and equipment Authorised but not contracted for Contracted but not accounted for	30 September 2008 (Unaudited) HK$ 12,080,303 10,012,668 22,092,971 30 September 2008 (Unaudited) HK$ 3,758,513 — 3,758,513	31 March 2008 (Audited) HK$ 13,281,429 12,854,411
		26,135,840
		31 March 2008 (Audited) HK$ — 1,340,760
		1,340,760

17. Related party transactions

Significant related party transactions during the period were:

		Six months	ended
		30 September
		2008	2007
		(Unaudited)	(Unaudited)
	Notes	HK$	HK$
Rental expenses to related companies	(a)	2,130,495	2,091,428
Acquisition of investment properties from related
parties	(b)	—	48,000,000
Interest income receivable from related party	(c)	717,900	175,233
Rental expenses to related companies	(d)	254,250	—
Composer fee to a subsidiary director	(e)	245,302	—

(a) Rental expenses were charged by related companies which are associates of two directors of the Company, Ms. Ma Shuk Kam and Mr. Yeung Chi Hang based on the tenancy agreements signed between the parties.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

• (b) There was no acquisition of investment properties during the period.

• The acquisition in 2007 related to (1) an agreement signed on 13 April 2007 between (i) Wise Mark Group Limited (“Wise Mark”), a wholly owned subsidiary of the Company; and (ii) Mr. Yeung Chi Hang and Well Harvest Enterprises Limited (collectively referred as 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; and (2) an agreement signed on 13 April 2007 between (i) Golden Island (Management) Limited and (ii) Well Harvest whereby Golden Island (Management) Limited agreed to acquire from Well Harvest 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 acquisition was not accounted for under HKFRS 3 “Business Combinations” as the major asset of Shenzhen Land is interest in a property in the PRC and the property was vacant at the acquisition date. The property was accounted for under HKFRS 40 “Investment Property” and the carrying value of the property was stated at fair value at the balance sheet date.

• (c) Pursuant to a loan agreement dated 4 July 2007 between Well Allied and PLD, Well Allied advanced 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. The loan remains outstanding and is repayable on demand. PLD has paid interest due from the loan. Besides, pursuant to a loan agreement dated 9 May 2008, Well Allied advanced an additional loan of HK$17.2 million to PLD at the interest rate of 5.25% per annum and repayable within 1 year from the date of loan agreement.

• (d) Rental expenses were charged by related company which is beneficially owned by a director of a subsidiary, Mr. Ng Lok Shing, Ronald, based on tenancy agreements signed between the parties.

• (e) This represents the fee charged by a director of a subsidiary, Mr. Ng Lok Shing, Ronald, for music composition.

18. Events after the balance sheet date

• (a) Winkler Profits Limited, a wholly owned subsidiary of the Company, entered into an agreement on 30 September 2008 for the disposal of 51% of the issued share capital of, and the benefit of loans of HK$5,941,241 advanced to, Witty Ventures Limited and 51% of the registered capital of HMS Watches Company Limited to the minority owner, Mr. Yuen Tak Yau, Daniel for an aggregate consideration of HK$9,870,982 in cash. The transaction was completed on 10 November 2008.

• (b) On 21 November 2008, the Company subscribed for 42.88 shares of US$1 each of Welly Champ International Limited (“Welly Champ”) at a total cash consideration of HK$25.4 million, which was used by Welly Champ to subscribe for 21.873 shares of US$1 each of Well Allied. Well Allied also issued 3.96 shares of US$1 each to Tak Full Group Limited at a total cash consideration of HK$4.6 million. After the subscription, the interest of the Company in Welly Champ increases from 75.92% to 80.86%, whereas the interest of Welly Champ in Well Allied increases from 63.36% to 66.81%.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2008

The following is a reproduction of the text of the audited consolidated financial statements of the Group together with accompanying notes contained on pages 23 to 95 of the annual report of the Company for the year ended 31 March 2008.

Consolidated Income Statement

For the year ended 31 March 2008

Notes Continuing operations Turnover 6 Cost of sales Gross profit Other revenue 7 Net operating expenses Increase in fair value of investment properties Excess of the Group’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost 37 Finance costs 12 Profit/(loss) before taxation Taxation 13 Profit/(loss) for the year from continuing operations 8 Discontinued operations Profit for the year from discontinued operations 9 Profit for the year Attributable to: Equity holders of the Company Minority interests Dividends 15 Earnings/(loss) per share 16 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)	2008 HK$ 276,016,114 (151,339,908) 124,676,206 16,015,066 (187,664,968) 27,163,329 59,318,750 (517,129) 38,991,254 (6,038,558) 32,952,696 — 32,952,696 31,901,584 1,051,112 32,952,696 Nil 1.09 1.09 N/A N/A 1.09 1.09	2007 HK$ 202,150,157 (96,669,711) 105,480,446 7,895,945 (151,999,844) — — (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 (1.18) N/A 3.35 3.28 2.17 2.13

— 63 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Balance Sheet

As at 31 March 2008

Notes Non-current assets Goodwill 17 Property, plant and equipment 18 Investment properties 19 Payments for leasehold land held for own use under operating leases 20 Deferred expenditure 21 Interest in an associate 23 Held-to-maturity investment 24 Deferred tax assets 33 Total non-current assets Current assets Inventories 25 Trade and other receivables 26 Deferred expenditure 21 Cash and cash equivalents 27 Total current assets Current liabilities Trade and other payables 28 Amounts due to minority shareholders 29 Provision for taxation Total current liabilities Net current assets Total assets less current liabilities Non-current liabilities Provision for long service payments 32 Deferred tax liabilities 33 Total non-current liabilities Net assets Capital and reserves Share capital 34 Reserves Total equity attributable to equity holders of the Company Minority interests Total equity 35	2008 HK$ 560,000 214,484,148 180,642,000 398,799,949 3,720,627 — — 7,022,274 805,228,998 36,037,072 91,163,533 45,267,624 252,170,278 424,638,507 51,711,961 117,378,195 1,846,886 170,937,042 253,701,465 1,058,930,463 2,159,770 90,764,658 92,924,428 966,006,035 169,911,570 780,783,788 950,695,358 15,310,677 966,006,035	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 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

— 64 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Balance Sheet

As at 31 March 2008

Notes Non-current assets Investments in subsidiaries 22 Total non-current assets Current assets Amounts due from subsidiaries 22 Trade and other receivables 26 Cash and cash equivalents 27 Total current assets Current liabilities Trade and other payables 28 Amounts due to subsidiaries 22 Total current liabilities Net current assets Net assets Capital and reserves Share capital 34 Reserves Total equity 35	2008 HK$ 183,379,580 183,379,580 574,394,230 23,928 200,250 574,618,408 993,196 98,624,316 99,617,512 475,000,896 658,380,476 169,911,570 488,468,906 658,380,476	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

— 65 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Changes in Equity

For the year ended 31 March 2008

Total equity at the beginning of year Net income recognised directly in equity: Profit for the year: — attributable to equity shareholders of the Company — minority interests Profit for the year Surplus on revaluation of other properties revaluation reserve, net of deferred tax Exchange differences arising from subsidiaries in the PRC 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 Decrease in employee share-based compensation reserve due to exercise of share options Excess of consideration paid over the relevant share acquired of the carrying value of net assets of the subsidiaries Minority interests Total movements in equity arising from capital transactions Total equity at the end of year Attributable to: Equity holders of the Company Minority interests	2008 HK$ 646,651,578 31,901,584 1,051,112 32,952,696 15,482,782 31,443,333 79,878,811 38,405,490 183,767,138 (3,878,188) (2,370,305) 23,551,511 239,475,646 966,006,035 950,695,358 15,310,677 966,006,035	2007 HK$ 606,020,391 57,132,114 (6,350,751) 50,781,363 1,827,911 120,912 52,730,186 — — — — (12,098,999) (12,098,999) 646,651,578 655,943,524 (9,291,946) 646,651,578

— 66 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Cash Flow Statement

For the year ended 31 March 2008

Notes Operating activities Net cash (used in)/generated from operations 39 Interest paid Interest received Tax paid Net cash (used in)/generated from operating activities Investing activities Disposal of subsidiaries, net of cash disposed of 9 Acquisition of subsidiaries, net of cash acquired 37 Proceeds from disposal of property, plant and equipment Purchase of property, plant and equipment Purchase of investment properties Deferred expenditure paid Net cash (used in)/generated from investing activities Financing activities Repayment of bank loans Advances from minority shareholders Capital contribution by minority shareholders Proceeds from exercise of share options Net cash generated from/(used in) financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of year Effect of foreign exchange rate changes Cash and cash equivalents at the end of year	2008 HK$ (44,741,733) (517,129) 12,402,896 (585,235) (33,441,201) — (118,395,364) 324,440 (7,728,566) (49,056,671) (45,000,000) (219,856,161) — 40,251,911 3,654,350 15,552,600 59,458,861 (193,838,501) 438,160,876 7,847,903 252,170,278	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

— 67 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes to the Financial Statements

31 March 2008

1. General

United Power Investment Limited (the “Company”) is a public limited company incorporated in Bermuda and its shares are listed on The Stock Exchange of Hong Kong Limited. The Company’s registered office and principal place of business are at Clarendon House, Church Street, Hamilton HM 11, Bermuda and Room 2810-11, 28/F., 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 22.

2. Basis Of Preparation

(a) Statement of compliance

The consolidated financial statements have been prepared in accordance with all applicable new and revised standards, amendments and interpretations (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). In addition, the consolidated 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 measurement

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.

(c) Use of estimate and judgments

The preparation of financial statements in conformity with HKFRSs 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 consolidated financial statements are disclosed in note 41.

(d) Functional and presentation currency

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

— 68 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. Application of Hong Kong Financial Reporting Standards

• (a) In the current year, the Company and its subsidiaries (collectively referred to as the “Group”), has applied all the new and revised HKFRSs issued by the HKICPA that are relevant to its operation and effective for the current accounting period. The adoption of these new HKFRSs had no material effect on how the results for the current or prior accounting periods have been prepared and presented.

The adoption of these new HKFRSs did not affect recognition or measurement of the amounts recognised in the financial statements for the current or prior accounting periods. As a result no prior period adjustment is required.

However, the adoption of “HKFRS 7 Financial Instruments: Disclosure” and “Amendment to HKAS 1, Presentation of financial statements: Capital disclosure” resulted in much more extensive disclosures in respect of financial instruments and an additional disclosure on capital management policy respectively. Comparative information has been restated to achieve a consistent presentation.

• (b) Potential impact arising on the new accounting standards not yet effective

The Group has not yet applied the following new or revised HKFRSs that have been issued but are not yet effective. The Directors of the Company anticipate that the application of these standards, amendments or interpretations will have no material impact on the results and the financial position of the Group and the Company, except for the adoption of HKFRS 3 (Revised) may affect the accounting for business combination for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. HKAS 27 (Revised) will affect the accounting treatment on changes in a parent’s ownership interest in a subsidiary that do not result in a loss of control, which will be accounted for as equity transactions.

HKAS 1 (Revised)	Presentation of Financial Statements 1	Presentation of Financial Statements 1
HKAS 23 (Revised)	Borrowing Costs 1
HKAS 27 (Revised)	Consolidated and Separate Financial Statements		4
HKAS 32 Amendment	Financial Instruments: Presentation 1
HKFRS 2 Amendment	Share-based Payments — Vesting Conditions and
	Cancellations 1
HKFRS 3 (Revised)	Business Combinations 4
HKFRS 8	Operating Segments 1
HK (IFRIC) — Interpretation 12	Service Concession Arrangements 3
HK (IFRIC) — Interpretation 13	Customer Loyalty Programmes 2
HK (IFRIC) — Interpretation 14	HKAS 19 — The Limit on a Defined Benefit Asset,
	Minimum Funding Requirements	and their
	Interaction 3

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

2 Effective for annual periods beginning on or after 1 July 2008.

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

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

— 69 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. Principal Accounting Policies

(a) Basis of consolidation

Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity so as to obtain benefits from its activities, that other entity is classified as a subsidiary. The consolidated financial statements comprise the results of the Company and its subsidiaries. Inter-company transactions and balances between group companies are 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 the minority’s 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 holders 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 holders of the Company.

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

The Group applies a policy of treating transactions with minority interests as transactions with equity owners of the Group. For purchases from minority interests, any excess/ (shortfall) of the consideration paid over/(under) the relevant share acquired of the carrying value of net assets of the subsidiary is deducted from/(credited to) equity. For disposals to minority interests, differences between any proceeds received and the relevant share of minority interests are also recorded in equity.

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

(b) Subsidiaries

A subsidiary is an entity over which the Company is able to exercise control. Control is achieved where the Company, directly or indirectly has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account.

— 70 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(c) Associate

Where the Group has the power to participate in (but not control) the financial and operating policy decisions of another entity, that other entity is classified as an associate. Associates are accounted for using the equity method, whereby they are initially recognised in the consolidated balance sheet at cost and thereafter, their carrying values are adjusted for the Group’s share of the post-acquisition change in 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.

(d) 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.

The Group signed several agreements with 北京天語同聲信息技術有限公司 to set up a jointly controlled operation in the People’s Republic of China (“PRC”) for the collection of music licence fee from karaoke operators in the PRC as detailed in note 38(e).

(e) 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 a separate asset with any impairment in carrying value being charged to the consolidated 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 consolidated 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.

— 71 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For goodwill arising on an acquisition in a financial year, the cash-generating unit to which goodwill has been allocated is tested for impairment at 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 rate on the basis of the carrying amount to each asset in the unit. Any impairment loss for goodwill is recognised directly in the consolidated income statement. An impairment loss for goodwill is not reversed in subsequent periods.

(f) 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 land and buildings and adjustment is made where they consider that there has been a 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 in Macau
— Buildings	Over the term of the land lease
— Leasehold improvements, furniture, fixtures
and equipment	2 — 10 years
Hotel buildings in the PRC	5 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	3 — 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.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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 assets.

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.

The gain or loss arising from disposal of an item of property, plant and equipment other than leasehold land and building is the difference between the net sale proceeds and its carrying amount, and is recognised in the income statement.

(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. Changes in fair value are recognised in the income statement.

The gain or loss arising from disposal of investment properties is the difference between the net sale proceeds and its carrying amounts and is recognised in the income statement.

(h) Payments for leasehold land held for own use under operating leases

Payments for 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.

(i) 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.

(j) Film and movie rights

Films and movies invested by the Group are stated at cost less accumulated amortisation and accumulated impairment losses. Amortisation of released films and movies is calculated at rates sufficient to write off the total cost of production in relation to expected revenues. Unreleased films and movies are valued at cost less provision for impairment losses.

(k) Deferred expenditure

Deferred expenditure represents non-refundable 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 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.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(l) Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as lessor

Rental income from operating leases is recognised in the consolidated income statement on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised as an expense on straight-line basis over the lease term.

The Group as lessee

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.

The land and buildings elements of property leases in the PRC are considered separately for the purposes of lease classification.

(m) 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. Financial assets are classified as held for trading if they are acquired for the purpose of sale in the near term. Gains or losses on investments held for trading are recognised in the income statement.

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.

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.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(ii) Impairment loss on financial assets

Objective evidence that the asset is impaired includes observable data that comes to the attention of the Group may include the following loss events:

• significant financial difficulty of the debtor;

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

• granting concession to a debtor because of debtor’s financial difficulty; and

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

For loan and receivables or held-to-maturity investments:

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. The carrying amount of financial asset is reduced through the use of an allowance account. When any part of financial asset is determined as uncollectible, it is written off against the allowance account for the relevant financial asset.

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.

(iii) Financial liabilities

The Group classifies its financial liabilities as other financial liabilities which include the following items:

• Trade payables and other short-term monetary liabilities, which are recognised at amortised cost.

• Bank borrowings 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 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.

(iv) Equity instruments

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

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(v)

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.

(n) Inventories

Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost, comprises all costs of purchase and other costs incurred, 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 necessary to make the sale.

(o) 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 when it is probable that the economic benefits will flow to the Group.

Revenue from musical works is recognised when the Group’s entitlement to such payments has been established which is upon the delivery of the master copy or materials to the customers.

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

Hotel room revenue is recognised when hotel rooms are occupied.

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.

(p) 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.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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.

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.

(q) 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 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 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 year, in which case, the rate approximating 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 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.

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.

— 77 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(r) 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 post-employment 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 Scheme for that employee. Plan assets are measured at fair values. Actuarial gains and losses are recognised over the average remaining service lives of employees.

— 78 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The employees of the Group’s subsidiaries that operate in Macau and in the PRC are required to participate in government-managed retirement benefit schemes. These subsidiaries are required to contribute a fixed cost per employee to the governmentmanaged retirement benefit schemes. The contributions are charged to the income statement as they become payable.

(s) 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.

(t) Impairment of other assets

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;

• investment properties;

• payments for leasehold land held for own use under operating leases;

• investments in subsidiaries;

• investments in associates;

• film and movie rights; and

• deferred expenditure.

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, 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.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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.

(u) 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.

(v) 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.

(w) Segment reporting

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

In accordance with the Group’s 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.

— 80 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5. Business and Geographical Segments

(a) Business segments

For management purposes, the Group is currently organised into seven operating divisions – restaurant operations, property investment, wedding services, entertainment business, retail operations, licence fee collection business and hotel operations. 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 of investment properties
Wedding services	—	provision of wedding services
Entertainment business	—	provision of talent management and entertainment
		business
Retail operations	—	trading of watches and wine
License fee collection	—	collection of licence fee from karaoke operators in
business		the PRC
Hotel operations	—	ownership, operation and management of hotel (note)

Note: The Group disposed of a subsidiary, Waldorf Holding Limited (“Waldorf”), in November 2006 which provided the hotel operations, as detailed in note 9. In November 2007, the Group acquired another group of subsidiaries which owns and operates a hotel in the PRC as detailed in notes 37(c).

— 81 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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

TURNOVER External turnover RESULT Segment results Excess of fair value of net assets acquired over cost of acquisition of subsidiaries Unallocated income Unallocated costs Profit before taxation Taxation Profit for the year Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Capital expenditure — segment — unallocated Depreciation — segment — unallocated Impairment of goodwill — segment Amortisation of deferred expenditure — segment Amortisation of prepaid land lease — segment			2008	2008	2008			Total HK$ 276,016,114
			Continuing operations				Hotel operations HK$ 30,107,202 (610,933) 59,318,750 513,619,346 (22,996,772) 1,605,896 5,765,593 — — 1,850,245
	Restaurant operations HK$ 41,238,230 2,680,317 116,644,725 (7,855,679) 372,636 2,178,050 — — —	Property investment HK$ 5,845,600 34,978,588 181,253,333 (2,269,631) 49,056,671 129,297 — — —	Wedding services HK$ 75,020,902 (5,399,931) 9,143,736 (8,351,759) 1,118,645 2,577,909 — — —	Entertainment business HK$ 3,140,375 (6,158,358) 39,642,161 (9,067,255) 3,810,507 252,412 4,277,660 — —	Retail operations HK$ 116,715,459 1,817,935 38,252,719 (21,552,287) 336,812 671,193 — — —	Licence fee collection business HK$ 3,948,346 (55,982,898) 63,649,906 (71,880,133) 192,275 71,776 — 45,267,624 —
								(28,675,280) 59,318,750 12,402,896 (4,055,112)
								38,991,254 (6,038,558)
								32,952,696
								962,205,926 267,661,579
								1,229,867,505
								(143,973,516) (119,887,954)
								(263,861,470)
								56,493,442 291,795
								56,785,237
								11,646,230 37,407
								11,683,637
								4,277,660
								45,267,624
								1,850,245

— 82 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Turnover Segment results Gain on disposal of hotel operations Unallocated income Unallocated costs Profit before taxation Taxation Profit for the year Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Capital expenditure — segment — unallocated Depreciation — segment — unallocated Impairment of goodwill — segment Amortisation of deferred expenditure — segment Amortisation of prepaid land lease — segment Amortisation of land premium — segment						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 7,022,643 81,504,515 — — 237,313 24,024,398 — — 864,827 2,102,957	Total HK$ 273,617,763
		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 business 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 — —
										(33,345,133) 81,504,515 7,533,236 (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

— 83 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Geographical segments

The Group’s operations are located in Hong Kong, Macau and the PRC.

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

Turnover Segment assets Capital expenditure Turnover Segment assets Capital expenditure	Hong Kong Continuing operations Discontinued operations HK$ HK$ 236,025,011 — 576,167,487 — 2,503,566 — Hong Kong Continuing operations Discontinued operations HK$ HK$ 186,618,871 — 723,894,357 — 4,040,393 —	2008 Macau Continuing operations Discontinued operations HK$ HK$ 5,935,555 — 11,028,685 — — — 2007 Macau Continuing operations Discontinued operations HK$ HK$ 15,465,320 71,467,606 22,121,015 — 3,320,583 237,313	PRC Continuing operations Discontinued operations HK$ HK$ 34,055,548 — 642,671,333 — 54,281,671 — PRC Continuing operations Discontinued operations HK$ HK$ 65,966 — 40,437,919 — 191,358 —	Total HK$ 276,016,114 1,229,867,505 56,785,237
				Total HK$ 273,617,763 786,453,291 7,789,647

6. Turnover

Analysis of the Group’s turnover for the year, are as follows:

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 business Revenue from trading of watches and wine Revenue from licence fee collection business Revenue from hotel operations: — Room rental — Food and beverages Discontinued operations: Revenue from hotel operations — Room rental — Food and beverages	Group 2008 2007 HK$ HK$ 41,238,230 39,253,682 5,845,600 5,403,700 75,020,902 89,732,139 3,140,375 2,530,068 116,715,459 65,164,602 3,948,346 65,966 13,108,984 — 16,998,218 — 276,016,114 202,150,157 — 50,980,911 — 20,486,695 — 71,467,606 276,016,114 273,617,763	Group 2008 2007 HK$ HK$ 41,238,230 39,253,682 5,845,600 5,403,700 75,020,902 89,732,139 3,140,375 2,530,068 116,715,459 65,164,602 3,948,346 65,966 13,108,984 — 16,998,218 — 276,016,114 202,150,157 — 50,980,911 — 20,486,695 — 71,467,606 276,016,114 273,617,763
		202,150,157
		50,980,911 20,486,695
		71,467,606
		273,617,763

— 84 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

7. Other Revenue

Continuing operations: Bank interest income Recovery of bad debt Others Discontinued operations: Bank interest income Others 8. Profit/(Loss) For The Year From Continuing Operations Profit/(loss) for the year is arrived at after charging:	Group 2008 2007 HK$ HK$ 12,402,896 7,533,232 2,876,855 — 735,315 362,713 16,015,066 7,895,945 — 1,082,955 — 1,326,176 — 2,409,131 16,015,066 10,305,076	Group 2008 2007 HK$ HK$ 12,402,896 7,533,232 2,876,855 — 735,315 362,713 16,015,066 7,895,945 — 1,082,955 — 1,326,176 — 2,409,131 16,015,066 10,305,076
		7,895,945
		1,082,955 1,326,176
		2,409,131
		10,305,076

	Group
	2008	2007
	HK$	HK$
Depreciation of property, plant and equipment	11,683,637	29,721,303
Loss on disposal of property, plant and equipment	462,407	—
Cost of inventories recognised as an expense	147,545,289	81,387,364
Direct operating expenses from investment properties that
generated rental income during the year	163,102	170,205
Property tax on rental income	—	364,385
Operating lease rentals in respect of land and buildings
Land and buildings	12,439,320	20,927,622
Payments for leasehold land held for own use under
operating leases	1,850,245	864,827
Amortisation of land premium	—	2,102,957
Amortisation of deferred expenditure	45,267,624	744,125
Amortisation of pre-paid licence fee	3,937,500	2,500,000
Impairment loss on goodwill (recognised in net operating
expenses)	4,277,660	19,003,140
Auditor’s remuneration
Audit services	1,335,400	873,900
Non-audit services	430,000	310,000

— 85 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

9. Discontinued operation in prior year

During the year ended 31 March 2007, the Group disposed of its 95% interests in 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 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 2007 HK$ 34,523,135 1,130,417 (63,406,574) (27,753,022)

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.

The total consideration received in connection with this transaction amounted to HK$404,516,364 and was fully satisfied in cash.

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.

The net cash inflow arising from the disposal amounts to HK$370,960,802.

— 86 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

10. Staff Costs

Staff costs (including directors) comprise: Salaries and bonuses Contribution to defined contribution pension plans Other post-employment benefits Other short-term monetary benefits			Group
		Continuing operations 2008 2007 HK$ HK$ 52,513,192 51,165,107 2,891,239 2,817,429 — 135,074 1,086,577 1,449,338 56,491,008 55,566,948	Discontinued operations 2008 2007 HK$ HK$ — 13,614,010 — 462,718 — — — 1,551,834 — 15,628,562	Total 2008 2007 HK$ HK$ 52,513,192 64,779,117 2,891,239 3,280,147 — 135,074 1,086,577 3,001,172 56,491,008 71,195,510
					71,195,510

11. Directors’ and Employees’ Emoluments

Directors’ emoluments

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

2008

Executive directors Yeung Chi Hang Liu Yu Mo Au Edmond Wah Chik To Pan Yeung Kit Yu, Kitty Chung Siu Wah Ma Shuk Kam Independent non-executive directors* Chan Lai Mei Lee Wai Loun Lee Yuk Sang, Angus			Group
		Fees HK$ — — 66,839 — — 80,000 — 96,000 96,000 96,000 434,839	Salaries and other benefits Discretionary bonuses Retirement scheme contributions HK$ HK$ HK$ 1,950,000 900,000 11,895 1,820,000 420,000 11,895 656,129 180,000 6,820 644,516 120,000 9,685 352,336 32,800 9,685 — — 4,000 — — — — — — — — — — — — 5,422,981 1,652,800 53,980	Total HK$ 2,861,895 2,251,895 909,788 774,201 394,821 84,000 — 96,000 96,000 96,000
				7,564,600

— 87 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2007

Executive directors Yeung Chi Hang Liu Yu Mo Chik To Pan Yeung Kit Yu, Kitty Au Edmond Wah Chung Siu Wah Ma Shuk Kam Independent non-executive directors* Chan Lai Mei Lee Wai Loun Lee Yuk Sang, Angus			Group
		Fees HK$ — — — — 96,000 96,000 — 96,000 96,000 96,000 480,000	Salaries and other benefits Discretionary bonuses Retirement scheme contributions HK$ HK$ HK$ 1,830,000 720,000 11,863 1,700,000 330,000 11,863 660,000 30,000 11,863 426,400 32,800 11,863 — — 4,800 — — 4,800 — — — — — — — — — — — — 4,616,400 1,112,800 57,052	Total HK$ 2,561,863 2,041,863 701,863 471,063 100,800 100,800 — 96,000 96,000 96,000
				6,266,252

No directors waived their emoluments in respect of the year ended 31 March 2008 (2007: HK$ Nil).

• These directors resigned during the year ended 31 March 2008.

Employees’ emoluments

Of the five individuals with the highest emoluments in the Group, four (2007: three) were directors of the Company whose emoluments are included in the above.

The emoluments of the remaining one (2007: two) highest paid individuals was as follows:

Basic salaries, housing allowances, other allowances and benefits in kind Retirement scheme contributions	Group 2008 2007 HK$ HK$ 647,511 1,228,521 12,000 24,000 659,511 1,252,521	Group 2008 2007 HK$ HK$ 647,511 1,228,521 12,000 24,000 659,511 1,252,521
		1,252,521

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

— 88 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

12. Finance Costs

Interest on — long-term bank loans — other borrowings			Group
		Continuing operations 2008 2007 HK$ HK$ — 18,300 517,129 157,819 517,129 176,119	Discontinued operations 2008 2007 HK$ HK$ — 7,559,602 — — — 7,559,602	Total 2008 2007 HK$ HK$ — 7,577,902 517,129 157,819 517,129 7,735,721
					7,735,721

13. Taxation

The amount of taxation in the consolidated income statement represents:

Hong Kong profits tax Macau tax PRC tax Deferred tax_(note 33)_			Group
		Continuing operations 2008 2007 HK$ HK$ 886,335 194,276 3,415 — 1,023,387 — 1,913,137 194,276 4,125,421 (1,249,335) 6,038,558 (1,055,059)	Discontinued operations 2008 2007 HK$ HK$ — — — 1,282 — — — 1,282 — — — 1,282	Total 2008 2007 HK$ HK$ 886,335 194,276 3,415 1,282 1,023,387 — 1,913,137 195,558 4,125,421 (1,249,335) 6,038,558 (1,053,777)
					195,558 (1,249,335)
					(1,053,777)

Hong Kong profits tax has been provided for certain subsidiaries within the Group and is calculated at 17.5% (2007: 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% (2007: 12%) on the estimated assessable profits for the year.

PRC subsidiaries are subject to PRC Enterprise Income Tax at rates ranging from 15% to 33% (2007: 15% to 33%).

— 89 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Tenth National People’s congress enacted a new Enterprise Income Tax Law (“EIT Law”) on 16 March 2007, which provides for a unified income tax rate of 25% to both domestic enterprises and foreign-invested enterprises. The new tax law became effective on 1 January 2008. As a result, the tax rate for domestic enterprises will be reduced to 25%, whereas the tax rate for foreigninvested enterprises that have enjoyed preferential tax treatment, shall have five years from the time when the EIT Law takes effect to transition progressively to the legally prescribed tax rate. During this period, an enterprise that enjoyed the 15% enterprises income tax rate shall be subject to the 18% tax rate for the year 2008, 20% for the year 2009, 22% for the year 2010, 24% for the year 2011, and 25% for the year 2012; an enterprise that previously enjoyed the 24% tax rate shall be subject to the 25% tax rate starting from the year 2008.

The taxation for the year can be reconciled to the profit/(loss) per the consolidated income statement as follows:

Profit/(loss) before taxation Continuing operations Discontinued operations Tax calculated at Hong Kong profits tax rate of 17.5% (2007: 17.5%) Effect of different tax rates of subsidiaries operating in other jurisdictions Deferred tax not recognized Tax effect of non-deductible expenses Tax effect of non-taxable revenue Others Taxation	2008 HK$ 38,991,254 — 38,991,254 6,823,470 439,666 864,927 713,512 (2,565,445) (237,572) 6,038,558	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)

14. Profit Attributable to Shareholders

Profit attributable to shareholders includes a loss of HK$5,274,461 (2007: loss of HK$5,870,149) which has been dealt with in the financial statements of the Company.

15. Dividends

No dividend was paid or proposed in respect of the year ended 31 March 2008, nor has any dividend been proposed since the balance sheet date (2007: Nil).

— 90 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

16. 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/(loss) per share Effect of dilutive potential ordinary shares: — Share options Weighted average number of ordinary shares for the purpose of diluted earnings/(loss) per share	Group 2008 2007 HK$ HK$ 31,901,584 (31,036,169) — 88,168,283 31,901,584 57,132,114 2,925,058,004 2,630,121,600 6,930,534 58,091,574 2,931,988,538 2,688,213,174	Group 2008 2007 HK$ HK$ 31,901,584 (31,036,169) — 88,168,283 31,901,584 57,132,114 2,925,058,004 2,630,121,600 6,930,534 58,091,574 2,931,988,538 2,688,213,174
		57,132,114
		2,630,121,600 58,091,574
		2,688,213,174

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

17. Goodwill and Impairment

Group Cost: At 1 April 2006 and 2007 Arising from business combinations_(Note 37)_ At 31 March 2008 Impairment At 1 April 2006 Impairment loss At 31 March 2007 Impairment loss At 31 March 2008 Carrying value At 31 March 2008 At 31 March 2007	HK$ 20,373,261 4,837,660
	25,210,921
	1,370,121 19,003,140
	20,373,261 4,277,660
	24,650,921
	560,000
	—

— 91 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Note:

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

Wedding services Entertainment business Restaurant operations Others Total	2008 HK$ 18,988,140 5,287,287 920,494 15,000 25,210,921	2007 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.

For the year ended 31 March 2007, impairment was provided on goodwill from wedding services and other operations as cashflow forecasts indicate that there will be net cash outflows from these CGUs. For the year ended 31 March 2008, impairment was provided on goodwill from the entertainment business.

The carrying amount of goodwill (net of impairment loss) is as follows:

	2008	2007
	HK$	HK$
Entertainment business	560,000	—

The recoverable amount of entertainment business has been determined from value in use calculations based on cash flow projections covering a five year period to 31 March 2013. Key assumptions are as follows:

	2008
	Entertainment
	business
	%
Discount rate	5.25
Operating margin	3.5
Growth rate	—
Wage inflation	—

— 92 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

18. Property, Plant and Equipment

Group Cost or valuation At 1 April 2006 Surplus on revaluation Additions Disposal of subsidiaries Write off At 31 March and 1 April 2007 Surplus on revaluation Additions Acquired through business combinations Exchange differences Disposals At 31 March 2008 Accumulated depreciation At 1 April 2006 Charge for the year Eliminated on revaluation Disposal of subsidiaries Written off At 31 March and 1 April 2007 Exchange differences Charge for the year Eliminated on revaluation Written back on disposals At 31 March 2008 Net book value At 31 March 2008 At 31 March 2007		Hote	lproperty in Maca	u Furniture, fixtures and equipment HK$ 32,182,563 — 237,313 (32,391,468) (28,408) — — — — — — — 2,663,747 3,094,700 — (5,748,418) (10,029) — — — — — — — —	Hotel buildings in the PRC HK$ — — — — — — — — 21,306,000 — — 21,306,000 — — — — — — — 1,053,136 — — 1,053,136 20,252,864 —	Leasehold land and buildings HK$ 96,300,000 260,000 — — — 96,560,000 16,440,000 — — — — 113,000,000 — 1,955,650 (1,955,650) — — — 635 2,326.374 (2,327,009) — — 113,000,000 96,560,000	Leasehold improvements HK$ 6,208,568 — 2,811,656 — (2,182,341) 6,837,883 — 1,657,841 23,076,775 1,312,609 — 32,885,108 2,250,799 1,527,777 — — (428,618) 3,349,958 440 2,964,195 — — 6,314,593 26,570,515 3,487,925	Wardrobe HK$ 1,137,797 — — — — 1,137,797 — — — — — 1,137,797 1,137,797 — — — — 1,137,797 — — — — 1,137,797 — —	Furniture, fixtures and equipment HK$ 8,368,277 — 1,305,912 — (3,643,806) 6,030,383 — 3,310,989 44,113,446 3,373,871 (475,386) 56,353,303 3,436,836 1,890,574 — — (1,364,529) 3,962,881 — 4,150,949 — (30,039) 8,083,791 48,269,512 2,067,502	Motor vehicles HK$ 5,861,243 — 3,434,766 (4,433,434) (944,709) 3,917,866 — 2,759,736 1,640,788 41,912 (690,000) 7,670,302 729,700 1,016,256 — (935,059) (372,335) 438,562 — 1,188,983 — (348,500) 1,279,045 6,391,257 3,479,304	Total HK$ 342,497,513 260,000 7,789,647 (228,823,563) (7,239,668)
		Buildings HK$ 129,162,972 — — (129,162,972) — — — — — — — — 1,246,808 1,467,761 — (2,714,569) — — — — — — — — —	Leasehold improvements HK$ 63,276,093 — — (62,835,689) (440,404) — — — — — — — 16,083,634 18,768,585 — (34,852,219) — — — — — — — — —
											114,483,929 16,440,000 7,728,566 90,137,009 4,728,392 (1,165,386)
											232,352,510
											27,549,321 29,721,303 (1,955,650) (44,250,265) (2,175,511)
											8,889,198 1,075 11,683,637 (2,327,009) (378,539)
											17,868,362
											214,484,148
											105,594,731

The analysis of the net book value or valuation of the above assets at 31 March 2008 is as follows:

At cost At 2008 professional valuation	Hotel buildings in the PRC HK$ 20,252,864 — 20,252,684	Leasehold land and buildings HK$ — 113,000,000 113,000,000	Leasehold improve- ments HK$ 26,570,515 — 26,570,515	Furniture, fixtures and equipment HK$ 48,269,512 — 48,269,512	Motor vehicles HK$ 6,391,257 — 6,391,257	Total HK$ 101,484,148 113,000,000
						214,484,148

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

At cost At 2007 professional valuation	Leasehold land and buildings HK$ — 96,560,000 96,560,000	Leasehold improve- ments HK$ 3,487,925 — 3,487,925	Furniture, fixtures and equipment HK$ 2,067,502 — 2,067,502	Motor vehicles HK$ 3,479,304 — 3,479,304	Total HK$ 9,034,731 96,560,000
					105,594,731

— 93 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group’s leasehold land and buildings and hotel property are located in Hong Kong and the PRC 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 Properties located in the PRC Leases of over 50 years	2008 HK$ 110,000,000 3,000,000 113,000,000 20,252,864	2007 HK$ 95,000,000 1,560,000
		96,560,000
		—

The leasehold land and buildings were revalued at 31 March 2008 on the open market value basis by Vigers Appraisal and Consulting Limited, an independent professional valuer. A revaluation surplus of HK$15,482,782 (2007: HK$1,827,911) was credited to other properties revaluation reserve, after net of applicable deferred income taxes of HK$3,284,227 (2007: HK$387,739).

The carrying amount of leasehold land and buildings of the Group would have been HK$18,639,595 (2007: HK$19,362,515) had they been stated at cost less accumulated depreciation.

During the year ended 31 March 2007, 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 the subsidiary. The Group’s banking facilities decreased simultaneously from HK$252,000,000 to HK$52,100,000.

At 31 March 2008, the Group pledged leasehold land and building with carrying value of HK$110,000,000 (2007: HK$95,000,000) as security of the Group’s banking facilities.

At 31 March 2008, the Group did not utilise any banking facilities (2007: Nil).

19. Investment Properties

Group At beginning of year Acquired through business combinations_(note 37)_ Additions Change in fair value At end of year	2008 HK$ 100,500,000 3,922,000 49,056,671 27,163,329 180,642,000	2007 HK$ 100,500,000 — — —
		100,500,000

1. Investment properties were revalued at 31 March 2008 on the open market value basis by Vigers Appraisal and Consulting Limited, an independent professional valuer.

2. At 31 March 2008, one investment property with a carrying value of HK$76,000,000 (2007: HK$61,000,000) was pledged to secure the banking facilities granted to the Group.

3. Gross rental income from investment properties amounted to HK$5,845,600 (2007: HK$5,403,700).

— 94 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. The Group’s investment properties are analysed at their carrying values as follows:

2008 HK$ Investment properties located in Hong Kong Leases of over 50 years 76,000,000 Leases of between 10 to 50 years 43,000,000 119,000,000 Investment properties located in the PRC Leases of between 10 to 50 years 61,642,000 20. Payments for Leasehold Land Held for own use under Operating Leases Group Cost As at 1 April 2006 Written off on disposal of subsidiaries At 31 March and 1 April 2007 Acquired through business combinations_(note 37)_ Exchange difference At 31 March 2008 Accumulated amortisation As at 1 April 2006 Charge for the year Written off on disposal of subsidiaries At 31 March and 1 April 2007 Charge for the year At 31 March 2008 Carrying value At 31 March 2008 At 31 March 2007

2007 HK$ 61,000,000 39,500,000 100,500,000 — Amount HK$ 75,368,572 (75,368,572) — 381,774,848 18,875,346 400,650,194 719,165 864,827 (1,583,992) — 1,850,245 1,850,245 398,799,949 —

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

— 95 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

21. Deferred Expenditure

Group Cost As at 1 April 2006 Amount paid during the year As at 31 March and 1 April 2007 Amount paid during the year As at 31 March 2008 Accumulated amortisation As at 1 April 2006 Amortisation for the year As at 31 March and 1 April 2007 Amortisation for the year As at 31 March 2008 Carrying amount At 31 March 2008 At 31 March 2007 Shown in the financial statements as: Deferred expenditure — current portion (to be amortised within one year) Deferred expenditure — non-current portion	2008 HK$ 45,267,624 3,720,627 48,988,251	Advance on licence fee HK$ — 50,000,000
		50,000,000 45,000,000
		95,000,000
		— 744,125
		744,125 45,267,624
		46,011,749
		48,988,251
		49,255,875
		2007 HK$ 45,267,624 3,988,251
		49,255,875

During the year ended 31 March 2007, Well Allied Investments Limited, 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. Please refer to note 38(e) for details.

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 co-operation 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 period commencing on the Completion Date and end on 30 April 2009. The remaining HK$45 million was paid to the copyright holder in current year. Accordingly, the advance on licence fee is considered as a deferred expenditure and amortised over the term of this agreement.

— 96 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

22. Investments in Subsidiaries

Unlisted shares, at cost _Less:_Impairment loss Amounts due from subsidiaries _Less:_Impairment loss Amounts due to subsidiaries	Company 2008 2007 HK$ HK$ 184,579,580 53,284,559 (1,200,000) (1,200,000) 183,379,580 52,084,559 798,054,599 686,896,042 (223,660,369) (285,346,456) 574,394,230 401,549,586 (98,624,316) (7,295,550)	Company 2008 2007 HK$ HK$ 184,579,580 53,284,559 (1,200,000) (1,200,000) 183,379,580 52,084,559 798,054,599 686,896,042 (223,660,369) (285,346,456) 574,394,230 401,549,586 (98,624,316) (7,295,550)
		52,084,559
		686,896,042 (285,346,456)
		401,549,586
		(7,295,550)

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 2008.

				Percentage
			Particulars	of equity
	Place of	Principal	of issued/share	interest held
Name	incorporation	activities	capital	2008	2007
Held directly
Golden Island Bird’s Nest	Hong Kong	Investment holding	100 ordinary shares of	100	100
Chiu Chau Restaurant			HK$100 each and
(Star House) Limited			240,000 deferred
			shares of HK$100
			each
Golden Island Catering	Hong Kong	Restaurant operations and	2 ordinary shares of	100	100
Group Company Limited		provision of wedding	HK$1 each
		services
Golden Island (Management)	Hong Kong	Provision of management	10,000 ordinary shares	100	100
Limited		services to group	of HK$1 each
		companies
Marlborough Gold Limited	The British Virgin	Investment holding	1 ordinary share of	100	100
	Islands (“BVI”)		US$1
Winkler Profits Limited	BVI	Investment holding	1 ordinary share of	100	100
			US$1
Win Big Profits Limited	BVI	Investment holding	1 ordinary share of	100	100
			US$1
Welly Champ International	BVI	Investment holding	166.12 ordinary shares	75.92	60
Limited			of US$1 each

— 97 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

				Percentage
			Particulars	of equity
	Place of	Principal	of issued/share	interest held
Name	incorporation	activities	capital	2008	2007
Wholly Gain Limited	BVI	Investment holding	1 ordinary share of	100	100
			US$1
Win Castle Group Limited	BVI	Investment holding	1 ordinary share of	100	100
			US$1
Win Fame Limited	BVI	Investment holding	1 ordinary share of	100	100
			US$1
Wise Mark Group Limited	BVI	Investment holding	1 ordinary share of	100	100
			US$1
Wave High International	BVI	Investment holding	1 ordinary share of	100	100
Limited			US$1
Win Sea Group Limited	Hong Kong	Investment holding	1 ordinary share of	100	—
			US$1
Wellrich Investments	BVI	Investment holding	100 ordinary shares of	100	100
Limited			US$1 each
Held indirectly
Golden Island Bird’s Nest	Hong Kong	Property holding	12,000 ordinary	100	100
Chiu Chau Restaurant			shares of HK$100 each
(Causeway Bay) Limited
Witty Ventures Limited	Hong Kong	Trading and retailing of	100 ordinary shares of	51	51
		watches	HK$1 each
HMS Watches Company	Macau	Trading and retailing of	MOP100,000	51	51
Limited		watches
World Honour Investments	Hong Kong	Property holding	100 ordinary shares of	100	100
Limited			HK$1 each
Le Caveau Limited	Macau	Retail of wines and	MOP100,000	51	51
		beverage
Well Allied Investments	BVI	Licence fee collection	133.734 ordinary	48.1	31
Limited		business	shares of US$1	(note 1)
			each
Golden Capital	BVI	Investment holding	10 ordinary shares of	100	60
Entertainment Company			US$1 each
Limited

— 98 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

				Percentage
			Particulars	of equity
	Place of	Principal	of issued/share	interest held
Name	incorporation	activities	capital	2008	2007
Solid Sound Productions	Hong Kong	Music production and	100 ordinary shares of	51	—
Limited		artist management	HK$1 each
Baron Productions and	Hong Kong	Music production and	100 ordinary shares of	51	—
Artiste Management		artist management	HK$1 each
Company Limited
Chance Music Limited	Hong Kong	Music production	10,000 ordinary shares	60	—
			of HK$1 each
Shenzhen Land Company	Hong Kong	Investment holding	10,000 ordinary shares	100	—
Limited			of HK$1 each
北京金英馬國際文化交流	PRC	Film investment	RMB37,500,000	60	—
有限公司
肇慶星湖俱樂部	PRC	Hotel operations	RMB101,425,044	94	—
Golden Capital	Hong Kong	Investment holding	1 ordinary share of	100	—
Entertainment Limited			HK$1
深圳市金都多媒體	PRC	Entertainment	HK$10,000,000	100	—
技術有限公司
中音傳播（深圳）	PRC	Karaoke licence fee	HK$10,000,000	48.1	31
有限公司		collection business		(note 2)

• Notes: 1. This company is a 63.4% (2007: 51%) owned subsidiary of Welly Champ International Limited.

• This company is a 100% (2007: 100%) owned subsidiary of Well Allied Investments Limited.

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.

23. 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.

— 99 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

24. Held-to-maturity Investment

Unlisted investment, at cost _Less:_Impairment loss	Group 2008 2007 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 of the Company 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 has been 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 “Judgment Debts”).

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 Judgment 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.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

25. Inventories

Watches Food, beverages, wine and low value consumables	Group 2008 2007 HK$ HK$ 26,773,293 23,570,139 9,263,779 4,023,988 36,037,072 27,594,127	Group 2008 2007 HK$ HK$ 26,773,293 23,570,139 9,263,779 4,023,988 36,037,072 27,594,127
		27,594,127

26. Trade And Other Receivables

Amount due from a related company Trade receivables Films and movies costs Deposits, prepayments and other receivables	Group 2008 2007 HK$ HK$ 9,000,000 — 9,566,334 2,136,332 42,058,227 — 30,538,972 57,595,094 91,163,533 59,731,426	Company 2008 2007 HK$ HK$ — — — — — — 23,928 23,928 23,928 23,928	Company 2008 2007 HK$ HK$ — — — — — — 23,928 23,928 23,928 23,928
			23,928

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

	Balance of the
	outstanding
	amount
	HK$
At 31 March 2008	9,000,000
At 1 April 2007	—
Maximum balance outstanding during the year	9,000,000

The amount due from related company is unsecured, interest bearing at 8% per annum and repayable on 3 July 2008. Two directors of Well Allied Investments Limited, a subsidiary of the Company, Mr. Lee Tien-Yung and Philip Lu Yueh-Wei, have beneficial interests in the related company, PLD International Co., Ltd.

The Group generally does not grant credit term to its customers, all invoices are due on presentation.

— 101 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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

Current Less than 1 month past due 1 to 3 months past due Amount past due at balance sheet date but not impaired_(Note)_	Group 2008 2007 HK$ HK$ — — 8,678,299 1,765,363 888,035 370,969 9,566,334 2,136,332 9,566,334 2,136,332	Group 2008 2007 HK$ HK$ — — 8,678,299 1,765,363 888,035 370,969 9,566,334 2,136,332 9,566,334 2,136,332
		1,765,363 370,969
		2,136,332
		2,136,332

Note: The balances that were past due but not impaired related to a number of customers that have a good track record with the Group. Based on past experience, management estimated that the carrying amounts could be fully recovered.

Included in trade and other receivables in the consolidated balance sheet are the following significant amounts denominated in currencies other than the functional currency of the Company.

Macau Pataca Renminbi	Group 2008 2007 MOP MOP 1,016,902 5,089,189 RMB RMB 40,874,786 30,001,231	Group 2008 2007 MOP MOP 1,016,902 5,089,189 RMB RMB 40,874,786 30,001,231
		RMB 30,001,231

27. Cash and Cash Equivalents

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

Macau Pataca Renminbi	Group 2008 2007 MOP MOP 2,255,861 2,322,162 RMB RMB 17,662,893 6,782,896	Group 2008 2007 MOP MOP 2,255,861 2,322,162 RMB RMB 17,662,893 6,782,896
		RMB 6,782,896

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

28. Trade and other Payables

Trade payables Other payables and accruals Deposits received	Group 2008 2007 HK$ HK$ 7,046,819 5,033,601 26,613,388 21,095,162 18,051,754 29,588,658 51,711,961 55,717,421	Company 2008 2007 HK$ HK$ — — 993,196 1,150,990 — — 993,196 1,150,990	Company 2008 2007 HK$ HK$ — — 993,196 1,150,990 — — 993,196 1,150,990
			1,150,990

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	Group 2008 2007 HK$ HK$ 4,446,536 3,924,636 1,637,205 600,205 41,170 88 921,908 508,672 7,046,819 5,033,601	Group 2008 2007 HK$ HK$ 4,446,536 3,924,636 1,637,205 600,205 41,170 88 921,908 508,672 7,046,819 5,033,601
		5,033,601

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 significant amounts denominated in currencies other than the functional currency of the Company:

Macau Pataca Renminbi	Group 2008 2007 MOP MOP 782,644 4,561,811 RMB RMB 23,348,663 32,711,723	Group 2008 2007 MOP MOP 782,644 4,561,811 RMB RMB 23,348,663 32,711,723
		RMB 32,711,723

— 103 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

29. Amounts due to Minority Shareholders

Except for the amount of HK$6,836,000 (2007: HK$13,948,802) which bears interest at prime rate quoted by Chiyu Banking Corporation, the balances due to minority shareholders are unsecured, interest free and repayable on demand.

Included in amounts due to minority shareholders in the consolidated balance sheet are the following significant amounts denominated in currencies other than the functional currency of the Group:

Renminbi Macau Pataca	Group 2008 2007 RMB RMB 9,342,976 — MOP MOP 3,272,895 3,532,501	Group 2008 2007 RMB RMB 9,342,976 — MOP MOP 3,272,895 3,532,501
		MOP 3,532,501

30. Financial Instruments — Risk Management

The Group is exposed through its operations to the following risks from its use of financial instruments:

• Market risks (interest rate risk and foreign exchange risk)

• Liquidity risk

• Credit risk

Policy for managing these risks is set by the Board following recommendations from the Chief Financial Officer. Certain risks are managed centrally, while others are managed locally following guidelines communicated from the management. The policy for each of the above risks is described in more detail below.

(a) Market risks

(i) Interest rate risk

Interest rate risk is the risk the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to the risk of change in market interest rates relates primarily to the Group’s cash and bank balance and interest bearing loan with floating interest rate.

— 104 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Interest rate profile

The following table details interest rates analysis that management of the Company evaluates their interest rate risk.

Financial assets Floating rate financial assets Fixed rate financial assets Financial liabilities Floating rate financial liabilities Sensitivity analysis	Group 2008 2007 Effective interest rate (%) HK$ Effective interest rate (%) HK$ 0.5% 252,170,278 3.5% 438,160,876 8% 9,000,000 — — 7% 6,836,000 8% 13,948,802	Group 2008 2007 Effective interest rate (%) HK$ Effective interest rate (%) HK$ 0.5% 252,170,278 3.5% 438,160,876 8% 9,000,000 — — 7% 6,836,000 8% 13,948,802
		13,948,802

The following table indicates the approximate change in the profit after tax in response to reasonably possible changes in interest rate to which the Group has significant exposure at the balance sheet date. In determining the effect on profit after tax on the next accounting period until the next balance sheet date, management of the Company assumed that the change in interest rate had occurred at the balance sheet date and all other variables remain constant. There is no change in the methods and assumptions used in 2008 and 2007.

	Group	Group
	2008	2007
	Effect on	Effect on
	profit after tax	profit after tax
	HK$	HK$
HIBOR
Increase by 100 basis points	1,996,000	3,350,000
Decrease by 100 basis points	(1,996,000)	(3,350,000)

— 105 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(ii) Foreign exchange risk

Foreign exchange risk arises when individual group operations enter into transactions denominated in a currency other than their functional currencies.

The carrying amounts of the Group’s foreign currency denominated monetary financial assets and liabilities at the balance sheet date are as follows:

Macau Pataca Renminbi	Assets 2008 HK$ 3,237,735 65,632,447 68,870,182	2007 HK$ 7,192,270 37,556,933 44,749,203	Liabilities 2008 2007 HK$ HK$ 3,937,417 7,858,556 36,652,744 33,078,094 40,590,161 40,936,650	Liabilities 2008 2007 HK$ HK$ 3,937,417 7,858,556 36,652,744 33,078,094 40,590,161 40,936,650
				40,936,650

Sensitivity analysis

The sensitivity analysis on foreign exchange risk includes monetary financial assets and liabilities that are denominated in a foreign currency, i.e. in a currency other than the functional currency in which they are measured.

The directors of the Company are of the opinion that the exchange rate between Macau Pataca and Hong Kong dollars will remain substantially the same in the next twelve months. The impact to the profit after tax of the Group in response to the reasonably possible changes in an exchange rate between Renminbi and Hong Kong dollar is considered insignificant.

(b) Liquidity risk

The Group’s objective is to ensure there are adequate funds to meet commitments associated with its financial liabilities. Cash flows of the Group are closely monitored by senior management on an ongoing basis. In addition, banking facilities have been put in place for contingency purposes.

The contractual maturities of financial liabilities are shown as below:

In less than one year (c) Credit risk	2008 HK$ 169,568,676	2007 HK$ 123,708,594

Credit risk refers to the risk that counterparties will default on their contractual obligations resulting in financial loss to the Group. The Group is exposed to credit risk from loans and receivables and held-to-maturity investments. The Group has adopted a credit policy to monitor and mitigate credit risk arising from trade debtors. Credit limit is regularly reviewed and approved by head of credit control. The Group assesses credit risk based on customers’ past due records, trading history, financial conditions or credit ratings. The Group and the Company is not exposed to concentration of credit risk.

— 106 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

31. Financial Instruments — Carrying Amount and Fair Value

The fair values of financial assets and financial liabilities are determined as follows:

• the fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices;

• the fair value of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions; and

The directors of the Company considered that the carrying amounts of these categories approximate their fair value.

32. 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 Employment Ordinance. The provisions are calculated based on the Group’s best estimates using the projected unit credit method.

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

At the beginning of year Reversal of long service payments At the end of year	Group 2008 2007 HK$ HK$ 2,262,353 2,307,157 (102,583) (44,804) 2,159,770 2,262,353	Group 2008 2007 HK$ HK$ 2,262,353 2,307,157 (102,583) (44,804) 2,159,770 2,262,353
		2,262,353

The principal assumptions used in the estimation of long service payments are as follows:

	Group
	2008	2007
Discount rate	5.25%	5.5%
Expected rate of future salary increases	1.2%	1.2%

— 107 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

33. 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 charged/(credited) to income statement_(note 13) Tax charged to equity(note 35)_ Exchange difference At 31 March	Group 2008 2007 HK$ HK$ 8,811,430 38,594,027 67,663,851 — — (28,921,001) 4,125,421 (1,249,335) 3,284,227 387,739 (142,545) — 83,742,384 8,811,430	Group 2008 2007 HK$ HK$ 8,811,430 38,594,027 67,663,851 — — (28,921,001) 4,125,421 (1,249,335) 3,284,227 387,739 (142,545) — 83,742,384 8,811,430
		8,811,430

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 2008, the Group had estimated unutilised tax losses of HK$115,200,000 (2007: HK$118,200,000). A deferred tax has been recognised in respect of HK$79,500,000 (2007: HK$89,700,000) 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.

In addition to the amount charged to the consolidated 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.

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 Exchange differences At the end of the year		Group
	Accelerated accounting depreciation 2008 2007 HK$ HK$ (35,565) 167,309 113,004 (202,874) — — 77,439 (35,565)	Tax losses 2008 2007 HK$ HK$ 15,688,938 14,152,000 (744,719) 1,536,938 142,545 — 15,086,764 15,688,938	Total 2008 2007 HK$ HK$ 15,653,373 14,319,309 (631,715) 1,334,064 142,545 — 15,164,203 15,653,373
				15,653,373

Company

At 31 March 2008, the Company had estimated unutilised tax losses of HK$8,500,000 (2007: HK$6,100,000). No deferred tax assets has been recognised in respect of the tax losses due to unpredictability of future profit streams.

— 108 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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		Group
	Property revaluation 2008 2007 HK$ HK$ 14,916,668 14,528,929 — — — — — — 3,284,227 387,739 18,200,895 14,916,668	Depreciation allowances 2008 2007 HK$ HK$ 9,548,135 38,384,407 67,663,851 — — (28,921,001) 3,493,706 84,729 — — 80,705,692 9,548,135	Total 2008 2007 HK$ HK$ 24,464,803 52,913,336 67,663,851 — — (28,921,001) 3,493,706 84,729 3,284,227 387,739 98,906,587 24,464,803
				24,464,803

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 2008 2007 HK$ HK$ (7,022,274) (5,616,256) 90,764,658 14,427,686 83,742,384 8,811,430	Group 2008 2007 HK$ HK$ (7,022,274) (5,616,256) 90,764,658 14,427,686 83,742,384 8,811,430
		8,811,430

34. Share Capital

(a) Authorised and issued share capital

Authorised: Ordinary shares of HK$0.05 each At the beginning of year Increase in authorised ordinary shares At the end of year Issued and fully paid: At the beginning of year Exercise of share options New shares issued — part consideration At the end of year	2008 Number of shares 3,800,000,000 6,200,000,000 10,000,000,000 2,630,121,600 69,000,000 699,109,792 3,398,231,392	2008 HK$ 190,000,000 310,000,000 500,000,000 131,506,080 3,450,000 34,955,490 169,911,570	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

By an ordinary resolution dated 28 September 2007, the authorised share capital of the Company was increased from HK$190 million divided into 3,800,000,000 ordinary shares of HK$0.05 each to HK$500 million by the creation of a further 6,200,000,000 shares of HK$0.05 each ranking pari passu in all respects with the existing shares of the Company.

— 109 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

On 8 June 2007, the Company issued (a) 22,000,000 shares to each of Ms. Ma Shuk Kam, Mr. Yeung Chi Hang and Ms. Yeung Kit Yu, Kitty; and (b) 1,000,000 shares to each of Mr. Liu Yu Mo and Mr. Chung Siu Wah, all at HK$0.2254 per share pursuant to the exercise of options granted to them under the share option scheme of the Company (see note 36).

On 12 June 2007, the Company issued 1,000,000 shares to Mr. Chik To Pan at HK$0.2254 per share pursuant to the exercise of options granted to him under the share option scheme of the Company (see note 36).

On 28 November 2007, the Company issued 699,109,792 shares to Mr. Yeung Chi Hang, credited as fully paid, as part consideration for the acquisition of interests in Wellrich Investments Limited (see note 37(c)).

(b) Capital management policy

The Group’s objectives when managing capital are:

• to safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and

• to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.

The capital structure of the Group consists of equity attributable to equity holders of the Company comprising share capital and reserves.

The directors of the Company review the capital structure periodically. As a part of this review, the directors of the Company assess the annual budget prepared by the corporate finance department taking into account the provision of funding. Based on the proposed annual budget, the directors of the Company consider the cost of capital and the risks associated with each class of capital. The directors of the Company also balance its overall capital structure through the issue of new shares and new debts.

— 110 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

35. Capital and Reserves

(a) Group

									Employee		Other						Equity
									share-based		properties		Foreign				attributable
			Share		Other		Contributed		compensation		revaluation		exchange		Accumulated		to equity
	Share		premium		reserves		surplus		reserve		reserve		reserve		losses		holders of		Minority		Total
	capital		(note)		(note)		(note)		(note)		(note)		(note)		(note)		the Company		interests		equity
	HK$		HK$		HK$		HK$		HK$		HK$		HK$		HK$		HK$		HK$		HK$
2007
At 1 April 2006	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
Capital contribution from
minority interests	—		—		—		—		—		—		—		—		—		31		31
Translation differences	—		—		—		—		—		—		120,912		—		120,912		274,225		395,137
Disposal of subsidiaries	—		—		—		—		—		—		—		—		—		(12,373,255)		(12,373,255)
Surplus on revaluation	—		—		—		—		—		2,215,650		—		—		2,215,650		—		2,215,650
Revaluation — tax effect	—		—		—		—		—		(387,739)		—		—		(387,739)		—		(387,739)
Profit for the year	—		—		—		—		—		—		—		57,132,114		57,132,114		(6,350,751)		50,781,363
At 31 March 2007	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
2008
At 1 April 2007	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
Acquisition of subsidiary	—		—		—		—		—		—		—		—		—		17,377,078		17,377,078
Excess of consideration paid
over and the relevant share
acquired of the carrying
value of net assets of the
subsidiaries	—		—		(2,370,305)		—		—		—		—		—		(2,370,305)		2,370,305		—
Capital contribution from
minority interests	—		—		—		—		—		—		—		—		—		3,654,350		3,654,350
Translation differences	—		—		—		—		—		—		31,443,333		—		31,443,333		149,778		31,593,111
Issue of shares	34,955,490		167,786,350		—		—		—		—		—		—		202,741,840		—		202,741,840
Exercise of share option	3,450,000		15,980,788		—		—		(3,878,188)		—		—		—		15,552,600		—		15,552,600
Surplus on revaluation	—		—		—		—		—		18,767,009		—		—		18,767,009		—		18,767,009
Revaluation — tax effect	—		—		—		—		—		(3,284,227)		—		—		(3,284,227)		—		(3,284,227)
Profit for the year	—		—		—		—		—		—		—		31,901,584		31,901,584		1,051,112		32,952,696
At 31 March 2008	169,911,570		723,939,216		(2,370,305)		28,784,000		56,206		90,001,447		31,564,245		(91,191,021)		950,695,358		15,310,677		966,006,035

— 111 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Company

At 1 April 2006 Loss for the year At 31 March and 1 April 2007 Issue of shares Exercise of share options Loss for the year At 31 March 2008	Share capital HK$ 131,506,080 — 131,506,080 34,955,490 3,450,000 — 169,911,570	Share premium (note) HK$ 540,172,078 — 540,172,078 167,786,350 15,980,788 — 723,939,216	Contributed surplus (note) Employee share-based compensation reserves (note) HK$ HK$ 28,784,000 3,934,394 — — 28,784,000 3,934,394 — — — (3,878,188) — — 28,784,000 56,206	Accumulated losses (note) HK$ (253,165,906) (5,870,149) (259,036,055) — — (5,274,461) (264,310,516)	Total HK$ 451,230,646 (5,870,149)
					445,360,497 202,741,840 15,552,600 (5,274,461)
					658,380,476

Note:

The following describes the nature and purpose of each reserve within owners’ equity:

Description and purpose

Reserve Description and purpose Share premium Amount subscribed for share capital in excess of nominal value. Contributed surplus 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 meet its obligations after distribution and the net realisable value of the Company’s assets would not be less than the aggregate of its liabilities, issued share capital and share premium accounts.

Other reserves Excess of consideration paid over the relevant share acquired of the carrying value of net assets of the subsidiaries.

Employee share-based Cumulative expenses recognised on the granting of share compensation reserve options to the employees over the vesting period. Other properties Gains/losses arising on the revaluation of the Group’s land revaluation reserve and buildings (other than investment property). The balance on this reserve is wholly undistributable. Foreign exchange reserve Gains/losses arising on retranslating the net assets of overseas operations into Hong Kong dollars. Accumulated losses Cumulative net losses recognised in the consolidated income statement.

— 112 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

36. 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.

On 13 December 2005, options to subscribe 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.

Options in respect of a total of 69,000,000 shares were exercised during the year (see note 34 for details) and thus the total number of shares under outstanding options as at 31 March 2008 was 1,000,000 (2007: 70,000,000).

The following information is relevant in the determination of the fair value of HK$3,934,394 of the options granted.

Option pricing model used	Binomial lattice
Weighted average share price at grant date	HK$0.215
Exercise price	HK$0.2254
Date of expiry	30 August 2012
Expected volatility	80%
Expected dividend growth rate	0%
Risk-free interest rate	4.354%

— 113 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

37. Acquisitions During The Year

Details of the net assets acquired by the Group during the year ended 31 March 2008 were as follows:

Fair value of net asset acquired Payments for leasehold land held for own use under operating leases Investment properties Property, plant and equipment Inventories Trade and other receivables Cash and cash equivalents Trade and other payables Amount due to minority equity owner Amounts due to a shareholder Deferred taxation Minority interests Net assets acquired Excess of the Group’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost Goodwill_(note 17)_ Total consideration Satisfied by: Cash Issue of the Company’s shares Benefits of a shareholder’s loan Net cash outflow arising on acquisition Cash consideration paid Cash and cash equivalents acquired		Chance Music Limited (Note(a) and(e)) Acquiree’s carrying amount and fair value at acquisition HK$ — — 12,871 — 1,959,544 19,916 (832,368) — — — (463,985) 695,978 — 4,304,022 5,000,000 5,000,000 — — 5,000,000 5,000,000 (19,916) 4,980,084		Baron Productions and Artiste Management Company Limited (Note(b) and(e)) Acquiree’s carrying amount and fair value at acquisition HK$ — — 1,615,072 — 617,334 309,218 (587,972) — — — (957,290) 996,362 — 533,638 1,530,000 1,530,000 — — 1,530,000 1,530,000 (309,218) 1,220,782		Wellrich Investments Limited and its subsidiary (Note(c)) Acquiree’s carrying amount at acquisition Fair value adjustment Fair value at acquisition HK$ HK$ HK$ 12,661,987 369,112,861 381,774,848 2,474,846 1,447,154 3,922,000 188,413,677 (99,904,611) 88,509,066 4,473,741 — 4,473,741 4,306,528 — 4,306,528 7,805,502 — 7,805,502 (14,860,426) — (14,860,426) (10,251,015) — (10,251,015) (230,646,836) — (230,646,836) — (67,663,851) (67,663,851) (3,776,310) (12,179,493) (15,955,803) 151,413,754 (59,318,750) — 92,095,004 120,000,000 202,741,840 (230,646,836) 92,095,004 120,000,000 (7,805,502) 112,194,498	Wellrich Investments Limited and its subsidiary (Note(c)) Acquiree’s carrying amount at acquisition Fair value adjustment Fair value at acquisition HK$ HK$ HK$ 12,661,987 369,112,861 381,774,848 2,474,846 1,447,154 3,922,000 188,413,677 (99,904,611) 88,509,066 4,473,741 — 4,473,741 4,306,528 — 4,306,528 7,805,502 — 7,805,502 (14,860,426) — (14,860,426) (10,251,015) — (10,251,015) (230,646,836) — (230,646,836) — (67,663,851) (67,663,851) (3,776,310) (12,179,493) (15,955,803) 151,413,754 (59,318,750) — 92,095,004 120,000,000 202,741,840 (230,646,836) 92,095,004 120,000,000 (7,805,502) 112,194,498	Total HK$ 381,774,848 3,922,000 90,137,009 4,473,741 6,883,406 8,134,636 (16,280,766) (10,251,015) (230,646,836) (67,663,851) (17,377,078)
						Acquiree’s carrying amount at acquisition HK$ 12,661,987 2,474,846 188,413,677 4,473,741 4,306,528 7,805,502 (14,860,426) (10,251,015) (230,646,836) — (3,776,310)	Fair value adjustment HK$ 369,112,861 1,447,154 (99,904,611) — — — — — — (67,663,851) (12,179,493)
								153,106,094 (59,318,750) 4,837,660
								98,625,004
								126,530,000 202,741,840 (230,646,836)
								98,625,004
								126,530,000 (8,134,636)
								118,395,364

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes:

• (a) On 31 October 2007, the Group acquired 60% of the issued share capital of Chance Music Limited at a consideration of HK$5,000,000. This transaction has been accounted for using the purchase method of accounting. Chance Music Limited had contributed HK$1,520,341 to the Group’s turnover and contributed profit of HK$11,949 to the Group’s profit before taxation for the period between the date of acquisition and the balance sheet date.

If the acquisition had been completed on 1 April 2007, the Group’s turnover for the year would have been increased by HK$2,634,734 and profit for the year would have been increased by HK$1,190,098. The proforma information is for illustrative purpose only and is not necessary an indication of revenue and results of operations of the Group that actually would have been achieved had the acquisition been completed on 1 April 2007, nor is it intended to be a projection of future results.

• (b) On 10 September 2007, the Group acquired 51% of the issued share capital of Baron Productions and Artiste Management Company Limited at a consideration of HK$1,530,000. This transaction has been accounted for using the purchase method of accounting. Baron Productions and Artiste Management Company Limited had contributed HK$1,619,788 to the Group’s turnover and contributed loss of HK$950,932 to the Group’s profit before taxation for the period between the date of acquisition and the balance sheet date.

If the acquisition had been completed on 1 April 2007, the Group’s turnover for the year would have been increased by HK$2,047,579 and profit for the year would have been increased by HK$398,900. The proforma information is for illustrative purpose only and is not necessary an indication of revenue and results of operations of the Group that actually would have been achieved had the acquisition been completed on 1 April 2007, nor is it intended to be a projection of future results.

• (c) On 15 October 2007, the Group entered into an agreement with Well Harvest Enterprises Limited “Well Harvest”, a company which is beneficially owned by Ms. Ma Shuk Kam, a director of the Company, to purchase 100% of the issued share capital of, and the benefits of an interest free unsecured shareholder’s loan in the amount of HK$230,646,836 to, Wellrich Investments Limited (“Wellrich”).

The consideration of the transactions include HK$120,000,000 settled in cash and the allotment of 699,109,792 Company’s shares to Mr. Yeung Chi Hang as directed by Well Harvest. The transaction was completed on 28 November 2007 and the fair value of the shares being issue upon completion were determined on the closing price of the Company’s share on 28 November 2007 and amounted to HK$202,741,840.

Wellrich and its subsidiary (collectively referred to as the “Wellrich Group”) mainly owns and operates a hotel in Guangdong, the PRC. The hotel is situated on a parcel of land with lease term of 70 years expiring on 14 September 2064. The Group intends to redevelop the land into a commercial/residential complex (the “Redevelopment”). The fair value of the land was determined based on 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 completion with a total redevelopment plot ratio of 3.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

According to the relevant agreement, if the Group’s application for the Redevelopment is rejected by the relevant PRC authorities or all necessary approvals for the Redevelopment are not granted by the relevant PRC authorities within five years from the completion date, Well Harvest shall repurchase the 100% share capital of Wellrich and the benefits of the loan at the consideration of HK$355,600,000 plus interest. For details please refer to the Company’s circular dated 7 November 2007.

Wellrich Group had contributed HK$30,107,202 to the Group’s turnover and contributed profit of HK$2,731,525 to the Group’s profit before taxation for the period between the date of acquisition and the balance sheet date.

If the acquisition had been completed on 1 April 2007, the Group’s turnover for the year would have been increased by HK$51,823,299 and profit for the year would have been increased by HK$940,388. The proforma information is for illustrative purpose only and is not necessary an indication of revenue and results of operations of the Group that actually would have been achieved had the acquisition been completed on 1 April 2007, nor is it intended to be a projection of future results.

(d) On 13 April 2007, (i) Wise Mark Group Limited (“Wise Mark”), a wholly owned subsidiary of the Company; and (ii) Mr. Yeung Chi Hang and Well Harvest (collectively referred as the “Share Vendors”) entered into an agreement 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.

Further on 13 April 2007, (i) Golden Island (Management) Limited and (ii) Well Harvest entered into an agreement whereby Golden Island (Management) Limited agreed to acquire from Well Harvest 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 acquisition was not accounted for under HKFRS 3 “Business Combinations” as the major asset of Shenzhen Land is interest in a property in the PRC and the property was vacant at the acquisition date. The property was accounted for under HKFRS 40 “Investment Property” and the carrying value of the property was stated at fair value at 31 March 2008.

• (e) The goodwill arising from the acquisition of Chance Music Limited and Baron Productions and Artiste Management Company Limited represents the consideration paid over the net assets acquired at the acquisition date, which is mainly attributable to the musical talent of some members of the top management of these two companies. The value of their musical talent cannot be reliably measured and separately accounted for.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

38. Related Party Transactions

Significant related party transactions during the year were:

		Group
		2008	2007
	Notes	HK$	HK$
Hotel revenue, food and beverage revenues	a	—	5,941,756
Reimbursement of salaries and other allowances	a	—	24,306,230
Reimbursement of administrative expenses	a	—	1,211,140
Rental expenses to related companies	b	3,842,496	3,019,170
Acquisition of subsidiaries from related parties
— the Wellrich Group	37(c)	322,741,840	—
— Shenzhen Land	37(d)	48,000,000	—
Sponsorship income from a related company	c	—	150,000

• (a) One of the former subsidiaries of the Group, Waldo Hotel Limited (“Waldo Hotel”) entered into a memorandum dated 25 August 2005 (the “Memorandum”) with Waldo Entertainment Limited (“Waldo Entertainment”) of which Mr. Yeung Chi Hang (a director of the Company) is a director and has beneficial interest. Waldo Entertainment is a service provider for a casino which is located in the hotel property of a fellow subsidiary, Waldo Hotel. 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. Waldo Hotel was disposed of during the year ended 31 March 2007.

• (b) Rental expenses were charged by related companies which are associates of two directors of the Company, Ms. Ma Shuk Kam and Mr. Yeung Chi Hang, and a former director of certain former subsidiaries, Mr. Cheng Kwee, based on the tenancy agreements signed between the parties.

• (c) Sponsorship income was received from Grand Waldo Hotel Limited, an associate of Mr. Yeung Chi Hang, by Cite Du Louvre Limited, which is located in Macau for its grand opening.

• (d) Pursuant to a loan agreement dated 4 July 2007 between (i) Well Allied Investments Limited (“Well Allied”), a subsidiary of the Company; and (ii) PLD International Limited (“PLD”), 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.

• (e) On 14 July 2006, Well Allied and 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) (“China Music”), a wholly owned subsidiary of Well Allied relating to licensing of copyright to karaoke music products to karaoke operators in the PRC (the “Co-operation Agreements”):

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

• (i) a copyright co-operation agreement with 中國音像集體管理協會 (China Music Video Collective Management Association) (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.

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 audiovisual 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 Co-operation 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.

(f) Compensation of key management personnel

The remuneration of directors and other members of key management during the year was as follows:

Short-term benefits Post employment benefits	2008 HK$ 8,960,297 77,980 9,038,277	2007 HK$ 7,781,483 93,052
		7,874,535

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

39. 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 Impairment loss of goodwill Loss on disposal of property, plant and equipment Amortisation of deferred expenditure Amortisation of pre-paid licence fee Revaluation gain on investment properties Amortisation of payment for leasehold land held for own use Excess of Group’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost Amortisation of land premium 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 (Decrease)/increase in trade and other payables Payment for licence fee Decrease in provision for long service payments Net cash (used in)/generated from operations	2008 HK$ 32,952,696 6,038,558 (12,402,896) — 4,277,660 462,407 45,267,624 3,937,500 (27,163,329) 1,850,245 (59,318,750) — — 11,683,637 517,129 — 8,102,481 (3,969,204) (28,486,201) (20,286,226) — (102,583) (44,741,733)	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

40. 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:

Not later than one year Later than one year and not later than five years	Group 2008 2007 HK$ HK$ 13,043,938 12,411,560 2,635,604 8,846,190 15,679,542 21,257,750	Group 2008 2007 HK$ HK$ 13,043,938 12,411,560 2,635,604 8,846,190 15,679,542 21,257,750
		21,257,750

The Company did not have any commitments under operating leases at 31 March 2008 (2007: Nil).

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(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:

Not later than one year Later than one year and not later than five years	Group 2008 2007 HK$ HK$ 13,281,429 2,982,000 12,854,411 1,235,000 26,135,840 4,217,000	Group 2008 2007 HK$ HK$ 13,281,429 2,982,000 12,854,411 1,235,000 26,135,840 4,217,000
		4,217,000

The Company did not have any operating lease rental receivables at 31 March 2008 (2007: Nil).

(c) Capital commitments

The Company did not have any operating lease rental receivables at 31 March 2008 (2007: Nil).

	Group		Company
	2008	2007	2008	2007
	HK$	HK$	HK$	HK$
Commitments for the
acquisition of plant and
equipment:
Contracted for but not
provided	1,340,760	—	—	—

41. Key Sources of Estimation Uncertainty

Estimates 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 used in preparing the financial statements that have a significant effect on the carrying amounts of assets and liabilities are discussed below:

(a) 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 judgment, 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.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) 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.

(c) 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.

(d) Estimated impairment of film production costs

Determining whether film production costs are impaired requires an estimation of the future cash inflow from the distribution of the films in local and overseas markets and a suitable discount rate in order to calculate the recoverable amounts. If the recoverable amount is less than the carrying amount of the film production costs, additional impairment may be required.

(e) 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.

(f) Deferred expenditure

The carrying amounts of deferred expenditure are reviewed periodically in order to assess whether the recoverable amounts have declined below the carrying amounts. These assets are tested for impairment whenever events or changes in circumstances indicate that their recorded carrying amounts may not be recoverable. When such a decline has occurred, the carrying amount is reduced to recoverable amount. The Group uses all readily available information in determining an amount that is a reasonable approximation of recoverable amount, including estimates based on reasonable and supportable assumptions.

42. Post Balance Sheet Events

On 9 May 2008, Well Allied entered into a loan agreement with PLD for the advance of a loan of HK$17.2 million to PLD at the interest rate of 5.25% per annum and repayable within 1 year from the date of the loan agreement.

43. Approval of Financial Statements

The financial statements were approved and authorised for issue by the Board of Directors on 16 June 2008.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. INDEBTEDNESS

As at the close of business on 31 January, 2009, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Enlarged Group had HK$98,946,843 due to minority shareholders (which were contributed as shareholders’ loan pro rata to their shareholdings in the relevant subsidiaries of the Company), HK$60,070,522 due to shareholders of the HR Group, HK$22,853,761 due to former shareholders of HR Group and HK$1,182,828 due to related companies.

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 January, 2009 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 acceptances credits or any guarantees or other material contingent liabilities.

5. WORKING CAPITAL

The Directors are of the opinion that the Enlarged Group has sufficient working capital for its present requirements for at least 12 months from the date of this circular after taking into account its internal resources, available banking facilities of the Group, loans from minority shareholders of the Company (which were contributed as shareholders’ loan pro rata to their shareholdings in the relevant subsidiaries of the Company).

6. MATERIAL CHANGE

Save as disclosed in the interim report of the Company for the six months ended 30 September 2008 and the section headed “Financial and trading prospects of the Group” in Appendix III to this circular that the Group suffered loss of HK$21.8 million for the six months ended 30 September 2008, the watch retail operations were disposed of in November 2008 and the hotel, wedding services and certain division of the entertainment operations of the Group are expected to suffer loss in the current financial year, the Directors are not aware of any material change in the financial or trading position or prospects of the Group since 31 March, 2008, being the date to which the Company’s latest published audited accounts were made up.

— 122 —

APPENDIX II

ACCOUNTANTS’ REPORT ON THE HR GROUP

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6 March 2009

The Directors United Power Investment Limited

Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) regarding Hua Rong Sheng Shi Holding Limited (“Hua Rong”, together with its subsidiary and jointly controlled entities, collectively referred as the “HR Group”) for the period from 14 June 2007 (being the earliest date of incorporation of entities now comprising the HR Group) to 31 March 2008 and the six months ended 30 September 2008 (the “Relevant Periods”) for the inclusion in the circular of United Power Investment Limited (the “Company”) dated 6 March 2009 (the “Circular”) issued in connection with the Company’s acquisition of the HR Group (the “Acquisition”).

Hua Rong was incorporated in the British Virgin Islands (the “BVI”) with limited liability on 25 July 2007 with share capital of United States dollars (“US$”) 100 and acts as an investment holding company. Pursuant to a corporate reorganisation as described in note 1 of section B below, which was completed on 22 June 2008, Hua Rong became the holding company of the subsidiary, which in turn holds the jointly controlled entities.

— 123 —

APPENDIX II ACCOUNTANTS’ REPORT ON THE HR GROUP

Hua Rong has adopted 31 March as its financial year end date. The subsidiary and jointly controlled entities which comprising the HR Group have adopted 31 December as their financial year end date. As 30 September 2008, Hua Rong had equity interests in the following entities:

						Percentage of effective	Percentage of effective
						equity interests held
				Registered	Registered
				capital at	capital at	At	At 30
		Place of		31 March	30 September	31 March	September
	Name	registration	Principal activities	2008	2008	2008	2008	Notes
				RMB	RMB
(a)	Subsidiary
	directly held
	深圳市華融	People’s	Investment holding	50,000,000	50,000,000	100.0%	100.0%	(i)
	盛世投資管	Republic
	理有限公司	of China
	(“Shenzhen	(“PRC”)
	Hua Rong”)
(b)	Jointly controlled
	entity indirectly held
	天合文化集團	PRC	Provision of copyright licence	100,000,000	100,000,000	50.0%	50.0%	(ii)
	有限公司		fees settlement and collection
	(“Tian He”)		services in respect of the karaoke
			music products and videos in
			the PRC through a nationwide
			karaoke content management
			service system (“Karaoke CMS”)
			and investment holding
(c)	Subsidiaries of
	jointly controlled
	entity
	福建天合文化	PRC	Provision of copyright licence	—	5,000,000	—	25.5%	(iii)
	傳播有限		fees settlement and collection
	公司		services in respect of the karaoke
			music products and videos in the
			PRC
	浙江天合文化	PRC	Provision of copyright licence	—	5,000,000	—	25.5%	(iii)
	發展有限		fees settlement and collection
	公司		services in respect of the karaoke
			music products and videos in the
			PRC

— 124 —

ACCOUNTANTS’ REPORT ON THE HR GROUP

APPENDIX II

					Percentage of effective	Percentage of effective
					equity interests held
			Registered	Registered
			capital at	capital at	At	At 30
	Place of		31 March	30 September	31 March	September
Name	registration	Principal activities	2008	2008	2008	2008	Notes
			RMB	RMB
北京天合新紀	PRC	Provision of copyright licence	—	3,000,000	—	50%	(iii)
元文化有限		fees settlement and collection
公司		services in respect of the karaoke
		music products and videos in the
		PRC
天津天合新紀	PRC	Provision of copyright licence	—	3,000,000	—	50.0%	(iii)
元文化傳播		fees settlement and collection
有限公司		services in respect of the karaoke
		music products and videos in the
		PRC
山東天合世紀	PRC	Provision of copyright licence	—	3,000,000	—	50.0%	(iii)
文化傳播		fees settlement and collection
有限公司		services in respect of the karaoke
		music products and videos in the
		PRC
北京天合傳媒	PRC	Website operation	—	3,000,000	—	50.0%	(iii)
網絡有限
公司
湖南天合世嘉	PRC	Provision of copyright licence	—	3,000,000	—	37.8%	(iii)
文化有限		fees settlement and collection
公司		services in respect of the karaoke
		music products and videos in the
		PRC
上海天合文化	PRC	Provision of copyright licence	—	3,000,000	—	37.8%	(iii)
傳播有限		fees settlement and collection
公司		services in respect of the karaoke
		music products and videos in the
		PRC
遼寧天合文化	PRC	Provision of copyright licence	3,000,000	3,000,000	28.0%	28.0%	(iii)
有限公司		fees settlement and collection
		services in respect of the karaoke
		music products and videos in the
		PRC

— 125 —

ACCOUNTANTS’ REPORT ON THE HR GROUP

APPENDIX II

					Percentage of effective	Percentage of effective
					equity interests held
			Registered	Registered
			capital at	capital at	At	At 30
	Place of		31 March	30 September	31 March	September
Name	registration	Principal activities	2008	2008	2008	2008	Notes
			RMB	RMB
湖北天合文化	PRC	Provision of copyright licence	—	3,000,000	—	25.5%	(iii)
發展有限		fees settlement and collection
公司		services in respect of the karaoke
		music products and videos in the
		PRC
河南天合文化	PRC	Provision of copyright licence	3,000,000	3,000,000	25.5%	25.5%	(iii)
有限公司		fees settlement and collection
		services in respect of the karaoke
		music products and videos in the
		PRC
海南天合傳美	PRC	Provision of copyright licence	—	3,000,000	—	25.5%	(iii)
文化有限		fees settlement and collection
公司		services in respect of the karaoke
		music products and videos in the
		PRC
重慶天合世紀	PRC	Provision of copyright licence	—	3,000,000	—	25.5%	(iii)
文化傳媒		fees settlement and collection
有限公司		services in respect of the karaoke
		music products and videos in the
		PRC
黑龍江天合	PRC	Provision of copyright licence	—	3,000,000	—	25.5%	(iii)
世紀文化		fees settlement and collection
有限公司		services in respect of the karaoke
		music products and videos in the
		PRC
四川天合文化	PRC	Provision of copyright licence	3,000,000	3,000,000	25.1%	25.1%	(iii)
有限公司		fees settlement and collection
		services in respect of the karaoke
		music products and videos in the
		PRC
山西天合文化	PRC	Provision of copyright licence	—	3,000,000	—	23.0%	(iii),
傳播有限		fees settlement and collection					(iv)
公司		services in respect of the karaoke
		music products and videos in the
		PRC

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ACCOUNTANTS’ REPORT ON THE HR GROUP

APPENDIX II

					Percentage of effective	Percentage of effective
					equity interests held
			Registered	Registered
			capital at	capital at	At	At 30
	Place of		31 March	30 September	31 March	September
Name	registration	Principal activities	2008	2008	2008	2008	Notes
			RMB	RMB
雲南天合世紀	PRC	Provision of copyright licence	3,000,000	3,000,000	28.0%	18.0%	(iii),
文化傳播		fees settlement and collection					(v)
有限公司		services in respect of the karaoke
		music products and videos in the
		PRC
吉林天合世嘉	PRC	Provision of copyright licence	—	2,000,000	—	50.0%	(iii)
文化有限		fees settlement and collection
公司		services in respect of the karaoke
		music products and videos in the
		PRC
貴州天合陽光	PRC	Provision of copyright licence	—	2,000,000	—	25.5%	(iii)
文化有限		fees settlement and collection
公司		services in respect of the karaoke
		music products and videos in the
		PRC
陝西天合陽光	PRC	Provision of copyright licence	—	1,000,000	—	50.0%	(iii)
文化傳播		fees settlement and collection
有限公司		services in respect of the karaoke
		music products and videos in the
		PRC
寧夏天合文化	PRC	Provision of copyright licence	—	1,000,000	—	50.0%	(iii)
有限公司		fees settlement and collection
		services in respect of the karaoke
		music products and videos in the
		PRC

Notes

• (i) The statutory account of this company prepared under the accounting principles generally accepted in the PRC for the period from 14 June 2007 (date of incorporation) to 31 December 2007 was audited by 深圳業 信會計師事務所.

• (ii) The statutory account of this company prepared under the accounting principles generally accepted in the PRC for the period from 27 August 2007 (date of incorporation) to 31 December 2007 was audited by 北京 睿合達會計師事務所有限公司.

• (iii) No statutory accounts have been prepared for these companies since their respective dates of incorporation as they were incorporated shortly before 30 September 2008.

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ACCOUNTANTS’ REPORT ON THE HR GROUP

APPENDIX II

• (iv) Tian He owned 51% of the registered capital of this company on incorporation. On 16 July 2008, Tian He signed an agreement with the existing minority equity owner to transfer 5% of the profit sharing right to that minority equity owner. However, according to the agreement, Tian He retains the right to nominate majority of directors to the board of this company, therefore this company is regarded as a subsidiary of Tian He.

• (v) Tian He owned 56% of the registered capital of this company on incorporation. On 8 May 2008, Tian He signed an agreement to dispose of 5% of its equity interests to the existing minority equity owner and on the same date signed another agreement to further transfer 15% of the profit sharing right to that minority equity owner. However, according to the agreement, Tian He retains the right to nominate majority of directors to the board of this company, therefore this company is regarded as a subsidiary of Tian He.

No statutory accounts have been prepared for Hua Rong since the date of incorporation as it was incorporated in a country where there is no statutory audit requirement.

For the purpose of this report, the directors of Hua Rong have prepared the consolidated financial statements of the HR Group for the Relevant Periods in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) (the “Underlying Financial Statements”) on the basis set out in note 4 of section B for which the directors of Hua Rong are solely responsible for. We have carried out independent audit procedures on the Underlying Financial Statements of the HR Group for the Relevant Periods in accordance with Hong Kong Standards on Auditing (“HKSA”) issued by the HKICPA.

The Financial Information set out in this report has been prepared from the Underlying Financial Statements. We have examined the Underlying Financial Statements in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” as recommended by the HKICPA. No adjustment was considered necessary for the purpose of preparing our report for the inclusion in the Circular.

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

In our opinion, the Financial Information together with the notes thereon, for the purpose of this report, give a true and fair view of the state of affairs of the HR Group and Hua Rong as at 31 March 2008 and 30 September 2008 and of the consolidated results and cash flows of the HR Group for the Relevant Periods.

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APPENDIX II

For the purpose of this report, we have also reviewed the unaudited comparative financial information of the HR Group which includes the consolidated income statement, consolidated statement of changes in equity and consolidated cash flow statement for the period from 14 June 2007 (being the earliest date of incorporation of entities now comprising the HR Group) to 30 September 2007, together with the notes thereto (the “30 September 2007 Corresponding Information”). The directors of Hua Rong are responsible for the preparation and for presentation of the 30 September 2007 Corresponding Information in accordance with Hong Kong Financial Reporting Standards. Our responsibility is to express a conclusion on the 30 September 2007 Corresponding Information based on our review. We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA. A review of the 30 September 2007 Corresponding Information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the 30 September 2007 Corresponding Information.

Based on our review, nothing has come to our attention that causes us to believe that the 30 September 2007 Corresponding Information is not prepared, in all material respects, in accordance with the accounting policies consistent with those used in the preparation of the Financial Information.

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APPENDIX II ACCOUNTANTS’ REPORT ON THE HR GROUP

ACCOUNTANTS’ REPORT OF THE HR GROUP

A. Financial Information

Consolidated income statements

Notes Turnover 5 Cost of sales Gross profit Other revenue and gain 7 Net operating expenses Loss before income tax (expense)/credit 8 Income tax (expense)/ credit 11 Loss for the period	14 June 2007 to 31 March 2008 HK$ — — — 1,575,662 (16,610,180) (15,034,518) (2,065) (15,036,583)	HR Group 14 June 2007 to 30 September 2007 HK$ (Unaudited) — — — — (52,564) (52,564) — (52,564)	Six months ended 30 September 2008 HK$ 553,417 (165,121) 388,296 562,820 (5,313,111) (4,361,995) 68,142 (4,293,853)

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APPENDIX II

Consolidated balance sheets

Notes Non-current assets Property, plant and equipment 14 Intangible assets 15 Deferred tax assets 18 Total non-current assets Current assets Other receivables 19 Cash and cash equivalents Total current assets Total assets Current liabilities Trade and other payables 20 Amounts due to the former shareholders 21 Amount due to a shareholder 22 Amounts due to related companies 23 Total current liabilities Net current assets/(liabilities) Total assets less current liabilities Net assets/(liabilities) Capital and reserves Share capital 24 Reserves Total equity/(deficit)

HR Group At 31 March 2008 At 30 September 2008 HK$ HK$ 1,941,638 2,878,027 8,024,859 7,757,290 30,314 98,443 9,996,811 10,733,760 13,814,706 1,151,745 52,179,662 48,793,407 65,994,368 49,945,152 75,991,179 60,678,912 79,212 1,118,358 30,280,706 79,994,784 19,454 62,432 5,606,000 108,261 35,985,372 81,283,835 30,008,996 (31,338,683) 40,005,807 (20,604,923) 40,005,807 (20,604,923) 780 780 40,005,027 (20,605,703) 40,005,807 (20,604,923)

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ACCOUNTANTS’ REPORT ON THE HR GROUP

APPENDIX II

Balance sheets

Notes Non-current assets Investment in a subsidiary 16 Current assets Other receivables 19 Cash and cash equivalents Total current assets Total assets Current liabilities Amounts due to the former shareholders 21 Amount due to a shareholder 22 Total current liabilities Net current liabilities Total assets less current liabilities Net liabilities Capital and reserves Share capital 24 Reserves 25 Total deficit

Hua Rong At 31 March 2008 At 30 September 2008 HK$ HK$ — 57,000,000 234 234 1,793 1,793 2,027 2,027 2,027 57,002,027 — 57,000,000 19,454 62,432 19,454 57,062,432 (17,427) (57,060,405) (17,427) (60,405) (17,427) (60,405) 780 780 (18,207) (61,185) (17,427) (60,405)

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ACCOUNTANTS’ REPORT ON THE HR GROUP

APPENDIX II

Consolidated statements of changes in equity

At 14 June 2007 Translation differences on foreign operations Loss for the period Total recognised income and expense Capital injection upon incorporation of a subsidiary Issue of shares At 31 March and 1 April 2008 Translation differences on foreign operations Loss for the period Total recognised income and expense Provision of statutory reserve Deemed distribution to the former shareholders upon reorganisation At 30 September 2008 Unaudited At 14 June 2007 Translation differences on foreign operations Loss for the period Total recognised income and expense Issue of shares Capital injection upon incorporation of a subsidiary At 30 September 2007	Share capital (note 24) HK$ — — — — — 780 780 — — — — — 780 — — — — 780 — 780	Statutory reserve (note 25) HK$ — — — — — — — — — — 112 — 112 — — — — — — —	HR Group Merger reserve Foreign exchange reserve Accumulated losses (note 25) (note 25) (note 25) HK$ HK$ HK$ — — — — 3,761,610 — — — (15,036,583) — 3,761,610 (15,036,583) 51,280,000 — — — — — 51,280,000 3,761,610 (15,036,583) — 683,123 — — — (4,293,853) — 683,123 (4,293,853) — — (112) (57,000,000) — — (5,720,000) 4,444,733 (19,330,548) — — — — 535,000 — — — (52,564) — 535,000 (52,564) — — — 51,280,000 — — 51,280,000 535,000 (52,564)	Total HK$ —
				3,761,610 (15,036,583)
				(11,274,973) 51,280,000 780
				40,005,807
				683,123 (4,293,853)
				(3,610,730) — (57,000,000)
				(20,604,923)
				—
				535,000 (52,564)
				482,436
				780 51,280,000
				51,763,216

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ACCOUNTANTS’ REPORT ON THE HR GROUP

APPENDIX II

Consolidated cash flow statements

Cash flows from operating activities Loss before income tax (expense)/credit Adjustments for: Interest income Depreciation of property, plant and equipment Amortisation of intangible assets Impairment loss on intangible assets Operating loss before working capital changes Increase in other receivables Increase in trade and other payables Increase in amount due to a shareholder Increase in amounts due to related companies Cash generated used in operations Interest received Income tax paid Net cash used in operating activities	14 June 2007 to 31 March 2008 HK$ (15,034,518) (194,449) 215,991 540,152 13,417,094 (1,055,730) (13,814,706) 79,212 19,454 5,606,000 (9,165,770) 194,449 (30,454) (9,001,775)	HR Group 14 June 2007 to 30 September 2007 HK$ (Unaudited) (52,564) — — — — (52,564) (10,270,051) 25,801 — — (10,296,814) — — (10,296,814)	Six months ended 30 September 2008 HK$ (4,361,995) (142,142) 300,592 408,502 — (3,795,043) (784,947) 1,048,958 42,628 108,261 (3,380,143) 142,142 — (3,238,001)

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ACCOUNTANTS’ REPORT ON THE HR GROUP

APPENDIX II

Investing activities Purchase of property, plant and equipment Purchase of intangible assets Net cash used in investing activities Financing activities Issue of shares Capital injection upon establishment of a subsidiary Advances from the former shareholders Deemed distribution to the former shareholders upon reorganisation Net cash flows from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Effect of foreign exchange rate changes Cash and cash equivalents at end of period, represents cash and bank balances	14 June 2007 to 31 March 2008 HK$ (2,172,275) (22,928,540) (25,100,815) 780 51,280,000 30,280,706 — 81,561,486 47,458,896 — 4,720,766 52,179,662	HR Group 14 June 2007 to 30 September 2007 HK$ (Unaudited) — — — 780 51,280,000 — — 51,280,780 40,983,966 — 535,000 41,518,966	Six months ended 30 September 2008 HK$ (1,206,734) — (1,206,734) — — 57,158,328 (57,000,000) 158,328 (4,286,407) 52,179,662 900,152 48,793,407

Major non-cash transactions are disclosed in note 19 and note 23.

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APPENDIX II

B. Notes to the Financial Information

1. General Information

The HR Group’s principal place of business is at A1109 Gehua Tower, No. 1 Qinglong Hutong, Dongcheng District, Beijing, PRC.

On 23 March 2008, Hua Rong signed an agreement with the former equity owners of Shenzhen Hua Rong (the “Former Shareholders”) to transfer the entire equity interests of Shenzhen Hua Rong to Hua Rong (the “Reorganisation”). Both of Hua Rong and Shenzhen Hua Rong were controlled by the Former Shareholders since their respective dates of incorporation. Upon completion of the Reorganisation, Hua Rong became the holding company of Shenzhen Hua Rong.

On 20 May 2008, the Former Shareholders disposed their entire equity interests in Hua Rong to Mr. Yeung Chi Hang and Mr. Chu Ying Man.

The consolidated income statements, consolidated balance sheets, consolidated statements of changes in equity and consolidated cash flow statements are presented as if the current group structure had been in existence throughout the Relevant Periods, or since their respective dates of incorporation/registration, whichever is the shorter period.

2. Basis of Preparation

(a) Statement of compliance

The Financial Information set out in this report has been prepared in accordance with all applicable Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“HKASs”) and Interpretations (hereinafter collectively referred to as the “HKFRSs”) issued by the HKICPA. In addition, the Financial Information includes applicable disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited and by the Hong Kong Companies Ordinance.

(b) Basis of measurement

The Financial Information has been prepared on the historical cost basis except for certain financial instruments, which are measured at fair values as explained in the accounting policies set out below.

(c) Basis of preparation

The HR Group and Hua Rong have recorded net current liabilities of HK$31,338,683 and HK$57,060,405 respectively at 30 September 2008. The Company has confirmed its intention to provide sufficient financial support to the HR Group and Hua Rong so as to enable the HR Group and Hua Rong to meet their liabilities as and when they fall due and to enable the HR Group and Hua Rong to continue operating for the forseeable future. Consequently, the Financial Information has been prepared on a going concern basis.

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APPENDIX II

(d) Functional and presentation currency

Each entity in the HR Group maintains its books and records in its own functional currency, i.e., Renminbi (“RMB”). The Financial Information are presented in Hong Kong dollars (“HK$”), which management of Hua Rong considered is more beneficial to the users of the Financial Inforamtion.

(e) Use of estimates and judgments

The preparation of Financial Information in conformity with HKFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the HR 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 Information are disclosed in note 29.

3. Potential Impact Arising on the New HKFRSs Not Yet Effective

The HR Group has not yet applied the following new or revised HKFRSs that have been issued but are not yet effective:

HKFRSs (Amendments)	Improvements to HKFRSs 1
HKFRS 1 (Revised)	First-time Adoption of Hong Kong Financial Reporting
	Standards 3
Amendments to HKAS 32 and	Puttable Financial Instruments and Obligations	Arising on
HKAS 1	Liquidation 2
Amendment to HKAS 39	Eligible Hedged Items 3
Amendments to HKFRS 1 and	Cost of an Investment in a Subsidiary, Jointly Controlled Entity
HKAS 27	or Associate 2
HKAS 1 (Revised)	Presentation of Financial Statements 2
HKAS 23 (Revised)	Borrowing Costs 2
HKAS 27 (Revised)	Consolidated and Separate Financial Statements		3
HKFRS 2 Amendment	Share-based Payment — Vesting Conditions and Cancellations				2
HKFRS 3 (Revised)	Business Combinations 3
HKFRS 8	Operating Segments 2
HK(IFRIC) — Interpretation 13	Customer Loyalty Programmes 4
HK(IFRIC) — Interpretation 15	Agreements for the Construction of Real Estate	2
HK(IFRIC) — Interpretation 16	Hedges of a Net Investment in a Foreign Operation			5
HK(IFRIC) — Interpretation 17	Distributions of Non-cash Assets to Owners 3
HK(IFRIC) — Interpretation 18	Transfers of Assets from Customers 6

1 Effective for annual periods beginning on or after 1 January 2009 except the amendments

to HKFRS 5, effective for annual periods beginning on or after 1 July 2009 2 Effective for annual periods beginning on or after 1 January 2009 3 Effective for annual periods beginning on or after 1 July 2009 4 Effective for annual periods beginning on or after 1 July 2008

5 Effective for annual periods beginning on or after 1 October 2008

6 Effective for transfer of assets from customers received on or after 1 July 2009

The adoption of HKFRS 3 (Revised) may affect the accounting for business combination for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. HKAS 27 (Revised) will affect the accounting treatment for changes in a parent’s ownership interest in a subsidiary that do not result in a loss of control, which will be accounted for as equity transactions. The directors of Hua Rong anticipate that the application of the other new or revised HKFRSs will have no material impact on the results and the financial position of the HR Group.

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ACCOUNTANTS’ REPORT ON THE HR GROUP

APPENDIX II

4. Principal Accounting Policies

(a) Basis of consolidation

The Financial Information comprises the financial statements of Hua Rong and its subsidiary. Inter-company transactions and balances between group companies are eliminated in full in preparing the Financial Information.

On acquisition, the assets and liabilities of the subsidiary are measured at its fair values at the date of acquisition. The interest of minority equity holders is stated at the minority’s proportion of the fair values of the assets and liabilities recognised.

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

(b) Merger accounting for business combination under common control

The Financial Information incorporates the financial statement items of the combining entities in which the common control combination occurs as if they had been combined from the date when the combining entities first came under the control of the controlling party.

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

The consolidated income statement includes the results of each of the combining entities from the earliest date presented or since the date when the combining entities first came under the common control, where this is a shorter period, regardless of the date of the common control combination.

All intra-group transaction balances, income and expenses are eliminated on combination.

(c) Subsidiaries

A subsidiary is an entity over which Hua Rong is able to exercise control. Control is achieved where Hua Rong, directly or indirectly, has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account.

In Hua Rong’s balance sheet, investment in a subsidiary is stated at cost less impairment loss, if any. The results of the subsidiary are accounted by Hua Rong on the basis of dividend received and receivable.

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ACCOUNTANTS’ REPORT ON THE HR GROUP

APPENDIX II

(d) Joint ventures

A joint venture is a contractual arrangement whereby the HR 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.

Interests in jointly controlled entities are included in the Financial Information using proportionate consolidation. The HR Group’s share of each of the jointly controlled entities assets, liabilities, revenue and expenses are combined line-by-line with similar items of the HR Group.

Profits and losses arising on transactions between the HR Group and the jointly controlled entities are recognised only to the extent of unrelated investors’ interests in the entity. The investor’s share in the jointly controlled entities’ profits and losses resulting from these transactions is eliminated against the asset or liability of the jointly controlled entity arising on the transaction.

(e) Property, plant and equipment

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

The cost of property, plant and equipment includes its purchase price and the costs directly attributable to the acquisition of the items.

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

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

Leasehold improvements	2 — 5 years
Furniture, fixtures and equipment	3 — 5 years
Motor vehicles	4 — 5 years

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 assets.

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

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ACCOUNTANTS’ REPORT ON THE HR GROUP

APPENDIX II

(f) Intangible assets

• (i) Externally acquired intangible assets

Externally acquired intangible assets are initially recognised at cost. Subsequently, intangible assets with finite useful lives are carried at cost less accumulated amortisation and accumulated impairment losses, if any. Amortisation is provided on a straight-line basis over their useful economic lives. Intangible assets with indefinite useful lives are carried at cost less any accumulated losses. The amortisation expense is included within the net operating expenses in the consolidated income statement.

Intangible assets, separated from goodwill, are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques.

The significant intangible assets recognised by the HR Group, their useful economic lives are as follow:

Intangible assets	Useful economic life
Golf club membership	Indefinite
Exclusive right for using Karaoke CMS	10 years

• (ii) Impairment

Intangible assets with indefinite useful lives are tested for impairment annually by comparing their carrying amounts with their recoverable amounts, irrespective of whether there is any indication that they may be impaired. If the recoverable amount 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, in which case the impairment loss is treated as revaluation decrease.

When 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.

Intangible assets with finite lives are tested for impairment when there is an indication that an asset may be impaired.

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ACCOUNTANTS’ REPORT ON THE HR GROUP

APPENDIX II

(g) Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to lessee. All other leases are classified as operating leases.

The HR Group as lessee

The total rentals payable under the operating leases are charged to the consolidated income statement on a straight-line basis over the lease term. Lease incentives received are recognised as an integrated part of the total rental expense, over the term of the lease.

(h) Financial instruments

(i) Financial assets

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

Financial assets at fair value through profit or loss including financial assets held for trading: Financial assets are classified as held for trading if they are acquired for the purpose of sale in the near term. Gains or losses on investments held for trading are recognised in the consolidated income statement.

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 consolidated 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 services to customers (trade debtors), and 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.

(ii) Impairment loss on financial assets

Objective evidence that the asset is impaired includes observable data that comes to the attention of the HR Group includes the following loss events:

• significant financial difficulty of the debtor;

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

• granting concession to a debtor because of debtor’s financial difficulty; and

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

— 141 —

ACCOUNTANTS’ REPORT ON THE HR GROUP

APPENDIX II

An impairment loss is recognised in the consolidated 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. The carrying amount of financial asset is reduced through the use of an allowance account. When any part of financial asset is determined as uncollectible, it is written off against the allowance account for the relevant financial asset.

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.

(iii) Financial liabilities

The HR Group’s financial liabilities include trade and other payables, amounts due to the Former Shareholders, a shareholder and related companies, and are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method.

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

(iv) Equity instruments

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

(v) Derecognition

The HR Group derecognises a financial asset when the contractual rights to the future cash flows in relation to the financial asset expire or when the financial asset has been transferred and the transfer meets the criteria for derecognition in accordance with HKAS 39 “Financial Instruments: Recognition and Measurement”.

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires.

(i) Revenue recognition

Revenue from licence fee collection business is recognised when services are performed.

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

(j) Income taxes

Income taxes for the Relevant Periods 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.

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ACCOUNTANTS’ REPORT ON THE HR GROUP

APPENDIX II

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.

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

(k) Foreign currency

Transactions entered into by each of the HR 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. Nonmonetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

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 consolidated 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 case, the exchange differences are also recognised directly in equity.

On consolidation, the results of foreign operations are translated into the presentation currency of Hua Rong at the average exchange rates for the 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 foreign 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 foreign 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 HR Group’s net investment in the foreign operations concerned are reclassified to the foreign exchange reserve.

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 consolidated income statement as part of the profit or loss on disposal.

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APPENDIX II

Goodwill and fair value adjustments on identifiable assets acquired arising on an acquisition of a foreign operation 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.

(l) Employee benefits

The employees of Hua Rong’s subsidiary and jointly controlled entities that operate in the PRC are required to participate in a government-managed retirement benefit schemes. They are required to contribute a fixed cost per employee to the government-managed retirement benefit schemes. The contributions are charged to the consolidated income statement as they become payable.

(m) Impairment of other assets

At each balance sheet date, the HR 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;

• investments in a subsidiary and jointly controlled entities; and

• Intangible assets with finite useful lives.

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, 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.

(n) Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the HR 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.

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APPENDIX II

5. Turnover

			HR Group	HR Group
	14 June			14 June	Six months
	2007 to			2007 to		ended
	31	March	30	September	30 September
		2008		2007		2008
		HK$		HK$		HK$
			(Unaudited)
Revenue from licence fee collection
business		—		—		553,417

6. Segement Information

The HR Group’s turnover and operating results are principally derived from the licence fee collection business in the PRC. Accordingly, no business and geographical segment information is presented.

7. Other Revenue and Gain

Gain on disposal of financial assets at fair value through profit or loss Interest income Others	14 June 2007 to 31 March 2008 HK$ 1,375,963 194,449 5,250 1,575,662	HR Group 14 June 2007 to 30 September 2007 HK$ (Unaudited) — — — —	Six months ended 30 September 2008 HK$ 420,678 142,142 —
			562,820

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APPENDIX II

8. Loss Before Income Tax (Expense)/Credit

Loss before income tax (expense)/credit is arrived at after charging:

Auditor’s remuneration Depreciation of property, plant and equipment Amortisation of intangible assets Impairment loss on intangible assets Operating lease rentals in respect of land and buildings 9. Staff Costs Staff costs (including directors) comprise: Salaries and bonus Contributions to defined contribution pension plans	14 June 2007 to 31 March 2008 HK$ 4,935 215,991 540,152 13,417,094 508,883 14 June 2007 to 31 March 2008 HK$ 872,354 123,005 995,359	HR Group 14 June 2007 to 30 September 2007 HK$ (Unaudited) — — — — — HR Group 14 June 2007 to 30 September 2007 HK$ (Unaudited) — — —	Six months ended 30 September 2008 HK$ 11,763 300,592 408,502 — 564,535
			Six months ended 30 September 2008 HK$ 1,577,846 263,393
			1,841,239

10. Directors’ and Employees’ Remuneration

(a) Directors’ remuneration

No remuneration was paid to the directors of Hua Rong during the Relevant Periods.

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

No emoluments were paid by the HR Group to Hua Rong’s directors as an inducement to join, or upon joining the HR Group, or as compensation for loss of office.

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APPENDIX II

(b) Employees’ remuneration

None of the five highest paid individuals in the HR Group were directors of Hua Rong. The emoluments of the five highest paid individuals were as follows:

Basic salaries, other allowances and benefits in kind Contributions to defined contribution pension plans	14 June 2007 to 31 March 2008 HK$ 218,942 13,618 232,560	HR Group 14 June 2007 to 30 September 2007 HK$ (Unaudited) — — —	Six months ended 30 September 2008 HK$ 221,497 17,421
			238,918

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

11. Income Tax Expense/(Credit)

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

Current tax — PRC Enterprise Income Tax for the period Deferred tax_(note 18)_	14 June 2007 to 31 March 2008 HK$ 30,454 (28,389) 2,065	HR Group 14 June 2007 to 30 September 2007 HK$ (Unaudited) — — —	Six months ended 30 September 2008 HK$ — (68,142)
			(68,142)

Hong Kong Profits Tax

No provision for Hong Kong Profits Tax has been made during the Relevant Periods as the HR Group had no assessable profits in Hong Kong.

PRC Enterprise Income Tax

The PRC subsidiary and the jointly controlled entities are subject to the PRC Enterprise Income Tax at a standard rate of 25% (2007: 33%).

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ACCOUNTANTS’ REPORT ON THE HR GROUP

APPENDIX II

Income tax in other jurisdictions

No provision for income tax in other jurisdictions has been made during the Relevant Periods as the HR Group had no assessable profits subject to tax in other jurisdictions.

The income tax expense/(credit) for the Relevant Periods can be reconciled to the loss per the consolidated income statement as follows:

Loss before income tax expense/(credit) Tax calculated at the PRC Enterprise Income Tax at tax rate of 25% (2007: 33%) Effect of tax exemptions granted to group entities in the PRC Tax effect of non-deductible expenses Tax effect of tax losses not recognised Effect of different tax rates applicable to group entities in the PRC Income tax expense/(credit)	14 June 2007 to 31 March 2008 HK$ (15,034,518) (3,758,630) — 30,405 3,729,273 1,017 2,065	HR Group 14 June 2007 to 30 September 2007 HK$ (Unaudited) (52,564) (17,346) 9,461 — 7,885 — —	Six months ended 30 September 2008 HK$ (4,361,995) (1,090,499) — — 1,007,718 14,639 (68,142)

12. Dividends

No dividend was paid or proposed by Hua Rong during the Relevant Periods, nor has any dividend been proposed since the respective balance sheet dates.

13. Loss Per Share

Loss per share information is not presented as its inclusion, for the purpose of this report, is not considered meaningful due to the preparation of the results for the Relevant Periods on the combined basis.

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ACCOUNTANTS’ REPORT ON THE HR GROUP

APPENDIX II

14. Property, Plant and Equipment

HR Group

Cost At 14 June 2007 Additions for the period At 31 March and 1 April 2008 Additions for the period Exchange differences At 30 September 2008 Accumulated depreciation At 14 June 2007 Charge for the period Exchange differences At 31 March and 1 April 2008 Charge for the period Exchange differences At 30 September 2008 Net book value At 30 September 2008 At 31 March 2008	Leasehold improvements HK$ — 864,335 864,335 49,061 13,860 927,256 — 154,160 10,454 164,614 152,041 4,323 320,978 606,278 699,721	Furniture, fixtures and equipment HK$ — 679,077 679,077 322,257 11,898 1,013,232 — 30,052 2,038 32,090 66,869 1,176 100,135 913,097 646,987	Motor vehicles HK$ — 628,863 628,863 835,416 11,329 1,475,608 — 31,779 2,154 33,933 81,682 1,341 116,956 1,358,652 594,930	Total HK$ — 2,172,275
				2,172,275 1,206,734 37,087
				3,416,096
				— 215,991 14,646
				230,637 300,592 6,840
				538,069
				2,878,027
				1,941,638

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ACCOUNTANTS’ REPORT ON THE HR GROUP

APPENDIX II

15. Intangible Assets

HR Group

Cost At 14 June 2007 Additions for the period At 31 March and 1 April 2008 Exchange differences At 30 September 2008 Amortisation and impairment At 14 June 2007 Charge for the period Impairment loss Exchange differences At 31 March and 1 April 2008 Charge for the period Exchange differences At 30 September 2008 Net book value At 30 September 2008 At 31 March 2008	Golf club membership Exclusive right for using Karaoke CMS (note 17) HK$ HK$ — — 504,540 22,424,000 504,540 22,424,000 9,090 404,000 513,630 22,828,000 — — — 540,152 — 13,417,094 — 946,435 — 14,903,681 — 408,502 — 272,157 — 15,584,340 513,630 7,243,660 504,540 7,520,319	Total HK$ — 22,928,540
		22,928,540 413,090
		23,341,630
		— 540,152 13,417,094 946,435
		14,903,681 408,502 272,157
		15,584,340
		7,757,290
		8,024,859

For the purpose of impairment testing on the golf club membership, the recoverable amount has been determined based on fair value less costs to sell. The fair value less costs to sell is the second-hand market price of the golf club membership less estimated cost of disposal. At 31 March 2008 and 30 September 2008, management of the HR Group determines that there was no impairment of the golf club membership since the recoverable amount of the golf club membership exceeds its carrying amount.

In view of the delay in the revenue generated from the use of the Karaoke CMS, impairment loss of HK$13,417,094 was recognised with reference to the fair value of the exclusive right for using the Karaoke CMS as determined by the professional valuer, Savills Valuation and Professional Services Limited.

The recoverable amount of the exclusive right for using Karaoke CMS is its fair value less costs to sell. As the system was developed in-house and is not commercially available, the fair value was based on the estimated cost to reproduce or construct the intangible asset at current price as of the date of valuation, after taking into account of impairment loss and costs of disposal.

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ACCOUNTANTS’ REPORT ON THE HR GROUP

APPENDIX II

16. Investment in a Subsidiary

		Hua	Rong
		At		At
	31	March	30	September
		2008		2008
		HK$		HK$
Unlisted shares, at cost		—		57,000,000

Particulars of Hua Rong’s subsidiary as at 30 September 2008 are as follows:

					Percentage of	Percentage of
			Registered	Registered	equity interests held
	Place of		capital at	capital at	At	At
	incorporation/		31 March	30 September	31 March	30 September
Name	registration	Principal activity	2008	2008	2008	2008
			RMB	RMB
Directly held
Shenzhen Hua	PRC	Investment holding	50,000,000	50,000,000	100%	100%
Rong

17. Investments in Jointly Controlled Entities

On 27 August 2007, Shenzhen Hua Rong signed an agreement with 北京中文發數字科技有限公 司 (“CCDDT”) to set up a jointly controlled entity in the PRC for the collection of the copyright income from karaoke operators in the PRC and the management of Karaoke CMS. Shenzhen Hua Rong and CCDDT contributed RMB70,000,000 and RMB30,000,000 in cash, respectively, to the jointly controlled entity, Tian He, for 70% and 30% equity interests.

On the same date, Shenzhen Hua Rong signed an agreement to dispose of 20% equity interests in Tian He to CCDDT, and in return CCDDT granted a right to use the self-developed Karaoke CMS to Tian He for 10 years. The Karaoke CMS facilitates the collection of music license fee from karaoke operators and the provision of product advertisement and promotion services.

After the above transactions, Shenzhen Hua Rong owns 50% equity interests in Tian He. Pursuant to the shareholders’ agreement in relation to the establishment of Tian He, each equity holder has a veto right relating to certain financial and operating decisions, and is therefore considered as having joint control over the entity.

Details of the jointly controlled entity and its subsidiaries are disclosed in the third paragraph of this report.

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APPENDIX II

ACCOUNTANTS’ REPORT ON THE HR GROUP

The following amounts represent Hua Rong’s proportionate share of the assets, liabilities, revenue and expenses of the jointly controlled entities which are included in the consolidated balance sheet and consolidated income statement as a result of proportionate consolidation.

Non-current assets Current assets Current liabilities Revenue and gain Net operating expenses Loss before income tax	14 June 2007 to 31 March 2008 HK$ 1,478,265 (16,499,562) (15,021,297)	At 31 March 2008 HK$ 9,996,812 52,529,030 (79,212) 14 June 2007 to 30 September 2007 HK$ (Unaudited) — — —	At 30 September 2008 HK$ 10,733,760 49,934,066 (1,226,619) Six months ended 30 September 2008 HK$ 1,113,697 (5,275,775) (4,162,078)

18. Deferred Tax Assets

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

At beginning of period Credited for the period_(note 11)_ Exchange differences At end of period	HR Group Tax losses At 31 March At 30 September 2008 2008 HK$ HK$ — 30,314 28,389 68,142 1,925 (13) 30,314 98,443

Deferred 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.

As the HR Group has obtained the right as the exclusive service provider in the PRC to provide copyright licence fees settlement and collection services in respect of the karaoke music products and videos, management expects that this right would enable the HR Group to generate profits to utilise the tax losses carried forward.

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ACCOUNTANTS’ REPORT ON THE HR GROUP

APPENDIX II

The HR Group has not recognised deferred tax assets in respect of tax losses of HK$15,931,512 and HK$20,358,614 as at 31 March 2008 and 30 September 2008 respectively, as it is not probable that future taxable profits against which the losses can be utilised will be available in the relevant group entities.

These unrecognised tax losses can be carried forward for up to five years from the year in which the loss originated.

19. Other Receivables

Other receivables_(note)_ Deposits Prepayments	HR Group At 31 March At 30 September 2008 2008 HK$ HK$ 13,506,871 346,625 285,912 368,099 21,923 437,021 13,814,706 1,151,745	Hua Rong At 31 March At 30 September 2008 2008 HK$ HK$ 234 234 — — — — 234 234	Hua Rong At 31 March At 30 September 2008 2008 HK$ HK$ 234 234 — — — — 234 234
			234

Note:

The amounts are unsecured, non-interest being and repayable on demand.

Pursuant to an agreement entered into by the HR Group, the Former Shareholders and a debtor on 30 April 2008, the debtor agreed to utilise its amount due from the HR Group of HK$13,696,800 to offset the amount the HR Group due to the Former Shareholders.

The balance is neither past due nor impaired and there was no recent history of default.

20. Trade and Other Payables

Trade payables_(note)_ Other payables and accruals	HR Group At 31 March At 30 September 2008 2008 HK$ HK$ — 934,108 79,212 184,250 79,212 1,118,358	HR Group At 31 March At 30 September 2008 2008 HK$ HK$ — 934,108 79,212 184,250 79,212 1,118,358
		1,118,358

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ACCOUNTANTS’ REPORT ON THE HR GROUP

APPENDIX II

Note:

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

Within 30 days 31 to 60 days 61 to 90 days	HR Group At 31 March At 30 September 2008 2008 HK$ HK$ — 554,901 — 231,149 — 148,058 — 934,108	HR Group At 31 March At 30 September 2008 2008 HK$ HK$ — 554,901 — 231,149 — 148,058 — 934,108
		934,108

Trade and other payables are expected to be settled within one year.

21. Amounts Due to the Former Shareholders

The amounts due to the Former Shareholders are unsecured, interest-free and repayable on demand.

22. Amount Due to a Shareholder

The amount due to a shareholder is unsecured, interest-free and repayable on demand.

23. Amounts Due to Related Companies

CCDDT_(note (i)) 重慶東融投資有限公司(note (ii), (iii))_	HR Group At 31 March At 30 September 2008 2008 HK$ HK$ — 108,261 5,606,000 — 5,606,000 108,261	HR Group At 31 March At 30 September 2008 2008 HK$ HK$ — 108,261 5,606,000 — 5,606,000 108,261
		108,261

Notes:

• (i) CCDDT has 50% equity interests in Tian He (see note 17). The amount is unsecured, interest-free and repayable on demand.

• (ii) This company is beneficially owned by the Former Shareholders. Pursuant to an agreement entered into by the HR Group, the Former Shareholders and 重慶東融投資有限公司 on 30 April 2008, the Former Shareholders agreed to repay this amount on behalf of the HR Group to 重慶東融投資有限公司 and accordingly the balance was accounted for as the amount due to Former Shareholders as at 30 September 2008.

• (iii) The amount is unsecured, interest-free and repayable on demand.

— 154 —

ACCOUNTANTS’ REPORT ON THE HR GROUP

APPENDIX II

24. Share Capital

(a) Authorised and issued share capital

Authorised (note (a)): 50,000 ordinary shares of US$1 each Issued and fully paid (note (b)): 100 ordinary shares of US$1 each	HR Group and Hua Rong At 31 March At 30 September 2008 2008 US$ US$ 50,000 50,000 At 31 March At 30 September 2008 2008 HK$ HK$ 780 780	HR Group and Hua Rong At 31 March At 30 September 2008 2008 US$ US$ 50,000 50,000 At 31 March At 30 September 2008 2008 HK$ HK$ 780 780
		At 30 September 2008 HK$ 780

Notes:

• (a) Hua Rong was incorporated in the BVI on 25 July 2007 with an authorised share capital of US$50,000 divided into 50,000 shares of US$1 each.

• (b) On incorporation, Hua Rong issued 100 ordinary shares at par to the promoter of Hua Rong as initial working capital.

(b) Capital management policy

The HR Group’s objectives when managing capital are:

• to safeguard the HR Group’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and

• to provide an adequate return to shareholders by pricing services commensurately with the level of risk.

The HR Group sets the amount of capital in proportion to risk. The HR Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets.

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ACCOUNTANTS’ REPORT ON THE HR GROUP

APPENDIX II

25. Reserves

Hua Rong

At 25 July 2007 (date of incorporation) Loss for the period At 31 March and 1 April 2008 Loss for the period At 30 September 2008	Accumulated losses HK$ — 18,207
	18,207 42,978
	61,185

Note:

The following describes the nature and purpose of each reserve within owners’ equity:

Description and purpose

Reserve Description and purpose Statutory reserve The appropriation of 10% of profit after taxation of the subsidiary and its jointly controlled entities in the PRC calculated in accordance with the relevant local accounting standards and regulations. The appropriation may cease to apply if the balance of the statutory reserve has reached 50% of the subsidiary’s and jointly controlled entities’ registered capital. Merger reserve The merger reserve represents the difference between the paid-up capital of Shenzhen Hua Rong and the deemed distribution to the Former Shareholders when it was acquired by Hua Rong upon the Reorganisation. Foreign exchange Gains/losses arising on retranslating the net assets of foreign operations reserve into HK$.

Accumulated losses Cumulative net losses recognised in the consolidated income statement.

26. Financial Risk Management Objectives and Policies

The HR Group is exposed through its operations to the following risks from its use of financial instruments:

• Market risks (interest rate risk and foreign exchange risk)

• Liquidity risk

• Credit risk

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ACCOUNTANTS’ REPORT ON THE HR GROUP

APPENDIX II

Policy for managing these risks is set by the Board of Hua Rong. Certain risks are managed centrally, while others are managed locally following guidelines communicated from the management. The policy for each of the above risks is described in more detail below.

Market risks

(a) Interest rate risk

The HR Group is exposed to interest rate risk due to the fluctuation of the prevailing market interest rate on bank deposits.

The HR Group currently does not use any derivative contracts to hedge its exposure to interest rate risk. However, management will consider hedging significant interest rate exposure should the need arise.

Interest rate profile

The following table details interest rates analysis that management of the HR Group evaluates its interest rate risk.

		HR	Group
	At 31 March 2008		At 30 September 2008
	Effective		Effective
	interest rate		interest rate
	(%)	HK$	(%)	HK$
Financial assets
Floating rate
— Cash and cash equivalents	1	52,179,662	1	48,793,407
Interest rate sensitivity

The following table indicates the approximate favorable/(unfavorable) effect on the loss after taxation in response to reasonably possible changes in an interest rate to which the HR Group has significant exposure at the balance sheet dates. In determining the effect on loss after taxation, the HR Group assumes that the change in interest rate had occurred at the balance sheet date and all other variables held constant. There is no change in the methods and assumptions used in respective balance sheet dates:

		HR Group
	14 June	14 June	Six months
	2007 to	2007 to	ended
	31 March	30 September	30 September
	2008	2007	2008
	HK$	HK$	HK$
		(Unaudited)
Deposit interest rate set by the
People’s Bank of China
Increases by 100 basis points	391,347	43,531	365,951
Decreases by 100 basis points	(391,347)	(43,531)	(365,951)

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ACCOUNTANTS’ REPORT ON THE HR GROUP

APPENDIX II

(b) Foreign exchange risk

The HR Group mainly operates in the PRC with most of the transactions denominated and settled in RMB. Most of the HR Group’s monetary assets and liabilities are also denominated in RMB. Therefore, directors of Hua Rong consider it has no significant foreign exchange risk.

Liquidity risk

Internally generated cash flow and owners’ contribution are the general sources of funds to finance the operations of the HR Group. The HR Group’s liquidity risk management is to diversify the funding sources. The HR Group regularly reviews its major funding positions to ensure it has adequate financial resources in meeting its financial obligations.

The HR Group and Hua Rong have recorded net current liabilities of HK$31,338,683 and HK$57,060,405 respectively at 30 September 2008. The Company has confirmed its intention to provide sufficient financial support to the HR Group and Hua Rong so as to meet their liabilities as and when they fall due and to enable the HR Group and Hua Rong to continue operating for the foreseeable future.

The contractual maturities of financial liabilities are shown below:

	HR	Group
	At		At
	31 March	30	September
	2008		2008
	HK$		HK$
In less than one year	35,985,372		81,283,835

Credit risk

The HR Group’s maximum exposure to credit risk in the event of the counterparties failure to perform their obligations as at 31 March 2008 and 30 September 2008 in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the consolidated balance sheet. The HR Group has policies in place to determine credit limits, credit approval and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In this regard, the directors of Hua Rong consider that the HR Group’s credit risk is significantly reduced.

The HR Group has no significant concentration of credit risk, with exposure spread over a number of counterparties and customers.

The credit risk on bank deposits is limited because the counterparties are banks with high creditratings assigned by international credit-rating agencies or state-owned banks in the PRC.

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ACCOUNTANTS’ REPORT ON THE HR GROUP

APPENDIX II

27. Related Party Transactions

• (a) Transactions with related party

		HR Group
	14 June	14 June	Six months
	2007 to	2007 to	ended
	31 March	30 September	30 September
	2008	2007	2008
	HK$	HK$	HK$
		(Unaudited)
Maintenance fee of Karaoke CMS
paid to CCDDT	114,555	—	107,303

According to the agreement, the maintenance fee is charged at 8% of the gross receipt, net of local levies and tax, of the copyright income received from karaoke operators.

• (b) On 27 August 2007, CCDDT granted the exclusive right for using the Karaoke CMS to the HR Group for 10 years as detailed in note 17 to the Financial Information.

• (c) Balances with related parties are set out in notes 21, 22 and 23 to the Financial Information.

(d) Compensation of key management personnel

The remuneration of key management personnel during the Relevant Periods was as follows:

Short-term benefits Post-employment benefits	14 June 2007 to 31 March 2008 HK$ 218,942 13,618 232,560	HR Group 14 June 2007 to 30 September 2007 HK$ (Unaudited) — — —	Six months ended 30 September 2008 HK$ 221,497 17,421
			238,918

28. Commitments

Operating leases commitments — lessee

The HR Group leases certain properties under operating leases. The duration of lease ranges from one to three years. Lease payments are usually negotiated to reflect market rentals.

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APPENDIX II

ACCOUNTANTS’ REPORT ON THE HR GROUP

The HR Group had future aggregate minimum lease payments under non-cancelable operating leases in respect of the premises to follows:

Not later than one year Later than one year and not later than five years Later than five years	HR Group At 31 March At 30 September 2008 2008 HK$ HK$ 1,018,199 1,397,986 1,184,115 1,426,625 — 122,381 2,202,314 2,946,992	HR Group At 31 March At 30 September 2008 2008 HK$ HK$ 1,018,199 1,397,986 1,184,115 1,426,625 — 122,381 2,202,314 2,946,992
		2,946,992

Capital commitments

Commitment for the acquisition of intangible assets — contracted for but not provided for Commitments for capital contributions to the subsidiaries of the jointly controlled entity — contracted for but not provided for	HR Group At 31 March At 30 September 2008 2008 HK$ HK$ — 79,613 — 9,505,066	HR Group At 31 March At 30 September 2008 2008 HK$ HK$ — 79,613 — 9,505,066
		9,505,066

Other commitments

The HR Group has committed to pay, before 29 April 2011, the aggregate amount of RMB5,000,000 to 中國音像協會, 中國音像協會卡拉OK版權運營中心 and 中國音像集體管理協會, as partial settlement of the copyright licence fees collected from the copyright users.

29. Key Sources of Estimation Uncertainty

Estimated impairment of intangible assets

Determining whether intangible assets are impaired requires an estimation of the fair value less costs to sell of the intangible assets. There is no binding sale agreement or active market for those intangible assets. The fair value less costs to sales is determined based on the best information available to reflect the amount that the HR Group could obtain, at the balance sheet date, from the disposal of the asset in an arm’s length transaction between knowledgeable, willing parties, after deducting the costs of disposal. Where there is any change to the economic environment and market conditions, material impairment losses may arise.

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ACCOUNTANTS’ REPORT ON THE HR GROUP

APPENDIX II

Income taxes

As at 31 March 2008 and 30 September 2008, deferred tax assets of HK$30,314 and HK$98,443 in relation to unused tax losses has been recognised in the HR Group’s consolidated balance sheet respectively. The realisability of the deferred tax assets mainly depends on whether sufficient future profits or taxable temporary differences will be available in the future. In cases where the actual future profits generated are less than expected, a material reversal of deferred tax assets may arise, which would be recognised in the consolidated income statement for the period in which such a reversal takes place.

30. Events after the balance sheet date

• (i) The HR Group set up several jointly controlled entities in the PRC with total capital contribution of RMB10,082,550 subsequent to the balance sheet date.

• (ii) Tian He sold 49% equity interests in 北京天合新紀元文化有限公司 to an independent third party for RMB1,470,000.

• (iii) According to the agreement in relation to the Acquisition, the amounts due to the Former Shareholders shall be settled in full with funds from the shareholders before the completion of the Acquisition.

• (iv) Upon completion of the Acquisition, the amount due to a shareholder will be assigned to the Company.

C. Subsequent financial statements

No audited financial statements have been prepared by any companies in the HR Group in respect of any period subsequent to 30 September 2008.

Yours faithfully, BDO McCabe Lo Limited

Certified Public Accountants

Alfred Lee

Practising Certificate Number P04960 Hong Kong

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APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF THE FINANCIAL POSITION OF THE GROUP

For the year ended 31 March 2006

Group results

The turnover of the Group for the year ended 31 March 2006 was HK$266.8 million (or HK$211.2 million from continuing operations after excluding the revenue from Waldorf Holding Limited, in which the Group disposed its 95% Stake in November 2006), representing an increase of 85.7% compared to last year. The increase was mainly contributed by the watch retail business and hotel operations acquired in July 2005 and October 2005 respectively, which achieved a total turnover of about HK$124.l million. The profit of the Group for the year amounted to HK$42.3 million as compared to a profit of HK$23.2 million last year. This increase in profit was mainly due to the HK$29.7 million excess of fair value of net assets acquired over cost of acquisition of subsidiaries for the hotel business and the contribution of HK$8 million from the hotel business which was partly offset by a decrease in profit of HK$9 million from the wedding services business, loss of HK$6.9 million in entertainment operations and loss ofHK$3 million in Japanese restaurant operations.

Hotel operations

On 28 October 2005, the Group expanded its operations to the hotel business by the acquisition of Waldorf Holding Limited, which owns and operates a three star hotel known as Waldo Hotel in Macau. The business of hotel operations has contributed significant income to the Group.

From the date of acquisition, 28 October 2005, to 31 March 2006, the total revenue from hotel operations of approximately HK$55.6 million was derived from two sources, namely (i) food and beverage revenue of about HK$19.6 million and (ii) hotel rooms and rental income of about HK$36 million. The hotel business recorded an operating profit of approximately HK$8 million.

Wedding services

The Group provided wedding services under the trade names of “Cite Du Louvre” and “Wonderful Arts Wedding Services” in Hong Kong. Turnover and operating profit of this business decreased mainly due to keen competition from local and Taiwan wedding services companies.

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APPENDIX III

Investment properties

The investment properties have contributed steady rental income to the Group.

Restaurant operation

The business of Golden Island Bird’s Nest Chiu Chau Restaurant in Star House, Tsimshatsui (“Chiu Chau Restaurant”) was stable and profitable. During the year, a 51% owned subsidiary of the Company commenced operating a Japanese restaurant in Tsimshatsui. The Japanese restaurant recorded a loss of approximately HK$3 million.

Watch retail operations

The newly acquired watch retail business was profitable and contributed operating profit of approximately HK$1.8 million to the Group.

Entertainment operations

The newly acquired entertainment business incurred a loss of approximately HK$6.9 million.

Investment in convertible note

Opal Technology Inc. failed to pay US$1.08 million to the Group under a deed of settlement dated 19 January 2004 in respect of a judgement debt relating to a US$10 million convertible note. The Company made full provision for such note in its financial statements for the year ended 31 March 2001.

Employees and emolument policy

As at 31 March 2006, the Group had a total of 864 employees. The Group remunerated its employees based on their performance, experience and prevailing industry practices.

The Group periodically reviewed its remuneration package in order to attract, motivate and retain its employees. Discretionary bonuses were rewarded to staff 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 provided in-house and external training courses for its staff to improve their skill and services.

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APPENDIX III

Liquidity and financial resources

The Group financed its operations with internally generated resources. The Group maintained good business relationship with banks and had banking facilities available for future business development.

As at 31 March 2006, the Group had secured bank borrowings of HK$140 million which were repayable within 5 years. The gearing ratio of the Group, based on total borrowings to Shareholders’ equity, was 23.5% as at 31 March 2006.

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. The Group was not exposed to any exchange rate risk or any related hedges.

Charges

On 31 March 2006, 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$252 million amounted to HK$622.7 million.

Dividend

The Company did not pay any dividend for the year ended 31 March 2006.

For the year ended 31 March 2007

Group results

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 this 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 the Chiu Chau Restaurant operation. 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.

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APPENDIX III

Hotel operations

On 29 November 2006, the Group disposed of its 95% interests in Waldorf Holding Limited, which owns and operates a three star hotel known as Waldo Hotel in Macau, in view of the more intense competition in the hotel industry in Macau after several large scale casino hotels commenced operations in 2006. The Group realised a gain of HK$81.5 million from this disposal.

From 1 April 2006 to the date of disposal, the total revenue from hotel operations amounted to approximately HK$71.5 million. The hotel business recorded an operating profit of approximately HK$7 million.

Wedding services

The Group provided wedding services under the trade names of “Cite Du Louvre” and “Wonderful Arts Wedding Services” in Hong Kong. The business in Hong Kong was adversely affected by keen competition from local and Taiwan wedding services companies and the Group has to close its branch in Gold Coast, New Territories. During the year, the Group opened a branch in Grand Waldo Hotel, Macau. However due to its poor performance, the branch was closed on 31 March 2007.

The Group suffered loss of about HK$33.9 million in respect of wedding services business, HK$9 million of which related to operations, HK$19 million was an impairment loss of goodwill and HK$6 million was written off for the investment in the Macau and Gold Coast branches.

Investment properties

The investment properties contributed steady rental income to the Group.

Restaurant operations

The business of the Group’s Chiu Chau Restaurant was stable and contributed operating profit of HK$2 million to the Group. However the Japanese restaurant in Tsimshatsui in which the Group had an 80% interest had closed down as a result of continued loss. The Group recorded a loss of approximately HK$0.6 million for its restaurant operations.

Watch retail operations

The watch retail business was profitable and contributed operating profit of approximately HK$0.8 million to the Group.

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APPENDIX III

Collection of fees for licensing of karaoke music products

During the year the Group entered into various agreements relating to collection of fees for licensing of copyright to karaoke music products to karaoke operators in the PRC. The operation commenced in early 2007.

As this business was at the initial development stage, it incurred a loss of approximately HK$6.1 million.

Wine retail operations

A 51% owned subsidiary of the Company commenced wine retail business in Grand Waldo Hotel, Macau in June 2006. This business recorded a loss of approximately HK$0.8 million.

Entertainment operations

Reli-a-bo Entertainment Limited, a 60% owned subsidiary of the Company which carried on the business of talent management in the entertainment industry, was closed down due to continued loss.

Employees and emolument policy

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

The Group periodically reviewed its remuneration package in order to attract, motivate and retain its employees. Discretionary bonuses were rewarded to staff 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 provided in-house and external training courses for its staff to improve their skill and services.

Liquidity and financial resources

The Group financed its operations with internally generated resources. The Group maintained good business relationship with banks and had banking facilities available for future business development.

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APPENDIX III

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% 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

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

Dividend

The Company did not pay any dividend for the year ended 31 March 2007.

For the year ended 31 March 2008

Group results

The turnover of the Group for the year ended 31 March, 2008 was about HK$276 million, representing an increase of about 36.5% as compared to that of last year. The increase was mainly contributed by the watch retail business of about HK$112.5 million and the acquisition of interest in Dynasty Hotel in Zhaoqing, the PRC, in November 2007 which achieved a turnover of about HK$30.1 million. However there was a decrease of about HK$14.7 million in the turnover of wedding services. The Group achieved a profit of about HK$33.0 million this year, a decrease of approximately 35.1% as compared to last year. The profit was mainly attributable to the excess of the Group’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost of about HK$59.3 million arising on the acquisition of the hotel operations in the PRC, fair value adjustment and rental income of about HK$27.2 million and HK$5.8 million respectively from investment properties, and net income of about HK$2.7 million from Chiu Chau Restaurant operations. However the wedding services business recorded a loss of about HK$5.4 million. The profit was further reduced by a loss of about HK$56 million from the business of collection of fees for licensing of copyright to karaoke music products to karaoke operators in the PRC and a loss of about HK$6.2 million from entertainment business.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE FINANCIAL POSITION OF THE GROUP AND THE HR GROUP

APPENDIX III

Hotel operations

In November 2007, the Group acquired Wellrich Investments Limited, which owns 94% interest in 肇慶星湖俱樂部 (Star-Lake Club Zhaoqing) which owns and operates the hotel under the business name of Dynasty Hotel in Zhaoqing, the PRC. The business suffered a loss of about HK$0.6 million. The Group recorded an excess of its interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost of approximately HK$59.3 million arising on the acquisition of the hotel operations.

Wedding services

The Group provided wedding services under the trade names of “Cite Du Louvre” and “Wonderful Arts Wedding Services” in Hong Kong. The business was adversely affected by keen competition from local and Taiwan wedding services companies.

This business suffered loss of about HK$5.4 million, which was reduced by about 84% as compared to that of last year when an impairment loss of goodwill of HK$19 million was recorded.

Investment properties

The investment properties contributed steady rental income to the Group. In May 2007, the Group acquired properties located at the commercial district in Guangzhou, the PRC, for HK$48 million. The Group was looking for suitable tenants for these properties.

Restaurant operations

The business of the Group’s Chiu Chau Restaurant was stable and contributed operating profit of about HK$2.7 million to the Group.

Watch retail operations

The watch retail business was profitable and contributed operating profit of approximately HK$2.3 million to the Group.

Wine retail operations

A 51% owned subsidiary of the Company commenced wine retail business in Grand Waldo Hotel, Macau in June 2006. This business recorded a loss of approximately HK$0.5 million.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE FINANCIAL POSITION OF THE GROUP AND THE HR GROUP

APPENDIX III

Entertainment operations

In July 2007, the Group established a 60% owned subsidiary, 北京金英馬國際文化交流有限 公司 (Beijing Jingyingma International Cultural Exchange Company Limited), in Beijing, the PRC for its movie and television series production business. The Group entered into three agreements relating to television series production. The total investment is approximately RMB38 million. Production of two television series had substantially completed.

In September 2007, the Group acquired a 51% interest in Baron Productions and Artiste Management Company Limited, which is engaged in providing services relating to production and artist management in the entertainment industry. It incurred a loss of about HK$1 million.

In September 2007, the Group set up a wholly-owned subsidiary, Golden Capital Entertainment Limited, to develop entertainment and related business in Shenzhen, the PRC.

In October 2007, the Group acquired a 60% interest in Chance Music Limited, which was engaged in entertainment and related business and owned intellectual property rights to lyrics of various songs. It achieved a profit of about HK$0.01 million.

Collection of fees for licensing of karaoke music products

The Group entered into various agreements relating to collection of fees for licensing of copyright to karaoke music products to karaoke operators in PRC. It incurred a loss of approximately HK$56 million, which was mainly due to an amortisation of deferred expenditure of approximately HK$45.3 million. The Group was entitled to receive portion of fee payment from karaoke operators in the PRC.

Employees and emolument policy

As at 31 March 2008, the Group had a total of 1,125 employees. The Group remunerated its employees based on their performance, experience and prevailing industry practice.

The Group periodically reviewed its remuneration package in order to attract, motivate and retain its employees. Discretionary bonuses were rewarded to staff 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 provided in-house and external training courses for its staff to improve their skill and services.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE FINANCIAL POSITION OF THE GROUP AND THE HR GROUP

APPENDIX III

Liquidity and financial resources

The Group financed its operations with internally generated resources. The Group maintained good business relationship with banks and had banking facilities available for future business development.

As at 31 March 2008, the Group had no bank borrowings. The gearing ratio of the Group, based on total borrowings to Shareholders’ equity, was 0% as at 31 March 2008.

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

On 31 March 2008, 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$55 million amounted to HK$186 million.

Dividend

The Company did not pay any dividend for the year ended 31 March 2008.

MANAGEMENT DISCUSSION AND ANALYESIS OF FINANCIAL POSITION OF THE HR GROUP

The following is a discussion and analysis of the financial results of the HR Group for the period from 14 June 2007 (date of incorporation of Shenzhen Hua Rong) to 30 September 2008 (based on the accountants’ report on the HR Group, details of which are set out in Appendix II, and the information provided by the HR Group).

For the period from 14 June 2007 to 31 March 2008

Shenzhen Hua Rong was established in the PRC on 14 June 2007 with a registered capital of RMB50,000,000. It is an investment holding company.

Hua Rong was incorporated in the British Virgin Islands on 25 July 2007 and is an investment holding company.

Tian He was formed as a joint venture company in the PRC on 27 August 2007 by Shenzhen Hua Rong and CCDDT. Tian He has a registered capital of RMB100 million which has been fully paid up. Tian He is principally engaged in the provision of copyright transaction settlement services relating to karaoke venues.

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APPENDIX III

On 15 July 2007, Tian He and CCDDT entered into a licensing agreement (subsequently supplemented on 12 May 2008), pursuant to which Tian He was granted an exclusive right to use the Karaoke CMS to provide copyright transactions settlement services and the right to develop related value-added services in the PRC for a term of 10 years from the date of the licensing agreement.

On 27 December 2007, Tian He entered into a service agreement with the Associations (subsequently supplemented on 21 April 2008), pursuant to which Tian He was appointed as the exclusive service provider of the Associations to provide, amongst other services, copyright licence fees settlement and collection services in respect of the karaoke music products and videos managed and administered by the Associations for a term of 10 years from its date of execution. Pursuant to the service agreement, Tian He, together with the Provincial JVs, is entitled to a service fee equivalent to 25% of the fee income collected (after tax) from the karaoke operators.

As at 30 September 2008, Tian He had established a total of 6 wholly-owned subsidiaries and 15 Provincial JVs with local partners to provide the settlement and collection services in the PRC.

For the period from 14 June 2007 (the date of incorporation of Shenzhen Hua Rong) to 31 March 2008, the unaudited consolidated loss of the HR Group after taxation was HK$15,036,583. There was no extraordinary item during the period.

The HR Group had net assets of about HK$40,005,807 as at 31 March 2008.

Turnover

No revenue was recorded in the period. The HR Group had a net loss of about HK$15,036,583.

Cost of operations

There was no cost of sales in the period. Administrative expenses and staff cost were about HK$16,610,180 and HK$995,359 respectively.

Property, plant and equipment

The HR Group acquired property, plant and equipment of HK$2,172,275 as of 31 March 2008.

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APPENDIX III

Liquidity and capital resources

As at 31 March 2008, the HR Group’s current ratio was 183.39%, with current assets of HK$65,994,368 against current liabilities of HK$35,985,372. Cash and cash equivalents totaled HK$52,179,662.

For the period ended 31 March 2008, the HR Group recorded a net cash outflow from operating activities of HK$9,001,775, which was funded by shareholders’ loans. The HR Group had no bank borrowing or charges during the period.

No financial instrument was used for hedging. The directors of Hua Rong considered that the HR Group was not exposed to any exchange rate risk and any related hedges.

Employees and emolument policy

As at 31 March 2008, the HR Group had about 104 employees.

The HR Group remunerated its employees based on their responsibilities, posts, performance and experience, and the prevailing consumer goods price level and industry competitiveness. Its employees’ remuneration included basic salary, performance related salary, allowances (for communication, travel and lunch) and welfares stipulated by the relevant laws of the PRC. It reviewed its remuneration package annually, taking into account its operation position, inflation and anticipated trend of changes in wages.

The HR Group did not have any share option scheme or similar incentive scheme or bonus system for its employees. Tian He provided in-house training courses for its new employees, marketing staff and employees of subsidiaries.

Dividends

The HR Group did not pay any dividend for the period.

For the six months ended 30 September 2008

During the period, the HR Group gradually built up its operation network to provide copyright transaction settlement and collection services relating to karaoke venues in the PRC. As at 30 September 2008, Tian He had established a total of 7 wholly-owned subsidiaries and 14 Provincial JVs with local partners.

For the six months ended 30 September 2008, the unaudited consolidated loss of the HR Group after taxation was HK$4,293,853. There was no extraordinary item during the period.

The HR Group had net liabilities of about HK$20,604,923 as at 30 September 2008.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE FINANCIAL POSITION OF THE GROUP AND THE HR GROUP

APPENDIX III

Turnover

Revenue of HK$553,417 was recorded in the period. The HR Group had a net loss of about HK$4,293,853.

Cost of operations

For the period, cost of sales was about HK$165,121, while administrative expenses and staff cost were about HK$5,313,111 and HK$1,841,239 respectively.

Property, plant and equipment

The HR Group acquired property, plant and equipment of HK$1,206,734 as of 30 September 2008.

Liquidity and capital resources

As at 30 September 2008, the HR Group’s current ratio was 61.45%, with currents assets of HK$49,945,152 against current liabilities of HK$81,283,835. Cash and cash equivalents totaled HK$48,793,407.

For the six months ended 30 September, 2008, the HR Group recorded a net cash outflow from operating activities of HK$3,238,001, which was funded by shareholders loans. The HR Group had no bank borrowing or charges during the period.

No financial instrument was used for hedging. The directors of the Hua Rong considered that the HR Group was not exposed to any exchange rate risk and any related hedges.

Employee and emolument policy

As at 30 September 2008, the HR Group had about 212 employees.

The HR Group remunerated its employees based on their responsibilities, posts, performance and experience, and the prevailing consumer goods price level and industry competitiveness. Its employees’ remuneration included basic salary, performance related salary, allowances (for communication, travel and lunch) and welfares stipulated by the relevant laws of the PRC. It reviewed its remuneration package annually, taking into account its operation position, inflation and anticipated trend of changes in wages.

The HR Group did not have any share option scheme or similar incentive scheme or bonus system for its employees. Tian He provided in-house training courses for its new employees, marketing staff and employees of subsidiaries.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE FINANCIAL POSITION OF THE GROUP AND THE HR GROUP

APPENDIX III

Dividend

The HR Group did not pay any dividend for the period.

FINANCIAL AND TRADING PROSPECTS OF THE ENLARGED GROUP

Currently the Group is principally engaged in hotel and restaurant operations, property investment, provision of wedding services, entertainment business and collection of fees for licensing of karaoke music products to karaoke operators in the PRC for content distribution. After completion of the Acquisition, the Enlarged Group will also provide copyright transaction settlement and collection services relating to karaoke venues in the PRC.

Hotel operations

The business of Dynasty Hotel in Zhaoqing, the PRC has been adversely affected by the economic downturn in the PRC and is expected to remain affected for the remaining term of the current financial year.

Restaurant operations

The business of the Group’s Chiu Chau Restaurant in Star House, Tsimshatsui is stable and profitable. The Directors consider that given its established reputation in Hong Kong, the restaurant will continue to contribute profit to the Group.

Investment properties

Income from the investment properties of the Group is expected to be stable for the current financial year.

Wedding services operations

The Group’s wedding services business is operated under the trade names of “Cite Du Louvre 羅浮宮婚紗影城” and “Wonderful Arts Wedding Services 新天地婚紗攝影” in Hong Kong. This operation has been adversely affected by the economic downturn in Hong Kong and its performance is not expected to improve in the current financial year.

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APPENDIX III

Entertainment operations

The Group has commenced distribution of three television series produced in the PRC.

Baron Production and Artiste Management Company Limited, a 51% owned subsidiary engaged in providing services relating to production and artist management in the entertainment industry, is expect to continue to suffer loss in the current financial year.

Golden Capital Entertainment Limited, a wholly-owned subsidiary of the Company, is in the process of developing entertainment and related business in Shenzhen, PRC.

The business of Chance Music Limited, a 60% owned subsidiary engaged in entertainment and related business and owns intellectual property rights to lyrics of various songs, is expected to continue to contribute profit to the Group in the current financial year.

Collection of fees for licensing of karaoke music products

The Directors are optimistic about the future prospects of the entertainment industry in the PRC. The Group’s business relating to collection of fees for licensing of copyright to karaoke music products to karaoke operators in the PRC for content distribution is gradually yielding income to the Group. After its initial set up period, the operation of the HR Group started to yield income in the six months ended 30 September 2008. The Directors consider that the Acquisition will enable the Group to quickly scale up and become a platform to consolidate operations for collection of copyright fees for both content distribution and infrastructure in respect of karaoke music products in the PRC, and income from these operations is expected to grow.

Apart from the existing businesses, the Group will continue to seek attractive investment opportunities.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

1. INTRODUCTION

The unaudited pro forma financial information of the Enlarged Group, comprising the unaudited pro forma consolidated balance sheet, consolidated income statement and consolidated cash flow statement, have been prepared on the basis of the notes set out below for the purpose of illustrating the effect of the Acquisition of the HR Group by the Group as if the Acquisition had taken place on (i) 30 September 2008 for the unaudited pro forma consolidated balance sheet; and (ii) on 1 April 2007 for the unaudited pro forma consolidated income statement and consolidated cash flow statement.

The unaudited pro forma financial information of the Enlarged Group has been prepared based on the audited financial statements of the Group for the year ended 31 March 2008 as set out in Appendix I, the unaudited financial statements of the Group for the six months period ended 30 September 2008 as set out in Appendix I and the audited financial information of the HR Group as set out in Appendix II to this circular, after giving effect to the pro forma adjustments described in the accompanying notes. Narrative descriptions of the pro forma adjustments of the Acquisition that are (i) directly attributable to the transactions; (ii) expected to have a continuing impact on the Enlarged Group; and (iii) factually supportable, are set out in the in accompanying notes.

The unaudited pro forma financial information of the Enlarged Group is based on a number of assumptions, estimates and uncertainties and currently available information. As a result of these assumptions, estimates and uncertainties, the accompanying unaudited pro forma financial information of the Enlarged Group does not purport to describe the actual financial position, results of operations and cash flows of the Enlarged Group that would have been attained had the Acquisition been completed on the dates indicated herein. Furthermore, the unaudited pro forma financial information of the Enlarged Group does not purport to predict the future financial position, results of operations or cash flows of the Enlarged Group.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

(I) Unaudited pro forma consolidated balance sheet of the Enlarged Group

Assets Non-current assets Goodwill Property, plant and equipment Investment properties Payments for leasehold land held for own use under operating leases Interest in an associate Held-to-maturity investment Intangible assets Deferred tax assets Total non-current assets	Unaudited balance sheet of the Group as at 30 September 2008 HK$ Note 1 560,000 218,741,657 180,642,000 395,196,120 — — — 3,002,770 798,142,547	Audited balance sheet of the HR Group as at 30 September 2008 Pro forma adjustment Pro forma adjustment Pro forma adjustment HK$ HK$ HK$ HK$ Note 2 Note 3 Note 4 Note 5, 6 — 598,553,989 2,878,027 — — — — 7,757,290 532,630 122,125,660 98,443 10,733,760	Unaudited pro forma consolidated balance sheet of the Enlarged Group as at 30 September 2008 HK$ 599,113,989 221,619,684 180,642,000 395,196,120 — — 130,415,580 3,101,213
			1,530,088,586

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

(I) Unaudited pro forma consolidated balance sheet of the Enlarged Group — Continued

Current assets Inventories Trade and other receivables Amount due from a related company Deferred expenditure Cash and cash equivalents Total current assets Assets classified as held for sale Total assets	Unaudited balance sheet of the Group as at 30 September 2008 HK$ Note 1 8,530,265 93,017,917 26,200,000 26,354,439 240,964,957 395,067,578 28,882,853 1,222,092,978	Audited balance sheet of the HR Group as at 30 September 2008 Pro forma adjustment Pro forma adjustment Pro forma adjustment HK$ HK$ HK$ HK$ Note 2 Note 3 Note 4 Note 5, 6 — 1,151,745 — — 48,793,407 (90,000,000) 49,945,152 — 60,678,912	Unaudited pro forma consolidated balance sheet of the Enlarged Group as at 30 September 2008 HK$ 8,530,265 94,169,662 26,200,000 26,354,439 199,758,364
			355,012,730 28,882,853
			1,913,984,169

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

(I) Unaudited pro forma consolidated balance sheet of the Enlarged Group — Continued

Liabilities Current liabilities Trade and other payables Amounts due to the former shareholders Amount due to a shareholder Amounts due to related companies Amount due to minority shareholders Current tax liabilities Total current liabilities Liabilities directly associated with assets classified as held for sale Net current assets/ (liabilities) Total assets less current liabilities	Unaudited balance sheet of the Group as at 30 September 2008 Audited balance sheet of the HR Group as at 30 September 2008 Pro forma adjustment Pro forma Adjustment Pro forma adjustment HK$ HK$ HK$ HK$ HK$ Note 1 Note 2 Note 3 Note 4 Note 5, 6 54,644,037 1,118,358 — 79,994,784 (79,994,784) — 62,432 (62,432) — 108,261 100,459,254 — 455,887 — 155,559,178 81,283,835 23,913,668 — 244,477,585 (31,338,683) 1,042,620,132 (20,604,923)	Unaudited pro forma consolidated balance sheet of the Enlarged Group as at 30 September 2008 HK$ 55,762,395 — — 108,261 100,459,254 455,887
		156,785,797
		23,913,668
		203,196,118
		1,733,284,704

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

(I) Unaudited pro forma consolidated balance sheet of the Enlarged Group — Continued

Non-current liabilities Provision for long service payment Deferred tax liabilities Total non-current liabilities Total liabilities Total net assets/ (liabilities) Capital and reserves attributable to equity holders of the Company Share capital Reserves Equity/(deficit) attributable to equity holders of the Company Minority interests Total equity/(deficit)	Unaudited balance sheet of the Group as at 30 September 2008 Audited balance sheet of the HR Group as at 30 September 2008 Pro forma adjustment Pro forma Adjustment Pro forma adjustment HK$ HK$ HK$ HK$ HK$ Note 1 Note 2 Note 3 Note 4 Note 5, 6 2,159,770 — 90,757,968 — 133,157 30,531,415 92,917,738 — 272,390,584 81,283,835 949,702,394 (20,604,923) 169,911,570 780 299,999,220 764,693,130 (20,605,703) 399,473 91,594,245 288,611,985 934,604,700 (20,604,923) 15,097,694 — 949,702,394 (20,604,923)	Unaudited pro forma consolidated balance sheet of the Enlarged Group as at 30 September 2008 HK$ 2,159,770 121,422,540
		123,582,310
		304,281,775
		1,609,702,394
		469,911,570 1,124,693,130
		1,594,604,700 15,097,694
		1,609,702,394

— 180 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

(II) Unaudited pro forma consolidated income statement of the Enlarged Group

Turnover Cost of sales Gross profit Other revenue Net operating expenses Increase in fair value of investment properties Excess of the Group’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost Finance costs Profit/(loss) before taxation Taxation Profit/(loss) for the year/period	Audited income statement of the Group for the year ended 31 March 2008 Audited income statement of the HR Group for the period from 14 June 2007 to 31 March 2008 Pro forma adjustment HK$ HK$ HK$ Note 7 Note 2 Note 8 276,016,114 — (151,339,908) — 124,676,206 — 16,015,066 1,575,662 (187,664,968) (16,610,180) (13,628,699) 27,163,329 — 59,318,750 — (517,129) — 38,991,254 (15,034,518) (6,038,558) (2,065) 3,407,175 32,952,696 (15,036,583)	Unaudited pro forma consolidated income statement of the Enlarged Group for the year ended 31 March 2008 HK$ 276,016,114 (151,339,908)
		124,676,206 17,590,728 (217,903,847) 27,163,329 59,318,750 (517,129)
		10,328,037 (2,633,448)
		7,694,589

— 181 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

(III) Unaudited pro forma consolidated cash flow statement of the Enlarged Group

Operating activities Profit/(loss) before taxation Adjustments for: Interest income Impairment loss of goodwill Impairment loss on intangible assets Loss on disposal of property, plant and equipment Amortisation of intangible assets Amortisation of deferred expenditure Amortisation of pre-paid licence fee Revaluation gain on investment properties Amortisation of payment of leasehold land held for own use Excess of Group’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost Depreciation of property, plant and equipment Interest expenses Operating profit/(loss) before working capital changes	Audited cash flow statement of the Group for the year ended 31 March 2008 HK$ Note 7 38,991,254 (12,402,896) 4,277,660 — 462,407 — 45,267,624 3,937,500 (27,163,329) 1,850,245 (59,318,750) 11,683,637 517,129 8,102,481	Audited cash flow statement of the HR Group for the period from 14 June 2007 to 31 March 2008 Pro forma adjustment Pro forma adjustment Unaudited pro forma consolidated cash flow statement of the Enlarged Group for the year ended 31 March 2008 HK$ HK$ HK$ HK$ Note 2 Note 8 Note 9 (15,034,518) (13,628,699) 10,328,037 (194,449) (12,597,345) — 4,277,660 13,417,094 13,417,094 — 462,407 540,152 13,628,699 14,168,851 — 45,267,624 — 3,937,500 — (27,163,329) — 1,850,245 — (59,318,750) 215,991 11,899,628 — 517,129 (1,055,730) 7,046,751	Audited cash flow statement of the HR Group for the period from 14 June 2007 to 31 March 2008 Pro forma adjustment Pro forma adjustment Unaudited pro forma consolidated cash flow statement of the Enlarged Group for the year ended 31 March 2008 HK$ HK$ HK$ HK$ Note 2 Note 8 Note 9 (15,034,518) (13,628,699) 10,328,037 (194,449) (12,597,345) — 4,277,660 13,417,094 13,417,094 — 462,407 540,152 13,628,699 14,168,851 — 45,267,624 — 3,937,500 — (27,163,329) — 1,850,245 — (59,318,750) 215,991 11,899,628 — 517,129 (1,055,730) 7,046,751
			7,046,751

— 182 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

(III) Unaudited pro forma consolidated cash flow statement of the Enlarged Group — Continued

					Unaudited pro
		Audited cash flow			forma consolidated
	Audited cash flow	statement of the			cash flow
	statement of the	HR Group for			statement of the
	Group for the	the period from			Enlarged Group
	year ended	14 June 2007 to	Pro forma	Pro forma	for the year ended
	31 March 2008	31 March 2008	adjustment	adjustment	31 March 2008
	HK$	HK$	HK$	HK$	HK$
	Note 7	Note 2	Note 8	Note 9
Increase in inventories	(3,969,204)	—			(3,969,204)
Increase in trade and other
receivables	(28,486,201)	(13,814,706)			(42,300,907)
Increase in amount due to a
shareholder	—	19,454			19,454
Increase in amount due to
related companies	—	5,606,000			5,606,000
(Decrease)/increase in trade
and other payables	(20,286,226)	79,212			(20,207,014)
Decrease in provision for
long service payment	(102,583)	—			(102,583)
Net cash used in operations	(44,741,733)	(9,165,770)			(53,907,503)
Interest paid	(517,129)	—			(517,129)
Interest received	12,402,896	194,449			12,597,345
Tax paid	(585,235)	(30,454)			(615,689)
Net cash used in operating
activities	(33,441,201)	(9,001,775)			(42,442,976)
Investing activities
Acquisition of subsidiaries,
net of cash acquired	(118,395,364)	—		(90,000,000)	(208,395,364)
Proceeds from disposal
of property, plant and
equipment	324,440	—			324,440
Purchase of property, plant
and equipment	(7,728,566)	(2,172,275)			(9,900,841)
Purchase of intangible
assets	—	(22,928,540)			(22,928,540)
Purchase of investment
properties	(49,056,671)	—			(49,056,671)
Deferred expenditure paid	(45,000,000)	—			(45,000,000)
Net cash used in investing
activities	(219,856,161)	(25,100,815)			(334,956,976)

— 183 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

(III) Unaudited pro forma consolidated cash flow statement of the Enlarged Group — Continued

					Unaudited pro
		Audited cash flow			forma consolidated
	Audited cash flow	statement of the			cash flow
	statement of the	HR Group for			statement of the
	Group for the	the period from			Enlarged Group
	year ended	14 June 2007 to	Pro forma	Pro forma	for the year ended
	31 March 2008	31 March 2008	adjustment	adjustment	31 March 2008
	HK$	HK$	HK$	HK$	HK$
	Note 7	Note 2	Note 8	Note 9
Financing activities
Issue of shares	—	780			780
Advances from minority
shareholders	40,251,911	—			40,251,911
Advances from the former
shareholders	—	30,280,706			30,280,706
Capital contribution upon
establishment of a
subsidiary	—	51,280,000			51,280,000
Capital contribution by
minority shareholders	3,654,350	—			3,654,350
Proceeds from exercise of
share options	15,552,600	—			15,552,600
Net cash flows generated
from financing activities	59,458,861	81,561,486			141,020,347
Net (decrease)/increase
in cash and cash
equivalents	(193,838,501)	47,458,896			(236,379,605)

— 184 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

(III) Unaudited pro forma consolidated cash flow statement of the Enlarged Group — Continued

					Unaudited pro
		Audited cash flow			forma consolidated
	Audited cash flow	statement of the			cash flow
	statement of the	HR Group for			statement of the
	Group for the	the period from			Enlarged Group
	year ended	14 June 2007 to	Pro forma	Pro forma	for the year ended
	31 March 2008	31 March 2008	adjustment	adjustment	31 March 2008
	HK$	HK$	HK$	HK$	HK$
	Note 7	Note 2	Note 8	Note 9
Cash and cash equivalents
at the beginning of the
year/period	438,160,876	—			438,160,876
Effect of foreign exchange
rate changes	7,847,903	4,720,766			12,568,669
Cash and cash equivalents
at the end of the
year/period	252,170,278	52,179,662			214,349,940

— 185 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

Notes to unaudited pro forma financial information:

1. The financial information of the Group is extracted from the consolidated financial statements as included in the published interim report of the Company for the six months ended 30 September 2008.

2. The financial information of the HR Group is extracted from the financial information of the HR Group as set out in Appendix II of this Circular. For the unaudited pro forma consolidated income statement and cash flow statement, the information presented represents the financial information of the HR Group for the period from 14 June 2007 (being the earliest date of incorporation of the entities now comprising the HR Group) to 31 March 2008. The period covers approximately nine months of the operating results of the HR Group, which was in its preliminary stage of operation.

3. The Group will apply the purchase method to account for the Acquisition of the HR Group in the consolidated financial statements of the Group. In applying the purchase method, the identifiable assets and liabilities of the HR Group will be recorded on the balance sheet of the Group at their fair value at the date of Completion.

The adjustment represents the pro form adjustment to reflect the fair value of intangible assets attributable to the HR Group of HK$7,776,289 in connection with an exclusive right for using a nationwide karaoke content management service system based on the valuation performed by an independent firm of professional valuer, Savills Valuation and Professional Services Limited, as at 30 September 2008 and the recognition of the related deferred tax liabilities. Since the fair value of intangible assets at the date of Completion of the Acquisition may be different from the fair value used in the preparation of this unaudited pro forma financial information, the final amount of fair value adjustment to the intangible assets and related deferred tax liabilities to be recognised in connection with the Acquisition at the date of Completion may be different from the estimated value stated therein.

1. The adjustment represents the recognition of intangible assets upon business combination in relation to the right obtained by the HR Group as the exclusive service provider of the Associations to provide copyright licence fees settlement and collection services in respect of the karaoke music products and videos managed and administered by the Associations. The pro forma adjustment reflects the fair value of intangible assets attributable to the HR Group of HK$122,125,661 based on the valuation performed by an independent firm of professional valuer, Savills Valuation and Professional Services Limited, as at 30 September 2008 and the recognition of the related deferred tax liabilities. Since the fair value of intangible assets at the date of Completion of the Acquisition may be different from the fair value used in the preparation of this unaudited pro forma financial information, the final amount of fair value adjustment to the intangible assets and related deferred tax liabilities to be recognised in connection with the Acquisition at the date of Completion may be different from the estimated value stated therein.

2. Pursuant to the Agreement, the Company has agreed to acquire the entire interests of the HR Group at a consideration of HK$750,000,000, which is to be satisfied in the following manner:

Issue of Consideration Shares_(note i) Issue of Convertible Preference Shares(note ii) Cash(note iii)_ Cost of investment	HK$ 502,500,000 157,500,000 90,000,000
	750,000,000

— 186 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

note i: According to the Agreement, Consideration Shares will be issued, credited as fully paid at HK$0.11 each (the “Issue Price”). As a result of the issue of the Consideration Shares, the share capital and share premium of the Company increased by HK$228,409,091 and HK$274,090,909, respectively. The fair value of the Consideration Shares is assumed for the purpose of the preparation of unaudited pro forma financial information as equal to the Issue Price times the number of Consideration Shares to be issued.

• note ii: According to the Agreement, Convertible Preference Shares will be issued credited as fully paid at the Issue Price. As a result of the issue of Convertible Preference Shares, the share capital and share premium of the Company increased by HK$71,590,909 and HK$85,909,091, respectively. The fair value of the Convertible Preference Shares is assumed for the purpose of the preparation of unaudited pro forma financial information as equal to the Issue Price times the number of Convertible Preference Shares to be issued.

note iii: According to the Agreement, cash of HK$90,000,000 will be paid. As a result, the cash and cash equivalent balances decreased by HK$90,000,000.

1. The pro forma adjustment is to reflect the effect of the Acquisition on the consolidated balance sheet of the Group as if the Acquisition had taken place on 30 September 2008:

Cost of investment_(Note 4) _Less: Fair value of net identifiable assets and liabilities to be acquired: Carrying amount of net identifiable liabilities of the HR Group Repayment of loans from the former shareholders by the Vendors_(note i) Assignment of shareholders’ loan(note ii) Fair value adjustments(Notes 3 and 4)_ Goodwill	HK$ 750,000,000 (20,604,923) 79,994,784 62,432 91,993,718 151,446,011 598,553,989

Note i: According to the Agreement, the “Amounts due to the former shareholders” in the books of the HR Group shall be settled in full with funds from the Vendors before Completion.

Note ii: Upon Completion, the loans due to the Vendors by the HR Group will be assigned to the Company, and as a result, the “Amount due to a shareholder” in the books of the HR Group and “Amount due from a subsidiary” in the book of the Company of HK$62,432 would be eliminated upon consolidation.

At the date of Completion, the fair value of the Consideration Shares, the Convertible Preference Shares and the net identifiable assets, liabilities and contingent liabilities of the HR Group will have to be assessed. As a result of the assessment, the amount of goodwill may be different from that estimated based on the basis stated above for the purpose of preparing unaudited pro forma financial information. Accordingly, the actual amount of the goodwill may be different from that presented above.

— 187 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

No adjustment had been made to reflect the costs of the Acquisition, estimated to be at HK$16,153,000, as such costs are not considered to be material and will not have financial impact on the unaudited pro forma consolidated income statement and cash flow statement.

1. The financial information of the Group is extracted from the consolidated financial statements as included in the published annual report of the Company for the year ended 31 March 2008.

2. The amount represents the additional amortisation of intangible assets and release of deferred tax liabilities as a result of fair value adjustments as disclosed in Notes 3 and 4, which are expected to have a continuing effect on the Enlarged Group after the Completion of the Acquisition.

Calculation for the additional amortisation of intangible assets:

Additional amortisation in relation to the intangible assets stated in Note 3, with remaining useful life of approximately nine years Additional amortisation in relation to the intangible assets stated in Note 4, with remaining useful life of approximately nine years Calculation for the deferred tax liabilities released:	HK$ 59,181 13,569,518
	13,628,699

Release of deferred tax liabilities in relation to the additional amortisation for intangible assets stated in Note 3 at a tax rate of 25% Release of deferred tax liabilities in relation to the additional amortisation for intangible assets stated in Note 4 at a tax rate of 25%	HK$ 14,795 3,392,380
	3,407,175

1. The adjustment represents the payment of cash consideration for the partial settlement of the Acquisition amounted to HK$90,000,000, deemed had been paid on 1 April 2007.

2. For the purpose of the unaudited pro forma financial information of the Enlarged Group, amounts expressed in Renminbi have been translated to Hong Kong dollars at the rate of RMB1: HK$1.143, which is the prevailing exchange rate as at 30 September 2008.

— 188 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

==> picture [95 x 64] intentionally omitted <==

==> picture [140 x 61] intentionally omitted <==

6 March 2009

The Board of Directors United Power Investment Limited Room 2810-2811 28/F Shun Tak Centre West Tower 200 Connaught Road Central Hong Kong

Dear Sirs,

We report on the unaudited pro forma financial information (the “Unaudited Pro Forma Financial Information”) of United Power Investment Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”), which has been prepared by the directors of the Company for illustrative purposes only, to provide information about how the acquisition of the entire interest in Hua Rong Sheng Shi Holding Limited (together with its subsidiary, jointly controlled entities and the Group referred to as the “Enlarged Group”) might have affected the historical financial information presented therein. The basis of preparation of the Unaudited Pro Forma Financial Information is set out in the section headed “Introduction” in Section 1 of Appendix IV to the circular of the Company dated 6 March 2009.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS OF THE COMPANY AND REPORTING ACCOUNTANTS

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

It is our responsibility to form an opinion, as required by paragraph 29(7) of Chapter 4 of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

— 189 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

BASIS OF OPINION

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the HKICPA. Our work consisted primarily of comparing the unadjusted financial information with the 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 29(1) of Chapter 4 of the Listing Rules.

The Unaudited Pro Forma Financial Information is for illustrative purposes only, based on the judgments 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 30 September 2008 or at any future date; or

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

— 190 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

OPINION

In our opinion:

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

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

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

Yours faithfully,

BDO McCabe Lo Limited

Certified Public Accountants

Alfred Lee

Practising Certificate Number P04960

Hong Kong, 6 March 2009

— 191 —

APPENDIX V

PROPERTY VALUATION OF THE GROUP

The following is the text of a letter, summary of values and valuation certificate received from Savills Valuation and Professional Services Limited, prepared for the purpose of incorporation in this circular, in connection with its valuation as at 31 January 2009 for the property interests of the Group.

==> picture [72 x 72] intentionally omitted <==

==> picture [93 x 83] intentionally omitted <==

The Directors United Power Investment Limited Units 2810-11, 28th Floor Shun Tak Centre West Tower 168-200 Connaught Road Central Sheung Wan Hong Kong

6 March 2009

Dear Sirs,

In accordance with your instructions for us to value the property interests held by United Power Investment Limited (the “Company”) and its subsidiaries (hereinafter together referred to as the “Group”) situated in Hong Kong and the People’s Republic of China (the “PRC”), we confirm that we have carried out inspections, made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion of values of such property interests as at 31 January 2009 (“date of valuation”) for the purpose of incorporation in a circular of the Company dated 6 March 2009 relating to a very substantial acquisition and connected transaction.

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

— 192 —

PROPERTY VALUATION OF THE GROUP

APPENDIX V

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

In the course of our valuation of the properties in the PRC, we have assumed that transferable land use rights in respect of the properties for specific terms at nominal land use fees have been granted and that any land grant premium payable has been fully paid. We have also assumed that the grantee have enforceable titles to the properties and have free and uninterrupted rights to use, occupy or assign the properties for the whole of the unexpired terms as granted.

Property interests in Group I are held by the Group for occupation in Hong Kong. We have valued such property interests by reference to comparable market transactions assuming sale with the benefit of vacant possession.

Property interests in Groups II and III are held by the Group for investment in Hong Kong and the PRC. We have valued such property interests by reference to comparable market transactions and where appropriate, on the basis of the capitalization of the net income shown on schedules provided to us with due provision for the reversionary income potential.

Property 8 in Group IV is currently held and operated by 肇興星湖俱樂部 (“Star-Lake Club Zhaoqing”) 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. In response to the Company’s specific instruction on the valuation with certain special assumptions made on its alternative use and redevelopment potential, we opine that such change of use and redevelopment are practicable according to the Company’s PRC legal advisers. In addition, the special assumptions adopted were the same as those used in the valuation of the property set out in the circular of the Company dated 7 November 2007, which was the basis for determination of the consideration under an agreement dated 15 October 2007 relating to acquisition of interests in Wellrich Investments Limited, which holds 94% interest in the property, and for calculation of any compensation payable by Well Harvest Enterprises Limited (the vendor) to the Company under such agreement. According to the Company, no development plan on the redevelopment of the property has been submitted 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 is assumed that the planning and development approvals for the mentioned alternative uses and density would be obtained without undue time delay. We have valued this property by making reference to the comparable market transactions as available on the market.

— 193 —

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Property interests in Group V and VI are rented by the Group in Hong Kong and the PRC respectively. We have assigned no commercial values to such properties due mainly to the prohibitions against assignment or sub-letting otherwise due to the lack of substantial profit rents.

We have been provided with extracts of documents relating to the property interests in the PRC and have caused searches to be made at the Land Registry for the properties in Hong Kong. However, we have not inspected the original documents to verify the ownership or to ascertain the existence of any amendments which may not appear on the copies provided to us. We do not accept a liability for any interpretation which we have placed on such information which is more properly the sphere of your legal adviser. In respect of the property interests in Groups III and IV, we have relied on the advice given by the Group and its legal adviser, Hills & Co., regarding the titles to the properties.

We have relied to a very considerable extent on information given by the Group and accepted advice on such matters as planning approvals or statutory notices, easements, tenure, particulars of occupancy, site and floor areas and all other relevant matters. Dimensions, measurements and areas included in the valuation certificate are based on information contained in the documents provided by the Group to us and are therefore only approximations. No on-site measurements have been taken. We have had no reason to doubt the truth and accuracy of the information provided to us by the Group, which is material to our valuation. We have also sought confirmation from the Group that no material facts have been omitted from the information supplied.

We have inspected the exterior and where possible, the interior of the properties. During the course of our inspections, we did not note any serious defects. However, no structural survey has been made, we are therefore unable to report whether the properties are free from rot, infestation or any other defects. No tests were carried out on any of the services.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on any property interests 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 their values.

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

— 194 —

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Unless otherwise stated, all monetary amounts stated in our valuation are in Hong Kong dollars. The exchange rate adopted in our valuation is HK$1 = RMB0.8873, which was the approximate exchange rate prevailing as at the date of valuation and there has been no significant fluctuation in such exchange rate between that date and the date of this letter.

We enclose herewith our summary of values and valuation certificate.

Yours faithfully, For and on behalf of

Savills Valuation and Professional Services Limited

Charles C K Chan MSc FRICS FHKIS MCIArb RPS(GP) Managing Director

Note: Charles C K Chan is a qualified valuer and has about 24 years’ experience in the valuation of properties in Hong Kong and has about 19 years’ experience in the valuation of properties in the PRC.

— 195 —

PROPERTY VALUATION OF THE GROUP

APPENDIX V

SUMMARY OF VALUES

No. Property

Market value in existing state as at 31 January 2009

GROUP I — PRO PE RT Y I N T E R E ST S H E L D BY T H E G ROU P F O R OCCUPATION IN HONG KONG

1. Portion A2 of Portion A and Portion B on 2nd Floor, Star House, 3 Salisbury Road, Tsim Sha Tsui, Kowloon

2. Factory Flat A on 21st Floor, On Dak Industrial Building, 2-6 Wah Sing Street, Kwai Chung, New Territories

HK$104,000,000

HK$3,000,000

Sub-total: HK$107,000,000

GROUP II — PROPE RT Y I N T E R E ST S H E L D BY T H E G ROU P F O R INVESTMENT IN HONG KONG

1. 3rd and 4th Floors including Flat Roof, BCC Building, 25-31 Carnarvon Road, Tsim Sha Tsui, Kowloon

HK$40,000,000

1. Shops 9 and 10 on Ground Floor, Whole of 1st Floor and 2nd Floor, Tung Ning Building, 125-126 Connaught Road Central, 2, 2A-2D Hillier Street, 249-251 Des Voeux Road Central, Sheung Wan, Hong Kong

HK$73,000,000

— 196 —

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Market value in existing state as at No. Property 31 January 2009 5. Unit No. 3001 on 3rd Floor of the Podium, HK$4,000,000 Shun Tak Centre, 168-200 Connaught Road Central, Sheung Wan, Hong Kong Sub-total: HK$117,000,000

No. Property

GROUP III —	GROUP III —	PROPE RT Y I N T E R E ST S H E L D BY T H E G ROU P F O R	PROPE RT Y I N T E R E ST S H E L D BY T H E G ROU P F O R	PROPE RT Y I N T E R E ST S H E L D BY T H E G ROU P F O R
		INVESTMENT IN THE PRC
6.	Levels 1 to 3 of Yidong Building,			HK$58,604,756
	Nos. 301 and 303 Huanshizhong Road,			(RMB52,000,000)
	Yuexiu District,
	Guangzhou,
	Guangdong	Province,
	PRC
7.	The land portion of a car repairing workshop			HK$4,057,252
	located to the north of Yingbin Dadao,			(RMB3,600,000)
	Zhaoqing,
	Guangdong	Province,
	PRC
			Sub-total:	HK$62,662,008
GROUP IV —		PROPERTY INTERESTS HELD	BY THE GROUP FOR FUTURE
		DEVELOPMENT IN THE PRC
8.	Dynasty Hotel,			HK$281,753,635
	No. 9 Duan	Zhou Wu Road,		(RMB250,000,000)
	Zhaoqing,
	Guangdong	Province,
	PRC
			Sub-total:	HK$281,753,635

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PROPERTY VALUATION OF THE GROUP

APPENDIX V

No. Property

Market value in existing state as at 31 January 2009

GROUP V — PROPERTY INTERESTS RENTED BY THE GROUP IN HONG KONG

9.	139 Waterloo Road,	No commercial value
	Kowloon Tong,
	Kowloon
10.	Shop B on Ground Floor,	No commercial value
	Carson Mansion,
	61-63 Kimberley Road,
	Tsim Sha Tsui,
	Kowloon
11.	Unit No. 2810 on 28th Floor,	No commercial value
	Shun Tak Centre West Tower,
	168-200 Connaught Road Central,
	Sheung Wan,
	Hong Kong
12.	Unit No. 2811 on 28th Floor,	No commercial value
	Shun Tak Centre West Tower,
	168-200 Connaught Road Central,
	Sheung Wan,
	Hong Kong
13.	135 Waterloo Road,	No commercial value
	Kowloon Tong,
	Kowloon
14.	Basement, Ground Floor and 1st Floor,	No commercial value
	52 Kimberley Road,
	Tsim Sha Tsui,
	Kowloon

— 198 —

APPENDIX V

PROPERTY VALUATION OF THE GROUP

No. Property

Market value in existing state as at 31 January 2009

1. 2nd Floor, 52 Kimberley Road, Tsim Sha Tsui, Kowloon 16. 1st Floor, 50 Kimberley Road, Tsim Sha Tsui, Kowloon 17. Portion A1 of Workshop Space A on 2nd Floor, Fung Wah Factorial Building, 646, 648 and 648A Castle Peak Road, Lai Chi Kok, Kowloon 18. Workshop Space B on 2nd Floor, Fung Wah Factorial Building, 646, 648 and 648A Castle Peak Road, Lai Chi Kok, Kowloon 19. Shop Nos. 5, 6 and 7 on Ground Floor, Marina Magic Shopping Mall, Hong Kong Gold Coast, Tuen Mun, New Territories 20. 7th Floor, 15A Matheson Street, 2 Yiu Wa Street, Causeway Bay, Hong Kong

No commercial value

No commercial value

No commercial value No commercial value No commercial value No commercial value

— 199 —

PROPERTY VALUATION OF THE GROUP

APPENDIX V

No. Property

Market value in existing state as at 31 January 2009

1. Flat A on 22nd Floor, Block II No commercial value and Car Parking Space No. 54 on Lower Ground Floor and the Adjoining Spaces (if any), Clovelly Court, 12 May Road, Mid-Levels, Hong Kong 22. Rooms 05 and 06 on 23rd Floor, No commercial value Hing Yip Commercial Centre, 272-284 Des Voeux Road Central, Sheung Wan, Hong Kong 23. Portion of 1st Floor, No commercial value St. John’s Building, 33 Garden Road, Central, Hong Kong 24. Portion of Basement Floor, No commercial value Tung Ning Building, 125-126 Connaught Road Central, 2, 2A-2D Hillier Street, 249-251 Des Voeux Road Central, Sheung Wan, Hong Kong

Sub-total: Nil

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PROPERTY VALUATION OF THE GROUP

APPENDIX V

No. Property

Market value in existing state as at 31 January 2009

GROUP VI — PROPERTY INTERESTS RENTED BY THE GROUP IN THE PRC

1. Unit 2105, Xia Xuan, Qilin Garden, Nanshan District, Shenzhen PRC

No commercial value

1. Level 1 East, Levels 24-32 of East Tower No commercial value and Level 3 of the podium, Nanshan Software Park, Nanshan District, Shenzhen, Guangdong Province, PRC

Sub-total: Nil Total: HK$568,415,643

— 201 —

PROPERTY VALUATION OF THE GROUP

APPENDIX V

VALUATION CERTIFICATE

GROUP I — PRO PE RT Y I N T E R E ST S H E L D BY T H E G ROU P F O R OCCUPATION IN HONG KONG

No. Property Description and tenure

Market value in Particulars of existing state as at occupancy 31 January 2009

1. Portion A2 of Star House is an office/commercial Portion A and development comprising a 14-storey Portion B on office tower erected over a 6-storey 2nd Floor, (including a basement) shopping Star House, arcade completed in 1969. 3 Salisbury Road, Tsim Sha Tsui, The property comprises two Kowloon commercial units on the 2nd floor of the development with a total

392/19,328th shares saleable area of approximately of and in Section A 1,179.86 sq m (12,700 sq ft). of Kowloon Marine Lot No. 10 The property is held under a Government Lease for a term of 999 years commencing on 25 July 1864.

The property is HK$104,000,000 occupied by the Group as a Chinese restaurant.

The Government rent payable for the subject section of the lot is HK$736 per annum.

Notes:

1. The registered owner of the property is Golden Island Bird’s Nest Chiu Chau Restaurant (Causeway Bay) Limited, in which the Company has a 100% attributable interest.

2. The property is subject to a legal charge in favour of Chiyu Banking Corporation Limited.

3. The property lies within an area zoned Commercial under the draft Tsim Sha Tsui Outline Zoning Plan No. S/K1/23 dated 25 April 2008.

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PROPERTY VALUATION OF THE GROUP

APPENDIX V

• No. Property Description and tenure 2. Factory Flat A on On Dak Industrial Building is 21st Floor, a 26-storey industrial building On Dak Industrial completed in 1979. Building, 2-6 Wah Sing Street, The property comprises one unit on Kwai Chung, the 21st floor of the building with New Territories a gross floor area of approximately 382.94 sq m (4,122 sq ft).

• 42/2,542nd shares of and in Kwai Chung The property is held under New Town Lot Nos. 291 Grant Nos. 5365 and 5397 both for and 318 a term of 99 years commencing on 1 July 1898 less the last three days and extended to 30 June 2047 without premium but at a annual Government rent at 3% of the rateable value for the time being of the lot.

Market value in Particulars of existing state as at occupancy 31 January 2009 The property HK$3,000,000 is occupied by the Group as a warehouse.

Notes:

1. The registered owner of the property is Golden Island Bird’s Nest Chiu Chau Restaurant (Causeway Bay) Limited, in which the Company has a 100% attributable interest.

2. The property lies within an area zoned Industrial under the approved Kwai Chung Outline Zoning Plan No. S/KC/21 dated 29 June 2004.

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PROPERTY VALUATION OF THE GROUP

APPENDIX V

GROUP II — PROPE RT Y I N T E R E ST S H E L D BY T H E G ROU P F O R INVESTMENT IN HONG KONG

				Market value in
			Particulars of	existing state as at
No.	Property	Description and tenure	occupancy	31 January 2009
3.	3rd and 4th Floors	BCC Building is a 17-storey	3rd Floor is subject	HK$40,000,000
	including Flat Roof,	(including a basement) commercial	to a tenancy
	BCC Building,	building completed in 1976.	agreement from
	25-31 Carnarvon		1 December 2008
	Road,	The property comprises the whole	and expiring on 30
	Tsim Sha Tsui,	of the 3rd and 4th floors of the	November 2010 at
	Kowloon	building.	a monthly rental
			of HK$190,000
	28/320th shares	The total saleable area of the	exclusive of
	of and in the	property is approximately 917.32	Government rent,
	Remaining Portions	sq m (9,874 sq ft) plus a flat roof	rates, management
	of Kowloon Inland	area of approximately 151.06 sq m	fees and all other
	Lot No. 6538, the	(1,626 sq ft).	outgoings with an
	Remaining Portions		option to renew for
	of Kowloon Inland	The property is held under	a further term of
	Lot No. 9593, the	Conditions of Grant Nos. 10089,	1 year at market
	Remaining Portions	10109 and 10043 as well as	rent not exceeding
	of Kowloon Inland	Conditions of Renewal No. 5377	HK$209,000
	Lot No. 9926 and	each for a term of 150 years	exclusive of
	the Remaining	commencing on 25 December 1898.	Government rent,
	Portions of Kowloon		rates, management
	Inland Lot No. 9966	The Government rent for the	fees and all other
		subject section of the lots is HK$80	outgoings.
		per annum.
			4th Floor including
			the flat roof is
			occupied by the
			Group as a wedding
			services shop.

Notes:

1. The registered owner of the property is Golden Island Bird’s Nest Chiu Chau Restaurant (Causeway Bay) Limited, in which the Company has a 100% attributable interest.

2. The property lies within an area zoned Commercial (6) under the draft Tsim Sha Tsui Outline Zoning Plan No. S/K1/23 dated 25 April 2008.

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PROPERTY VALUATION OF THE GROUP

APPENDIX V

				Market value in
			Particulars of	existing state as at
No.	Property	Description and tenure	occupancy	31 January 2009
4.	Shops 9 and 10 on	Tung Ning Building is a 22-storey	The property is	HK$73,000,000
	Ground Floor,	(including a basement) commercial	subject to a tenancy
	Whole of 1st Floor	building completed in 1976.	agreement from
	and 2nd Floor,		1 August 2007
	Tung Ning Building,	The property comprises two shops	and expiring on
	125-126 Connaught	on the ground floor and the whole	31 July 2009 at
	Road Central,	of the 1st and 2nd floors of the	a monthly rental
	2, 2A-2D Hillier	development. The total saleable	of HK$350,000
	Street,	area of the ground floor and the	exclusive of
	249-251 Des Voeux	total saleable area of 1st and 2nd	Government rent,
	Road Central,	floors are approximately 55.93	rates, management
	Sheung Wan,	sq m (602 sq ft) and 1,031.22 sq m	fees and all other
	Hong Kong	(11,100 sq ft) respectively.	outgoings with an
			option to renew for
	882/5,200th shares	The property is held under three	a further term of 2
	of and in Marine Lot	Government Leases each for a	years at market rent.
	Nos. 303, 304 and	term of 999 years commencing on
	351	4 March 1901 for Marine Lot Nos.
		303 and 304 and 13 September 1901
		for Marine Lot No. 351.

The total Government rent payable for the subject lots is HK$126 per annum

Notes:

1. The registered owner of the property is Golden Island Bird’s Nest Chiu Chau Restaurant (Causeway Bay) Limited, in which the Company has a 100% attributable interest.

2. The property is subject to a Mortgage in favour of Hang Seng Bank Limited.

3. The property lies within an area zoned Commercial/Residential under the approved Sai Ying Pun & Sheung Wan Outline Zoning Plan No. S/H3/22 dated 15 July 2008.

— 205 —

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Market value in Particulars of existing state as at No. Property Description and tenure occupancy 31 January 2009 5. Unit No. 3001 on Shun Tak Centre is an office/ The property is HK$4,000,000 3rd Floor of the commercial development subject to a tenancy Podium, comprising two 30-storey office agreement from Shun Tak Centre, buildings erected over a 12-level 1 October 2008 168-200 commercial podium (including and expiring on 30 Connaught Road a shopping arcade on 2nd to September 2010 at Central, 4th Floors and carpark on 5tha monthly rental Sheung Wan, 6th Floors). The development is of HK$25,000 Hong Kong completed in 1986. exclusive of Government rent, 15/33,888th shares The property comprises a shop unit rates, management of and in Inland Lot on the 3rd floor of the commercial fees and all other No. 8517 podium with a saleable area of outgoings with an approximately 21.37 sq m (230 option to renew for sq ft). a further term of 1 year at market rent. The property is held under Conditions of Grant No. UB11612 for a term of 75 years commencing on 31 December 1980 renewable for 75 years. The Government rent for the subject lot is HK$1,000 per annum.

Notes:

1. The registered owner of the property is World Honour Investments Limited, in which the Company has a 100% attributable interest.

2. The property lies within an area zoned Commercial under the approved Central District Outline Zoning Plan No. S/H4/12 dated 18 February 2003.

— 206 —

PROPERTY VALUATION OF THE GROUP

APPENDIX V

GROUP III — PROPE RT Y I N T E R E ST S H E L D BY T H E G ROU P F O R INVESTMENT IN THE PRC

No. Property

Description and tenure

Particulars of occupancy

Market value in existing state as at 31 January 2009

1. Levels 1 to 3 of Yidong Building, Nos. 301 and 303 Huanshizhong Road, Yuexiu District, Guangzhou, Guangdong Province, PRC

Yidong Building is a 14-storey plus two basement levels commercial building. The development was completed in about 1993.

The property comprises Levels 1 to 3 of the development with a total gross floor area of approximately 4,042.77 sq m (43,516 sq ft), the breakdown of which is as follows:

Level 1 2 3 Total	Approximate gross floor area (sq m) (sq ft) 904.70 9,738 1,620.75 17,446 1,517.32 16,332 4,042.77 43,516	Approximate gross floor area (sq m) (sq ft) 904.70 9,738 1,620.75 17,446 1,517.32 16,332 4,042.77 43,516
		43,516

The land use rights of the property have been granted for a term expiring on 31 January 2040 for composite uses.

The property HK$58,604,756 is subject to a (RMB52,000,000) tenancy for a term of 10 years from 9 October 2008 at the following monthly rentals:

1st-4th : rent free month 5th-36th : RMB343,635 month 37th-72nd : RMB371,126 month 73rd-96th : RMB400,816 month 97th-120th : RMB420,857 month

The tenant has an option to renew the tenancy for a further term of five years at a monthly rental of RMB462,943.

Notes:

1. Pursuant to 3 Real Estate Title Certificates Sui Fang Di Zhen Zi Nos. 180210 to 180212, the land use rights and the building ownership of the property having a total gross floor area of approximately 4,042.77 sq m are vested in Shenzhen Land Company Limited (深圳房屋置業有限公 司) (“Shenzhen Land”), in which the Company has a 100% attributable interest, for a term expiring on 31 January 2040.

2. We have been provided with a legal opinion on the title to the property issued by the Group’s PRC legal adviser, which contains, inter-alia , the following information:

3. (i) Shenzhen Land has obtained the Real Estate Title Certificates and is entitled to transfer, lease or mortgage the property;

4. (ii) the property is not subject to any mortgages; and

5. (iii) the tenancy agreement is lawful, valid and legally binding.

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PROPERTY VALUATION OF THE GROUP

APPENDIX V

• No. Property Description and tenure 7. The land portion The property comprises a of a car repairing parcel of land with a site area of workshop located to approximately 10,446.28 sq m the north of Yingbin (112,444 sq ft). Dadao, Zhaoqing, Currently, a single-storey (with Guangdong a mezzanine floor) workshop Province, and a 5-storey dormitory block PRC with a total gross floor area of approximately 5,125.00 sq m (55,166 sq ft) are erected on the site. The buildings were completed in 2000.

Market value in Particulars of existing state as at occupancy 31 January 2009

The property is HK$4,057,252 subject to a tenancy (RMB3,600,000) for a term of 5 years from 1 May 2005 at a monthly rental of RMB25,314.

The land use rights of the property have been granted for a term expiring on 16 March 2050 for car repairing workshop use.

Notes:

1. Pursuant to the State-owned Land Use Rights Certificate Zhao Guo Yong (2002) No. 00543 issued by the People’s Government of Zhaoqing City, the land use rights of the property having a site area of approximately 10,446.28 sq m have been granted to Star-Lake Club Zhaoqing for a term expiring on 16 March 2050 for car repairing workshop uses.

2. As advised by the Group, the buildings were built by the tenant. Thus, we have excluded such buildings from the property.

3. We have been provided with a legal opinion on the title to the property issued by the Group’s PRC legal adviser, which contains, inter-alia, the following information:

4. (i) Star-Lake Club Zhaoqing has obtained the State-owned Land Use Rights Certificate and is entitled to transfer, lease or mortgage the property;

5. (ii) the property is not subject to any mortgages; and

6. (iii) the tenancy agreement has not been registered but this will not affect the validity of the tenancy agreement.

— 208 —

APPENDIX V PROPERTY VALUATION OF THE GROUP

GROUP IV — PROPERTY INTEREST HELD BY THE GROUP FOR FUTURE DEVELOPMENT IN THE PRC

				Market value on
				alternative use value
				based on special
				assumptions made
				on its redevelopment
			Particulars of	potential as at
No.	Property	Description and tenure	occupancy	31 January 2009
8.	Dynasty Hotel,	The property comprises a site with	The property is	HK$281,753,635
	No. 9 Duan Zhou	an area of approximately 26,197.50	currently used and	(RMB250,000,000)
	Wu Road,	sq m, (281,990 sq ft) on which	operated as hotel.	(see Note 1)
	Zhaoqing,	various buildings completed in
	Guangdong	1994 and 2001 are erected. The	A portion of the
	Province,	property is occupied and operated	property with a total
	PRC	as a hotel under the business name	gross floor area
		of Dynasty Hotel.	of approximately
			8,101.03 sq m
		The hotel accommodates 312 guest	and exterior
		rooms, various shops, Chinese	advertising panels
		restaurant, Western restaurant,	with a total area
		Japanese restaurant, banquet	of approximately
		room, health club, staff quarters,	158.30 sq m are
		facilities houses, together with	leased to various
		amenities including tennis court	tenants for various
		and swimming pool.	terms. The current
			total monthly
		The property has a total gross floor	rental is about
		area of approximately 53,843.59	RMB611,000
		sq m (579,572 sq ft).	exclusive of
			management fee and
		The land use rights of the property	service charges.
		have been granted for a term
		expiring on 14 September 2064 for
		commercial and services uses.

— 209 —

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Notes:

1. The property is currently held and operated by Star-Lake Club Zhaoqing 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, no development plan on the redevelopment of the property has been 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.

2. Pursuant to State-owned Land Use Rights Certificate Zhao Fu Guo Yong (1996) Zi No. 00231 issued by the People’s Government of Zhaoqing on 1 July 1996, the land use rights of the property with a site area of approximately 26,197.50 sq m have been granted to Star-Lake Club Zhaoqing for a term of 70 years commencing on 15 September 1994 for commercial and services uses.

3. Pursuant to the 8 Real Estate Title Certificates all issued by the People’s Government of Zhaoqing, the building ownership of the property is vested in Star-Lake Club Zhaoqing. Details of such certificates are as follows:

No. Building Certificate No. (1) Facility House Yue Fang Di Zheng Zi No. 0151665 (2) Staff Quarters Yue Fang Di Zheng Zi No. 0151666 (3) Boiler House Yue Fang Di Zheng Zi No. 0151667 (4) Comprehensive Building Yue Fang Di Zheng Zi No. 0151668 (5) Comprehensive Building Yue Fang Di Zheng Zi No. 0151669 (6) Comprehensive Building Yue Fang Di Zheng Zi No. 0151670 (7) Comprehensive Building Yue Fang Di Zheng Zi No. 0151672 (8) Meeting Center Yue Fang Di Zheng Zi No. C1099705 Total

Gross floor area (sq m) 980.1418 3,965.8841 148.1544 11,808.9660 16,390.3100 7,438.4678 9,899.2796 3,212.3908

53,843.5945

1. We have been provided with a legal opinion on the title to the property issued by the Group’s PRC legal adviser, which contains, inter-alia, the following information:

2. (i) 偉富投資有限公司(Weifu Investment Co., Ltd.) (Party A) and 肇慶市粵西園林建築工程公司 (Zhaoqing Shi Yuexi Yuanlin Construction Works Company) (Party B) established a joint venture (the “JV”), Star-Lake Club Zhaoqing, on 8 December 1993 for an operating period up to 7 December 2043. The People’s Government of Guangdong Province has approved the change of investor from Party A to Wellrich Investments Limited (Party C) on 8 October 1994. Party B and Party C have interests in 6% and 94% of the registered capital of the JV respectively.

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PROPERTY VALUATION OF THE GROUP

APPENDIX V

• (ii) as per the supplemental agreement of the joint venture contract entered into between Party B and Party C, Party C has to pay Party B RMB1,100,000 per year from 1995 (with an increment of 5% every 2 years) and is entitled to all the after-tax profit from the JV.

• (iii) the JV has obtained the land use rights certificate of the property and has the rights to occupy the piece of land and is entitled to transfer, lease and mortgage the land use rights in accordance with the relevant regulations;

• (iv) the JV may apply for the change of land uses of the property to composite uses or other uses in accordance with the local planning regulations. After obtaining approvals from the relevant authorities and entering into new Contract for Grant of Land Use Rights, the JV can redevelop the property by the land’s alternative uses;

• (v) the JV has obtained the building ownership certificates for the buildings erected on the property and has the rights to occupy the buildings and is entitled to transfer, lease and mortgage the buildings in accordance with the relevant regulations;

• (vi) the JV can commence the construction works of the new buildings (for alternative uses) once all the necessary permits/approvals have been obtained. After completion, the JV can apply for Building Ownership Certificates for such buildings and has the rights to occupy, use, lease, transfer or mortgage the buildings when obtained the Building Ownership Certificates; and

• (vii) the tenancy agreements that 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.

— 211 —

PROPERTY VALUATION OF THE GROUP

APPENDIX V

GROUP V — PROPERTY INTERESTS RENTED BY THE GROUP IN HONG KONG

				Market value in
			Particulars of	existing state as at
No.	Property	Description and tenancy details	occupancy	31 January 2009
9.	139 Waterloo Road,	The property comprises a	The property is	No commercial value
	Kowloon Tong,	rectangular lot with a registered	occupied by the
	Kowloon	site area of approximately	Group as part of a
		941.75 sq m (10,137 sq ft).	wedding services
			shop.
		Erected on the lot are a number
		of buildings and some temporary
		structures completed in about
		1980s. The total gross area of the
		buildings and temporary structures
		is approximately 265.79 sq m (2,861
		sq ft).
		The property is leased to the Group
		for a term of 3 years from 15 July
		2006 and expiring on 14 July 2009
		at the following monthly rentals
		inclusive of Government rent but
		exclusive of rates, service charge
		and other outgoings:
		1st year: HK$220,000
		2nd year: HK$230,000
		3rd year: HK$240,000

Note:

The property is leased from Broadic Investment Limited, an independent third party, to Golden Island Catering Group Company Limited, in which the Company has a 100% attributable interest.

— 212 —

PROPERTY VALUATION OF THE GROUP

APPENDIX V

No. Property

Description and tenancy details

Market value in Particulars of existing state as at occupancy 31 January 2009

1. Shop B on Ground Carson Mansion is a 17-storey Floor, composite building including upper Carson Mansion, ground floor completed in 1978. 61-63 Kimberley Road, The property comprises a shop unit Tsim Sha Tsui, on the Ground Floor of the building Kowloon with a gross area of approximately 145.95 sq m (1,571 sq ft).

The property is No commercial value occupied by the Group as a wedding services shop.

The property is leased to the Group from 1 December 2008 and expiring on 31 May 2009 at a monthly rental of HK$118,000 inclusive of rates, Government rent and management fee.

Note:

The property is leased from Tang Shui Shing（鄧瑞成）, an independent third party, to Golden Island Catering Group Company Limited, in which the Company has a 100% attributable interest.

— 213 —

PROPERTY VALUATION OF THE GROUP

APPENDIX V

No. Property

Description and tenancy details

Market value in Particulars of existing state as at occupancy 31 January 2009

1. Unit No. 2810 on Shun Tak Centre is an office/ 28th Floor, commercial development Shun Tak Centre comprising two 30-storey office West Tower, buildings erected over a 12-level 168-200 Connaught commercial podium (including Road Central, a shopping arcade on 2nd to Sheung Wan, 4th Floors and carpark on 5thHong Kong 6th Floors). The development is completed in 1986.

The property is No commercial value occupied by the Group as an office.

The property comprises an office unit on the 28th Floor of West Tower of the development with a gross area of approximately 130.06 sq m (1,400 sq ft).

The property is leased to the Group from 1 July 2008 and expiring on 30 June 2010 at a monthly rental of HK$63,000 inclusive of Government rent but exclusive of rates, management fee and airconditioning charges.

Notes:

1. The property is sub-leased from Permanence Investment Company Limited ,an independent third party, to Golden Island Catering Group Company Limited, in which the Company has a 100% attributable interest.

2. This sub-tenancy is subject to a Tenancy Agreement dated 26 June 2008 made between Founder Enterprises Limited as Head Landlord of the one part and Permanence Investment Company Limited, the Landlord hereof as Tenant of the other part.

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PROPERTY VALUATION OF THE GROUP

APPENDIX V

No. Property

Description and tenancy details

Market value in Particulars of existing state as at occupancy 31 January 2009

1. Unit No. 2811 on 28th Floor, Shun Tak Centre West Tower, 168-200 Connaught Road Central, Sheung Wan, Hong Kong

Shun Tak Centre is an office/ commercial development comprising two 30-storey office buildings erected over a 12-level commercial podium (including a shopping arcade on 2nd to 4th Floors and carpark on 5th6th Floors). The development is completed in 1986.

The property is occupied by the Group as an office.

No commercial value

The property comprises an office unit on the 28th Floor of West Tower of the development with a gross area of approximately 237.37 sq m (2,555 sq ft).

The property is leased to the Group from 1 July 2008 and expiring on 30 June 2010 at a monthly rental of HK$114,975 inclusive of Government rent but exclusive of rates, management fee and airconditioning charges.

Note:

The property is leased from High Brand Limited, an associate of Ms. Ma Shuk Kam (“Ms. Ma”), the nonexecutive chairperson of the Company, to Golden Island Catering Group Company Limited, in which the Company has a 100% attributable interest.

— 215 —

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Market value in Particulars of existing state as at No. Property Description and tenancy details occupancy 31 January 2009 13. 135 Waterloo Road, The property comprises a The property is No commercial value Kowloon Tong, rectangular lot with a registered occupied by the Kowloon site area of approximately 848.66 Group as part of a sq m (9,135 sq ft). wedding services shop. Erected on the lot is a 2-storey building completed in 1986. The total gross area of the building is approximately 477.61 sq m (5,141 sq ft). The property is leased to the Group from 1 December 2008 and expiring on 30 November 2010 at a monthly rental of HK$180,000 exclusive of Government rent, rates, management fees and all other outgoings with an option to renew for one year at market rent.

Note:

The property is leased from West Global Investments Limited, an associate of Ms. Ma and Mr. Yeung Chi Hang (“Mr. Yeung”), the chief executive officer and an executive director of the Company, to Golden Island Catering Group Company Limited, in which the Company has a 100% attributable interest.

— 216 —

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Market value in Particulars of existing state as at No. Property Description and tenancy details occupancy 31 January 2009 14. Basement, Ground 50 & 52 Kimberley Road is a The property is No commercial value Floor and 1st Floor, 5-storey tenement block including a occupied by the 52 Kimberley Road, basement completed in 1952. Group as a wedding Tsim Sha Tsui, services shop. Kowloon The property comprises the Basement Floor, Ground Floor and 1st Floor of 52 Kimberley Road with a total gross area of approximately 224.27 sq m (2,414 sq ft). The property is leased to the Group from 1 January 2007 and expiring on 31 December 2008 and is then extended to 31 March 2009 at a monthly rental of HK$115,000 inclusive of Government rent but exclusive of rates, management fees and other charges.

Notes:

1. The property is leased from Lee Chan Land Investment Company Limited, an independent third party, to Golden Island Catering Group Company Limited, in which the Company has a 100% attributable interest, for the term from 1 January 2007 to 31 December 2008.

2. The lease is then extended through CB Richard Ellis Limited, as an agency on behalf of Lee Chan Land Investment Company Limited, an independent third party, to Golden Island Catering Group Company Limited, in which the Company has a 100% attributable interest, for the term from 1 January 2009 to 31 March 2009.

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APPENDIX V

No. Property Description and tenancy details

Market value in Particulars of existing state as at occupancy 31 January 2009

1. 2nd Floor, 50 & 52 Kimberley Road is a 52 Kimberley Road, 5-storey tenement block including a Tsim Sha Tsui, basement completed in 1952. Kowloon The property comprises an unit on the 2nd floor of 52 Kimberley Road with a gross area of approximately 72.84 sq m (784 sq ft).

The property is No commercial value occupied by the Group for wedding services and related material storage.

The property is leased to the Group from 10 January 2006 and expiring on 31 January 2009 and is then extended to 31 March 2009 at a monthly rental of HK$12,000 inclusive of Government rent but exclusive of rates and management fee.

Notes:

1. The property is leased from Lee Chan Land Investment Company Limited, an independent third party, to Golden Island Catering Group Company Limited, in which the Company has a 100% attributable interest, for the term from 10 January 2006 to 31 January 2009.

2. The lease is then extended through CB Richard Ellis Limited, as an agency on behalf of Lee Chan Land Investment Company Limited, an independent third party, to Golden Island Catering Group Company Limited, in which the Company has a 100% attributable interest, for the term from 1 February 2009 to 31 March 2009.

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PROPERTY VALUATION OF THE GROUP

APPENDIX V

No. Property Description and tenancy details 16. 1st Floor, 50 & 52 Kimberley Road is a 50 Kimberley Road, 5-storey tenement block including a Tsim Sha Tsui, basement completed in 1952. Kowloon The property comprises an unit on the 1st floor of 50 Kimberley Road with a gross area of approximately 72.84 sq m (784 sq ft).

Market value in Particulars of existing state as at occupancy 31 January 2009

The property is occupied by the Group for wedding services and related material storage.

No commercial value

The property is leased to the Group from 1 January 2009 and expiring on 31 March 2009 at a monthly rental of HK$14,800 inclusive of Government rent but exclusive of rates, management fees and other outgoings.

Note:

The property is leased from To Wing Ming, an independent third party, to Golden Island Catering Group Company Limited, in which the Company has a 100% attributable interest.

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PROPERTY VALUATION OF THE GROUP

APPENDIX V

No. Property

Description and tenancy details

Market value in Particulars of existing state as at occupancy 31 January 2009

1. Portion A1 of Fung Wah Factorial Building is Workshop Space A a 7-storey industrial building on 2nd Floor, completed in 1960. Fung Wah Factorial Building, The property comprises a portion 646, 648 and 648A of an industrial unit on 2nd Floor Castle Peak Road, of the building with a gross area of Lai Chi Kok, approximately 178.00 sq m (1,916 Kowloon sq ft).

The property is occupied by the Group for industrial use.

No commercial value

The property is leased to the Group from 1 September 2008 and expiring on 31 August 2009 at a monthly rental of $12,000 inclusive of Government rent and rates but exclusive of other utility charges

Note:

The property is leased from Tam Ting Kai and Wu Lan Wah, Ida, independent third parties, to Golden Island Catering Group Company Limited, in which the Company has a 100% attributable interest.

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PROPERTY VALUATION OF THE GROUP

APPENDIX V

Market value in Particulars of existing state as at No. Property Description and tenancy details occupancy 31 January 2009 18. Workshop Space B Fung Wah Factorial Building is The property is No commercial value on 2nd Floor, a 7-storey industrial building occupied by the Fung Wah Factorial completed in 1960. Group for industrial Building, use. 646, 648 and 648A The property comprises an Castle Peak Road, industrial unit on 2nd Floor of Lai Chi Kok, the building with a gross area of Kowloon approximately 178.00 sq m (1,916 sq ft). The property is leased to the Group from 1 January 2008 and expiring on 31 December 2009 at a monthly rental of HK$19,000 exclusive of Government rent, rates, management fees and other utility charges.

Note:

The property is leased from Source Expand Development Limited, an associate of Ms. Ma and Mr. Yeung, to Golden Island Catering Group Company Limited, in which the Company has a 100% attributable interest.

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PROPERTY VALUATION OF THE GROUP

APPENDIX V

No. Property

Description and tenancy details

Market value in Particulars of existing state as at occupancy 31 January 2009

1. Shop Nos. 5, 6 and 7 Hong Kong Gold Coast is a on Ground Floor, large-scale private residential Marina Magic development comprising a total Shopping Mall, of 30 residential blocks, a resort Hong Kong Gold hotel and a commercial centre. Coast, Marina Magic Shopping Mall Tuen Mun, is the commercial centre of the New Territories development completed in 1992.

The property is occupied by the Group as a wedding services shop.

No commercial value

The property comprises three shop units on Ground Floor of Marina Magic Shopping Mall with a total gross area of approximately 178.28 sq m (1,919 sq ft)

The property is leased to the Group for a term of 3 years from 10 November 2006 and expiring on 9 November 2009 at the following monthly rentals exclusive of Government rent, rates, management fees, air-conditioning charge and other outgoings:

1st & 2nd years: HK$90,500 3rd year: HK$95,000

Note:

The property is leased from Commercial Ace Limited, an independent third party, to Golden Island Catering Group Company Limited, in which the Company has a 100% attributable interest.

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PROPERTY VALUATION OF THE GROUP

APPENDIX V

No. Property Description and tenancy details 20. 7th Floor, 15A Matheson Street & 2 Yiu Wa 15A Matheson Street is a 10-storey commercial Street, building completed in 1974. 2 Yiu Wa Street, Causeway Bay, The property comprises the 7th Hong Kong floor of the building with a gross area of approximately 127.28 sq m (1,370 sq ft). The property is leased to the Group from 27 March 2008 and expiring on 26 March 2010 at a monthly rental of HK$33,000 inclusive of Government rent, rates, management fees and other charges with an option to renew for one year at new monthly rent equivalent to an increase of 15% to 30% of the existing rental.

Market value in Particulars of existing state as at occupancy 31 January 2009

The property is No commercial value occupied by the Group as an office.

Note:

The property is leased from Yee On Enterprises Limited, an independent third party, to Chance Music Limited, in which the Company has a 60% attributable interest.

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PROPERTY VALUATION OF THE GROUP

APPENDIX V

No. Property Description and tenancy details

Market value in Particulars of existing state as at occupancy 31 January 2009

1. Flat A on 22nd Clovelly Court comprises two Floor, Block II and 40-storey residential blocks erected Car Parking Space over a 5-storey carport podium No. 54 on Lower completed in 1994. Ground Floor and the Adjoining The property comprises a domestic Spaces unit on 22nd floor of Block II and (if any), a car parking space on the Lower Clovelly Court, Ground Floor of the development. 12 May Road, The gross floor area of the domestic Mid-Levels, unit is approximately 196.49 sq m Hong Kong (2,115 sq ft).

The property is occupied by the Group for residential use.

No commercial value

The property is leased to the Group from 1 August 2008 and expiring on 31 July 2010 at a monthly rental of HK$83,000 inclusive of Government rent, rates and management fees.

Note:

The property is leased from Income World Limited, an independent third party, to Chance Music Limited, in which the Company has a 60% attributable interest.

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PROPERTY VALUATION OF THE GROUP

APPENDIX V

No. Property Description and tenancy details

Market value in Particulars of existing state as at occupancy 31 January 2009

1. Rooms 05 & 06 on Hing Yip Commercial Centre is 23rd Floor, a 23-storey commercial building Hing Yip completed in 1984. Commercial Centre, 272-284 Des Voeux The property comprises two Road Central, office units on 23rd floor of the Sheung Wan, building with a total gross area of Hong Kong approximately 52.40 sq m (564 sq ft).

The property is occupied by the Group as an office.

No commercial value

The property is leased to the Group from 16 July 2007 and expiring on 15 July 2009 at a monthly rental of HK$11,000 inclusive of Government rent, rates and management fees.

Note:

The property is leased from Keen Base Investment Limited, an independent third party, to Witty Idea Finance Company Limited, in which the Company has a 100% attributable interest.

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PROPERTY VALUATION OF THE GROUP

APPENDIX V

No. Property Description and tenancy details

Market value in Particulars of existing state as at occupancy 31 January 2009

1. Portion of 1st Floor, St. John’s Building is a 23-storey St. John’s Building, office building with a number of 33 Garden Road, retail outlets on the ground floor Central, and the Peak Tram Terminal on the Hong Kong lower ground floor completed in 1983.

The property is No commercial value occupied by the Group for the purposes of music production and artiste management.

The property comprises a portion of 1st floor of the building with a gross area of approximately 105.26 sq m (1,133 sq ft).

The property is sub-leased to the Group from 21 November 2008 and expiring on 20 November 2011 at a monthly rental of HK$60,000 inclusive of rates, air-conditioning charges, management fees and Government rent.

Note:

The property is sub-leased by Baron’s School of Music Limited, an associate of Mr. Ng Lok Shing Ronald, a director and substantial shareholder of Baron Productions and Artiste Management Limited, to Baron Productions and Artiste Management Limited, in which the Company has a 51% attributable interest.

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PROPERTY VALUATION OF THE GROUP

APPENDIX V

No. Property

Description and tenancy details

Market value in Particulars of existing state as at occupancy 31 January 2009

1. Portion of Basement Tung Ning Building is a 22-storey The property is No commercial value Floor, (including a basement) commercial further sub-leased Tung Ning Building, building completed in 1976. to Action System 125-126 Connaught Limited from 1 July Road Central, The property comprises a lift 2008 and expiring 2, 2A-2D Hillier machine room on the basement on 30 June 2010 at Street, floor of the building. The gross a monthly rental of 249-251 Des Voeux area is approximately 23.23 sq m HK$6,178 exclusive Road Central, (250 sq ft). of Government Sheung Wan, rent, rates, Hong Kong The property is leased to the Group management fee from 1 July 2008 and expiring on and air-conditioning 30 June 2010 at a monthly rental charges. of HK$9,900 exclusive of rates, air-conditioning charges and management fees but inclusive of Government rent.

Notes:

1. The property is leased from Tung Wah Group of Hospitals, an independent third party, to Golden Island Bird’s Nest Chiu Chau Restaurant (Causeway Bay) Limited, in which the Company has a 100% attributable interest.

2. The property is further sub-leased to Action System Limited, an independent third party.

— 227 —

PROPERTY VALUATION OF THE GROUP

APPENDIX V

GROUP VI — PROPERTY INTERESTS RENTED BY THE GROUP IN THE PRC

				Market value in
			Particulars of	existing state as at
No.	Property	Description and tenancy details	occupancy	31 January 2009
25.	Unit 2105,	The property comprises a	The property is	No commercial value
	Xia Xuan,	residential unit on Level 21 of	occupied by the
	Qilin Garden,	a 24-storey residential building	Group as staff
	Nanshan District,	completed in about 2004.	quarter.
	Shenzhen,
	PRC	The property is leased to the Group
		for a term of one year commencing
		on 1 January 2008 and expiring on
		31 December 2008 at a monthly
		rental of RMB4,600 exclusive of
		management fees.

Note:

The property is leased from 潘洪 (Pan Hong) to 石曉東 (Shi Xiao Dong), a representative of the Company.

— 228 —

PROPERTY VALUATION OF THE GROUP

APPENDIX V

No. Property Description and tenancy details 26. Level 1 East, Nanshan Software Park is a Levels 24-32 of East composite development comprising Tower and two office towers erected over Level 3 of the a 3-storey commercial podium podium, completed in about 2000. Nanshan Software Park, The property comprises portion Nanshan District, of Level 1, the whole of Levels Shenzhen, 24 to 32 of East Tower, and Level Guangdong 3 of the commercial podium of Province, the development. The total gross PRC floor area of the property is approximately 12,723.06 sq m. (136,951 sq ft). The property is leased to the Group for a term of 10 years from 22 October 2007 and expiring on 21 January 2017 at the following monthly rentals:

Market value in Particulars of existing state as at occupancy 31 January 2009

The property is occupied by the Group as offices.

No commercial value

1st-3rd year	:	rent free
4th-5th year	:	half of the then
		market rent
6th year	:	market rent
7th to 10 year	:	rent increment of
		5% every year

Note:

The property is leased from 南山區物業管理辦公室 (Nanshan District Property Management Office) to Golden Capital Multimedia (Shenzhen) Co., Ltd, in which the Company has a 100% attributable interest.

— 229 —

GENERAL INFORMATION

APPENDIX VI

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

The authorized and issued share capital of the Company as at the Latest Practicable Date and at Completion were/will be as follows:

Authorized: 10,000,000,000 Shares 1,431,818,182 Convertible Preference Shares Issued and to be issued: 3,398,231,392 Shares in issue 4,568,181,818 Shares to be issued 1,431,818,182 Convertible Preference Shares to be issued	As at the Latest Practicable Date HK$ 500,000,000.00 — 169,911,569.60 — — 169,911,569.60	As at Completion HK$ 928,409,090.90 71,590,909.10
		1,000,000,000.00 169,911,569.60 228,409,090.90
		71,590,909.10
		469,911,569.60

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

— 230 —

GENERAL INFORMATION

APPENDIX VI

DISCLOSURE OF INTERESTS

Interests of Directors

As at the Latest Practicable Date, the interests of the Directors in the share capital of the Company 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, 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 (except the changes arising as a result of the Agreement, which has not been completed) were as follows:

			Percentage of
Name	Number of Shares	Nature of interest	shareholding
Ma Shuk Kam	1,445,550,686	(Note 1)	42.54
Yeung Chi Hang	2,144,660,478	(Note 2)	63.11
Liu Yu Mo	1,048,000	Personal	0.03
Au Edmond Wah	1,000,000	Personal_(Note 3)_	0.03

Notes:

1. 1,423,550,686 Shares are owned by World Possession, which is beneficially owned by Ms. Ma, Mr. Yeung and Ms. Yeung in equal shares, and 22,000,000 Shares are owned by Ms. Ma personally.

2. 1,423,550,686 Shares are owned by World Possession, which is beneficially owned by Ms. Ma, Mr. Yeung and Ms. Yeung in equal shares, and 721,109,792 Shares are owned by Mr. Yeung personally.

3. This relates to the options granted to Mr. Au Edmond Wah to subscribe for 1,000,000 Shares at the exercise price of HK$0.2254 per Share 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 are 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 (except the changes arising as a result of the Agreement, which has not been completed).

— 231 —

GENERAL INFORMATION

APPENDIX VI

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 (except the interest of Mr. Chu arising as a result of the Agreement, which has not been completed):

Percentage of Name Number of Shares Nature of interest Shareholding World Possession 1,423,550,686 Beneficial owner 41.89

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 (except the interest of Mr. Chu arising as a result of the Agreement, which has not been completed).

Ms. Ma and Mr. Yeung are directors of World Possession.

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) each of Long Sincere International Limited and Rise Jumbo Limited was interested in 9.57% of the issued share capital of Welly Champ International Limited (“Welly Champ”);

• (d) Tak Full Group Limited was interested in 28.19% of the issued share capital of Well Allied Investments Limited (“Well Allied”);

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GENERAL INFORMATION

APPENDIX VI

• (e) Impeccable Group Limited was interested in 49% of the issued share capital of Le Caveau Limited;

• (f) Smooth Luck Investments Limited was interested in 40% of the issued share capital of Genius Star International Limited;

• (g) Mr. Ng Lok Shing Ronald was interested in 49% of the issued share capital of Baron Productions and Artiste Management Company Limited and Solid Sound Productions Limited;

• (h) Media Business Services Limited was interested in 49% of the issued share capital of Wise Reach Investments Limited;

• (i) Mr. Chan Siu Kei and Ms. Wong Oi Kwan Jenny Natalie were interested in 30% and 10% of the issued share capital of Chance Music Limited respectively; and

• (j) 北京金英馬影視文化有限責任公司 (Beijing Jiangyingma Movie and Television Culture Company Limited) was interested in 40% of the issued share capital of 北京金英馬國 際文化交流有限公司 (Beijing Jiangyingma International Culture Exchange Company Limited).

Interests of experts in the Group

The experts named in the paragraph headed “Qualifications of experts” below do not have 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.

— 233 —

GENERAL INFORMATION

APPENDIX VI

Interests in assets, contracts or arrangements

Since 31 March 2008, the date of the latest published audited financial statements of the Group, none of the Directors or the experts named in the paragraph headed “Qualifications of experts” below had 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 following tenancy agreements entered into between associates of Ms. Ma and/or Mr. Yeung as landlords and Golden Island Catering Group Company Limited as tenant:

• (a) Tenancy agreement dated 1 December 2008 relating to No. 135, Waterloo Road, Kowloon, Hong Kong

Landlord	Term	Monthly rent
West Global Investments	1 December 2008 to 30	HK$180,000 (exclusive of
Limited (an associate of	November 2010 (with	rates, management fees
Ms. Ma and Mr. Yeung)	an option to renew for a	and government rent which
	further term of 1 year at	are payable to independent
	the then prevailing market	third parties)
	rent)

• (b) Tenancy agreement dated 1 January 2008 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 2008 to 31	HK$19,000 (exclusive of
Development Limited (an	December 2009	rates, management fees
associate of Ms. Ma and		and government rent which
Mr. Yeung)		are payable to independent
		third parties)

• (c) Tenancy agreement dated 26 June 2008 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 Limited (an	1 July 2008 to 30 June 2010	HK$114,975 (exclusive of
associate of Ms. Ma)		rates, management fees
		and government rent which
		are payable to independent
		third parties)

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GENERAL INFORMATION

APPENDIX VI

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.

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 Group within one year without payment of compensation (other than statutory compensations)).

Competing business

As at the Latest Practicable Date, none of the Directors has any interest in any business which competes or is likely to complete, either directly or indirectly, with the Group’s business.

LITIGATION

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

CONSENTS

The experts named in the paragraph headed “Qualifications of experts” below 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.

QUALIFICATION OF EXPERTS

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

Name	Qualification
Piper Jaffray Asia Limited	a licensed corporation for types 1 (dealing
	in securities) and 6 (advising on corporate
	financial) regulated activities under the SFO
Savills Valuation and Professional	professional property valuers
Services Limited
BDO McCabe Lo Limited	certified public accountants

— 235 —

GENERAL INFORMATION

APPENDIX VI

MATERIAL CONTRACTS

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

• (a) an agreement dated 13 April 2007 between (i) Wise Mark Group Limited (“Wise Mark”), a wholly-owned subsidiary of the Company; and (ii) Mr. Yeung and Ms. Ma, whereby Wise Mark agreed to purchase from Mr. Yeung and Ms. Ma the entire issued share capital of Shenzhen Land Company Limited (“Shenzhen Land”) for a total consideration of HK$31,565,901;

• (b) an agreement dated 13 April 2007 between (i) GI Management; and (ii) Well Harvest Enterprises Limited (“Well Harvest”), a company wholly owned by Ms. Ma, whereby GI Management agreed to acquire from Well Harvest 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) a joint operation co-operation agreement dated 18 June 2007 between (i) China Music Video Broadcast (Shenzhen) Company Limited, a subsidiary of the Company; (ii) Song Labs, Ltd.; and (iii) CCDDT relating to charge of licence fees 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 (Market Development Centre of the Ministry of Culture) as appointed by 文化部 (Ministry of Culture) in the PRC for a term of 10 years for the business of copyright licensing of karaoke music products to karaoke operators in the PRC;

• (d) a loan agreement dated 4 July 2007 between (i) Well Allied; and (ii) PLD International Limited (“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;

• (e) a shareholders’ agreement dated 15 July 2007 between (i) CCDDT; and (ii) Shenzhen Hua Rong relating to the formation of Tian He with registered capital of RMB100,000,000 to be held by CCDDT and Shenzhen Hua Rong as to 30% and 70% respectively;

• (f) an agreement signed in 2007 between (i) CCDDT; and (ii) Shenzhen Hua Rong whereby Shenzhen Hua Rong agreed to transfer 20% of the registered capital of Tian He to CCDDT for a cash consideration of RMB1;

— 236 —

GENERAL INFORMATION

APPENDIX VI

• (g) 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;

• (h) an agreement dated 15 October 2007 between (i) the Company; and (ii) Well Harvest, whereby the Company agreed to acquire from Well Harvest the entire issued share capital of, and the benefits of all shareholders’ loans to, Wellrich Investment Limited, for an aggregate consideration of HK$355.6 million. HK$120 million of which was paid in cash and the balance of HK$235.6 million to be satisfied by the issued and allotment of 699,109,792 Shares;

• (i) 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;

• (j) two agreements dated 23 March 2008 and 26 June 2008 respectively both between (i) 曾觀年 and 曾觀明 (as vendors); and (ii) Hua Rong (as purchaser) relating to the sale and purchase of 100% of the registered capital and all the benefits of the shareholders’ loans to, Shenzhen Hua Rong for a cash consideration of RMB50,000,000;

• (k) an agreement dated 9 May 2008 between (i) Well Allied; and (ii) PLD for the advance of a loan of HK$17.2 million to PLD at an interest rate of 5.25% per annum and repayable within 1 year from the date of the loan agreement;

• (l) an agreement dated 30 September 2008 between (i) Winkler Profits Limited, a whollyowned subsidiary of the Company (as vendor); and (ii) Mr. Yuen Tak Yau, Daniel (as purchaser), relating to the sale and purchase of 51% of the issued share capital of, and the benefit of loans of HK$5,941,241.10 advanced to, Witty Ventures Limited, and 51% of the registered capital of HMS Watches Company Limited, for an aggregate cash consideration of HK$9,870,982.14;

• (m) an agreement made on 21 November 2008 between (i) Welly Champ (a subsidiary of the Company); and (ii) the Company relating to the subscription of 42.88 shares of US$1 each of Welly Champ by the Company at HK$25.4 million as evidenced by an application for shares dated 21 November 2008;

• (n) an agreement made on 21 November 2008 between (i) Well Allied; and (ii) Welly Champ relating to the subscription of 21.873 shares of US$1 each of Well Allied by Welly Champ at HK$25.4 million as evidenced by an application for shares dated 21 November 2008;

— 237 —

GENERAL INFORMATION

APPENDIX VI

• (o) an agreement made on 21 November 2008 between (i) Well Allied; and (ii) Tak Full Group Limited relating to the subscription of 3.96 shares of US$1 each of Well Allied by Tak Full Group Limited at HK$4.6 million as evidenced by an application for shares dated 21 November 2008;

• (p) an agreement made on 23 December 2008 between (i) Welly Champ; and (ii) the Company relating to the subscription of 13.47 shares of US$1 each of Welly Champ by the Company at HK$8 million as evidenced by an application for shares dated 23 December 2008; and

• (q) the Agreement.

GENERAL

• (a) The secretary of the Company is Ms. Cheung Mei Ha, Jennifer. She is a solicitor practising in Hong Kong.

• (b) The registered office of the Company is at Clarendon House, Church Street, Hamilton HM11, Bermuda. The Hong Kong share registrar of the Company is at Tricor Secretaries Limited of 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 20 March 2009:

• (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 2008 and the interim report for the six months ended 30 September 2008;

• (c) the circulars of the Company issued pursuant to Chapter 14 and/or Chapter 14A of the Listing Rules since 31 March 2008, being the date of the latest published audited accounts;

• (d) the letter of recommendation from the Independent Board Committee containing its recommendation to the Independent Shareholders, the text of which is set out in the section headed “Letter from the Independent Board Committee” in this circular;

• (e) the letter from the IFA;

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GENERAL INFORMATION

APPENDIX VI

• (f) the accountants’ report on the HR Group, the text of which is set out in Appendix II;

• (g) the letter, summary of valuation and valuation certificate relating to the property interests of the Group prepared by the Valuer, the texts of which are set out in Appendix V;

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

• (i) the written consents referred to in the paragraph headed “Consents” in this appendix.

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NOTICE OF SPECIAL GENERAL MEETING

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UNITED POWER INVESTMENT LIMITED

(Incorporated in Bermuda with limited liability) (Stock Code: 674)

NOTICE IS HEREBY GIVEN that a special general meeting of the above mentioned company (the “Company”) will be held at Golden Island Bird’s Nest Chiu Chau Restaurant at 2nd Floor, East Wing, Star House, 3 Salisbury Road, Tsimshatsui, Kowloon, Hong Kong on 23 March 2009 at 3.30 p.m. for the purpose of considering and, if thought fit, passing the following resolution as an ordinary resolution:

ORDINARY RESOLUTION

“ THAT:

• (A) the agreement dated 13 February 2009 between (1) Mr. Yeung Chi Hang and Mr. Chu Ying Man (the “Vendors”); and (2) the Company, pursuant to which the Company conditionally agreed to purchase and the Vendors conditionally agreed to sell the entire issued share capital of, and the benefit of shareholders’ loans advanced to, Hua Rong Sheng Shi Holding Limited at a total consideration of HK$750,000,000, of which HK$90,000,000 is to be paid in cash, HK$157,500,000 of which is to be satisfied by the issue and allotment of 1,431,818,182 Convertible Preference Shares (as defined in section (B) and having the rights and benefits and subject to the restrictions set out in section (C) of this resolution below) and the balance of HK$502,500,000 by the issue and allotment of a total of 4,568,181,818 Ordinary Shares (as defined in section (B)) to the Vendors or their respective nominees (a copy of which has been tabled at the meeting and signed by the Chairman of the meeting for the purpose of identification), be and is hereby approved, ratified and confirmed and the directors of the Company be and are hereby authorized to implement the transactions contemplated thereunder by the said agreement (with any amendments to the terms of such agreement as may be approved by the directors of the Company) including but not limited to the allotment and issue of the said Convertible Preference Shares and new Ordinary Shares to the Vendors and/or their respective nominee(s) pursuant thereto and the allotment and issue of shares of the Company upon exercise of the conversion rights attached to the Convertible Preference Shares;

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NOTICE OF SPECIAL GENERAL MEETING

• (B) all the shares of HK$0.05 each in the existing authorized share capital of HK$500,000,000 of the Company be and are hereby re-classified as ordinary shares of HK$0.05 each (“Ordinary Shares”) and the authorized share capital of the Company be and is hereby increased from HK$500,000,000 divided into 10,000,000,000 Ordinary Shares to HK$1,000,000,000 by the creation of 1,431,818,182 convertible preference shares of HK$0.05 each (“Convertible Preference Shares”) and 8,568,181,818 new Ordinary Shares; and

• (C) the Convertible Preference Shares shall carry equal rights and rank pari passu with one another and each Convertible Preference Share shall have the rights and benefits and subject to the restriction as follows:

1. Dividend, bonus issue and distribution

  - Holders of Convertible Preference Shares shall not be entitled to any dividend payment or any distribution (including bonus issue) of the Company.

2. Transferability

The Convertible Preference Shares are freely transferable. Any transfer shall be in compliance with the bye-laws of the Company, applicable laws and regulatory requirements, including the rules of any stock exchange on which the securities of the Company are listed.

3. Conversion

• 3.1 Subject to paragraph 3.2 below, holders of Convertible Preference Shares shall have the right to convert each Convertible Preference Share into one Ordinary Share, subject to adjustment in the manner provided in paragraph 4 below (the “Conversion Ratio”) on a day other than a Saturday during which banks are regularly open for business in Hong Kong (“Business Day”) at any time after the issue of the Convertible Preference Shares (the “Conversation Right”).

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NOTICE OF SPECIAL GENERAL MEETING

• 3.2 If the issue of Ordinary Shares following the exercise of Conversion Right by a holder of Convertible Preference Shares would result in the Company not meeting the requirement under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) applicable to the Company that not less than a specified percentage of the Ordinary Shares shall be held by the public (“Public Float Requirement”) immediately after the conversion, then the number of Ordinary Shares to be issued pursuant to such conversion shall be limited to the maximum number of Ordinary Shares issuable by the Company which would not result in a breach of the Public Float Requirement and the balance of the Conversion Right attached to the Convertible Preference Shares which the holder of the Convertible Preference Shares sought to convert shall be suspended until such time when the Company is able to issue new Ordinary Shares in satisfaction of the exercise of the said balance of conversion rights in compliance with the Public Float Requirement.

• 3.3 The Conversion Right may, subject as provided herein, be exercised by a holder of Convertible Preference Shares delivering, at its own expense, during normal business hours on a Business Day to the principal place of business of the Company in Hong Kong a notice (a “Conversion Notice”) duly completed and signed stating the intention of such holder to convert and the address in Hong Kong for the delivery of the certificate(s) for the Ordinary Shares arising from such conversion together with the original certificate(s) for the Convertible Preference Shares. The Company shall be responsible for payment of all taxes and stamp, issue and registration fees and duties (if any), and Stock Exchange levies and charges (if any) arising on any such conversion. A Conversion Notice once delivered shall be irrevocable.

• 3.4 The Ordinary Shares arising from the conversion shall be allotted and issued by the Company, credited as fully paid, to the holder of the relevant Convertible Preference Shares or its nominees as it may in writing direct on the day on which the Conversion Notice is given to the Company, and the Company shall within 21 Business Days thereafter issue certificate(s) for the relevant Ordinary Shares to which the holder of the relevant Convertible Preference Shares or such person as it may direct shall become entitled on exercise of its Conversion Right in board lots with one certificate for any odd lot of Ordinary Shares arising from the conversion (unless otherwise directed by the relevant holder) and shall deliver such certificate(s) to the relevant holder at the address in Hong Kong set out in the Conversion Notice (or, in the absence of such address in the Conversion Notice, the registered address of such holder) and, if applicable, a new certificate for any unconverted Convertible Preference Shares.

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NOTICE OF SPECIAL GENERAL MEETING

• 3.5 Conversion of the Convertible Preference Shares shall be effected in such manner as the directors of the Company shall subject to the bye-laws of the Company and to any other applicable laws and regulations, from time to time determine provided that no conversion shall take place if to do so would result in the Ordinary Shares arising from the conversion being issued at a price below their nominal value as at the date of the conversion.

• 3.6 Ordinary Shares arising on conversion shall carry the right to receive all dividends and other distributions declared, made or paid upon the Ordinary Shares by reference to any record date on or after the date of surrender of the certificate(s) for the Convertible Preference Shares and the delivery of the Conversion Notice and shall rank pari passu in all other respects and form one class with the Ordinary Shares then in issue and fully paid.

• 3.7 Until such time as all Convertible Preference Shares have been converted to Ordinary Shares, the Company shall:

  • (a) at all times keep available for issue and free of all liens, charges, options, mortgages, pledges, claims, equities, encumbrances and other third-party rights of any nature, and not subject to any preemptive rights out of its authorised but unissued share capital such number of authorised but unissued Ordinary Shares as would enable all Convertible Preference Shares to be converted to Ordinary Shares and any other rights of conversion into, subscription for or exchange into Ordinary Shares to be satisfied in full; and

  • (b) use its best endeavours to maintain the listing of Ordinary Shares on the Main Board of the Stock Exchange.

4. Adjustment to conversion

• 4.1 If while any of the Convertible Preference Shares remain outstanding, the Company shall sub-divide or consolidate the Ordinary Shares, the Conversion Ratio applicable to any subsequent conversion shall in the case of a sub-division be increased or in the case of a consolidation be reduced proportionately.

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NOTICE OF SPECIAL GENERAL MEETING

• 4.2 Save as provided in paragraph 4.1, no adjustment will be made to the Conversion Ratio as a result of any other changes to the share capital of the Company, including without limitation, to the generality of the foregoing, any bonus issue, scrip dividend or other distribution and any rights issue or other issue of shares, options to subscribe for or any other securities convertible into Ordinary Shares.

• 4.3 Any adjustment to the Conversion Ratio shall be made to the nearest whole number such that in the event of any fraction of a whole number of Ordinary Shares in the case of a conversion, such fraction shall be rounded down to the nearest whole number of Ordinary Shares.

• 4.4 Whenever the Conversion Ratio is adjusted as herein provided, the Company shall as soon as possible but not later than 28 days of the event giving rise to such adjustment give written notice to the holders of the Convertible Preference Shares that the Conversion Ratio has been adjusted (setting out brief particulars of the event giving rise to the adjustment, the Conversion Ratio in effect prior to such adjustment, the adjusted Conversion Ratio and the effective date thereof) and such notice shall be conclusive and binding.

5. Non-redemption

Without prejudice to the power of the Company to purchase its shares in accordance with the bye-laws of the Company, the Convertible Preference Shares are non-redeemable once issued.

6. Voting rights

Without prejudice to the sub-paragraph below, holders of Convertible Preference Shares shall be entitled to receive notices of and attend any general meetings of holders of Ordinary Shares but shall not be entitled to vote at such general meetings of the Company unless:

• 6.1 the resolution in question, which if passed would (subject to any consents required for such purpose being obtained) vary or abrogate the rights or privileges of the holders of Convertible Preference Shares; or

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NOTICE OF SPECIAL GENERAL MEETING

• 6.2 the resolution in question relates to the dissolution or winding-up of the Company,

in which event the Convertible Preference Shares shall confer on the holders thereof the right to participate and vote (either in person or by proxy) at that general meeting on an “as-converted-to-Ordinary Shares” basis at the time of the relevant general meeting.

7. Rights in liquidation

On a return of capital in liquidation or otherwise the assets of the Company available for distribution among the members of the Company shall be applied as follows:

• 7.1 firstly, towards payment to the holders of the Convertible Preference Shares of an amount equal to the aggregate of the amounts paid up or credited as paid up on all the outstanding Convertible Preference Shares (pro rata to the aggregate of the nominal amounts of the Convertible Preference Shares held by each such holder); and

• 7.2 secondly, the balance of such assets shall belong to and be distributed among the holders of the Ordinary Shares and other classes of shares of the Company currently or to be created in future in the capital of the Company. Holders of Convertible Preference Shares shall not have the right to participate in such remaining assets.”

By Order of the Board Jennifer Cheung Mei Ha Company Secretary

Hong Kong, 6 March 2009

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NOTICE OF SPECIAL GENERAL MEETING

Principal Office: 2810-11, 28th Floor Shun Tak Centre West Tower 200 Connaught Road Central Hong Kong

Notes:

1. A member entitled to attend and vote at the meeting convened by the above notice is entitled to appoint proxies to attend and vote in his stead. A proxy need not be a member of the Company.

2. In order to be valid, the form of proxy must be deposited at the Company’s principal office together with a power of attorney or other attorney, if any, under which it is signed or a notarially certified copy of that power of attorney, not less than 48 hours before the time for holding the meeting or adjourned meeting.

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