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Jade Dynasty Group Limited 食F薰司

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					THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION


If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult a licensed     R14
securities dealer, bank manager, solicitor, professional accountant or other professional advisor.
If you have sold or transferred all of your securities in the Company, you should at once hand this circular together with
the enclosed form of proxy to the purchaser or transferee or to the bank, or a licensed securities dealer or other agent
through whom the sale or transfer was effected for transmission to the purchaser or transferee.
The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes no representation   R14
as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or
in reliance upon the whole or any part of the contents of this circular.
This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or   R14
subscribe for the securities.




                            Jade Dynasty Group Limited                                                                       A1B

                                                                                          *

                                       (incorporated in Bermuda with limited liability)
                                                   (Stock Code: 970)                                                         R13




         (1) PROPOSED VERY SUBSTANTIAL ACQUISITION
            IN RELATION TO ACQUISITION OF INTEREST
  IN THE ACQUIREES (THROUGH NOMINEE ARRANGEMENT) AND
            THE EXCLUSIVE ENTITLEMENTS TO ALL OF
THE ECONOMIC BENEFITS DERIVED FROM THE DEALERSHIPS; AND
           (2) CONTINUING CONNECTED TRANSACTIONS

                                       Financial adviser to the Company




A notice convening the SGM to be held on Tuesday, 8 April 2008 at 4:00p.m. at Dragon Room 3, The Hong Kong
Bankers Club, 43/F, Gloucester Tower, The Landmark, Central, Hong Kong is set out on pages 447 to 449 of this circular.
If you are not able to attend the SGM, you are requested to complete the enclosed form of proxy in accordance with the
instructions printed thereon and return the same to the branch share registrar of the Company, Tricor Secretaries Limited
at 26/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48
hours before the time appointed for the holding of the SGM or any adjournment thereof. Completion and return of the
form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof should
you so wish.
                                                                                                          20 March 2008
*   For identification purposes only
                                                                 CONTENTS


                                                                                                                                                      Page


Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      1


Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                6


Appendix I                   – Financial information on the Group . . . . . . . . . . . . . . . . . . . . . . . . . . .                                 34


Appendix II                  – Financial information on the Dealerships and the Acquirees . . . . .                                                    149


Appendix IIIA                – Unaudited pro forma financial information
                                of the Enlarged Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                        267

Appendix IIIB                – Unaudited pro forma financial information of
                                the Group (including the Target Companies) . . . . . . . . . . . . . . . . .                                           277


Appendix IV                  – Financial information on the Target Companies . . . . . . . . . . . . . . . .                                           288


Appendix V                   – Valuation report on the Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                          379


Appendix VI                  – Valuation report on the property interests of
                                 the Enlarged Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                    392


Appendix VII                 – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                   431


Notice of SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        447

Accompanying document – Form of proxy for use at the SGM




                                                                           –i–
                                      DEFINITIONS


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


“Acquirees”                     Company B and Company C


“Acquisition”                   the acquisition of the economic rights and interests in Company B
                                and Company C contemplated under the SP Agreement and as
                                described in the paragraph “Assets and rights to be acquired”
                                under the section headed “The SP Agreement” in the letter from
                                the Board


“Acquisition Consideration      the 400,000,000 Shares to be allotted and issued, credited as
  Shares”                       fully paid, to the Vendor (or party(ies) designated by the Vendor)
                                by the Company as part of the consideration payable by JD Car
                                for the Acquisition


“Assets”                        the exclusive entitlements to all of the economic benefits derived
                                from the Dealerships


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


“Auditors of Companies B                                                 (Beijing Xin Yu Cheng
  and C”                        Certified Public Accountants Limited Company*), a Certified
                                Public Accountants firm in the PRC and the auditors of Company
                                B and Company C


“Beijing YST”                                                        (Beijing Ying Shang Tong
                                Trading Development Limited*), a company established in the
                                PRC with limited liability which is controlled by Mr. Qi


“Beijing YST Agency             the agency fee agreement between Company C and Beijing YST
  Agreement”                    dated 22 February 2008


“BJBG”                                                    (Beijing Bin Li Group Limited*), a
                                company established in the PRC with limited liability which is
                                controlled by Mr. Qi


“BJBG Agency Agreement”         the agency fee agreement between Company B and BJBG dated
                                22 February 2008


“Board”                         the board of Directors


                                              –1–
                                   DEFINITIONS


“BL Dealership”              the dealership of Bentley cars in Beijing, the PRC


“Commission”                 the Securities and Futures Commission


“Companies Ordinance”        the Companies Ordinance, Chapter 32 of the Laws of Hong Kong


“Company”                    Jade Dynasty Group Limited, a company incorporated in Bermuda
                             with limited liability whose Shares are listed on the Stock
                             Exchange


“Company A”                                            (Beijing Mu Tai Trading Limited*), a
                             company established in the PRC with limited liability

“Company B”                                                         (Beijing Mei He Zhen Yong
                             Motors Trading Limited*), a company established in the PRC
                             with limited liability and is principally engaged in the operations
                             of the BL Dealership and the LB Dealership


“Company C”                                                   (Beijing De Te Motors Trading
                             Limited*), a company established in the PRC with limited liability
                             and is principally engaged in the operation of the RR Dealership


“Completion”                 completion of the Acquisition pursuant to the terms of the SP
                             Agreement


“connected person(s)”        has the meaning given to it under the Listing Rules

“Contractual Arrangements”   the contractual arrangements as referred to in the sub-section
                             headed “Contractual Arrangements” under the section headed “The
                             SP Agreement” in the letter from the Board


“Conversion Shares”          a maximum of 1,200,000,000 Shares that can be issued pursuant
                             to the full conversion of the rights attached to the Convertible
                             Note


“Convertible Note”           the convertible note in the principal amount of HK$264,000,000
                             to be issued to the Vendor as part of the consideration payable by
                             JD Car for the Acquisition


“Dealerships”                collectively, the BL Dealership, the RR Dealership and the LB
                             Dealership



                                           –2–
                                       DEFINITIONS


“Designated JD Companies”        wholly owned subsidiaries of the Group as designated by JD Car
                                 in respect of the implementation of the Contractual Arrangements
                                 as described in this circular


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


“Enlarged Group”                 the Group and the Acquirees


“Framework Agreement”            the agreement dated 9 January 2008 entered into by JD Car the
                                 Vendor and Mr. Qi


“Group”                          the Company and its subsidiaries


“HK$”                            Hong Kong dollars, the lawful currency of Hong Kong


“Hong Kong”                      the Hong Kong Special Administrative Region of the People’s
                                 Republic of China


“Independent Third Party(ies)”   a party(ies) who is/are independent of and is/are not connected
                                 with any of the Directors, chief executives or substantial
                                 Shareholders of the Company or any of its subsidiaries or any of
                                 their respective associates


“JD Car”                         JD Motor Cars Limited (formerly JD Copyright Limited), a
                                 company incorporated under the laws of the British Virgin Islands
                                 with limited liability, an indirect wholly owned subsidiary of the
                                 Company


“JD Nominee(s)”                  nominee(s) designated by JD Car as the recipient(s) of the entire
                                 interests in Company B and Company C to be transferred from
                                 Company A and Mr. Qi on or before Completion


“Latest Practicable Date”        18 March 2008, being the practicable date prior to the printing of
                                 this circular for the purpose of ascertaining and collation of
                                 relevant information contained herein


“LB Dealership”                  the dealership of Lamborghini cars in Beijing, the PRC


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



                                               –3–
                               DEFINITIONS


“m2”                     squared meter


“Mr. Qi”                 Mr. Qi Jian Hong            alias Mr. Kei Kin Hung


“Mrs. Qi”                Ms. Zhu Shuang          , wife of Mr. Qi


“PRC”                    The People’s Republic of China which excludes Hong Kong for
                         the purposes of this circular


“Previous Acquisition”   the acquisition of the Target Companies completed on 31 October
                         2007


“Previous Circular”      the Company’s circular dated 31 August 2007 issued in connection
                         with the Previous Acquisition of the Target Companies


“RMB”                    Renminbi, the lawful currency of the PRC


“RMO Agreement”          the office rental, management fees and office expenses agreement
                         between Company B, Company C and BJBG dated 22 February
                         2008


“RR Dealership”          the dealership of Rolls-Royce cars in Beijing, the PRC


“SGM”                    the special general meeting of the Company to be convened and
                         held on 8 April 2008 for the Shareholders to consider and, if
                         thought fit, approve, among other things, the transactions
                         contemplated under the SP Agreement


“Showroom Rental         the showroom rental agreement between Company B and BJBG
  Agreement”             dated 28 December 2007


“Share(s)”               share(s) of HK$0.002 each in the share capital of the Company


“Shareholder(s)”         shareholder(s) of the Company


“SP Agreement”           the formal sale and purchase agreement dated 22 February 2008
                         entered into between Mr. Qi, the Vendor and JD Car


“Sparkle Roll”           Sparkle Roll Holdings Limited, a company incorporated in British
                         Virgin Islands with limited liability and is wholly owned by Mr.
                         Qi


                                      –4–
                                             DEFINITIONS


“Stock Exchange”                       The Stock Exchange of Hong Kong Limited


“Takeovers Code”                       the Hong Kong Code on Takeovers and Mergers


“Target Companies”                     collectively                           (Suzhou Hongyang
                                       Cartoon Production Company Limited*),
                                                 (Nanjing Hongying Anmie-cartoon Entertainment
                                       Company Limited*) and                          (Shanghai
                                       Sanding Animation Creation Company Limited*), companies
                                       previously acquired by the Group under the Previous Acquisition
                                       detailed in the Previous Circular

“Valuer”                               GA Appraisal Limited, an independent firm of qualified
                                       professional valuers


“Vendor”                               Sparkle Roll


“Yuk Long Agreement”                   the rental agreement between Yuk Long Cultural Development
                                       (Shenzhen) Limited and BJBG dated 30 November 2007
                                       (superseding the agreement dated 30 November 2006)


“%”                                    per cent


      For illustrative purposes in this circular only and unless otherwise stated, exchange of HK$
into RMB has been carried out at an exchange rate of HK$1 = RMB0.93.

*   For identification purposes only




                                                      –5–
                                   LETTER FROM THE BOARD




                            Jade Dynasty Group Limited
                                                                                          *

                                       (incorporated in Bermuda with limited liability)
                                                   (Stock Code: 970)

Executive Directors:                                                       Registered Office:                  R2.1

Mr. Wan Siu Lun                                                            Clarendon House
Mr. Wong Chun Keung                                                        2 Church Street
Mr. Kwong Chi Tak                                                          Hamilton HM 11
                                                                           Bermuda
Non-executive Director:
Mr. Tong Kai Lap                                                           Principal place of business:
Mr. Zheng Hao Jiang                                                        11th Floor
Mr. Ko Chi Keung                                                           Safety Godown Industrial Building
                                                                           56 Ka Yip Street
Independent non-executive Directors:                                       Chai Wan
Mr. Choy Sze Chung, Jojo                                                   Hong Kong
Mr. Lam Kwok Cheong
Mr. Tsui Pui Hung

                                                                           20 March 2008

To the Shareholders

Dear Sir or Madam,

         (1) PROPOSED VERY SUBSTANTIAL ACQUISITION
            IN RELATION TO ACQUISITION OF INTEREST
  IN THE ACQUIREES (THROUGH NOMINEE ARRANGEMENT) AND
            THE EXCLUSIVE ENTITLEMENTS TO ALL OF
THE ECONOMIC BENEFITS DERIVED FROM THE DEALERSHIPS; AND
           (2) CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

       On 23 January 2008 and 22 February 2008, the Company announced that JD Car has entered                  R14
into the Framework Agreement and the SP Agreement respectively. The SP Agreement is the
formal sale and purchase agreement entered into between JD Car, the Vendor, and Mr. Qi (as
guarantor of the Vendor) in respect of the Acquisition, superseding all previous agreements or
arrangements (including those under the Framework Agreement) between JD Car, the Vendor and
Mr. Qi in connection with the Acquisition.
*   For identification purposes only
                                                           –6–
                             LETTER FROM THE BOARD


      Pursuant to the SP Agreement, JD Car is to acquire (i) the exclusive entitlements to all of
the economic benefits derived from BL Dealership and LB Dealership and rights to control,
manage and operate Company B; and (ii) the exclusive entitlements to all of the economic benefits
derived from RR Dealership and rights to control, manage and operate Company C. The aggregate
consideration payable by the Group under the SP Agreement shall be HK$402,000,000 and shall
be payable in the manner set out under the paragraph headed “Consideration” in the sub-section
headed “The SP Agreement” in this section headed “Letter from the Board” in this circular.


       The SGM will be held to consider, and if thought fit, passing the resolutions to approve the
SP Agreement, the transactions contemplated thereunder including the Acquisition and the issue of
the Convertible Note. Furthermore, the Company will also seek the grant of a specific mandate to
allot and issue Shares to satisfy the allotment and issue of the Acquisition Consideration Shares
and the Conversion Shares at the SGM.


        The purpose of this circular is to provide, amongst others, (i) details of the SP Agreement,
(ii) information on the transactions contemplated thereunder including the Acquisition, (iii) financial
information of the Acquirees, (iv) pro forma financial information of the Enlarged Group, (v) a
valuation report on the Assets, (vi) a valuation report on the property interests of the Enlarged
Group and (vii) the notice of the SGM.


THE SP AGREEMENT


Date


       22 February 2008                                                                                   R14


Parties

(a)    JD Car (an indirect wholly owned subsidiary of the Company) as the purchaser;


(b)    Sparkle Roll, a company wholly owned by Mr. Qi, as the Vendor; and


(c)    Mr. Qi as the guarantor of the Vendor’s obligations.




                                                –7–
                            LETTER FROM THE BOARD


      To the best of the Directors’ knowledge, information and belief, and having made all
reasonable enquiries, the Vendor and Mr. Qi are Independent Third Parties prior to Completion.        R14
Save for (i) the subscription of 61,500,000 Shares, representing approximately 14.69% of the then     R14
enlarged issued share capital of the Company by Mr. Qi as announced by the Company on 24
October 2003 which have been subsequently disposed of by Mr. Qi; (ii) the Yuk Long Agreement
and a rental agreement dated 30 November 2006 between the Yuk Long Culture Development
(Shenzhen) Company Limited and BJBG; (iii) a grant of copyright agreement dated 15 March
2007 between the Group and BJBG in respect of the production of a TV series based on one of the
Group’s comics; and (iv) a profit sharing agreement, subject to minimum guarantee payable by the
Group to the Vendor, dated 28 September 2007 between the Group and BJBG in respect of the
Group’s animation “          ” (Shen Bing Kids), the Group has no prior transaction or relationship
with Mr. Qi. Neither Mr. Qi nor the Vendor holds any Shares as at the Latest Practicable Date. To
the best of the Directors’ knowledge, information and belief, the Vendor is not acting or not
presumed to be acting in concert with any Shareholders.

Assets and rights to be acquired

(i)    the exclusive entitlements to all of the economic benefits derived from BL Dealership and      R14
       the LB Dealership and rights to control, manage and operate Company B (which is owned
       as to 97.5% by Company A and 2.5% by Mr. Qi as at the Latest Practicable Date), and

(ii)   the exclusive entitlements to all of the economic benefits derived from RR Dealership and
       rights to control, manage and operate Company C (which is owned as to 97.19% by Company
       A and 2.81% by Mr. Qi as at the Latest Practicable Date).

        Mr. Qi, through BJBG, Beijing YST and other companies majority owned and controlled by
him, has operated (i) the BL Dealership in Beijing, the PRC; (ii) the LB Dealership in Beijing, the
PRC; and (iii) the RR Dealership in Beijing, the PRC. At the direction of Mr. Qi in October 2007,
the BL Dealership and the LB Dealership were assigned from BJBG to Company B while the RR
Dealership was assigned from Beijing YST to Company C. Pursuant to an agreement dated 1
November 2007 (“Dealerships Assignment Agreement”) among various parties, including Mr. Qi,
the Vendor, Company A, Company B, Company C, BJBG and Beijing YST, the parties to the
Dealerships Assignment Agreement agreed that the Vendor is the ultimate owner and beneficiary
of all existing and future economic benefits derived from the Dealerships.

       BJBG entered into the dealership agreement in respect of the BL Dealership with Dah
Chong Hong Motors (Bentley) Limited (“DCH Motors”) on 14 November 2001. On 23 March
2007, BIBJ has entered into another agreement with                              (Shanghai Bin
Li Motors Trading Limited) (“SHBL”), which according to the directors of BJBG, is an affiliated
company of DCH Motors, in respect of the BL Dealership. The agreement can be terminated with
12 months advance written notice by either party and has no specified termination date. SHBL,
BJBG and Company B have already entered into the relevant agreements in respect of the transfer
of the BL Dealership to Company B on 1 February 2008. The effective period of the dealership
agreement in respect of the BL Dealership commenced on 1 February 2008 with an indefinite term

                                               –8–
                             LETTER FROM THE BOARD


until terminated by the parties thereto in accordance with the terms thereof. However, Company B
cannot operate the BL Dealership as at the Latest Practicable Date as completion of the transfer is
subject to regulatory procedures by Ministry of Commerce which are yet to be completed. According
to the PRC legal adviser, no legal impediment is expected to prevent completion of the regulatory
procedures by Ministry of Commence of the PRC.

       BJBG and VAD (Tianjin) Company Limited have entered into the dealership agreement in
respect of the LB Dealership on 21 February 2005 for an initial term of 1 year which shall be
automatically renewed for subsequent term of 1 year unless terminated by either party. Based on
information obtained from BJBG, the Directors consider that BJBG has, in substance, obtained the
right to the LB Dealership after the expiry of the agreement on 20 February 2007 since there is a
transitional arrangement for the continuation of the existing mode of operations until the
aforementioned transfer of the LB Dealership to Company B. The grantor of the LB Dealership
has given its in-principle written consent to the transfer of the LB Dealership to Company B on 11
January 2008 and the Directors expect that the transfer of the LB Dealership would take place in
or about June 2008.

       Beijing YST and BMW China Automotive Trading Limited (“BMW”) have entered into the
dealership agreement in respect of the RR Dealership on 20 January 2006 for a period up to 31
December 2006. On 5 December 2006, Beijing YST and BMW have entered into another agreement
to extend the right for a term of 2 years from 5 December 2006. Application has been made to the
grantor of the RR Dealership for their consent to the transfer of the RR Dealership to Company C.
Based on Mr. Qi’s expectation, the Directors believe that the consent in respect of the RR Dealership
can be obtained in the near future and in any event no later than 31 December 2008.

       The Directors are of the view that Mr. Qi has already established excellent working
relationships with the head PRC agents of the relevant car brands. Barring any unforeseen situations
and on the assumption that the Dealerships could continue their historic performance, the Directors
do not anticipate that the grantor will decline to consent the transfers. In the unlikely event that the
transfer of the RR Dealership does not take place before 31 December 2008, Company C will have
to carry on the operation of the RR Dealership by way of extending the Beijing YST Agency
Agreement mentioned in the section headed “Continuing connected transactions” in this circular.

       As at 31 December 2007, the audited net asset value of the Acquirees is approximately               R14

RMB20,001,000. By virtue of the Contractual Arrangements as set out in the sub-section headed
“The Contractual Arrangements” in this circular, the Directors expect that Company B and Company
C will be accounted for as wholly-owned subsidiaries of the Company after Completion.                      R14


       The entire equity interests of each of Company B and Company C are registered under
Company A (a limited liability company incorporated in PRC which is owned as to 80% by Mr. Qi
and as to 20% by Mrs. Qi) and Mr. Qi who are Independent Third Parties as at the Latest
Practicable Date. Under the SP Agreement, the Vendor has agreed to procure the transfer of the
entire interests in Company B and Company C to the JD Nominees.


                                                 –9–
                               LETTER FROM THE BOARD


       The JD Nominees will be           (Liu Jing Jing) and    (Zhao Rui). To the best knowledge
of the Directors, both persons are Independent Third Parties in accordance with the provisions of
Listing Rules. It is expected that each of Company B and Company C will be owned as to 50% by
Liu Jing Jing and 50% by Zhao Rui. Please refer to the sub-section headed “Contractual
Arrangements” in this circular for further details.


Shareholding structure of the Acquirees


      The shareholding structures of the Acquirees (i) as at the Latest Practicable Date; (ii)
immediately after Completion; and (iii) immediately after Completion and full conversion of the
Convertible Note are set out below:

      As at the Latest Practicable Date



                                Mrs. Qi                         Mr. Qi


                                     20.0%             80.0%                          100.0%




                                             Company A                      The Vendor




                                             Company B                      Company C



      Note:   The solid lines above represent shareholding while the dotted lines above represent ownership of the
              economic benefits. As at the Latest Practicable Date, Company B is owned as to 97.5% by Company A
              and 2.5% by Mr. Qi while Company C is owned as to 97.19% by Company A and 2.81% by Mr. Qi.




                                                    – 10 –
                         LETTER FROM THE BOARD


Immediately after Completion



                                                  Mr. Qi


                                                       100.0%


                                                The Vendor


                                                       26.9%


                                              The Company


                                                       100.0%


                                                  JD Car




                                               JD Nominees
                                               (as nominees
                                                of JD Car)




                                         100.0%            100.0%


                                Company B                       Company C



Note:   The solid lines above represent shareholding while the dotted lines above represent ownership of the
        economic benefits.




                                              – 11 –
                          LETTER FROM THE BOARD


Immediately after Completion and full conversion of the Convertible Note



                                                      Mr. Qi


                                                          100.0%


                                                   The Vendor


                                                          59.6%


                                                 The Company


                                                          100.0%


                                                     JD Car




                                                  JD Nominees
                                                  (as nominees
                                                   of JD Car)




                                            100.0%             100.0%


                                  Company B                        Company C



Note:   The solid lines above represent shareholding while the dotted lines above represent ownership of the
        economic benefits. The Vendor’s 59.6% shareholding in the Company immediately after Completion and
        full conversion of the Convertible Note is based on a maximum of 1,200,000,000 Conversion Shares that
        can be issued pursuant to the full exercise of the conversion rights attached to the Convertible Note. As
        stated in the section headed “The Convertible Note”, conversion of the Convertible Note is subject to the
        conditions that conversion can only be made to the extent that (i) there is no change in control (as defined
        in the Takeovers Code); and (ii) the Company would remain in compliance with the public float requirement
        set out under Rule 8.08(1) of the Listing Rules immediately after any such conversion. Accordingly, the
        Vendor’s shareholding in the Company following full conversion of the Convertible Note is for illustrative
        purpose only.




                                                 – 12 –
                            LETTER FROM THE BOARD


Consideration


       Under the SP Agreement, JD Car shall pay the Vendor a sum of HK$402,000,000 as                 R14
consideration. The consideration is to be satisfied as to (i) HK$50,000,000 in cash to the Vendor
which has been paid upon signing of the Framework Agreement; (ii) HK$88,000,000 through the
issue of 400,000,000 Acquisition Consideration Shares to the Vendor at a price of HK$0.22 per         A1B
Share at Completion; and (iii) HK$264,000,000 by way of the issue of the Convertible Note
which, upon full conversion, can be converted into 1,200,000,000 Conversion Shares at a price of
HK$0.22 per Share. The Acquisition Consideration Shares represent approximately 36.9% and
26.9% of the Company’s issued share capital on the Latest Practicable Date and the Company’s
issued share capital as enlarged by the issue of the Acquisition Consideration Shares respectively.
In addition, the Conversion Shares represent approximately 110.6% and 52.51% of the Company’s
issued share capital on the Latest Practicable Date and the Company’s issued share capital as
enlarged by the issue of the Conversion Shares. The issue price and, as the case may be, the
conversion price of HK$0.22 per Share for the Acquisition Consideration Shares and, as the case
may be, the Conversion Shares represents:


(i)     a discount of approximately 63.93% to the closing price of HK$0.61 per Share as quoted on
        the Stock Exchange on 9 January 2008 (i.e. the date of the Framework Agreement);


(ii)    a discount of approximately 63.33% to the average closing price of approximately HK$0.60
        per Share as quoted on the Stock Exchange on the 5 trading days up to and including 9
        January 2008 (i.e. the date of the Framework Agreement);


(iii)   a discount of approximately 51.11% to the closing price of HK$0.45 per Share as quoted on
        the Stock Exchange on 22 February 2008 (i.e. the date of the SP Agreement);

(iv)    a discount of approximately 52.17% to the average closing price of approximately HK$0.46
        per Share as quoted on the Stock Exchange on the 5 trading days up to and including 22
        February 2008 (i.e. the date of the SP Agreement);


(v)     a discount of approximately 50.56% to the closing price of HK$0.445 per Share as quoted
        on the Stock Exchange on the Latest Practicable Date;


(vi)    a discount of approximately 31.25% to the unaudited net asset value of the Company of
        approximately HK$0.32 per Share as at 30 September 2007; and


(vii) a premium of 10.00% to the unaudited net tangible asset value of the Company of
      approximately HK$0.20 per Share as at 30 September 2007.




                                              – 13 –
                            LETTER FROM THE BOARD


       The consideration of the Acquisition was determined after arm’s length negotiations between     R14
JD Car and the Vendor with reference to the then preliminary current market valuation of the car
dealership business estimated by the Valuer. In the valuation report on the Assets in Appendix V to
this circular, the fair market value of the Assets as at 4 January 2008 is in the range of HK$426
million to HK$480 million. The Valuer has adopted the market approach which considers prices
recently paid for similar assets, with adjustment made to the indicated market prices to reflect
condition and utility of the appraised assets relative to the market comparables. As the
aforementioned valuation is not based on discounted cash flows or projection of profits, earnings
or cash flow, the valuation does not constitute a profit forecast under Listing Rule 14.61.


       The Directors (including the independent non-executive Directors) consider that the issue
price of the Acquisition Consideration Shares and the conversion price of the Conversion Shares
are fair and reasonable to all Shareholders. During the process of considering the conversion price
of the Conversion Shares and the issue price of Acquisition Consideration Shares, the Directors
have taken into account that (i) the SP Agreement would help the Company to capture the new
business opportunity in the PRC; (ii) the Vendor agreed to provide profit guarantee to the Company
that is expected to help the Company to secure recurring net profit in the coming years; and (iii)
the Acquisition is expected to help the Company to enhance its price/earning ratio in the future.


The Convertible Note


      The principal terms of the Convertible Note to be issued to the Vendor as part of the
consideration payable under the Acquisition are set out below:


      Issuer                    :      the Company


      Principal amount          :      HK$264,000,000

      Interest rate             :      the Convertible Note shall bear interest of 4.0% p.a. payable
                                       semi-annually


      Maturity                  :      the day falling 2 years from the date of issue of the
                                       Convertible Note


      Conversion price          :      HK$0.22 per Share


      Number of Shares          :      1,200,000,000 Conversion Shares
        to be issued upon
        full conversion




                                              – 14 –
                  LETTER FROM THE BOARD


Conversion          :   the Vendor shall have the right to convert a minimum of
                        HK$500,000 and thereafter in integral multiples of
                        HK$100,000 of the outstanding principal of the Convertible
                        Note into Shares at the conversion price of HK$0.22 per
                        Share


Redemption          :   the Company is required to redeem the outstanding principal
                        amount of the Convertible Note upon its maturity and has
                        no right to redeem the Convertible Note early


Transferability     :   the Convertible Note may be transferred, in minimum units
                        of HK$1,000,000, by the Vendor to any third party

Voting rights       :   the Convertible Note does not confer any voting rights at
                        general meetings of the Company on the holder of the
                        Convertible Note


Listing             :   application has been made for the listing of, and permission
                        to deal in, the Conversion Shares to be issued pursuant to
                        the conversion of the Convertible Note but not the
                        Convertible Note itself


Restrictions on     :   (a)   conversion of the Convertible Note shall be subject
  conversion                  to the condition that any such conversion will not
                              result in a change in control (as defined in the         R14

                              Takeovers Code) of the Company during the entire
                              term of the Convertible Note; and

                        (b)   conversion of the Convertible Note shall be subject
                              to the condition that conversion can only be made to
                              the extent that the Company would remain in
                              compliance with the public float requirement set out
                              under Rule 8.08(1) of the Listing Rules immediately
                              after any such conversion during the entire term of
                              the Convertible Note




                              – 15 –
                            LETTER FROM THE BOARD


      In view of the potential dilution effect on existing Shareholders on the exercise of the
conversion rights attaching to the Convertible Note, for so long as the Convertible Note is
outstanding, the Company will keep Shareholders informed of the level of dilution and details of
conversion after issue of the Convertible Note as follows:–

      (i)     the Company will make a monthly announcement (the “Monthly Announcement”) on
              the website of the Stock Exchange and the Company. Such announcement will be
              made on or before the fifth business day following the end of each calendar month
              and will include the following details in a table form:

              (a)   whether there is any conversion of the Convertible Note during the relevant
                    month. If yes, details of the conversion(s), including the conversion date, number
                    of new Shares issued, conversion price for each conversion. If there is no
                    conversion during the relevant month, a negative statement to that effect;

              (b)   the outstanding principal amount of the Convertible Note after the conversion,
                    if any;

              (c)   the total number of Shares issued pursuant to other transactions, including
                    Shares issued pursuant to exercise of options under any share option scheme(s)
                    of the Company; and

              (d)   the total issued share capital of the Company as at the commencement and the
                    last day of the relevant month;

      (ii)    in addition to the Monthly Announcement, if the cumulative amount of new Shares
              issued pursuant to the conversion of the Convertible Note reaches 5% of the issued
              share capital of the Company as disclosed in the last Monthly Announcement or any
              subsequent announcement made by the Company in respect of the Convertible Note
              (as the case may be) (and thereafter in a multiple of such 5% threshold), the Company
              will make an announcement on the website of the Stock Exchange and the Company
              including details as stated in (i) above for the period commencing from the date of
              the last Monthly Announcement or any subsequent announcement made by the
              Company in respect of the Convertible Note (as the case may be), up to the date on
              which the total amount of Shares issued pursuant to the conversion amounts to 5% of
              the issued share capital of the Company as disclosed in the last Monthly Announcement
              or any subsequent announcement made by the Company in respect of the Convertible
              Note (as the case may be); and

      (iii)   if the Company forms the view that any issue of Conversion Shares will trigger the
              disclosure requirements under Rule 13.09(1) of the Listing Rules, then the Company
              is obliged to make such disclosure regardless of the issue of any announcement in
              relation to the Convertible Note as mentioned in (i) and (ii) above.


                                               – 16 –
                            LETTER FROM THE BOARD


Condition precedents

     Completion is conditional upon, among other conditions, the following conditions
(“Conditions”) having been fulfilled or (as the case may be) waived:

     (i)     a PRC legal opinion regarding, among others, (a) the due establishment of the
             Acquirees, (b) the validity of the licenses required for the continued operation of the
             Acquirees, (c) the JD Nominees becoming the legal registered shareholders of the
             Acquirees, (d) Company B legally and beneficially owning the BL Dealership and LB
             Dealership, (e) Company C legally and beneficially owning the RR Dealership, and
             (f) the legality, validity and enforceability of the various transactions contemplated
             under the SP Agreement including but not limited to the Contractual Arrangements;

     (ii)    in respect of the Dealerships, among others, (a) grantor of the BL Dealership granting
             its consent to the transfer of the BL Dealership to Company B, (b) grantor of LB
             Dealership granting its consent to the transfer of the LB Dealership to Company B,
             (c) the grantor of the RR Dealership granting its consent to the transfer of the RR
             Dealership to Company C and (d) a sum of not less than RMB37,770,000 being
             injected in the registered capital of Company B and Company C;

     (iii)   in respect of the Contractual Arrangements, (a) the signing of all relevant agreements
             in respect of the implementation of the Contractual Arrangements, (b) the approvals
             (if required) and registration of the transfers of the equity interests in the Acquirees
             to the JD Nominees, and (c) by way of the Contractual Arrangements, the Company’s
             auditors confirming that each of Company B and Company C would become indirect
             subsidiaries of the Company such that the Company can book all of their economic
             benefits into its own books and records;

     (iv)    JD Car being satisfied with the due diligence review on the Acquirees and the
             Dealerships;

     (v)     the Company having obtained all necessary consent, authorization, approval or waiver
             (as the case may be) from the Stock Exchange or other regulators as required under
             the Listing Rules or other applicable laws or regulations in respect of the SP
             Agreement;

     (vi)    the Shareholders having approved in the general meeting (a) the transactions
             contemplated under the SP Agreement, (b) the issue and allotment of the Acquisition
             Consideration Shares, (c) the issue of the Convertible Note, and (d) the issue and
             allotment of the Conversion Shares; and

     (vii) the Listing Committee of the Stock Exchange having granted the listing approval and
           the permission to deal in the Acquisition Consideration Shares and Conversion Shares
           on the Main Board.

                                               – 17 –
                             LETTER FROM THE BOARD


        Under the SP Agreement, JD Car may at its absolute discretion waive any of the Conditions
as set out in (i), (ii), (iii) and (iv) above. As at the Latest Practicable Date, condition precedents
(ii)(a) and (ii)(d) as mentioned above have been fully fulfilled.

      As mentioned in condition precedent (ii)(d) above, a sum of not less than RMB37,770,000
must be injected in the registered capital of Company B and Company C prior to Completion. Such
increases of the registered capital have been reflected under note 15 to the accountants’ reports of
Company B and Company C in Appendix II to this circular. Based on the aforesaid, the Directors
consider that the capital contributions to the registered capital of Company B and Company C in
January 2008 to be directly attributable to the Acquisition. Accordingly, the Directors are of the
view that the inclusion of the pro forma adjustments mentioned under note (a) to the unaudited pro
forma financial information of the Enlarged Group in Appendix IIIA to this circular fully comply
with Rule 4.29(6)(b) of the Listing Rules.

Completion

       Completion is expected to take place on the third business day after the day on which the
last of the outstanding conditions under the SP Agreement is fulfilled or waived by JD Car (or
such a later date as the parties thereto may agree in writing).

Contractual Arrangements

       For the reasons as set out in the section headed “Reasons for and the benefits of entering
into the SP Agreement” below, the Group is desirous of acquiring the Acquirees. Commencing
from 1 January 2004, Hong Kong and Macau based companies could apply for the establishment
of businesses engaged in the retail sales of motor vehicles in the PRC if the applicant can satisfy,
amongst others, the following requirements set out under the
(Regulations on the management of foreign investment in businesses) issued by the Ministry of
Commerce in the PRC on 16 April 2004: (i) average revenue of not less than US$100 million
during the 3 years immediately prior to the application and (ii) assets of not less than US$10
million for the year prior to the application. In light of the regulatory requirements in respect of
the operation of car dealerships by foreign enterprises in the PRC, the Group decided to maintain
the domestic enterprise nature of Company B and Company C. Instead, to facilitate the acquisitions
of the economic benefits and management rights of Company B and Company C by the Group, Mr.
Qi and the Vendor have jointly and severally agreed to and/or will procure Company B, Company
C, the respective registered shareholders of Company B and Company C and any other third
parties designated by JD Car to enter into the following contractual arrangements.

      (i)    The Designated JD Companies shall enter into one or more exclusive consultancy and
             service agreements with each of Company B and Company C under which the
             Designated JD Companies shall provide consultancy, advertising, business promotion,
             public relation services to each of Company B and Company C. In return, each of
             Company B and Company C shall pay the Designated JD Companies fees which are
             equal to the entire after tax profit of each of Company B and Company C.

                                               – 18 –
                             LETTER FROM THE BOARD


      (ii)    The registered shareholders of each of Company B and Company C shall enter into
              share transfer agreements with the JD Nominee(s) for the transfer of their entire
              interests in each of Company B and Company C to such JD Nominee(s).


      (iii)   One of the Designated JD Companies shall enter into a business operation agreement
              with each of Company B and Company C under which that designated JD company
              shall act as a guarantor to guarantee all liabilities of Company B and Company C
              from time to time. In return, Company B and Company C shall pledge its accounts
              receivables and assets to the designated JD company as security.


      (iv)    One of the Designated JD Companies shall enter into an exclusive share option
              agreement with each of the JD Nominee(s) under which the JD Nominee(s) will grant
              an exclusive option to the designated JD company for the purchase of the entire
              equity interest in each of Company B and Company C at RMB10.


      (v)     One of the Designated JD Companies shall enter into a share pledge agreement with
              each of the JD Nominee(s) under which the JD Nominee(s) will pledge its/their entire
              equity interests in Company B and Company C to that designated JD company to
              secure the performance of the respective obligations of Company B and Company C
              under the exclusive consultancy and service agreement and the business operation
              agreement as referred to in paragraphs (i) and (iii) above.


      (vi)    Such other contractual arrangement as reasonably requested by JD Car for the effective
              acquisitions of the economic benefits and management rights of Company B and
              Company C.


       As stated under point (iii) under the subsection headed “Conditions precedent” above,
Completion is subject to the signing of all relevant agreements in respect of the implementation of
the Contractual Arrangements. The purpose of the Contractual Arrangements (in particular the
consultancy and service agreement and the business operation agreement as mentioned above) is to
ensure that the Designated JD Companies will control the entire business operation and management,
be entitled to all the profits of, and assume the risk of each of Company B and Company C.


       On completion of the Acquisition and subject to the auditors of the Company having
confirmed that each of Company B and Company C can be accounted for as wholly-owned subsidiary
of the Company after Completion by virtue of the Contractual Arrangements (the condition (iii) as
disclosed under the paragraph headed “Conditions Precedents” above refers), the JD Nominee(s)
will be or will be deemed to be a connected person of the Company by virtue of them being
substantial shareholders of the subsidiaries of the Company. Accordingly, the transaction
contemplated under the share option agreement will constitute connected transaction for the




                                               – 19 –
                            LETTER FROM THE BOARD


Company under Chapter 14A of the Listing Rules and, depending on the applicable percentage
ratios set out in Rule 14.07 of the Listing Rules, be subject to the reporting, announcement and/or
independent Shareholders’ approval requirement (as the case may be) under Chapter 14A of the
Listing Rules. The Company will comply with the applicable requirements of the Listing Rules as
and when appropriate.


Guarantees and warranty                                                                                 R14


(i)    Profit guarantee


       Under the SP Agreement, Mr. Qi and the Vendor have guaranteed that, subject to Company
B and Company C being provided with reasonably sufficient working capital, the aggregate audited
profit after tax (calculated in accordance with Hong Kong accounting standards) of the Acquirees
will be not less than HK$55,000,000 and HK$65,000,000 for the two years ending 31 December
2008 and 2009 respectively. If the aggregate audited profit in any of the two years mentioned
above shall be less than the guaranteed amount, Mr. Qi and the Vendor will be required to pay JD
Car the shortfall (on a dollar-for-dollar basis) in cash within 14 days after the audited financial
statements for the financial year in question has been provided to JD Car. The Directors consider
that the guaranteed profits of HK$55,000,000 and HK$65,000,000 for the two years ending 31
December 2008 and 2009 respectively are achievable since the guaranteed amount was arrived at
based on the historic performance of the Dealerships.


(ii)   Guarantee on combined tangible assets of the Acquirees


       Furthermore, Mr. Qi and the Vendor have also guaranteed that the Acquirees would have
combined tangible assets of not less than HK$40,000,000. As of 15 January 2008, the Auditors of
Companies B and C issued capital verification reports to confirm that the actual contribution to
their registered capital (equivalent to the net asset value as the Acquirees have not conducted any
business activities as of the date of the capital verification reports) are over RMB37,770,000
(equivalent to approximately HK$40,600,000). The Directors consider that the guarantee on
combined tangible assets of not less than HK$40,000,000 has been satisfied already.


Lockup undertaking                                                                                      R14


       The Vendor has undertaken to JD Car that it will not dispose of or otherwise sell any of the
Acquisition Consideration Shares during the first 12 month period following the date of Completion
(the “First Period”). Furthermore, the Vendor has undertaken that it will not dispose of or otherwise
sell more than 200,000,000 Acquisition Consideration Shares during the second 12 month period
following the end of the First Period unless prior written approval has been obtained from JD Car.




                                               – 20 –
                                    LETTER FROM THE BOARD


SHAREHOLDING STRUCTURE OF THE COMPANY


      Set out below is the shareholding structure of the Company (i) as at the Latest Practicable
Date, (ii) immediately following the issue of the Acquisition Consideration Shares and (iii)
immediately following the issue of the Acquisition Consideration Shares and the full conversion of
the Convertible Note.

                                                                                              Number of
                                                                    Number of                Shares held
                                                                   Shares held              immediately
                                                                  immediately          after the issue of
                                                                          after          the Acquisition
                                           Number of               the issue of           Consideration
                                          Shares held          the Acquisition         Shares and all of
                                      as at the Latest          Consideration            the Conversion
      Name of Shareholder            Practicable Date        %          Shares       %            Shares       %

      Substantial Shareholder
      Mr. Wong Chun Loong
        (“Mr. Wong”)1                    281,291,100       25.9    281,291,100     18.9     281,291,100      10.4
      Mr. Wong Chun Keung2                 4,264,000        0.4      4,264,000      0.3       4,264,000       0.2
      Ms. Wong Miu Ling 2                  2,551,466        0.2      2,551,466      0.2       2,551,466       0.1

      Subtotal of Mr. Wong and
        parties acting in concert
        with him2                        288,106,566       26.5    288,106,566     19.4     288,106,566      10.7

      Directors

      Mr. Tong Kai Lap3                   15,034,400        1.4     15,034,400      1.0      15,034,400       0.6
      Mr. Wan Siu Lun                        504,000        0.0        504,000      0.0         504,000       0.0
      Mr. Ko Chi Keung                     1,420,000        0.1      1,420,000      0.1       1,420,000       0.1
      Mr. Kwong Chi Tak                      906,666        0.1        906,666      0.1         906,666       0.0
      Mr. Zheng Hao Jiang                 10,640,000        1.0     10,640,000      0.7      10,640,000       0.4

      Subtotal of the Directors           28,505,066        2.6     28,505,066      1.9      28,505,066       1.1

      The Vendor4                                   –         –    400,000,000     26.9   1,600,000,000      59.6

      Other Shareholders
      Evolution Capital
        Management, LLC                  119,473,864       11.0    119,473,864      8.0     119,473,864       4.4
      Public Shareholders1 and 4         650,067,354       59.9    650,067,354     43.8     650,067,354      24.2

      Total                            1,086,152,850      100.0   1,486,152,850   100.0   2,686,152,850     100.0



                                                         – 21 –
                                  LETTER FROM THE BOARD


      Notes:


      1.       273,435,100 Shares are held by Super Empire Investments Limited (“Super Empire”), a company held as
               to 100% by Mr. Wong Chun Loong. The remaining 7,856,000 Shares are directly held by Mr. Wong.


      2.       Mr. Wong Chun Keung, a Director, and Ms. Wong Miu Ling are brother and sister of Mr. Wong respectively.
               In this connection, they are deemed to be parties acting in concert with Mr. Wong.


      3.       10,274,400 Shares are held by Rapid Alert International Limited, a company held as to 100% by a
               discretionary trust of which Mr. Tong Kai Lap is the founder, 4,760,000 Shares are beneficially held by
               Mr. Tong Kai Lap.


      4.       The 1,600,000,000 Shares that may be held by the Vendor immediately after the issue of the Acquisition
               Consideration Shares and the Conversion Shares is based on a maximum of 1,200,000,000 Conversion
               Shares that can be issued pursuant to the full exercise of the conversion rights attached to the Convertible
               Note. As stated in the section headed “The Convertible Note”, conversion of the Convertible Note is
               subject to the condition that conversion can only be made to the extent that (i) there is no change in
               control (as defined in the Takeovers Code); and (ii) the Company would remain in compliance with the
               public float requirement set out under Rule 8.08(1) of the Listing Rules immediately after any such
               conversion. Accordingly, the shareholding structure following full conversion of the Convertible Note is
               for illustrative purpose only.


REASONS FOR AND BENEFITS OF ENTERING INTO THE SP AGREEMENT                                                                    R14


       The Group is principally engaged in the publication of comic books and multimedia
development. As a strategy to diversify the Group’s business into other areas where the Group can
tap into the buoyant economy of the PRC, the Directors have been seeking various investment
opportunities in the PRC. The PRC has experienced significant economic growth in recent years,
and the gross domestic product grew from approximately RMB7,897 billion in 1997 to RMB21,087
billion in 2006, representing a compound annual growth rate of approximately 11.5% during the
aforesaid period. The increase in the PRC’s gross domestic product has vastly increased personal
wealth in the PRC during the recent years. In particular, the Directors believe that the flourishing
economy in the PRC has created a new class of consumers who have very high spending power
and the willingness to consume luxury goods. The Directors believe that this phenomenon is
especially evident in large cities in the PRC with high level of development such as Beijing. In
order to tap into this market group where returns are expected to be high, the Directors have
identified dealerships of ultra-luxury cars and supercars as an ideal entry point. Mr. Qi has gained
extensive business experience and network in the PRC. Apart from operating the Dealerships, he is
also the controlling shareholder of companies engaging in the retail distribution of luxury goods
such as branded clothing, jewellery and watches in the PRC. The Directors believe that Mr. Qi’s
expertise in the retail of luxury goods, together with his well established relationships with the
relevant national agents representing the relevant car manufacturers in the PRC, would enable the
Dealerships to continue to develop in a positive direction. Against such a background, the Directors
believe the Acquisition would enable to Group to capture this highly lucrative business opportunity
and enhance overall Shareholder’s return in the Company.

                                                        – 22 –
                           LETTER FROM THE BOARD


      Having taken the above into consideration, the Directors consider that the terms of the SP
Agreement are fair and reasonable and in the interest of the Company and the Shareholders as a
whole. The Directors currently intend to carry on its business in the publication of comic books
and multimedia development following Completion.


CONTINUING CONNECTED TRANSACTIONS


      Upon Completion, Mr. Qi and his associates will become connected persons of the Company
by virtue of Mr. Qi’s 26.9% shareholding in the Company immediately following Completion,
therefore qualifying him as a substantial Shareholder. Accordingly, transactions entered into by
the Group (including Company B and Company C) and Mr. Qi and his associates will be regarded
as connected transactions.

A.    The Showroom Rental Agreement


       Company B has entered into the Showroom Rental Agreement with BJBG, a company
controlled by Mr. Qi, on 28 December 2007. The Showroom Rental Agreement sets out the terms
with regard to the rental charges of the showroom of the BL Dealership in Beijing, the PRC. Under
the Showroom Rental Agreement which commenced on 1 January 2008, the monthly rental charges
in respect of the aforesaid showroom is RMB320,000 (equivalent to approximately HK$344,000)
per month which is paid in advance out of the Group’s internal resources. Furthermore, the
Showroom Rental Agreement would terminate on 31 December 2010 upon which it can be renewed
by the parties thereto upon reaching mutual agreement as to the terms of the new agreement.


       The gross area of the showroom for Company B is 450m 2 for the BL Dealership. The
address of the showroom of Company B is portion of Level 1, Scitech Plaza, No. 22 Jian Wai
Avenue, Chao Yang District, Beijing Municipality, the PRC (property no. 21 in the property
valuation report in Appendix VI to this circular).


      Reason for entering into the Showroom Rental Agreement


             The rental agreement of the aforesaid showroom was originally entered by BJBG
      with the landlord which is an Independent Third Party. Before restructuring the Dealerships,
      the aforesaid showroom was managed and operated by BJBG. As a result of the restructuring
      of the Dealerships business, the Showroom Rental Agreement was entered into in the normal
      course of business operations of the BL Dealership.




                                             – 23 –
                           LETTER FROM THE BOARD


      Basis of determination of the annual cap

            The Group has not entered into any prior rental agreement with BJBG with regard to
      the aforesaid showroom and accordingly, there is no historic data for the purpose of
      determining the annual cap pursuant to Rule 14A.35(2). The rental charge was based on
      arm’s length negotiation and determined with reference to market price. In that connection,
      the Directors would like to propose annual caps of RMB3,840,000 (equivalent to
      approximately HK$4,129,000) for each of the three years ending 31 December 2008, 2009
      and 2010.

            The annual caps for each of the three years ending 31 December 2008, 2009 and
      2010 were determined with reference to the monthly rental of RMB320,000 set out under
      the Showroom Rental Agreement.

B.    The RMO Agreement

       Company B and Company C has entered into the RMO Agreement for the period from 22
February 2008 to 31 December 2010 in respect of office rental, management fees and office
expenses with BJBG, a company controlled by Mr. Qi, on 22 February 2008. The RMO Agreement
sets out the terms with regard to the aforementioned expenses incurred from the operation of the
Dealerships. It is envisaged that the monthly expenses arising out of the RMO Agreement would
be RMB80,000 (equivalent to approximately HK$86,000) per month which is to be paid in advance
out of the Group’s internal resources. Furthermore, the RMO Agreement would terminate on 31
December 2010 upon which the agreement can be renewed by the parties thereto upon reaching
mutual agreement as to the terms of the new agreement.

       The area of the portion of the office occupied by the Group is approximately 300m 2. the
address of the office is portion of Level 24, 25 and 26, Office Tower 1, Henderson Centre, No. 18
Jian Guo Men Nei Avenue, Dong Cheng District, Beijing, the PRC (property no. 18 in the property
valuation report in Appendix VI to this circular).

      Reasons for entering into the RMO Agreement

             The office premises where the Dealerships are conducted are owned by BJBG. As a
      result of the acquisition of Company B and Company C by JD Car, the RMO Agreement
      was entered into in the normal course of business operations of the Dealerships.

      Basis of determination of the annual cap

            The Group has not entered into any prior agreement in respect of rental, management
      fees and office expenses with BJBG and accordingly, there is no historic data for the
      purpose of determining the annual cap pursuant to Rule 14A.35(2). In that connection, the
      Directors would like to propose annual caps of:

            (i)    for the year ending 31 December 2008, an annual cap of RMB900,000
                   (equivalent to approximately HK$968,000); and


                                             – 24 –
                           LETTER FROM THE BOARD


             (ii)   for each of the two years ending 31 December 2009 and 2010, annual caps of
                    RMB1,100,000 (equivalent to approximately HK$1,183,000).


             The annual cap for the year ending 31 December 2008 was determined with reference
      to (i) the expected number of months remaining in the year ending 31 December 2008
      starting from March 2008; and (ii) the monthly rental, management fees and office expenses
      of RMB80,000 set out under the relevant agreement.


             As for the annual caps for each of the two years ending 31 December 2009 and 2010,
      they were determined with reference to (i) 12 full months in each of the relevant years; and
      (ii) the monthly rental, management fees and office expenses of RMB80,000 set out under
      the relevant agreement.

C.    The BJBG Agency Agreement


       Company B has entered into the BJBG Agency Agreement with BJBG, a company controlled
by Mr. Qi, on 22 February 2008. The BJBG Agency Agreement sets out the terms with regard to
the agency fee payable by Company B in respect of the operations of the BL Dealership and the
LB Dealership, the rights of which are held by BJBG until the actual transfer of the dealership
rights to Company B by the grantors of the relevant dealerships. Upon entering into the BJBG
Agency Agreement, the rights to operate together with the entitlements to the economic benefits of
the BL Dealership and the LB Dealership are vested in Company B. The agency fee which shall be
paid within 30 days following the end of each quarter out of the Group’s internal resources, is to
be calculated according the following formula:


         Agency fee = Net profit before tax of the BL Dealership and LB Dealership/97% x 3%

       The term for the BJBG Agency Agreement is for the period commencing from Completion
up to 31 December 2008, i.e. the latest date on which Mr. Qi expects that the grantors of the
dealership rights in respect of the BL Dealership and the LB Dealership would effect the transfer
of the dealership rights in respect of the BL Dealership and the LB Dealership to Company B. In
the unlikely event that the transfers of the BL Dealership and the LB Dealership do not complete
before 31 December 2008, Company B will have to carry on the operations of the BL Dealership
and the LB Dealership through the agency of BJBG by way of extending the BJBG Agency
Agreement.




                                             – 25 –
                           LETTER FROM THE BOARD


      Reason for entering into the agency fee agreement with BJBG


             Although (i) the grantor of the BL Dealership, BJBG and Company B have already
      entered into the relevant agreements in respect of the transfer of the BL Dealership to
      Company B; and (ii) the grantor of the LB Dealership has already given its in-principle
      written consent to the transfer of the LB Dealership to Company B as mentioned in the
      section headed “The SP Agreement” above, the actual transfers have not completed yet.
      Accordingly, Company B has entered into the BJBG Agency Agreement such that it can
      operate the BL Dealership and LB Dealership through the agency of BJBG prior to the
      actual transfer of the relevant dealerships. Furthermore, Mr. Qi has extensive experience in
      sales and marketing of luxury motor vehicles. In this connection, the agency fee is the
      incentive to be provided to Mr. Qi to motivate him to expand sales opportunity of Company
      B and Company C.


      Basis of determination of the annual cap


            The Group has not entered into any prior agency fee agreement with BJBG and
      accordingly, there is no historic data for the purpose of determining the annual cap pursuant
      to Rule 14A.35(2). In that connection, the Directors would like to propose an annual cap of
      HK$2,500,000 for the year ending 31 December 2008.


             The annual cap for the year ending 31 December 2008 was determined with reference
      to (i) the expected number of months remaining in the year ending 31 December 2008
      starting from March 2008; (ii) the profit guarantee for the Acquirees of not less than
      HK$55,000,000 for the year ending 31 December 2008; (iii) a tax rate of 25%; and (iv) the
      formula for calculation of the agency fee as set out under the BJBG Agency Agreement.

D.    The Beijing YST Agency Agreement


       Company C has entered into the Beijing YST Agency Agreement with Beijing YST, a
company controlled by Mr. Qi, on 22 February 2008. The Beijing YST Agency Agreement sets out
the terms with regard to the agency fee payable by Company C in respect of the RR Dealership,
the rights of which are held by Beijing YST until the actual transfer of the dealership rights to
Company C by the grantor of the RR Dealership. Upon entering into the Beijing YST Agency
Agreement, the right to operate together with the entitlement to the economic benefits of the RR
Dealership are vested in Company C. The agency fee which shall be paid within 30 days following
the end of each quarter out of the Group’s internal resources, is to be calculated according the
following formula:


                Agency fee = Gross profit net of sales tax from the RR Dealership x 1%




                                              – 26 –
                            LETTER FROM THE BOARD


       The term for the Beijing YST Agency Agreement is for the period commencing from
Completion up to 31 December 2008, i.e. the latest date on which Mr. Qi expects that the grantors
of the dealership rights in respect of the RR Dealership would effect the transfer of the dealership
rights in respect of the RR Dealership to Company C. In the unlikely event that the transfer of the
RR Dealership does not take place before 31 December 2008, Company C will have to carry on the
operation of the RR Dealership through the agency of Beijing YST by way of extending the
Beijing YST Agency Agreement.


      Reason for entering into the Beijing YST Agency Agreement


              As mentioned in the section headed “The SP Agreement” above, application has been
      made to the grantor of the RR Dealership for their consent to the transfer of the RR
      Dealership to Company C. Accordingly, Company C has entered into the Beijing YST
      Agency Agreement such that it can operate the RR Dealership through the agency of Beijing
      YST prior to the actual transfer of the relevant dealership. Furthermore, Mr. Qi has extensive
      experience in sales and marketing of luxury motor vehicles. In this connection, the agency
      fee is the incentive to be provided to Mr. Qi to motivate him to expand sales opportunity of
      Company C.


      Basis of determination of the annual cap


            The Group has not entered into any prior agency fee agreement with Beijing YST and
      accordingly, there is no historic data for the purpose of determining the annual cap pursuant
      to Rule 14A.35(2). In that connection, the Directors would like to propose an annual cap of
      HK$1,000,000 for the year ending 31 December 2008.


             The annual cap for the year ending 31 December 2008 was determined with reference
      to (i) the expected number of months remaining in the year ending 31 December 2008
      starting from March 2008; (ii) the estimated profit of the RR Dealership for the year ending
      31 December 2008; and (iii) the formula for calculation of the agency fee as set out under
      the Beijing YST Agency Agreement.




                                              – 27 –
                           LETTER FROM THE BOARD


E.    The Yuk Long Agreement

       On 30 November 2007, Yuk Long Cultural Development (Shenzhen) Limited, a wholly
owned subsidiary of the Company, has entered into the Yuk Long Agreement (superseding the
agreement dated 30 November 2006) with BJBG, a company controlled by Mr. Qi for the period
from 1 December 2007 to 30 November 2008. The rental charges are incurred for the representative
office in Beijing utilized by Yuk Long Cultural Development (Shenzhen) Limited for liaison
purposes in connection with animation and comics production. The aggregate fees payable under
the relevant agreement is a monthly fee of RMB35,000 (equivalent to approximately HK$38,000)
which is paid in advance out of the Group’s internal resources. This agreement is renewable on an
annual basis.

      The size of the office is around 150m 2. The address of the office is portion of Level 25,
Office Tower 1, Henderson Centre, No. 18 Jian Guo Men Nei De Jie, Beijing, the PRC (property
no. 17 in the property valuation report in Appendix VI to this circular).

      Reasons for entering into the Yuk Long Agreement

            In 2004, the Group has started to develop animation business in northern province of
      the PRC. In order to have better communication, Yuk Long Cultural Development (Shenzhen)
      Limited has opened a representative office in Beijing and rented office from BJBG.

      Basis of determination of the annual cap

             The rental charge set out under the Yuk Long Agreement is based on market rate.
      During the year ended 31 December 2007, rental charges paid by BJBG to the landlord
      amounted to approximately RMB420,000 (equivalent to approximately HK$433,000 using
      settlement exchange rate). In that connection, the Directors would like to propose annual
      caps of RMB420,000 (equivalent to approximately HK$433,000 using settlement exchange
      rate) for each of the three years ending 31 December 2008, 2009 and 2010.

            The annual caps for each of the three years ending 31 December 2008, 2009 and
      2010, they were determined with reference to the monthly rental of RMB35,000 set out
      under the Yuk Long Agreement.

Other matters in relation to the continuing connected transactions

      The Company is required to comply with the annual review requirements under Rules
14A.37 and 14A.38 of the Listing Rules in respect of all of the continuing connected transactions
mentioned above.

      The Directors (including the independent non-executive Directors), consider that:

      (i)   the terms and conditions of the continuing connected transactions were negotiated
            between the parties to them on arm’s length basis, are on normal commercial terms
            and are fair and reasonable;



                                             – 28 –
                               LETTER FROM THE BOARD


      (ii)    the annual caps of each of the continuing connected transactions are fair and
              reasonable; and


      (iii)   the continuing connected transactions are in the ordinary and usual course of business
              of the Group and are in the interest of the Company and the Shareholders.


INFORMATION ON THE ACQUIREES


      Company B was established in the PRC on 16 October 2007 with limited liability and its
business is the operations of the BL Dealership and the LB Dealership. Company C was established
in the PRC on 16 October 2007 with limited liability and its business is the operation of the RR
Dealership. As of 31 December 2007, Company B and Company C did not commence business
with audited net asset value of approximately RMB10,001,000 for each of them. The following
audited financial information is extracted from the financial information of the Dealerships in
Appendix II to this circular.


                                                                       Year ended       Year ended     R14
                                                                     31 December      31 December
                                                                             2006             2007
                                                                         RMB’000          RMB’000


      Profit before tax attributable to the BL Dealership and
        LB Dealership                                                        6,232           23,050
      Profit before tax attributable to the RR Dealership                    2,625           20,279


      Total profit before tax                                                8,857           43,329


      Profit after tax attributable to the BL Dealership and
        LB Dealership                                                        4,119           15,443
      Profit after tax attributable to the RR Dealership                     1,759           13,587


      Total profit after tax                                                 5,878           29,030


INFORMATION ON THE COMPANY


      The Company was incorporated as an exempted company with limited liability in Bermuda            R14
under the Companies Act 1981 of Bermuda (as amended), the Shares of which are listed on the
Main Board of the Stock Exchange. The Group is principally engaged in the publication of comic
books and multimedia development.




                                               – 29 –
                             LETTER FROM THE BOARD


INFORMATION OF THE VENDOR


       Sparkle Roll is a company incorporated in the British Virgin Islands with limited liability. It   R14
is wholly owned by Mr. Qi and is principally engaged in investment holding. As at the Latest
Practicable Date, it is an Independent Third Party.


INFORMATION ON BJBG


      BJBG is a company established in the PRC with limited liability. It is controlled by Mr. Qi        R14
and is principally engaged in, amongst others, sales of motor vehicles, car accessories, chemical
products, equipment, art items, jewelry, silverware, etc. As at the Latest Practicable Date, it is an
Independent Third Party.

INFORMATION ON BEIJING YST


      Beijing YST is a company established in the PRC with limited liability. It is controlled by        R14

Mr. Qi and is principally engaged in, amongst others, sales of motor vehicles, construction materials,
chemical products, etc. As at the Latest Practicable Date, it is an Independent Third Party.


FINANCIAL EFFECTS OF THE ACQUISITION ON THE GROUP


       Following the completion date of Contractual Arrangements, the results, assets and liabilities
of the Acquirees will be fully consolidated into the financial statements of the Group. As shown in
the “Unaudited pro forma consolidated balance sheet of the Enlarged Group” as set out in Appendix
IIIA to this circular, a goodwill of approximately HK$360,451,000 arising from acquisition of
Acquirees will be recorded in the balance sheet of the Group. According to the requirements of the
Hong Kong Financial Reporting Standards, this goodwill is subject to an impairment test annually.
If the recoverable amount of the goodwill is less than its carrying amount, an impairment shall
have to be recognised directly in the consolidated financial statement of the Group. The Directors
shall review the recoverable amount of this goodwill at the next balance sheet date for the year
ended to determine if there is an impairment to be recognised in the consolidated financial statement
of the Group.


Assets and liabilities


        Based on the “Unaudited pro forma consolidated balance sheet of the Enlarged Group” as
set out in Appendix IIIA to this circular, the Group had audited total assets and total liabilities of
around HK$271,653,000 and HK$24,950,000 respectively as at 31 March 2007. Upon the completion
of the Acquisition, the Enlarged Group would have unaudited pro forma total assets and total
liabilities of around HK$623,675,000 and HK$278,928,000 respectively.




                                               – 30 –
                              LETTER FROM THE BOARD


Earnings


       According to the audited financial statements of the Dealerships, the audited net profit for          R14
the year ended 31 December 2007 was approximately RMB29,030,000 (equivalent to approximately
HK$31,215,000). As stated in the section of “Profit guarantee”, Mr. Qi and the Vendor have
guaranteed aggregate audited profit after tax of the Acquirees will be not less than HK$55,000,000
and HK$65,000,000 for the two years ending 31 December 2008 and 2009 respectively. The
Directors believe that the Acquisition will have a positive impact on the earnings of the Group in
the future.


LISTING RULES IMPLICATIONS

General


       As the profit test and revenue test ratios involving the profit before tax and revenue attributable
to the Dealerships and the equity capital test ratio exceed 100%, the Acquisition is classified as
very substantial acquisition under the Listing Rules and is subject to the approval of the Shareholders.


       Under Rule 14A.25, the continuing connected transactions are to be aggregated over a
12-month period. As the total asset test and revenue test ratios are equal to or more than 2.5% but
less than 25% and the total consideration is less than HK$10,000,000 stipulated under Rule
14A.34(2), the continuing connected transactions are only subject to the reporting and announcement
requirements set out in Rules 14A.45 to 14A.47 and are exempted from the independent
shareholders’ approval requirements of Chapter 14A of the Listing Rules.


       Application has been made to the Stock Exchange for the listing of and permission to deal             R14
in the Acquisition Consideration Shares and the Conversion Shares on the Main Board.                         A1B


SGM


     The SGM will be held on Tuesday, 8 April 2008 at 4:00 p.m. at Dragon Room 3, The Hong
Kong Bankers Club, 43/F, Gloucester Tower, The Landmark, Central, Hong Kong. A notice of the
SGM is set out on pages 447 to 449 of this circular.


       Since none of the Shareholders has an interest in the SP Agreement and the transactions               R14
contemplated thereunder which is different from the other Shareholders, none of the Shareholders
will be required to abstain from voting in favour of the resolutions in connection with the approval
thereof.




                                                 – 31 –
                             LETTER FROM THE BOARD


      The SGM will be held to consider and, if thought fit, passing the resolutions to approve the
SP Agreement and the transactions contemplated thereunder, including the Acquisition and the
issue of the Convertible Note. Furthermore, the Company will also seek the grant of a specific
mandate to allot and issue new Shares to satisfy the allotment and issue of the Acquisition
Consideration Shares and the Conversion Shares at the SGM.


       The form of proxy for use at the SGM is enclosed. If you are not able to attend the meeting,
you are requested to complete the accompanying form of proxy in accordance with the instructions
printed thereon and return the same to the Company’s branch share registrar and transfer office,
Tricor Secretaries Limited at 26/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong
as soon as possible and in any event not less than 48 hours before the time appointed for the
holding of the meeting or any adjournment thereof. Completion and return of the form of proxy
will not preclude you from attending and voting in person at the meeting or any adjourned meeting
should you so wish.


PROCEDURE TO DEMAND A POLL AT THE SGM                                                                    A1B


       Pursuant to Bye-law 66 of the Company’s Bye-laws, a resolution put to the vote of a
meeting shall be decided on a show of hands unless (before or on the declaration of the result of
the show of hands or on the withdrawal of any other demand for a poll) a poll is demanded:

      (i)     by the chairman of such meeting; or

      (ii)    by at least three Shareholders present in person (or, in the case of a Shareholder
              being a corporation, by its duly authorised representative) or by proxy for the time
              bring entitled to vote at the meeting; or

      (iii)   by a Shareholder or Shareholders present in person (or, in the case of a Shareholder
              being a corporation, by its duly authorised representative) or by proxy and representing
              not less than one-tenth of the total voting rights of all Shareholders having the right
              to vote at the meeting; or

      (iv)    by a Shareholder or Shareholders present in person (or, in the case of a Shareholder
              being a corporation, by its duly authorised representative) or by proxy and holding
              Shares in the Company conferring a right to vote at the meeting being Shares on
              which an aggregate sum has been paid up equal to not less than one-tenth of the total
              sum paid up on all Shares conferring that right.




                                                – 32 –
                            LETTER FROM THE BOARD


RECOMMENDATIONS

       The Board considers that the SP Agreement, the transactions contemplated thereunder            R14
including the Acquisition and the issue of the Convertible Note are fair and reasonable and in the
interests of the Shareholders as a whole. Accordingly, the Board recommends the Shareholders to
vote in favour of the relevant ordinary resolutions to be proposed at the SGM with regard to the SP
Agreement, the transactions contemplated thereunder including the Acquisition, the issue of the
Convertible Note and the grant of the specific mandates to allot and issue Shares to satisfy the
allotment and issue of the Acquisition Consideration Shares under the SP Agreement and the
Conversion Shares under the Convertible Note as set out in the notice of the SGM.

ADDITIONAL INFORMATION

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

                                                                 By the order of the Board
                                                               Jade Dynasty Group Limited
                                                                      Tong Kai Lap
                                                                     Deputy Chairman




                                              – 33 –
APPENDIX I                       FINANCIAL INFORMATION ON THE GROUP


1.    SUMMARY OF AUDITED FINANCIAL STATEMENTS

       Set out below is a summary of the audited consolidated income statements of the Group for   A1B
each of the three years ended 31 March, 2005, 2006 and 2007 and the audited consolidated balance
sheets of the Group as at 31 March 2005, 31 March 2006 and 31 March 2007 as extracted from the
annual reports of the Company for the relevant years.

                                                                   Year ended 31 March
                                                          2007             2006           2005
                                                       HK$’000         HK$’000       HK$’000
                                                                                     (restated)

      CONTINUING OPERATIONS

      Revenue                                           102,094         102,214         107,307
      Cost of goods sold                                (61,378)        (55,420)        (58,948)
      Direct operating expenses                         (15,552)        (14,739)        (10,331)

      Gross profit                                       25,164          32,055          38,028
      Other income                                        1,264           1,221           1,613
      Selling and distribution costs                     (2,640)         (2,529)         (2,800)
      Administrative expenses                           (12,331)        (13,962)        (21,581)

      Operating profits                                  11,457          16,785          15,260
      Finance costs                                        (380)         (1,527)         (1,433)

      Profit before income tax                           11,077          15,258          13,827
      Income tax credit/(expense)                           286          (1,631)          1,617

      Profit for the year from
        continuing operations                            11,363          13,627          15,444

      DISCONTINUED OPERATIONS

      Loss for the year from
        discontinued operations                               –             (89)         (1,302)
      Gain on disposal of subsidiaries                        –               –             547

      Profit for the year                                11,363          13,538          14,689


      Attributable to:
        Equity holders of the Company                    11,370          13,538          11,043
        Minority interests                                   (7)              –           3,646

      Profit for the year                                11,363          13,538          14,689




                                             – 34 –
APPENDIX I                 FINANCIAL INFORMATION ON THE GROUP


                                                              Year ended 31 March
                                                     2007             2006           2005
                                                  HK$’000         HK$’000       HK$’000
                                                                                (restated)


   Dividends
   – Interim dividend declared
       during the year                               1,862           1,582              –


   – Final dividend proposed after
       the balance sheet date                        2,081           1,849              –


   Earnings per share
   From continuing and discounted operations
     Basic                                       1.24 cents      1.81 cents     1.59 cents


     Diluted                                     1.23 cents      1.67 cents     1.54 cents


   From continuing operations
     Basic                                       1.24 cents      1.82 cents     1.69 cents


     Diluted                                     1.23 cents      1.68 cents     1.64 cents




                                        – 35 –
APPENDIX I                   FINANCIAL INFORMATION ON THE GROUP


   Assets and liabilities

                                                              Year ended 31 March
                                                       2007           2006           2005
                                                    HK$’000       HK$’000       HK$’000
                                                                                (restated)

   ASSETS AND LIABILITIES

   Non-current assets
   Property, plant and equipment                      7,899          6,790          7,368
   Prepaid lease payments                             8,358          8,532          8,706
   Intangible assets                                  6,107          1,858          2,598
   Club membership                                        –              –            100
   Goodwill                                         124,539        124,539        124,539
   Deferred tax assets                                4,353          3,092          3,322
   Trade receivables                                  1,597              –              –

                                                    152,853        144,811        146,633

   Current assets
   Prepaid lease payments                               174            174            174
   Inventories                                       65,298         43,704         21,384
   Trade receivables                                 31,252         27,710         21,643
   Other receivables, deposits and prepayments       11,239         12,026         12,649
   Tax recoverable                                    1,280            413            104
   Pledged bank deposits                              4,258          4,113          4,003
   Cash and bank balances                             5,299          2,318          4,119

                                                    118,800         90,458         64,076

   Current liabilities
   Trade payables                                     9,672          7,878          8,521
   Other payables accrued charges                     4,597          8,760         11,177
   Provision for tax                                  1,521            633            938
   Bank borrowings                                    3,557         14,610          8,485
   Convertible notes                                  5,603              –              –

                                                     24,950         31,881         29,121

   Net current assets                                93,850         58,577         34,955

   Total assets less current liabilities            246,703        203,388        181,588

   Non-current liabilities
   Convertible notes                                      –         15,225         65,092

   Net assets                                       246,703        188,163        116,496




                                           – 36 –
APPENDIX I                   FINANCIAL INFORMATION ON THE GROUP


                                                              Year ended 31 March
                                                       2007           2006           2005
                                                    HK$’000       HK$’000       HK$’000
                                                                                (restated)


   EQUITY
   Equity attributable to the equity holders
     of the Company
     Share capital                                    1,865          1,689          1,428
     Reserves                                       242,395        186,474        115,068


                                                    244,260        188,163        116,496


   Minority interests                                 2,443              –              –


   Total equity                                     246,703        188,163        116,496




                                           – 37 –
APPENDIX I                      FINANCIAL INFORMATION ON THE GROUP


2.    AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2007


     Set out below is the audited financial statements of the Company for the year ended 31
March 2007, which is extracted from the annual report of the Company for the year ended 31
March 2007.


      CONSOLIDATED INCOME STATEMENT
      For the year ended 31 March 2007


                                                                      2007           2006
                                                     Notes         HK$’000        HK$’000


      CONTINUING OPERATIONS
      Revenue                                         6             102,094        102,214
      Cost of goods sold                                            (61,378)       (55,420)
      Direct operating expenses                                     (15,552)       (14,739)


      Gross profit                                                   25,164          32,055
      Other income                                    8               1,264           1,221
      Selling and distribution costs                                 (2,640)         (2,529)
      Administrative expenses                                       (12,331)        (13,962)


      Operating profits                                              11,457         16,785
      Finance costs                                   9                (380)        (1,527)


      Profit before income tax                                       11,077         15,258
      Income tax credit/(expense)                     10                286         (1,631)


      Profit for the year from continuing
        operations                                                   11,363         13,627


      DISCONTINUED OPERATIONS                         11


      Loss for the year from discontinued
        operations                                                        –             (89)


      Profit for the year                             12             11,363         13,538




                                            – 38 –
APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


                                                              2007        2006
                                                   Notes   HK$’000     HK$’000


   Attributable to:


     Equity holders of the Company                           11,370      13,538
     Minority interests                                          (7)          –


                                                             11,363      13,538


   Dividends                                        16
     – Interim dividend declared during the year              1,862       1,582


     – Final dividend proposed after
          the balance sheet date                              2,081       1,849


   Earnings per share                               17
   From continuing and discontinued operations


     Basic                                                 1.24 cent   1.81 cent


     Diluted                                               1.23 cent   1.67 cent


   From continuing operations


     Basic                                                 1.24 cent   1.82 cent


     Diluted                                               1.23 cent   1.68 cent




                                         – 39 –
APPENDIX I                   FINANCIAL INFORMATION ON THE GROUP


   CONSOLIDATED BALANCE SHEET
   As at 31 March 2007

                                                               2007      2006
                                                    Notes   HK$’000   HK$’000

   ASSETS AND LIABILITIES
   Non-current assets
     Property, plant and equipment                   18       7,899     6,790
     Prepaid lease payments                          19       8,358     8,532
     Intangible assets                               20       6,107     1,858
     Goodwill                                        21     124,539   124,539
     Deferred tax assets                             22       4,353     3,092
     Trade receivables                               24       1,597         –


                                                            152,853   144,811


   Current assets
    Prepaid lease payments                           19         174       174
    Inventories                                      23      65,298    43,704
    Trade receivables                                24      31,252    27,710
    Other receivables, deposits and
       prepayments                                   26      11,239    12,026
    Tax recoverable                                           1,280       413
    Pledged bank deposits                            27       4,258     4,113
    Cash and bank balances                           28       5,299     2,318


                                                            118,800    90,458


   Current liabilities
    Trade payables                                   29       9,672     7,878
    Other payables and accrued charges               30       4,597     8,760
    Provision for tax                                         1,521       633
    Bank borrowings                                  31       3,557    14,610
    Convertible notes                                32       5,603         –


                                                             24,950    31,881


   Net current assets                                        93,850    58,577


   Total assets less current liabilities                    246,703   203,388



                                           – 40 –
APPENDIX I                   FINANCIAL INFORMATION ON THE GROUP


                                                              2007      2006
                                                   Notes   HK$’000   HK$’000


   Non-current liabilities
     Convertible notes                              32           –    15,225


   Net assets                                              246,703   188,163


   EQUITY
    Equity attributable to the equity holders
      of the Company
    Share capital                                   33       1,865     1,689
    Reserves                                               242,395   186,474


                                                           244,260   188,163


   Minority interests                                        2,443         –


   Total equity                                            246,703   188,163




                                          – 41 –
APPENDIX I                     FINANCIAL INFORMATION ON THE GROUP


   BALANCE SHEET
   As at 31 March 2007

                                                               2007      2006
                                                    Notes   HK$’000   HK$’000

   ASSETS AND LIABILITIES

   Non-current assets

   Interests in subsidiaries                         25     150,298   150,298
   Deferred tax assets                               22         880       979

                                                            151,178   151,277

   Current assets
   Amount due from a subsidiary                      25      76,635    43,069
   Other receivables, deposits and prepayments                  346       197
   Pledged bank deposits                             27       3,190     3,085
   Cash and bank balances                            28       3,332       568

                                                             83,503    46,919

   Current liabilities
   Other payables and accrued charges                           178     1,043
   Bank borrowings                                   31       1,863    12,500
   Convertible notes                                 32       5,603         –

                                                              7,644    13,543

   Net current assets                                        75,859    33,376

   Total assets less current liabilities                    227,037   184,653

   Non-current liabilities
   Convertible notes                                 32           –    15,225

   Net assets                                               227,037   169,428


   EQUITY
   Share capital                                     33       1,865     1,689
   Reserves                                          34     225,172   167,739

   Total equity                                             227,037   169,428



                                           – 42 –
APPENDIX I                   FINANCIAL INFORMATION ON THE GROUP


   CONSOLIDATED CASH FLOW STATEMENT
   For the year ended 31 March 2007


                                                                 2007        2006
                                                      Notes   HK$’000     HK$’000


   Cash flows from operating activities


   Profit before income tax from continuing
     and discontinued operations                               11,077      15,169


   Adjustments for:
     Bank interest income                              8         (530)       (116)
     Interest expense                                  9          380       1,527
     Depreciation of property,
       plant and equipment                             12         816         804
     Amortisation of intangible assets                 12         827         740
     Amortisation of prepaid lease payments            12         174         174
     Gain on disposal of property,
       plant and equipment                             12        (135)       (100)


   Operating profit before working
     capital changes                                            12,609      18,198
   Increase in inventories                                     (21,594)    (22,320)
   Increase in trade receivables                                (5,139)     (6,067)
   Decrease in other receivables, deposits
     and prepayments                                              787         623
   Increase/(Decrease) in trade payables                        1,794        (643)
   Decrease in other payables and
     accrued charges                                            (4,163)     (2,417)


   Cash used in operations                                     (15,706)    (12,626)
   Income taxes paid                                              (954)     (2,015)


   Net cash used in operating activities                       (16,660)    (14,641)




                                             – 43 –
APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


                                                               2007        2006
                                                    Notes   HK$’000     HK$’000


   Cash flows from investing activities
   Increase in pledged bank deposits                            (145)      (110)
   Purchase of property, plant and equipment                  (1,948)      (226)
   Addition of intangible assets                                 (76)         –
   Acquisition of a subsidiary (net of cash and
     cash equivalents acquired)                      35       (2,550)          –
   Proceeds from disposal of property,
     plant and equipment                                        158         100
   Decrease of club membership                                    –         100
   Interest received                                            530         116

   Net cash used in investing activities                      (4,031)        (20)

   Cash flows from financing activities
   Repayment of bank loans                                   (14,610)     (3,394)
   Dividends paid to equity holders
     of the Company                                          (3,717)      (1,582)
   Bank interest paid                                          (251)        (810)
   Interest on convertible notes paid                          (120)        (667)
   Proceeds from the issue of new shares                     39,770        9,704
   Share issue expenses                                        (989)           –
   New bank loans raised                                      2,188        9,519

   Net cash generated from financing activities              22,271      12,770

   Net increase/(decrease) in cash and
     cash equivalents                                         1,580       (1,891)

   Cash and cash equivalents at 1 April                       2,318       4,119

   Effect of foreign exchange rate changes                       32          90

   Cash and cash equivalents at 31 March                      3,930       2,318


   Analysis of balances of cash and
     cash equivalents
   Cash and bank balances                                      5,299      2,318
   Bank overdrafts                                            (1,369)         –

   Cash and cash equivalents at 31 March                      3,930       2,318



                                           – 44 –
APPENDIX I                                     FINANCIAL INFORMATION ON THE GROUP


   CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
   For the year ended 31 March 2007

                                                          Attributable to equity holders of the Company
                                                                              Contri-           Proposed
                                 Share       Share     Capital    Special       buted Exchange       final     Retained                Minority
                                capital   premium      reserve    reserve     surplus   reserve dividends        profits     Total     interests      Total
                               HK$’000    HK$’000     HK$’000    HK$’000     HK$’000 HK$’000 HK$’000           HK$’000     HK$’000     HK$’000      HK$’000
                                                                 (Note 1)    (Note 2)

   At 1 April 2005                1,428      3,336        282     (36,810)    49,394         (88)         –      98,954    116,496            –     116,496
   Exchange difference
     on translation of
     overseas operations
     recognised directly
     in equity                       –           –          –           –          –          90          –           –         90            –          90
   Profit for the year               –           –          –           –          –           –          –      13,538     13,538            –      13,538

   Total recognised income
      for the year                   –           –          –           –          –          90          –      13,538     13,628            –      13,628
   Issue of shares upon
      conversion of
      convertible notes            201      49,932       (216)          –          –           –          –           –     49,917            –      49,917
   Issue of shares upon
      exercise of
      share options                 60       9,644          –           –          –           –          –           –      9,704            –       9,704
   Interim dividend paid for
      the period ended
      30 September 2005              –           –          –           –          –           –          –      (1,582)     (1,582)          –       (1,582)
   Proposed final dividends
      for the year ended
      31 March 2006                  –           –          –           –          –           –      1,855      (1,855)          –           –            –

   At 1 April 2006                1,689     62,912         66     (36,810)    49,394           2      1,855     109,055    188,163            –     188,163
   Exchange difference on
     translation of overseas
     operations recognised
     directly in equity              –           –          –           –          –          32          –           –         32             –         32
   Profit for the year               –           –          –           –          –           –          –      11,370     11,370            (7)    11,363

   Total recognised income
      for the year                   –           –          –           –          –          32          –      11,370     11,402            (7)    11,395
   Issue of shares upon
      conversion of
      convertible notes             39       9,634        (42)          –          –           –          –           –      9,631            –       9,631
   Issue of shares upon
      exercise of
      share options                 57      10,513          –           –          –           –          –           –     10,570            –      10,570
   Placing of shares                80      29,120          –           –          –           –          –           –     29,200            –      29,200
   Expenses of issues
      of shares                      –        (989)         –           –          –           –          –           –       (989)           –        (989)
   Minority interests arising
      from acquisition of a
        subsidiary                   –           –          –           –          –           –          –           –           –       2,450       2,450
   Final dividend paid for
      the year ended
      31 March 2006                  –           –          –           –          –           –     (1,855)          –      (1,855)          –       (1,855)
   Interim dividend paid for
      the period ended
      30 September 2006              –           –          –           –          –           –          –      (1,862)     (1,862)          –       (1,862)
   Proposed final dividends
      for the year ended
      31 March 2007                  –           –          –           –          –           –      2,081      (2,081)          –           –            –

   At 31 March 2007               1,865    111,190         24     (36,810)    49,394          34      2,081     116,482    244,260        2,443     246,703




                                                                      – 45 –
APPENDIX I                          FINANCIAL INFORMATION ON THE GROUP


   Notes:


   1.       The special reserve of the Group represents the difference between the nominal amount of the shares of
            the subsidiaries at the date on which they were acquired by the Company and the nominal amount of the
            shares issued for the acquisition.


   2.       Pursuant to a special resolution passed at the annual general meeting of the Company on 10 August 2004,
            the Company reduced its share premium by an amount of approximately HK$286,300,000 in accordance
            with the provisions of section 46 of the Bermuda Companies Act 1981 and transferred the same amount
            to the contributed surplus account of the Company. On the same date, the Company applied an amount of
            approximately HK$236,906,000 from the contributed surplus account against the accumulated losses. The
            remaining balance of the contributed surplus amounted to HK$49,394,000.




                                                   – 46 –
APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


   NOTES TO THE FINANCIAL STATEMENTS
   For the year ended 31 March 2007


   1.    General information


          Jade Dynasty Group Limited                         (the “Company”) is an exempted
   company with limited liability incorporated in Bermuda. The address of its registered office
   is Clarendon House, 2 Church House, Hamilton HM11, Bermuda and its principal place of
   business is 11th Floor Safety Godown Industrial Building, 56 Ka Yip Street, Chai Wan,
   Hong Kong. The Company’s shares are listed on The Stock Exchange of Hong Kong Limited
   (the “Stock Exchange”).


          The principal activity of the Company is investment holding. The principal activities
   of the Company and its subsidiaries (the “Group”) are the publication of comics books and
   multimedia development. There were no changes in the nature of the principal activities
   during the year. On 30 April 2005, the Group has completed the discontinuation of its
   restaurant operations in Hong Kong.


          The financial statements on pages 37 to 107 have been prepared in accordance with
   Hong Kong Financial Reporting Standards (“HKFRSs”) which collective term includes all
   applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting
   Standards and Interpretations issued by the Hong Kong Institute of Certified Public
   Accountants (“HKICPA”). The financial statements also include the applicable disclosure
   requirements of the Hong Kong Companies Ordinance and the Rules Governing the Listing
   of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).


          The financial statements for the year ended 31 March 2007 were approved for issue
   by the board of directors on 26 July 2007.


   2.    Adoption of new and amended HKFRSs


           From 1 April 2006, the Group has adopted all the new and amended HKFRSs which
   are first effective on 1 April 2006 and relevant to the Group. The adoption of these HKFRSs
   has resulted in changes in the Group’s accounting policies on


         •      financial guarantee contracts


          Other than the above, the adoption of these new and amended HKFRSs did not result
   in any significant changes in the Company’s and the Group’s accounting policies.




                                          – 47 –
APPENDIX I                FINANCIAL INFORMATION ON THE GROUP


       2.1   Amendments to HKAS 39 Financial Instruments: Recognition and
             Measurement – Financial Guarantee Contracts


              The amendments to HKAS 39 require an entity to account for certain financial
       guarantee contracts in accordance with that standard. To comply with the requirements
       of the amended HKAS 39, the Group has adopted a new accounting policy to recognise
       financial guarantee contracts. On initial recognition, these contracts are measured at
       fair value and they are subsequently stated at the higher of:


             –      the amount initially recognised less where appropriate, cumulative
                    amortisation recognised in accordance with the Group’s revenue
                    recognition policies; and


             –      the amount of the obligation under the contract, as determined in
                    accordance with HKAS 37 “Provision, Contingent Liabilities and
                    Contingent Assets” (“HKAS 37”).


             Details of this new accounting policy are set out in note 3.21.


              Prior to adopting this new accounting policy, the Company and the Group
       disclosed the financial guarantees issued as contingent liabilities in accordance with
       HKFRS 4 “Insurance Contracts” and HKAS 37. Provisions for the Group’s liabilities
       under the financial guarantee contracts were made when it was more likely than not
       that the guaranteed party would default and the Group would incur outflow of resources
       embodying economic benefits.


              This new accounting policy requires these financial guarantee contracts to be
       recognised in the balance sheet according to the Group’s accounting policy as set out
       in note 3.21.


              The changes in accounting policies arising from the adoption of amended HKAS
       39 in respect of financial guarantee contracts did not have any significant impact to
       the Group’s results or financial position for the years presented.




                                        – 48 –
APPENDIX I                FINANCIAL INFORMATION ON THE GROUP


       2.2   New or amended HKFRSs that have been issued but are not yet effective


              The Group has not early adopted the following HKFRSs that have been issued
       but are not yet effective. The directors of the Company are currently assessing the
       impact of these HKFRSs but are not yet in a position to state whether they would
       have material financial impact on the Group’s financial statements.


             Amendments to HKAS 1                      Presentation of Financial Statements –
                                                         Capital Disclosures1
             HKAS 23 (Revised)                         Borrowing Costs 2
             HKFRS 7                                   Financial Instruments: Disclosures 1
             HKFRS 8                                   Operating Segments 2
             HK(IFRIC) – Interpretation 8              Scope of HKFRS 2 3
             HK(IFRIC) – Interpretation 9              Reassessment of Embedded Derivatives 4
             HK(IFRIC) – Interpretation 10             Interim Financial Reporting and
                                                         Impairment 5
             HK(IFRIC) – Interpretation 11             Group and Treasury Share Transactions6
             HK(IFRIC) – Interpretation 12             Service Concession Arrangements 7

             1
                   Effective for annual periods beginning on or after 1 January 2007.
             2
                   Effective for annual periods beginning on or after 1 January 2009.
             3
                   Effective for annual periods beginning on or after 1 May 2006.
             4
                   Effective for annual periods beginning on or after 1 June 2006.
             5
                   Effective for annual periods beginning on or after 1 November 2006.
             6
                   Effective for annual periods beginning on or after 1 March 2007.
             7
                   Effective for annual periods beginning on or after 1 January 2008.




                                           – 49 –
APPENDIX I                   FINANCIAL INFORMATION ON THE GROUP


   3.   Summary of significant accounting policies


        3.1   Basis of preparation


              The significant accounting policies that have been adopted in the preparation
        of these financial statements are summarised below. These policies have been
        consistently applied to all the years presented unless otherwise stated.


              The financial statements have been prepared on the historical cost basis.


               It should be noted that accounting estimates and assumptions are used in
        preparation of the financial statements. Although these estimates are based on
        management’s best knowledge and judgement of current events and actions, actual
        results may ultimately differ from those estimates. The areas involving a higher
        degree of judgement or complexity, or areas where assumptions and estimates are
        significant to the financial statements, are disclosed in note 4.


        3.2   Basis of consolidation


              The consolidated financial statements incorporate the financial statements of
        the Company and its subsidiaries made up to 31 March each year.


        3.3   Subsidiaries


               Subsidiaries are entities (including special purpose entities) over which the
        Group has the power to control the financial and operating policies so as to obtain
        benefits from their activities. The existence and effect of potential voting rights that
        are currently exercisable or convertible are considered when assessing whether the
        Group controls another entity. Subsidiaries are fully consolidated from the date on
        which control is transferred to the Group. They are excluded from consolidation from
        the date that control ceases.


               Business combinations (other than for combining entities under common control)
        are accounted for by applying the purchase method. This involves the revaluation at
        fair value of all identifiable assets and liabilities, including contingent liabilities of
        the subsidiary, at the acquisition date, regardless of whether or not they were recorded
        in the financial statements of the subsidiary prior to acquisition. On initial recognition,
        the assets and liabilities of the subsidiary are included in the consolidated balance
        sheet at their fair values, which are also used as the bases for subsequent measurement
        in accordance with the Group’s accounting policies.




                                           – 50 –
APPENDIX I                FINANCIAL INFORMATION ON THE GROUP


             Intra-group transactions, balances and unrealised gains on transactions between
       group companies are eliminated in preparing the consolidated financial statements.
       Unrealised losses are also eliminated unless the transaction provides evidence of an
       impairment of the asset transferred.


              In the Company’s balance sheet, subsidiaries are carried at cost less any
       impairment loss. The results of the subsidiaries are accounted for by the Company on
       the basis of dividends received and receivable at the balance sheet date.


             Minority interest represents the portion of the profit or loss and net assets of a
       subsidiary attributable to equity interests that are not owned by the Group and are not
       the Group’s financial liabilities.


              Minority interests are presented in the consolidated balance sheet within equity,
       separately from the equity attributable to the equity holders of the Company. Profit or
       loss attributable to the minority interests are presented separately in the consolidated
       income statement as an allocation of the Group’s results. Where losses applicable to
       the minority exceeds the minority interests in the subsidiary’s equity, the excess and
       further losses applicable to the minority are allocated against the minority interests to
       the extent that the minority has a binding obligation and is able to make an additional
       investment to cover the losses. Otherwise, the losses are charged against the Group’s
       interests. If the subsidiary subsequently reports profits, such profits are allocated to
       the minority interests only after the minority’s share of losses previously absorbed by
       the Group has been recovered.


       3.4   Foreign currency translation


              The financial statements are presented in Hong Kong Dollars (HK$), which is
       also the functional currency of the Company.


              In the individual financial statements of the consolidated entities, foreign
       currency transactions are translated into the functional currency of the individual
       entity using the exchange rates prevailing at the dates of the transactions. At balance
       sheet date, monetary assets and liabilities denominated in foreign currencies are
       translated at the foreign exchange rates ruling at the balance sheet date. Foreign
       exchange gains and losses resulting from the settlement of such transactions and from
       the balance sheet date retranslation of monetary assets and liabilities are recognised
       in the income statement.




                                         – 51 –
APPENDIX I                FINANCIAL INFORMATION ON THE GROUP


              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 and are reported as part of the fair value gain or loss. Non-monetary
       items that are measured in terms of historical cost in a foreign currency are not
       retranslated.


               In the consolidated financial statements, all individual financial statements of
       foreign operations, originally presented in a currency different from the Group’s
       presentation currency, have been converted into Hong Kong dollars. Assets and
       liabilities have been translated into Hong Kong dollars at the closing rates at the
       balance sheet date. Income and expenses have been converted into Hong Kong dollars
       at the exchange rates ruling at the transaction dates, or at the average rates over the
       reporting period provided that the exchange rates do not fluctuate significantly. Any
       differences arising from this procedure have been dealt with separately in the exchange
       reserve in equity. Goodwill and fair value adjustments arising on the acquisition of a
       foreign operation on or after 1 April 2005 have been treated as assets and liabilities
       of the foreign operation and translated into Hong Kong dollars at the closing rates.
       Goodwill arising on the acquisitions of foreign operations before 1 April 2005 is
       translated at the foreign exchange rate that applied at the date of acquisition of the
       foreign operation.


       3.5   Revenue recognition


              Revenue comprises the fair value for the sale of goods, rendering of services
       and the use by others of the Group’s assets yielding interest, royalties and dividends,
       net of returns and discounts. Provided it is probable that the economic benefits will
       flow to the Group and the revenue can be measured reliably, revenue is recognised as
       follows:


             Sales of goods are recognised when goods are delivered.


             Royalty income and return on film investment are recognised on a basis in
       accordance with the terms of the relevant agreements.


              Online comics viewing income are recognised on a basis that reflects the timing,
       nature and value of the benefits provided.


             Service fees are recognised when services are rendered.




                                         – 52 –
APPENDIX I                 FINANCIAL INFORMATION ON THE GROUP


             Advertising income for advertisements on comics books is recognised on the
       relevant publication date of the Group’s comics books.


              Interest income is recognised on a time-proportion basis using the effective
       interest method.


             Dividend is recognised when the right to receive the payment is established.


       3.6   Borrowing costs


             All borrowing costs are recognised as and included in interest in the period in
       which they are incurred.


       3.7   Goodwill


              Goodwill arising on a business combination represents the excess of the cost of
       the business combination over the Group’s interest in the net fair value of the acquiree’s
       identifiable assets, liabilities and contingent liabilities at the date of acquisition. The
       cost is measured at the aggregate of the fair values, at the date of exchange, of assets
       given, liabilities incurred or assume, and equity instruments issued by the Group,
       plus any costs directly attributable to the business combination.


              Goodwill is stated at cost less accumulated impairment losses. Goodwill is
       allocated to cash-generating units and is tested annually for impairment (see note
       3.10).


              Any excess of the Group’s interest in the net fair value of the acquiree’s
       identifiable assets, liabilities and contingent liabilities over the cost of a business
       combination is recognised immediately in the income statement.


              On subsequent disposal of a subsidiary, the attributable amount of goodwill
       capitalised is included in the determination of the amount of gain or loss on disposal.




                                          – 53 –
APPENDIX I                FINANCIAL INFORMATION ON THE GROUP


       3.8   Intangible assets (other than goodwill)


              Intangible assets are recognised initially at cost. After initial recognition,
       intangible assets with finite useful lives are carried at costs less accumulated
       amortisation and any accumulated impairment losses. Amortisation for intangible
       assets with finite useful lives is provided on a straight-line basis over their estimated
       useful lives. Amortisation commences when the intangible assets are available for
       use.


              The intangible assets of the Group which have definite useful lives are amortised
       on a straight-line basis over the following useful lives:


             Copyrights                                                            4 – 10 years
             Trademarks                                                                 5 years


              Gains or losses arising from derecognition of an intangible asset are measured
       at the difference between the net disposal proceeds and the carrying amount of the
       asset and are recognised in the consolidated income statement when the asset is
       derecognised.


             Intangible assets are tested for impairment as described in note 3.10.


       3.9   Property, plant and equipment


              Buildings held for own use which are situated on leasehold land, where the fair
       value of the building could be measured separately from the fair value of the leasehold
       land at the inception of the lease, and other items of property, plant and equipment
       are stated at cost less accumulated depreciation and accumulated impairment losses.




                                         – 54 –
APPENDIX I                 FINANCIAL INFORMATION ON THE GROUP


             Depreciation is provided to write off the cost of items of property, plant and
       equipment, over their estimated useful lives and after taking into account of their
       estimated residual value, using the straight-line method, at the following rates per
       annum:


             Buildings                                                Over the estimated useful
                                                                       lives of 50 years or over
                                                                         the terms of the leases,
                                                                            if less than 50 years
             Furniture and equipment                                                  10 – 33 1/3%
             Fixture                                                 10 – 20% or over the term
                                                                                     of the leases
                                                                            whichever is shorter
             Motor vehicles                                                             20 – 25%


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


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


             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 costs, such as repairs and maintenance are charged to the
       income statement during the financial period in which they are incurred.




                                          – 55 –
APPENDIX I                 FINANCIAL INFORMATION ON THE GROUP


       3.10 Impairment of non-financial assets


              Goodwill arising on an acquisition of subsidiary, other intangible assets,
       property, plant and equipment, prepaid lease payments and interests in subsidiaries
       are subject to impairment testing.


              Goodwill and other intangible assets with an indefinite useful life or those not
       yet available for use are tested for impairment at least annually, irrespective of whether
       there is any indication that they are impaired. All other assets are tested for impairment
       whenever there are indications that the asset’s carrying amount may not be recoverable.


              An impairment loss is recognised as an expense immediately for the amount by
       which the asset’s carrying amount exceeds its recoverable amount. The recoverable
       amount is the higher of fair value, reflecting market conditions less costs to sell, and
       value in use. In assessing value in use, the estimated future cash flows are discounted
       to their present value using a pre-tax discount rate that reflects current market
       assessment of time value of money and the risk specific to the asset.


              For the purposes of assessing impairment, where an asset does not generate
       cash inflows largely independent from those from other assets, the recoverable amount
       is determined for the smallest group of assets that generate cash inflows independently
       (i.e. a cash-generating unit). As a result, some assets are tested individually for
       impairment and some are tested at cash-generating unit level. Goodwill in particular
       is allocated to those cash-generating units that are expected to benefit from synergies
       of the related business combination and represent the lowest level within the Group at
       which the goodwill is monitored for internal management purpose.


              Impairment losses recognised for cash-generating units, to which goodwill has
       been allocated, are credited initially to the carrying amount of goodwill. Any remaining
       impairment loss is charged pro rata to the other assets in the cash-generating unit,
       except that the carrying value of an asset will not be reduced below its individual fair
       value less cost to sell, or value in use, if determinable.


              An impairment loss on goodwill is not reversed in subsequent periods. In
       respect of other assets, an impairment loss is reversed if there has been a favourable
       change in the estimates used to determine the asset’s recoverable amount and only to
       the extent that the asset’s carrying amount does not exceed the carrying amount that
       would have been determined, net of depreciation or amortisation, if no impairment
       loss had been recognised.




                                         – 56 –
APPENDIX I                FINANCIAL INFORMATION ON THE GROUP


       3.11 Leasing


              An arrangement, comprising a transaction or a series of transactions, is or
       contains a lease if the Group determines that the arrangement conveys a right to use a
       specific asset or assets for an agreed period of time in return for a payment or a series
       of payments. Such a determination is made based on an evaluation of the substance of
       the arrangement and is regardless of whether the arrangement takes the legal form of
       a lease.


             (i)    Classification of assets leased to the Group


                     Assets that are held by the Group under leases which transfer to the
             Group substantially all the risks and rewards of ownership are classified as
             being held under finance leases. Leases which do not transfer substantially all
             the risks and rewards of ownership to the Group are classified as operating
             leases.


             (ii)   Assets acquired under finance leases


                    Where the Group acquires the right to use the assets under finance
             leases, the amounts representing the fair values of the leased asset, or, if lower,
             the present values of the minimum lease payments, of such assets are included
             in property, plant and equipment and the corresponding liabilities, net of finance
             charges, are recorded as obligation under finance leases.


                   Subsequent accounting for assets held under finance lease agreements
             corresponds to those applied to comparable acquired assets. The corresponding
             finance lease liabilities are reduced by lease payments less finance charges.


                    Finance charges implicit in the lease payments are charged to income
             statement over the period of the leases so as to produce an approximately
             constant periodic rate of charge on the remaining balance of the obligations for
             each accounting period. Contingent rentals are charged to income statement in
             the accounting period in which they are incurred.




                                         – 57 –
APPENDIX I                FINANCIAL INFORMATION ON THE GROUP


             (iii)   Operating lease charges as the lessee


                    Where the Group has the right to use the assets held under operating
             leases, payments made under the leases are charged to the income statement on
             a straight line basis over the lease terms except where an alternative basis is
             more representative of the pattern of benefits to be derived from the leased
             assets. Lease incentives received are recognised in the income statement as an
             integral part of the aggregate net lease payments made. Contingent rental are
             charged to the income statement in the accounting period in which they are
             incurred.


       3.12 Financial assets


             The Group’s accounting policies for financial assets other than investments in
       subsidiaries are set out below.


             Recognition and measurement


                     The Group’s financial assets include trade and other receivables and are
             classified as loans and receivables. Management determines the classification
             of its financial assets at initial recognition depending on the purpose for which
             the financial assets were acquired and where allowed and appropriate, re-
             evaluates this designation at every reporting date.


                    All financial assets are recognised when, and only when, the Group
             becomes a party to the contractual provisions of the instrument. When financial
             assets are recognised initially, they are measured at fair value, plus, in the case
             of investments not at fair value through profit or loss, directly attributable
             transaction costs.


                    Loans and receivables are non-derivative financial assets with fixed or
             determinable payments that are not quoted in an active market. Loans and
             receivables are subsequently measured at amortised cost using the effective
             interest method, less any impairment losses. Amortised cost is calculated taking
             into account any discount or premium on acquisition and includes fees that are
             an integral part of the effective interest rate and transaction cost.




                                        – 58 –
APPENDIX I               FINANCIAL INFORMATION ON THE GROUP


             Derecognition


                    Derecognition of financial assets occurs when the rights to receive cash
             flows from the investments expire or are transferred and substantially all of the
             risks and rewards of ownership have been transferred. At each balance sheet
             date, financial assets are reviewed to assess whether there is objective evidence
             of impairment. If any such evidence exists, impairment loss is determined and
             recognised based on the classification of the financial asset.


             Impairment of financial assets


                   At each balance sheet date, financial assets other than at fair value
             through profit or loss are reviewed to determine whether there is any objective
             evidence of impairment. If any such evidence exists, the impairment loss is
             measured and recognised as follows:


                   For financial assets carried at amortised cost:


                          If there is objective evidence that an impairment loss on loans
                   and receivables carried at amortised cost has been incurred, the amount
                   of the loss is measured as the difference between the asset’s carrying
                   amount and the present value of estimated future cash flows (excluding
                   future credit losses that have not been incurred) discounted at the financial
                   asset’s original effective interest rate (i.e. the effective interest rate
                   computed at initial recognition). The amount of the loss is recognised in
                   profit or loss of the period in which the impairment occurs.


                          If, in subsequent period, the amount of the impairment loss
                   decreases and the decrease can be related objectively to an event occurring
                   after the impairment was recognised, the previously recognised
                   impairment loss is reversed to the extent that it does not result in a
                   carrying amount of the financial asset exceeding what the amortised
                   cost would have been had the impairment not been recognised at the
                   date the impairment is reversed. The amount of the reversal is recognised
                   in income statement in the period in which the reversal occurs.




                                        – 59 –
APPENDIX I                 FINANCIAL INFORMATION ON THE GROUP


       3.13 Inventories


              Inventories are stated at the lower of cost and net realisable value. Costs
       comprise direct materials and, where applicable, direct labour costs and those overheads
       that have been incurred in bringing the inventories to their present location and
       condition. Cost is calculated using the weighted average method. Net realisable value
       represents the estimated selling price in the ordinary course of business less all
       estimated costs of completion and applicable selling expenses.


       3.14 Accounting for income taxes


             Income tax comprises current tax and deferred tax.


              Current income tax assets and/or liabilities comprise those obligations to, or
       claims from, fiscal authorities relating to the current or prior reporting period, that
       are unpaid at the balance sheet date. They are calculated according to the tax rates
       and tax laws applicable to the fiscal periods to which they relate, based on the taxable
       profit for the year. All changes to current tax assets or liabilities are recognised as a
       component of tax expense in the income statement.


               Deferred tax is calculated using the liability method on temporary differences
       at the balance sheet date between the carrying amounts of assets and liabilities in the
       financial statements and their respective tax bases. Deferred tax liabilities are generally
       recognised for all taxable temporary differences. Deferred tax assets are recognised
       for all deductible temporary differences, tax losses available to be carried forward as
       well as other unused tax credits, to the extent that it is probable that taxable profit
       will be available against which the deductible temporary differences, unused tax
       losses and unused tax credits can be utilised.


              Deferred tax assets and liabilities are not recognised if the temporary difference
       arises from goodwill or from initial recognition (other than in a business combination)
       of assets and liabilities in a transaction that affects neither taxable nor accounting
       profit or loss.


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




                                          – 60 –
APPENDIX I                FINANCIAL INFORMATION ON THE GROUP


             Deferred tax is calculated, without discounting, at tax rates that are expected to
       apply in the period the liability is settled or the asset realised, provided they are
       enacted or substantively enacted at the balance sheet date.


              Changes in deferred tax assets or liabilities are recognised in the income
       statement, or in equity if they relate to items that are charged or credited directly to
       equity.


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


       3.15 Cash and cash equivalents


             Cash and cash equivalents include cash at bank and in hand, demand deposits
       with banks and short term highly liquid investments with original maturities of three
       months or less that are readily convertible into known amounts of cash and which are
       subject to an insignificant risk of changes in value, less bank overdrafts which are
       repayable on demand and form an integral part of the Group’s cash management.


       3.16 Share capital


             Ordinary shares are classified as equity. Share capital is determined using the
       nominal value of shares that have been issued. Any transaction costs associated with
       the issuing of shares are deducted from share premium to the extent they are
       incremental costs directly attributable to the equity transaction.




                                         – 61 –
APPENDIX I               FINANCIAL INFORMATION ON THE GROUP


       3.17 Retirement benefit costs and short term employee benefits


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


             Defined contribution plan


                    The Group operates a defined contribution Mandatory Provident Fund
             retirement benefits scheme (the “MPF Scheme”) under the Mandatory Provident
             Fund Schemes Ordinance, for those employees who are eligible to participate
             in the MPF Scheme. Contributions are made based on a percentage of the
             employees’ basic salaries and are charged to the income statement as they
             become payable in accordance with the rules of the MPF Scheme. The assets
             of the MPF Scheme are held separately from those of the Group in an
             independently administered fund. The Group’s employer contributions vest fully
             with the employees when contributed into the MPF Scheme.


                    The employees of the Group’s subsidiary which operates in the People’s
             Republic of China except for Hong Kong (the “PRC”) are required to participate
             in a central pension scheme operated by the local municipal government. This
             subsidiary is required to contribute 10% – 13% of its payroll costs to the
             central pension scheme. The contributions are charged to the income statement
             as they become payable in accordance with the rules of the central pension
             scheme.


             Short-term employee benefits


                    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.


                    Non-accumulating compensated absences such as sick leave and maternity
             leave are not recognised until the time of leave.




                                         – 62 –
APPENDIX I               FINANCIAL INFORMATION ON THE GROUP


       3.18 Equity-settled share-based payment transactions


             Share options granted to employees of the Company


                     The fair value of services received determined by reference to the fair
             value of share options granted at the grant date is recognised as an expense in
             full at the grant date when the share options granted vest immediately, with a
             corresponding increase in equity (share option reserve).


                    If vesting periods or other vesting conditions apply, the expense is
             recognised over the vesting period, based on the best available estimate of the
             number of share options expected to vest. Non-market vesting conditions are
             included in assumptions about the number of options that are expected to
             become exercisable. Estimates are subsequently revised, if there is any indication
             that the number of share options expected to vest differs from previous estimates.
             No adjustment to expense recognised in prior periods is made if fewer share
             options ultimately are exercised than originally vested.


                   At the time when the share options are exercised, the amount previously
             recognised in share option reserve will be transferred to share capital and share
             premium. When the share options are still not exercised at the expiry date, the
             amount previously recognised in share option reserve will be transferred to
             accumulated profits.


             Share options granted to consultants, advisors, customers, shareholders and
             business associates


                    Share options issued in exchange for goods or services are measured at
             the fair values of the goods or services received. The fair values of the goods
             or services received are recognised as expenses immediately, unless the goods
             or services qualify for recognition as assets. Corresponding adjustment has
             been made to equity (share option reserve).




                                        – 63 –
APPENDIX I                FINANCIAL INFORMATION ON THE GROUP


       3.19 Financial liabilities


              The Group’s financial liabilities include bank loans and overdrafts, trade and
       other payables and convertible notes.


              Financial liabilities are recognised when the Group becomes a party to the
       contractual provisions of the instrument. All interest related charges are recognised
       as an expense in finance costs in the income statement.


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


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


             Borrowings


                    Borrowings are recognised initially at fair value, net of transaction costs
             incurred. Borrowings are subsequently stated at amortised cost; any difference
             between the proceeds (net of transaction costs) and the redemption value is
             recognised in the income statement over the period of the borrowings using the
             effective interest method.


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


             Convertible notes


                    Convertible notes issued by the Group that contain both financial liability
             and equity components are classified separately into respective liability and
             equity components on initial recognition. On initial recognition, the fair value
             of the liability component is determined using the prevailing market interest of
             similar non-convertible debts. The difference between the proceeds of the issue
             of the convertible notes and the fair value assigned to the liability component,
             representing the embedded option for the holders to convert the notes into
             equity, is included in equity (capital reserve).




                                        – 64 –
APPENDIX I                FINANCIAL INFORMATION ON THE GROUP


                    In subsequent periods, the liability component of the convertible notes
             is carried at amortised cost using the effective interest method. The equity
             component, represented by the option to convert the liability component into
             ordinary shares of the Company, will remain in capital reserve until the
             embedded option is exercised (in which case the balance stated in capital
             reserve will be transferred to share premium). Where the option remains
             unexercised at the expiry date, the balance stated in capital reserve will be
             released to the accumulated profits. No gain or loss is recognised in profit or
             loss upon conversion or expiration of the option.


                    Transaction costs that relate to the issue of the convertible notes are
             allocated to the liability and equity components in proportion to the allocation
             of the proceeds. Transaction costs relating to the equity component are charged
             directly to equity. Transaction costs relating to the liability component are
             included in the carrying amount of the liability portion and amortised over the
             period of the convertible notes using the effective interest method.


             Trade and other payables


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


       3.20 Provisions, contingent liabilities and contingent assets


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


              All provisions are reviewed at each balance sheet date and adjusted to reflect
       the current best estimate.


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




                                         – 65 –
APPENDIX I                 FINANCIAL INFORMATION ON THE GROUP


              Contingent liabilities are recognised in the course of the allocation of purchase
       price to the assets and liabilities acquired in a business combination. They are initially
       measured at fair value at the date of acquisition and subsequently measured at the
       higher of the amount that would be recognised in a comparable provision as described
       above and the amount initially recognised less any accumulated amortisation, if
       appropriate.


       3.21 Financial guarantees issued


              A financial guarantee contract is a contract that requires the issuer (or guarantor)
       to make specified payments to reimburse the holder for a loss it incurs because a
       specified debtor fails to make payment when due in accordance with the terms of a
       debt instrument.


               Where the Group issues a financial guarantee, the fair value of the guarantee is
       initially recognised as deferred income within other payables. Where consideration is
       received or receivable for the issuance of the guarantee, the consideration is recognised
       in accordance with the Group’s policies applicable to that category of asset. Where
       no such consideration is received or receivable, an immediate expense is recognised
       in profit or loss on initial recognition of any deferred income.


               The amount of the guarantee initially recognised as deferred income is amortised
       in income statement over the term of the guarantee as income from financial guarantees
       issued. In addition, provisions are recognised if and when it becomes probable that
       the holder of the guarantee will call upon the Group under the guarantee and the
       amount of that claim on the Group is expected to exceed the current carrying amount
       i.e. the amount initially recognised less accumulated amortisation, where appropriate.


       3.22 Segment reporting


             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 segments as the secondary reporting format.


              In respect of business segment reporting, unallocated costs represent corporate
       expenses. Segment assets consist primarily of intangible assets, property, plant and
       equipment, inventories, receivables and operating cash, and mainly exclude corporate
       assets. Segment liabilities comprise operating liabilities and exclude items such as
       taxation and certain corporate borrowings.




                                          – 66 –
APPENDIX I                 FINANCIAL INFORMATION ON THE GROUP


             Capital expenditure comprises additions to intangible assets and property, plant
       and equipment, including additions resulting from acquisitions through purchases of
       subsidiaries.


              In respect of geographical segment reporting, revenue is based on the country
       in which the customer is located and total assets and capital expenditure are where
       the assets are located.


       3.23 Related parties


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


             (i)     directly, or indirectly through one or more intermediaries, the party (1)
                     controls, is controlled, or is under common control with, the Company/
                     Group; (2) has an interest in the Company that gives it significant
                     influence over the Company/Group; or (3) has joint control over the
                     Company/Group;


             (ii)    the party is an associate;


             (iii)   the party is a jointly-controlled entity;


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


             (v)     the party is a close member of the family of any individual referred to in
                     (i) or (iv);


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


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




                                          – 67 –
APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


   4.    Critical accounting estimates and judgements


         Estimates and judgements are continually evaluated and are based on historical
   experience and other factors including expectations of future events that are believed to be
   reasonable under the circumstances.


         The Group makes estimates and assumptions concerning the future. The resulting
   accounting estimates will, by definition, seldom equal to the related actual results. The
   estimates and assumptions that have a significant risk of causing a material adjustment to
   the carrying amounts of assets and liabilities within the next financial year are discussed
   below:


         Assessment of impairment of goodwill


                The Group tests annually whether goodwill has suffered any impairment in
         accordance with the accounting policy stated in note 3.10. The recoverable amounts
         of cash-generating units have been determined based on value-in-use calculations.
         These calculations require the Group to estimate the future cash flows expected to
         arise from the cash-generating units and a suitable discount rate. In cases where the
         actual future cash flows generated are less than expected, a material portion of the
         goodwill may be derecognised, which would be charged to the consolidated income
         statement for the year in which such a derecognition takes place. As at 31 March
         2007, the carrying amount of goodwill was HK$124,539,000 (2006: HK$124,539,000).
         Details of the impairment assessment are disclosed in note 21.


         Assessment of indication of impairment of intangible assets


                The Group assesses at each reporting date whether there is any indication that
         the intangible assets with definite lives may be impaired. If any such indication
         exists, the Group will estimate the recoverable amount of the assets in accordance
         with the accounting policy stated in note 3.10. In assessing whether there is any
         indication that intangible assets may be impaired, the Group considers indications
         from both internal and external sources of information such as evidence of obsolescence
         or decline in economic performance of the assets, changes in market, economic
         environment and customers’ tastes. These assessments are subjective and require
         management’s judgements and estimations.




                                          – 68 –
APPENDIX I                 FINANCIAL INFORMATION ON THE GROUP


       Deferred tax


               As at 31 March 2007, deferred tax assets of HK$4,353,000 (2006:
       HK$3,092,000) in relation to unused tax losses have been recognised in the
       consolidated balance sheet. The realisability of the deferred tax assets mainly depends
       on whether sufficient future profits or taxable temporary differences will be available
       in the future. Based on the taxable profit and loss projection of the relevant subsidiaries,
       it is probable the Group can fully utilise deferred tax assets recognised within the
       utilisation period. In cases where the actual future profits generated are less than
       expected, a material portion of these deferred tax assets may be derecognised, which
       would be charged to the consolidated income statement for the year in which such a
       reversal takes place.


       Allowances for trade receivables


              The policy for allowance for doubtful debts of the Group is based on the
       evaluation of collectability and ageing analysis of trade receivables and on
       management’s judgement. A considerable amount of judgement is required in assessing
       the ultimate realisation of these receivables, including current creditworthiness and
       the past collection history of each customer. If the financial conditions of the customers
       of the Group deteriorate thus resulting in impairment as to their ability to make
       payments, additional allowances may be required.


       Allowances for inventories


              The management of the Group reviews the inventory list at each balance sheet
       date, and makes allowance for obsolete and slow-moving inventory items identified
       that are no longer suitable for sales. In particular, work-in-progress represents the
       production costs of certain comics films. The management estimates the net realisable
       value for such inventories based primarily on the expected future market conditions
       as to whether the revenue associated with these comics films is sufficient to cover the
       costs of production. The Group carries out an inventory review at each balance sheet
       date and makes allowance if the net realisable value is below the cost.




                                          – 69 –
APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


   5.    Financial risk management objectives and policies


          The Group’s major financial instruments include trade receivables, other receivables,
   deposits, bank balances, trade payables, other payables, accrued charges, bank borrowings
   and convertible notes. Details of these financial instruments are disclosed in respective
   notes. The risks associated with these financial instruments and the policies on how to
   mitigate these risks are set out below. The management manages and monitors these exposures
   to ensure appropriate measures are implemented on a timely and effective manner.


         Fair value interest rate risk


               The Group’s fair value interest rate risk relates primarily to pledged bank
         deposits and convertible notes due to fluctuation of prevailing market rates. The
         Group has not used any derivative contracts to hedge its exposure to interest rate risk.
         The directors consider the Group’s exposure to interest rate risk is not significant as
         the pledged bank deposits are within short maturity period and majority of the
         convertible notes were already converted into the shares of the Company.


         Cash flow interest rate risk


                The Group’s cash flow interest rate risk relates primarily to bank balances and
         bank borrowings. Bank balances and bank borrowings at variable market rates expose
         the Group to cash flow interest rate risk. The Group has not used any interest rate
         swaps in order to mitigate its exposure associated with the cash flow interest rate
         risk. However, management monitors interest rate exposure and will consider hedging
         significant interest rate exposure should the need arises. Details of the Group’s bank
         borrowings have been disclosed in note 31.


         Credit risk


                The Group’s maximum exposure to credit risk in the event of the counterparties
         failure to perform their obligations in relation to each class of recognised financial
         assets is the carrying amount of those assets as stated in the consolidated balance
         sheet. In order to minimise the credit risk, the management of the Group has monitored
         the credit status of customers and performed necessary procedures to ensure that
         follow-up action is taken to recover overdue debts. In addition, the Group reviews the
         recoverable amount of each individual trade debt at each balance sheet date to ensure
         that adequate impairment losses are made for irrecoverable amounts. In this regard,
         the directors of the Company consider that the Group’s exposure to bad debts is
         minimal.




                                           – 70 –
APPENDIX I                FINANCIAL INFORMATION ON THE GROUP


               The Group is exposed to concentration of credit risk. During the year, sales
       made to a major customer represented about 49% of the Group’s total revenue (2006:
       49%). Trade receivables from this customer represented about 64% of the Group’s
       total trade receivables as at 31 March 2007 (2006: 82%). The Group’s concentration
       of credit risk by geographical locations is mainly in Hong Kong.


              The Group’s bank balances and deposits are placed with banks of high credit
       rating and the Group has limited exposure to any single financial institution.


       Foreign currency risk


             The Group is not exposed to significant foreign currency risk since most of its
       business operations are transacted in Hong Kong dollars.


       Liquidity risk


              Liquidity risk arises in the general funding of the Group’s operating activities.
       It includes the risk of not being able to fund the operating activities at settlement
       dates and liquidate positions in a timely manner at a reasonable price. The Group has
       no significant exposure to liquidity risk. Short-term fundings will be obtained from
       financial institutions, when required.


       Fair value


              The fair values of the Group’s financial assets and liabilities are not materially
       different from their carrying amounts because of the immediate or short term maturity.


              The fair value of the liability component of the convertible notes determined
       based on the present value of the estimated future cash outflows discounted at the
       prevailing market rate for an equivalent non-convertible loan approximated its carrying
       amount at balance sheet date.




                                         – 71 –
APPENDIX I                     FINANCIAL INFORMATION ON THE GROUP


   6.    Revenue – Group


          Revenue represents the net amounts received and receivable for goods sold and services
   rendered to outside customers and the use by others of the Group’s assets yielding interest,
   royalties and dividends less returns and allowances. An analysis of the Group’s revenue for
   the year, for both continuing and discontinued operations, is as follows:


                                                                                    2007               2006
                                                                                 HK$’000            HK$’000


         Continuing operations
         Sale of comics books                                                       83,568           95,964
         Royalty income                                                             11,987            4,468
         Return on film investment                                                   4,800                –
         Sale of merchandised goods                                                  1,067              872
         Online comics viewing income                                                  592              717
         Sale of comics scripts                                                         80              193


                                                                                   102,094          102,214


         Discontinued operations
         Sale of goods in restaurants                                                      –            615
         Services rendered *                                                               –             54


                                                                                           –            669


                                                                                   102,094          102,883


         *      Services rendered represented surcharge for services provided in the restaurants.




                                                – 72 –
APPENDIX I                           FINANCIAL INFORMATION ON THE GROUP


   7.   Segment information – Group


        Business segments


              For management purposes, the Group is                                        currently organised into two main
        operating divisions, namely, publication and                                       distribution of comics books and
        multimedia development. These divisions are the                                    basis on which the Group reports its
        primary segment information. On 30 April                                           2005, the Group completed the
        discontinuation of its restaurant operations.

                                                              Continuing operations              Discontinued operations
                                            Publication and
                                            distribution of      Multimedia                           Restaurant
                                             comics books       development           Total           operations         Consolidated
                                              2007       2006    2007       2006    2007    2006      2007       2006     2007       2006
                                           HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

              Revenue                       90,032        101,414      12,062     800    102,094     102,214         –         669       102,094     102,883


              Segment results                  9,306       22,404       8,410     613     17,716      23,017         –         (89 )      17,716      22,928


              Unallocated corporate
                expenses                                                                  (6,259 )    (6,232 )       –            –       (6,259 )    (6,232)
              Finance costs                                                                 (380 )    (1,527 )       –            –         (380 )    (1,527)

              Profit/(loss) before income tax                                             11,077      15,258         –         (89 )      11,077      15,169

              Income tax credit/(expense)                                                   286       (1,631 )       –            –         286       (1,631)

              Profit/(loss) for the year                                                  11,363      13,627         –         (89 )      11,363      13,538



                                                              Continuing operations                     Discontinued operations
                                                   Publication and
                                                   distribution of           Multimedia                   Restaurant
                                                    comics books            development                    operations                  Consolidated
                                                     2007          2006       2007       2006              2007        2006              2007       2006
                                                  HK$’000     HK$’000     HK$’000     HK$’000           HK$’000     HK$’000           HK$’000    HK$’000

              ASSETS
              Segment assets                       178,650          177,797     77,467      47,339               –         –           256,117       225,136
              Unallocated corporate
                assets                                                                                                                  15,536        10,133

              Consolidated total assets                                                                                                271,653       235,269


              LIABILITIES
              Segment liabilities                      14,079        13,318        10        2,277               –         –            14,089        15,595


              Unallocated corporate
                liabilities                                                                                                             10,861        31,511

              Consolidated total liabilities                                                                                            24,950        47,106




                                                                    – 73 –
APPENDIX I                              FINANCIAL INFORMATION ON THE GROUP


   7.   Segment information – Group


        Other information

                                                            Continuing operations              Discontinued operations
                                          Publication and
                                          distribution of      Multimedia                           Restaurant
                                           comics books       development           Total           operations         Consolidated
                                            2007       2006    2007       2006    2007    2006      2007       2006     2007       2006
                                         HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

        Additions of property,
          plant and equipment               1,922      179        26       47     1,948      226         –         –    1,948       226
        Additions of intangible
          assets on acquisition
          of a subsidiary                      –         –      5,000       –     5,000        –         –         –    5,000         –
        Addition of intangible assets          –         –         76       –        76        –         –         –       76         –
        Gain on disposal of property,
          plant and equipment                135         –         –        –      135         –         –       100      135       100
        Amortisation of prepaid
          lease payments                     174       174         –        –      174       174         –         –      174       174
        Depreciation and
          amortisation                     1,530     1,510       113        –     1,643    1,510         –        34    1,643     1,544



        Geographical segments


                                                                                                        Revenue
                                                                                                      2007         2006
                                                                                                   HK$’000      HK$’000


                   Continuing operations
                   Hong Kong                                                                         92,774                  89,840
                   Taiwan                                                                             4,734                   8,772
                   Others                                                                             4,586                   3,602


                                                                                                   102,094                 102,214


                   Discontinued operations
                   Hong Kong                                                                                 –                   669


                   Total                                                                           102,094                 102,883


             The Group’s assets and liabilities are substantially located in Hong Kong.
        Accordingly, no analysis by geographical segment is presented.




                                                             – 74 –
APPENDIX I                 FINANCIAL INFORMATION ON THE GROUP


   8.    Other income – Group


                                                       2007        2006
                                                    HK$’000     HK$’000


         Continuing operations
         Advertising income                             355         385
         Bank interest income                           530         116
         Others                                         379         720


                                                      1,264       1,221


   9.    Finance costs – Group


                                                       2007        2006
                                                    HK$’000     HK$’000


         Interest on
           – Bank overdrafts and loans wholly
                 repayable within five years            251         810
           – Effective interest expense
                 on convertible notes                   129         717


                                                        380       1,527


   10.   Income tax credit/(expense) – Group


                                                       2007        2006
                                                    HK$’000     HK$’000


         Hong Kong:
           Current tax:
             – Provision for current year             (1,027)     (1,410)
             – Overprovision in prior year                52           9
           Deferred tax credit/(charge) (note 22)      1,261        (230)


                                                        286       (1,631)




                                          – 75 –
APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


         Hong Kong Profits Tax is calculated at 17.5% (2006: 17.5%) on the estimated
   assessable profit for the year.


          No provision for PRC Income Tax has been made as the Group has no assessable
   profit derived from the PRC.


          Reconciliation between income tax credit/(expense) for the year to the profit before
   tax per the consolidated income statement at applicable tax rate is as follows:


                                                                       2007             2006
                                                                    HK$’000          HK$’000


         Profit/(loss) before income tax:
           Continuing operations                                       11,077          15,258
           Discontinued operations                                          –             (89)


                                                                       11,077          15,169


         Tax at the Hong Kong Profits Tax rate of 17.5%
           (2006: 17.5%)                                               (1,939)         (2,655)
         Tax effect of expenses not deductible
           for tax purpose                                                (66)           (183)
         Tax effect of tax losses not recognised                            –            (412)
         Utilisation of tax losses previously not recognised               23              62
         Recognition of tax losses previously
           not recognised                                               1,171               –
         Tax effect of income not taxable                               1,105           1,542
         Overprovision in prior year                                       52               9
         Others                                                           (60)              6


         Income tax credit/(expense) for the year                         286          (1,631)




                                            – 76 –
APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


   11.   Discontinued operations – Group


         In March 2005, the directors were determined to phase out the Group’s restaurant
   operations, which were located in Hong Kong. The Group’s restaurant operations had
   permanently ceased in April 2005.


         The results of the restaurant operations for the year 2006 were as follows:


                                                                        2007              2006
                                                                     HK$’000           HK$’000


         Revenue                                                             –             669
         Cost of goods sold                                                  –            (208)
         Direct operating expenses                                           –            (692)
         Other income                                                        –             142


         Loss before income tax                                              –             (89)
         Income tax                                                          –               –


         Loss from ordinary activities after income tax                      –             (89)


          Since the restaurant operations were ceased in April 2005, there was no cashflow for
   the restaurant operations in operating activities (2006: HK$189,000 cash outflows) and in
   respect of investing activities (2006: HK$100,000 cash inflows) for the year ended 31
   March 2007.




                                          – 77 –
APPENDIX I                      FINANCIAL INFORMATION ON THE GROUP


   12.   Profit for the year – Group

                                             Continuing              Discontinued
                                             operations               operations          Consolidated
                                             2007       2006          2007       2006      2007       2006
                                          HK$’000 HK$’000          HK$’000 HK$’000      HK$’000 HK$’000

         Profit for the year has been
           arrived at after charging:

         Amortisation of intangible
           assets (included in direct
           operating expenses)                  827        740           –          –         827        740
         Amortisation of prepaid
           lease payments (included
           in administrative
           expenses)                            174        174           –          –         174        174
         Auditors’ remuneration                 680        700           –          –         680        700
         Cost of inventories
           recognised as expense             31,766     29,850           –        208      31,766     30,058
         Depreciation*                          816        770           –         34         816        804
         Gain of disposal of property,
           plant and equipment                  135           –          –        100         135        100
         Operating lease payments in
           respect of rented premises           851        968           –         40         851      1,008

         Staff costs, including
           directors’ emoluments
           (note 13) and retirement
           benefits scheme
           contributions (note 15)           49,247     54,225           –        341      49,247     54,566
         Amount capitalised in
           inventories                      (12,090)    (17,190)         –          –     (12,090)   (17,190)

         Amount charged to
          income statement                   37,157     37,035           –        341      37,157     37,376


         *       Depreciation of HK$126,000 (2006: HK$226,000) has been expensed in direct operating expenses
                 and HK$690,000 (2006: HK$578,000) in administrative expenses.




                                               – 78 –
APPENDIX I                        FINANCIAL INFORMATION ON THE GROUP


   13.   Directors’ emoluments – Group


         The emoluments paid or payable to each of the ten (2006: nine) directors were as
   follows:


                                                                               Retirement
                                                                                   benefit
                                    Directors’      Salary and Discretionary       scheme       2007
                                           fee      allowances      bonuses* contributions     Total
                                     HK$’000          HK$’000       HK$’000      HK$’000     HK$’000


         Executive directors:
         Tong Kai Lap                     180             1,614            –           12      1,806
         Wan Siu Lun                      180             1,082            –           12      1,274
         Wong Chun Keung                  180              841             –           12      1,033
         Ko Chi Keung                     180              780             –           12        972
         Kwong Chi Tak                    180              660             –           12        852


         Non-executive directors:
         Zhang Li Chen                     60                –             –            –         60
         Zheng Hao Jiang                   60                –             –            –         60


         Independent non-
           executive directors:
         Ho Yiu Ming                      180                –             –            –        180
         Kwong Chi Keung                  180                –             –            –        180
         Ma Fung Kwok                     180                –             –            –        180


         Total                          1,560             4,977            –           60      6,597




                                                 – 79 –
APPENDIX I                          FINANCIAL INFORMATION ON THE GROUP


                                                                                   Retirement
                                                                                       benefit
                                       Directors’      Salary and Discretionary        scheme            2006
                                              fee      allowances      bonuses* contributions           Total
                                        HK$’000          HK$’000       HK$’000        HK$’000        HK$’000


         Executive directors:
         Tong Kai Lap                         180            1,451         133              12          1,776
         Wan Siu Lun                          180             702         1,568             12          2,462
         Wong Chun Keung                      180             625          360              12          1,177
         Ko Chi Keung                         180             349            43             12            584
         Kwong Chi Tak                        180             444            50             12            686


         Non-executive directors:
         Zhang Li Chen                         30               –             –              –             30


         Independent non-
             executive directors:
         Ho Yiu Ming                          180               –             –              –            180
         Kwong Chi Keung                      180               –             –              –            180
         Ma Fung Kwok                         180               –             –              –            180


         Total                              1,470            3,571        2,154             60          7,255


          During the year, no emoluments were paid by the Group to the directors as an
   inducement to join or upon joining the Group or as compensation for loss office. None of
   the directors has waived or agreed to waive any emoluments during the year.

         *        The discretionary bonuses are determined as a percentage of the results of business segments
                  managed by respective directors.




                                                    – 80 –
APPENDIX I                   FINANCIAL INFORMATION ON THE GROUP


   14.   Employees’ emoluments – Group


         Of the five individuals with the highest emoluments in the Group, three (2006: three)
   were directors of the Company whose emoluments are included in the disclosures in note 13
   above. The total emoluments of the remaining two (2006: two) highest paid individuals
   were as follows:


                                                                       2007             2006
                                                                    HK$’000          HK$’000


         Salaries and other benefits                                    8,404           9,247
         Retirement benefits scheme contributions                          24              24


                                                                        8,428           9,271


         Their emoluments were within the following bands:


                                                                  Number of individuals
                                                                      2007            2006


         HK$3,500,001   to   HK$4,000,000                                   1               1
         HK$4,000,001   to   HK$4,500,000                                   –               –
         HK$4,500,001   to   HK$5,000,000                                   1               –
         HK$5,000,001   to   HK$5,500,000                                   –               1


                                                                            2               2




                                            – 81 –
APPENDIX I                   FINANCIAL INFORMATION ON THE GROUP


   15.   Retirement benefits scheme contributions – Group


          The Group operates three Mandatory Provident Fund Schemes (“MPF Schemes”) for
   all qualifying employees. The assets of the MPF Schemes are held separately in funds under
   the control of independent trustees. The Group contributes 5% of relevant payroll costs to
   the MPF Schemes, which contribution is matched by employees (to the extent of HK$12,000
   per annum per employee).


          The employees of the Group’s subsidiary in the PRC are members of a state-managed
   retirement benefit plan operated by the government of the PRC. The subsidiary is required
   to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund
   the benefits. The only obligation of the Group with respect to the retirement benefit plan is
   to make the specified contributions.


         Total contributions to retirements benefit schemes charged to consolidated income
   statement amounted to HK$1,030,000 (2006: HK$1,005,000).


   16.   Dividends – Group


                                                                         2007             2006
                                                                      HK$’000          HK$’000


         Ordinary shares:
           Interim dividend paid of HK$0.2 cent per share                 1,862            1,582


          An interim dividend for the six months ended 30 September 2006 of HK0.2 cent per
   share (six months ended 30 September 2005: HK0.2 cent) amounting to HK$1,862,000 (six
   months ended 30 September 2005: HK$1,582,000) was paid on 25 January 2007 to the
   shareholders of the Company whose names appeared in the Register of Members on 11
   January 2007.




                                           – 82 –
APPENDIX I                      FINANCIAL INFORMATION ON THE GROUP


         The directors have proposed that a final dividend of HK0.2 cent per share (2006:
   HK0.2 cent) amounting to HK$2,081,000 (2006: HK$1,855,000) be payable on 19 September
   2007 to the shareholders of the Company whose names appear in the Register of Members
   on 30 August 2007 (“Book Close Date”).


                                                                                       2007                2006
                                                                                    HK$’000             HK$’000


         Final dividends to existing shareholders                                       1,865                1,689
         Final dividends to other shareholders (Note i, ii)                               216                  160


                                                                                        2,081                1,849
         Final dividends to other shareholders (Note ii)                                    –                    6


                                                                                        2,081                1,855


         Note i: Subsequent to the year end and up to the date of approval of the financial statements for the year
                 ended 31 March 2007, an aggregate of 8,000,000 ordinary shares (the “New Shares”) were issued
                 pursuant to the conversion of convertible notes and the placement of 100,000,000 ordinary shares
                 to Super Empire Investments Limited, details of which are set out in note 40. The holders of the
                 New Shares are also entitled to the proposed final dividend per share pursuant to the relevant
                 provisions in the Company’s Bye-laws. Accordingly, final dividends of HK$216,000 will be paid
                 to the holders of the New Shares.


                 The number of shares entitled to the final dividends is subject to future exercise/conversion of
                 Company’s share options and convertible notes prior to the Book Close Date.


         Note ii: Subsequent to the year end and up to the date of approval of the financial statements for the year
                 ended 31 March 2006, an aggregate of 80,003,732 ordinary shares (the “New Shares”) were
                 issued pursuant to the conversion of convertible notes, exercise of share options and the placement
                 of ordinary shares to Super Empire Investments Limited. The holders of the New Shares were
                 also entitled to the proposed final dividend per share pursuant to the relevant provisions in the
                 Company’s Bye-laws. Accordingly, final dividends of HK$160,000 were paid to the holders of
                 the New Shares.


                 Subsequent to the announcement of the financial results for the year end 31 March 2006 and prior
                 to the book close date on 23 August 2006, an aggregate of 3,000,000 share options were exercised
                 into 3,000,000 new ordinary shares, the holders of which were also entitled to the final dividend
                 per share pursuant to the relevant provisions in the Company’s Bye-laws. Accordingly, additional
                 final dividends of HK$6,000 were paid to the holders of these new ordinary shares.




                                                  – 83 –
APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


   17.   Earnings per share – Group


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


         For continuing and discontinued operations


                                                                        2007            2006
                                                                     HK$’000         HK$’000


         Earnings
         Earnings for the purposes of basic earnings
           per share                                                   11,370           13,538
         Effect on dilutive potential ordinary shares:
           Interest on convertible notes                                  129              717


         Earnings for the purposes of diluted
           earnings per share                                          11,499           14,255


         Number of shares
         Weighted average number of shares for
           the purposes of basic earnings per share               918,045,752     748,960,707
         Effect of dilutive potential ordinary shares:
           Share options                                            4,114,756       6,457,525
           Convertible notes                                       13,859,668      98,200,863


         Weighted average number of shares
          for the purposes of diluted earnings
          per share                                               936,020,176     853,619,095




                                           – 84 –
APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


          The calculation of the basic and diluted earnings per share from continuing operations
   attributable to the ordinary equity holders of the Company is based on the following data:


         From continuing operations


                                                                         2007             2006
                                                                      HK$’000          HK$’000


                Earnings
                Earnings for the purposes of
                  basic earnings per share                               11,370           13,538
                Add: Loss for the year from
                        discontinued operations                               –               89


                Earnings for the purposes of basic earnings
                  per share from continuing operations                   11,370           13,627
                Effect of dilutive potential ordinary shares:
                  Interest on convertible notes                             129              717


                Earnings for the purposes of diluted
                  earnings per share from
                  continuing operations                                  11,499           14,344


                The denominators used are the same as those detailed above for both basic and
         diluted earnings per share.


         From discontinued operations


                The basic loss per share for discontinued operations for the year ended 31
         March 2006 of HK0.01 cent is based on the calculation on the loss for that year from
         the discontinued operations of HK$89,000 and the same denominators detailed above
         for the basic earnings per share. For the year ended 31 March 2007, there is no result
         from discontinued operations.


                Diluted loss per share for discontinued operations for the year ended 31 March
         2006 is not presented because the exercise of the convertible notes and share options
         outstanding would result in a decrease in net loss per share for that year. For the year
         ended 31 March 2007, there is no result from discontinued operations.




                                           – 85 –
APPENDIX I                 FINANCIAL INFORMATION ON THE GROUP


   18.   Property, plant and equipment – Group

                                                     Furniture,
                                                    fixture and     Motor
                                       Buildings     equipment     vehicles      Total
                                        HK$’000        HK$’000     HK$’000     HK$’000

         At 1 April 2005
         Cost                              6,227        10,443          527     17,197
         Accumulated depreciation           (113)       (9,408)        (308)    (9,829)

         Net carrying amount               6,114         1,035         219       7,368


         Year ended 31 March 2006
         Opening net carrying amount       6,114         1,035          219      7,368
         Additions                             –           226            –        226
         Depreciation                       (132)         (525)        (147)      (804)

         Closing net carrying amount       5,982           736          72       6,790


         At 31 March 2006
         Cost                              6,227         1,936         527       8,690
         Accumulated depreciation
           and impairment                   (245)        (1,200)       (455)     (1,900)

         Net carrying amount               5,982           736          72       6,790


         Year ended 31 March 2007

         Opening net carrying amount       5,982           736           72      6,790
         Additions                             –           638        1,310      1,948
         Disposals                             –             –          (23)       (23)
         Depreciation                       (161)         (414)        (241)      (816)

         Closing net carrying
           amount                          5,821           960        1,118      7,899


         At 31 March 2007
         Cost                              6,227         2,574        1,599     10,400
         Accumulated depreciation
           and impairment                   (406)        (1,614)       (481)     (2,501)

         Net carrying amount               5,821           960        1,118      7,899



                                       – 86 –
APPENDIX I                 FINANCIAL INFORMATION ON THE GROUP


         The Group’s buildings are situated in Hong Kong on land held under long leases.


        The Group has pledged buildings with a carrying amount of HK$5,821,000 (2006:
   HK$5,982,000) to secure general banking facilities granted to the Group (note 31).


   19.   Prepaid lease payments – Group


                                                                      2007            2006
                                                                   HK$’000         HK$’000


         The Group’s prepaid lease payments comprise:


         Leasehold land in Hong Kong under long lease
           Opening net carrying amount                                8,706           8,880
           Amortisation                                                (174)           (174)


           Closing net carrying amount                                8,532           8,706


         Analysed for reporting purposes as:
           Current asset                                                174             174
           Non-current asset                                          8,358           8,532


                                                                      8,532           8,706


         The Group has pledged prepaid lease payments of a carrying amount of HK$8,532,000
   (2006: HK$8,706,000) to secure banking facilities granted to the Group (note 31).




                                         – 87 –
APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


   20.   Intangible assets – Group


                                              Copyrights   Trademarks     Total
                                                HK$’000       HK$’000   HK$’000


         Cost
         At 1 April 2005 and
           31 March 2006                           3,213          151     3,364
         Acquired on acquisition
           of a subsidiary                         5,000            –     5,000
         Addition                                     76            –        76


         At 31 March 2007                          8,289          151     8,440


         Amortisation
         At 1 April 2005                            710            56       766
         Charge for the year                        680            60       740


         At 31 March 2006                          1,390          116     1,506
         Charge for the year                         792           35       827


         At 31 March 2007                          2,182          151     2,333


         Carrying amount
         At 31 March 2007                          6,107            –     6,107


         At 31 March 2006                          1,823           35     1,858




                                     – 88 –
APPENDIX I                   FINANCIAL INFORMATION ON THE GROUP


   21.   Goodwill – Group


                                                                                       HK$’000


         Cost
         At 1 April 2005, 31 March 2006 and 31 March 2007                               124,539


          As explained in note 7, the Group considers and presents business segments as its
   primary segment for reporting segment information. For the purposes of impairment testing,
   goodwill have been allocated to an individual cash generating unit (“CGU”), including
   subsidiaries engaged in publications and distributions of comics books and related businesses.


          For the years ended 31 March 2006 and 2007, management of the Group determines
   that there is no impairment of goodwill.


        The basis of the recoverable amount and its major underlying assumptions are
   summarised below:


          The recoverable amount is determined from value in use calculations. The key
   assumptions for the value in use calculations are discount rate and expected changes in
   selling prices and direct costs in the future. Management estimates discount rate using pre-
   tax rates that reflect current market assessments of the time value of money and the risks
   specific to the CGU. The discount rate used is 7.2% (2006: 7.2%). The growth rate is based
   on industry growth forecast. Selling prices and direct costs are based on past practices and
   expectations of future changes in the market.


          The Group prepares cashflow forecast derived from the most recent financial budgets
   approved by management for the next five years and extrapolates cashflow for the following
   ten years at zero growth rate. After considering the relevant comics business has a history of
   over 30 years with a steady stream of operating profits in the past, the directors considered
   the adoption of a 15-years forecast period is appropriate.




                                           – 89 –
APPENDIX I                   FINANCIAL INFORMATION ON THE GROUP


   22.   Deferred tax assets – Company and Group


         The Company’s and the Group’s deferred tax assets are mainly derived from the
   unused tax losses. The movement during the current and prior years is as follows:


                                                                        Group          Company
                                                                       HK$’000          HK$’000


         At 1 April 2005                                                   3,322            1,165
         Charged to income statement (note 10)                              (230)            (186)


         At 31 March 2006                                                  3,092              979
         Credited/(charged) to income statement (note 10)                  1,261              (99)


         At 31 March 2007                                                  4,353              880


          At the balance sheet date, the Group has unused tax losses of HK$28,744,000 (2006:
   HK$27,662,000) available for offset against future profits. Deferred tax assets have been
   recognised in respect of HK$26,263,000 (2006: HK$17,669,000) of such losses as the
   directors consider that the realisation of these deferred tax assets through the future taxable
   profits of those subsidiaries which incurred these tax losses is probable. No deferred tax
   asset has been recognised in respect of the remaining HK$2,481,000 (2006: HK$9,993,000)
   due to the unpredictability of future profit streams of the subsidiaries which incurred these
   remaining tax losses.


   23.   Inventories – Group


                                                                          2007             2006
                                                                       HK$’000          HK$’000


         Raw materials and consumables                                     1,005              120
         Work-in-progress                                                 61,146           43,457
         Merchandised goods and books                                      3,147              127


                                                                          65,298           43,704


         The work-in-progress represents production and other direct costs in relation to the
   production of animations.




                                           – 90 –
APPENDIX I                   FINANCIAL INFORMATION ON THE GROUP


   24.   Trade receivables – Group


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


                                                                         2007             2006
                                                                      HK$’000          HK$’000


         0 – 30 days                                                     15,353           15,748
         31 – 60 days                                                     5,606            7,337
         61 – 90 days                                                     1,769            2,567
         Over 90 days                                                    10,121            2,058


                                                                         32,849           27,710
         Less: Trade receivables due over one year                       (1,597)               –


         Trade receivables due within one year                           31,252           27,710


          The Group’s sales to its customers are mainly on credit. Except as detailed below, the
   credit period is generally for a period of two to three months for major customers. The
   Group seeks to maintain strict control over its outstanding trade receivables and has a credit
   control policy to minimise credit risk. Overdue balances are reviewed regularly by senior
   management.


          On 9 January 2007, the Group entered into an agreement with one of the major
   customers that HK$8,597,000 of the trade debts due from this customer is to be settled by
   18 equal instalments and approximately HK$1,597,000 of trade receivables from this customer
   are to be settled over one year from the balance sheet date.




                                           – 91 –
APPENDIX I                        FINANCIAL INFORMATION ON THE GROUP


   25.   Interests in subsidiaries – Company


                                                                                           2007                    2006
                                                                                        HK$’000                 HK$’000


         Unlisted shares at cost                                                          150,298                 150,298


         Due from a subsidiary                                                              76,635                  43,069


        The amount due from the subsidiary is unsecured, interest-free and is repayable on
   demand.


         Particulars of the principal subsidiaries at 31 March 2007 are as follows:

                                                                                      Proportion of
                                                                                      nominal value
                                                                                           of issued
                                                                   Nominal value      share capital/
                                  Place of                               of issued        registered
                                  incorporation/   Class of         share capital/   capital held by
         Name of subsidiary       registration     share held   registered capital     the Company     Principal activities

         Jade Dynasty             British Virgin   Ordinary            US$10,000              100%* Investment holding
           Holdings Limited       Islands

         Dragon Animation         British Virgin   Ordinary               US$100               51%     Development of
           Holdings Limited         Islands                                                              animation and
           (formerly known                                                                               related products
           as Dragon Animation
           Limited) **

         Jade Dynasty Comics      Hong Kong        Ordinary                 HK$2              100%     Publication of
           Development Limited                                                                           comics books

         Jade Dynasty             Hong Kong        Ordinary       HK$30,000,000               100%     Publication of
           Publications Limited                                                                          comic books and
                                                                                                         investment holding

         KINGcomics.com           Hong Kong        Ordinary                 HK$2              100%     Provision of online
           Limited                                                                                       comic viewing
                                                                                                         services and
                                                                                                         sales of related
                                                                                                         merchandised goods

         Rising Dragon            Hong Kong        Ordinary              HK$100               100%     Sales of merchandised
           Publications Limited                                                                          goods




                                                   – 92 –
APPENDIX I                       FINANCIAL INFORMATION ON THE GROUP


                                                                                      Proportion of
                                                                                      nominal value
                                                                                           of issued
                                                                   Nominal value      share capital/
                                  Place of                               of issued        registered
                                  incorporation/   Class of         share capital/   capital held by
         Name of subsidiary       registration     share held   registered capital     the Company     Principal activities

         Yuk Long Animation       Hong Kong        Ordinary       HK$30,000,000               100%     Development of
           Limited                                                                                       animation and
                                                                                                         games

         Yuk Long (Overseas)      British Virgin   Ordinary                 US$1              100%     Provision of agency
           Limited                  Islands                                                              and promotion
                                                                                                         services

         Yuk Long Publishing      Hong Kong        Ordinary           HK$10,000               100%     Publication of
           (International)                                                                               comics books
          Limited

         Yuk Long Cultural        The PRC          Registered      HK$1,000,000               100%     Digital graphic design
           Development                               capital                                             and software
           (Shenzhen) Limited                                                                            development


         *        Other than this subsidiary which is directly held by the Company, all other principal subsidiaries
                  are indirectly held by the Company.


         **       This subsidiary is newly acquired by the Group during the year.


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

         The above table lists the principal subsidiaries of the Group. To give details of other
   subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

   26.   Other receivables, deposits and prepayments – Group

                                                                                           2007                    2006
                                                                                        HK$’000                 HK$’000

         Amount due from related parties                                                     2,000                       –
         Deposits                                                                              318                     308
         Other receivables                                                                     142                     233
         Prepayments                                                                         8,779                  11,485


                                                                                            11,239                  12,026


        The related parties are relatives of an executive director of the Company, Mr. Wong
   Chun Keung. The amount is unsecured, interest-free and has no fixed term of repayment.

                                                   – 93 –
APPENDIX I                   FINANCIAL INFORMATION ON THE GROUP


   27.   Pledged bank deposits – Company and Group


         Certain of the Company’s and the Group’s bank deposits have been pledged to secure
   general banking facilities granted to the Group (note 31). The deposits bore fixed interest
   ranging from 3.6% to 3.92% per annum (2006: 3.5% to 3.61% per annum). The pledged
   bank deposits will be released upon the settlement of the relevant bank borrowings.


   28.   Cash and bank balances – Company and Group


         The bank balances bore interest at the prevailing market interest rates of approximately
   2.8% per annum (2006: 2.8% per annum). At 31 March 2007, the Group’s cash and bank
   balances of approximately HK$330,000 (2006: HK$254,000) were denominated in Renminbi
   which is not freely convertible into other currencies.


   29.   Trade payables – Group


         The following is an aged analysis of trade payables at the balance sheet date:


                                                                         2007             2006
                                                                      HK$’000          HK$’000


         0 – 30 days                                                      4,044            3,219
         31 – 60 days                                                     1,977            1,515
         61 – 90 days                                                     1,880            1,620
         Over 90 days                                                     1,771            1,524


                                                                          9,672            7,878


   30.   Other payables and accrued charges – Group


                                                                         2007             2006
                                                                      HK$’000          HK$’000


         Other payables                                                     441            3,765
         Accrued charges                                                  4,156            4,995


                                                                          4,597            8,760




                                           – 94 –
APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


   31.   Bank borrowings – company and group


         At 31 March 2007, the bank loans and overdrafts are as follows:


                                               Group                      Company
                                             2007       2006              2007      2006
                                          HK$’000    HK$’000           HK$’000   HK$’000


         Current
         Bank overdrafts (unsecured)          1,369              –           363             –
         Secured bank loans                   1,500         14,610         1,500        12,500
         Unsecured bank loans                   688              –             –             –


                                              3,557         14,610         1,863        12,500


        The effective interest rates (which are also equal to contracted interest rates) on the
   Group’s borrowings are:


                                                              2007                        2006

         Bank overdrafts (unsecured)            Hong Kong Dollar                             –
                                                Prime Rate + 0.5%


         Secured bank loans                            HIBOR + 2%             HIBOR + 2.5%
                                                                            Hong Kong Dollar
                                                                             Prime Rate – 2%


         Unsecured bank loans                      Hong Kong Dollar                          –
                                                    Prime Rate – 2%


         At 31 March 2007, the banking facilities of the Group were secured by the charge
   over the buildings with the carrying amount of approximately HK$5,821,000 (2006:
   HK$5,982,000), prepaid lease payments of approximately HK$8,532,000 (2006:
   HK$8,706,000) and bank deposits of approximately HK$4,258,000 (2006: HK$4,113,000)
   and corporate guarantees provided by the Company. The Group’s bank borrowings are
   denominated in Hong Kong dollars.




                                          – 95 –
APPENDIX I                   FINANCIAL INFORMATION ON THE GROUP


   32.   Convertible notes – company and group


         Convertible notes (the “Notes”) of the Company were issued on 19 October 2004
   upon completion of the purchase of 49% equity interests in Jade Dynasty Holdings Limited,
   the Company’s direct subsidiary. The Notes are convertible into ordinary shares of the
   Company at a price of HK$0.5 (subject to adjustments) and will mature on 18 October 2007
   (the “Maturity Date”).


          The Notes bear interest on the outstanding principal from the date of issue to the date
   of redemption or conversion at a rate of 2% per annum payable in arrear semi-annually.


         The Group may elect to repay the outstanding principal under the Notes prior to the
   Maturity Date provided that the amount of principal repaid under each Note shall not
   exceed (i) within the first year of issue, one-third of the original principal amount of such
   Note and (ii) within the second year of issue, two-thirds of the original principal amount of
   such Note. The fair value of early redemption right of the Notes is insignificant.


          Unless converted by the noteholder or repaid by the Group before the Maturity Date,
   the Group will repay the Notes in cash without premium representing the outstanding
   principal, accrued and unpaid interest in accordance with the terms and conditions of the
   Notes at the Maturity Date.


          The Notes contain two components, liability and equity elements. Upon the application
   of HKAS 32 Financial Instruments: Disclosure and Presentation, the Notes were split between
   the liability and equity elements, on a retrospective basis, in the year ended 31 March 2005.
   The equity element is presented in equity heading “capital reserve”. The effective interest
   rate of the liability component is 2.15%.


         The movement of the liability component of the Notes for the year is set out below:


                                                                         2007             2006
                                                                      HK$’000          HK$’000


         Liability component at the beginning of the year                15,225           65,092
         Conversion to shares of the Company                             (9,631)         (49,917)
         Interest charge (note 9)                                           129              717
         Interest paid                                                     (120)            (667)


         Liability at the end of the year                                 5,603           15,225




                                            – 96 –
APPENDIX I                       FINANCIAL INFORMATION ON THE GROUP


   33.   Share capital – Company and Group

                                                          Par value of              Number of
                                                        ordinary share         ordinary shares       Amount
                                              Notes               HK$                                HK$’000

         Authorised:
         At 1 April 2005,
           31 March 2006
           and 31 March 2007                                  0.002 each       250,000,000,000        500,000


         Issued and fully paid:
         At 1 April 2005                                      0.002 each            714,106,184          1,428
         Issue of new shares upon
            conversion of convertible
            notes                                             0.002 each            100,267,200            201
         Issue of new shares upon
            exercise of share options                         0.002 each             29,984,000             60

         At 31 March 2006                                                           844,357,384          1,689

         Issue of new shares upon
            conversion of convertible
            notes                              (1)            0.002 each             19,345,066             39
         Issue of new shares upon
            exercise of share options          (2)            0.002 each             28,692,000             57
         Placing of new shares                 (3)            0.002 each             40,000,000             80

         At 31 March 2007                                                           932,394,450          1,865

         Notes:


         (1)      During the year, convertible notes with an aggregate principal amount of HK$9,673,000 were
                  converted into 19,345,066 shares at a conversion price of HK$0.5 per share.


         (2)      During the year, 28,692,000 share options were exercised at a subscription price ranging from
                  HK$0.363 to HK$0.37 per share, resulting in the issue of 28,692,000 shares of HK$0.002 each
                  for a total cash consideration of HK$10,570,000.


         (3)      On 10 May 2006, 40,000,000 ordinary shares of HK$0.002 each of the Company held by Super
                  Empire Investments Limited (“Super Empire”), a company wholly owned by the major shareholder
                  of the Company, were placed to independent professional investors at a price of HK$0.73 each
                  for a total consideration of HK$29,200,000. On 23 May 2006, 40,000,000 new ordinary shares of
                  HK$0.002 each of the Company were issued and allotted to Super Empire at a price of HK$0.73
                  each under a placing and subscription agreement entered into by the Company on 9 May 2006.


                                                  – 97 –
APPENDIX I                         FINANCIAL INFORMATION ON THE GROUP


   34.   Reserves – Company

                                                                                        Retained
                                                                         Proposed         profits/
                                      Share     Capital    Contributed        final (Accumulated
                                   premium      reserve        surplus   dividends         losses)     Total
                                   HK$’000     HK$’000        HK$’000     HK$’000        HK$’000     HK$’000
                                                              (Note 1)

         At 1 April 2005              3,336        282         100,680           –         (2,373)   101,925
         Profit for the year              –          –               –           –          8,036      8,036

         Total recognised
            income for the year           –           –              –           –          8,036      8,036
         Issue of shares upon
            conversion of
            convertible notes        49,932        (216)             –           –              –     49,716
         Issue of shares upon
            exercise of
            share options             9,644           –              –           –              –      9,644
         Interim dividend paid
            for the period ended
            30 September 2005             –           –              –           –         (1,582)     (1,582)
         Proposed final
            dividends for the
            year ended
            31 March 2006                 –           –              –       1,855         (1,855)          –

         At 1 April 2006             62,912         66         100,680       1,855          2,226    167,739
         Profit for the year              –          –               –           –         12,914     12,914

         Total recognised
            income for the year           –           –              –           –         12,914     12,914
         Issue of shares upon
            conversion of
            convertible notes         9,634         (42)             –           –              –      9,592
         Issue of shares upon
            exercise of
            share options            10,513           –              –           –              –     10,513
         Placing of shares           29,120           –              –           –              –     29,120
         Expenses of issues
            of shares                  (989)          –              –           –              –       (989)
         Final dividend paid
            for the year ended
            31 March 2006                 –           –              –      (1,855)             –      (1,855)
         Interim dividend paid
            for the period ended
            30 September 2006             –           –              –           –         (1,862)     (1,862)
         Proposed final
            dividends for the
            year ended
            31 March 2007                 –           –              –       2,081         (2,081)          –

         At 31 March 2007           111,190         24         100,680       2,081         11,197    225,172




                                                – 98 –
APPENDIX I                    FINANCIAL INFORMATION ON THE GROUP


         1.    The contributed surplus of the Company consists of:


               (i)     HK$51,286,000 being the difference between the underlying consolidated net assets of
                       Global Food Culture Group Limited and its subsidiaries and the nominal value of the
                       Company’s shares which were issued under a group reorganisation in 1997; and


               (ii)    Pursuant to a special resolution passed at the annual general meeting of the Company on
                       10 August 2004, the Company reduced its share premium by an amount of approximately
                       HK$286,300,000 in accordance with the provisions of section 46 of the Bermuda
                       Companies Act 1981 and transferred the same amount to the contributed surplus account
                       of the Company. On the same date, the Company applied an amount of approximately
                       HK$236,906,000 from the contributed surplus account against the accumulated losses.
                       The remaining balance amounted to HK$49,394,000.


   35.   Acquisition of a subsidiary – Group


          On 1 November 2006, a wholly-owned subsidiary of the Company, Jade Dynasty
   Multi-Media Limited (“JDMML”), entered into an agreement with an independent third
   party for the acquisition of 51% of the issued share capital of Dragon Animation Limited
   (subsequently changed the name as Dragon Animation Holdings Limited (“DAHL”)), for a
   consideration of HK$2,550,000. The principal activities of DAHL are to carry out the
   development of animation and related products. DAHL is authorised to produce Chinese
   animated series using the figure of world-famous movie star Mr. Jackie Chan.


         The details of the assets acquired are as follows:


                                                                                                Acquiree’s
                                                                                                 carrying
                                                                             Fair value           amount
                                                                              HK$’000            HK$’000


         Intangible assets                                                         5,000                    –


         Minority interests (49%)                                                 (2,450)


         Net assets acquired                                                       2,550


         Purchase consideration and cash outflow
           on acquisition                                                          2,550




                                              – 99 –
APPENDIX I                   FINANCIAL INFORMATION ON THE GROUP


          The fair value of the intangible assets was determined by the directors of the Company
   with reference to a valuation performed by a professional valuer in Hong Kong.


          DAHL had not commenced business for the year ended 31 March 2007. Since the
   acquisition, DAHL contributed nil and a loss of HK$14,000 to the Group’s revenue and
   profit for the year ended 31 March 2007, respectively.


          Had the acquisition taken place at 1 April 2006, there would be no impact to the
   revenue and the profit of the Group for the year ended 31 March 2007. These pro forma
   information are for illustrative purposes only and are not necessarily an indication of revenue
   and result of operations of the Group that actually would have been achieved had the
   acquisition been completed on 1 April 2006 nor are they intended to be a projection of
   future results.


   36.   Operating leases – Group


         The Group as lessee


                At the balance sheet date, the Group had commitments for future minimum
         lease payments under non-cancellable operating leases in respect of rented premises
         which fall due as follows:


                                                                          2007             2006
                                                                       HK$’000          HK$’000


                Within one year                                              199              573
                In the second to fifth year inclusive                          –              132


                                                                             199              705


               Operating lease payments represent rentals payable by the Group for its staff
         quarters and office premises in the PRC and Taiwan. Leases are mainly negotiated for
         an average term of one to two years.




                                           – 100 –
APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


   37.   SHARE BASED PAYMENT TRANSACTIONS – GROUP


         Equity-settled share option scheme


                The Company’s share option scheme (the “Scheme”) was adopted pursuant to
         an ordinary resolution passed at a special general meeting of the Company held on 7
         October 2002 for the primary purpose of providing incentives to directors and eligible
         employees. The Scheme will expire on 6 October 2012. Under the Scheme, the board
         of directors of the Company may, at its discretion, grant options to eligible employees,
         including executive directors, suppliers, customers, advisers or consultants and joint
         venture partners or business alliances of the Company or any of its subsidiaries to
         subscribe for shares in the Company.


                At 31 March 2007, the number of shares in respect of which options had been
         granted and remained outstanding under the Scheme was 3,116,000 (2006: 31,808,000),
         representing 0.3% (2006: 3.8%) of the shares of the Company in issue at that date.
         The total number of shares in respect of which options may be granted under the
         Scheme is not permitted to exceed 10% of the shares of the Company in issue at any
         point in time, without prior approval from the Company’s shareholders. The number
         of shares in respect of which options may be granted to any individual in any one
         year is not permitted to exceed 1% of the shares of the Company in issue at any point
         in time, without prior approval from the Company’s shareholders. Options granted to
         substantial shareholder or independent non-executive directors in excess of 0.1% of
         the Company’s share capital or with a value in excess of HK$5 million must be
         approved in advance by the Company’s shareholders.


                Options granted must be taken up within 21 days of the date of grant, upon
         payment of HK$1 per each grant of options. Options may be exercised from the date
         of grant of the share option to the tenth anniversary of the date of grant. The exercise
         price is determined by the directors of the Company and will not be less than the
         highest of the closing price of the shares on the Stock Exchange on the date of grant,
         the average closing prices of the shares on the Stock Exchange on the five trading
         days immediately preceding the date of grant of the options or the nominal value of
         the shares.


               The following table discloses details of the Company’s share options held by
         the Company’s directors, the Group’s employees and other registered holders and
         movements in such holdings during both years.




                                          – 101 –
APPENDIX I                           FINANCIAL INFORMATION ON THE GROUP


                                                                                                           Number of share options
                                                                                    At    Exercised      Lapsed           At     Exercised      Lapsed          At
                              Option   Date        Exercisable    Exercise      1 April      during       during    31 March        during      during    31 March
                              type     of grant    period            price        2005     the year     the year        2006      the year     the year       2007
                                                                      HK$

             Directors        2003     27.3.2003   28.3.2003 to      0.267   11,199,998 (11,192,000)      (7,998)           –             –          –           –
                                                     27.3.2006
                              2004     2.4.2004    22.4.2004 to      0.363    3,300,000   (1,096,000)          –     2,204,000   (2,196,000)         –       8,000
                                                     21.4.2007
                              2005     6.1.2005    21.1.2005 to      0.370    5,800,000   (1,496,000)          –     4,304,000   (1,200,000)         –    3,104,000
                                                     20.1.2008

                                                                             20,299,998 (13,784,000)      (7,998)    6,508,000   (3,396,000)         –    3,112,000


             Employees        2003     27.3.2003   28.3.2003 to      0.267    1,600,000   (1,600,000)          –            –             –          –           –
                                                     27.3.2006
                              2004     2.4.2004    22.4.2004 to      0.363     600,000     (300,000)           –      300,000     (296,000)          –       4,000
                                                     21.4.2007
                              2005     6.1.2005    21.1.2005 to      0.370     300,000     (300,000)           –            –             –          –           –
                                                     20.1.2008


                                                                              2,500,000   (2,200,000)          –      300,000     (296,000)          –       4,000


             Consultants,     2004     2.4.2004    22.4.2004 to      0.363   13,000,000   (9,000,000)          –     4,000,000   (4,000,000)         –           –
               advisors,                             21.4.2007
               customers,     2005     6.1.2005    21.1.2005 to      0.370   26,000,000   (5,000,000)          –    21,000,000 (21,000,000)          –           –
               shareholders                          20.1.2008
               and business
               associates


                                                                             39,000,000 (14,000,000)           –    25,000,000 (25,000,000)          –           –


                                                                             61,799,998 (29,984,000)      (7,998) 31,808,000 (28,692,000)            –    3,116,000




              The Group has not applied HKFRS 2 to share options granted on or after 7
       November 2002 and vested before 1 April 2005 in accordance with the relevant
       transitional provisions. All the share options granted under the Scheme were vested
       on the date of grant. Because all the share options outstanding as at 1 April 2005 had
       vested before 1 April 2005, the application of HKFRS 2 has had no impact on the
       Group’s result for the current or prior accounting periods.

              Accordingly, the financial impact of share options granted is not recorded in
       the Company’s or the Group’s balance sheet until such time as the options are exercised,
       and no charge is recognised in the consolidated income statement in respect of the
       value of options granted. Upon the exercise of the share options, the resulting shares
       issued are recorded by the Company as additional share capital at the nominal value
       of the shares, and the excess of the exercise price per share over the nominal value of
       the shares is recorded by the Company in the share premium account. Options which
       are lapsed or cancelled prior to their exercise date are deleted from the register of
       outstanding options.




                                                             – 102 –
APPENDIX I                       FINANCIAL INFORMATION ON THE GROUP


                In respect of the share options exercised during the year, the weighted average
         share price at the dates of exercise is HK$0.67.


                At the balance sheet date, the Company had outstanding 3,116,000
         (2006: 31,808,000) share options. Exercise in full of such share options would result
         in the issue of 3,116,000 (2006: 31,808,000) additional shares.


   38.   Related party transactions – Group


        During the year, except as disclosed elsewhere in these financial statements, the
   Group had the following significant transactions with related parties:


                                                                                      2007                2006
                                                               Notes               HK$’000             HK$’000


         Payment of comics script fee
           and bonus to a shareholder                           (1)                    4,716                5,484
         Payment of salary and administrative
           fees to related parties                              (2)                    1,422                1,308
         Interest expense on convertible notes
           paid to directors                                    (3)                          –                124
         Interest expense on convertible notes
           paid to a shareholder                                (3)                          –                384


         Notes:


         (1)      During the year, the Group paid comics script fee and bonus to Mr. Wong Chun Loong, in the
                  capacity as chief creative officer pursuant to the relevant service agreement signed with the
                  Group.


         (2)      During the years ended 31 March 2007 and 31 March 2006, the Group paid salary and
                  administrative expenses to certain relatives of two executive directors of the Company, Mr. Tong
                  Kai Lap and Mr. Wong Chun Keung. The amounts paid to these related parties are for the purpose
                  of normal course of business. No individual persons received over HK$1,000,000 in each of the
                  year.


         (3)      For the year ended 31 March 2006, the Group paid interest on convertible notes to directors and
                  their associates and a shareholder and his associates. The interest was charged at 2% on the
                  principal amount of the convertible notes. The corresponding finance costs based on the effective
                  interest rate of 2.15% of the liability component was HK$144,000.


         (4)      The directors of the Company considered they are the key management of the Group. Details of
                  their remuneration are set out in note 13.




                                                  – 103 –
APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


   39.   Guarantees – Company


                                                                        2007            2006
                                                                     HK$’000         HK$’000


         Financial guarantees given to:


         Banks for credit facilities granted to
           – certain subsidiaries                                      15,378                –


   40.   Non-adjusting post balance sheet events – Company and Group


         (1)   On 15 May 2007, a wholly-owned subsidiary of the Company, JDMML, entered
               into a framework agreement with an independent third party for the acquisition
               of 51% issued share capital of Hong Ying Universe Limited which has a wholly
               owned subsidiary, Suzhou Hongyong Cartoon Production Company Limited,
               and exclusive entitlement to all of the economic benefits and rights to control,
               manage and operate Nanjing Hongying Anmie-cartoon Entertainment Company
               Limited and Shanghai Shanding Animation Creation Company Limited. The
               aggregate consideration is HK$40,800,000. The aggregate consideration shall
               be in cash of HK$8,160,000 and in shares through the issue of 40,800,000 at
               HK$0.80 each by the Company. Further details of the transaction are included
               in the Company’s announcement dated 25 May 2007.


         (2)   On 29 May 2007, 100,000,000 ordinary shares of HK$0.002 each of the
               Company held by Super Empire, a company wholly owned by a major
               shareholder of the Company, were placed to independent professional investors
               at a price of HK$0.76 each and 100,000,000 new ordinary shares of HK$0.002
               each of the Company were issued and allotted to Super Empire on 13 June
               2007. These shares were issued under the general mandate granted to the
               directors of the Company on 23 August 2006. The net proceeds of approximately
               HK$73,400,000 from the placing and subscription agreement would be used
               for further development of multi-media business and general working capital.
               Further details of the transaction are included in the Company’s announcement
               dated 31 May 2007.


         (3)   Subsequent to the year end, an aggregate principal amount of HK$4,000,000
               convertible notes were converted into 8,000,000 new ordinary shares of
               HK$0.002 each at HK$0.5 per share.




                                           – 104 –
      APPENDIX I                       FINANCIAL INFORMATION ON THE GROUP


      3.    UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30
            SEPTEMBER 2007
YSL




            Set out below is the unaudited financial statements of the Company for the six months
      ended 30 September 2007, which is extracted from the interim report of the Company for the six
      months ended 30 September 2007.

            CONDENSED CONSOLIDATED INCOME STATEMENT
            FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007

                                                                                 For the
                                                                            Six months ended
                                                                           30.9.2007       30.9.2006
                                                           NOTES            HK$’000         HK$’000
                                                                         (unaudited)     (unaudited)

            Revenue                                          3               55,197          52,889
            Cost of goods sold                                              (30,826)        (28,383)
            Direct operating expenses                                        (7,790)         (7,960)

            Gross profit                                                     16,581          16,546
            Other income                                     4                1,290             561
            Selling and distribution costs                                   (1,835)         (1,639)
            Administrative expenses                                          (6,618)         (6,202)

            Operating profits                                5                9,418           9,266
            Finance costs                                    6                 (135)           (277)

            Profit before income tax                                           9,283          8,989
            Income tax expense                               7                (1,410)        (1,300)

            Profit for the period                                             7,873           7,689


            Attributable to:
              Equity holders of the Company                                   7,875           7,689
              Minority interests                                                 (2)              –

                                                                              7,873           7,689


            Dividends                                        8                2,169           1,862


            Earnings per share                               9
              Basic                                                         0.8 cent        0.8 cent


              Diluted                                                       0.8 cent        0.8 cent


                                                 – 105 –
APPENDIX I                   FINANCIAL INFORMATION ON THE GROUP


   CONDENSED CONSOLIDATED BALANCE SHEET
   AS AT 30 SEPTEMBER 2007

                                                               30.9.2007   31.3.2007
                                                     NOTES      HK$’000     HK$’000
                                                             (unaudited)    (audited)

   ASSETS AND LIABILITIES
   Non-current assets
     Property, plant and equipment                    10          7,658       7,899
     Prepaid lease payments                                       8,271       8,358
     Intangible assets                                11          5,632       6,107
     Goodwill                                                   124,539     124,539
     Deferred tax assets                              13          3,540       4,353
     Trade receivables                                14              –       1,597

                                                                149,640     152,853

   Current assets
    Prepaid lease payments                                          174          174
    Inventories                                                  73,961       65,298
    Trade receivables                                 14         41,377       31,252
    Other receivables, deposits and prepayments                   9,215       11,239
    Tax recoverable                                                 625        1,280
    Pledged bank deposits                                         4,335        4,258
    Cash and bank balances                                       72,941        5,299

                                                                202,628     118,800

   Current liabilities
    Trade payables                                    15         10,008        9,672
    Other payables and accrued charges                            6,452        4,597
    Provision for tax                                             1,186        1,521
    Bank borrowings                                   16          3,487        3,557
    Convertible notes                                 17          1,622        5,603

                                                                 22,755       24,950

   Net current assets                                           179,873       93,850

   Total assets less current liabilities                        329,513     246,703

   EQUITY
   Equity attributable to the equity holders
     Share capital                                    18          2,081       1,865
     Reserves                                                   324,991     242,395

                                                                327,072     244,260
   Minority interests                                             2,441       2,443

   Total equity                                                 329,513     246,703



                                           – 106 –
APPENDIX I                                          FINANCIAL INFORMATION ON THE GROUP


   CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
   FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007
                                                               Attributable to equity holders of the Company
                                                                                                        Proposed
                                  Share           Share     Capital     Special Contributed Exchange         final    Retained                Minority
                                 capital       premium      reserve     reserve     surplus     reserve dividends       profits     Total     interests      Total
                                HK$’000        HK$’000     HK$’000 HK$’000 HK$’000 HK$’000 HK$’000                    HK$’000     HK$’000     HK$’000      HK$’000
                                                                       (Note 1)    (Note 2)
   At 1 April 2006                 1,689         62,912          66     (36,810)    49,394           2      1,855      109,055    188,163            –     188,163
   Exchange difference
     on translation of
     overseas operations
     recognised directly
     in equity                        –               –           –           –          –         (16)          –           –        (16)           –         (16)
   Profit for the period              –               –           –           –          –           –           –       7,689      7,689            –       7,689

   Total recognised income
      and expense
      for the period                  –               –           –           –          –         (16)          –       7,689      7,673            –       7,673
   Issue of shares upon
      conversion of
      convertible notes              39           9,634         (42)          –          –           –           –           –      9,631            –       9,631
   Issue of shares upon
      exercise of
      shares options                 48           8,868           –           –          –           –           –           –      8,916            –       8,916
   Placing of share                  80          29,120           –           –          –           –           –           –     29,200            –      29,200
   Expenses of
      issue of shares                      –       (989)          –           –          –           –           –           –       (989)           –        (989)
   Final dividends paid
      for the year
      ended 31 March 2006             –               –           –           –          –           –      (1,855)          –      (1,855)          –       (1,855)

   At 30 September 2006            1,856        109,545          24     (36,810)    49,394         (14)          –     116,744    240,739            –     240,739
   Exchange difference on
     translation of overseas
     operations recognised
     directly in equity               –               –           –           –          –          48           –           –         48             –         48
   Profit for the year                –               –           –           –          –           –           –       3,681      3,681            (7)     3,674

   Total recognised income
      and expense
      for the period                  –               –           –           –          –          48           –       3,681      3,729            (7)     3,722
   Issue of shares upon
      conversion of
      convertible notes                9          1,645           –           –          –           –           –           –      1,654            –       1,654
   Minority interests arising
      from acquisition of
      a subsidiary                    –               –           –           –          –           –           –           –           –       2,450       2,450
   Interim dividend paid for
      the period ended
      30 September 2006               –               –           –           –          –           –           –      (1,862)     (1,862)          –       (1,862)
   Proposed final dividends
      for the year
      ended 31 March 2007             –               –           –           –          –           –      2,081       (2,081)          –           –            –

   At 31 March 2007 and
     1 April 2007                  1,865        111,190          24     (36,810)    49,394          34       2,081     116,482    244,260        2,443     246,703
   Exchange difference on
     translation of overseas
     operations recognised
     directly in equity               –               –           –           –          –         (59)          –           –        (59)            –        (59)
   Profit for the period              –               –           –           –          –           –           –       7,875      7,875            (2)     7,873

   Total recognised income
      and expense
      for the period                  –               –           –           –          –         (59)          –       7,875      7,816            (2)     7,814
   Issue of shares upon
      conversion of
      convertible notes              16           3,984         (17)          –          –           –           –           –      3,983            –       3,983
   Placing of shares                200          75,800           –           –          –           –           –           –     76,000            –      76,000
   Expenses of
      issue of shares                 –          (2,906)          –           –          –           –           –           –      (2,906)          –       (2,906)
   Final dividends paid
      for the year
      ended 31 March 2007             –               –           –           –          –           –      (2,081)          –      (2,081)          –       (2,081)

   At 30 September 2007
     (unaudited)                   2,081        188,068           7    (36,810)     49,394         (25)          –     124,357    327,072        2,441     329,513




                                                                           – 107 –
APPENDIX I                           FINANCIAL INFORMATION ON THE GROUP


   Notes :


   1.        The special reserve of the Group represents the difference between the nominal amount of the shares of
             the subsidiaries at the date on which they were acquired by the Company and the nominal amount of the
             shares issued for the acquisition.


   2.        Pursuant to a special resolution passed at the annual general meeting of the Company on 10 August 2004,
             the Company reduced its share premium by an amount of approximately HK$286,300,000 in accordance
             with the provisions of section 46 of the Bermuda Companies Act 1981 and transferred the same amount
             to the contributed surplus account of the Company. On the same date, the Company applied an amount of
             approximately HK$236,906,000 from the contributed surplus account against the accumulated losses. The
             remaining balance of the contributed surplus amounted to HK$49,394,000.




                                                    – 108 –
APPENDIX I                   FINANCIAL INFORMATION ON THE GROUP


   CONDENSED CONSOLIDATED CASH FLOW STATEMENT
   FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007


                                                               Six months ended
                                                              30.9.2007      30.9.2006
                                                     NOTE      HK$’000        HK$’000
                                                            (unaudited)    (unaudited)


   Net cash used in operating activities                        (3,709)         (9,310)


   Cash flows from investing activities
     Increase in pledged bank deposits                             (77)           (75)
     Net cash used in other investing activities                   677           (853)
   Net cash generated from/(used in)
     investing activities                                          600           (928)


   Cash flows from financing activities
     New bank loans raised                                       2,500              –
     Repayment of bank loans                                    (1,839)       (13,753)
     Proceeds from issue of shares                              73,094         37,127
     Dividend paid to shareholders                              (2,081)        (1,855)
     Others                                                       (133)          (271)
   Net cash generated from financing activities                 71,541         21,248


   Net increase in cash and cash equivalents                    68,432         11,010


   Cash and cash equivalents at beginning of
     the period                                                  3,930          2,318
   Effect of foreign exchange rate changes                         (59)           (16)


   Cash and cash equivalents at end of the period               72,303         13,312


   Analysis of balances of cash and
     cash equivalents
   Cash and bank balances                                       72,941         13,312
   Bank overdrafts                                    16          (638)             –


   Cash and cash equivalents at end of the period               72,303         13,312




                                           – 109 –
APPENDIX I                   FINANCIAL INFORMATION ON THE GROUP


   NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
   FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007

   1.    General information

           Jade Dynasty Group Limited (the “Company”) is an exempted company with limited
   liability incorporated in Bermuda and its shares are listed on The Stock Exchange of Hong
   Kong Limited (the “Stock Exchange”). Its registered address is Clarendon House, 2 Church
   House, Hamilton HM11, Bermuda and the principal place of business is 11th Floor, Safety
   Godown Industrial Building, 56 Kai Yip Street, Chai Wan, Hong Kong.

          The principal activities of the Company and its subsidiaries (collectively, the “Group”)
   are the publication of comics books and multimedia development.

          The unaudited condensed consolidated financial statements for the six months ended
   30 September 2007 (the “Interim 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. The Interim Financial Statements do not include all of the information required
   for full annual financial statements and thereby should be read in conjunction with the
   Group’s annual financial statements for the year ended 31 March 2007. The Interim Financial
   Statements of the Group are unaudited and have been reviewed by the Company’s Audit
   Committee.

   2.    Significant accounting policies

         The Interim Financial Statements have been prepared on the historical cost basis.

          The accounting policies adopted in the Interim Financial Statements are consistent
   with those followed in the Group’s annual financial statements for the year ended 31 March
   2007 with the addition of certain standards and interpretations of Hong Kong Financial
   Reporting Standards (“HKFRSs”) issued by the HKICPA and became effective in the current
   interim period as discussed below:

         2.1    Impact of new and revised HKFRSs which are effective in the current
                interim period

                In the current interim period, the Group has adopted, for the first time, all the
         new and revised HKFRSs which are effective on 1 April 2007 and relevant to the
         Group. The adoption of the new and revised HKFRSs did not result in significant
         changes in the Group’s accounting policies and had no significant financial impact on
         the current or the prior accounting periods.



                                           – 110 –
APPENDIX I                   FINANCIAL INFORMATION ON THE GROUP


        2.2   Impact of new and revised HKFRSs which are issued but not yet effective


               The Group has not early adopted the following new standards and interpretations
        that have been issued but are not yet effective:


              HKAS 23 (Revised)                           Borrowing Costs 1
              HKFRS 8                                     Operating Segments 1
              HK(IFRIC) – Interpretation 12               Service Concession Arrangements 2
              HK(IFRIC) – Interpretation 13               Customer Loyalty Programmes3
              HK(IFRIC) – Interpretation 14               HKAS19 – The Limit on a Defined
                                                            Benefit Asset, Minimum Funding
                                                            Requirements and their interation2

              Note:

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


                The Group is in the process of assessing the potential impact of these new and
        revised HKFRSs but is not yet in a position to determine whether these new and
        revised HKFRSs will have a significant impact on how its results of operations and
        financial position are prepared and presented. These new and revised HKFRSs may
        result in changes in the future as to how the results and financial position are prepared
        and presented.


   3.   Segment information


        Business segments


               For management purposes, the Group is currently organised into two operating
        divisions, namely, comics publication and multimedia development. These divisions
        are the basis on which the Group reports its primary segment information.


              Principal activities are as follows:


              Comics publication                –     publication of comics books and related
                                                        business
              Multimedia development            –     development of animation, games, websites
                                                        and licensing




                                             – 111 –
APPENDIX I                      FINANCIAL INFORMATION ON THE GROUP


       For the six months ended 30 September 2007 and 30 September 2006


                                  Comics        Comics     Multimedia     Multimedia
                               publication   publication   development    development             Total        Total
                                     2007          2006           2007           2006             2007          2006
                                 HK$’000       HK$’000        HK$’000        HK$’000         HK$’000        HK$’000
                               (unaudited)   (unaudited)    (unaudited)    (unaudited)      (unaudited)   (unaudited)


       Revenue                     51,197        50,622          4,000          2,267          55,197         52,889


       Segment result               9,058        12,166          3,008          2,231          12,066         14,397


       Unallocated income                                                                          891           320
       Unallocated expenses                                                                     (3,539)       (5,451)
       Finance costs                                                                              (135)         (277)


       Profit before
         income tax                                                                               9,283        8,989
       Income tax expense                                                                       (1,410)       (1,300)


       Profit for the period                                                                      7,873        7,689


       Geographical segments


                                                                                           Revenue
                                                                                        For the
                                                                                   six months ended
                                                                                  30.9.2007       30.9.2006
                                                                                   HK$’000         HK$’000
                                                                                (unaudited)     (unaudited)


       Hong Kong                                                                         50,009             48,041
       Taiwan                                                                             2,511              2,826
       Others                                                                             2,677              2,022


                                                                                         55,197             52,889




                                                – 112 –
APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


   4.   Other income


                                                                         For the
                                                                    six months ended
                                                                   30.9.2007       30.9.2006
                                                                    HK$’000         HK$’000
                                                                 (unaudited)     (unaudited)


        Advertising income                                              227             223
        Interest income                                                 891             320
        Other                                                           172              18


                                                                      1,290             561


   5.   Operating profits


                                                                         For the
                                                                    six months ended
                                                                   30.9.2007       30.9.2006
                                                                    HK$’000         HK$’000
                                                                 (unaudited)     (unaudited)


        Operating profits have been arrived at after charging:
          Amortisation of intangible assets                             475             370
          Amortisation of prepaid lease payments                         87              87
          Depreciation of property, plant and equipment                 455             372


        Total amortisation and depreciation                           1,017             829


        Staff costs, including directors emoluments and
          retirement benefits scheme contributions                   26,579          24,719
        Amount capitalised in inventories                            (7,253)         (6,501)


        Amount charged to income statement                           19,326          18,218




                                        – 113 –
APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


   6.    Finance costs


                                                                       For the
                                                                  six months ended
                                                                 30.9.2007       30.9.2006
                                                                  HK$’000         HK$’000
                                                               (unaudited)     (unaudited)


         Interest on
           Bank overdrafts and loans wholly
              repayable within 5 years                                114             207
           Effective interest expense on convertible notes             21              70


                                                                      135             277


   7.    Income tax expense


                                                                       For the
                                                                  six months ended
                                                                 30.9.2007       30.9.2006
                                                                  HK$’000         HK$’000
                                                               (unaudited)     (unaudited)


         Hong Kong:
           Current tax:
             – Provision for current period                           588             999
             – Underprovision in prior years                            9               –
           Deferred tax charge (note 13)                              813             301


                                                                    1,410           1,300


        Hong Kong profits tax is calculated at 17.5% (six months ended 30 September 2006:
   17.5%) on the estimated assessable profits for the six months ended 30 September 2007.


          No provision for PRC Income Tax has been made as the Group has no assessable
   profit derived from the PRC.




                                         – 114 –
APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


         Reconciliation between income tax expense for the six months ended 30 September
   2007 to the profit before income tax per the condensed consolidated income statement at
   applicable tax rate is as follows:


                                                                           For the
                                                                      six months ended
                                                                     30.9.2007       30.9.2006
                                                                      HK$’000         HK$’000
                                                                   (unaudited)     (unaudited)


         Tax at Hong Kong profits tax rate of 17.5%
           (six months ended 30 September 2006: 17.5%)                  1,625           1,573
         Tax effect of expenses not deductible for tax purpose              4               4
         Tax effect of income not taxable                                (310)           (509)
         Tax effect of tax losses not recognised                          150             295
         Underprovision in prior year                                       9               –
         Others                                                           (68)            (63)


         Income tax expense for the period                              1,410           1,300


   8.    Dividends


         The directors have determined that an interim dividend of HK0.2 cent per share (six
   months ended 30 September 2006: HK0.2 cent per share) amounting to HK$2,169,000 (six
   months ended 30 September 2006: HK$1,862,000) be payable on 24 January 2008 to the
   shareholders of the Company whose names appear in the Register of Members on 10 January
   2008 (“Book Close Date”).


                                                                           For the
                                                                      six months ended
                                                                     30.9.2007       30.9.2006
                                                                      HK$’000         HK$’000
                                                                   (unaudited)     (unaudited)


         Interim dividend to existing shareholders                      2,081           1,856
         Interim dividend to share options holders (Note 1)                 –               6
         Interim dividend to convertible notes holders (Note 2)             6               –
         Interim dividend to Acquisition Shares holders (Note 3)           82               –


                                                                        2,169           1,862



                                         – 115 –
APPENDIX I                        FINANCIAL INFORMATION ON THE GROUP


          During the six months ended 30 September 2007, a dividend of HK0.2 cent (six months ended 30
   September 2006: HK0.2 cent) per share, amounting to HK$2,081,000 (six months ended 30 September 2006:
   HK$1,855,000) was paid to shareholders as the final dividend for the immediate preceding financial year.


          Note


          (1)     Subsequent to 30 September 2006, an aggregate amount of HK$1,110,000 share options were
                  exercised into 3,000,000 ordinary shares (the “New Shares”). The holders of the New Shares
                  were also entitled to an equivalent amount of interim dividend per share pursuant to the relevant
                  provisions in the Company’s Bye-laws. Accordingly, an interim dividend of approximately
                  HK$6,000 was paid to the holders of the New Shares.


          (2)     Subsequent to 30 September 2007, all convertible notes were exercised and 3,054,400 ordinary
                  shares (the “New Shares”) were issued. The holders of the New Shares were also entitled to an
                  equivalent amount of interim dividend per share pursuant to the relevant provisions in the
                  Company’s Bye-laws. Accordingly, an interim dividend of approximately HK$6,000 will be paid
                  to the holders of the New Shares.


          (3)     Subsequent to 30 September 2007, 40,800,000 ordinary shares (the “Acquisition Shares”) were
                  issued for the acquisition of 51% issued share capital of Super Win Limited which has a wholly
                  owned subsidiary, Suzhou Hongyang Cartoon Production Company Limited, and exclusive
                  entitlement to all of the economic benefits and rights to control, manage and operate Nanjing
                  Hongying Anmie-cartoon Entertainment Company Limited and Shanghai Sanding Animation
                  Creation Company Limited. Details of information are set out in the circular of the Company on
                  31 August 2007. The holder of the Acquisition Shares was also entitled to an equivalent amount
                  of interim dividend per share pursuant to the relevant provisions in the Company’s Bye-laws.
                  Accordingly, an interim dividend of approximately HK$82,000 will be paid to the holder of the
                  Acquisition Shares.


          (4)     The number of shares entitled to interim dividend is subject to exercise of Company’s share
                  options prior to the Book Close Date.




                                                  – 116 –
APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


   9.    Earnings per share


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


                                                                           For the
                                                                      six months ended
                                                                     30.9.2007       30.9.2006
                                                                      HK$’000         HK$’000
                                                                   (unaudited)     (unaudited)


         Earnings for the purpose of basic earnings per share            7,875           7,689
         Interest on convertible notes                                      21              70


         Earnings for the purpose of diluted earnings per share          7,896           7,759


         Number (weighted average number) of ordinary shares
           for the purpose of basic earnings per share       997,968,220          905,677,101
         Effect of dilutive potential ordinary shares:
           Share options                                       1,499,073            6,130,786
           Convertible notes                                   5,589,919           16,885,065


         Weighted average number of shares for the purpose
          of diluted earnings per share                           1,005,057,212   928,692,952


   10.   Movements in property, plant and equipment


         During the period, the Group acquired property, plant and equipment at cost of
   approximately HK$214,000 (six months ended 30 September 2006: HK$1,318,000).


   11.    Movements in intangible assets


          Intangible assets represented copyrights and trademarks. During the period, the Group
   incurred amortisation of intangible assets of approximately HK$475,000 (six months ended
   30 September 2006: HK$370,000). The intangible assets have useful lives ranging from 4 to
   10 years.




                                          – 117 –
APPENDIX I                   FINANCIAL INFORMATION ON THE GROUP


   12.   Pledge of assets


         (a)    At 30 September 2007, the Group had pledged its buildings of approximately
                HK$5,740,000 (31 March 2007: HK$5,821,000) and prepaid lease payments of
                approximately HK$8,445,000 (31 March 2007: HK$8,532,000) to banks to
                secure general banking facilities granted to the Group.


         (b)    At 30 September 2007, deposits of approximately HK$4,335,000 (31 March
                2007: HK$4,258,000) were pledged to banks to secure general banking facilities
                granted to the Group.


   13.   Deferred tax assets


         The following is the major deferred tax assets recognised by the Group and movements
   thereon during the current and prior reporting periods.


                                                                                       Tax losses
                                                                                        HK$’000


         At 1 April 2006                                                                    3,092
         Charged to income statement for the period (note 7)                                 (301)


         At 30 September 2006                                                               2,791
         Credited to income statement for the period                                        1,562


         At 31 March 2007                                                                   4,353
         Charged to income statement for the period (note 7)                                 (813)


         At 30 September 2007 (unaudited)                                                   3,540


          At the balance sheet date, the Group has unused tax losses of HK$24,955,000 (31
   March 2007: HK$28,744,000) available to offset against future profits. Deferred tax assets
   have been recognised in respect of HK$21,619,000 (31 March 2007: HK$26,263,000) of
   such losses as the directors consider that the realisation of these deferred tax assets through
   the future taxable profits of those subsidiaries which incurred these tax losses is probable.
   No deferred tax has been recognised in respect of the remaining HK$3,336,000 (31 March
   2007: HK$2,481,000) due to the unpredictability of future profit streams of these subsidiaries
   which incurred these remaining tax losses.




                                           – 118 –
APPENDIX I                   FINANCIAL INFORMATION ON THE GROUP


   14.   Trade receivables


          The Group grants an average credit period ranging from 30 days to 60 days to its
   trade customers.


         The following is an aged analysis of trade receivables at the reporting date:


                                                                     30.9.2007           31.3.2007
                                                                      HK$’000             HK$’000
                                                                   (unaudited)            (audited)


         0-30 days                                                      14,523              15,353
         31-60 days                                                      6,177               5,606
         61-90 days                                                      5,366               1,769
         Over 90 days                                                   15,311              10,121


                                                                        41,377              32,849


         Less: Trade receivables due over one year                            –             (1,597)


         Trade receivables due within one year                          41,377              31,252


         On 9 January 2007, the Group entered into an agreement with one of the major
   customers that HK$8,597,000 of the trade debts due from this customer is to be settled by
   18 equal instalments and none of trade receivables from this customer are to be settled over
   one year from the balance sheet date (31 March 2007: HK$1,597,000).

   15.   Trade payables


         The following is an aged analysis of trade payables at the reporting date:


                                                                     30.9.2007           31.3.2007
                                                                      HK$’000             HK$’000
                                                                   (unaudited)            (audited)


         0-30 days                                                       2,344               4,044
         31-60 days                                                      2,029               1,977
         61-90 days                                                      2,184               1,880
         Over 90 days                                                    3,451               1,771


                                                                        10,008               9,672


                                          – 119 –
APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


   16.   Bank borrowings


                                                                     30.9.2007       31.3.2007
                                                                      HK$’000         HK$’000
                                                                   (unaudited)        (audited)


         Current
         Bank overdrafts (unsecured)                                         –           1,369
         Bank overdrafts (secured)                                         638               –
         Secured bank loans                                              2,500           1,500
         Unsecured bank loans                                              349             688


                                                                         3,487           3,557


        The effective interest rates (which are also equal to contracted interest rates) on the
   Group’s borrowings are:


                                                          For the                    For the
                                                 six months ended           six months ended
                                                        30.9.2007                  30.9.2006


         Bank overdrafts (secured)              Hong Kong Dollar                             –
                                                Prime Rate + 0.5%
         Secured bank loans                     Fixed rate of 6.5%          Hong Kong Dollar
                                                                             Prime Rate – 2%
         Unsecured bank loans                   Hong Kong Dollar                           –
                                                 Prime Rate – 2%


          The Group’s bank borrowings are denominated in Hong Kong dollars and their fair
   value approximates to the corresponding carrying amount.




                                          – 120 –
APPENDIX I                   FINANCIAL INFORMATION ON THE GROUP


   17.   Convertible notes


         Convertible notes (the “Notes”) of the Group were issued on 19 October 2004 upon
   completion of the agreement for the purchase of 49% equity interests in Jade Dynasty
   Holdings Limited, the Company’s direct subsidiary. The Notes are convertible into ordinary
   shares of the Company at a price of HK$0.50 (subject to adjustments) and will be matured
   on 18 October 2007 (“Maturity Date”).


          The Notes bear interest on the outstanding principal from the date of issue to the date
   of redemption or conversion at a rate of 2% per annum payable in arrears semi-annually.


         The Group may elect to repay the outstanding principal under the Notes prior to the
   Maturity Date provided that the amount of principal repaid under each Note shall not
   exceed (i) within the first year of issue, one-third of the original principal amount of such
   Note and (ii) within the second year of issue, two-thirds of the original principal amount of
   such Note.


          Unless converted by the noteholders or repaid by the Group before the Maturity Date,
   the Group will repay the Notes in cash without premium representing the outstanding
   principal, accrued and unpaid interest in accordance with the aforesaid terms and conditions
   of the Notes at the Maturity Date.


          Subsequent to the balance sheet date, all outstanding Notes were converted into
   ordinary shares of the Company. As such, the outstanding balance of the Notes was nil as of
   the date of this report.




                                          – 121 –
APPENDIX I                     FINANCIAL INFORMATION ON THE GROUP


   18.   Share capital


                                                                             Number                    Share
                                                                            of shares                 capital
                                                                                                     HK$’000


         Authorised:
           Ordinary shares of HK$0.002 each
             At 1 April 2006, 30 September 2006,
             31 March 2007 and 30 September 2007                    250,000,000,000                   500,000


         Issued and fully paid:
            Ordinary shares of HK$0.002 each
            At 1 April 2006                                              844,357,384                     1,689
            Issue of new shares upon conversion of
               convertible notes                                           19,345,066                        39
            Issue of new shares upon exercise of
               share options                                              24,192,000                         48
            Placement of shares                                           40,000,000                         80


             At 30 September 2006 and 1 October 2006                     927,894,450                     1,856
             Issue of new shares upon exercise of
                share options                                               4,500,000                         9


             At 31 March 2007 and 1 April 2007                           932,394,450                     1,865
             Issue of new shares upon conversion of
                convertible notes                                          8,000,000                        16
             Placement of shares *                                       100,000,000                       200


             At 30 September 2007                                      1,040,394,450                     2,081


         *      On 29 May 2007, 100,000,000 ordinary shares of HK$0.002 each of the Company held by Super
                 Empire Investments Limited (“Super Empire”), a company wholly owned by the major shareholder
                 of the Company, were placed to independent professional investors at a price of HK$0.76 each
                 and on 13 June 2007, 100,000,000 new ordinary shares of HK$0.002 each of the Company were
                 issued and allotted to Super Empire at a price of HK$0.76 each under a placing and subscription
                 agreement entered by the Company.




                                                – 122 –
APPENDIX I                      FINANCIAL INFORMATION ON THE GROUP


   19.   Related party transactions


         During the period, save as disclosed elsewhere in these Interim Financial Statements,
   the Group had the following significant transactions with related parties:


                                                                                      For the
                                                                                 six months ended
                                                                                30.9.2007       30.9.2006
                                                             Notes               HK$’000         HK$’000
                                                                              (unaudited)     (unaudited)


         Payment of comics script fee and
           bonus to a shareholder                              (1)                    2,334               2,358
         Payment of salaries and administrative
           fees to related parties                             (2)                      588                 662


        Remuneration of directors and other members of key management other than Mr.
   Wong Chun Loong (“Mr. Wong”) during the period was as follows:


                                                                                       For the
                                                                                  six months ended
                                                                                 30.9.2007       30.9.2006
                                                                                  HK$’000         HK$’000
                                                                               (unaudited)     (unaudited)


         Salaries and other benefits                                                  3,921               3,802
         Contributions to retirement benefits schemes                                    60                  55


         Note:


         1.      During the period, the Group paid comics script fee and bonus to Mr. Wong, in the capacity as
                 chief creative officer in pursuance with relevant service agreements signed with the Group on 30
                 March 2007 and 29 June 2006.


         2.      During the period ended 30 September 2007 and 30 September 2006, the Group paid salaries and
                 administrative expenses to certain relatives of two directors of the Company, Mr. Tong Kai Lap
                 and Mr. Wong Chun Keung. The amounts paid to these related parties are for the purpose of
                 normal course of business.




                                                – 123 –
APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


   20.   Operating leases


         At the balance sheet date, the Group had commitments for future minimum lease
   payments under non-cancellable operating leases in respect of rented premises which fall
   due as follows:


                                                                     30.9.2007       31.3.2007
                                                                      HK$’000         HK$’000
                                                                   (unaudited)        (audited)


         Within one year                                                  802              199
         In the second to fifth year inclusive                            492                –


                                                                         1,294             199


         Operating lease payments represent rentals payable by the Group for its staff quarters
   and office premises in the Mainland China and Taiwan. Leases are mainly negotiated for an
   average term of one to two years.

   21.   Events after the balance sheet date


         (1)    Subsequent to the period end, all convertibles notes were exercised and
                3,054,400 ordinary shares of HK$0.002 each were issued.


         (2)    On 20 August 2007, the Group entered into a sales and purchase agreement
                with an independent third party for the acquisition of 51% issued share capital
                of Super Win Limited which has a wholly owned subsidiary, Suzhou Hongyang
                Cartoon Production Company Limited, and exclusive entitlement to all of the
                economic benefits and rights to control, manage and operate Nanjing Hongying
                Anmie-cartoon Entertainment Company Limited and Shanghai Sanding
                Animation Creation Company Limited. The transaction is completed on 31
                October 2007. Details of information are set out in the circular of the Company
                on 31 August 2007.


   22.   Approval of the interim financial statements


         The financial statements for the period ended 30 September 2007 were approved by
   the Board of directors on 17 December 2007.




                                          – 124 –
      APPENDIX I                     FINANCIAL INFORMATION ON THE GROUP


      4.   STATEMENT OF INDEBTEDNESS

           Borrowings and contingent liabilities

                  As at the close of business on 31 January 2008, being the latest practicable date for       A1B

           the purpose of ascertaining certain information relating to this indebtedness statement prior
           to the printing of this circular, the Enlarged Group had only a current unsecured bank loan
           of approximately HK$118,000 guaranteed by the Company. The bank borrowings facilities
           were secured by charged assets with net carrying amount of approximately HK$18,459,000.
           The bank borrowings facilities granted to Suzhou Hongyang Cartoon Production Company
           Limited, a subsidiary of the Company, were secured by personal property of Mr. Hsieh Tai-
           chun, a related party of the Group.

                  As at the 31 January 2008, the Enlarged Group has the following contingent liabilities      A1B
           arising from the ordinary course of business.                                                      A16

                 1.     The Group has different financial guarantees to banks for credit facilities granted
                        to certain subsidiaries of HK$15,378,000.

                 2.     On 12 December 2006, Nanjing Hongying entered into an agreement with
YSL




                                                         (Guangdong Ao Fei Cultural Broadcasting
                        Company Limited) for the production of an animation. Suzhou Hongyang,
                        Shanghai Sanding and Mr. Hsieh have provided the guarantees on the liabilities
                        that may arise if Nanjing Hongying is in breach of the agreement. No provision
                        for Suzhou Hongyang’s and Shanghai Sanding’s obligation has been made as
                        the directors considered that it was not probable that Nanjing Hongying will be
                        in breach of the agreement.

                  Save as aforesaid and apart from intra-group liabilities, the Enlarged Group did not,       A1B
           at the close of business on 31 January 2008, have any loans capital issued and outstanding
           or agreed to be issued, bank overdrafts, charges or debentures, mortgages, loans, or other
           similar indebtedness or any finance lease commitment, hire purchase commitment, liabilities
           under acceptance (other than normal trade bills and payables), acceptance credits or any
           guarantees or other contingent liabilities.

                  For the purpose of the above indebtedness statement, foreign currency amounts have
           been translated into Hong Kong dollars at the approximate rates of exchange prevailing at
           the close of business on 31 January 2008.

                 The Directors are not aware of any material changes in the Enlarged Group’s
           indebtedness and contingent liabilities since 31 January 2008 other than inception of a
           current unsecured bank loan of approximately HK$850,000 guaranteed by the Company in
           March 2008.



                                                   – 125 –
      APPENDIX I                      FINANCIAL INFORMATION ON THE GROUP


      5.    WORKING CAPITAL

              The Directors are of the opinion that taking into account the existing cash and bank balances   A1B
      and the available unutilized banking facilities, the Enlarged Group has sufficient working capital
      for its present requirements and up to the period ending 31 March 2009.

      6.    MATERIAL ADVERSE CHANGES

             The Directors confirm that there has been no material adverse change in the financial or         A1B
      trading position of the Group since 31 March 2007 the date to which the latest published audited
      annual financial statements of the Group were made up.

      7.    MANAGEMENT DISCUSSION AND ANALYSIS ON THE GROUP

             The following is the management discussion and analysis on the Group extracted from the          R14
      annual reports of the Company for the years ended 31 March 2005, 2006 and 2007 and the interim
      report of the Company for the six months ended 30 September 2007.

            (a)    For the year ended 31 March 2005

                   Financial review
YSL




                          Following the Company’s completion of its major acquisition of the 51% and
                   49% interest of Jade Dynasty Holdings Limited (“JDH”) in April 2004 and October
                   2004 respectively as well as the disposals of the Group’s loss-making G. Sushi
                   restaurant, Suishaya Japanese Restaurant and My Wife’s Beef Noodle Shop in
                   November 2003, June 2004 and March 2005 respectively, the financial performance
                   of the Group changed significantly.

                          For the year ended 31 March 2005, the Group recorded a turnover of HK$123
                   million as compared to HK$166.5 million last year. Turnover from its comics
                   publication and related business rose by 16.7 times to approximately HK$107.3 million,
                   as compared to HK$6 million in last year. Meanwhile, the turnover from its restaurant
                   operations was HK$15.7 million, as compared to approximately HK$160.4 million in
                   last year.

                          During the year, the Group recorded a profit of approximately HK$11.1 million,
                   as compared with a profit of approximately HK$13.5 million for the last financial
                   year. Operating profit from its comics publication and related business rose by 4.8
                   times to approximately HK$10.4 million, as compared to HK$1.8 million in last year.
                   Whereas, operating profit from its catering business was HK$0.2 million and a net
                   gain on disposals of restaurants of HK$0.5 million, as compared to operating loss of
                   HK$14.3 million and a gain on disposal of restaurant of HK$26 million for previous
                   year.

                                                    – 126 –
      APPENDIX I                 FINANCIAL INFORMATION ON THE GROUP


             Dividend


                   The Directors did not recommend the payment of a final dividend for the year
             ended 31 March 2005.


             Operational review


             Comics Publication and Related Business


                   The remarkable performance of the Group’s comics publication and related
             business reflected the six-month contribution from the acquisition of 51% of JDH in
             April 2004, and the subsequent five-month contribution of the 100% of JDH since
             October 2004. Since the acquisition of JDH, the Group published and sold 7 local
             Chinese comics on a weekly or bi-weekly basis and approximately 30 Japanese comics
             on a monthly basis.


             Catering Business


                  The Directors considered that further resources allocations to this business
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             segment as compared with comics publication and related business was not justified.
             Accordingly, all the restaurant operations were either disposed of on or before 31
             March 2005 or being discontinued on 30 April 2005.


                   There was no other investment, subsidiary or associate being acquired or
             disposed of by the Group for the year.


             Geographical Segments


                   The Group’s turnover and profit after tax for the year are substantially derived
             from Hong Kong.


                   The Group assets and liabilities are substantially located in Hong Kong.


             Numbers and remuneration of employees


                   As at 31 March 2005, the Group had 163 permanent employees and 11 part-
             time employees. Employees’ cost (including directors’ other emoluments) amounted
             to approximately HK$43.7 million for the year. All permanent employees were under
             the remuneration policy of fixed monthly salary with discretionary bonus.




                                             – 127 –
      APPENDIX I                 FINANCIAL INFORMATION ON THE GROUP


                    There has been no change to the share option scheme adopted by the Company
             on 7 October 2002. A total of 61.8 million share options have been granted to certain
             directors, employees, consultants, advisors, customers, shareholders and business
             associates as at 31 March 2005.

             Liquidity and financial resources

                    The Group’s total assets as at 31 March 2005 were approximately HK$210.7
             million which were financed by the shareholders’ fund and total liabilities of HK$116.2
             million and HK$94.5 million respectively.

                   During the year, net proceeds of approximately HK$20.9 million were received
             from a top-up placing of 70 million new shares. On the other hand, the Company has
             issued HK$65.3 million convertible notes as part of the total consideration for the
             acquisition of the 49% remaining equity interest in JDH. The Group’s gearing ratio
             then computed as total borrowings over shareholders’ fund was 63.5% as at 31 March
             2005 (31 March 2004: 9%).

                    The directors consider the Group will have sufficient working capital for its
             operations and financial resources for financing future investment opportunities in
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             suitable business ventures.

                   The Group had limited exposure to fluctuations in exchange rates and its
             borrowings, bank balances and cash were all denominated in Hong Kong dollars.

             Capital structure

                   During the year, the Company issued 70 million new shares of HK$0.002 each
             at a price of HK$0.31 per share by way of top-up placing, with net proceeds amounting
             to approximately HK$20.9 million. Furthermore, the Company transferred its entire
             credit of approximately HK$286.3 million as at 30 June 2004 arising from the
             Company’s share premium account to its contributed surplus account and applied the
             amount of approximately HK$236.9 million from the contributed surplus account to
             set off against its accumulated losses.

             Charges on assets

                  As at 31 March 2005, certain assets of the Group with an aggregate amount of
             HK$19 million were pledged to secure general banking facilities granted to the Group.

             Contingent liability

                   The Group had no contingent liability as at 31 March 2005.


                                              – 128 –
      APPENDIX I                FINANCIAL INFORMATION ON THE GROUP


             Prospects

                   The financial year just passed marked a new era for the Company with all the
             disposal/discontinuation of its catering operation completed and at the same time, the
             acquisition of the entire interest of JDH as stated in the Circular dated 15 September
             2004. The substantial contribution from comics distribution and related business from
             the PRC market would be capitalized to the group in the years to come. Working
             towards this direction, the Company is realizing our dream into business, the home-
             grown comic stories, such as The Weapon and Super Dragon and Tiger Heros, are
             adapting into animated TV episodes and movie.


                     Being one of the leading companies in kind, our creative team is headed by the
             paramount comics publisher Mr. Wong Chun Loong alias Wong Yuk Long, who is the
             Chairman of Hong Kong Comics Federation Limited and Visiting Professor of Beijing
             Film Academy – Animation Academy. The Company now concentrates on comics
             publication and related business, with particular emphasis in animation. In order to
             carry through the corporate mission of promoting homegrown comics and cultural
             industry to every corner of the world, the Company starts to lay foot on the PRC. The
             State Administration of Radio Film and Television (“SARFT”) of PRC indicated in
             “Some Comments regarding the Development of the TV and Film Animation Industry
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             in Our Country” dated 20 April 2004, that it is urgent to solve the shortage in supply
             of children’s domestic TV and film programs. Our library of copyrights of comic
             titles would provide the solution, in which the interesting stories with Chinese element
             and educational principle are ready to adapt into animated TV series for children.
             The SARFT also stated in their notice that “private animation production agencies
             with good reputation and proper operation would be treated equally with state-owned
             animation and relative comic production organizations, in accordance with the
             policies”. The first animation project is the co-production with China Central Television
             (“CCTV”) in the animated TV series titled “The Invincible Amour” of 52 episodes,
             which is a cute version animation adapted from the comics titled “The Weapon”. A
             Letter of Intent on Co-operation was signed in July 2005 between the Company and
             CCTV to confirm this co-production project. We are looking forward excitedly for
             the broadcasting of these 52-episodes animated TV series in CCTV networks facing
             the population of about 13 billions in the near future, which will be closely followed
             by launching of our animation-derived products in the PRC. All the copyrights of the
             animation and its derivative products will be co-owned by the Company and CCTV. I
             believe this is a big step forward for the Company’s business and home-grown
             animations and their derived products in the PRC market, where the potentials of
             expansion is huge in the coming decades.




                                              – 129 –
      APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


                      The cultural industry scene in the PRC is thriving in recent years and the
               Company distributes our homegrown comics in collaboration with state-owned
               publishers in the PRC to 65 cities currently. To cope with the maturing internet
               market, the Company chooses to work in collaboration with the digital publication
               medium, TriWorks Computer & Telecommunications Technology (Shanghai) Company
               Limited (“TriWorks”). Through the internet platform of Shanda Interactive
               Entertainment Limited (“Shanda”), the largest online game company in the PRC, all
               online comics of the Group will be integrated with TriWorks’ DigiBook online reading
               system by signing the Letter of Intent on Co-operation in July 2005. The Company
               becomes the online content provider, making our home-grown comics available to 45
               million paid subscribers of Shanda directly. This penetration of readership will create
               significant revenues for the Company, and will bring along extensive and positive
               influence to the promotion of our comics at the same time, which paves the way for
               our further development in the PRC in the future.

                    There was no future plan for other material investment or capital assets by the
               Group for the year.

                      As a listed company, the Directors are aware of the requirements to comply
               with the Listing Rules in respect of the Practising Corporate Governance in Hong
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               Kong. In this regard, the Company has started to devote efforts on such compliance
               including but not limited to the set up of the Remuneration Committee on 24 March
               2005, in addition to our existing Audit Committee which are working to secure the
               interests of shareholders and enhance accountability.

         (b)   For the year ended 31 March 2006

               Financial review

                      For the year ended 31 March 2006, the Group recorded a turnover of HK$102.2
               million as compared to HK$107.3 million last year (restated). Profit attributable to
               equity holders of the Company were approximately HK$13.5 million, as compared
               with a profit of approximately HK$11.0 million for the last financial year (restated).
               During the year, the Group has disposed of all catering business, resulting operating
               loss from its catering business of approximately HK$0.1 million, as compared to
               operating loss of approximately HK$1.3 million and a gain on disposal of restaurant
               of HK$0.5 million for previous year.

                     At the year end, the Group maintained a net cash position with cash and bank
               balances of approximately HK$2.3 million (2005: HK$4.1 million) and revolving
               bank loans of approximately HK$14.6 million (2005: HK$8.5 million). The Group
               had sufficient financial resources and will continue to finance its business development
               by revolving bank borrowings.


                                                – 130 –
      APPENDIX I                 FINANCIAL INFORMATION ON THE GROUP


             Dividend

                    The Directors have resolved to recommend to shareholders the payment of a
             final dividend of HK0.20 cent (2005: nil), which together with the interim dividend
             of HK0.20 cent (2005: nil) make a total dividend of HK0.40 cent for the year end of
             31 March 2006. The total dividend of HK0.40 cent will amount to approximately
             HK$3.4 million of the Company’s profit for the year ended 31 March 2006 (2005:
             nil).

                   The proposed final dividend of HK0.20 cent per share, the payment of which is
             subject to approval of the shareholders at the forthcoming annual general meeting of
             the Company to be held on 23 August 2006, is to be payable on 6 September 2006 to
             shareholders whose names appear on the Register of Members of the Company on 23
             August 2006.

             Operational review

             Comics Publication and Related Business

                   The diversification of the Group’s business into comics publication and related
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             business has proved to be a successful move. Since the completion of the acquisition
             of 51% and the remaining 49% of Jade Dynasty Holdings Limited (“JDH”) in April
             2004 and October 2004 respectively, the full year contribution was fully reflected in
             the Group’s financial statement. During the year, the Group published and sold 7
             local Chinese comics on a weekly or bi-weekly basis and approximately 25 Japanese
             comics on a monthly basis. The Group’s had also diversified its business from
             traditional comics books to animation-related products.

             Catering Business

                   Since the catering business continued to face keen competition from other
             market players, the Directors completed the closure of the remaining restaurant business
             in April 2005.

                   There was no other investment, subsidiary or associate being acquired or
             disposed of by the Group for the year.

             Geographical Segments


                   The Group’s turnover and profit after tax for the year are substantially derived
             from Hong Kong.


                   The Group assets and liabilities are substantially located in Hong Kong.



                                              – 131 –
      APPENDIX I                 FINANCIAL INFORMATION ON THE GROUP


             Numbers and remuneration of employees

                    As at 31 March 2006, the Group had 226 (2005: 163) employees. Employees’
             cost (including directors’ other emoluments) amounted to approximately HK$37.4
             million for the year (2005: HK$43.7 million). All permanent employees were under
             the remuneration policy of fixed monthly salary with discretionary bonus.


                   There has been no change to the share option scheme adopted by the Company
             on 7 October 2002. 31.8 million (2005: 61.8 million) outstanding share options have
             been granted to certain directors, employees, consultants, advisors, customers and
             business associates as at 31 March 2006.


             Liquidty and financial resources


                     The Group’s total assets as at 31 March 2006 were approximately HK$235.2
             million (2005: HK$210.7 million) which were financed by the shareholders’ fund and
             total liabilities of approximately HK$188.1 million (2005: HK$116.5 million) and
             HK$47.1 million (2005: HK$94.2 million) respectively.


                   The Group’s gearing ratio then computed as total borrowings over shareholders’
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             fund was approximately 15.9% as at 31 March 2006 (31 March 2005: 63.2%).


                    The directors consider the Group will have sufficient working capital for its
             operations and financial resources for financing future investment opportunities in
             suitable business ventures.


                   The Group had limited exposure to fluctuations in exchange rates and its
             borrowings, bank balances and cash were mainly denominated in Hong Kong dollars.


             Capital structure


                   During the year, the Company issued approximately 100.3 million new shares
             of HK$0.002 each at a price of HK$0.5 per share by way of convertible notes
             conversion and approximately 30.0 million new shares of HK$0.002 each at weighted
             average price by way of exercise share options respectively.


             Charges on assets


                   As at 31 March 2006, certain assets of the Group with an aggregate amount of
             HK$25.9 million, including HK$21.8 million of property at market value and HK$4.1
             million of pledge deposit, (2005: HK$19.0 million) were pledged to secure general
             banking facilities granted to the Group.


                                            – 132 –
      APPENDIX I                FINANCIAL INFORMATION ON THE GROUP


             Contingent liability


                   The Group had no contingent liability as at 31 March 2006.


             Prospects


                    Striving to be “the leader of comics and animations industry in the Chinese
             community”, the Group has achieved a breakthrough development in its animations-
             related business for the year under review. The Group entered into the Joint Investment
             Production Agreement of Animated TV Series (“Agreement”) with China Central
             Television (“CCTV”) on 9 March 2006 for the co-adaptation and co-production of an
             animated TV series titled “Shen Bing Kids”. The animated TV series was adapted
             from the Group’s home-grown comics titled “The Weapon”. This breakthrough signified
             the Group has rolled out its plan to develop animations business and successfully
             penetrated into the enormous animations market in the PRC by positioning itself as
             the first overseas animations enterprise cooperating with the sole national TV station
             CCTV, utilizing the expertise and network of CCTV. The co-adapted and co-produced
             animated TV series was produced in accordance with “Comments on Developing
             Country’s Film, Television and Animations Industry” set out by the State
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             Administration of Radio Film and Television (“SARFT”) in 2004.


                    Pursuant to the Agreement, the Group is responsible for the pre-production
             and production of “Shen Bing Kids” while CCTV is in charge of the post-production.
             CCTV will be responsible for the sales and distribution of VCD/DVD products in the
             PRC market (excluding Hong Kong and Macau) while the Group will be responsible
             for the sales and distribution of animations-derived comics books, licensing of
             animations characters to toys, apparels, premiums, stationery, food and drink
             manufacturers, broadcasting of “Shen Bing Kids” in other TV stations in and outside
             the PRC as well as licensing of VCD/DVD products outside the PRC. Copyrights of
             the animated TV series and its derivative products will be jointly owned by the Group
             and CCTV.


                     The Group has proposed to CCTV to reschedule the broadcasting timetable for
             the first 26 episodes of “Shen Bing Kids” on CCTV 1 Channel to summer vacation in
             order to not only capture maximum viewing rates, but also to avoid clashing with the
             examination period of children in the PRC. Such broadcasting schedule is still subject
             to final regulatory procedures of SARFT and final broadcasting scheduling of CCTV.
             Besides, the second 26 episodes of “Shen Bing Kids” are expected to be broadcasted
             in the 4 th quarter of 2006. The post-production of the second 26 episodes will take
             place in CCTV from July 2006. The Group endeavors to make “Shen Bing Kids”
             become an integral part of the daily lives of the children in the PRC.



                                              – 133 –
      APPENDIX I                 FINANCIAL INFORMATION ON THE GROUP


                    “Shen Bing Kids” is the signature animations project enabling the Group to tap
             into the huge animations market in the PRC. We will keep our stakeholders informed
             once the broadcasting schedule is confirmed.


                   The Group believes “Shen Bing Kids” will on one hand generate substantial
             revenue and on another hand help diversifying the Group’s business from merely
             comics publications into animations production. To attain this, the Group in early
             2006 authorized Shanghai People’s Fine Arts Publishing House, which is one of the
             leading fine arts state-owned publishers in the PRC with over 16,000 titles published
             and over 6 billion copies in issue since its establishment in 1952, to publish animations-
             derived comics books of “Shen Bing Kids”.


                   In April 2006, the Group commissioned Promotional Partners Worldwide
             (“PPW”), which is one of the global promotional marketing service providers and
             licensing agents with headquarters in Hong Kong and has rich experience in
             cooperating with internationally renowned licensed intellectual properties owners such
             as Disney, Sanrio, Warner Bros and KFC, in granting product licensings as well as
             promotional licensings to renowned licensees of various derivative products of “Shen
             Bing Kids” including toys, apparels, premiums, stationery, food and drink
YSL




             manufacturers/distributors in the PRC.


                    Additionally, the Group has entered into two two-year contracts – “TV Program
             Agency and Distribution Contract” on 7 July 2006 with China International Television
             Corporation (“CITVC”), a wholly-owned subsidiary of CCTV which was founded in
             1984 and is the global marketing agent for program copyrights owned by CCTV and
             the exclusive overseas copyright agent for the Chinese TV Program Export Association,
             authorizing it to deal with an exclusive TV broadcasting and distribution right of
             “Shen Bing Kids” to areas in and outside the PRC and production and distribution
             rights of VCD/DVD products to areas outside the PRC. The authorization aimed at
             well-preparing the Group to capture the trend of “Shen Bing Kids” upon the first
             launch of the animated TV series in CCTV 1 Channel. The overseas markets that
             CITVC will cover include Hong Kong, Macau, Taiwan, Japan, Korea, South-East
             Asia, United States, Canada, Australia, New Zealand, Europe, South America, Middle-
             East, Africa and West Asia. Also, the further cooperation with CITVC complements
             the marketing and promotion of the licensees of other derivative products in and
             outside the PRC and fosters a closer business relationship with CCTV.


                     The directors are glad to report that the business developments undertaken by
             Shanghai People’s Fine Arts Publishing House, PPW and CITVC are in good progress
             with some early bird promotional licensing contracts to be concluded in the near
             future.



                                               – 134 –
      APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


                     During the year of 2005/06, the Group has launched 5 new comics books
               including “Bai Fa Gui” adapted from the comics adaptation copyright of “The Bride
               with White Hair” authorized by Mandarin Films Ltd., “Magical Weapon – Fore Story
               4”, movie-version comics named “Dragon Tiger Gate”, “The Deer and the Cauldron –
               Comics Version” adapted from Jin Yong’s famous knight-errant fiction “The Deer
               and the Cauldron”. Additionally, the Group launched “Legend of “No-Man’s-Land”-
               Comics Version”, which was adapted from Huang Yi’s recent masterpiece that has
               never been adapted by other media.

                      In view of the favourable environment of the capital market in the first few
               months of 2006, the Group is now in a debt-free position by ways of convertible
               notes conversions, share options exercises plus placing of new shares to 2 institutional
               investors, raising a net proceed of HK$28.5 million in a top-up placing in May 2006
               principally for future animations development. At present, the Group’s equity position
               has been enhanced by an aggregate of HK$105.0 million by these 3 types of fund-
               raising avenues. Such position allows the Group to face upcoming challenges in
               sustaining its position as the largest and only listed comics publisher in the local
               comics market and tap into the huge animations market in the PRC by adaptation of
               our existing comics library.
YSL




                     The undersupply in domestic animations in the PRC will prevail in the next
               few years. More importantly, the State Council of the People’s Republic of China just
               announced “Comments on Developing Country’s Animations Industry” dated 25 April
               2006 to further encourage the development of the animations industry which favours
               our moves to strive to be the leader in the Chinese community’s comics and animations
               industry.

                    There was no other future plan for material investment or capital assets by the
               Group for the year.

         (c)   For the year ended 31 March 2007

               Financial review

                      For the year ended 31 March 2007, the Group recorded revenue of HK$102.1
               million as compared to HK$102.2 million last year. Profit attributable to equity holders
               of the Company were approximately HK$11.4 million, as compared with a profit of
               approximately HK$13.5 million for the last financial year.

                     At the year end, the Group maintained a net cash position with cash and bank
               balances of approximately HK$5.3 million (2006: HK$2.3 million) and short term
               bank borrowings of approximately HK$3.6 million (2006: HK$14.6 million). Coupled
               with the completion of placing 100,000,000 shares to institutional investors in June
               2007, the Group had sufficient financial resources and will continue to finance its
               business development by internal resources and short-term bank borrowings.


                                                – 135 –
      APPENDIX I                FINANCIAL INFORMATION ON THE GROUP


             Dividend


                    The Directors have resolved to recommend to shareholders the payment of a
             final dividend of HK0.2 cent (2006: HK0.2 cent), which together with the interim
             dividend of HK0.2 cent (2006: HK0.2 cent) make a total dividend of HK0.4 cent for
             the year end of 31 March 2007 (2006: HK0.4 cent). The total dividend of HK0.4 cent
             will amount to approximately HK$3.9 million of the Company’s profit for the year
             ended 31 March 2007 (2006: HK$3.4 million).


                    The proposed final dividend of HK0.2 cent per share, the payment of which is
             subject to approval of the shareholders at the forthcoming annual general meeting of
             the Company to be held on 30 August 2007, is to be payable on 19 September 2007
             to shareholders whose names appear on the Register of Members of the Company on
             30 August 2007.


             Operational review


                    During the year, the Group published and sold 13 local Chinese comics on a
             weekly or bi-weekly basis and approximately 30 Japanese comics on a monthly basis.
YSL




             The Group also grants comics books licensing to overseas publishers to translate
             comic books into different languages. The Group’s has also diversified its business
             from traditional comics books to animation-related products by acquisition of 51% of
             the issued share capital of Dragon Animation Holdings Limited.


                   There was no other investment, subsidiary or associate being acquired or
             disposed of by the Group for the year.


             Geographical Segments


                   The Group’s turnover and profit after tax for the year are substantially derived
             from Hong Kong.


                   The Group assets and liabilities are substantially located in Hong Kong.


             Numbers and remuneration of employees


                    As at 31 March 2007, the Group had 227 (2006: 226) employees. Staff costs
             (including directors’ emoluments) charged to consolidated income statement amounted
             to approximately HK$37.2 million for the year (2006: HK$37.4 million). All permanent
             employees were under the remuneration policy of fixed monthly salary with
             discretionary bonus.



                                             – 136 –
      APPENDIX I                 FINANCIAL INFORMATION ON THE GROUP


                   There has been no change to the share option scheme adopted by the Company
             on 7 October 2002. As at 31 March 2007, 3.1 million share options outstanding have
             been granted to certain directors, employees, consultants, advisors, customers and
             business associates (2006: 31.8 million).


             Liquidity and financial resources

                   The Group’s total assets as at 31 March 2007 were approximately HK$271.7
             million (2006: HK$235.2 million) which were financed by the shareholders’ funds,
             minority interests and total liabilities of approximately HK$244.3 million (2006:
             HK$188.1 million), HK$2.4 million (2006: nil) and HK$25.0 million (2006: HK$47.1
             million) respectively.

                   The Group’s gearing ratio then computed as total borrowings over shareholders’
             fund was approximately 3.8% as at 31 March 2007 (31 March 2006: 15.9%).

                    The directors consider the Group will have sufficient working capital for its
             operations and financial resources for financing future investment opportunities in
             suitable business ventures.
YSL




                   The Group had limited exposure to fluctuations in exchange rates and its
             borrowings, bank balances and cash were mainly denominated in Hong Kong dollars.

             Capital structure

                   During the year, the Company issued approximately 19.3 million new shares of
             HK$0.002 each at a price of HK$0.5 per share by way of convertible notes conversion,
             approximately 28.7 million new shares of HK$0.002 each at HK$0.6 per share of
             weighted average price by way of exercise share options and 40.0 million new shares
             of HK$0.002 each at HK$0.73 per share by way of share placing respectively.

             Charges on assets

                   As at 31 March 2007, certain assets of the Group with an aggregate amount of
             HK$18.7 million (2006: HK$18.8 million) including HK$14.4 million of buildings
             and prepaid lease payments (2006: HK$14.7 million) and HK$4.3 million of pledge
             deposit (2006: HK$4.1 million) were pledged to secure general banking facilities
             granted to the Group.




                                            – 137 –
      APPENDIX I                FINANCIAL INFORMATION ON THE GROUP


             Contingent liability

                   The Group had no contingent liability as at 31 March 2007.

             Prospects

                   Following the proposed acquisition of a reputable PRC’s animations production
             house in May 2007, we will further our steps by optimizing our value chain of an
             animations production house and are on the track to become “the leader of comics
             and animations industry in the Chinese community”.


                    Our wholly owned subsidiary, Jade Dynasty Multi-media Limited proposed to
             acquire 51% issued capital in a PRC’s animations production house, Suzhou Hongyang
             Cartoon Production Company Limited (“Suzhou Hongyang”) and the entire interest
             of its two associates, namely Nanjing Hongying Anmie-cartoon Entertainment
             Company Limited (“Nanjing Hongying) and Shanghai Sanding Animation Creation
             Company Limited (“Shanghai Sanding”) (collectively called the “Hongying Group”)
             in May 2007, symbolizing the Group’s consistent commitment in becoming the leader
             of comics and animations industry in the Chinese community. The acquisition is also
             a significant milestone for sustainable animations development of the Group in the
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             PRC.


                     Nanjing Hongying possesses some property rights of animations worldwide
             and in the PRC, enriching our established comics and animations library on top of
             “Shen Bing Kids” and “Jackie Chan Chinese animated series”. Among them, two of
             its self-developed animations titles, “Yamacha’s” and “Xiangqi Master” have already
             obtained relevant television broadcasting permits in the PRC from Jiangsu Province
             Broadcast, Film and TV Bureau and “Yamacha’S” was already released on CCTV’s
             children channel early this year.


                   Another strong animations production partner that this acquisition brings in is
             Suzhou Hongyang, one of the largest animations production houses in the PRC.
             Various big names including CCTV, Disney, Warner Brothers, 20th Century Fox,
             DIC Entertainment, Les Film de la Perrine, Millimages, Tooncan Productions and
             Nelvana Limited are its clients. Its clients network scatters around the world including
             the PRC, Europe, United States and South East Asia.




                                              – 138 –
      APPENDIX I                FINANCIAL INFORMATION ON THE GROUP


                    The acquisition will on one hand create synergies between the Hong Kong and
             PRC teams and experienced production team of Hongying Group, it will on another
             hand enable us to launch our own animations titles in form of domestic animations in
             accordance with the laws, policies and regulations of the PRC through our connections
             with Nanjing Hongying and Shanghai Sanding, which offer excellent animations
             distribution platforms. The rich animations portfolio of Hongying Group could also
             diversify and enrich our animations contents.


                   The undersupply of domestic animations in the PRC will prevail in the next
             few years. The acquisition of Hongying Group as well as our landmark animations
             project, “Shen Bing Kids” in the PRC will both help augmenting the supply of
             domestic animations in the PRC.


                    “Shen Bing Kids” project is progressing well with all development and initiatives
             being effectively worked on. The production of the whole 52 episodes has been
             completed and its contents have been amended in accordance with the comments of
             the State Administration of Radio, Film and Television (“SARFT”). We are waiting
             for the final regulatory procedures and approval from the SARFT for broadcasting the
             whole 52 episodes, after which is subject to final broadcasting schedule of CCTV.
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             We are optimistic towards getting the green light from the SARFT on broadcasting
             the whole series of “Shen Bing Kids” in the foreseeable future. At the same time, we
             are working hard on preparing to roll out the audio-visual products, comics books,
             peripheral products, after-launch broadcasting network inside and outside the PRC
             relevant to “Shen Bing Kids” right after its official launch on CCTV in the PRC.
             Once the broadcasting approval has been granted, we are confident that the Group
             will benefit from the high growth potential of the derivative products of “Shen Bing
             Kids” and deliver promising returns to the shareholders.


                    To further strengthen our presence in the PRC animations market and continue
             the growth of our animations profile, we have acquired 51% interest of Dragon
             Animation Limited in late 2006 to produce Chinese animated series using the figure
             of Jackie Chan, the world-famous film star. The pre-production of the series has been
             undergoing in full speed. It is anticipated that the new series will bring the Group’s
             animations businesses further to another high following our signature “Shen Bing
             Kids” project.


                     With a view to enhancing the publicity of “Shen Bing Kids” in the PRC market
             after its premiere in CCTV, we are exploring new media opportunities and avenues to
             raise awareness of our animations contents as well as expand distribution platforms
             of the derivative products bearing our animations characters.




                                              – 139 –
      APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


                      Revenues derived from our core comics publication business have been steady.
               During the period under review, we have launched four new home-grown comics. In
               order to enhance competitiveness of this business segment, a sublimated format of
               printing has been adopted for certain comics books. The book volume was lengthened
               to over three times longer than existing Hong Kong comics and yet the book was
               priced 30% cheaper than Japanese comics. By such, we anticipate our shares in the
               local comics market will increase in the years ahead. However, this also accounts for
               a drop in gross profit in the second half since the manuscript fees and other direct
               production costs including but not limited to printing were much higher. Upon grasping
               a larger market share, we shall take steps to enhance the gross profit.


                      The directors are very glad that our dedication to comics and animations
               development has been recognized by investors. In May 2007, we raised net proceeds
               of approximately HK$73.4 million through placing of existing shares and subscription
               of new shares for sustainable animations development. We placed up to 100,000,000
               existing shares at a price of HK$0.76 per placing share to more than six placees and
               subscribed the same number of new shares via our substantial shareholder, Super
               Empire Investments Limited.

                     On account of the foregoing, we increased the dividend payout ratio to
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               acknowledge our shareholders’ support in the past and demonstrate our confidence in
               and commitment to the future of our Company.

                    There was no future plan for other material investment or capital assets by the
               Group for the year.

         (d)   For the six months ended 30 September 2007

               Financial review

                      The revenue of the Group for the six months ended 30 September 2007 of
               approximately HK$55.2 million represented a slight increase of approximately 4%
               compared to approximately HK$52.9 million recorded in the corresponding period of
               last year. In line with slight increment in revenue, the Group recorded net profit after
               tax of approximately HK$7.9 million, representing an increase of 3% compared to
               approximately HK$7.7 million for the last corresponding period. The increase in net
               profit was mainly due to the increase of sale of multimedia licensing to HK$4.0
               million with segment profit of HK$3.0 million.




                                                – 140 –
      APPENDIX I                FINANCIAL INFORMATION ON THE GROUP


             Operational review

             Comics Publication

                   During the six months ended 30 September 2007, the Group published and
             sold 11 local Chinese comics on a weekly, bi-weekly or monthly basis and
             approximately 30 Japanese comics on a monthly basis.

             Multimedia Development

                   During the six months ended 30 September 2007, multimedia development,
             especially in the grant of licensing, is continuously developing.

                    Save for the sale and purchase agreement dated 20 August 2007 in connection
             with the Previous Acquisition which subsequently completed on 31 October 2007,
             there was no other investment, subsidiary or associate being acquired or disposed of
             by the Group for the period.


             Geographical Segments
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                   The Group’s turnover and profit after tax for the period are substantially derived
             from Hong Kong.


                   The Group assets and liabilities are substantially located in Hong Kong.


             Numbers and remuneration of employees


                   As at 30 September 2007, the Group had 222 employees (31 March 2007:
             226). Employees’ cost charged to the Interim Financial Statements (including directors’
             other emoluments) amounted to approximately HK$19.3 million for six months ended
             30 September 2007 (six months ended 30 September 2006: HK$18.2 million). All
             permanent employees were under the remuneration policy of fixed monthly salary
             with discretionary bonus.


                   There has been no change to the terms of the share option scheme adopted by
             the Company on 7 October 2002. No new share options were granted during the six
             months ended 30 September 2007. No share options was exercised during the six
             months ended 30 September 2007 and therefore, the total outstanding share options
             granted to certain directors, employees, consultants, advisors, customers, shareholders
             and business associates amounted to 3,104,000 as at 30 September 2007 (31 March
             2007: 3,116,000).




                                              – 141 –
      APPENDIX I                 FINANCIAL INFORMATION ON THE GROUP


             Liquidity and financial resources


                    The Group’s total assets as at 30 September 2007 were approximately HK$352.3
             million (31 March 2007: HK$271.7 million) which were approximately financed by
             the shareholders’ fund, minority interest and total liabilities of HK$327.1 million (31
             March 2007: HK$244.3 million), HK$2.4 million (31 March 2007: HK$2.4 million)
             and HK$22.8 million (31 March 2007: HK$25.0 million) respectively.


                    The directors consider that the Group has sufficient working capital for its
             operations and financial resources for financing future investment opportunities in
             suitable business ventures.


                   The Group had limited exposure to fluctuations in exchange rates and its
             borrowings, bank balances and cash were mainly denominated in Hong Kong dollars
             and Renminbi.


             Capital structure


                   In May 2007, 100 million ordinary shares of HK$0.002 each of the Company
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             were placed to independent professional investors at a price of HK$0.76 each. The
             net proceeds of approximately HK$74.3 million from the placing agreement were
             used for further development of multimedia business and general working capital.


                   During the Latest Practicable Date, an aggregate principal amount of
             approximately HK$4.0 million convertible notes were converted into approximately
             8.0 million new ordinary shares of HK$0.002 each at HK$0.5 per share.


                   Subsequent to the period end, HK$1.53 million convertible notes were exercised
             at HK$0.50 each. As a result, 3.05 million new ordinary shares of HK$0.002 each
             were issued.


                   The Group’s gearing ratio computed as total borrowings over shareholders’
             fund was 1.6% as at 30 September 2007 (31 March 2007: 3.8%).


             Exposure to foreign exchange


                   The revenue of the Group is mainly denominated in Hong Kong dollars and the
             production cost is mainly denominated in Hong Kong dollars. Therefore, the Group is
             not exposed to any material foreign currency exchange risk.




                                              – 142 –
      APPENDIX I                 FINANCIAL INFORMATION ON THE GROUP


             Charges on assets


                   As at 30 September 2007, certain assets of the Group with an aggregate amount
             approximately of HK$18.5 million, (31 March 2007: HK$18.7 million) including
             HK$14.2 million of buildings and prepaid lease payments (31 March 2007: HK$14.4
             million) and HK$4.3 million of pledged deposits (31 March 2007: HK$4.3 million),
             were pledged to secure general banking facilities granted to the Group.


             Contingent liability


                   The Group had no contingent liability as at 30 September 2007.


             Prospects                                                                                R14
                                                                                                      A1B
                    Regarding our signature animations project, “Shen Bing Kids” has obtained
             animations distribution licence from the State Administration of Radio, Film and
             Television (“SARFT”) for broadcasting the entire 52 episodes of “Shen Bing Kids” in
             September 2007. The first 26 episodes have already been premiered on 4 October
             2007 during the Golden Week and finished on 6 November 2007. “Shen Bing Kids”
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             was well-received by children audience and animations lovers in the PRC. It has
             made a new high viewing record among programs recently shown at the 4:30 p.m.
             time slot on China Central Television (“CCTV”) children channel on the day of its
             debut. Its audience rating was almost seven times of that of the program shown at the
             same time slot on the previous day, lifting the place of children channel from 18th to
             11th of the audience rating rank as to 4:30 p.m. time slot among all channels under
             CCTV, which is a remarkable achievement. In Lunar New Year 2008, “Shen Bing
             Kids” will be broadcasting on provincial television stations in the PRC while the
             second 26 episodes are preliminarily expected to be premiered on CCTV children
             channel.


                    Having received favorable response of audience rating of “Shen Bing Kids”,
             the first 26 episodes of “Shen Bing Kids” were re-broadcasted on CCTV children
             channel during the “Galaxy Theatre” time slot at 8:30 p.m. and 9:30 a.m. from 10
             November 2007 to 5 December 2007. Further, we are proud to report that according
             to audience rating information of CCTV, the audience viewing population of “Shen
             Bing Kids” was once ranked the 4th among all programs aired on CCTV children
             channel in the week commencing from 18 November 2007. Since the premiere and
             rebroadcast of “Shen Bing Kids”, audio-visual products, animations-derived comics
             books and derivative products of “Shen Bing Kids” were rolled out in sequence to
             further drum up the “Shen Bing Kids” fad and strengthen the commodity effect,
             hoping to generate substantial revenue to the Group. Such rebroadcast will help



                                             – 143 –
      APPENDIX I                FINANCIAL INFORMATION ON THE GROUP


             heating up the “Shen Bing Kids” wave in the PRC and thus driving up the sales of
             animations-derived products. With the excellent audience rating in the PRC, we will
             continue to actively lobby CCTV to rebroadcast the first 26 episodes of “Shen Bing
             Kids” on its other channels as soon as possible to gain maximum exposure. The
             Group has licensed Guangzhou Toys & Wonders Limited to produce various toys
             making use of “Shen Bing Kids” characters including robots, role-play puppets and
             cotton-stuffed dolls to be sold across the PRC and assigned Kin Man Garment Factory
             Limited, a swimwear manufacturer established in 1959 to produce kids swimwear,
             sandals, towels and swimming accessories bearing “Shen Bing Kids” characters.
             Leveraging on the popularity of “Shen Bing Kids” in the PRC, we will continue to
             strengthen the Group’s revenue generation capacity by soliciting more local and
             overseas licensees plus licensees incorporated in the PRC to enlarge the derivative
             products portfolio of our animations titles. The Group hopes to further deliver
             promising returns in the coming fiscal year to our shareholders.


                    The Group has continued to expand its comics and animations library through
             strategic acquisitions plans. Again we are happy to report the further development of
             our acquisition of “Hongying Group” in the middle of 2007. The acquisition was
             approved in the Special General Meeting on 20 September 2007 and was completed
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             in 2007. Encouraging results were recorded during the year under review. “Yamacha’s”,
             one of the self-developed animations titles under Nanjing Hongying’s animations
             library already premiered on CCTV children channel in early 2007, copyright of
             broadcasting and derivative products in Asia Pacific of its first 104 episodes was
             successfully sold to a Taiwanese enterprise, contributing favorable returns to the
             shareholders in this fiscal year.


                    Jackie Chan Animations, our landmark project embarking on the international
             animations market has been progressing well. Our production team in Hong Kong
             and the PRC are in full gear to develop the storyboard, hoping to finish the production
             of the first 26 episodes in 2008. We are hoping that this animations project helps the
             Group tapping into the international market following our signature project, “Shen
             Bing Kids”.


                    With a view to tapping into the fast growing consumer markets in the PRC and
             thus enhancing the profitability of the Group, our board of directors is in the course
             of identifying and exploring such investment opportunities.


                  There was no future plan for other material investment or capital assets by the
             Group for the period.




                                              – 144 –
      APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


         (e)   Financial and trading prospects of the Enlarged Group


               Financial and trading aspect


               Comics Publication and Multimedia Development


                      Comics publication businesses are operating in a stable market environment.
               Multi-media development particularly the “Shen Bing Kids” project is being rolled
               out in full force.


               Animation Production


                     The acquisition of Target Companies completed on 31 October 2007 which
               contributed additional profit to the Enlarged Group based on profit guarantee of
               HK$8,500,000 from the vendors of Target Companies for the two years ended 31
               December 2008.


               Car Dealership Agency
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                      With the rapid expansion of the automobile markets in the PRC, the sales and
               profit after tax from the car dealership agency business would be encouraging based
               on profit guarantee from the Vendor and Mr. Qi of HK$55,000,000 and HK$65,000,000
               for the two years ending 31 December 2009.


               Risk factors


               The Enlarged Group’s future growth relies substantially on the PRC market and may
               be adversely affected by changes in the PRC’s economic, political and social conditions


                     Over 80% of the Enlarged Group’s total turnover and profit after tax are expected
               to be derived from the PRC. The Enlarged Group anticipates that the PRC will
               become its largest market in the foreseeable future. The strategy of the Enlarged
               Group involves the growth of its operations in the PRC and its such growth also
               depends the consumer demand which is affected by changes or developments in
               economic and financial conditions, and social and political stability, which are outside
               the Enlarged Group’s control.




                                                – 145 –
      APPENDIX I                 FINANCIAL INFORMATION ON THE GROUP


                    Hence, the Enlarged Group’s PRC operations and business expansion plans are
             subject to not only changes or development in economics and financial conditions,
             social and political stability, but also additional risks, such as differences in the legal
             and regulatory requirements, potentially adverse tax consequences, fluctuations in
             currency exchange rates, and differences in legal burdens in complying with Chinese
             laws and regulations. Should there be any material adverse change in the political,
             economic, legal, regulatory and social conditions in the PRC, the Enlarged Group’s
             business and profitability may be materially and adversely affected.


                   In the past twenty years, the PRC has been one of the world’s fastest growing
             economies measured in gross domestic product, or GDP. The Enlarged Group cannot
             assure that such growth will be sustained in the future. Moreover, a slowdown in the
             economies of the United States, the European Union and certain Asian countries may
YSL




             adversely affect economic growth in the PRC. The Enlarged Group’s financial condition
             and results of operation, as well as the Enlarged Group’s future prospects, would be
             materially and adversely affected by an economic downturn in the PRC.


                    Economic growth in the PRC has also historically been accompanied by periods
             of high inflation. In response to concerns regarding the PRC’s high rate of growth in
             industrial production, bank credit, fixed investment and money supply, the PRC
             government has taken measures to slow economic growth to a more manageable
             level. Among the measures that the PRC government has taken are restrictions on
             bank loans in certain sectors. These measures have contributed to a slowdown in
             economic growth in the PRC, and a reduction in demand for consumer goods, including
             automobiles. These measures and any additional measures, including an increase in
             interest rates, if it occurred, could contribute to a further slowdown in the PRC
             economy.




                                               – 146 –
      APPENDIX I                       FINANCIAL INFORMATION ON THE GROUP


                   Proposed imposition of higher automobile consumption taxes may have a negative
                   effect on the revenues and profits of PRC automobile dealers, including the Enlarged
                   Group


                          The PRC government adopted new automobile consumption taxes on 1 April
                   2006 which increased the consumption tax rate on passenger cars with cylinder capacity
                   of more than 2.0 litres. In particular, the tax on passenger cars with a cylinder
                   capacity of more than 2.0 litres and up to 2.5 litres has been increased by 1%; those
                   with a cylinder capacity of more than 2.5 litres and up to 3.0 litres has been increased
                   by 4%; those with a cylinder capacity of more than 3.0 litres and up to 4.0 litres has
                   been increased by 7%; and those with a cylinder capacity of more than 4.0 litres has
                   been increased by 12%. There is no assurance that the automobile consumption tax
                   rate will not be increased further in the future, which will increase the costs of
                   vehicles with relatively large cylinder capacity. Car importers, dealers and distributors
                   in the PRC might not be able to successfully pass on the tax increase as higher prices
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                   to customers. Even if such increased costs are added to selling prices, such increase
                   in prices could result in a decline in vehicles sale. Such an increase in cost of good
                   sold or decline in demand may have an adverse effect on the revenues and profits of
                   car dealers in the PRC, including the Enlarged Group.


      8.    SUBSEQUENT ACQUISITION


             Subsequent to the year ended 31 March 2007, the Company entered into a major transaction          A1B
      in respect of the Previous Acquisition of the Target Companies detailed in the Company’s Previous        (c)
      Circular which was completed on 31 October 2007. The Target Companies are principally engaged
      in, amongst others, (i) design, production and sale of computer software, (ii) production of various     A16
      types of animation and (iii) provision of post-production services for animation film, (iv) production
      and distribution of television animation and (v) production of television programs. The aggregate
      consideration was a sum of HK$40,800,000 which was satisfied as to (i) HK$32,640,000 through
      the issue of 40,800,000 Shares and (ii) HK$8,160,000 in cash. The aggregate remuneration payable
      to and benefits in kind receivable by the Directors was not varied in consequence of the aforesaid
      acquisition.




                                                     – 147 –
      APPENDIX I                            FINANCIAL INFORMATION ON THE GROUP


      9.    RECONCILIATION STATEMENT OF A PROPERTY


             Set out below is a statement of reconciliation between the values of a property held by the
      Group located at 11th Floor, Safety Godown Industrial Building, 56 Ka Yip Street, Chai Wan,
      Hong Kong (the “Property”), as stated in (i) the property valuation in Appendix VI to this circular
      (property no.1) and (ii) the Company’s audited consolidated balance sheet as at 31 March 2007 set
      out in Appendix I to this circular. The statement below was prepared in accordance with Rule 5.07
      of the Listing Rules.


                                                                                                                 HK$’000


            Net book value of the Property as at 31 March 2007 (Note 1)                                            16,431


            Adjustment:
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              Adjustment of value property per property valuation report
                as disclosed in Appendix VI of this circular (Note 2)                                              16,369


            As adjusted                                                                                            32,800


            Notes:


            1.       The net book value of the Property as at 31 March 2007 of approximately HK$16,431,000 comprises of
                     (i) property, plant and equipment of approximately HK$7,899,000 and (ii) prepaid lease payments of
                     approximately HK$8,532,000 as per notes 18 and 19 respectively to the Company’s financial statements
                     for the year ended 31 March 2007 reproduced in Appendix I to this circular.


            2.       The Property was classified as self occupied and included as building and prepaid lease payments in the
                     Company’s consolidated audited balance sheet as at 31 March 2007 which was not subjected to annual
                     valuation. In accordance with the valuation report in Appendix VI to this circular, the value of the
                     Property was HK$32.8 million which showed a surplus of approximately HK$16.4 million which was a
                     result of the recovery of property market in the past few years.




                                                             – 148 –
APPENDIX II                                 FINANCIAL INFORMATION ON
                                    THE DEALERSHIPS AND THE ACQUIREES


1.    BL DEALERSHIP

       The following is the text of the accountants report from Grant Thornton, Certified Public
Accountants, prepared in respect of the BL Dealership and for the purpose of incorporation in this
                                                                                                                 A1B
circular.

                                                                                  Grant Thornton
                                                                                  13th Floor, Gloucester Tower
                                                                                  The Landmark
                                                                                                                 R14
                                                                                  15 Queen’s Road Central        R14
                                                                                  Hong Kong
                                                                                                                 A1B
                                                                                  T +852 2218 3000
                                                                                  F +852 3748 2000
                                                                                  www.gthk.com.hk


20 March 2008
The Board of Directors                                                                                           A1B
Jade Dynasty Group Limited
11/F, Safety Godown Industrial Building
56 Ka Yip Street
Chai Wan
Hong Kong

Dear Sirs,

       We set out below our report on the financial information (the “Financial Information”) of a
dealership of Bentley automobiles in Beijing (the “Bentley Dealership”) including the balance
sheets as at 31 December 2005, 2006 and 2007, and income statements, statements of changes in
owners’ equity and cash flow statements for the year then ended (the “Relevant Periods”) and
notes thereto, prepared for inclusion in the circular (the “Circular”) dated 20 March 2008 issued
by Jade Dynasty Group Limited (the “Company”) in connection with the acquisition of all the
economic benefits derived from the Bentley Dealership (the “Acquisition”) from Sparkle Roll
Holdings Limited (“Sparkle Roll”, a company owned and controlled by Mr. Qi Jian Hong
    (“Mr. Qi”) ).


       The Bentley Dealership is a business line within the automobile dealership division of
Beijing Bin Li Group Ltd.                                (“BJBG”, a company majority-owned and
controlled by Mr. Qi). BJBG entered into an agreement with Dah Chong Hong Motors (Bentley)
Limited (“DCH Motors”) on 14 November 2001, pursuant to which DCH Motors granted BJBG
the right to market and sell the Bentley automobiles, parts and accessories at retail level, and to
provide after-sales services in Beijing, the People’s Republic of China (the “PRC”). On 23 March
2007, BJBG has entered into another agreement with Shanghai Bin Li Motors Trading Limited
                             (“           ”, which according to the directors of BJBG, is an affiliated
company of DCH Motors), pursuant to which                 granted BJBG the right to market and sell



                                               – 149 –
APPENDIX II                                 FINANCIAL INFORMATION ON
                                    THE DEALERSHIPS AND THE ACQUIREES


the Bentley automobiles, parts and accessories at retail level, and to provide after-sales services in
Beijing, the PRC, without specified termination date. The agreement can be terminated with 12
months advance written notice by either party.              , BJBG and Beijing Mei He Zhen Yong
Motors Trading Limited                                         (“Beijing Mei He”) have entered into
the relevant agreements in respect of the transfer of the Bentley Dealership to Beijing Mei He on 1
February 2008, subject to the completion of the regulatory procedures by Ministry of Commerce
of the PRC.


        Pursuant to an agreement dated 1 November 2007 entered among various parties, including
Mr. Qi, Sparkle Roll and BJBG, Sparkle Roll is assigned to be the ultimate owner and beneficiary
of all the existing and future economic benefits derived from the Bentley Dealership.


       For the purpose of this report, the directors of BJBG have prepared the financial statements
(the “Underlying Financial Statements”) of the Bentley Dealership for the Relevant Periods in
accordance with Hong Kong Financial Reporting Standards (“HKFRSs”). We have, for the purpose
of this report, carried out appropriate audit procedures in respect of the Underlying Financial
Statements of the Bentley Dealership for the Relevant Periods, in accordance with Hong Kong
Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants
(“HKICPA”).

       The Financial Information for the Relevant Periods as set out in Section I to III below has
been prepared by the directors of BJBG based on the Underlying Financial Statements and in
accordance with HKFRSs. For the purpose of this report, we have examined the Financial
Information of the Bentley Dealership and carried out such additional procedures as are necessary
in accordance with Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued
by the HKICPA.

       The directors of BJBG are responsible for the preparation of the Underlying Financial
Statements and the Financial Information which give a true and fair view. The directors of the
Company are responsible for the contents of the Circular in which this report is included. In
preparing the Financial Information which gives a true and fair view, it is fundamental that
appropriate accounting policies are selected and applied consistently. It is our responsibility to
form an independent opinion, based on our examination, on the Financial Information and to
report our opinion to you.


       In our opinion, the Financial Information, for the purpose of this report, gives a true and fair
view of the state of affairs of the Bentley Dealership as at 31 December 2005, 2006 and 2007 and
of the results and cash flows of the Bentley Dealership for each of the Relevant Periods.




                                               – 150 –
APPENDIX II                              FINANCIAL INFORMATION ON
                                 THE DEALERSHIPS AND THE ACQUIREES


I.   FINANCIAL INFORMATION


     (A)   INCOME STATEMENTS


                                                      Year ended      Year ended      Year ended
                                                    31 December     31 December     31 December
                                                            2005            2006            2007
                                            Notes       RMB’000         RMB’000         RMB’000


           Revenue                           5            67,508         102,861         191,371
           Cost of sales                                 (52,605)        (88,359)       (163,651)


           Gross profit                                   14,903          14,502          27,720
           Selling and distribution costs                 (4,417)         (4,211)         (4,645)
           Administrative and other
             operating expenses                           (4,189)         (3,887)         (5,009)


           Profit before income tax          7             6,297           6,404          18,066
           Income tax expense                8            (2,078)         (2,113)         (5,962)


           Profit for the year                             4,219           4,291          12,104




                                              – 151 –
APPENDIX II                           FINANCIAL INFORMATION ON
                              THE DEALERSHIPS AND THE ACQUIREES


   (B)   BALANCE SHEETS


                                                          As at 31 December
                                                       2005          2006        2007
                                         Notes      RMB’000      RMB’000      RMB’000


         Non-current assets
         Property, plant and equipment    10            473          288          706


         Current assets
         Inventories                      11           9,056        6,809        2,546
         Amount due from BJBG             12          32,811       36,503       76,341
         Trade and other deposit paid                    400        2,500        6,860


                                                      42,267       45,812       85,747


         Current liabilities
         Taxation                                     (2,078)      (2,113)      (5,962)
         Accruals and other payables                  (1,049)        (751)        (795)
         Trade deposit received                      (10,308)      (9,640)     (33,996)


                                                     (13,435)     (12,504)     (40,753)


         Net current assets                           28,832       33,308       44,994


         Net assets                                   29,305       33,596       45,700


         Financed by:


         Owners’ equity                   13          29,305       33,596       45,700




                                          – 152 –
APPENDIX II                          FINANCIAL INFORMATION ON
                             THE DEALERSHIPS AND THE ACQUIREES


   (C)   STATEMENTS OF CHANGES IN OWNERS’ EQUITY


                                                 Year ended     Year ended     Year ended
                                               31 December    31 December    31 December
                                                       2005           2006           2007
                                                   RMB’000        RMB’000        RMB’000


         Owners’ equity at 1 January                 25,086         29,305         33,596
         Profit for the year and
           total recognised income
           for the year                               4,219          4,291         12,104


         Owners’ equity at 31 December               29,305         33,596         45,700




                                         – 153 –
APPENDIX II                               FINANCIAL INFORMATION ON
                                  THE DEALERSHIPS AND THE ACQUIREES


   (D)   CASH FLOW STATEMENTS

                                                   Year ended      Year ended      Year ended
                                                 31 December     31 December     31 December
                                                         2005            2006            2007
                                       Notes         RMB’000         RMB’000         RMB’000

         Cash flows from operating
           activities
         Profit before income tax                       6,297           6,404          18,066
         Adjustment for:
           Depreciation of property,
              plant and equipment          7            1,126            321               96

         Operating profit before
           working capital changes                      7,423           6,725          18,162
         Decrease in inventories                       13,469           2,247           4,263
         Increase in trade deposit paid                  (400)         (2,100)         (4,360)
         Increase/(decrease) in accruals
           and other payables                            968             (298)             44
         Increase/(decrease) in trade
           deposit received                             8,308            (668)         24,356
         Increase in amount due
           from BJBG                                  (29,631)         (3,692)        (39,838)

         Cash generated from
           operating activities                          137            2,214           2,627
         Income tax paid                                   –           (2,078)         (2,113)

         Net cash generated from
           operating activities                          137             136             514

         Cash flows from investing
           activities
         Purchases of property,
           plant and equipment                           (137)           (136)           (514)

         Net cash used in investing
           activities                                    (137)           (136)           (514)

         Net movement in cash and
           cash equivalents                14               –               –               –


                                           – 154 –
APPENDIX II                                 FINANCIAL INFORMATION ON
                                    THE DEALERSHIPS AND THE ACQUIREES


II.   NOTES TO THE FINANCIAL INFORMATION


      1.     Basis of presentation


            The Financial Information set out in this report have been prepared in accordance
      with HKFRSs, which include all applicable individual Hong Kong Financial Reporting
      Standards, Hong Kong Accounting Standards and Interpretations issued by the HKICPA and
      has been consistently applied throughout the Relevant Periods.


             The Financial Information also complies with the applicable disclosure requirements
      of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong
      Limited.


             The Bentley Dealership has historically been managed as a business line within the
      automobile dealership division of BJBG and the operating assets, liabilities and results of
      the Bentley Dealership have been historically included in the books of accounts of BJBG.
      For the purpose of the preparation of the Financial Information, the operating assets, liabilities
      and results of the Bentley Dealership have been carved out from those of BJBG.

             The Financial Information is presented on a carve-out basis. When considering whether
      it is appropriate to carve out the Financial Information of the Bentley Dealership, the
      directors of BJBG have taken into consideration the following factors:


             (a)   the extent to which the Bentley Dealership has been separately managed and
                   financially controlled within BJBG; and

             (b)   the extent to which it is practicable to identify the historical financial information
                   attributable to the Bentley Dealership.


            In the opinion of the directors of BJBG, the carve out of the relevant results, assets
      and liabilities of Bentley Dealership are appropriate for the fair presentation of Bentley
      Dealership standalone:


             (i)   Separately managed and financially controlled within BJBG:


                   The day-to-day operations, inter alia, sourcing, merchandising, marketing and
                   sales of Bentley automobiles, parts and accessories are managed independently
                   by separate operation team. The Bentley Dealership’s financial performance is
                   assessed separately. Hence, operational and financial autonomy is maintained.




                                               – 155 –
APPENDIX II                                  FINANCIAL INFORMATION ON
                                     THE DEALERSHIPS AND THE ACQUIREES


         (ii)     Identify the historical financial information attributable to the Bentley
                  Dealership:


                  Apart from the sharing of certain back-office functions including accounting,
                  human resource and logistics, there were no other common facilities or
                  operational interdependencies between the Bentley Dealership and other
                  businesses of BJBG.


                As further discussed below, certain expenses in the Financial Information include
         allocations from BJBG. The directors of BJBG believe the allocations are made on a
         reasonable basis.


         The Bentley Dealership has, from inception, been operated as an integrated part of
   BJBG. As a result, the Bentley Dealership has not been operated as a standalone business.
   The Financial Information may not, therefore, necessarily reflect the results of operations,
   financial position or cash flows of the Bentley Dealership if the Bentley Dealership had
   been a separate legal entity during the Relevant Periods.


   2.    Adoption of new and amended HKFRSs

          For the purpose of preparing and presenting the Financial Information, Bentley
   Dealership has adopted all the new and amended HKFRSs issued by HKICPA that are
   effective.


          Bentley Dealership has not early adopted the following HKFRSs that have been
   issued but are not yet effective. The directors of BJBG are currently assessing the impact of
   these HKFRSs but are not yet in a position to state whether they would have any material
   impact to the Financial Information of the Bentley Dealership.


         HKAS 1 (Revised)                              Presentation of Financial Statements –
                                                         Comprehensive revision including requiring a
                                                         statement of comprehensive income1
         HKAS 23 (Revised)                             Borrowing Costs – Comprehensive revision to
                                                         prohibit immediate expensing1
         HK     (IFRIC)   –   Interpretation   11      Group and Treasury Share Transactions2
         HK     (IFRIC)   –   Interpretation   12      Service Concession Arrangements3
         HK     (IFRIC)   –   Interpretation   13      Customer Loyalty Programmes4
         HK     (IFRIC)   –   Interpretation   14      HKAS 19 – The Limit on a Defined Benefit
                                                         Asset, Minimum Funding Requirements and
                                                         their Interaction 3



                                                    – 156 –
APPENDIX II                                FINANCIAL INFORMATION ON
                                   THE DEALERSHIPS AND THE ACQUIREES


        Notes:

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


   3.   Summary of significant accounting policies


        (a)      Basis of preparation


              The significant accounting policies that have been adopted in the preparation
        of the Financial Information are summarized below. These policies have been
        consistently applied to all the periods presented unless otherwise stated.


                 The Financial Information has been prepared on the historical cost basis.


               It should be noted that accounting estimates and assumptions are used in
        preparation of the Financial Information. Although these estimates are based on
        management’s best knowledge and judgement of current events and actions, actual
        results may ultimately differ from those estimates. The areas involving a higher
        degree of judgement or complexity, or areas where assumptions and estimates are
        significant to the Financial Information, are disclosed in note 4.


        (b)      Allocation methodology


               The Financial Information has been presented on a carve-out basis. To the
        extent that an asset, liability, revenue or expense is identifiable and directly attributable
        to the Bentley Dealership, it is reflected in the Financial Information. Certain expenses
        recognized in the Financial Information include allocations from BJBG. These
        allocations have been calculated based upon factors such as revenue generated by,
        headcount of or area occupied by the Bentley Dealership as compared to those of
        BJBG.




                                                – 157 –
APPENDIX II                          FINANCIAL INFORMATION ON
                             THE DEALERSHIPS AND THE ACQUIREES


       (c)    Revenue recognition


              Revenue comprises the fair value for the sale of goods and services rendered,
       net of rebates and discounts. Provided it is probable that the economic benefits will
       flow to the dealership and the revenue can be measured reliably, revenue is recognized
       as follows:


                    Sales of goods are recognised upon transfer of the significant risks and
              rewards of ownership to the customer. This is usually taken as the time when
              the goods are delivered and the customer has accepted the goods.


                     Service income is recognised in the accounting period in which the
              services are rendered.


       (d)    Foreign currency translation


              The Financial Information is presented in Renminbi (“RMB”), which is also
       the functional currency of the Bentley Dealership. Foreign currency transactions are
       translated into the functional currency of the Bentley Dealership using the exchange
       rates prevailing at the dates of the transactions. Foreign exchange gains and losses
       resulting from the settlement of such transactions and from the translation of monetary
       assets and liabilities denominated in foreign currencies at period/year-end exchange
       rates are recognised in the income statement. Non-monetary items that are measured
       in terms of historical cost in foreign currencies are not translated.


       (e)    Property, plant and equipment

              Property, plant and equipment are stated at cost less accumulated depreciation
       and accumulated impairment losses. The cost of an item of property, plant and
       equipment comprises its purchase price and any directly attributable costs of bringing
       the asset to the working condition and location for its intended use.


             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 Bentley Dealership and the cost of the item
       can be measured reliably. All other costs, such as repairs and maintenance, are charged
       to the income statement during the period in which they are incurred.




                                        – 158 –
APPENDIX II                           FINANCIAL INFORMATION ON
                              THE DEALERSHIPS AND THE ACQUIREES


             Depreciation is provided to write off the cost of items of property, plant and
       equipment, over their estimated useful lives and after taking into account of their
       estimated residual value, using the straight-line method, as follows:


              Furniture, fixtures and office equipment                                   5 years
              Leasehold improvement                                          Over the lease term


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


              An item of property, plant and equipment is derecognised upon disposal or
       when no future economic benefits are expected to arise from the continued use of the
       asset. Any gain or loss arising on derecognition of the asset (calculated as the difference
       between the net disposal proceeds and the carrying amount of the item) is included in
       the income statement in the period in which the item is derecognised.


       (f)    Impairment of non-financial assets


              Property, plant and equipment are subject to impairment testing and are tested
       for impairment whenever there are indications that the assets’ carrying amount may
       not be recoverable.


              For the purposes of assessing impairment, where an asset does not generate
       cash flows largely independent from those from other assets, the recoverable amount
       is determined for the smallest group of assets that generated cash inflows independently
       (i.e. a cash-generating unit). As a result, some assets are tested individually for
       impairment and some are tested at cash-generating unit level.


              An impairment loss is recognised as an expense immediately for the amount by
       which the asset’s carrying amount exceeds its recoverable amount. The recoverable
       amount is the higher of fair value, reflecting market conditions less costs to sell, and
       value in use. In assessing value in use, the estimated future cash flows are discounted
       to their present value using a pre-tax discount rate that reflects current market
       assessment of time value of money and the risk specific to the asset.


             An impairment loss is reversed in subsequent periods if there has been a
       favourable change in the estimates used to determine the asset’s recoverable amount
       and only to the extent that the asset’s carrying amount does not exceed the carrying
       amount that would have been determined, net of depreciation or amortisation, if no
       impairment loss had been recognised.



                                         – 159 –
APPENDIX II                          FINANCIAL INFORMATION ON
                             THE DEALERSHIPS AND THE ACQUIREES


       (g)    Leases

              An arrangement, comprising a transaction or a series of transactions, is or
       contains a lease if the Bentley Dealership determines that the arrangement conveys a
       right to use a specific asset or assets for an agreed period of time in return for a
       payment or a series of payments. Such a determination is made based on an evaluation
       of the substance of the arrangement and is regardless of whether the arrangement
       takes the legal form of a lease.

              Where the Bentley Dealership has the right to use the assets held under operating
       leases, payments made under the leases are charged to the income statement on a
       straight line basis over the lease terms except where an alternative basis is more
       representative of the pattern of benefits to be derived from the leased assets. Lease
       incentives received are recognised in the income statement as an integral part of the
       aggregate net lease payments made. Contingent rental are charged to the income
       statement in the period in which they are incurred.

       (h)    Financial assets

              The Bentley Dealership’s financial assets are amount due from BJBG and are
       classified as loans and receivables. Management determines the classification of its
       financial assets at initial recognition depending on the purpose for which the financial
       assets were acquired and where allowed and appropriate, re-evaluates this designation
       at every reporting date.

              All financial assets are recognised when, and only when, the Bentley Dealership
       becomes a party to the contractual provisions of the instrument. When financial
       assets are recognised initially, they are measured at fair value, plus, in the case of
       investments not at fair value through profit or loss, directly attributable transaction
       costs.

              Loans and receivables are non-derivative financial assets with fixed or
       determinable payments that are not quoted in an active market. They are subsequently
       measured at amortised cost using the effective interest method, less any impairment
       losses. Amortised cost is calculated taking into account any discount or premium on
       acquisition and includes fees that are an integral part of the effective interest rate and
       transaction cost.

              Derecognition of financial assets occurs when the rights to receive cash flows
       expire or are transferred and substantially all of the risks and rewards of ownership
       have been transferred. At each balance sheet date, financial assets are reviewed to
       assess whether there is objective evidence of impairment.

                                         – 160 –
APPENDIX II                           FINANCIAL INFORMATION ON
                              THE DEALERSHIPS AND THE ACQUIREES


              If there is objective evidence that an impairment loss on loans and receivables
       carried at amortised cost has been incurred, the amount of the loss is measured as the
       difference between the asset’s carrying amount and the present value of estimated
       future cash flows (excluding future credit losses that have not been incurred) discounted
       at the financial asset’s original effective interest rate (i.e. the effective interest rate
       computed at initial recognition). The amount of the loss is recognised in income
       statement of the period in which the impairment occurs.


              If, in subsequent period, the amount of the impairment loss decreases and the
       decrease can be related objectively to an event occurring after the impairment was
       recognised, the previously recognised impairment loss is reversed to the extent that it
       does not result in a carrying amount of the financial asset exceeding what the amortised
       cost would have been had the impairment not been recognised at the date the
       impairment is reversed. The amount of the reversal is recognised in income statement
       in the period in which the reversal occurs.


       (i)    Inventories


              Inventories are stated at the lower of cost and net realisable value. Cost is
       determined on first-in, first-out basis. Net realisable value represents the estimated
       selling price in the ordinary course of business less all estimated applicable selling
       expenses.


       (j)    Financial liabilities


              The Bentley Dealership’s financial liabilities include accruals and other payable.
       They are initially recognized at fair value and subsequently measured at amortised
       cost using the effective interest method.


              Financial liabilities are recognised when the Bentley Dealership becomes a
       party to the contractual provisions of the instrument.


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


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



                                         – 161 –
APPENDIX II                           FINANCIAL INFORMATION ON
                              THE DEALERSHIPS AND THE ACQUIREES


       (k)    Accounting for income taxes


              Income tax comprises current tax and deferred tax.


              Current income tax is calculated according to the tax rates and tax laws
       applicable to the fiscal periods to which they relate, based on the taxable profit for
       the period/year.


              Deferred tax is calculated using the liability method on temporary differences
       at the balance sheet date between the carrying amounts of assets and liabilities in the
       financial statements and their respective tax bases. Deferred tax liabilities are generally
       recognised for all taxable temporary differences. Deferred tax assets are recognised
       for all deductible temporary differences to the extent that it is probable that taxable
       profit will be available against which the deductible temporary differences can be
       utilised.


               Deferred tax assets and liabilities are not recognised if the temporary difference
       arises from initial recognition (other than in a business combination) of assets and
       liabilities in a transaction that affects neither taxable nor accounting profit or loss.

             Deferred tax is calculated, without discounting, at tax rates that are expected to
       apply in the period the liability is settled or the asset is realised, provided they are
       enacted or substantively enacted at the balance sheet date.


              Changes in deferred tax assets or liabilities are recognised in the income
       statement, or in equity if they relate to items that are charged or credited directly to
       equity.


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




                                         – 162 –
APPENDIX II                           FINANCIAL INFORMATION ON
                              THE DEALERSHIPS AND THE ACQUIREES


       (l)     Retirement benefit costs


               Retirement benefits to employees are provided through a defined contribution
       plan.


              BJBG is required to participate in a central pension scheme operated by the
       local municipal government of the PRC. BJBG is required to contribute certain
       percentage of its payroll costs to the central pension scheme. The contributions are
       charged to the income statement as they become payable in accordance with the rules
       of the central pension scheme. BJBG has no legal or constructive obligations to pay
       further contributions after payment of the fixed contribution. The amount recognise
       in the Financial Information represents the Bentley Dealership’s share of the retirement
       benefit costs of BJBG.


       (m)     Provisions and contingent liabilities


              Provisions are recognised when the Bentley Dealership has a present obligation
       (legal or constructive) as a result of a past event, and it is probable that an outflow of
       economic benefits will be required to settle the obligation and a reliable estimate can
       be made. When the time value of money is material, provisions are stated at the
       present value of the expenditure expected to settle the obligation.


              All provisions are reviewed at each balance sheet date and adjusted to reflect
       the current best estimate.


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


       (n)     Related parties


               For the purposes of this Financial Information, a party is considered to be
       related to the Bentley Dealership if:


               (i)   the party, directly, or indirectly through one or more intermediaries:


                     –      controls, is controlled by, or is under common control with, Bentley
                            Dealership/BJBG;

                                          – 163 –
APPENDIX II                              FINANCIAL INFORMATION ON
                                 THE DEALERSHIPS AND THE ACQUIREES


                        –      has an interest in Bentley Dealership/BJBG that gives it significant
                               influence over Bentley Dealership/BJBG; or


                        –      has joint control over Bentley Dealership/BJBG;


                (ii)    the party is an associate of BJBG;


                (iii)   the party is a jointly controlled entity of BJBG;


                (iv)    the party is a member of the key management personnel of Bentley
                        Dealership, BJBG or BJBG’s parent;


                (v)     the party is a close member of the family of any individual referred to in
                        (i) or (iv);


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

                (vii) the party is a post-employment benefit plan for the benefit of employees
                      of the Bentley Dealership/BJBG, or of any entity that is a related party
                      of the Bentley Dealership/BJBG.


   4.    Critical accounting estimates and judgements


         Estimates and judgements are continually evaluated and are based on historical
   experience and other factors, including expectations of future events that are believed to be
   reasonable under the circumstances.


          Bentley Dealership makes estimates and assumptions concerning the future. The
   resulting accounting estimates will, by definition, seldom equal to the related actual results.
   The estimates and assumptions that have a significant effect on the carrying amounts of
   assets and liabilities are discussed below:


         (i)    Carve out of Financial Information


                As explained in note 1, the Financial Information has been prepared on a
         carve-out basis. Certain expenses in the Financial Information include allocations
         from BJBG. These allocations have been calculated based upon factors such as revenue
         generated by, headcount of or area occupied by the Bentley Dealership as compared
         to those of BJBG.

                                            – 164 –
APPENDIX II                            FINANCIAL INFORMATION ON
                               THE DEALERSHIPS AND THE ACQUIREES


         (ii)   Impairment of inventories


                In determining the amount of impairment required for obsolete and slow-moving
         inventories, management would compare the carrying amount of the aged inventories
         to their respective net realisable value. A considerable amount of judgement is required
         in determining such impairment. If conditions which have impact on the net realisable
         value of inventories have deteriorated, impairment may be required.


   5.    Revenue


          Revenue represents the net amounts received and receivable from goods sold and
   after-sales services rendered by the Bentley Dealership to customers, less returns and
   allowances.


         An analysis of revenue is as follows:


                                                   Year ended      Year ended       Year ended
                                                 31 December     31 December      31 December
                                                         2005            2006             2007
                                                     RMB’000         RMB’000          RMB’000


         Revenue (turnover)
         Sale of automobile and
           automotive parts                             65,088           99,547         186,282
         After-sales services income                     2,420            3,314           5,089


                                                        67,508         102,861          191,371


   6.    Segment information


         No analysis of segment information by business or geographical segment is presented
   as the Bentley Dealership’s sole business is selling of Bentley automobiles, parts and
   accessories in the PRC.




                                          – 165 –
APPENDIX II                            FINANCIAL INFORMATION ON
                               THE DEALERSHIPS AND THE ACQUIREES


   7.    Profit before income tax


         Profit before income tax is arrived at after charging:


                                                   Year ended       Year ended     Year ended
                                                 31 December      31 December    31 December
                                                         2005             2006           2007
                                                     RMB’000          RMB’000        RMB’000


         Cost of inventories recognised
           as expenses                                  51,781          87,296        160,219
         Cost of services provided                         824           1,063          3,432
         Depreciation of property,
           plant and equipment                           1,126            321             96
         Operating lease charges
           in respect of rented premises                 4,187           4,216          4,316


   8.    Income tax expense


          The provision for notional PRC income tax during the Relevant Periods are based on
   a statutory tax rate of 33% of the estimated assessable profit as determined in accordance
   with the relevant income tax rules and regulations of the PRC.


         Income tax in the income statement represents:


                                                   Year ended       Year ended     Year ended
                                                 31 December      31 December    31 December
                                                         2005             2006           2007
                                                     RMB’000          RMB’000        RMB’000


         Notional PRC corporate income tax
           – Current                                     2,078           2,113          5,962




                                           – 166 –
APPENDIX II                            FINANCIAL INFORMATION ON
                               THE DEALERSHIPS AND THE ACQUIREES


         Reconciliation between income tax expense and accounting profit for the Relevant
   Periods at applicable tax rate is as follows:


                                                     Year ended     Year ended     Year ended
                                                   31 December    31 December    31 December
                                                           2005           2006           2007
                                                       RMB’000        RMB’000        RMB’000


         Profit before income tax                         6,297          6,404         18,066


         Tax on profit before income tax,
           calculated at the statutory tax
           rate of 33%                                    2,078          2,113          5,962


   9.    Employee benefit expense (including directors’ emoluments)


                                                     Year ended     Year ended     Year ended
                                                   31 December    31 December    31 December
                                                           2005           2006           2007
                                                       RMB’000        RMB’000        RMB’000


         Wages and salaries                                783            856           1,294
         Contribution to retirement scheme                  72            128             189


                                                           855            984           1,483




                                             – 167 –
APPENDIX II                         FINANCIAL INFORMATION ON
                            THE DEALERSHIPS AND THE ACQUIREES


   10.   Property, plant and equipment
                                                   Furniture,
                                                 fixtures and     Leasehold
                                                   equipment    improvement      Total
                                                     RMB’000       RMB’000     RMB’000
         At 1 January 2005
         Cost                                            240          2,393       2,633
         Accumulated depreciation                       (101)        (1,070)     (1,171)

         Closing net carrying amount                     139          1,323      1,462

         Year ended 31 December 2005
         Opening net carrying amount                     139          1,323       1,462
         Additions                                       137              –         137
         Depreciation                                    (56)        (1,070)     (1,126)

         Closing net carrying amount                     220            253        473

         At 31 December 2005 and
           1 January 2006
         Cost                                            377          2,393       2,770
         Accumulated depreciation                       (157)        (2,140)     (2,297)

         Net carrying amount                             220            253        473

         Year ended 31 December 2006
         Opening net carrying amount                     220            253        473
         Additions                                       136              –        136
         Depreciation                                    (68)          (253)      (321)

         Closing net carrying amount                     288              –        288

         At 31 December 2006 and
           1 January 2007
         Cost                                            513          2,393       2,906
         Accumulated depreciation                       (225)        (2,393)     (2,618)

         Net carrying amount                             288              –        288

         Year ended 31 December 2007
         Opening net carrying amount                     288              –        288
         Additions                                       514              –        514
         Depreciation                                    (96)             –        (96)

         Closing net carrying amount                     706              –        706

         At 31 December 2007
         Cost                                          1,027          2,393       3,420
         Accumulated depreciation                       (321)        (2,393)     (2,714)

         Net carrying amount                             706              –        706


                                       – 168 –
APPENDIX II                          FINANCIAL INFORMATION ON
                             THE DEALERSHIPS AND THE ACQUIREES


   11.   Inventories


                                                    2005           2006           2007
                                                 RMB’000        RMB’000        RMB’000


         Merchandise for sales                      9,056          6,809          2,546


   12.   Amount due from BJBG


         The amount due from BJBG was non-trade related, unsecured, interest-free and
   repayable on demand.


         Disclosed pursuant to Section 161B of the Hong Kong Companies Ordinance, are as
   follows:


                                                              Maximum
                                                                 amount
                                                             outstanding
                                             31 December          during      1 January
                                                    2005        the year           2005
                                                 RMB’000       RMB’000         RMB’000


         Amount due from BJBG
          (controlled by Mr. Qi)                   32,811         32,811          3,180


                                                              Maximum
                                                                 amount
                                                             outstanding
                                             31 December          during      1 January
                                                    2006        the year           2006
                                                 RMB’000       RMB’000         RMB’000


         Amount due from BJBG
          (controlled by Mr. Qi)                   36,503         36,503         32,811




                                       – 169 –
APPENDIX II                            FINANCIAL INFORMATION ON
                               THE DEALERSHIPS AND THE ACQUIREES


                                                                   Maximum
                                                                      amount
                                                                  outstanding
                                                31 December            during       1 January
                                                       2007          the year            2007
                                                    RMB’000         RMB’000          RMB’000


         Amount due from BJBG
          (controlled by Mr. Qi)                       76,341          76,341           36,503


   13.   Owners’ equity


          As the Bentley Dealership was not a separate legal entity, the proportion of reserves
   attributable to the Bentley Dealership has been shown in the balance sheets as part of
   “Owners’ equity”.


   14.   Cash and cash equivalents


         BJBG has not maintained a separate bank account for Bentley Dealership. In this
   connection, no cash and bank balance have been presented on the balance sheet. For cash
   flow statement purpose, all cash flows are assumed to be paid or received by BJBG on
   Bentley Dealership’s behalf.


   15.   Operating lease commitments


         At the respective balance sheet dates, the total future minimum lease payments under
   non-cancellable operating lease payable by the Bentley Dealership are as follows:


                                                       2005             2006            2007
                                                    RMB’000          RMB’000         RMB’000


         Within one year                                4,216            4,316               –
         In the second to fifth years                   4,316                –               –


                                                        8,532            4,316               –


          Bentley Dealership leases motor vehicle showrooms and service center under operating
   lease. The lease runs for period of 3 years and 5 years respectively. None of the leases
   include contingent rentals.



                                          – 170 –
APPENDIX II                              FINANCIAL INFORMATION ON
                                 THE DEALERSHIPS AND THE ACQUIREES


   16.   Related party transactions

          Corporate overheads have been allocated to the Bentley Dealership including, but not
   limited to, personnel costs, marketing, management information systems, accounting and
   financial reporting, treasury, human resources, legal, tax and security, based upon revenue,
   headcount or area occupied. Management believes these allocations are reasonable.

                                                      For the          For the          For the
                                                   year ended       year ended       year ended
                                                 31 December      31 December      31 December
                                                         2005             2006             2007
                                                     RMB’000          RMB’000          RMB’000

         Corporate overheads                              1,632            1,632            1,632


   17.   Financial risk management objectives and policies

          Bentley Dealership does not have written financial risk management policies and
   guidelines. However, the management periodically analyses and formulates measures to
   manage Bentley Dealership’s exposure to market risk, including principally changes in
   interest rates and currency exchange rates. Generally, the Bentley Dealership employs a
   conservative strategy regarding its risk management.

         (a)    Interest rate risk

               The Bentley Dealership’s does not have exposure to interest rate risk because it
         does not have any interest-bearing financial assets or liabilities.

         (b)    Credit risk

              Bentley Dealership’s does not have exposure to credit risk because goods would
         normally be passed to customers only when full settlement is received.

         (c)    Foreign currency risk

                Bentley Dealership is not exposed to significant foreign currency risk. All the
         sales and purchase were conducted in RMB.

         (d)    Liquidity risk

                Liquidity risk arises in the general funding of the Bentley Dealership’s operating
         activities. It includes the risk of not being able to fund the operating activities at
         settlement dates and liquidate positions in a timely manner at a reasonable price. The
         Bentley Dealership has no significant exposure to liquidity risk. Funding will be
         obtained from BJBG, when required.

                                          – 171 –
APPENDIX II                            FINANCIAL INFORMATION ON
                               THE DEALERSHIPS AND THE ACQUIREES


         (e)    Fair value


                The fair value of the Bentley Dealership’s financial assets and liabilities are
         not materiality different from their carrying amounts because of the immediate or
         short term maturity.


         (f)    Summary of financial assets and liabilities by category


               The carrying amounts of financial assets and liabilities as recognised at the
         balance sheet date of the Relevant Periods may also be categorised as follows. See
         notes 3(h) and 3(j) for explanations about how the categorisation of financial
         instruments affects their subsequent measurement.


                                                       2004             2005            2006
                                                    RMB’000          RMB’000         RMB’000


                Financial assets (loans and
                  receivables measured
                  at amortise cost):
                Amount due from BJBG                   32,811          36,503           76,341


         No changes were made in the objectives, policies or processes during the three years
   ended 31 December 2005, 2006 and 2007.


   18.   Capital management


         The Bentley Dealership is not subject to externally imposed capital requirements.


   19.   Subsequent events


         On 1 February 2008, BJBG,                and Beijing Mei He have entered into certain
   agreements in respect of the transfer of Bentley Dealership to Beijing Mei He with effective
   from 1 February 2008.


         Save as disclosed above, no other significant events have taken place subsequent to
   31 December 2007.




                                          – 172 –
APPENDIX II                               FINANCIAL INFORMATION ON
                                  THE DEALERSHIPS AND THE ACQUIREES


III.   SUBSEQUENT FINANCIAL STATEMENTS


      No audited financial statements have been prepared for the Bentley Dealership in respect of
any period subsequent to 31 December 2007.


Yours faithfully,


Grant Thornton
Certified Public Accountants
13th Floor, Gloucester Tower
The Landmark
15 Queen’s Road Central
Hong Kong




                                            – 173 –
APPENDIX II                                 FINANCIAL INFORMATION ON
                                    THE DEALERSHIPS AND THE ACQUIREES


2.    LB DEALERSHIP

       The following is the text of the accountants report from Grant Thornton, Certified Public
Accountants, prepared in respect of the LB Dealership and for the purpose of incorporation in this               A1B
circular.

                                                                                  Grant Thornton
                                                                                  13th Floor, Gloucester Tower
                                                                                  The Landmark
                                                                                  15 Queen’s Road Central
                                                                                  Hong Kong
                                                                                  T +852 2218 3000
                                                                                  F +852 3748 2000
                                                                                  www.gthk.com.hk


20 March 2008                                                                                                    A1B
The Board of Directors
Jade Dynasty Group Limited
11/F, Safety Godown Industrial Building
56 Ka Yip Street
Chai Wan
Hong Kong

Dear Sirs,

       We set out below our report on the financial information (the “Financial Information”) of a
dealership of Lamborghini automobiles in Beijing (the “Lamborghini Dealership”) including the
balance sheets as at 31 December 2005, 2006 and 2007, and income statements, statements of
changes in owners’ equity and cash flow statements for the period from 21 February 2005 (date of
commencement of Lamborghini Dealership) to 31 December 2005 and the years ended 31 December
2006 and 2007 (the “Relevant Periods”) and notes thereto, prepared for inclusion in the circular
(the “Circular”) dated 20 March 2008 issued by Jade Dynasty Group Limited (the “Company”) in
connection with the acquisition of all the economic benefits derived from the Lamborghini Dealership
(the “Acquisition”) from Sparkle Roll Holdings Limited (“Sparkle Roll”, a company owned and
controlled by Mr. Qi Jian Hong               (“Mr. Qi”) ).

      The Lamborghini Dealership is a business line within the automobile dealership division of
Beijing Bin Li Group Ltd.                            (“BJBG”, a company majority-owned and
controlled by Mr. Qi). BJBG entered into an agreement with VAD (Tianjin) Company Limited
(“VAD”) on 21 February 2005, pursuant to which VAD granted BJBG the right to market and sell
the Lamborghini automobiles, parts and accessories at retail level, and to provide after-sales services
in Beijing, the People’s Republic of China (the “PRC”), for an initial term of 1 year which shall be
automatically renewed for subsequent term of 1 year unless terminated by either party. The directors
of BJBG are of the view that BJBG has in substance obtained the right to the Lamborghini




                                               – 174 –
APPENDIX II                                 FINANCIAL INFORMATION ON
                                    THE DEALERSHIPS AND THE ACQUIREES


Dealership after the expiry of the agreement on 20 February 2007 since there is a transitional
arrangement for the continuation of the existing mode of operations until the transfer of the
Lamborghini Dealership to Beijing Mei He Zhen Yong Motors Trading Limited
                   (“Beijing Mei He”). In-principle written consent to the transfer of the Lamborghini
Dealership to Beijing Mei He was obtained on 11 January 2008 and the directors of BJBG expect
that the transfer of the Lamborghini Dealership would take place in or about June 2008.


        Pursuant to an agreement dated 1 November 2007 entered among various parties, including
Mr. Qi, Sparkle Roll and BJBG, Sparkle Roll is assigned to be the ultimate owner and beneficiary
of all the existing and future economic benefits derived from the Lamborghini Dealership.


      For the purpose of this report, the directors of BJBG have prepared the financial statements
(the “Underlying Financial Statements”) of the Lamborghini Dealership for the Relevant Periods
in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”). We have, for the
purpose of this report, carried out appropriate audit procedures in respect of the Underlying
Financial Statements of the Lamborghini Dealership for the Relevant Periods, in accordance with
Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants
(“HKICPA”).

       The Financial Information for the Relevant Periods as set out in Section I to III below has
been prepared by the directors of BJBG based on the Underlying Financial Statements and in
accordance with HKFRSs. For the purpose of this report, we have examined the Financial
Information of the Lamborghini Dealership and carried out such additional procedures as are
necessary in accordance with Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant”
issued by the HKICPA.

       The directors of BJBG are responsible for the preparation of the Underlying Financial
Statements and the Financial Information which give a true and fair view. The directors of the
Company are responsible for the contents of the Circular in which this report is included. In
preparing the Financial Information which gives a true and fair view, it is fundamental that
appropriate accounting policies are selected and applied consistently. It is our responsibility to
form an independent opinion, based on our examination, on the Financial Information and to
report our opinion to you.


      In our opinion, the Financial Information, for the purpose of this report, gives a true and fair
view of the state of affairs of the Lamborghini Dealership as at 31 December 2005, 2006 and 2007
and of the results and cash flows of the Lamborghini Dealership for each of the Relevant Periods.




                                               – 175 –
APPENDIX II                               FINANCIAL INFORMATION ON
                                  THE DEALERSHIPS AND THE ACQUIREES


I.   FINANCIAL INFORMATION


     (A)   INCOME STATEMENTS


                                                     Period from
                                                     21 February
                                                          2005 to     Year ended      Year ended
                                                    31 December     31 December     31 December
                                                            2005            2006            2007
                                            Notes       RMB’000         RMB’000         RMB’000


           Revenue                           5            15,154          22,957         107,242
           Cost of sales                                 (13,394)        (20,646)        (95,732)


           Gross profit                                    1,760           2,311          11,510


           Selling and distribution costs                   (735)         (2,229)         (5,362)
           Administrative and
             other operating expenses                          –            (254)         (1,164)


           Profit/(Loss) before
             income tax                      7             1,025            (172)          4,984
           Income tax expense                8              (338)              –          (1,645)


           Profit/(Loss) for
             the period/year                                 687            (172)          3,339




                                              – 176 –
APPENDIX II                            FINANCIAL INFORMATION ON
                               THE DEALERSHIPS AND THE ACQUIREES


   (B)   BALANCE SHEETS


                                                     As at 31 December
                                                  2005          2006        2007
                                   Notes       RMB’000      RMB’000      RMB’000


         Non-current assets
         Property, plant and
           equipment                10                –         370          288


         Current assets
         Trade and other
           deposit paid                               –          414          414
         Inventories                11            4,171        9,054          499
         Amount due from BJBG       12                –            –       10,905


                                                  4,171        9,468       11,818


         Current liabilities
         Trade and other
           deposit received                           –            –       (6,600)
         Accrued liabilities                          –           (3)          (7)
         Amount due to BJBG         12           (3,146)      (9,320)           –
         Taxation                                  (338)           –       (1,645)


                                                 (3,484)      (9,323)      (8,252)


         Net current assets                        687          145         3,566


         Net assets                                687          515         3,854


         Financed by:


         Owners’ equity             13             687          515         3,854




                                     – 177 –
APPENDIX II                           FINANCIAL INFORMATION ON
                              THE DEALERSHIPS AND THE ACQUIREES


   (C)   STATEMENTS OF CHANGES IN OWNERS’ EQUITY


                                                Period from
                                                21 February
                                                     2005 to     Year ended      Year ended
                                               31 December     31 December     31 December
                                                       2005            2006            2007
                                                   RMB’000         RMB’000         RMB’000


         Owners’ equity at date of
           commencement of
           business/1 January                             –            687             515
         Profit/(loss) for the period/year
           and total recognised
           income/(loss) for the period/year            687            (172)          3,339


         Owners’ equity
          at 31 December                                687            515            3,854




                                         – 178 –
APPENDIX II                               FINANCIAL INFORMATION ON
                                  THE DEALERSHIPS AND THE ACQUIREES


   (D)   CASH FLOW STATEMENTS

                                                   Period from
                                                   21 February
                                                        2005 to     Year ended      Year ended
                                                  31 December     31 December     31 December
                                                          2005            2006            2007
                                          Notes       RMB’000         RMB’000         RMB’000

         Cash flows from
           operating activities
         Profit/(loss) before
           income tax                                    1,025            (172)          4,984
         Adjustment for:
           Depreciation of property,
              plant and equipment          7                 –             45             127

         Operating profit/(loss) before
            working capital changes                      1,025            (127)          5,111
         (Increase)/decrease in
            inventories                                 (4,171)         (4,883)          8,555
         Increase in trade and
            other deposits paid                              –            (414)              –
         Increase in trade
            deposits received                                –               –           6,600
         Increase in accrued expenses                        –               3               4
         Movement in amount due
            from/to BJBG                                 3,146           6,174         (20,225)

         Cash generated from
           operating activities                              –             753             45
         Income tax paid                                     –            (338)             –

         Net cash generated from
           operating activities                              –            415              45

         Cash flows from
           investing activities
         Purchases of property,
           plant and equipment                               –            (415)            (45)

         Net cash used in
           investing activities                              –            (415)            (45)

         Net movement in cash and
           cash equivalents                14                –               –               –


                                            – 179 –
APPENDIX II                                FINANCIAL INFORMATION ON
                                   THE DEALERSHIPS AND THE ACQUIREES


II.   NOTES TO THE FINANCIAL INFORMATION


      1.    Basis of presentation


            The Financial Information set out in this report have been prepared in accordance
      with HKFRSs, which include all applicable individual Hong Kong Financial Reporting
      Standards, Hong Kong Accounting Standards and Interpretations issued by the HKICPA and
      has been consistently applied throughout the Relevant Periods.


             The Financial Information also complies with the applicable disclosure requirements
      of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong
      Limited.


              The Lamborghini Dealership has historically been managed as a business line within
      the automobile dealership division of BJBG and the operating assets, liabilities and results
      of the Lamborghini Dealership have been historically included in the books of accounts of
      BJBG. For the purpose of the preparation of the Financial Information, the operating assets,
      liabilities and results of the Lamborghini Dealership have been carved out from those of
      BJBG.

              The Financial Information is presented on a carve-out basis. When considering whether
      it is appropriate to carve out the Financial Information of the Lamborghini Dealership, the
      directors of BJBG have taken into consideration the following factors:


            (a)    the extent to which the Lamborghini Dealership has been separately managed
                   and financially controlled within BJBG; and

            (b)    the extent to which it is practicable to identify the historical financial information
                   attributable to the Lamborghini Dealership.


            In the opinion of the directors of BJBG, the carve out of the relevant results, assets
      and liabilities of Lamborghini Dealership are appropriate for the fair presentation of
      Lamborghini Dealership standalone:


            (i)    Separately managed and financially controlled within BJBG:


                   The day-to-day operations, inter alia, sourcing, merchandising, marketing and
                   sales of Lamborghini automobiles, parts and accessories are managed
                   independently by separate operation team. The Lamborghini Dealership’s
                   financial performance is assessed separately. Hence, operational and financial
                   autonomy is maintained.

                                               – 180 –
APPENDIX II                                  FINANCIAL INFORMATION ON
                                     THE DEALERSHIPS AND THE ACQUIREES


         (ii)     Identify the historical financial information attributable to the Lamborghini
                  Dealership:


                  Apart from the sharing of certain back-office functions including accounting,
                  human resource and logistics, there were no other common facilities or
                  operational interdependencies between the Lamborghini Dealership and other
                  businesses of BJBG.


                As further discussed below, certain expenses in the Financial Information include
         allocations from BJBG. The directors of BJBG believe the allocations are made on a
         reasonable basis.


          The Lamborghini Dealership has, from inception, been operated as an integrated part
   of BJBG. As a result, the Lamborghini Dealership has not been operated as a standalone
   business. The Financial Information may not, therefore, necessarily reflect the results of
   operations, financial position or cash flows of the Lamborghini Dealership if the Lamborghini
   Dealership had been a separate legal entity during the Relevant Periods.


   2.    Adoption of new and amended HKFRSs

          For the purpose of preparing and presenting the Financial Information, Lamborghini
   Dealership has adopted all the new and amended HKFRSs issued by HKICPA that are
   effective.


          Lamborghini Dealership has not early adopted the following HKFRSs that have been
   issued but are not yet effective. The directors of BJBG are currently assessing the impact of
   these HKFRSs but are not yet in a position to state whether they would have any material
   impact to the Financial Information of the Lamborghini Dealership.


         HKAS 1 (Revised)                                 Presentation of Financial Statements –
                                                            Comprehensive revision including
                                                            requiring a statement of comprehensive
                                                            income 1
         HKAS 23 (Revised)                                Borrowing Costs – Comprehensive revision
                                                            to prohibit immediate expensing 1
         HK     (IFRIC)   –   Interpretation   11         Group and Treasury Share Transactions 2
         HK     (IFRIC)   –   Interpretation   12         Service Concession Arrangements3
         HK     (IFRIC)   –   Interpretation   13         Customer Loyalty Programmes4
         HK     (IFRIC)   –   Interpretation   14         HKAS 19 – The Limit on a Defined Benefit
                                                            Asset, Minimum Funding Requirements
                                                            and their Interaction3

                                                    – 181 –
APPENDIX II                                FINANCIAL INFORMATION ON
                                   THE DEALERSHIPS AND THE ACQUIREES


        Notes:

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


   3.   Summary of significant accounting policies


        (a)      Basic of preparation


              The significant accounting policies that have been adopted in the preparation
        of the Financial Information are summarized below. These policies have been
        consistently applied to all the periods presented unless otherwise stated.


                 The Financial Information has been prepared on the historical cost basis.


               It should be noted that accounting estimates and assumptions are used in
        preparation of the Financial Information. Although these estimates are based on
        management’s best knowledge and judgement of current events and actions, actual
        results may ultimately differ from those estimates. The areas involving a higher
        degree of judgement or complexity, or areas where assumptions and estimates are
        significant to the Financial Information, are disclosed in note 4.


        (b)      Allocation methodology


               The Financial Information has been presented on a carve-out basis. To the
        extent that an asset, liability, revenue or expense is identifiable and directly attributable
        to the Lamborghini Dealership, it is reflected in the Financial Information. Certain
        expenses recognized in the Financial Information include allocations from BJBG.
        These allocations have been calculated based upon factors such as revenue generated
        by, headcount of or area occupied by the Lamborghini Dealership as compared to
        those of BJBG.




                                                – 182 –
APPENDIX II                         FINANCIAL INFORMATION ON
                            THE DEALERSHIPS AND THE ACQUIREES


       (c)    Revenue recognition


              Revenue comprises the fair value for the sale of goods and services rendered,
       net of rebates and discounts. Provided it is probable that the economic benefits will
       flow to the dealership and the revenue can be measured reliably, revenue is recognized
       as follows:


                    Sales of goods are recognised upon transfer of the significant risks and
              rewards of ownership to the customer. This is usually taken as the time when
              the goods are delivered and the customer has accepted the goods.


                     Service income is recognised in the accounting period in which the
              services are rendered.


       (d)    Foreign currency translation


              The Financial Information is presented in Renminbi (“RMB”), which is also
       the functional currency of the Lamborghini Dealership. Foreign currency transactions
       are translated into the functional currency of the Lamborghini Dealership using the
       exchange rates prevailing at the dates of the transactions. Foreign exchange gains and
       losses resulting from the settlement of such transactions and from the translation of
       monetary assets and liabilities denominated in foreign currencies at period/year-end
       exchange rates are recognised in the income statement. Non-monetary items that are
       measured in terms of historical cost in foreign currencies are not translated.


       (e)    Property, plant and equipment

              Property, plant and equipment are stated at cost less accumulated depreciation
       and accumulated impairment losses. The cost of an item of property, plant and
       equipment comprises its purchase price and any directly attributable costs of bringing
       the asset to the working condition and location for its intended use.


             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 Lamborghini Dealership and the cost of the
       item can be measured reliably. All other costs, such as repairs and maintenance, are
       charged to the income statement during the period in which they are incurred.




                                       – 183 –
APPENDIX II                           FINANCIAL INFORMATION ON
                              THE DEALERSHIPS AND THE ACQUIREES


             Depreciation is provided to write off the cost of items of property, plant and
       equipment, over their estimated useful lives and after taking into account of their
       estimated residual value, using the straight-line method, as follows:


              Furniture, fixtures and office equipment                                   5 years
              Leasehold improvement                                          Over the lease term


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


              An item of property, plant and equipment is derecognised upon disposal or
       when no future economic benefits are expected to arise from the continued use of the
       asset. Any gain or loss arising on derecognition of the asset (calculated as the difference
       between the net disposal proceeds and the carrying amount of the item) is included in
       the income statement in the period in which the item is derecognised.


       (f)    Impairment of non-financial assets


              Property, plant and equipment are subject to impairment testing and are tested
       for impairment whenever there are indications that the assets’ carrying amount may
       not be recoverable.


              For the purposes of assessing impairment, where an asset does not generate
       cash flows largely independent from those from other assets, the recoverable amount
       is determined for the smallest group of assets that generated cash inflows independently
       (i.e. a cash-generating unit). As a result, some assets are tested individually for
       impairment and some are tested at cash-generating unit level.


              An impairment loss is recognised as an expense immediately for the amount by
       which the asset’s carrying amount exceeds its recoverable amount. The recoverable
       amount is the higher of fair value, reflecting market conditions less costs to sell, and
       value in use. In assessing value in use, the estimated future cash flows are discounted
       to their present value using a pre-tax discount rate that reflects current market
       assessment of time value of money and the risk specific to the asset.


             An impairment loss is reversed in subsequent periods if there has been a
       favourable change in the estimates used to determine the asset’s recoverable amount
       and only to the extent that the asset’s carrying amount does not exceed the carrying
       amount that would have been determined, net of depreciation or amortisation, if no
       impairment loss had been recognised.



                                         – 184 –
APPENDIX II                          FINANCIAL INFORMATION ON
                             THE DEALERSHIPS AND THE ACQUIREES


       (g)    Leases


              An arrangement, comprising a transaction or a series of transactions, is or
       contains a lease if the Lamborghini Dealership determines that the arrangement conveys
       a right to use a specific asset or assets for an agreed period of time in return for a
       payment or a series of payments. Such a determination is made based on an evaluation
       of the substance of the arrangement and is regardless of whether the arrangement
       takes the legal form of a lease.


              Where the Lamborghini Dealership has the right to use the assets held under
       operating leases, payments made under the leases are charged to the income statement
       on a straight line basis over the lease terms except where an alternative basis is more
       representative of the pattern of benefits to be derived from the leased assets. Lease
       incentives received are recognised in the income statement as an integral part of the
       aggregate net lease payments made. Contingent rental are charged to the income
       statement in the period in which they are incurred.


       (h)    Financial assets

              The Lamborghini Dealership’s financial assets are amount due from BJBG and
       are classified as loans and receivables. Management determines the classification of
       its financial assets at initial recognition depending on the purpose for which the
       financial assets were acquired and where allowed and appropriate, re-evaluates this
       designation at every reporting date.


              All financial assets are recognised when, and only when, the Lamborghini
       Dealership becomes a party to the contractual provisions of the instrument. When
       financial assets are recognised initially, they are measured at fair value, plus, in the
       case of investments not at fair value through profit or loss, directly attributable
       transaction costs.


              Loans and receivables are non-derivative financial assets with fixed or
       determinable payments that are not quoted in an active market. They are subsequently
       measured at amortised cost using the effective interest method, less any impairment
       losses. Amortised cost is calculated taking into account any discount or premium on
       acquisition and includes fees that are an integral part of the effective interest rate and
       transaction cost.




                                         – 185 –
APPENDIX II                           FINANCIAL INFORMATION ON
                              THE DEALERSHIPS AND THE ACQUIREES


              Derecognition of financial assets occurs when the rights to receive cash flows
       expire or are transferred and substantially all of the risks and rewards of ownership
       have been transferred. At each balance sheet date, financial assets are reviewed to
       assess whether there is objective evidence of impairment.


              If there is objective evidence that an impairment loss on loans and receivables
       carried at amortised cost has been incurred, the amount of the loss is measured as the
       difference between the asset’s carrying amount and the present value of estimated
       future cash flows (excluding future credit losses that have not been incurred) discounted
       at the financial asset’s original effective interest rate (i.e. the effective interest rate
       computed at initial recognition). The amount of the loss is recognised in income
       statement of the period in which the impairment occurs.


              If, in subsequent period, the amount of the impairment loss decreases and the
       decrease can be related objectively to an event occurring after the impairment was
       recognised, the previously recognised impairment loss is reversed to the extent that it
       does not result in a carrying amount of the financial asset exceeding what the amortised
       cost would have been had the impairment not been recognised at the date the
       impairment is reversed. The amount of the reversal is recognised in income statement
       in the period in which the reversal occurs.


       (i)    Inventories


              Inventories are stated at the lower of cost and net realisable value. Cost is
       determined on first-in, first-out basis. Net realisable value represents the estimated
       selling price in the ordinary course of business less all estimated applicable selling
       expenses.


       (j)    Financial liabilities


             The Lamborghini Dealership’s financial liabilities include accrued liabilities
       and amount due to BJBG. They are initially recognized at fair value and subsequently
       measured at amortised cost using the effective interest method.


              Financial liabilities are recognised when the Lamborghini Dealership becomes
       a party to the contractual provisions of the instrument.


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




                                         – 186 –
APPENDIX II                           FINANCIAL INFORMATION ON
                              THE DEALERSHIPS AND THE ACQUIREES


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


       (k)    Accounting for income taxes


              Income tax comprises current tax and deferred tax.


              Current income tax is calculated according to the tax rates and tax laws
       applicable to the fiscal periods to which they relate, based on the taxable profit for
       the period/year.


              Deferred tax is calculated using the liability method on temporary differences
       at the balance sheet date between the carrying amounts of assets and liabilities in the
       financial statements and their respective tax bases. Deferred tax liabilities are generally
       recognised for all taxable temporary differences. Deferred tax assets are recognised
       for all deductible temporary differences to the extent that it is probable that taxable
       profit will be available against which the deductible temporary differences.


               Deferred tax assets and liabilities are not recognised if the temporary difference
       arises from initial recognition (other than in a business combination) of assets and
       liabilities in a transaction that affects neither taxable nor accounting profit or loss.


             Deferred tax is calculated, without discounting, at tax rates that are expected to
       apply in the period the liability is settled or the asset is realised, provided they are
       enacted or substantively enacted at the balance sheet date.


              Changes in deferred tax assets or liabilities are recognised in the income
       statement, or in equity if they relate to items that are charged or credited directly to
       equity.


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




                                         – 187 –
APPENDIX II                           FINANCIAL INFORMATION ON
                              THE DEALERSHIPS AND THE ACQUIREES


       (l)     Retirement benefit costs


               Retirement benefits to employees are provided through a defined contribution
       plan.


              BJBG is required to participate in a central pension scheme operated by the
       local municipal government of the PRC. BJBG is required to contribute certain
       percentage of its payroll costs to the central pension scheme. The contributions are
       charged to the income statement as they become payable in accordance with the rules
       of the central pension scheme. BJBG has no legal or constructive obligations to pay
       further contributions after payment of the fixed contribution. The amount recognise
       in the Financial Information represents the Lamborghini Dealership’s share of the
       retirement benefit costs of BJBG.


       (m)     Provisions and contingent liabilities


              Provisions are recognised when the Lamborghini Dealership has a present
       obligation (legal or constructive) as a result of a past event, and it is probable that an
       outflow of economic benefits will be required to settle the obligation and a reliable
       estimate can be made. When the time value of money is material, provisions are
       stated at the present value of the expenditure expected to settle the obligation.


              All provisions are reviewed at each balance sheet date and adjusted to reflect
       the current best estimate.


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


       (n)     Related parties


               For the purposes of this Financial Information, a party is considered to be
       related to the Lamborghini Dealership if:


               (i)   the party, directly, or indirectly through one or more intermediaries:


                     –      controls, is controlled by, or is under common control with,
                            Lamborghini Dealership/BJBG;

                                          – 188 –
APPENDIX II                              FINANCIAL INFORMATION ON
                                 THE DEALERSHIPS AND THE ACQUIREES


                        –      has an interest in Lamborghini Dealership/BJBG that gives it
                               significant influence over Lamborghini Dealership/BJBG; or


                        –      has joint control over Lamborghini Dealership/BJBG;


                (ii)    the party is an associate of BJBG;


                (iii)   the party is a jointly controlled entity of BJBG;


                (iv)    the party is a member of the key management personnel of Lamborghini
                        Dealership, BJBG or BJBG’s parent;


                (v)     the party is a close member of the family of any individual referred to in
                        (i) or (iv);


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

                (vii) the party is a post-employment benefit plan for the benefit of employees
                      of the Lamborghini Dealership/BJBG, or of any entity that is a related
                      party of the Lamborghini Dealership/BJBG.


   4.    Critical accounting estimates and judgements


         Estimates and judgements are continually evaluated and are based on historical
   experience and other factors, including expectations of future events that are believed to be
   reasonable under the circumstances.


          Lamborghini Dealership makes estimates and assumptions concerning the future. The
   resulting accounting estimates will, by definition, seldom equal to the related actual results.
   The estimates and assumptions that have a significant effect on the carrying amounts of
   assets and liabilities are discussed below:


         (i)    Carve out of Financial Information


               As explained in note 1, the Financial Information has been prepared on a
         carve-out basis. Certain expenses in the Financial Information include allocations
         from BJBG. These allocations have been calculated based upon factors such as revenue
         generated by, headcount of or area occupied by the Lamborghini Dealership as
         compared to those of BJBG.

                                            – 189 –
APPENDIX II                            FINANCIAL INFORMATION ON
                               THE DEALERSHIPS AND THE ACQUIREES


         (ii)   Impairment of inventories


                In determining the amount of impairment required for obsolete and slow-moving
         inventories, management would compare the carrying amount of the aged inventories
         to their respective net realisable value. A considerable amount of judgement is required
         in determining such impairment. If conditions which have impact on the net realisable
         value of inventories have deteriorated, impairment may be required.


   5.    Revenue


          Revenue represents the net amounts received and receivable from goods sold and
   after-sales services rendered by the Lamborghini Dealership to customers, less returns and
   allowances.


         An analysis of revenue is as follows:


                                                  Period from
                                                  21 February
                                                       2005 to     Year ended       Year ended
                                                 31 December     31 December      31 December
                                                         2005            2006             2007
                                                     RMB’000         RMB’000          RMB’000


         Revenue (turnover)
         Sale of automobile and
           automotive parts                             15,154           22,957         106,990
         After-sales services income                         –                –             252


                                                        15,154           22,957         107,242




                                          – 190 –
APPENDIX II                                        FINANCIAL INFORMATION ON
                                           THE DEALERSHIPS AND THE ACQUIREES


   6.    Segment information


         The dealership is organised into 2 main business segments:


          Selling of Lamborghini automobiles, parts and accessories in the PRC and providing
   after-sales services.


         Importing of Lamborghini automobiles into PRC for dealers outside Beijing.

                                           Direct selling and      Import of Lamborghini for
                                             service income          dealer outside Beijing          Total
                                        2005        2006      2007  2005       2006        2007 2005   2006 2007
                                     RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

         Segment revenue:
           Sales to external
             customers                 6,966    3,675    49,150    8,188   19,282   58,092   15,154    22,957    107,242


           Segment results             1,649     309      6,733      17      318      773     1,666      627       7,506


           Unallocated corporate
             expenses                                                                          (641)     (799)    (2,522)

           Profit/(loss) before
             taxation                                                                         1,025      (172)     4,984
           Income tax expenses                                                                 (338)        –     (1,645)

           Profit/(loss) for
             the period/year                                                                   687       (172)     3,339


           Segment assets              4,171    9,838     1,201       –        –        –     4,171     9,838      1,201

           Unallocated assets                                                                     –         –     10,905

           Total assets                                                                       4,171     9,838     12,106


           Segment liabilities            –        –     (6,600)      –        –        –         –         –     (6,600)

           Unallocated liabilities                                                           (3,484)   (9,323)    (1,652)

           Total liabilities                                                                 (3,484)   (9,323)    (8,252)


         Other segment
           information:
           Capital expenditure            –      415        45        –        –        –         –      415         45


           Depreciation                   –       45       127        –        –        –         –       45        127



        No analysis of segment information by geographical segment is presented as the
   Lamborghini Dealership’s sole business is operating in the PRC.



                                                        – 191 –
APPENDIX II                            FINANCIAL INFORMATION ON
                               THE DEALERSHIPS AND THE ACQUIREES


   7.    Profit before income tax


         Profit before income tax is arrived at after charging:


                                                  Period from
                                                  21 February
                                                       2005 to      Year ended     Year ended
                                                 31 December      31 December    31 December
                                                         2005             2006           2007
                                                     RMB’000          RMB’000        RMB’000


         Cost of inventories recognised
           as expenses                                  13,394          20,646         95,571
         Cost of services provided                           –               –            161
         Depreciation of property,
           plant and equipment                                –            45            127
         Operating lease charges in
           respect of rented premises                         –           188            763


   8.    Income tax expense


          The provision for notional PRC income tax during the Relevant Periods are based on
   a statutory tax rate of 33% of the estimated assessable profit as determined in accordance
   with the relevant income tax rules and regulations of the PRC.


         Income tax in the income statement represents:


                                                  Period from
                                                  21 February
                                                       2005 to      Year ended     Year ended
                                                 31 December      31 December    31 December
                                                         2005             2006           2007
                                                     RMB’000          RMB’000        RMB’000


         Notional PRC corporate income tax
           – Current                                       338              –           1,645




                                          – 192 –
APPENDIX II                           FINANCIAL INFORMATION ON
                              THE DEALERSHIPS AND THE ACQUIREES


         Reconciliation between income tax (income)/expense and accounting profit/(loss) for
   the Relevant Periods at applicable tax rate is as follows:


                                                   Period from
                                                   21 February
                                                        2005 to     Year ended      Year ended
                                                  31 December     31 December     31 December
                                                          2005            2006            2007
                                                      RMB’000         RMB’000         RMB’000


         Profit/(loss) before income tax                 1,025            (172)          4,984


         Tax on profit before income tax,
           calculated at the statutory
           tax rate of 33%                                 338               –           1,645


   9.    Employee benefit expense (including directors’ emoluments)


                                                   Period from
                                                   21 February
                                                        2005 to     Year ended      Year ended
                                                  31 December     31 December     31 December
                                                          2005            2006            2007
                                                      RMB’000         RMB’000         RMB’000


         Wages and salaries                                  –            194             840
         Contribution to retirement scheme                   –              8              65


                                                             –            202             905




                                            – 193 –
APPENDIX II                         FINANCIAL INFORMATION ON
                            THE DEALERSHIPS AND THE ACQUIREES


   10.   Property, plant and equipment


                                                 Furniture,
                                                    fixtures
                                                  and office     Leasehold
                                                 equipment     improvement      Total
                                                   RMB’000        RMB’000     RMB’000


         Year ended 31 December 2006
         Additions                                      148            267        415
         Depreciation                                   (10)           (35)       (45)


         Closing net carrying amount                    138            232        370


         At 31 December 2006 and
           1 January 2007
         Cost                                           148            267        415
         Accumulated depreciation                       (10)           (35)       (45)


         Net carrying amount                            138            232        370


         Year ended 31 December 2007
         Opening net carrying amount                    138            232        370
         Additions                                        –             45         45
         Depreciation                                   (28)           (99)      (127)


         Closing net carrying amount                    110            178        288


         At 31 December 2007
         Cost                                           148            312        460
         Accumulated depreciation                       (38)          (134)      (172)


         Net carrying amount                            110            178        288




                                       – 194 –
APPENDIX II                           FINANCIAL INFORMATION ON
                              THE DEALERSHIPS AND THE ACQUIREES


   11.   Inventories


                                                       2005            2006            2007
                                                    RMB’000         RMB’000         RMB’000


         Merchandise for sales                          4,171           9,054             499


   12.   Amount due from/(to) BJBG


         The amount due from/(to) BJBG was non-trade related, unsecured, interest-free and
   repayable on demand.


         Disclosed pursuant to Section 161B of the Hong Kong Companies Ordinance, are as
   follows:


                                                                  Maximum
                                                                     amount
                                                                 outstanding
                                               31 December            during       1 January
                                                      2007          the year            2007
                                                   RMB’000         RMB’000          RMB’000


         Amount due from BJBG
          (controlled by Mr. Qi)                      10,905           10,905               –


   13.   Owners’ equity


          As the Lamborghini Dealership was not a separate legal entity, the proportion of
   reserves attributable to the Lamborghini Dealership has been shown in the balance sheets as
   part of “Owners’ equity”.


   14.   Cash and cash equivalents


          BJBG has not maintained a separate bank account for Lamborghini Dealership. In
   this connection, no cash bank balance have been presented on the balance sheet. For cash
   flow statement purpose, all cash flows are assumed to be paid or received by BJBG on
   Lamborghini Dealership’s behalf.




                                         – 195 –
APPENDIX II                             FINANCIAL INFORMATION ON
                                THE DEALERSHIPS AND THE ACQUIREES


   15.   Operating lease commitments


         At the respective balance sheet dates, the total future minimum lease payments under
   non-cancellable operating lease payable by the Lamborghini Dealership are as follows:


                                                         2005              2006             2007
                                                      RMB’000           RMB’000          RMB’000


         Within one year                                       –              763                –
         In the second to fifth years                          –                –                –


                                                               –              763                –


          Lamborghini Dealership leases motor vehicle showrooms under operating lease. The
   lease runs for period of 1 years. None of the leases include contingent rentals.


   16.   Related party transactions


          Corporate overheads have been allocated to the Lamborghini Dealership including,
   but not limited to, personnel costs, marketing, management information systems, accounting
   and financial reporting, treasury, human resources, legal, tax and security, based upon revenue,
   headcount or area occupied. Management believes these allocations are reasonable.


                                                   Period from
                                                   21 February          For the          For the
                                                        2005 to      year ended       year ended
                                                  31 December      31 December      31 December
                                                          2005             2006             2007
                                                      RMB’000          RMB’000          RMB’000


         Corporate overheads                                   –              154              683




                                           – 196 –
APPENDIX II                              FINANCIAL INFORMATION ON
                                 THE DEALERSHIPS AND THE ACQUIREES


   17.   Financial risk management objectives and policies


          Lamborghini Dealership does not have written financial risk management policies
   and guidelines. However, the management periodically analyses and formulates measures to
   manage Lamborghini Dealership’s exposure to market risk, including principally changes in
   interest rates and currency exchange rates. Generally, the Lamborghini Dealership employs
   a conservative strategy regarding its risk management.


         (a)    Interest rate risk


               The Lamborghini Dealership’s does not have exposure to interest rate risk
         because it does not have any interest-bearing financial assets or liabilities.


         (b)    Credit risk


               Lamborghini Dealership’s does not have exposure to credit risk because goods
         would normally be passed to customers only when full settlement is received.


         (c)    Foreign currency risk

               Lamborghini Dealership is not exposed to significant foreign currency risk. All
         the sales were conducted in RMB. The payment to vendor is in US dollars. The
         exposure to foreign currency risk is minimal because prepayment was made to the
         vendor usually 1 to 2 weeks before the car was shipped out. The time lag was short.


         (d)    Liquidity risk

                 Liquidity risk arises in the general funding of the Lamborghini Dealership’s
         operating activities. It includes the risk of not being able to fund the operating activities
         at settlement dates and liquidate positions in a timely manner at a reasonable price.
         The Lamborghini Dealership has no significant exposure to liquidity risk. Funding
         will be obtained from BJBG, when required.


         (e)    Fair value


                The fair value of the Lamborghini Dealership’s financial assets and liabilities
         are not materiality different from their carrying amounts because of the immediate or
         short term maturity.




                                            – 197 –
APPENDIX II                           FINANCIAL INFORMATION ON
                              THE DEALERSHIPS AND THE ACQUIREES


         (f)   Summary of financial assets and liabilities by category


               The carrying amounts of financial assets and liabilities as recognised at the
         balance sheet date of the Relevant Periods may also be categorised as follows. See
         notes 3(h) and 3(j) for explanations about how the categorisation of financial
         instruments affects their subsequent measurement.


                                                      2005             2006            2007
                                                   RMB’000          RMB’000         RMB’000


               Financial assets (loans and
                 receivables measured
                 at amortise cost):
               Amount due from BJBG                         –               –          10,905


               Financial liabilities
                 (measured at
                 amortised cost):
               Accrued liabilities                         –               (3)             (7)
               Amount due to BJBG                     (3,146)          (9,320)              –


                No changes were made in the objectives, policies or processes during the three
         years ended 31 December 2005, 2006 and 2007.


   18.   Capital management


         The Lamborghini Dealership is not subject to externally imposed capital requirements.


   19.   Subsequent events


        In-principle written consent to the transfer of the Lamborghini Dealership to Beijing
   Mei He was obtained on 11 January 2008.


         Save as disclosed above, no other significant events have taken place subsequent to
   31 December 2007.




                                         – 198 –
APPENDIX II                            FINANCIAL INFORMATION ON
                               THE DEALERSHIPS AND THE ACQUIREES


III.   SUBSEQUENT FINANCIAL STATEMENTS


      No audited financial statements have been prepared for the Lamborghini Dealership in
respect of any period subsequent to 31 December 2007.


Yours faithfully,


Grant Thornton
Certified Public Accountants
13th Floor, Gloucester Tower
The Landmark
15 Queen’s Road Central
Hong Kong




                                         – 199 –
APPENDIX II                                 FINANCIAL INFORMATION ON
                                    THE DEALERSHIPS AND THE ACQUIREES


3.    RR DEALERSHIP

       The following is the text of the accountants report from Grant Thornton, Certified Public
Accountants, prepared in respect of the RR Dealership and for the purpose of incorporation in this              A1B
circular.

                                                                                 Grant Thornton
                                                                                 13th Floor, Gloucester Tower
                                                                                 The Landmark
                                                                                 15 Queen’s Road Central
                                                                                 Hong Kong
                                                                                 T +852 2218 3000
                                                                                 F +852 3748 2000
                                                                                 www.gthk.com.hk

20 March 2008                                                                                                   A1B
The Board of Directors
Jade Dynasty Group Limited
11/F, Safety Godown Industrial Building
56 Ka Yip Street
Chai Wan
Hong Kong

Dear Sirs,

      We set out below our report on the financial information (the “Financial Information”) of a
dealership of Rolls-Royce automobiles in Beijing (the “Rolls-Royce Dealership”) including the
balance sheets as at 31 December 2006 and 2007, and income statements, statements of changes in
owners’ equity and cash flow statements for the period from 20 January 2006 (date of commencement
of Rolls-Royce Dealership) to 31 December 2006 and the year ended 31 December 2007 (the
“Relevant Periods”) and notes thereto, prepared for inclusion in the circular (the “Circular”) dated
20 March 2008 issued by Jade Dynasty Group Limited (the “Company”) in connection with the
acquisition of all the economic benefits derived from the Rolls-Royce Dealership (the “Acquisition”)
from Sparkle Roll Holdings Limited (“Sparkle Roll”, a company owned and controlled by Mr. Qi
Jian Hong              (“Mr. Qi”)).

      The Rolls-Royce Dealership is a business line within the automobile dealership division of
Beijing Ying Shang Tong Trade Development Limited                                            (“Beijing
YST”, a company majority-owned and controlled by Mr. Qi). Beijing YST entered into an agreement
with BMW China Automotive Trading Limited (“BMW”) on 20 January 2006, pursuant to which
BMW granted Beijing YST the right to market and sell the Rolls-Royce automobiles, parts and
accessories at retail level, and to provide after-sales services in Beijing, the People’s Republic of
China (the “PRC”), for a period up to 31 December 2006. On 5 December 2006, Beijing YST and
BMW have entered into another agreement to extend the right for a term of 2 years from 5 December
2006. An application has been made for the transfer of the Rolls-Royce Dealership to Beijing De Te
Motors Trading Limited                                     (“Beijing De Te”). The directors of Beijing
YST expect that the consent can be obtained in the near future and in any event no later than 31
December 2008.

                                               – 200 –
APPENDIX II                                 FINANCIAL INFORMATION ON
                                    THE DEALERSHIPS AND THE ACQUIREES


       Pursuant to an agreement dated 1 November 2007 entered among various parties, including
Mr. Qi, Sparkle Roll and Beijing YST, Sparkle Roll is assigned to be the ultimate owner and
beneficiary of all the existing and future economic benefits derived from the Rolls-Royce Dealership.


      For the purpose of this report, the directors of Beijing YST have prepared the financial
statements (the “Underlying Financial Statements”) of the Rolls-Royce Dealership for the Relevant
Periods in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”). We have, for
the purpose of this report, carried out appropriate audit procedures in respect of the Underlying
Financial Statements of the Rolls-Royce Dealership for the Relevant Periods, in accordance with
Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants
(“HKICPA”).


       The Financial Information for the Relevant Periods as set out in Section I to III below has
been prepared by the directors of Beijing YST based on the Underlying Financial Statements and
in accordance with HKFRSs. For the purpose of this report, we have examined the Financial
Information of the Rolls-Royce Dealership and carried out such additional procedures as are
necessary in accordance with Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant”
issued by the HKICPA.

       The directors of Beijing YST are responsible for the preparation of the Underlying Financial
Statements and the Financial Information which give a true and fair view. The directors of the
Company are responsible for the contents of the Circular in which this report is included. In
preparing the Financial Information which gives a true and fair view, it is fundamental that
appropriate accounting policies are selected and applied consistently. It is our responsibility to
form an independent opinion, based on our examination, on the Financial Information and to
report our opinion to you.

       In our opinion, the Financial Information, for the purpose of this report, gives a true and fair
view of the state of affairs of the Rolls-Royce Dealership as at 31 December 2006 and 2007 and of
the results and cash flows of the Rolls-Royce Dealership for each of the Relevant Periods.




                                               – 201 –
APPENDIX II                              FINANCIAL INFORMATION ON
                                 THE DEALERSHIPS AND THE ACQUIREES


I.   FINANCIAL INFORMATION


     (A)   INCOME STATEMENTS


                                                               Period from
                                                                20 January
                                                                    2006 to      Year ended
                                                              31 December      31 December
                                                                      2006             2007
                                                      Notes       RMB’000          RMB’000


           Revenue                                     5            32,752          179,991
           Cost of sales                                           (27,047)        (150,872)


           Gross profit                                              5,705           29,119
           Selling and distribution costs                           (1,627)          (4,659)
           Administrative and other
             operating expenses                                      (1,453)         (4,181)


           Profit before income tax                    7             2,625           20,279
           Income tax expense                          8              (866)          (6,692)


           Profit for the period/year                                1,759           13,587




                                            – 202 –
APPENDIX II                            FINANCIAL INFORMATION ON
                               THE DEALERSHIPS AND THE ACQUIREES


   (B)   BALANCE SHEETS


                                                               As at 31 December
                                                                  2006          2007
                                                      Notes   RMB’000       RMB’000


         Non-current assets
         Property, plant and equipment                 10        3,319         2,588


         Current assets
         Trade and other deposit paid                            6,454         5,407
         Inventories                                   11        8,326        19,163
         Amount due from Beijing YST                   12            –        29,518


                                                                14,780        54,088


         Current liabilities
         Trade and other deposit received                            –       (34,603)
         Accrued liabilities                                       (32)          (35)
         Amount due to Beijing YST                     12      (15,442)            –
         Taxation                                                 (866)       (6,692)


                                                               (16,340)      (41,330)


         Net current (liabilities)/assets                       (1,560)       12,758


         Net assets                                              1,759        15,346


         Financed by:


         Owners’ equity                                13        1,759        15,346




                                            – 203 –
APPENDIX II                         FINANCIAL INFORMATION ON
                            THE DEALERSHIPS AND THE ACQUIREES


   (C)   STATEMENTS OF CHANGES IN OWNERS’ EQUITY


                                                      Period from
                                                       20 January
                                                           2006 to     Year ended
                                                     31 December     31 December
                                                             2006            2007
                                                         RMB’000         RMB’000


         Owners’ equity at date of commencement of
           business/1 January                                   –           1,759
         Profit for the period/year and total
           recognised income for the period/year            1,759          13,587


         Owners’ equity at 31 December                      1,759          15,346




                                         – 204 –
APPENDIX II                            FINANCIAL INFORMATION ON
                               THE DEALERSHIPS AND THE ACQUIREES


   (D)   CASH FLOW STATEMENTS


                                                                  Period from
                                                                   20 January
                                                                       2006 to      Year ended
                                                                 31 December      31 December
                                                         Notes           2006             2007
                                                                     RMB’000          RMB’000


         Cash flows from operating activities
         Profit before income tax                                       2,625           20,279
         Adjustment for:
           Depreciation of property,
              plant and equipment                         7               409            1,142


         Operating profit before working
            capital changes                                             3,034           21,421
         Increase in inventories                                       (8,326)         (10,837)
         (Increase)/decrease in trade and
            other deposits paid                                         (6,454)          1,047
         Increase in trade and other deposits received                       –          34,603
         Increase in accrued expenses                                       32               3
         Movement in amount due from/to
            Beijing YST                                                15,442          (44,960)


         Cash generated from operating activities                       3,728            1,277
         Income tax paid                                                    –             (866)


         Net cash generated from operating activities                   3,728             411


         Cash flows from investing activities
         Purchases of property, plant and equipment                    (3,728)            (411)


         Net cash used in investing activities                         (3,728)            (411)


         Net movement in cash and cash equivalents        14                 –               –




                                          – 205 –
APPENDIX II                                FINANCIAL INFORMATION ON
                                   THE DEALERSHIPS AND THE ACQUIREES


II.   NOTES TO THE FINANCIAL INFORMATION


      1.    Basis of presentation


            The Financial Information set out in this report have been prepared in accordance
      with HKFRSs, which include all applicable individual Hong Kong Financial Reporting
      Standards, Hong Kong Accounting Standards and Interpretations issued by the HKICPA and
      has been consistently applied throughout the Relevant Periods.


             The Financial Information also complies with the applicable disclosure requirements
      of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong
      Limited.


             The Rolls-Royce Dealership has historically been managed as a business line within
      the automobile dealership division of Beijing YST and the operating assets, liabilities and
      results of the Rolls-Royce Dealership have been historically included in the books of accounts
      of Beijing YST. For the purpose of the preparation of the Financial Information, the operating
      assets, liabilities and results of the Beijing YST Dealership have been carved out from those
      of Beijing YST.

              The Financial Information is presented on a carve-out basis. When considering whether
      it is appropriate to carve out the Financial Information of the Rolls-Royce Dealership, the
      directors of Beijing YST have taken into consideration the following factors:


            (a)    the extent to which the Rolls-Royce Dealership has been separately managed
                   and financially controlled within Beijing YST; and

            (b)    the extent to which it is practicable to identify the historical financial information
                   attributable to the Rolls-Royce Dealership.


             In the opinion of the directors of Beijing YST, the carve out of the relevant results,
      assets and liabilities of Rolls-Royce Dealership are appropriate for the fair presentation of
      Rolls-Royce Dealership standalone:


            (i)    Separately managed and financially controlled within Beijing YST:


                   The day-to-day operations, inter alia, sourcing, merchandising, marketing and
                   sales of Rolls-Royce automobiles, parts and accessories are managed
                   independently by separate operation team. The Rolls-Royce Dealership’s
                   financial performance is assessed separately. Hence, operational and financial
                   autonomy is maintained.

                                               – 206 –
APPENDIX II                                  FINANCIAL INFORMATION ON
                                     THE DEALERSHIPS AND THE ACQUIREES


         (ii)     Identify the historical financial information attributable to the Rolls-Royce
                  Dealership:


                  Apart from the sharing of certain back-office functions including accounting,
                  human resource and logistics, there were no other common facilities or
                  operational interdependencies between the Rolls-Royce Dealership and other
                  businesses of Beijing YST.


                As further discussed below, certain expenses in the Financial Information include
         allocations from Beijing YST. The directors of Beijing YST believe the allocations
         are made on a reasonable basis.


          The Rolls-Royce Dealership has, from inception, been operated as an integrated part
   of Beijing YST. As a result, the Rolls-Royce Dealership has not been operated as a standalone
   business. The Financial Information may not, therefore, necessarily reflect the results of
   operations, financial position or cash flows of the Rolls-Royce Dealership if the Rolls-
   Royce Dealership had been a separate legal entity during the Relevant Periods.


   2.    Adoption of new and amended HKFRSs

          For the purpose of preparing and presenting the Financial Information, Rolls-Royce
   Dealership has adopted all the new and amended HKFRSs issued by HKICPA that are
   effective.


         Rolls-Royce Dealership has not early adopted the following HKFRSs that have been
   issued but are not yet effective. The directors of Beijing YST are currently assessing the
   impact of these HKFRSs but are not yet in a position to state whether they would have any
   material impact to the Financial Information of the Rolls-Royce Dealership.


         HKAS 1 (Revised)                              Presentation of Financial Statements –
                                                         Comprehensive revision including requiring a
                                                         statement of comprehensive income1
         HKAS 23 (Revised)                             Borrowing Costs – Comprehensive revision to
                                                         prohibit immediate expensing1
         HK     (IFRIC)   –   Interpretation   11      Group and Treasury Share Transactions2
         HK     (IFRIC)   –   Interpretation   12      Service Concession Arrangements3
         HK     (IFRIC)   –   Interpretation   13      Customer Loyalty Programmes4
         HK     (IFRIC)   –   Interpretation   14      HKAS 19 – The Limit on a Defined Benefit
                                                         Asset, Minimum Funding Requirements and
                                                         their Interaction 3



                                                    – 207 –
APPENDIX II                                FINANCIAL INFORMATION ON
                                   THE DEALERSHIPS AND THE ACQUIREES


        Notes:

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


   3.   Summary of significant accounting policies


        (a)      Basic of preparation


              The significant accounting policies that have been adopted in the preparation
        of the Financial Information are summarized below. These policies have been
        consistently applied to all the periods presented unless otherwise stated.


                 The Financial Information has been prepared on the historical cost basis.


               It should be noted that accounting estimates and assumptions are used in
        preparation of the Financial Information. Although these estimates are based on
        management’s best knowledge and judgement of current events and actions, actual
        results may ultimately differ from those estimates. The areas involving a higher
        degree of judgement or complexity, or areas where assumptions and estimates are
        significant to the Financial Information, are disclosed in note 4.


        (b)      Allocation methodology


               The Financial Information has been presented on a carve-out basis. To the
        extent that an asset, liability, revenue or expense is identifiable and directly attributable
        to the Rolls-Royce Dealership, it is reflected in the Financial Information. Certain
        expenses recognized in the Financial Information include allocations from Beijing
        YST. These allocations have been calculated based upon factors such as revenue
        generated by, headcount of or area occupied by the Rolls-Royce Dealership as
        compared to those of Beijing YST.




                                                – 208 –
APPENDIX II                         FINANCIAL INFORMATION ON
                            THE DEALERSHIPS AND THE ACQUIREES


       (c)    Revenue recognition


              Revenue comprises the fair value for the sale of goods and services rendered,
       net of rebates and discounts. Provided it is probable that the economic benefits will
       flow to the dealership and the revenue can be measured reliably, revenue is recognized
       as follows:


                    Sales of goods are recognised upon transfer of the significant risks and
              rewards of ownership to the customer. This is usually taken as the time when
              the goods are delivered and the customer has accepted the goods.


                     Service income is recognised in the accounting period in which the
              services are rendered.


       (d)    Foreign currency translation


              The Financial Information is presented in Renminbi (“RMB”), which is also
       the functional currency of the Rolls-Royce Dealership. Foreign currency transactions
       are translated into the functional currency of the Rolls-Royce Dealership using the
       exchange rates prevailing at the dates of the transactions. Foreign exchange gains and
       losses resulting from the settlement of such transactions and from the translation of
       monetary assets and liabilities denominated in foreign currencies at period/year-end
       exchange rates are recognised in the income statement. Non-monetary items that are
       measured in terms of historical cost in foreign currencies are not translated.


       (e)    Property, plant and equipment

              Property, plant and equipment are stated at cost less accumulated depreciation
       and accumulated impairment losses. The cost of an item of property, plant and
       equipment comprises its purchase price and any directly attributable costs of bringing
       the asset to the working condition and location for its intended use.


             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 Rolls-Royce Dealership and the cost of the
       item can be measured reliably. All other costs, such as repairs and maintenance, are
       charged to the income statement during the period in which they are incurred.




                                       – 209 –
APPENDIX II                           FINANCIAL INFORMATION ON
                              THE DEALERSHIPS AND THE ACQUIREES


             Depreciation is provided to write off the cost of items of property, plant and
       equipment, over their estimated useful lives and after taking into account of their
       estimated residual value, using the straight-line method, as follows:


              Furniture, fixtures and office equipment                                   5 years
              Leasehold improvement                                          Over the lease term


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


              An item of property, plant and equipment is derecognised upon disposal or
       when no future economic benefits are expected to arise from the continued use of the
       asset. Any gain or loss arising on derecognition of the asset (calculated as the difference
       between the net disposal proceeds and the carrying amount of the item) is included in
       the income statement in the period in which the item is derecognised.


       (f)    Impairment of non-financial assets


              Property, plant and equipment are subject to impairment testing and are tested
       for impairment whenever there are indications that the assets’ carrying amount may
       not be recoverable.


              For the purposes of assessing impairment, where an asset does not generate
       cash flows largely independent from those from other assets, the recoverable amount
       is determined for the smallest group of assets that generated cash inflows independently
       (i.e. a cash-generating unit). As a result, some assets are tested individually for
       impairment and some are tested at cash-generating unit level.


              An impairment loss is recognised as an expense immediately for the amount by
       which the asset’s carrying amount exceeds its recoverable amount. The recoverable
       amount is the higher of fair value, reflecting market conditions less costs to sell, and
       value in use. In assessing value in use, the estimated future cash flows are discounted
       to their present value using a pre-tax discount rate that reflects current market
       assessment of time value of money and the risk specific to the asset.


             An impairment loss is reversed in subsequent periods if there has been a
       favourable change in the estimates used to determine the asset’s recoverable amount
       and only to the extent that the asset’s carrying amount does not exceed the carrying
       amount that would have been determined, net of depreciation or amortisation, if no
       impairment loss had been recognised.



                                         – 210 –
APPENDIX II                          FINANCIAL INFORMATION ON
                             THE DEALERSHIPS AND THE ACQUIREES


       (g)    Leases

              An arrangement, comprising a transaction or a series of transactions, is or
       contains a lease if the Rolls-Royce Dealership determines that the arrangement conveys
       a right to use a specific asset or assets for an agreed period of time in return for a
       payment or a series of payments. Such a determination is made based on an evaluation
       of the substance of the arrangement and is regardless of whether the arrangement
       takes the legal form of a lease.

              Where the Rolls-Royce Dealership has the right to use the assets held under
       operating leases, payments made under the leases are charged to the income statement
       on a straight line basis over the lease terms except where an alternative basis is more
       representative of the pattern of benefits to be derived from the leased assets. Lease
       incentives received are recognised in the income statement as an integral part of the
       aggregate net lease payments made. Contingent rental are charged to the income
       statement in the period in which they are incurred.

       (h)    Financial assets

              The Rolls-Royce Dealership’s financial asset is amount due from Beijing YST
       and is classified as loans and receivables. Management determines the classification
       of its financial assets at initial recognition depending on the purpose for which the
       financial assets were acquired and where allowed and appropriate, re-evaluates this
       designation at every reporting date.

              All financial assets are recognised when, and only when, the Rolls-Royce
       Dealership becomes a party to the contractual provisions of the instrument. When
       financial assets are recognised initially, they are measured at fair value, plus, in the
       case of investments not at fair value through profit or loss, directly attributable
       transaction costs.

              Loans and receivables are non-derivative financial assets with fixed or
       determinable payments that are not quoted in an active market. They are subsequently
       measured at amortised cost using the effective interest method, less any impairment
       losses. Amortised cost is calculated taking into account any discount or premium on
       acquisition and includes fees that are an integral part of the effective interest rate and
       transaction cost.

              Derecognition of financial assets occurs when the rights to receive cash flows
       expire or are transferred and substantially all of the risks and rewards of ownership
       have been transferred. At each balance sheet date, financial assets are reviewed to
       assess whether there is objective evidence of impairment.

                                         – 211 –
APPENDIX II                           FINANCIAL INFORMATION ON
                              THE DEALERSHIPS AND THE ACQUIREES


              If there is objective evidence that an impairment loss on loans and receivables
       carried at amortised cost has been incurred, the amount of the loss is measured as the
       difference between the asset’s carrying amount and the present value of estimated
       future cash flows (excluding future credit losses that have not been incurred) discounted
       at the financial asset’s original effective interest rate (i.e. the effective interest rate
       computed at initial recognition). The amount of the loss is recognised in income
       statement of the period in which the impairment occurs.


              If, in subsequent period, the amount of the impairment loss decreases and the
       decrease can be related objectively to an event occurring after the impairment was
       recognised, the previously recognised impairment loss is reversed to the extent that it
       does not result in a carrying amount of the financial asset exceeding what the amortised
       cost would have been had the impairment not been recognised at the date the
       impairment is reversed. The amount of the reversal is recognised in income statement
       in the period in which the reversal occurs.


       (i)    Inventories


              Inventories are stated at the lower of cost and net realisable value. Cost is
       determined on first-in, first-out basis. Net realisable value represents the estimated
       selling price in the ordinary course of business less all estimated applicable selling
       expenses.


       (j)    Financial liabilities


             The Rolls-Royce Dealership’s financial liabilities include accrued liabilities
       and amount due to Beijing YST. They are initially recognized at fair value and
       subsequently measured at amortised cost using the effective interest method.


              Financial liabilities are recognised when the Rolls-Royce Dealership becomes
       a party to the contractual provisions of the instrument.


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


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



                                         – 212 –
APPENDIX II                           FINANCIAL INFORMATION ON
                              THE DEALERSHIPS AND THE ACQUIREES


       (k)    Accounting for income taxes


              Income tax comprises current tax and deferred tax.


              Current income tax is calculated according to the tax rates and tax laws
       applicable to the fiscal periods to which they relate, based on the taxable profit for
       the period/year.


              Deferred tax is calculated using the liability method on temporary differences
       at the balance sheet date between the carrying amounts of assets and liabilities in the
       financial statements and their respective tax bases. Deferred tax liabilities are generally
       recognised for all taxable temporary differences. Deferred tax assets are recognised
       for all deductible temporary differences to the extent that it is probable that taxable
       profit will be available against which the deductible temporary differences.


               Deferred tax assets and liabilities are not recognised if the temporary difference
       arises from initial recognition (other than in a business combination) of assets and
       liabilities in a transaction that affects neither taxable nor accounting profit or loss.

             Deferred tax is calculated, without discounting, at tax rates that are expected to
       apply in the period the liability is settled or the asset is realised, provided they are
       enacted or substantively enacted at the balance sheet date.


              Changes in deferred tax assets or liabilities are recognised in the income
       statement, or in equity if they relate to items that are charged or credited directly to
       equity.

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




                                         – 213 –
APPENDIX II                           FINANCIAL INFORMATION ON
                              THE DEALERSHIPS AND THE ACQUIREES


       (l)     Retirement benefit costs


               Retirement benefits to employees are provided through a defined contribution
       plan.


              Beijing YST is required to participate in a central pension scheme operated by
       the local municipal government of the PRC. Beijing YST is required to contribute
       certain percentage of its payroll costs to the central pension scheme. The contributions
       are charged to the income statement as they become payable in accordance with the
       rules of the central pension scheme. Beijing YST has no legal or constructive
       obligations to pay further contributions after payment of the fixed contribution. The
       amount recognised in the Financial Information represents the Rolls-Royce Dealership’s
       share of the retirement benefit costs of Beijing YST.


       (m)     Provisions and contingent liabilities


              Provisions are recognised when the Rolls-Royce Dealership has a present
       obligation (legal or constructive) as a result of a past event, and it is probable that an
       outflow of economic benefits will be required to settle the obligation and a reliable
       estimate can be made. When the time value of money is material, provisions are
       stated at the present value of the expenditure expected to settle the obligation.


              All provisions are reviewed at each balance sheet date and adjusted to reflect
       the current best estimate.


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


       (n)     Related parties


               For the purposes of this Financial Information, a party is considered to be
       related to the Rolls-Royce Dealership if:


               (i)   the party, directly, or indirectly through one or more intermediaries:


                     –      controls, is controlled by, or is under common control with, Rolls-
                            Royce Dealership/Beijing YST;

                                          – 214 –
APPENDIX II                              FINANCIAL INFORMATION ON
                                 THE DEALERSHIPS AND THE ACQUIREES


                        –      has an interest in Rolls-Royce Dealership/Beijing YST that gives
                               it significant influence over Rolls-Royce Dealership/Beijing YST;
                               or

                        –      has joint control over Rolls-Royce Dealership/Beijing YST;

                (ii)    the party is an associate of Beijing YST;

                (iii)   the party is a jointly controlled entity of Beijing YST;

                (iv)    the party is a member of the key management personnel of Rolls-Royce
                        Dealership, Beijing YST or Beijing YST ‘s parent;

                (v)     the party is a close member of the family of any individual referred to in
                        (i) or (iv);

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

                (vii) the party is a post-employment benefit plan for the benefit of employees
                      of the Rolls-Royce Dealership/Beijing YST, or of any entity that is a
                      related party of the Rolls-Royce Dealership/Beijing YST.

   4.    Critical accounting estimates and judgements

         Estimates and judgements are continually evaluated and are based on historical
   experience and other factors, including expectations of future events that are believed to be
   reasonable under the circumstances.

          Rolls-Royce Dealership makes estimates and assumptions concerning the future. The
   resulting accounting estimates will, by definition, seldom equal to the related actual results.
   The estimates and assumptions that have a significant effect on the carrying amounts of
   assets and liabilities are discussed below:

         (i)    Carve out of Financial Information

               As explained in note 1, the Financial Information has been prepared on a
         carve-out basis. Certain expenses in the Financial Information include allocations
         from Beijing YST. These allocations have been calculated based upon factors such as
         revenue generated by, headcount of or area occupied by the Rolls-Royce Dealership
         as compared to those of Beijing YST.


                                            – 215 –
APPENDIX II                            FINANCIAL INFORMATION ON
                               THE DEALERSHIPS AND THE ACQUIREES


         (ii)   Impairment of inventories


                In determining the amount of impairment required for obsolete and slow-moving
         inventories, management would compare the carrying amount of the aged inventories
         to their respective net realisable value. A considerable amount of judgement is required
         in determining such impairment. If conditions which have impact on the net realisable
         value of inventories have deteriorated, impairment may be required.


   5.    Revenue


          Revenue represents the net amounts received and receivable from goods sold and
   after-sales services rendered by the Rolls-Royce Dealership to customers, less returns and
   allowances.


         An analysis of revenue is as follows:


                                                                  Period from
                                                                   20 January
                                                                       2006 to      Year ended
                                                                 31 December      31 December
                                                                         2006             2007
                                                                     RMB’000          RMB’000


         Revenue (turnover)
         Sale of automobile and automotive parts                         32,752         179,441
         After-sales services income                                          –             550


                                                                         32,752         179,991


   6.    Segment information


          No analysis of segment information by business or geographical segment is presented
   as the Rolls-Royce Dealership’s sole business is selling of Rolls-Royce automobiles, parts
   and accessories in the PRC.




                                          – 216 –
APPENDIX II                            FINANCIAL INFORMATION ON
                               THE DEALERSHIPS AND THE ACQUIREES


   7.    Profit before income tax


         Profit before income tax is arrived at after charging:


                                                                   Period from
                                                                    20 January
                                                                        2006 to     Year ended
                                                                  31 December     31 December
                                                                          2006            2007
                                                                      RMB’000         RMB’000


         Cost of inventories recognised as expenses                     27,047         150,702
         Cost of services provided                                           –             170
         Depreciation of property, plant and equipment                     409           1,142
         Operating lease charges in respect of rented premises             752           3,052


   8.    Income tax expense


          The provision for notional PRC income tax during the Relevant Periods are based on
   a statutory tax rate of 33% of the estimated assessable profit as determined in accordance
   with the relevant income tax rules and regulations of the PRC.


         Income tax in the income statement represents:


                                                                   Period from
                                                                    20 January
                                                                        2006 to     Year ended
                                                                  31 December     31 December
                                                                          2006            2007
                                                                      RMB’000         RMB’000


         Notional PRC corporate income tax
           – Current                                                       866           6,692




                                          – 217 –
APPENDIX II                           FINANCIAL INFORMATION ON
                              THE DEALERSHIPS AND THE ACQUIREES


         Reconciliation between income tax expense and accounting profit for the Relevant
   Periods at applicable tax rate is as follows:


                                                             Period from
                                                              20 January
                                                                  2006 to     Year ended
                                                            31 December     31 December
                                                                    2006            2007
                                                                RMB’000         RMB’000


         Profit before income tax                                   2,625         20,279


         Tax on profit before income tax, calculated
           at the statutory tax rate of 33%                           866          6,692


   9.    Employee benefit expense (including directors’ emoluments)


                                                             Period from
                                                              20 January
                                                                  2006 to     Year ended
                                                            31 December     31 December
                                                                    2006            2007
                                                                RMB’000         RMB’000


         Wages and salaries                                         1,347          1,617
         Contribution to retirement scheme                             32            213


                                                                    1,379          1,830




                                         – 218 –
APPENDIX II                         FINANCIAL INFORMATION ON
                            THE DEALERSHIPS AND THE ACQUIREES


   10.   Property, plant and equipment


                                                 Furniture,
                                                    fixtures
                                                  and office     Leasehold
                                                 equipment     improvement      Total
                                                   RMB’000        RMB’000     RMB’000


         Period from 20 January 2006
           to 31 December 2006
         Additions                                    1,329          2,399      3,728
         Depreciation                                   (93)          (316)      (409)


         Closing net carrying amount                  1,236          2,083      3,319


         At 31 December 2006 and
           1 January 2007
         Cost                                         1,329          2,399      3,728
         Accumulated depreciation                       (93)          (316)      (409)


         Net carrying amount                          1,236          2,083      3,319


         Year ended 31 December 2007
         Opening net carrying amount                  1,236          2,083       3,319
         Additions                                        4            407         411
         Depreciation                                  (254)          (888)     (1,142)


         Closing net carrying amount                    986          1,602      2,588


         At 31 December 2007
         Cost                                         1,333          2,806       4,139
         Accumulated depreciation                      (347)        (1,204)     (1,551)


         Net carrying amount                            986          1,602      2,588




                                       – 219 –
APPENDIX II                           FINANCIAL INFORMATION ON
                              THE DEALERSHIPS AND THE ACQUIREES


   11.   Inventories


                                                                       2006            2007
                                                                    RMB’000         RMB’000


         Merchandise for sales                                          8,326          19,163


   12.   Amount due from/(to) Beijing YST


          The amount due from/(to) Beijing YST was non-trade related, unsecured, interest-
   free and repayable on demand.


         Disclosed pursuant to Section 161B of Hong Kong Companies Ordinance, are as
   follows:


                                                                  Maximum
                                                                     amount
                                                                 outstanding
                                               31 December            during       1 January
                                                      2007          the year            2007
                                                   RMB’000         RMB’000          RMB’000


         Amount due from Beijing YST
          (Controlled by Mr. Qi)                      29,518           29,518               –


   13.   Owners’ equity


          As the Rolls-Royce Dealership was not a separate legal entity, the proportion of
   reserves attributable to the Rolls-Royce Dealership has been shown in the balance sheets as
   part of “Owners’ equity”.


   14.   Cash and cash equivalents


          Beijing YST was not maintained a separate bank account for Rolls-Royce Dealership.
   In this connection, no cash bank balance have been presented on the balance sheet. For the
   cash flow statement purpose, all cash flows are assumed to be paid or received by Beijing
   YST on behalf of Rolls-Royce Dealership.




                                         – 220 –
APPENDIX II                             FINANCIAL INFORMATION ON
                                THE DEALERSHIPS AND THE ACQUIREES


   15.   Operating lease commitments


         At the respective balance sheet dates, the total future minimum lease payments under
   non-cancellable operating lease payable by the Rolls-Royce Dealership are as follows:


                                                                           2006             2007
                                                                        RMB’000          RMB’000


         Within one year                                                    3,052                –
         In the second to fifth years                                           –                –


                                                                            3,052                –


          Rolls-Royce Dealership leases motor vehicle showrooms under operating lease. The
   lease runs for period of 3 years. None of the leases include contingent rentals.


   16.   Related party transactions


          Corporate overheads have been allocated to the Rolls-Royce Dealership including,
   but not limited to, personnel costs, marketing, management information systems, accounting
   and financial reporting, treasury, human resources, legal, tax and security, based upon revenue,
   headcount or area occupied. Management believes these allocations are reasonable.


                                                                    Period from
                                                                     20 January
                                                                         2006 to      Year ended
                                                                   31 December      31 December
                                                                           2006             2007
                                                                       RMB’000          RMB’000


         Corporate overheads                                                  480            2,160




                                           – 221 –
APPENDIX II                              FINANCIAL INFORMATION ON
                                 THE DEALERSHIPS AND THE ACQUIREES


   17.   Financial risk management objectives and policies


          Rolls-Royce Dealership does not have written financial risk management policies and
   guidelines. However, the management periodically analyses and formulates measures to
   manage Rolls-Royce Dealership’s exposure to market risk, including principally changes in
   interest rates and currency exchange rates. Generally, the Rolls-Royce Dealership employs a
   conservative strategy regarding its risk management.


         (a)    Interest rate risk


               The Rolls-Royce Dealership’s does not have exposure to interest rate risk
         because it does not have any interest-bearing financial assets or liabilities.


         (b)    Credit risk


               Rolls-Royce Dealership’s does not have exposure to credit risk because goods
         would normally be passed to customers only when full settlement is received.


         (c)    Foreign currency risk

                Rolls-Royce Dealership is not exposed to significant foreign currency risk. All
         the sales and purchase were conducted in RMB.


         (d)    Liquidity risk

                 Liquidity risk arises in the general funding of the Rolls-Royce Dealership’s
         operating activities. It includes the risk of not being able to fund the operating activities
         at settlement dates and liquidate positions in a timely manner at a reasonable price.
         The Rolls-Royce Dealership has no significant exposure to liquidity risk. Funding
         will be obtained from Beijing YST, when required.

         (e)    Fair value

                The fair value of the Rolls-Royce Dealership’s financial assets and liabilities
         are not materiality different from their carrying amounts because of the immediate or
         short term maturity.




                                            – 222 –
APPENDIX II                           FINANCIAL INFORMATION ON
                              THE DEALERSHIPS AND THE ACQUIREES


         (f)   Summary of financial assets and liabilities by category

               The carrying amounts of financial assets and liabilities as recognised at the
         balance sheet date of the Relevant Periods may also be categorised as follows. See
         notes 3(h) and 3(j) for explanations about how the categorisation of financial
         instruments affects their subsequent measurement.

                                                                       2006            2007
                                                                    RMB’000         RMB’000

               Financial assets (loans and receivables
                 measured at amortise cost):
               Amount due from Beijing YST                                  –          29,518


               Financial liabilities (measured
                 at amortised cost):
               Amount due to Beijing YST                              (15,442)              –


               No changes were made in the objectives, policies or processes during the years
         ended 31 December 2006 and 2007.


   18.   Capital management


         The Rolls-Royce Dealership is not subject to externally imposed capital requirements.


   19.   Subsequent events


         No significant events have taken place subsequent to 31 December 2007.




                                         – 223 –
APPENDIX II                               FINANCIAL INFORMATION ON
                                  THE DEALERSHIPS AND THE ACQUIREES


III.   SUBSEQUENT FINANCIAL STATEMENTS


      No audited financial statements have been prepared for the Rolls-Royce Dealership in respect
of any period subsequent to 31 December 2007.


Yours faithfully,


Grant Thornton
Certified Public Accountants
13th Floor, Gloucester Tower
The Landmark
15 Queen’s Road Central
Hong Kong




                                             – 224 –
APPENDIX II                                FINANCIAL INFORMATION ON
                                   THE DEALERSHIPS AND THE ACQUIREES


4.    COMPANY B

       The following is the text of the accountants report from Grant Thornton, Certified Public
Accountants, prepared in respect of Company B and for the purpose of incorporation in this                    A1B
circular.

                                                                               Grant Thornton
                                                                               13th Floor, Gloucester Tower
                                                                               The Landmark
                                                                               15 Queen’s Road Central
                                                                               Hong Kong
                                                                               T +852 2218 3000
                                                                               F +852 3748 2000
                                                                               www.gthk.com.hk


20 March 2008                                                                                                 A1B
The Board of Directors
Jade Dynasty Group Limited
11/F, Safety Godown Industrial Building
56 Ka Yip Street
Chai Wan
Hong Kong

Dear Sirs,

       We set out below our report on the financial information (the “Financial Information”) of
Beijing Mei He Zhen Yong Motors Trading Limited                                            (“Beijing
Mei He”) including the balance sheet as at 31 December 2007, and income statement, statement of
changes in equity and cash flow statement for the period from 16 October 2007 (date of establishment
of Beijing Mei He) to 31 December 2007 (the “Relevant Period”) and notes thereto, prepared for
inclusion in the circular (the “Circular”) dated 20 March 2008 issued by Jade Dynasty Group
Limited (the “Company”) in connection with the acquisition of the economic rights and interests
of Beijing Mei He by the Company (the “Acquisition”).

       Beijing Mei He was a domestic enterprise established in the People’s Republic of China (the
“PRC”) with a registered capital of RMB10,000,000 on 16 October 2007. The address of Beijing
Mei He’s registered office and principal place of business is Room 302, 9-17 Zhongli Building,
Yongdingmennei Dong Street, Chongwen District, Beijing, China
   9-17      302      . Beijing Mei He has not carried on any business since the date of its
establishment. On 1 February 2008, Beijing Mei He, Beijing Bin Li Group Limited
           (“BJBG”) and Shanghai Bin Li Motors Trading Limited
(“           ”) have entered into certain agreements in respect of the transfer of a dealership of
Bentley cars in Beijing (the “BL Dealership”) to Beijing Mei He. In addition, in-principle written
consent to transfer a dealership of Lamborghini cars in Beijing (the “LB Dealership”) was also
obtained on 11 January 2007. Notwithstanding the above, Beijing Mei He cannot operate the BL
Dealership and LB Dealership as at the date of this report as completion of the transfer is subject
to regulatory procedures by Ministry of Commerce which are yet to be completed.

                                              – 225 –
APPENDIX II                                 FINANCIAL INFORMATION ON
                                    THE DEALERSHIPS AND THE ACQUIREES


       For the purpose of this report, the directors of Beijing Mei He have prepared the financial
statements (the “Underlying Financial Statements”) of Beijing Mei He for the Relevant Period in
accordance with Hong Kong Financial Reporting Standards (“HKFRSs”). We have, for the purpose
of this report, carried out appropriate audit procedures in respect of the Underlying Financial
Statements of Beijing Mei He for the Relevant Period, in accordance with Hong Kong Standards
on Auditing issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

      The Financial Information for the Relevant Period as set out in Section I to III below has
been prepared by the directors of Beijing Mei He based on the Underlying Financial Statements
and in accordance with HKFRSs. For the purpose of this report, we have examined the Financial
Information of Beijing Mei He and carried out such additional procedures as are necessary in
accordance with Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by
the HKICPA.


       The directors of Beijing Mei He are responsible for the preparation of the Underlying
Financial Statements and the Financial Information which give a true and fair view. The directors
of the Company are responsible for the contents of the Circular in which this report is included. In
preparing the Financial Information which gives a true and fair view, it is fundamental that
appropriate accounting policies are selected and applied consistently. It is our responsibility to
form an independent opinion, based on our examination, on the Financial Information and to
report our opinion to you.


      In our opinion, the Financial Information, for the purpose of this report, gives a true and fair
view of the state of affairs of Beijing Mei He as at 31 December 2007 and of the results and cash
flows of Beijing Mei He for the Relevant Period.




                                               – 226 –
APPENDIX II                                FINANCIAL INFORMATION ON
                                   THE DEALERSHIPS AND THE ACQUIREES


I.   FINANCIAL INFORMATION


     (A)   INCOME STATEMENT


                                                                      Period from
                                                                 16 October 2007
                                                                          (date of
                                                                   establishment)
                                                                  to 31 December
                                                                             2007
                                                         Notes               RMB


           Other income                                   5                10,820
           Administrative and other operating expenses                    (10,000)


           Profit before income tax                       7                   820
           Income tax expense                             8                  (148)


           Profit for the period                                              672




                                          – 227 –
APPENDIX II                          FINANCIAL INFORMATION ON
                             THE DEALERSHIPS AND THE ACQUIREES


   (B)   BALANCE SHEET


                                                                      As at
                                                           31 December 2007
                                                   Notes               RMB


         Current assets
         Amount due from a related company          9             8,000,000
         Cash and cash equivalents                  10            2,010,820


                                                                 10,010,820


         Current liabilities
         Other payables and accruals                                (10,000)
         Taxation                                                      (148)


                                                                    (10,148)


         Net assets                                              10,000,672


         EQUITY


         Equity attributable to equity
           owner of Beijing Mei He
         Capital                                    11           10,000,000
         Retaining earnings                                             672


         Total equity                                            10,000,672




                                         – 228 –
APPENDIX II                          FINANCIAL INFORMATION ON
                             THE DEALERSHIPS AND THE ACQUIREES


   (C)   STATEMENT OF CHANGES IN EQUITY


                                               Registered   Retained
                                                  capital   earnings   Total equity
                                                     RMB        RMB           RMB


         At 16 October 2007
           (Date of establishment)                      –         –              –
         Capital injection                     10,000,000         –     10,000,000
         Profit for the period                          –       672            672


         At 31 December 2007                   10,000,000       672     10,000,672




                                     – 229 –
APPENDIX II                            FINANCIAL INFORMATION ON
                               THE DEALERSHIPS AND THE ACQUIREES


   (D)   CASH FLOW STATEMENT


                                                                Period from
                                                           16 October 2007
                                                                    (date of
                                                             establishment)
                                                            to 31 December
                                                                       2007
                                                                       RMB


         Cash flows from operating activities
         Profit before income tax                                       820
         Adjustment for:
           Interest income                                          (10,820)


         Operating profit before working capital changes            (10,000)
         Increase in amount due from a related company           (8,000,000)
         Increase in other payables and accruals                     10,000


         Net cash used in operating activities                   (8,000,000)


         Cash flows from investing activity
         Interest received                                           10,820


         Net cash generated from investing activity                  10,820


         Cash flows from financing activity
         Proceeds from capital injection                         10,000,000


         Net cash generated from financing activity              10,000,000


         Net increase in cash and cash equivalents                2,010,820


         Cash and cash equivalents at 31 December 2007            2,010,820




                                          – 230 –
APPENDIX II                                    FINANCIAL INFORMATION ON
                                       THE DEALERSHIPS AND THE ACQUIREES


II.   NOTES TO THE FINANCIAL INFORMATION


      1.    Basis of presentation


            The Financial Information set out in this report have been prepared in accordance
      with all applicable HKFRSs, which include all applicable individual Hong Kong Financial
      Reporting Standards, Hong Kong Accounting Standards and Interpretations issued by the
      HKICPA and have been consistently applied throughout the Relevant Period.


            The Financial Information also complies with the applicable disclosure requirements
      of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong
      Limited.


      2.    Adoption of new and amended HKFRSs


            For the purpose of preparing and presenting the Financial Information, Beijing Mei
      He has adopted all the new and amended HKFRSs issued by HKICPA that are effective.


             Beijing Mei He has not early adopted the following HKFRSs that have been issued
      but are not yet effective. The directors of Beijing Mei He are currently assessing the impact
      of these HKFRSs but are not yet in a position to state whether they would have any material
      impact to the Financial Information.


            HKAS 1 (Revised)                             Presentation of Financial Statements –
                                                           Comprehensive revision including requiring a
                                                           statement of comprehensive income1
            HKAS 23 (Revised)                            Borrowing Costs – Comprehensive revision to
                                                           prohibit immediate expensing 1
            HK   (IFRIC)    –   Interpretation   11      Group and Treasury Share Transactions2
            HK   (IFRIC)    –   Interpretation   12      Service Concession Arrangements3
            HK   (IFRIC)    –   Interpretation   13      Customer Loyalty Programmes4
            HK   (IFRIC)    –   Interpretation   14      HKAS 19 – The Limit on a Defined Benefit
                                                           Asset, Minimum Funding Requirements and
                                                           their Interaction3

            Notes:

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




                                                      – 231 –
APPENDIX II                           FINANCIAL INFORMATION ON
                              THE DEALERSHIPS AND THE ACQUIREES


   3.   Summary of significant accounting policies

        a)    Basic of preparation

              The significant accounting policies that have been adopted in the preparation
        of the Financial Information are summarised below. These policies have been
        consistently applied throughout the Relevant Period unless otherwise stated. The
        Financial Information have been prepared on the historical cost basis.

               It should be noted that accounting estimates and assumptions are used in
        preparation of the Financial Information. Although these estimates are based on
        management’s best knowledge and judgement of current events and actions, actual
        results may ultimately differ from those estimates. The areas involving a higher
        degree of judgement or complexity, or areas where assumptions and estimates are
        significant to the Financial Information, are disclosed in note 4.

        b)    Leases

               An arrangement, comprising a transaction or a series of transactions, is or
        contains a lease if Beijing Mei He determines that the arrangement conveys a right to
        use a specific asset or assets for an agreed period of time in return for a payment or a
        series of payments. Such a determination is made based on an evaluation of the
        substance of the arrangement and is regardless of whether the arrangement takes the
        legal form of a lease.

              Operating lease charges as the lessee

                     Where Beijing Mei He has the right to use the assets held under operating
              leases, payments made under the leases are charged to the income statement on
              a straight line basis over the lease terms except where an alternative basis is
              more representative of the pattern of benefits to be derived from the leased
              assets. Lease incentives received are recognised in the income statement as an
              integral part of the aggregate net lease payments made. Contingent rental are
              charged to the income statement in the period in which they are incurred.

        c)    Financial assets

               Beijing Mei He’s financial assets mainly are amount due from a related company
        and are classified as loans and receivables. Management determines the classification
        of its financial assets at initial recognition depending on the purpose for which the
        financial assets were acquired and where allowed and appropriate, re-evaluates this
        designation at every reporting date.


                                         – 232 –
APPENDIX II                          FINANCIAL INFORMATION ON
                             THE DEALERSHIPS AND THE ACQUIREES


              All financial assets are recognised when, and only when, Beijing Mei He
       becomes a party to the contractual provisions of the instrument. When financial
       assets are recognised initially, they are measured at fair value, plus, in the case of
       investments not at fair value through profit or loss, directly attributable transaction
       costs.


              Loans and receivables non-derivative financial assets with fixed or determinable
       payments that are not quoted in an active market. Amount due from a related company
       is subsequently measured at amortised cost using the effective interest method, less
       any impairment losses. Amortised cost is calculated taking into account any discount
       or premium on acquisition and includes fees that are an integral part of the effective
       interest rate and transaction cost.


              Derecognition of financial assets occurs when the rights to receive cash flows
       expire or are transferred and substantially all of the risks and rewards of ownership
       have been transferred. At each balance sheet date, financial assets are reviewed to
       assess whether there is objective evidence of impairment.


              If there is objective evidence that an impairment loss on amount due from a
       related company carried at amortised cost has been incurred, the amount of the loss is
       measured as the difference between the asset’s carrying amount and the present value
       of estimated future cash flows (excluding future credit losses that have not been
       incurred) discounted at the financial asset’s original effective interest rate (i.e. the
       effective interest rate computed at initial recognition). The amount of the loss is
       recognised in income statement of the period in which the impairment occurs.

              If, in subsequent period, the amount of the impairment loss decreases and the
       decrease can be related objectively to an event occurring after the impairment was
       recognised, the previously recognised impairment loss is reversed to the extent that it
       does not result in a carrying amount of the financial asset exceeding what the amortised
       cost would have been had the impairment not been recognised at the date the
       impairment is reversed. The amount of the reversal is recognised in income statement
       in the period in which the reversal occurs.


       d)     Cash and cash equivalents


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




                                        – 233 –
APPENDIX II                           FINANCIAL INFORMATION ON
                              THE DEALERSHIPS AND THE ACQUIREES


       e)     Financial liabilities

               Beijing Mei He’s financial liabilities are other payables and accruals. They are
       initially recognized at fair value and subsequently measured at amortised cost using
       the effective interest method.

              Financial liabilities are recognised when Beijing Mei He becomes a party to
       the contractual provisions of the instrument. All interest related charges are recognised
       as an expense in finance costs in the income statement.

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

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

       f)     Accounting for income taxes

              Income tax comprises current tax and deferred tax.

              Current income tax assets and/or liabilities comprise those obligations to, or
       claims from, tax authorities relating to the current or prior reporting period, that are
       unpaid at the balance sheet date. They are calculated according to the tax rates and
       tax laws applicable to the fiscal periods to which they relate, based on the taxable
       profit for the year. All changes to current tax assets or liabilities are recognised as a
       component of tax expense in the income statement.

               Deferred tax is calculated using the liability method on temporary differences
       at the balance sheet date between the carrying amounts of assets and liabilities in the
       financial statements and their respective tax bases. Deferred tax liabilities are generally
       recognised for all taxable temporary differences. Deferred tax assets are recognised
       for all deductible temporary differences, tax losses available to be carried forward as
       well as other unused tax credits, to the extent that it is probable that taxable profit
       will be available against which the deductible temporary differences, unused tax
       losses and unused tax credits can be utilised.

               Deferred tax assets and liabilities are not recognised if the temporary difference
       arises from initial recognition (other than in a business combination) of assets and
       liabilities in a transaction that affects neither taxable nor accounting profit or loss.



                                         – 234 –
APPENDIX II                          FINANCIAL INFORMATION ON
                             THE DEALERSHIPS AND THE ACQUIREES


             Deferred tax is calculated, without discounting, at tax rates that are expected to
       apply in the period the liability is settled or the asset realised, provided they are
       enacted or substantively enacted at the balance sheet date.


              Changes in deferred tax assets or liabilities are recognised in the income
       statement, or in equity if they relate to items that are charged or credited directly to
       equity.


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


       g)     Provisions and contingent liabilities


             Provisions are recognised when Beijing Mei He has a present obligation (legal
       or constructive) as a result of a past event, and it is probable that an outflow of
       economic benefits will be required to settle the obligation and a reliable estimate can
       be made. When the time value of money is material, provisions are stated at the
       present value of the expenditure expected to settle the obligation.

              All provisions are reviewed at each balance sheet date and adjusted to reflect
       the current best estimate.


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


       h)     Related parties


              For the purposes of these Financial Information, a party is considered to be
       related to Beijing Mei He if:


              (i)   the party, directly, or indirectly through one or more intermediaries:


                    –      controls, is controlled by, or is under common control with, Beijing
                           Mei He;




                                        – 235 –
APPENDIX II                              FINANCIAL INFORMATION ON
                                 THE DEALERSHIPS AND THE ACQUIREES


                        –      has an interest in Beijing Mei He that gives it significant influence
                               over Beijing Mei He; or


                        –      has joint control over Beijing Mei He;


                (ii)    the party is an associate;


                (iii)   the party is a jointly controlled entity;


                (iv)    the party is a member of the key management personnel of Beijing Mei
                        He or its parent;


                (v)     the party is a close member of the family of any individual referred to in
                        (i) or (iv);


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

                (vii) the party is a post-employment benefit plan for the benefit of employees
                      of Beijing Mei He, or of any entity that is a related party of Beijing Mei
                      He.


   4.    Critical accounting estimates and judgements


          Estimates and judgements are continually evaluated and are based on historical
   experience and other factors, including expectations of future events that are believed to be
   reasonable under the circumstances. Beijing Mei He did not adopt any critical accounting
   estimates and judgements in the preparation of the Financial Information and the estimates
   and judgements used did not have a significant risk of causing a material adjustment to the
   carrying amounts of assets and liabilities within the next financial year.


   5.    Other income


         Other income represented bank interest income.


   6.    Segment information


         No separate business and geographical segment information is presented as it has not
   yet commenced its business.



                                            – 236 –
APPENDIX II                            FINANCIAL INFORMATION ON
                               THE DEALERSHIPS AND THE ACQUIREES


   7.    Profit before income tax


                                                                                  Period from
                                                                             16 October 2007
                                                                                      (date of
                                                                               establishment)
                                                                              to 31 December
                                                                                         2007
                                                                                         RMB


         Profit before income tax is arrived at after charging:


         Auditors’ remuneration                                                               –


   8.    Income tax expense


          The provision for PRC income tax during the Relevant Period is based on a statutory
   rate of 18% of the estimated assessable profit as determined in accordance with the relevant
   income tax rules and regulations of the PRC.


         Reconciliation between income tax expense and accounting profit for the Relevant
   Period at applicable tax rate is as follows:


                                                                                  Period from
                                                                             16 October 2007
                                                                                      (date of
                                                                               establishment)
                                                                              to 31 December
                                                                                         2007
                                                                                         RMB


         Profit before income tax                                                          820


         Tax on profit before income tax, calculated
           at the statutory tax rate of 18%                                               (148)


   9.    Amount due from a related company


         The amount is non-trade related, unsecured, interest-free and repayable on demand.



                                          – 237 –
APPENDIX II                            FINANCIAL INFORMATION ON
                               THE DEALERSHIPS AND THE ACQUIREES


         Disclosed pursuant to Section 161B of the Hong Kong Companies Ordinance, are as
   follows:


                                                                    Maximum
                                                                       amount
                                                                   outstanding
                                                31 December             during      16 October
                                                       2007           the year            2007
                                                       RMB                RMB             RMB


         Amount due from a relate company           8,000,000        8,000,000               –


   10.   Cash and cash equivalents


         Cash at bank earns interest at floating rates based on daily bank deposit rates.


         As at 31 December 2007, the cash and bank balances of Beijing Mei He denominated
   in Renminbi (“RMB”) are not freely convertible into foreign currencies. Under the PRC
   Foreign Exchange Control Regulations and Administration of Settlement, Sales and Payment
   of Foreign Exchange Regulations, Beijing Mei He is permitted to exchange RMB for foreign
   currencies through banks that are authorised to conduct foreign exchange business.


   11.   Capital


          Beijing Mei He was established in the PRC on 16 October 2007 with a registered
   capital of RMB10,000,000. In accordance with the relevant PRC regulations, Beijing Mei
   He’s registered capital had been fully contributed and verified by a firm of PRC Certified
   Public Accountants.


   12.   Director remuneration and five highest paid individuals


          During the Relevant Period, no emoluments were paid by Beijing Mei He to the
   directors or employees for services rendered or as an inducement to join or upon joining or
   as a compensation for loss of office. There was no arrangement under which a director of
   Beijing Mei He waived or agreed to waive any remuneration during the Relevant Period.




                                          – 238 –
APPENDIX II                            FINANCIAL INFORMATION ON
                               THE DEALERSHIPS AND THE ACQUIREES


   13.   Operating lease commitments


         As at 31 December 2007, the total future minimum lease payments under non-
   cancellable operating lease payable by Beijing Mei He are as follows:


                                                                                          2007
                                                                                          RMB


         Within one year                                                             5,456,808
         In the second to fifth years                                                8,892,606


                                                                                   14,349,414


          Beijing Mei He leases automobile showrooms under operating leases. The leases run
   for period of 1-2 years. None of the leases include contingent rentals.


   14.   Financial risk management objectives and policies


          Beijing Mei He is not exposed to a variety of financial risks as Beijing Mei He has
   not commenced its business. Beijing Mei He has not used any derivates or other instruments
   for hedging purposes. Beijing Mei He does not hold or issue derivate financial instruments
   for trading purposes. As at the balance sheet date, Beijing Mei He’s financial instrument
   mainly consisted of cash and cash equivalents, amount due from the related company and
   other payables.


         (a)   Interest rate risk


                Beijing Mei He’s interest rate risk relates primarily to bank balances. Beijing
         Mei He has not used any derivative contracts to hedge its exposure in interest rate
         risk. However, management monitors interest rate exposure closely.


         (b)   Credit risk


              The major credit risk come from the amount due from the related company.
         The carrying amount included in the balance sheet represents Beijing Mei He’s
         maximum exposure to credit risk in relation to its financial asset.




                                         – 239 –
APPENDIX II                               FINANCIAL INFORMATION ON
                                  THE DEALERSHIPS AND THE ACQUIREES


         (c)     Foreign currency risk


                 Beijing Mei He is not exposed to significant foreign currency risk since most
         of its business operations are transacted in RMB.


         (d)     Liquidity risk


                Liquidity risk arises in the general funding of Beijing Mei He’s operating
         activities. It includes the risk of not being able to fund the operating activities at
         settlement dates and liquidate positions in a timely manner at a reasonable price.
         Beijing Mei He has no significant exposure to liquidity risk. Funding will be obtained
         from its related company, Beijing Bin Li Group Limited, when required.


         (e)     Fair value


               The fair value of Beijing Mei He’s financial assets and liabilities are not
         materiality different from their carrying amounts because of the immediate or short
         term maturity.

   15.   Subsequent events


          Except for disclosed elsewhere of the accountants’ report, subsequent to the balance
   sheet date, Beijing Mei He has the following post balance sheet events:


         (i)     Pursuant to a shareholders meeting passed on 7 January 2008, the registered
                 capital of Beijing Mei He was increased to RMB20,000,000 by the creation of
                 additional registered capital of RMB10,000,000. According to the capital
                 verification report issued by Beijing Xin Yu Cheng Certified Public Accountants
                 Co., Ltd. dated 10 January 2008, the additional registered capital has been
                 fully paid.


         (ii)    On 1 February 2008, Beijing Mei He, BJBG and                have entered into
                 certain agreements in respect of the transfer of BL Dealership to Beijing Mei
                 He with effective from 1 February 2008.


         (iii)   In-principal written consent to transfer of LB Dealership to Beijing Mei He
                 was obtained on 11 January 2008.




                                           – 240 –
APPENDIX II                                FINANCIAL INFORMATION ON
                                   THE DEALERSHIPS AND THE ACQUIREES


             (iv)   On 22 February 2008, Beijing Mei He has entered into an agency agreement
                    (“Agency Agreement”) with BJBG. Pursuant to the Agency Agreement, Beijing
                    Mei He has to pay agency fee to BJBG for operating the LB Dealership until
                    such dealership rights transfer to Beijing Mei He. The agency fee is calculated
                    as 3.09% of the net profit before tax of the LB Dealership.


             (v)    On 22 February 2008, Beijing Mei He has entered into an office rental,
                    management fees and office expenses agreement (the “RMO Agreement”) with
                    BJBG for the period from 22 February 2008 to 31 December 2010. Pursuant to
                    the RMO Agreement, Beijing Mei He has to pay a monthly expenses of RMB80,
                    000 (equivalent to HK$86,000) to BJBG for occupying certain office premises
                    owns by BJBG.


III.   SUBSEQUENT FINANCIAL STATEMENTS


      No audited financial statements have been prepared for Beijing Mei He in respect of any
period subsequent to 31 December 2007.


Yours faithfully,

Grant Thornton
Certified Public Accountants
13th Floor, Gloucester Tower
The Landmark
15 Queen’s Road Central
Hong Kong




                                              – 241 –
APPENDIX II                               FINANCIAL INFORMATION ON
                                  THE DEALERSHIPS AND THE ACQUIREES


5.    COMPANY C

       The following is the text of the accountants report from Grant Thornton, Certified Public
Accountants, prepared in respect of Company C and for the purpose of incorporation in this                   A1B
circular.

                                                                              Grant Thornton
                                                                              13th Floor, Gloucester Tower
                                                                              The Landmark
                                                                              15 Queen’s Road Central
                                                                              Hong Kong
                                                                              T +852 2218 3000
                                                                              F +852 3748 2000
                                                                              www.gthk.com.hk


20 March 2008
The Board of Directors                                                                                       A1B

Jade Dynasty Group Limited
11/F, Safety Godown Industrial Building
56 Ka Yip Street
Chai Wan
Hong Kong

Dear Sirs,

       We set out below our report on the financial information (the “Financial Information”) of
Beijing De Te Motors Trading Limited                                    (“Beijing De Te”) including
the balance sheet of Beijing De Te as at 31 December 2007, and income statement, cash flow
statement and statement of changes in equity for the period from 16 October 2007 (date of
establishment of Beijing De Te) to 31 December 2007 (the “Relevant Period”) and notes thereto,
prepared for inclusion in the circular (the “Circular”) dated 20 March 2008 issued by Jade Dynasty
Group Limited (the “Company”) in connection with the acquisition of the economic rights and
interests of Beijing De Te by the Company (the “Acquisition”).

       Beijing De Te was a domestic enterprise established in the People’s Republic of China (the
“PRC”) with a registered capital of RMB10,000,000 on 16 October 2007. The address of Beijing
De Te’s registered office and principal place of business is Room 304, 9-17 Zhongli Building,
Yongdingmennei Dong Street, Chongwen District, Beijing, China
     9-17      304      . Beijing De Te has not carried on any business since the date of its
establishment.

       For the purpose of this report, the directors of Beijing De Te have prepared the financial
statements (the “Underlying Financial Statements”) of Beijing De Te for the Relevant Period in
accordance with Hong Kong Financial Reporting Standards (“HKFRSs”). We have, for the purpose
of this report, carried out appropriate audit procedures in respect of the Underlying Financial
Statements of Beijing De Te for the Relevant Period, in accordance with Hong Kong Standards on
Auditing issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).


                                             – 242 –
APPENDIX II                                 FINANCIAL INFORMATION ON
                                    THE DEALERSHIPS AND THE ACQUIREES


      The Financial Information for the Relevant Period as set out in Section I to III below has
been prepared by the directors based on the Underlying Financial Statements and in accordance
with HKFRSs. For the purpose of this report, we have examined the Financial Information of
Beijing De Te and carried out such additional procedures as are necessary in accordance with
Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA.


       The directors of Beijing De Te are responsible for the preparation of the Underlying Financial
Statements and the Financial Information which give a true and fair view. The directors of the
Company are responsible for the contents of the Circular in which this report is included. In
preparing the Financial Information which give a true and fair view, it is fundamental that appropriate
accounting policies are selected and applied consistently. It is our responsibility to form an
independent opinion, based on our examination, on the Financial Information and to report our
opinion to you.


      In our opinion, the Financial Information, for the purpose of this report, gives a true and fair
view of the state of affairs of Beijing De Te as at 31 December 2007 and of the results and cash
flows of Beijing De Te for the Relevant Period.




                                               – 243 –
APPENDIX II                                FINANCIAL INFORMATION ON
                                   THE DEALERSHIPS AND THE ACQUIREES


I.   FINANCIAL INFORMATION


     (A)   INCOME STATEMENT


                                                                      Period from
                                                                 16 October 2007
                                                                          (date of
                                                                   establishment)
                                                                  to 31 December
                                                                             2007
                                                         Notes               RMB


           Other income                                   5                10,885
           Administrative and other operating expenses                    (10,000)


           Profit before income tax                       7                   885
           Income tax expense                             8                  (159)


           Profit for the period                                              726




                                          – 244 –
APPENDIX II                          FINANCIAL INFORMATION ON
                             THE DEALERSHIPS AND THE ACQUIREES


   (B)   BALANCE SHEET


                                                                  As at
                                                           31 December
                                                                  2007
                                                   Notes          RMB


         Current assets
         Amount due from a related company          9         8,000,000
         Cash and cash equivalents                  10        2,010,885


                                                             10,010,885


         Current liabilities
         Other payables and accruals                             10,000
         Taxation                                                   159


                                                                 10,159


         Net assets                                          10,000,726


         EQUITY


         Equity attributable to equity
           owner of Beijing De Te
         Capital                                    11       10,000,000
         Retained earnings                                          726


         Total equity                                        10,000,726




                                         – 245 –
APPENDIX II                          FINANCIAL INFORMATION ON
                             THE DEALERSHIPS AND THE ACQUIREES


   (C)   STATEMENT OF CHANGES IN EQUITY


                                               Registered   Retained        Total
                                                  capital   earnings       equity
                                                     RMB        RMB         RMB


         At 16 October 2007
           (Date of establishment)                      –         –             –
         Capital injection                     10,000,000         –    10,000,000
         Profit for the period                          –       726           726


         At 31 December 2007                   10,000,000       726    10,000,726




                                     – 246 –
APPENDIX II                            FINANCIAL INFORMATION ON
                               THE DEALERSHIPS AND THE ACQUIREES


   (D)   CASH FLOW STATEMENT


                                                                    Period from
                                                                     16 October
                                                                   2007 (date of
                                                                 establishment)
                                                                to 31 December
                                                         Note              2007
                                                                           RMB


         Cash flows from operating activities
         Profit before income tax                                           885
         Adjustment for:
           Interest income                                5             (10,885)


         Operating loss before working capital changes                  (10,000)
         Increase in amount due from a related company               (8,000,000)
         Increase in other payables and accruals                         10,000


         Net cash used in operating activities                       (8,000,000)


         Cash flows from investing activity
         Interest received                                               10,885


         Net cash generated from investing activity                      10,885


         Cash flows from financing activity
         Proceeds from capital injection                             10,000,000


         Net cash generated from financing activity                  10,000,000


         Net increase in cash and cash equivalents                    2,010,885


         Cash and cash equivalents at 31 December 2007                2,010,885




                                          – 247 –
APPENDIX II                                    FINANCIAL INFORMATION ON
                                       THE DEALERSHIPS AND THE ACQUIREES


II.   NOTES TO THE FINANCIAL INFORMATION


      1.    Basis of presentation


            The Financial Information set out in this report have been prepared in accordance
      with all applicable HKFRSs, which include all applicable individual Hong Kong Financial
      Reporting Standards, Hong Kong Accounting Standards and Interpretations issued by the
      HKICPA and have been consistently applied throughout the Relevant Period.


            The Financial Information also complies with the applicable disclosure requirements
      of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong
      Limited.


      2.    Adoption of new and amended HKFRSs


            For the purpose of preparing and presenting the Financial Information, Beijing De Te
      has adopted all the new and amended HKFRSs issued by HKICPA that are effective.


            Beijing De Te has not early adopted the following HKFRSs that have been issued but
      are not yet effective. The directors of Beijing De Te are currently assessing the impact of
      these HKFRSs but are not yet in a position to state whether they would have any material
      impact to the Financial Information.


            HKAS 1 (Revised)                             Presentation of Financial Statements –
                                                           Comprehensive revision including requiring a
                                                           statement of comprehensive income1
            HKAS 23 (Revised)                            Borrowing Costs – Comprehensive revision to
                                                           prohibit immediate expensing 1
            HK   (IFRIC)    –   Interpretation   11      Group and Treasury Share Transactions2
            HK   (IFRIC)    –   Interpretation   12      Service Concession Arrangements3
            HK   (IFRIC)    –   Interpretation   13      Customer Loyalty Programmes4
            HK   (IFRIC)    –   Interpretation   14      HKAS 19 – The Limit on a Defined Benefit
                                                           Asset, Minimum Funding Requirements and
                                                           their Interaction3

            Notes:

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




                                                      – 248 –
APPENDIX II                           FINANCIAL INFORMATION ON
                              THE DEALERSHIPS AND THE ACQUIREES


   3.   Summary of significant accounting policies

        a)    Basic of preparation

              The significant accounting policies that have been adopted in the preparation
        of the Financial Information are summarised below. These policies have been
        consistently applied throughout the Relevant Period unless otherwise stated. The
        Financial Information have been prepared on the historical cost basis.

               It should be noted that accounting estimates and assumptions are used in
        preparation of the Financial Information. Although these estimates are based on
        management’s best knowledge and judgement of current events and actions, actual
        results may ultimately differ from those estimates. The areas involving a higher
        degree of judgement or complexity, or areas where assumptions and estimates are
        significant to the Financial Information, are disclosed in note 4.

        b)    Leases

               An arrangement, comprising a transaction or a series of transactions, is or
        contains a lease if Beijing De Te determines that the arrangement conveys a right to
        use a specific asset or assets for an agreed period of time in return for a payment or a
        series of payments. Such a determination is made based on an evaluation of the
        substance of the arrangement and is regardless of whether the arrangement takes the
        legal form of a lease.

              Operating lease charges as the lessee

                     Where Beijing De Te has the right to use the assets held under operating
              leases, payments made under the leases are charged to the income statement on
              a straight line basis over the lease terms except where an alternative basis is
              more representative of the pattern of benefits to be derived from the leased
              assets. Lease incentives received are recognised in the income statement as an
              integral part of the aggregate net lease payments made. Contingent rental are
              charged to the income statement in the period in which they are incurred.

        c)    Financial assets

               Beijing De Te’s financial assets mainly are amount due from a related company
        and are classified as loans and receivables. Management determines the classification
        of its financial assets at initial recognition depending on the purpose for which the
        financial assets were acquired and where allowed and appropriate, re-evaluates this
        designation at every reporting date.



                                         – 249 –
APPENDIX II                          FINANCIAL INFORMATION ON
                             THE DEALERSHIPS AND THE ACQUIREES


              All financial assets are recognised when, and only when, Beijing De Te becomes
       a party to the contractual provisions of the instrument. When financial assets are
       recognised initially, they are measured at fair value, plus, in the case of investments
       not at fair value through profit or loss, directly attributable transaction costs.


              Loans and receivables are non-derivative financial assets with fixed or
       determinable payments that are not quoted in an active market. Amount due from a
       related company is subsequently measured at amortised cost using the effective interest
       method, less any impairment losses. Amortised cost is calculated taking into account
       any discount or premium on acquisition and includes fees that are an integral part of
       the effective interest rate and transaction cost.


              Derecognition of financial assets occurs when the rights to receive cash flows
       expire or are transferred and substantially all of the risks and rewards of ownership
       have been transferred. At each balance sheet date, financial assets are reviewed to
       assess whether there is objective evidence of impairment.


              If there is objective evidence that an impairment loss on amount due from a
       related company carried at amortised cost has been incurred, the amount of the loss is
       measured as the difference between the asset’s carrying amount and the present value
       of estimated future cash flows (excluding future credit losses that have not been
       incurred) discounted at the financial asset’s original effective interest rate (i.e. the
       effective interest rate computed at initial recognition). The amount of the loss is
       recognised in income statement of the period in which the impairment occurs.


              If, in subsequent period, the amount of the impairment loss decreases and the
       decrease can be related objectively to an event occurring after the impairment was
       recognised, the previously recognised impairment loss is reversed to the extent that it
       does not result in a carrying amount of the financial asset exceeding what the amortised
       cost would have been had the impairment not been recognised at the date the
       impairment is reversed. The amount of the reversal is recognised in income statement
       in the period in which the reversal occurs.




                                        – 250 –
APPENDIX II                           FINANCIAL INFORMATION ON
                              THE DEALERSHIPS AND THE ACQUIREES


       d)     Cash and cash equivalents

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

       e)     Financial liabilities

               Beijing De Te’s financial liabilities are other payables and accruals. They are
       initially recognized at fair value and subsequently measured at amortised cost using
       the effective interest method.

             Financial liabilities are recognised when Beijing De Te becomes a party to the
       contractual provisions of the instrument. All interest related charges are recognised
       as an expense in finance costs in the income statement.

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

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

       f)     Accounting for income taxes

              Income tax comprises current tax and deferred tax.

              Current income tax assets and/or liabilities comprise those obligations to, or
       claims from, tax authorities relating to the current or prior reporting period, that are
       unpaid at the balance sheet date. They are calculated according to the tax rates and
       tax laws applicable to the fiscal periods to which they relate, based on the taxable
       profit for the year. All changes to current tax assets or liabilities are recognised as a
       component of tax expense in the income statement.

               Deferred tax is calculated using the liability method on temporary differences
       at the balance sheet date between the carrying amounts of assets and liabilities in the
       financial statements and their respective tax bases. Deferred tax liabilities are generally
       recognised for all taxable temporary differences. Deferred tax assets are recognised
       for all deductible temporary differences, tax losses available to be carried forward as
       well as other unused tax credits, to the extent that it is probable that taxable profit
       will be available against which the deductible temporary differences, unused tax
       losses and unused tax credits can be utilised.


                                         – 251 –
APPENDIX II                          FINANCIAL INFORMATION ON
                             THE DEALERSHIPS AND THE ACQUIREES


               Deferred tax assets and liabilities are not recognised if the temporary difference
       arises from initial recognition (other than in a business combination) of assets and
       liabilities in a transaction that affects neither taxable nor accounting profit or loss.


             Deferred tax is calculated, without discounting, at tax rates that are expected to
       apply in the period the liability is settled or the asset realised, provided they are
       enacted or substantively enacted at the balance sheet date.


              Changes in deferred tax assets or liabilities are recognised in the income
       statement, or in equity if they relate to items that are charged or credited directly to
       equity.


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


       g)     Provisions and contingent liabilities


             Provisions are recognised when Beijing De Te has a present obligation (legal
       or constructive) as a result of a past event, and it is probable that an outflow of
       economic benefits will be required to settle the obligation and a reliable estimate can
       be made. When the time value of money is material, provisions are stated at the
       present value of the expenditure expected to settle the obligation.


              All provisions are reviewed at each balance sheet date and adjusted to reflect
       the current best estimate.

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




                                         – 252 –
APPENDIX II                            FINANCIAL INFORMATION ON
                               THE DEALERSHIPS AND THE ACQUIREES


       h)     Related parties


              For the purposes of these Financial Information, a party is considered to be
       related to Beijing De Te if:


              (i)     the party, directly, or indirectly through one or more intermediaries:


                      –      controls, is controlled by, or is under common control with, Beijing
                             De Te;


                      –      has an interest in Beijing De Te that gives it significant influence
                             over Beijing De Te; or


                      –      has joint control over Beijing De Te;


              (ii)    the party is an associate;


              (iii)   the party is a jointly controlled entity;

              (iv)    the party is a member of the key management personnel of Beijing De
                      Te or its parent;


              (v)     the party is a close member of the family of any individual referred to in
                      (i) or (iv);


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


              (vii) the party is a post-employment benefit plan for the benefit of employees
                    of Beijing De Te, or of any entity that is a related party of Beijing De
                    Te.




                                          – 253 –
APPENDIX II                            FINANCIAL INFORMATION ON
                               THE DEALERSHIPS AND THE ACQUIREES


   4.    Critical accounting estimates and judgements


          Estimates and judgements are continually evaluated and are based on historical
   experience and other factors, including expectations of future events that are believed to be
   reasonable under the circumstances. Beijing De Te did not adopt any critical accounting
   estimates and judgements in the preparation of the Financial Information and the estimates
   and judgements used did not have a significant risk of causing a material adjustment to the
   carrying amounts of assets and liabilities within the next financial year.


   5.    Other income


         Other income represented bank interest income.


   6.    Segment information


         No separate business and geographical segment information is presented as it has not
   yet commenced its business.


   7.    Profit before income tax

                                                                                   Period from
                                                                              16 October 2007
                                                                                       (date of
                                                                                establishment)
                                                                               to 31 December
                                                                                          2007
                                                                                          RMB


         Profit before income tax is arrived at after charging:


         Auditors’ remuneration                                                               –




                                          – 254 –
APPENDIX II                            FINANCIAL INFORMATION ON
                               THE DEALERSHIPS AND THE ACQUIREES


   8.    Income tax expense


          The provision for PRC income tax during the Relevant Period is based on a statutory
   rate of 18% of the estimated assessable profit as determined in accordance with the relevant
   income tax rules and regulations of the PRC.


         Reconciliation between income tax expense and accounting profit for the Relevant
   Period at applicable tax rate is as follows:


                                                                                  Period from
                                                                             16 October 2007
                                                                                      (date of
                                                                               establishment)
                                                                              to 31 December
                                                                                         2007
                                                                                         RMB


         Profit before income tax                                                          885


         Tax on profit before income tax, calculated
           at the statutory tax rate of 18%                                               (159)


   9.    Amount due from a related company


         The amount is non-trade related, unsecured, interest-free and repayable on demand.


         Disclosed pursuant to Section 161B of the Hong Kong Companies Ordinance, are as
   follows:


                                                                   Maximum
                                                                      amount
                                                                  outstanding
                                                31 December            during      16 October
                                                       2007          the year            2007
                                                       RMB               RMB             RMB


         Amount due from a related company          8,000,000       8,000,000                 –




                                          – 255 –
APPENDIX II                            FINANCIAL INFORMATION ON
                               THE DEALERSHIPS AND THE ACQUIREES


   10.   Cash and cash equivalents


         Cash at bank earns interest at floating rates based on daily bank deposit rates.


         As at 31 December 2007, the cash and bank balances of Beijing De Te denominated
   in Renminbi (“RMB”) are not freely convertible into foreign currencies. Under the PRC
   Foreign Exchange Control Regulations and Administration of Settlement, Sales and Payment
   of Foreign Exchange Regulations, Beijing De Te is permitted to exchange RMB for foreign
   currencies through banks that are authorised to conduct foreign exchange business.


   11.   Capital


          Beijing De Te was established in the PRC on 16 October 2007 with a registered
   capital of RMB10,000,000. In accordance with the relevant PRC regulations, Beijing De
   Te’s registered capital had been fully contributed and verified by a firm of PRC Certified
   Public Accountants.


   12.   Director remuneration and five highest paid individuals

         During the Relevant Period, no emoluments were paid by Beijing De Te to the directors
   or employees for services rendered or as an inducement to join or upon joining or as a
   compensation for loss of office. There was no arrangement under which a director of Beijing
   De Te waived or agreed to waive any remuneration during the Relevant Period.


   13.   Operating lease commitments

         As at 31 December 2007, the total future minimum lease payments under non-
   cancellable operating lease payable by Beijing De Te as follows:


                                                                                            2007
                                                                                            RMB


         Within one year                                                              2,666,738
         In the second to fifth years                                                 2,408,387


                                                                                      5,075,125


         Beijing De Te leases automobile showrooms under operating lease. The lease runs for
   period of 1 – 4 years. None of the leases include contingent rentals.




                                          – 256 –
APPENDIX II                              FINANCIAL INFORMATION ON
                                 THE DEALERSHIPS AND THE ACQUIREES


   14.   Financial risk management objectives and policies


          Beijing De Te is not exposed to a variety of financial risks as Beijing De Te has not
   commenced its business. Beijing De Te has not used any derivates or other instruments for
   hedging purposes. Beijing De Te does not hold or issue derivate financial instruments for
   trading purposes. As at the balance sheet date, Beijing De Te’s financial instrument mainly
   consisted of cash and cash equivalents, amount due from the related company and other
   payables.


         (a)    Interest rate risk


               Beijing De Te’s interest rate risk relates primarily to bank balances. Beijing De
         Te has not used any derivative contracts to hedge its exposure in interest rate risk.
         However, management monitors interest rate exposure closely.


         (b)    Credit risk


               The major credit risk come from the amount due from the related company.
         The carrying amount included in the balance sheet represents Beijing De Te’s maximum
         exposure to credit risk in relation to its financial asset.


         (c)    Foreign currency risk


                Beijing De Te is not exposed to significant foreign currency risk since most of
         its business operations are transacted in RMB.


         (d)    Liquidity risk


                Liquidity risk arises in the general funding of Beijing De Te’s operating
         activities. It includes the risk of not being able to fund the operating activities at
         settlement dates and liquidate positions in a timely manner at a reasonable price.
         Beijing De Te has no significant exposure to liquidity risk. Funding will be obtained
         from its related company, Beijing Bin Li Group Limited, when required.


         (e)    Fair value


               The fair value of Beijing De Te’s financial assets and liabilities are not
         materiality different from their carrying amounts because of the immediate or short
         term maturity.




                                          – 257 –
APPENDIX II                                FINANCIAL INFORMATION ON
                                   THE DEALERSHIPS AND THE ACQUIREES


       15.   Subsequent events

              Except for disclosed elsewhere of the accountants’ report, subsequent to the balance
       sheet date, Beijing De Te has the following post balance sheet events:

             (i)     Pursuant to a shareholders meeting passed on 7 January 2008 and 11 January
                     2008, the registered capital of Beijing De Te was increased to RMB17,770,000
                     by the creation of additional registered capital of RMB7,110,000 and
                     RMB660,000, respectively. According to the capital verification report issued
                     by Beijing Xin Yu Cheng Certified Public Accountants Co., Ltd. dated 10
                     January 2008 and 15 January 2008, the additional registered capital has been
                     fully paid.

             (ii)    On 22 February 2008, Beijing De Te has entered into an agency agreement
                     (“Agency Agreement”) with Beijing Ying Shang Tong Trading Development
                     Limited                                       (“Beijing YST”). Pursuant to the
                     Agency Agreement, Beijing De Te has to pay agency fee to Beijing YST for
                     operating a dealership of Rolls-Royce cars in Beijing (“RR Dealership”) until
                     such dealership rights transfer to Beijing De Te. The agency fee is calculated
                     as 1% of the gross profit net of sales tax from the RR Dealership.

             (iii)   On 22 February 2008, Beijing De Te has entered into an office rental,
                     management fees and office expenses agreement (the “RMO Agreement”) with
                     Beijing Bin Li Group Limited                        (“BJBG”) for the period
                     from 22 February 2008 to 31 December 2010. Pursuant to the RMO Agreement,
                     Beijing De Te has to pay a monthly expenses of RMB80,000 (equivalent to
                     HK$86,000) to BJBG for occupying certain office premises owns by BJBG.

III.   SUBSEQUENT FINANCIAL STATEMENTS

      No audited financial statements have been prepared for Beijing De Te in respect of any
period subsequent to 31 December 2007.

Yours faithfully,

Grant Thornton
Certified Public Accountants
13th Floor, Gloucester Tower
The Landmark
15 Queen’s Road Central
Hong Kong



                                              – 258 –
APPENDIX II                             FINANCIAL INFORMATION ON
                                THE DEALERSHIPS AND THE ACQUIREES


6.   MANAGEMENT DISCUSSION AND ANALYSIS ON THE DEALERSHIPS AND THE
     ACQUIREES
                                                                                                  R14
      The following is the management discussion and analysis on the Dealerships and the          A16
Acquirees for the three years ended 31 December 2005, 2006 and 2007.


     (a)   For the year ended 31 December 2005


           Financial review


                  For the year ended 31 December 2005, the Dealerships recorded revenue, gross
           profit and profit after tax of RMB82.7 million, RMB 16.7 million and RMB4.9 million
           respectively which was mainly contributed by sale of Bentley automobile and
           automotive parts. The gross profit ratio and net profit ratio were 20.2% and 5.9%
           respectively.


           Operational review


           BL Dealership

                 With the strong distribution channel and experience of management, BJBG
           committed the sales of 23 Bentley automobile that contributed revenue of RMB67.5
           million, gross profit of RMB14.9 million and profit after tax of RMB4.2 million
           respectively during the year. The gross profit ratio and net profit ratio were 22.1%
           and 6.2% respectively.

           LB Dealership


                 On 21 February 2005, BJBG entered into an agreement with VAD (Tianjin)
           Company Limited (“VAD”), pursuant to which VAD granted BJBG the right to market
           and sell the Lamborghini automobiles, parts and accessories at retail level, and to
           provide after-sales services in Beijing, the PRC. Although the sale of Lamborghini
           automobiles was new to BJBG, a good start was made during the year. BJBG finally
           sold 5 Lamborghini automobiles with revenue of RMB15.2 million, gross profit of
           RMB1.8 million and profit after tax of RMB0.7 million respectively during the year.
           The gross profit and net profit ratio were 11.8% and 4.6% respectively as the brand
           was new to the market.




                                          – 259 –
APPENDIX II                          FINANCIAL INFORMATION ON
                             THE DEALERSHIPS AND THE ACQUIREES


              Among the 5 Lamborghini automobiles being sold during the year, 2 automobiles
       of RMB7.0 million were sold directly to end users while the other 3 automobiles of
       RMB8.2 million were sold to other Lamborghini dealers outside Beijing and segment
       result of RMB1.6 million and RMB17,000 were resulted respectively.


       Geographical Segments


              The Dealerships’ turnover and profit after tax for the year are derived from the
       PRC.


              The Dealerships’ assets and liabilities are located in the PRC.


       Numbers and remuneration of employees


             As at 31 December 2005, the Dealerships had 23 permanent employees.
       Employees’ cost amounted to approximately RMB0.9 million for the year. All
       permanent employees were under the remuneration policy of fixed monthly salary
       with discretionary bonus.

       Liquidity and financial resources


              The Dealerships’ total assets as at 31 December 2005 were approximately
       RMB46.4 million which were financed by the working capital generated from the
       Dealerships’ operations and funding from BJBG. There was no borrowing incepted
       by the Dealerships and therefore the gearing ratio was zero.

       Capital structure


             As the Dealerships were not separate legal entities, no capital is attributable to
       the Dealerships.


       Exposure to foreign exchange


            The revenue and cost of sales of the Dealerships were mainly denominated in
       RMB and therefore the Dealerships were not exposed to any material foreign currency
       exchange risk.




                                        – 260 –
APPENDIX II                            FINANCIAL INFORMATION ON
                               THE DEALERSHIPS AND THE ACQUIREES


         Charges on assets


               No asset of the Dealerships was pledged during the year.


         Prospects


               As the economy of the PRC recovered after the SARS outbreak in 2003, the
         earning power of the PRC’s residents had been strengthened and more Chinese,
         especially those young generations are willing to spend on luxury products like branded
         automobiles. According to this economy trend, the revenue of the Dealerships kept
         on improving.


               There was no investment, subsidiary or associate being acquired, held or
         disposed of by the Dealerships for the year.


               There was no future plan for material investment or capital assets by the
         Dealerships during the year.


               The Dealerships had no contingent liability during the year.

   (b)   For the year ended 31 December 2006


         Financial review


                For the year ended 31 December 2006, the Dealerships recorded revenue, gross
         profit and profit after tax of RMB158.6 million, RMB22.5 million and RMB5.9 million
         respectively which represented by an increase of 91.8%, 34.7% and 20.4% compared
         to last year respectively. The increase in revenue was mainly due to the booming
         automobile market in the PRC and the addition of the RR Dealership to BJBG’s
         portfolio (operated by Beijing YST) which made further contributions to the increase
         in revenue. However, as a result of the introduction of additional sales and other tax
         of around 12% on automobile, increment in profit margin was adversely affected
         during the year. In aggregate, the gross profit and net profit ratio were 14.2% and
         3.7% respectively.




                                          – 261 –
APPENDIX II                          FINANCIAL INFORMATION ON
                             THE DEALERSHIPS AND THE ACQUIREES


       Operational review


       BL Dealership


              BJBG committed the sales of 38 Bentley automobiles that contributed revenue
       of RMB102.9 million, gross profit of RMB14.5 million and profit after tax of RMB4.3
       million during the year which represented a 52.4% and 2.4% increase in revenue and
       profit after tax and decrease in gross profit of 2.7% respectively. The gross profit
       ratio and net profit ratio were dropped to 14.1% and 4.2% respectively as a result of
       the introduction of additional tax.


       LB Dealership


              As this was the second year of sale of Lamborghini automobiles, BJBG sold 8
       Lamborghini automobiles with revenue of RMB23.0 million and gross profit of
       RMB2.3 million but loss after tax of RMB0.1 million during the year. The gross
       profit ratio was dropped to 10% while a net loss was incurred.


             Among the 8 Lamborghini automobiles being sold during the year, 1 automobile
       of RMB3.7 million was sold to end user while the other 7 automobiles of RMB19.3
       million were sold to other Lamborghini dealers outside Beijing and segment results
       of RMB0.3 million and RMB0.3 million were resulted respectively.


       RR Dealership


              On 20 January 2006, Beijing YST entered into an agreement with BMW China
       Automotive Trading Limited (“BMW”), pursuant to which BMW granted Beijing
       YST the right to market and sell the Rolls-Royce automobiles, parts and accessories
       at retail level, and to provide after-sales services in Beijing, the PRC. Although sales
       of Rolls-Royce automobiles was new to Beijing YST, a good start was made during
       the year. Beijing YST sold 7 Rolls-Royce automobiles with revenue of RMB32.8
       million, gross profit of RMB5.7 million and profit after tax of RMB1.8 million
       during the year. The gross profit ratio and net profit ratio were 17.4% and 5.3%
       respectively.




                                        – 262 –
APPENDIX II                          FINANCIAL INFORMATION ON
                             THE DEALERSHIPS AND THE ACQUIREES


       Geographical Segments


              The Dealerships’ turnover and profit after tax for the year are derived from the
       PRC.


              The Dealerships’ assets and liabilities are located in the PRC.


       Numbers and remuneration of employees


             As at 31 December 2006, the Dealerships had 25 permanent employees.
       Employees’ cost amounted to approximately RMB2.6 million for the year. All
       permanent employees were under the remuneration policy of fixed monthly salary
       with discretionary bonus.


       Liquidity and financial resources


             The Dealerships’ total assets as at 31 December 2006 were approximately
       RMB70.1 million which were financed by the working capital generated from the
       Dealerships’ operations and funding from BJBG and Beijing YST. There was no
       borrowing incepted by the Dealerships and therefore the gearing ratio was zero.


       Capital structure


              As the Dealerships were not separate legal entities, no capital was attributable
       to the Dealerships.

       Exposure to foreign exchange


             The revenue and cost of sales of the Dealerships were mainly denominated in
       RMB and therefore the Dealerships were not exposed to any material foreign currency
       exchange risk.


       Charges on assets


              No asset of the Dealerships was pledged during the year.




                                        – 263 –
APPENDIX II                            FINANCIAL INFORMATION ON
                               THE DEALERSHIPS AND THE ACQUIREES


         Prospects


                Due to the introduction of addition sales tax to automobiles in the PRC, the
         profit margin of the Dealerships were adversely affected. However, the management
         of BJBG maintained the view that the retail sales of automobile in the PRC would
         pick up very strong in the coming years.


               There was no investment, subsidiary or associate being acquired, held or
         disposed of by the Dealerships for the year.


               There was no future plan for material investment or capital assets by the
         Dealerships during the year.


               The Dealerships had no contingent liability during the year.


   (c)   For the year ended 31 December 2007


         Financial review

                 For the year ended 31 December 2007, the Dealerships recorded a substantial
         increase in revenue, gross profit and profit after tax of RMB478.6 million, RMB68.3
         million and RMB29.0 million respectively which represented by an increase of 301.8%,
         303.6% and 491.5% compared to the last year. The increase in revenue was mainly
         due to the buoyant stock and real estate market in the PRC which resulted in a quick
         increase in the wealth of PRC’s citizens. The increase in wealth has pushed up the
         demand for automobiles in the PRC which contributed to the increase in revenue and
         profit. The gross profit ratio and net profit ratio were 14.3% and 6.1%.


         Operational review


         BL Dealership


               BJBG committed the sales of 66 Bentley automobiles that contributed revenue
         of RMB191.4 million gross profit of RMB27.7 million and profit after tax of RMB12.1
         million during the year which represented a 86.0%, 91.0% and 281.4% increase in
         revenue, gross profit and profit after tax respectively. The gross profit ratio and net
         profit ratio were 14.5% and 6.3% respectively.




                                          – 264 –
APPENDIX II                          FINANCIAL INFORMATION ON
                             THE DEALERSHIPS AND THE ACQUIREES


       LB Dealership


              BJBG kept up with a satisfactory performance by selling 34 Lamborghini
       automobiles with sales of RMB107.2 million gross profit of RMB11.5 million and
       profit after tax of RMB3.3 million during the year. The gross profit ratio and net
       profit ratio were 10.7% and 3.1% respectively.


             Among the 34 Lamborghini automobiles being sold during the year, 16
       automobiles of RMB49.2 million were sold directly to end users while 18 automobiles
       of RMB58.1 million were sold to other Lamborghini dealers outside Beijing and
       gross profit of RMB6.7 million and RMB0.8 million were resulted respectively, with
       gross profit ratio of 13.6% and 1.4% respectively.


       RR Dealership


              Beijing YST sold 33 Rolls-Royce automobiles with sales of RMB180.0 million,
       gross profit of RMB29.1 million and profit after tax of RMB13.6 million during the
       year. The gross profit ratio and net profit ratio were 16.2% and 7.5% respectively.

       Company B and Company C


            Both companies were established during the year and no material transaction
       was made.


       Geographical Segments

              The Dealerships’ turnover and profit after tax are derived from the PRC.


              The Dealerships and Acquirees assets and liabilities are located in the PRC.


       Numbers and remuneration of employees


              As at 31 December 2007, the Dealerships had 35 permanent employees and
       will be transferred these employees to Company B and Company C and these was no
       staff employed by the Company B or Company C. Employees’ cost amounted to
       approximately RMB4.2 million for the year. All permanent employees were under the
       remuneration policy of fixed monthly salary with discretionary bonus.




                                       – 265 –
APPENDIX II                          FINANCIAL INFORMATION ON
                             THE DEALERSHIPS AND THE ACQUIREES


       Liquidity and financial resources


              The Acquirees and Dealerships’ total assets as at 31 December 2007 were
       approximately RMB151.7 million and 20 million respectively which were financed
       by the working capital generated from the Dealerships’ operations and capital injected
       during the year. There was no borrowing incepted by the Dealerships or the Acquirees
       and the gearing ratios were zero.


       Capital structure


              As the Dealerships were not separate legal entities, no capital is attributable to
       the Dealerships. During the year, the Acquirees were established and an aggregate
       registered capital of RMB20,000,000 was injected.


       Exposure to foreign exchange


              The revenue and cost of sales of the Dealerships were mainly denominated in
       RMB and therefore the Dealerships and Acquirees were not exposed to any material
       foreign currency exchange risk.

       Charges on assets


              No asset of the Dealerships or Acquirees was pledged during the year.


       Prospects

              As a result of the increasing number of high net worth individuals as a result
       of the buoyant economy in the PRC, the management is confident that the retail sales
       of luxury automobiles in PRC would maintain strong growth in the coming years
       partially based on contracts but signed pending delivery of these branded automobiles.


             There was no investment, subsidiary or associate being acquired, held or
       disposed of by the Dealerships or the Acquirees for the year.


              There was no future plan for material investment or capital assets by the
       Dealerships or Acquirees during the year.


              The Dealerships and Acquirees had no contingent liability during the year.




                                        – 266 –
APPENDIX IIIA                        UNAUDITED PRO FORMA FINANCIAL
                                INFORMATION OF THE ENLARGED GROUP


1.    ACCOUNTANTS’ REPORT ON UNAUDITED PRO FORMA FINANCIAL
      INFORMATION OF THE ENLARGED GROUP


       The following is the text of a letter prepared for the sole purpose of inclusion in this              A1B
circular, received from the independent reporting accountants, Grant Thornton, Certified Public
Accountants, Hong Kong, in respect of the unaudited pro forma financial information of the
Enlarged Group.

                                                                              Grant Thornton
                                                                              13th Floor, Gloucester Tower
                                                                              The Landmark
                                                                              15 Queen’s Road Central
                                                                              Hong Kong
                                                                              T +852 2218 3000
                                                                              F +852 3748 2000
                                                                              www.gthk.com.hk


20 March 2008                                                                                                A1B


The Directors
Jade Dynasty Group Limited
11/F, Safety Godown Industrial Building
56 Ka Yip Street
Chai Wan
Hong Kong


Dear Sirs


      We report on the unaudited pro forma financial information of Jade Dynasty Group Limited
(the “Company”) and its subsidiaries (collectively referred to as the “Group”), and the dealership
of Bentley cars in Beijing (“BL Dealership”), the dealership of Lamborghini cars in Beijing (“LB
Dealership”), the dealership of Rolls Royce cars in Beijing (“RR Dealership”),
                   (“Company B”) and                                   (“Company C”) (collectively
referred to as the “Acquirees”) (together with the Group collectively referred to as the “Enlarged
Group”), which has been prepared by the directors for illustrative purposes only, to provide
information about how the proposed acquisition of the Acquirees might have affected the financial
information presented, as set out on pages 270 to 276 of the Company’s circular dated 20 March
2008 (the “Circular”). The basis of preparation of the unaudited pro forma financial information is
set out in the Section 2 of the “Unaudited Pro Forma Financial Information on the Enlarged
Group” in Appendix III A to the Circular.




                                             – 267 –
APPENDIX IIIA                     UNAUDITED PRO FORMA FINANCIAL
                             INFORMATION OF THE ENLARGED GROUP


   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 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.


   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 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 of
   Chapter 4 of the Listing Rules.




                                           – 268 –
APPENDIX IIIA                        UNAUDITED PRO FORMA FINANCIAL
                                INFORMATION OF THE ENLARGED GROUP


             The unaudited pro forma financial information is for illustrative purposes only, based
      on the judgements and assumptions of the directors of the Company, and because of its
      hypothetical nature, does not give any assurance or indication that any event will take place
      in the future and may not be indicative of:


             •     the financial position of the Enlarged Group as at 31 March 2007 or any future
                   date; or


             •     the results and cash flows of the Enlarged Group for the year ended 31 March
                   2007 or any future periods.


      Opinion


             In our opinion:


             (a)   the unaudited pro forma financial information has been properly compiled by
                   the directors of the Company on the basis stated;


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

             (c)   the adjustments are appropriate for the purposes of the unaudited pro forma
                   financial information as disclosed pursuant to paragraph 29 of Chapter 4 of the
                   Listing Rules.


Yours faithfully

Grant Thornton
Certified Public Accountants
13th Floor, Gloucester Tower
The Landmark
15 Queen’s Road Central
Hong Kong




                                             – 269 –
APPENDIX IIIA                         UNAUDITED PRO FORMA FINANCIAL
                                 INFORMATION OF THE ENLARGED GROUP


2.    INTRODUCTION                                                                                        R14
                                                                                                          R14
       The following is the unaudited pro forma financial information of the Enlarged Group
prepared in accordance with Rule 4.29 of the Rules Governing the Listing of Securities on the
Stock Exchange of Hong Kong Limited for the purpose of illustrating the effect of the Acquisition
on the financial position of the Enlarged Group as at 31 March 2007 and the results and cash flows
of the Enlarged Group for the year ended 31 March 2007.


       The accompanying unaudited pro forma financial information of the Enlarged Group is
based on certain assumptions, estimates, uncertainties and other currently available financial
information, and is provided for illustrative purposes only. Because of its hypothetical nature, it
may not give a true picture of the actual financial position and financial results of operations of the
Enlarged Group following Completion. Further, the accompanying unaudited pro forma financial
information of the Enlarged Group does not purport to predict the Enlarged Group’s future financial
position or results of operations.


       The unaudited pro forma consolidated balance sheet of the Enlarged Group is prepared
based on the audited consolidated balance sheet of the Group as at 31 March 2007 extracted from
the published annual report of the Group as of 31 March 2007 as set out in Appendix I to this
circular and the audited balance sheets of BL Dealership, LB Dealership, RR Dealership, Company
B and Company C as at 31 December 2007 as extracted from the accountants’ reports as set out in
Appendix II to this circular (translated into HK$ at an exchange rate of RMB1 = HK$1.1) as if the
Acquisition had been completed on 31 March 2007.


       The unaudited pro forma consolidated income statement and cash flow statement of the
Enlarged Group are prepared based on the audited consolidated income statement and cash flow
statement of the Group for the year ended 31 March 2007 extracted from the published annual
report of the Group as of 31 March 2007 as set out in Appendix I to this circular and the audited
income statements and cash flow statements of BL Dealership, LB Dealership and RR Dealership
for the year ended 31 December 2007, the audited income statement and cash flow statement of
Company B for the period from 16 October 2007 (being the date of establishment of Company B)
to 31 December 2007, and the audited income statement and cash flow statement of Company C
for the period from 16 October 2007 (being the date of establishment of Company C) to 31
December 2007 as extracted from the accountants’ reports as set out in Appendix II) to this
circular (translated into HK$ at an average exchange rate of RMB1 = HK$1.1) as if the Acquisition
had been completed on 1 April 2006. However, the financial information of Company B and
Company C presented in the unaudited pro forma income statement and cash flow statement of the
Enlarged Group only covers the period from 16 October 2007 (being the date of establishment) to
31 December 2007, as there was no financial information of Company B and Company C for a
completed financial year.



                                               – 270 –
APPENDIX IIIA                                            UNAUDITED PRO FORMA FINANCIAL
                                                    INFORMATION OF THE ENLARGED GROUP


3.   UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET OF THE
     ENLARGED GROUP
                                                                BL          LB          RR                              Pro forma
                                             The Group   Dealership  Dealership  Dealership Company B Company C       adjustments
                                                  as at       as at       as at       as at       as at       as at       relating              Pro forma
                                              31 March 31 December 31 December 31 December 31 December 31 December          to the               Enlarged
                                                  2007         2007        2007        2007       2007        2007     Acquisition                 Group
                                               HK$’000     HK$’000     HK$’000     HK$’000     HK$’000     HK$’000       HK$’000      Notes      HK$’000

     Non-current assets
     Property, plant and equipment               7,899         777         317        2,847          –            –         (3,941)    (c)          7,899
     Prepaid lease payments                      8,358           –           –            –          –            –                                 8,358
     Intangible assets                           6,107           –           –            –          –            –                                 6,107
     Goodwill                                  124,539           –           –            –          –            –       360,451     (b)(ii)     484,990
     Deferred tax assets                         4,353           –           –            –          –            –                                 4,353
     Trade receivables                           1,597           –           –            –          –            –                                 1,597

                                               152,853         777         317        2,847          –            –                               513,304

     Current assets
     Prepaid lease payments                        174           –           –            –          –            –                                   174
     Inventories                                65,298       2,801         549       21,079          –            –       (24,429)     (c)         65,298
     Trade receivables                          31,252           –           –            –          –            –                                31,252
     Other receivables, deposits and
       prepayments                              11,239       7,546          455       5,947           –           –       (13,948)     (c)         11,239
     Tax recoverable                             1,280           –            –           –           –           –                                 1,280
     Amount due from related companies               –      83,975       11,996      32,470       8,800       8,800      (128,441)     (c)         17,600
     Pledged bank deposits                       4,258           –            –           –           –           –                                 4,258
     Cash and bank balances (Note d)             5,299           –            –           –       2,212       2,212        19,547      (a)        (20,730)
                                                                                                                          (50,000)    (b)(i)

                                               118,800      94,322       13,000      59,496      11,012      11,012                               110,371

     Current liabilities
     Trade payables                              9,672           –            –           –          –            –                                 9,672
     Other payables and accrued charges          4,597         875            8          39         11           11          (922)     (c)          4,619
     Provision for tax                           1,521       6,558        1,810       7,361          –            –       (15,729)     (c)          1,521
     Trade deposit received                          –      37,396        7,260      38,063          –            –       (82,719)     (c)              –
     Bank borrowings                             3,557           –            –           –          –            –                                 3,557
     Convertible notes                           5,603           –            –           –          –            –                                 5,603

                                                24,950      44,829        9,078      45,463         11           11                                24,972

     Net current assets                         93,850      49,493        3,922      14,033      11,001      11,001                                85,399

     Total assets less current liabilities     246,703      50,270        4,239      16,880      11,001      11,001                               598,703

     Non-current liabilities
     Convertible notes                               –           –           –           –           –            –       253,956     (b)(i)      253,956

     Net assets/(liabilities)                  246,703      50,270        4,239      16,880      11,001      11,001                               344,747

     EQUITY
     Equity attributable to equity
       holders of the Company
     Share capital                               1,865           –           –           –       11,000      11,000        19,547       (a)         2,665
                                                                                                                              800     (b)(i)
                                                                                                                          (41,547)    (b)(ii)
     Retained earnings                         116,482      50,270        4,239      16,880          1            1            (2)    (b)(ii)     116,482
                                                                                                                          (71,389)      (c)

     Reserves                                  125,913           –           –           –           –            –        87,200     (b)(i)      223,157
                                                                                                                           10,044     (b)(i)

                                               244,260      50,270        4,239      16,880      11,001      11,001                               342,304
     Minority interests                          2,443           –            –           –           –           –                                 2,443

     Total equity                              246,703      50,270        4,239      16,880      11,001      11,001                               344,747



                                                                       – 271 –
APPENDIX IIIA                                       UNAUDITED PRO FORMA FINANCIAL
                                               INFORMATION OF THE ENLARGED GROUP


4.   UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT FOR THE
     ENLARGED GROUP

                                                                                           Company B Company C
                                                               BL          LB          RR        from        from        Pro forma
                                       The Group        Dealership  Dealership  Dealership 16 October 16 October       adjustments
                                       year ended       year ended year ended year ended       2007 to     2007 to         relating            Pro forma
                                        31 March      31 December 31 December 31 December 31 December 31 December            to the             Enlarged
                                             2007             2007        2007        2007       2007        2007       Acquisition               Group
                                         HK$’000          HK$’000     HK$’000     HK$’000     HK$’000     HK$’000         HK$’000      Notes    HK$’000

     Revenue                              102,094         210,508      117,966      197,990          –           –                               628,558
     Cost of sales                        (61,378 )      (180,016 )   (105,305 )   (165,959 )        –           –                              (512,658 )
     Direct operating expenses            (15,552 )             –            –            –          –           –                               (15,552 )


     Gross profit                          25,164          30,492       12,661       32,031          –           –                               100,348

     Other income                           1,264               –            –            –         12          12                                 1,288
     Selling and distribution costs        (2,640 )        (5,110 )     (5,898 )     (5,125 )        –           –                               (18,773 )
     Administrative expenses              (12,331 )        (5,510 )     (1,280 )     (4,599 )      (11 )       (11 )                             (23,742 )


     Operating profit                      11,457          19,872        5,483       22,307          1           1                                59,121
     Finance costs                           (380 )             –            –            –          –           –         (15,000 )    (e)      (15,380 )


     Profit before tax                     11,077          19,872        5,483       22,307          1           1                                43,741
     Income tax credit/(expenses)             286          (6,558 )     (1,810 )     (7,361 )        –           –                               (15,443 )


     Profit for the year/period            11,363          13,314        3,673       14,946          1           1                                28,298


     Attributable to:
       Equity holders of the Company       11,370          13,314        3,673       14,946          1           1                                28,305
       Minority interests                      (7 )             –            –            –          –           –                                    (7 )


                                           11,363          13,314        3,673       14,946          1           1                                28,298




                                                                      – 272 –
APPENDIX IIIA                                             UNAUDITED PRO FORMA FINANCIAL
                                                     INFORMATION OF THE ENLARGED GROUP


5.   UNAUDITED PRO FORMA CONSOLIDATED CASH FLOW STATEMENT OF THE
     ENLARGED GROUP
                                                                                                 Company B Company C
                                                                     BL          LB          RR        from        from         Pro forma
                                             The Group        Dealership  Dealership  Dealership 16 October 16 October        adjustments
                                             year ended       year ended year ended year ended       2007 to     2007 to          relating             Pro forma
                                              31 March      31 December 31 December 31 December 31 December 31 December             to the              Enlarged
                                                   2007             2007        2007        2007       2007        2007        Acquisition                Group
                                               HK$’000          HK$’000     HK$’000     HK$’000     HK$’000     HK$’000          HK$’000      Notes     HK$’000

     Cash flows from
       operating activities
       Profit before income tax                  11,077          19,872        5,483      22,307           1            1         (15,000 )    (e)        43,741
       Adjustments for:
         Bank interest income                      (530 )             –            –           –         (12 )        (12 )                                 (554 )
         Interest expense                           380               –            –           –           –            –          15,000      (e)        15,380
         Depreciation of property,
            plant and equipment                     816             106          140       1,256           –            –                                  2,318
         Amortisation of intangible assets          827               –            –           –           –            –                                    827
         Amortisation of prepaid
            lease payments                          174               –            –           –           –            –                                    174
         Gain on disposal of property,
            plant and equipment                    (135 )             –            –           –           –            –                                   (135 )

       Operating profit before working
          capital changes                        12,609          19,978        5,623      23,563         (11 )        (11 )                               61,751
       (Increase)/decrease in inventories       (21,594 )         4,689        9,411     (15,336 )         –            –                                (22,830 )
       Increase in trade receivables             (5,139 )             –            –           –           –            –                                 (5,139 )
       Decrease/(increase) in other
          receivables, deposits and
          prepayments                               787          (7,546 )          –       1,152           –            –                                 (5,607 )
       Increase in trade payables                 1,794               –            –           –           –            –                                  1,794
       (Decrease)/increase in other
          payables and accrued charges           (4,163 )            49            4           3          11           11           5,280      (e)         1,195
       Increase in Trade and
          other deposit received                      –          26,792        7,260      38,063           –            –                                 72,115
       Amount due from
          a related company                           –         (41,072 )    (22,248 )   (46,041 )    (8,800 )     (8,800 )                             (126,961 )

       Cash (used in)/generated from
         operations                             (15,706 )         2,890           50       1,404      (8,800 )     (8,800 )                              (23,682 )
       Income tax paid                             (954 )        (2,324 )          –        (953 )         –            –                                 (4,231 )

     Net cash (used in)/generated from
       operating activities                     (16,660 )           566           50         451      (8,800 )     (8,800 )                              (27,913 )

     Cash flows from investing activities
       Increase in pledged bank deposits           (145 )             –            –           –           –            –                                   (145 )
       Purchase of property,
         plant and equipment                     (1,948 )          (566 )        (50 )      (451 )         –            –                                 (3,015 )
       Addition of intangible assets                (76 )             –            –           –           –            –                                    (76 )
       Acquisition of a subsidiary
         (net of cash and cash
         equivalents acquired)                   (2,550 )             –            –           –           –            –         (50,000 )   (b)(i)     (52,550 )
       Proceeds from disposal of
         a property, plant and
         equipment                                  158               –            –           –           –            –                                    158
       Interest received                            530               –            –           –          12           12                                    554

     Net cash (used in)/generated
       from investing activities                 (4,031 )          (566 )        (50 )      (451 )        12           12                                (55,074 )




                                                                            – 273 –
APPENDIX IIIA                                          UNAUDITED PRO FORMA FINANCIAL
                                                  INFORMATION OF THE ENLARGED GROUP


                                                                                              Company B Company C
                                                                  BL          LB          RR        from        from      Pro forma
                                          The Group        Dealership  Dealership  Dealership 16 October 16 October     adjustments
                                          year ended       year ended year ended year ended       2007 to     2007 to       relating             Pro forma
                                           31 March      31 December 31 December 31 December 31 December 31 December          to the              Enlarged
                                                2007             2007        2007        2007       2007        2007     Acquisition                Group
                                            HK$’000          HK$’000     HK$’000     HK$’000     HK$’000     HK$’000       HK$’000       Notes    HK$’000

   Cash flows from
     financing activities
     Repayment of bank loans                 (14,610 )            –            –           –           –            –                              (14,610 )
     Dividends paid to equity holders
        of the Company                        (3,717 )            –            –           –           –            –                               (3,717 )
     Bank interest paid                         (251 )            –            –           –           –            –                                 (251 )
     Interest on convertible notes paid         (120 )            –            –           –           –            –         (5,280 )    (e)       (5,400 )
     Proceeds from the issue
        of new shares                         39,770              –            –           –       11,000      11,000        19,547       (a)       81,317
     Share issue expenses                       (989 )            –            –           –            –           –                                 (989 )
     New bank loans raised                     2,188              –            –           –            –           –                                2,188

   Net cash generated from
     financing activities                     22,271              –            –           –       11,000      11,000                               58,538

   Net increase in cash and
     cash equivalents                          1,580              –            –           –        2,212       2,212                              (24,449 )
   Cash and cash equivalents
     at the beginning of
     the year/period                           2,318              –            –           –           –            –                                2,318
   Effect of foreign exchange
     rate changes                                 32              –            –           –           –            –                                   32

   Cash and cash equivalents
     at the end of the year/period             3,930              –            –           –        2,212       2,212                              (22,099 )


   Analysis of balances of cash and
    cash equivalents
    Cash and bank balances                     5,299              –            –           –        2,212       2,212                              (20,730 )
    Bank overdrafts                           (1,369 )            –            –           –            –           –                               (1,369 )

   Cash and cash equivalents
     at the end of the year/period             3,930              –            –           –        2,212       2,212                              (22,099 )




                                                                        – 274 –
APPENDIX IIIA                         UNAUDITED PRO FORMA FINANCIAL
                                 INFORMATION OF THE ENLARGED GROUP


   Notes to unaudited pro forma financial information of the Enlarged Group

   (a)   Pursuant to the resolution passed in shareholders’ meeting of Company B and Company C on 7 January
         2008, capital contribution of RMB10,000,000 were made to Company B and RMB7,110,000 to Company
         C as registered capital on 10 January 2008. Subsequently on 15 January 2008, further capital contribution
         of RMB660,000 was made to Company C as registered capital following the resolution passed in a
         shareholder meeting on 11 January 2008. Assuming that these capital contributions of RMB17,770,000
         were made as at 31 December 2007, the amount will be equivalent to HK$19,547,000 (translated into
         HK$ at an exchange rate of RMB = HK$1.1).


         As specified in the SP Agreement, as a condition precedent, a sum of not less than RMB37,770,000 is to
         be injected in the registered capital of Company B and Company C prior to the Completion. In this
         connection, the existing shareholder of Company B and Company C injected additional capital to Company
         B and Company C in early January 2008. The management considers that it is an arrangement directly
         attributable to the Acquisition and should be accounted for in the pro forma financial information.


   (b)   On 22 February 2008, the Group and the Vendor entered into the SP Agreement pursuant to which the
         Group will acquire the exclusive entitlements and interests of BL Dealership, LB Dealership and RR
         Dealerships, Company B and Company C.


         (i)     The aggregate consideration payable by the Group was HK$402,000,000, to be settled by cash of
                 HK$50,000,000 and issuance by the Company of 400,000,000 Acquisition Consideration Shares
                 of HK$0.002 each at HK$0.22 per share amounting to HK$88,000,000 and Convertible Note of
                 HK$264,000,000 bearing 4% interest p.a.


                 The Acquisition Consideration Shares were recorded as share capital of HK$800,000 and share
                 premium of HK$87,200,000, respectively.


                 In accordance with HKAS 32, the fair value of the liability portion and the conversion option of
                 the Convertible Note of approximately HK$253,956,000 and HK$10,044,000, respectively, were
                 separately recorded as financial liabilities and equity.


         (ii)    The expected net asset value of Company B and Company C, after taking into consideration the
                 capital contribution after 31 December 2007 of RMB17,770,000 as stated in note (a) above, are
                 amounting to HK$41,549,000 (comprising of share capital of HK$41,547,000 and reserves of
                 HK$2,000. Goodwill arising thereof is amounting to HK$360,451,000.


                                                                                                          HK$’000


                 Fair value of total consideration                                                         402,000
                 Fair value of net assets of Company B                                                     (22,001)
                 Fair value of net assets of Company C                                                     (19,548)


                 Goodwill                                                                                  360,451




                                                     – 275 –
APPENDIX IIIA                         UNAUDITED PRO FORMA FINANCIAL
                                 INFORMATION OF THE ENLARGED GROUP


         The goodwill represents the excess of the fair value of consideration of the Acquisition over the fair value
         of the identified assets and liabilities of the Acquirees. On Completion, the fair value of the identifiable
         assets and liabilities of the Acquirees will have to be reassessed. As a result of the reassessment, the
         amount of goodwill may be different from the amount estimated based on the basis stated above for the
         purpose of preparation of the unaudited pro forma financial information. Accordingly, the actual goodwill
         at the date of Completion may be different from the amount presented above.


         The issue price of HK$0.22 per share for the 400,000,000 Acquisition Consideration Shares is for illustrative
         purpose only. The actual issue price will be based on the market price of the shares of the Company upon
         Completion which may be different from HK$0.22 per share. Accordingly, the actual goodwill at the date
         of Completion may be different from the amount presented above.


   (c)   The adjustment represents the elimination of assets and liabilities of BL Dealership, LB Dealership and
         RR Dealership which will not be taken up by the Group upon the Completion.


   (d)   Based on the cash and bank balances of the Group as at 31 March 2007, the Group did not have adequate
         cash to settle the above cash consideration of HK$50,000,000 if the Acquisition had taken place on 31
         March 2007. On 29 May 2007, 100,000,000 ordinary shares of HK$0.002 each of the Company held by
         Super Empire, a company wholly owned by a major shareholder of the Company were placed to independent
         professional investors at a price of HK$0.76 each and 100,000,000 new ordinary shares of HK$0.002
         each of the Company were issued and allotted to Super Empire on 13 June 2007. These shares were
         issued under the general mandate granted to the directors of the Company on 23 August 2006. The net
         proceeds of approximately HK$73,400,000 from the placing and subscription agreement would be used
         for further development of muti-media business and general working capital. Further details of the
         transaction are included in the Company’s announcement dated 31 May 2007. In this connection, the
         directors are of the opinion that the Group would have enough cash and cash equivalent to settle the cash
         consideration of HK$50,000,000.


   (e)   Assuming that the Acquisition was completed on 1 April 2006, the interest expenses in relating to the
         Convertible Note issued as part of the consideration is estimated to be approximately HK$15,000,000.


         The interest expenses of approximately HK$15,000,000 is calculated based on the imputed interest rate of
         5.9% and the amount of liability component of Convertible Note of HK$253,956,000.


         The annual interest payment is calculated as 4% on the nominal value of Convertible Note of
         HK$264,000,000. Semi-annually interest payment is therefore HK$5,280,000.


         Interest for Convertible Note is recurring in nature and is expected to have continuing effect on the
         Group’s income statement and cash flow statement up to the expiry date of the Convertible Note (i.e. two
         years from the date of issuance).


   (f)   The unaudited pro forma financial information has been prepared in accordance with the accounting
         policies of the Group, as set out in the published annual report of the Group as at 31 March 2007 and
         extracted in Appendix I to this circular, prepared under Hong Kong Financial Reporting Standards.


   (g)   For the pro forma financial information of the Group and the Target Companies as extracted from the
         Previous Circular, please refer to pages 277 to 284 of Appendix IIIB to this circular.



                                                  – 276 –
      APPENDIX IIIB           UNAUDITED PRO FORMA FINANCIAL INFORMATION OF
                                       THE GROUP AND THE TARGET COMPANIES


            The following unaudited pro forma financial information of the Group and the Target
      Companies is extracted directly from the Previous Circular. Unless otherwise defined, terms used
      in Appendix IIIB to this circular only shall have the following meanings:


      “Acquirees”                    Super Win, Nanjing Hongying and Shanghai Sanding


      “Acquisition”                  the acquisition of the shares, economic rights and interests in the
                                     Acquirees contemplated under the SP Agreement


      “Acquisition Consideration     the 40,800,000 Shares to be allotted and issued, credited as fully
        Shares”                      paid, to Samoa Hongying by the Company as part of the
                                     consideration payable by JD Multi-media for the Acquisitions


      “Call Option”                  the call option granted by Samoa Hongying to JD Multi-media
                                     under the Option Deed for the purchase of the remaining 49%
                                     interest in the issued share capital of Super Win by JD Multi-
                                     media from Samoa Hongying


      “Completion”                   Completion of the Acquisition pursuant to the terms of SP
YSL




                                     Agreement


      “Enlarged Group”               the Group and the Acquirees


      “JD Multi-media”               Jade Dynasty Multi-media Limited, a wholly owned subsidiary of
                                     the Company incorporated in Samoa, being the purchaser under
                                     the Acquisition

      “Mr. Hsieh”                    Mr. Hsieh Tai-chun            , being the guarantor of the Vendors
                                     under the SP Agreement


      “Nanjing Hongying”                                            (Nanjing Hongying Anmie-cartoon
                                     Entertainment Company Limited*), a domestic company
                                     established in the PRC with limited liability


      “Option Deed”                  the option deed dated 20 August 2007 entered into between the
                                     Vendors and JD Multi-media in respect of the grant of the Call
                                     Option and the Put Option




                                                  – 277 –
      APPENDIX IIIB                  UNAUDITED PRO FORMA FINANCIAL INFORMATION OF
                                              THE GROUP AND THE TARGET COMPANIES


      “Put Option”                           the put option granted by JD Multi-media to Samoa Hongying
                                             under the Option Deed for the sale of the remaining 49% interest
                                             in the issued share capital of Super Win by Samoa Hongying to
                                             JD Mult-media


      “Samoa”                                the Independent State of Samoa

      “Samoa Hongying”                       Hong Ying Universe Co., Ltd.                                  * , a
                                             company incorporated in Samoa with limited liability whose
                                             principal asset is its 100% equity interest in Super Win, being one
                                             of the Vendors under the Acquisition


      “Shanghai Sanding”                                                    (Shanghai Sanding Animation
                                             Creation Company Limited*), a domestic company established in
                                             the PRC with limited liability


      “SP Agreement”                         the formal sale and purchase agreement dated 20 August 2007
YSL




                                             entered into between the Vendors, Mr. Hsieh (as guarantor of the
                                             Vendors), JD Multi-Media as the purchaser and the Company (as
                                             guarantor of JD Multi-Media)


      “Super Win”                            Super Win Limited, a company incorporated in Samoa with limited
                                             liability


      “Suzhou Hongyang”                                                        (Suzhou Hongyang Cartoon
                                             Production Company Limited*), a wholly foreign owned enterprise
                                             established in the PRC with limited liability owned by Super Win


      “Taiwan Hongying”                                                 (Hong Ying Universe Company
                                             Limited*), a company established in Taiwan with limited liability,
                                             being one of the Vendors


      “Vendors”                              collectively, Taiwan Hongying and Samoa Hongying, being the
                                             vendors under the Acquisition

      *   For identification purposes only




                                                          – 278 –
APPENDIX IIIB            UNAUDITED PRO FORMA FINANCIAL INFORMATION OF
                                  THE GROUP AND THE TARGET COMPANIES


1.    INTRODUCTION


       The following is the unaudited pro forma financial information of the Enlarged Group
prepared in accordance with the Listing Rules for the purpose of illustrating the effect of the
Acquisition on the financial position of the Group as if the Acquisition had been completed on 31
March 2007. As it is prepared for illustrative purpose only, and because of its nature, it may not
give a true picture of the financial position of the Enlarged Group following the completion of the
Acquisition.


       The unaudited pro forma statement of assets and liabilities of the Enlarged Group is prepared
based on the audited consolidated balance sheet of the Group as at 31 March 2007 extracted from
the published annual report of the Group as at 31 March 2007 as set out in Appendix I to this
circular and the audited balance sheet of Suzhou Hongyang, Shanghai Sanding and Nanjing
Hongying as at 31 March 2007 as extracted from the accountants’ reports set out in Appendix II to
this circular (translated into HK$ at an exchange rate of HK$1 = RMB0.9725) as if the Previous
Acquisition had been completed on 31 March 2007.




                                              – 279 –
APPENDIX IIIB                     UNAUDITED PRO FORMA FINANCIAL INFORMATION OF
                                           THE GROUP AND THE TARGET COMPANIES


2.   UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES AS AT 31
     MARCH 2007

                                                               Suzhou    Shanghai     Nanjing
                                             The Group as Hongyang as Sanding as Hongying as                         Pro forma
                                              at 31 March at 31 March at 31 March at 31 March   Pro forma             Enlarged
                                                     2007        2007        2007        2007 adjustments               Group
                                                  HK$’000     HK$’000     HK$’000     HK$’000    HK$’000     Notes    HK$’000

     ASSETS AND LIABILITIES
     Non-current assets
     Property, plant and equipment                  7,899       3,539       1,271       1,090                           13,799
     Prepaid lease payments                         8,358           –           –           –                            8,358
     Intangible assets                              6,107           –           –           –                            6,107
     Goodwill                                     124,539           –           –           –      30,307     (a)      154,846
     Deferred tax assets                            4,353           –           –           –                            4,353
     Trade receivables                              1,597           –           –           –                            1,597

                                                  152,853       3,539       1,271       1,090                          189,060

     Current assets
     Financial assets – call option                     –           –           –           –       2,376     (a)        2,376
     Prepaid lease payments                           174           –           –           –                              174
     Inventories                                   65,298      21,863      11,201       1,574        (786)    (e)       99,150
     Trade receivables                             31,252           –         245       1,069                           32,566
     Other receivables,
       deposits and prepayments                    11,239         932       1,251          75                           13,497
     Tax recoverable                                1,280           –           –           –                            1,280
     Pledged bank deposits                          4,258           –           –           –                            4,258
     Amount due from a related company                  –      15,387         229       5,205     (20,821)    (b)            –
     Cash and bank balances                         5,299       1,251         272       1,623      (8,160)    (a)          285

                                                  118,800      39,433      13,198       9,546                          153,586

     Current liabilities
     Financial liabilities – put option                 –           –           –           –       1,621     (a)        1,621
     Trade payables                                 9,672         975          39           –                           10,686
     Other payables and accrued charges             4,597      15,153       1,799       1,278        (786)    (e)       22,041
     Provision for tax                              1,521           –          26           –                            1,547
     Bank borrowings                                3,557       1,028           –           –                            4,585
     Convertible notes                              5,603           –           –           –                            5,603
     Amount due to immediate
       holding company                                 –        4,971           –           –      (4,971)    (c)            –
     Amount due to minority shareholder                –            –           –           –       4,971     (c)        4,971
     Amount due to a related company                   –        5,205      15,387         229     (20,821)    (b)            –
     Amount due to a related party                     –            –         777           –       5,454     (d)        6,231
     Amount due to a director                          –        5,454           –           –      (5,454)    (d)            –

                                                   24,950      32,786      18,028       1,507                           57,285

     Net current assets/(liabilities)              93,850       6,647      (4,830)      8,039                           96,301

     Total assets less current liabilities        246,703      10,186      (3,559)      9,129                          285,361

     Non-current liabilities
     Other payables and accrued charges                –           –           –        1,027                            1,027

     Net assets/(liabilities)                     246,703      10,186      (3,559)      8,102                          284,334




                                                                – 280 –
APPENDIX IIIB                    UNAUDITED PRO FORMA FINANCIAL INFORMATION OF
                                          THE GROUP AND THE TARGET COMPANIES


                                                      Suzhou      Shanghai      Nanjing
                                     The Group as Hongyang as    Sanding as Hongying as                         Pro forma
                                      at 31 March at 31 March at 31 March at 31 March      Pro forma            Enlarged
                                            2007         2007         2007         2007 adjustments                Group
                                         HK$’000     HK$’000       HK$’000     HK$’000      HK$’000     Notes    HK$’000


     EQUITY
     Equity attributable to equity
       holders of the Company
     Share capital                          1,865      12,775        3,085       10,283      (26,061)    (a)        1,947
     Reserves                             242,395      (2,589)       (6,644)     (2,181)      43,972     (a)      274,953


                                          244,260      10,186        (3,559)      8,102                           276,900
     Minority interests                     2,443           –            –            –        4,991     (a)        7,434


     Total equity/(deficiency)            246,703      10,186        (3,559)      8,102                           284,334



3.   NOTE TO THE UNAUDITED PRO FORMA STATEMENT OF ASSETS AND
     LIABILITIES


     (a)        On 20 August 2007, the Group and the Vendors entered into the SP Agreement
                pursuant to which the Group will acquire 51% of the equitable interests of Suzhou
                Hongyang through the acquisition of 51% of the paid up share capital in Super Win
                Limited, the exclusive entitlement to all of the economic benefits and rights to control,
                manage and operate Shanghai Sanding, and the exclusive entitlement to all of the
                economic benefits and rights to control, manage and operate Nanjing Hongying. The
                aggregate consideration payable by the Group is HK$40,800,000, to be settled by
                cash of HK$8,160,000 and issuance by the Company of 40,800,000 Acquisition
                Consideration Shares of HK$0.002 each at HK$0.80 per share amounting to
                HK$32,640,000.


                Suzhou Hongyang, Shanghai Sanding and Nanjing Hongying are therefore considered
                by the directors as subsidiaries of the Company because Suzhou Hongyang, Shanghai
                Sanding and Nanjing Hongying will be controlled by the Group after Completion.
                The balance sheet of Suzhou Hongyang, Shanghai Sanding and Nanjing Hongying
                will be consolidated with that of the Group from the date on which control is transferred
                to the Group.




                                                        – 281 –
APPENDIX IIIB      UNAUDITED PRO FORMA FINANCIAL INFORMATION OF
                            THE GROUP AND THE TARGET COMPANIES


        The adjustment is to reflect the effect of the Acquisitions on the consolidated balance
        sheet of the Group as if the Acquisitions had taken place on 31 March 2007. The
        goodwill of HK$30,307,000 represents the excess of the fair value of consideration of
        the Acquisitions over the fair value of the Group’s share of the identified assets and
        liabilities of Suzhou Hongyang, Shanghai Sanding and Nanjing Hongying, which is
        derived from the calculation as follows:


                                                                                      As at
                                                                              31 March 2007
                                                                                   HK$’000


        Fair value of total consideration                                               40,800
        51% of fair value of net assets of Suzhou Hongyang                              (5,195)
        Fair value of net liabilities of Shanghai Sanding                                3,559
        Fair value of net assets of Nanjing Hongying                                    (8,102)
        Net fair value of the Call Option and Put Option                                  (755)


        Goodwill arising from the Acquisition                                           30,307


        Net assets attributable to the minority interests upon the Completion will increase by
        HK$4,991,000, being the Vendor’s share of the fair value of the identifiable assets
        and liabilities of Suzhou Hongyang.


        On Completion, the fair value of the Group’s share of the identifiable assets and
        liabilities of Suzhou Hongyang, Shanghai Sanding and Nanjing Hongying will have
        to be reassessed. As a result of the reassessment, the amount of goodwill may be
        different from the amount estimated based on the basis stated above for the purpose
        of preparation of the unaudited pro forma financial information. Accordingly, the
        actual goodwill at the date of Completion may be different from the amount presented
        above.


        Based on the cash and bank balances of the Group as at 31 March 2007, the Group
        did not have adequate cash to settle the above cash consideration of HK$8,160,000 if
        the Acquisitions had taken place on 31 March 2007. As stated in the Company’s
        announcement dated 31 May 2007, the Company had issued 100 million placement
        shares at HK$0.76 per share, the net proceed of which amounted to HK$73.4 million.
        As a result, the directors are of the opinion that the Group would have adequate cash
        to settle the cash consideration of HK$8,160,000 at the Completion Date.




                                         – 282 –
APPENDIX IIIB       UNAUDITED PRO FORMA FINANCIAL INFORMATION OF
                             THE GROUP AND THE TARGET COMPANIES


        The issue price of HK$0.80 per share for the 40,800,000 Acquisition Consideration
        Shares is for illustrative purpose only. The fair value of the Acquisition Consideration
        Shares will be based on the market price of the shares of the Company at the date of
        issue of the Acquisition Consideration Shares upon Completion which may be different
        from HK$0.80 per share. Accordingly, the actual goodwill at the date of Completion
        may be different from the amount presented above.


        Under the Option Deed, the Vendor shall, for a consideration of HK$100, grant to the
        Group the Call Option for the further acquisition of the remaining 49% interest in the
        issued share capital of Super Win Limited. The Call Option shall be exercisable by
        the Group in one lot during the period commencing from the date of Completion and
        up to and including 30 April 2009 at the exercise price of HK$49,000,000.


        Under the Option Deed, the parties also agree that the Group shall, for a consideration
        of HK$100, grant to the Vendor the Put Option for the sale of the remaining 49%
        interest in the issued share capital of Super Win Limited. The exercise of the Put
        Option is subject to Suzhou Hongyang, Shanghai Sanding and Nanjing Hongying
        being able to meet the guaranteed profits as stated in the SP Agreement. The Put
        Option shall be exercisable by the Vendor in one lot after the expiry of the exercise
        period of the Call Option and on or before 21 May 2009 at the exercise price of
        HK$49,000,000.


        The Call Option and the Put Option should be stated at fair value. Valuation was
        performed by Norton Appraisals Limited (“NAL”), an independent professional valuer
        in Hong Kong, on the Call Option and the Put Option. In determining the fair value
        of the Call Option and the Put Option, NAL considered the generally accepted valuation
        methodologies, including but not limited to Black-Scholes-Merton Option Pricing
        Model, Binomial Option Model and etc. Black-Scholes-Merton Option Pricing Model
        was used in this valuation. The value of the Call Option and the Put Option are
        affected by risk free rate, stock price, exercise price, volatility and expected option
        life. Based on NAL’s evaluation, the estimated fair value of the Call Option (a financial
        asset) and the Put Option (a financial liability) are approximately HK$2,376,000 and
        HK$(1,621,000) respectively, resulting in a net fair value of the Call Option and Put
        Option of approximately HK$755,000.




                                         – 283 –
APPENDIX IIIB        UNAUDITED PRO FORMA FINANCIAL INFORMATION OF
                              THE GROUP AND THE TARGET COMPANIES


    (b)   Upon Completion of the Acquisitions, current account balances between Suzhou
          Hongyang, Shanghai Sanding and Nanjing Hongying would become intragroup
          balances of the Enlarged Group, and should then be eliminated on consolidation.


    (c)   Upon Completion of the Acquisitions, the prior immediate holding company of Suzhou
          Hongyang would then become a minority shareholder of Suzhou Hongyang.
          Accordingly, the advance received from this prior immediate holding company would
          become an amount due to a minority shareholder.


    (d)   Upon Completion of the Acquisitions, Mr. Hsieh Tai-chun would become a related
          party of the Enlarged Group. Accordingly, the amounts due to Mr. Hsieh Tai-chun by
          Suzhou Hongyang and Shanghai Sanding of HK$5,454,000 and HK$777,000,
          respectively, are grouped together and classified as “Amount due to a related party”.


    (e)   Upon Completion of the Acquisitions, advance received from a wholly-owned
          subsidiary of the Group by Suzhou Hongyang of approximately of HK$786,000 which
          has been capitalised in the inventory of the Group as at 31 March 2007 would become
          intragroup balance of the Enlarged Group, and should then be eliminated on
          consolidation.

    (f)   The unaudited pro forma financial information has been prepared in accordance with
          the accounting policies of the Group, as set out in the published annual report of the
          Group as at 31 March 2007 and extracted in Appendix I to this circular, prepared
          under Hong Kong Financial Reporting Standards.




                                          – 284 –
APPENDIX IIIB            UNAUDITED PRO FORMA FINANCIAL INFORMATION OF
                                  THE GROUP AND THE TARGET COMPANIES


4.    ACCOUNTANTS’ REPORT ON UNAUDITED PRO FORMA FINANCIAL
      INFORMATION OF THE ENLARGED GROUP




                                                                                   31 August 2007


The Directors
Jade Dynasty Group Limited
11/F, Safety Godown Industrial Building
56 Ka Yip Street
Chai Wan
Hong Kong


Dear Sirs


       We report on the unaudited pro forma financial information of Jade Dynasty Group Limited
(the “Company”) and its subsidiaries (collectively referred to as the “Group”) and Suzhou Hongyang
Cartoon Production Company Limited (“Suzhou Hongyang”), Shanghai Sanding Animation Creation
Company Limited (“Shanghai Sanding”) and Nanjing Hongying Anmie-cartoon Entertainment
Company Limited (“Nanjing Hongying”) (together with the Group collectively referred to as the
“Enlarged Group”), which has been prepared by the directors of the Company for illustrative
purposes only, to provide information about how the proposed acquisition of 51% of the equitable
interests of Suzhou Hongyang through the acquisition of 51% of the paid up share capital in Super
Win Limited, the exclusive entitlement to all of the economic benefits and rights to control,
manage and operate Shanghai Sanding, and the exclusive entitlement to all of the economic benefits
and rights to control, manage and operate Nanjing Hongying, might have affected the financial
information presented, as set out on pages 205 to 209 of the Company’s circular dated 31 August
2007 (the “Circular”). The basis of the preparation of the unaudited pro forma financial information
is set out in the Section 1 of the “Unaudited Pro Forma Financial Information of the Enlarged
Group” (the “Unaudited Pro Forma Financial Information”) in Appendix III of the Company’s
Circular.




                                              – 285 –
APPENDIX IIIB          UNAUDITED PRO FORMA FINANCIAL INFORMATION OF
                                THE GROUP AND THE TARGET COMPANIES


    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 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.

    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 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 judgements and assumptions of the directors of the Company, and because of
    its hypothetical nature, does not provide any assurance or indication that any event will take
    place in the future and may not be indicative of the financial position of the Group as at 31
    March 2007 or any future date.




                                            – 286 –
APPENDIX IIIB        UNAUDITED PRO FORMA FINANCIAL INFORMATION OF
                              THE GROUP AND THE TARGET COMPANIES


    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




                                                               Grant Thornton
                                                         Certified Public Accountants
                                                                  Hong Kong




                                          – 287 –
      APPENDIX IV                  FINANCIAL INFORMATION ON THE TARGET COMPANIES


      1.    SUZHOU HONGYANG CARTOON PRODUCTION COMPANY LIMITED

           The following is the text of the accountants’ report dated 31 August 2007 from Grant
      Thornton, Certified Public Accountants, prepared for Suzhou Hongyang Cartoon Production
      Company Limited as extracted from the Previous Circular.




                                                                                        31 August 2007     A1B


      The Directors
      Jade Dynasty Group Limited
      11/F, Safety Godown Industrial Building
      56 Ka Yip Street
      Chai Wan
      Hong Kong

      Dear Sirs,

             We set out below our report on the financial information of
      (Suzhou Hongyang Cartoon Production Company Limited#, “Suzhou Hongyang”) in Sections I and
YSL




      II below, including the balance sheets of Suzhou Hongyang as at 31 December 2004, 2005 and
      2006 and 31 March 2007, income statements, cash flow statements and statements of changes in
      equity for each of the three years ended 31 December 2004, 2005 and 2006 and the three months
      ended 31 March 2007 (the “Relevant Periods”) and notes thereto, together with the unaudited
      financial information of Suzhou Hongyang including the income statement, cash flow statement
      and statement of changes in equity for the three months ended 31 March 2006 (“the 31 March
      2006 Corresponding Information”), prepared for inclusion in the circular (the “Circular”) dated 31
      August 2007 issued by Jade Dynasty Group Limited (the “Company”) in connection with the
      acquisition of 51% of the equitable interest of Suzhou Hongyang through the acquisition of 51%
      of the issued shares of Super Win Limited by the Company (the “Acquisition”).

             Suzhou Hongyang is a wholly foreign owned enterprise established in the People’s Republic
      of China (the “PRC”) with an initial registered capital of US$400,000 for a period of 12 years on
      25 April 1997. The registered capital was increased to US$1,500,000 on 1 May 2002. The equity
      owner of the entire registered capital of Suzhou Hongyang during the Relevant Periods was Hong
      Ying Universe Co., Ltd, a company incorporated in Samoa with limited liability. On 5 July 2007,
      Hong Ying Universe Co., Ltd’s interest in Suzhou Hongyang was transferred to Super Win Limited,
      a company incorporated in Samoa with limited liability. Super Win Limited is an investment
      holding company whose sole asset is its 100% equity interest in Suzhou Hongyang. The address of
      Suzhou Hongyang’s registered office and principal place of business is No. 162, Longxi Road,
      Suzhou, Jiangsu, the PRC. Suzhou Hongyang is principally engaged in the production of various
      types of animation.

      #     The unofficial English translation is for identification purpose only

                                                             – 288 –
APPENDIX IV              FINANCIAL INFORMATION ON THE TARGET COMPANIES


       The financial statements of Suzhou Hongyang were prepared in accordance with the relevant
accounting rules and regulations applicable to enterprises in the PRC. Suzhou Hongyang has
adopted 31 December as its financial year-end date. The financial statements of Suzhou Hongyang
for the year ended 31 December 2004 were audited by Suzhou Dongrui Certified Public Accountants
Co., Ltd (“Suzhou Dongrui”), and the financial statements of Suzhou Hongyang for each of the
two years ended 31 December 2005 and 2006 were audited by Suzhou Jianxin Certified Public
Accountants Co., Ltd (“Suzhou Jianxin”). Both Suzhou Dongrui and Suzhou Jianxin are firms of
certified public accountants registered in the PRC. No audited financial statements have been
prepared for the three months ended 31 March 2007.


       For the purpose of this report, the director of Suzhou Hongyang has prepared the financial
statements (the “Underlying Financial Statements”) of Suzhou Hongyang for the Relevant Periods
in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong
Kong Institute of Certified Public Accountants (“HKICPA”). We have, for the purpose of this
report, carried out appropriate audit procedures in respect of the Underlying Financial Statements
of Suzhou Hongyang for the Relevant Periods, in accordance with Hong Kong Standards on
Auditing issued by the HKICPA.


       The financial information and the notes thereto for the Relevant Periods (the “Financial
Information”) as set out in this report have been prepared by the director of Suzhou Hongyang
based on the Underlying Financial Statements and in accordance with HKFRSs. For the purpose of
this report, we have examined the Financial Information of Suzhou Hongyang and carried out such
additional procedures as are necessary in accordance with Auditing Guideline 3.340 “Prospectuses
and the Reporting Accountant” issued by the HKICPA.


       The director of Suzhou Hongyang is responsible for the preparation of the Underlying
Financial Statements and the Financial Information which give a true and fair view. The director
of the Company is responsible for the contents of the Circular in which this report is included. In
preparing the Financial Information which gives a true and fair view, it is fundamental that
appropriate accounting policies are selected and applied consistently. It is our responsibility to
form an independent opinion, based on our examination, on the Financial Information and to
report our opinion to you.


      In our opinion, the Financial Information, for the purpose of this report, gives a true and fair
view of the state of affairs of Suzhou Hongyang as at 31 December 2004, 2005 and 2006, and 31
March 2007 and of the results and cash flows of Suzhou Hongyang for each of the Relevant
Periods.




                                               – 289 –
APPENDIX IV              FINANCIAL INFORMATION ON THE TARGET COMPANIES


        For the purpose of this report, we have reviewed the 31 March 2006 Corresponding
Information, which are prepared in accordance with accounting principles generally accepted in
Hong Kong and for which the director of Suzhou Hongyang is responsible, in accordance with
Statement of Auditing Standard 700 “Engagements to Review Interim Financial Reports” issued
by the HKICPA. Our review consists principally of making enquiries of management and applying
analytical procedures to the 31 March 2006 Corresponding Information and, based thereon assessing
whether the accounting policies and presentation have been consistently applied unless otherwise
disclosed. A review excludes audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit and therefore provides a
lower level of assurance than an audit. Accordingly we do not express an audit opinion on the 31
March 2006 Corresponding Information.


       For the purpose of this report and on the basis of our review which does not constitute an
audit, we are not aware of any material modifications that should be made to the unaudited 31
March 2006 Corresponding Information presented for the three months ended 31 March 2006.




                                               – 290 –
APPENDIX IV                 FINANCIAL INFORMATION ON THE TARGET COMPANIES


I.   FINANCIAL INFORMATION


     INCOME STATEMENTS


                                                                                       Three months
                                                     Year ended 31 December           ended 31 March
                                                    2004       2005        2006         2007        2006
                                         Notes   RMB’000    RMB’000    RMB’000      RMB’000     RMB’000
                                                                                              (unaudited)


     Revenue                              5         35,868     36,044     33,145       3,529        2,103
     Cost of sales                                 (29,557)   (30,666)   (33,138)     (5,003)      (3,097)


     Gross profit/(loss)                            6,311      5,378          7       (1,474)       (994)
     Other income                         5            52        131        466          274          46
     Selling and distribution costs                  (144)      (353)      (133)         (34)        (43)
     Administrative and other
       operating expenses                           (4,446)    (2,996)    (3,149)       (739)       (652)


     Operating profit/(loss)                        1,773      2,160      (2,809)     (1,973)      (1,643)
     Finance costs                        6             –          –        (113)        (17)         (33)


     Profit/(Loss) before income tax      7         1,773      2,160      (2,922)     (1,990)      (1,676)
     Income tax expense                   8          (687)      (731)          –           –            –


     Profit/(loss) for the year/period              1,086      1,429      (2,922)     (1,990)      (1,676)




                                                 – 291 –
APPENDIX IV              FINANCIAL INFORMATION ON THE TARGET COMPANIES


    BALANCE SHEETS

                                                                                      As at
                                                        As at 31 December         31 March
                                                   2004         2005      2006        2007
                                        Notes   RMB’000    RMB’000     RMB’000     RMB’000

    Non-current assets
    Property, plant and equipment        11          6,970    5,276      3,741        3,442

    Current assets
    Inventories                          12          9,459   12,177     19,545      21,262
    Other receivables and prepayments    13            475      363      1,246         905
    Amount due from a related company    14          1,660    6,863     14,179      14,964
    Cash and cash equivalents            15          4,968    1,023        357       1,217

                                                    16,562   20,426     35,327      38,348

    Current liabilities
    Trade and other payables             16          5,529    7,692     12,948      15,684
    Amount due to immediate
      holding company                    14          1,868      243      3,336        4,834
    Amount due to a related company      14              –        –      4,776        5,062
    Amount due to a director             14          2,059    2,249      5,112        5,304
    Bank borrowings                      17              –        –      1,000        1,000
    Tax payable                                        687      700          –            –

                                                    10,143   10,884     27,172      31,884

    Net current assets                               6,419    9,542      8,155        6,464

    Net assets                                      13,389   14,818     11,896        9,906


    EQUITY
    Equity attributable to the
      equity holders of Suzhou Hongyang
    Registered capital                  18          12,424   12,424     12,424      12,424
    Reserves                                           965    2,394       (528)     (2,518)

    Total equity                                    13,389   14,818     11,896        9,906




                                          – 292 –
APPENDIX IV               FINANCIAL INFORMATION ON THE TARGET COMPANIES


    CASH FLOW STATEMENTS

                                                                                        Three months
                                                       Year ended 31 December          ended 31 March
                                                      2004       2005        2006        2007        2006
                                           Notes   RMB’000    RMB’000    RMB’000     RMB’000     RMB’000
                                                                                               (unaudited)

    Cash flows from
      operating activities
    Profit/(Loss) before income tax                   1,773      2,160     (2,922)     (1,990)      (1,676)
    Adjustments for:
      Interest expenses                     6             –          –        113          17          33
      Interest income                       5            (8)       (13)        (9)         (1)         (2)
      Impairment of inventories             7            23      2,464        646         395           –
      Impairment of other receivables       7           285        119          –           –           –
      Loss on disposal of property,
         plant and equipment                7                –      48          –           –            –
      Depreciation of property,
         plant and equipment                7         2,225      2,106      1,595         309         446

    Operating profit/(loss) before
       working capital changes                         4,298      6,884      (577)     (1,270)      (1,199)
    Increase in inventories                           (2,523)    (5,182)   (8,014)     (2,112)      (6,557)
    (Increase)/Decrease in other
       receivables and prepayments                     (449)         (7)     (883)        341       (1,105)
    Decrease in amount due
       from immediate holding company                 3,323           –         –           –            –
    Increase in amount due from
       a related company                              (1,660)    (5,203)   (7,316)       (785)      (2,426)
    Increase in trade and other payables               1,164      2,163     5,256       2,736        6,715
    Increase/(Decrease) in amount due
       to immediate holding company                   1,868      (1,625)    3,093       1,498        1,774
    (Decrease)/Increase in amount due
       to a related company                              (23)         –     4,776         286            –
    (Decrease)/Increase in amount due
       to a director                                  (1,465)      190      2,863         192         625

    Cash generated from/(used in)
      operations                                      4,533      (2,780)     (802)        886       (2,173)
    Income tax paid                                       –        (718)     (700)          –         (700)

    Net cash generated from/(used in)
      operating activities                            4,533      (3,498)   (1,502)        886       (2,873)



                                                   – 293 –
APPENDIX IV               FINANCIAL INFORMATION ON THE TARGET COMPANIES


                                                                                         Three months
                                                        Year ended 31 December          ended 31 March
                                                       2004       2005        2006        2007        2006
                                            Notes   RMB’000    RMB’000    RMB’000     RMB’000     RMB’000
                                                                                                (unaudited)

    Cash flows from investing activities
    Purchases of property,
      plant and equipment                               (933)      (460)       (60)        (10)          (4)
    Interest received                                      8         13          9           1            2


    Net cash used in investing activities               (925)      (447)       (51)         (9)          (2)


    Cash flows from financing activities
    Interest paid                                             –        –      (113)        (17)         (33)
    Proceeds from borrowings                                  –        –     7,000           –        3,000
    Repayment of borrowings                                   –        –    (6,000)          –            –


    Net cash generated from/(used in)
      financing activities                                    –        –       887         (17)       2,967


    Net increase/(decrease) in cash and
      cash equivalents                                 3,608      (3,945)     (666)        860          92
    Cash and cash equivalents at
      beginning of year/period                         1,360      4,968      1,023         357        1,023


    Cash and cash equivalents at
      end of year/period                               4,968      1,023        357       1,217        1,115




                                                    – 294 –
APPENDIX IV             FINANCIAL INFORMATION ON THE TARGET COMPANIES


    STATEMENTS OF CHANGES IN EQUITY

                                                                      (Accumulated
                                                                            losses)/
                                                         Registered       Retained
                                                            capital        earnings    Total equity
                                                          RMB’000         RMB’000         RMB’000

    At 1 January 2004                                       12,424             (121)        12,303
    Profit for the year and total recognised income
      for the year                                               –            1,086          1,086

    At 31 December 2004 and 1 January 2005                  12,424              965         13,389
    Profit for the year and total recognised income
      for the year                                               –            1,429          1,429


    At 31 December 2005 and 1 January 2006                  12,424            2,394         14,818
    Loss for the year and total recognised expense
      for the year                                               –           (2,922)         (2,922)


    At 31 December 2006 and 1 January 2007                  12,424             (528)        11,896
    Loss for the period and total recognised expense
      for the period                                             –           (1,990)        (1,990)


    At 31 March 2007                                        12,424           (2,518)         9,906


    For the three months ended 31 March 2006 (Unaudited)

                                                         Registered        Retained
                                                            capital        earnings    Total equity
                                                          RMB’000          RMB’000        RMB’000

    At 1 January 2006                                       12,424            2,394         14,818
    Loss for the period and total recognised expense
      for the period                                             –           (1,676)        (1,676)


    At 31 March 2006                                        12,424              718         13,142




                                               – 295 –
APPENDIX IV                 FINANCIAL INFORMATION ON THE TARGET COMPANIES


II.   NOTES TO THE FINANCIAL INFORMATION AND THE 31 MARCH 2006
      CORRESPONDING INFORMATION


      1.    Basis of presentation


             The Financial Information and the 31 March 2006 Corresponding Information set out
      in this report have been prepared in accordance with all applicable HKFRSs, which include
      all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting
      Standards and Interpretations issued by the HKICPA and have been consistently applied
      throughout the Relevant Periods.


            The Financial Information and the 31 March 2006 Corresponding Information also
      comply with the applicable disclosure requirements of the Rules Governing the Listing of
      Securities on The Stock Exchange of Hong Kong Limited.


      2.    Adoption of new and amended HKFRSs


            Suzhou Hongyang has not early adopted the following HKFRSs that have been issued
      but are not yet effective. The directors of Suzhou Hongyang is currently assessing the
      impact of these HKFRSs but are not yet in a position to state whether they would have
      material financial impact on Suzhou Hongyang’s financial statements.


            HKAS 23 (Revised)                        Borrowing Costs1
            HKFRS 8                                  Operating Segments 1
            HK(IFRIC) – Int 11                       Group and Treasury Share Transactions2
            HK(IFRIC) – Int 12                       Service concession arrangements3

            Notes :

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




                                                     – 296 –
APPENDIX IV          FINANCIAL INFORMATION ON THE TARGET COMPANIES


    3.   Summary of significant accounting policies


         (a)   Basic of preparation


                The significant accounting policies that have been adopted in the preparation
         of the Financial Information and the 31 March 2006 Corresponding Information are
         summarised below. These policies have been consistently applied to all the years/
         periods presented unless otherwise stated. The Financial Information and the 31 March
         2006 Corresponding Information have been prepared on the historical cost basis.


                It should be noted that accounting estimates and assumptions are used in
         preparation of the Financial Information and the 31 March 2006 Corresponding
         Information. Although these estimates are based on management’s best knowledge
         and judgement of current events and actions, actual results may ultimately differ from
         those estimates. The areas involving a higher degree of judgement or complexity, or
         areas where assumptions and estimates are significant to the financial information,
         are disclosed in note 4.


         (b)   Revenue recognition


               Revenue comprises the fair value for the rendering of services. Provided it is
         probable that the economic benefits will flow to Suzhou Hongyang and the revenue
         can be measured reliably, revenue is recognised as follows:


               Subcontracting service income is recognised when services are rendered.


                Interest income is recognised on a time-proportion basis using the effective
         interest method.


         (c)   Borrowing costs


               All borrowing costs are recognised as and included in interest in the period in
         which they are incurred.




                                         – 297 –
APPENDIX IV         FINANCIAL INFORMATION ON THE TARGET COMPANIES


        (d)   Foreign currency translation


              The financial information of Suzhou Hongyang are presented in Renminbi
        (“RMB”), which is also the functional currency of Suzhou Hongyang. Foreign currency
        transactions are translated into the functional currency of Suzhou Hongyang using
        the exchange rates prevailing at the dates of the transactions. Foreign exchange gains
        and losses resulting from the settlement of such transactions and from the translation
        of monetary assets and liabilities denominated in foreign currencies at year-end
        exchange rates are recognised in the income statement. Non-monetary items that are
        measured in terms of historical cost in foreign currencies are not translated.


        (e)   Property, plant and equipment


              Measurement bases


                     Property, plant and equipment are stated at cost less accumulated
              depreciation and accumulated impairment losses. The cost of an item of property,
              plant and equipment comprises its purchase price and any directly attributable
              costs of bringing the asset to the working condition and location for its intended
              use.


                     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 Suzhou Hongyang and the cost of
              the item can be measured reliably. All other costs, such as repairs and
              maintenance, are charged to the income statement during the period in which
              they are incurred.


              Depreciation


                     Depreciation is provided to write off the cost of items of property, plant
              and equipment, over their estimated useful lives and after taking into account
              of their estimated residual value, using the straight-line method, as follows:


                                                                        Estimated useful lives


                     Furniture, fixtures and office equipment                           5 years
                     Motor vehicles                                                     5 years


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



                                        – 298 –
APPENDIX IV         FINANCIAL INFORMATION ON THE TARGET COMPANIES


              Gain or loss on disposal

                     An item of property, plant and equipment is derecognised upon disposal
              or when no future economic benefits are expected to arise from the continued
              use of the asset. Any gain or loss arising on derecognition of the asset (calculated
              as the difference between the net disposal proceeds and the carrying amount of
              the item) is included in the income statement in the period in which the item is
              derecognised.

              Impairment of non-financial assets

                     Property, plant and equipment are subject to impairment testing.

                     For the purposes of assessing impairment, where an asset does not
              generate cash flows largely independent from those from other assets, the
              recoverable amount is determined for the smallest group of assets that generated
              cash inflows independently (i.e. a cash-generating unit). As a result, some
              assets are tested individually for impairment and some are tested at cash-
              generating unit level.

                     An impairment loss is recognised as an expense immediately for the
              amount by which the asset’s carrying amount exceeds its recoverable amount.
              The recoverable amount is the higher of fair value, reflecting market conditions
              less costs to sell, and value in use. In assessing value in use, the estimated
              future cash flows are discounted to their present value using a pre-tax discount
              rate that reflects current market assessment of time value of money and the
              risk specific to the asset.

                     An impairment loss is reversed in subsequent periods if there has been a
              favourable change in the estimates used to determine the asset’s recoverable
              amount and only to the extent that the asset’s carrying amount does not exceed
              the carrying amount that would have been determined, net of depreciation or
              amortisation, if no impairment loss had been recognised.

        (f)   Leases

               An arrangement, comprising a transaction or a series of transactions, is or
        contains a lease if Suzhou Hongyang determines that the arrangement conveys a right
        to use a specific asset or assets for an agreed period of time in return for a payment
        or a series of payments. Such a determination is made based on an evaluation of the
        substance of the arrangement and is regardless of whether the arrangement takes the
        legal form of a lease. Leases which do not transfer substantially all the risks and
        rewards of ownership to Suzhou Hongyang are classified as operating leases.




                                         – 299 –
APPENDIX IV        FINANCIAL INFORMATION ON THE TARGET COMPANIES


              Operating lease charges as the lessee


                     Where Suzhou Hongyang has the right to use the assets held under
              operating leases, payments made under the leases are charged to the income
              statement on a straight line basis over the lease terms except where an alternative
              basis is more representative of the pattern of benefits to be derived from the
              leased assets. Lease incentives received are recognised in the income statement
              as an integral part of the aggregate net lease payments made. Contingent rental
              are charged to the income statement in the accounting period in which they are
              incurred.


        (g)   Financial assets


              The accounting policies for financial assets are set out below.


              Recognition and measurement


                    Suzhou Hongyang’s financial assets include other receivables and amount
              due from a related company. They are classified as loans and receivables.
              Management determines the classification of its financial assets at initial
              recognition depending on the purpose for which the financial assets were
              acquired.


                     All financial assets are recognised when, and only when, Suzhou
              Hongyang becomes a party to the contractual provisions of the instrument.
              When financial assets are recognised initially, they are measured at fair value
              plus directly attributable transaction costs.


                     Loans and receivables are non-derivative financial assets with fixed or
              determinable payments that are not quoted in an active market. They are
              subsequently measured at amortised cost using the effective interest method,
              less any impairment losses. Amortised cost is calculated taking into account
              any discount or premium on acquisition and includes fees that are an integral
              part of the effective interest rate and transaction cost.




                                         – 300 –
APPENDIX IV         FINANCIAL INFORMATION ON THE TARGET COMPANIES


              Derecognition


                     Derecognition of financial assets occurs when the rights to receive cash
              flows from the investments expire or are transferred and substantially all of the
              risks and rewards of ownership have been transferred.


              Impairment of financial assets


                    At each balance sheet date, financial assets other than at fair value
              through profit or loss are reviewed to determine whether there is any objective
              evidence of impairment. If any such evidence exists, the impairment loss is
              measured and recognised as follows:


                     For financial assets carried at amortised cost :


                     If there is objective evidence that an impairment loss on loans and
              receivables carried at amortised cost has been incurred, the amount of the loss
              is measured as the difference between the asset’s carrying amount and the
              present value of estimated future cash flows (excluding future credit losses that
              have not been incurred) discounted at the financial asset’s original effective
              interest rate (i.e. the effective interest rate computed at initial recognition).
              The amount of the loss is recognised in profit or loss of the period in which the
              impairment occurs.


                     If, in subsequent period, the amount of the impairment loss decreases
              and the decrease can be related objectively to an event occurring after the
              impairment was recognised, the previously recognised impairment loss is
              reversed to the extent that it does not result in a carrying amount of the financial
              asset exceeding what the amortised cost would have been had the impairment
              not been recognised at the date the impairment is reversed. The amount of the
              reversal is recognised in income statement in the period in which the reversal
              occurs.


        (h)   Inventories


               Inventories are stated at the lower of cost and net realisable value. Costs
        comprise direct materials and, where applicable, direct labour costs and those overheads
        that have been incurred in bringing the inventories to their present location and
        condition. Cost is calculated using the weighted average method. Net realisable value
        represents the estimated selling price in the ordinary course of business less all
        estimated costs of completion and applicable selling expenses.



                                         – 301 –
APPENDIX IV         FINANCIAL INFORMATION ON THE TARGET COMPANIES


        (i)   Cash and cash equivalents


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


        (j)   Financial liabilities


              Suzhou Hongyang’s financial liabilities include trade and other payables, amount
        due to immediate holding company, a related company and a director, and bank
        borrowings.


               Financial liabilities are recognised when Suzhou Hongyang becomes a party to
        the contractual provisions of the instrument. All interest related charges are recognised
        as an expense in finance costs in the income statement.


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


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


              Borrowings


                     Borrowings are recognised initially at fair value, net of transaction costs
              incurred. Borrowings are subsequently stated at amortised cost; any difference
              between the proceeds (net of transaction costs) and the redemption value is
              recognised in the income statement over the period of the borrowings using the
              effective interest method.


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


              Payables and other financial liabilities


                    Payables and other financial liabilities are recognised initially at fair
              value and subsequently measured at amortised cost using effective interest
              method.




                                         – 302 –
APPENDIX IV         FINANCIAL INFORMATION ON THE TARGET COMPANIES


        (k)   Accounting for income taxes


              Income tax comprises current tax and deferred tax.


               Current income tax assets and/or liabilities comprise those obligations to, or
        claims from, tax authorities relating to the current or prior reporting period, that are
        unpaid at the balance sheet date. They are calculated according to the tax rates and
        tax laws applicable to the fiscal periods to which they relate, based on the taxable
        profit for the year. All changes to current tax assets or liabilities are recognised as a
        component of tax expense in the income statement.


                Deferred tax is calculated using the liability method on temporary differences
        at the balance sheet date between the carrying amounts of assets and liabilities in the
        financial statements and their respective tax bases. Deferred tax liabilities are generally
        recognised for all taxable temporary differences. Deferred tax assets are recognised
        for all deductible temporary differences, tax losses available to be carried forward as
        well as other unused tax credits, to the extent that it is probable that taxable profit
        will be available against which the deductible temporary differences, unused tax
        losses and unused tax credits can be utilised.


                Deferred tax assets and liabilities are not recognised if the temporary difference
        arises from initial recognition (other than in a business combination) of assets and
        liabilities in a transaction that affects neither taxable nor accounting profit or loss.


              Deferred tax is calculated, without discounting, at tax rates that are expected to
        apply in the period the liability is settled or the asset realised, provided they are
        enacted or substantively enacted at the balance sheet date.


               Changes in deferred tax assets or liabilities are recognised in the income
        statement, or in equity if they relate to items that are charged or credited directly to
        equity.


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




                                          – 303 –
APPENDIX IV          FINANCIAL INFORMATION ON THE TARGET COMPANIES


        (l)     Retirement benefit costs


                Retirement benefits to employees are provided through a defined contribution
        plan.


               Suzhou Hongyang is required to participate in a central pension scheme operated
        by the local municipal government. Suzhou Hongyang is required to contribute certain
        percentage of its payroll costs to the central pension scheme. The contributions are
        charged to the income statement as they become payable in accordance with the rules
        of the central pension scheme. Suzhou Hongyang has no legal or constructive
        obligations to pay further contributions after payment of the fixed contribution.


        (m)     Provisions and contingent liabilities


               Provisions are recognised when Suzhou Hongyang has a present obligation
        (legal or constructive) as a result of a past event, and it is probable that an outflow of
        economic benefits will be required to settle the obligation and a reliable estimate can
        be made. When the time value of money is material, provisions are stated at the
        present value of the expenditure expected to settle the obligation.


               All provisions are reviewed at each balance sheet date and adjusted to reflect
        the current best estimate.


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




                                           – 304 –
APPENDIX IV           FINANCIAL INFORMATION ON THE TARGET COMPANIES


        (n)   Related parties


              For the purposes of these Financial Information and 31 March 2006
        Corresponding Information, parties are considered to be related to Suzhou Hongyang
        if:


              (i)     the party, directly, or indirectly through one or more intermediaries:


                      –      controls, is controlled by, or is under common control with, Suzhou
                             Hongyang;


                      –      has an interest in Suzhou Hongyang that gives it significant
                             influence over Suzhou Hongyang; or


                      –      has joint control over Suzhou Hongyang;


              (ii)    the party is an associate;


              (iii)   the party is a jointly controlled entity;


              (iv)    the party is a member of the key management personnel of Suzhou
                      Hongyang or its parent;


              (v)     the party is a close member of the family of any individual referred to in
                      (i) or (iv);


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


              (vii) the party is a post-employment benefit plan for the benefit of employees
                    of Suzhou Hongyang, or of any entity that is a related party of Suzhou
                    Hongyang.




                                          – 305 –
APPENDIX IV            FINANCIAL INFORMATION ON THE TARGET COMPANIES


    4.    Critical accounting estimates and judgements


          Estimates and judgements are continually evaluated and are based on historical
    experience and other factors, including expectations of future events that are believed to be
    reasonable under the circumstances.


           Suzhou Hongyang makes estimates and assumptions concerning the future. The
    resulting accounting estimates will, by definition, seldom equal to the related actual results.
    The estimates and assumptions that have a significant effect on the carrying amounts of
    assets and liabilities are discussed below:


          (i)     Impairment of assets


                 Property, plant and equipment are reviewed for impairment whenever events or
          changes in circumstance indicate that the carrying amount of the assets exceeds its
          recoverable amount. The recoverable amount of an asset or a cash-generating unit has
          been determined based on value-in-use calculations. These calculations require the
          use of estimates.


          (ii)    Impairment of receivables


                 Allowance for impairment of receivables is determined by management based
          on the credit history of its debtors and the current market condition. It could change
          significantly as a result of changes in the financial position of the debtors. Management
          would re-assess the amount of impairment allowance of receivables, if any, at each
          balance sheet date.


          (iii)   Impairment of inventories


                 In determining the amount of impairment required for obsolete and slow-moving
          inventories, management would compare the carrying value of the aged inventories to
          their respective net realisable values. A considerable amount of judgement is required
          in determining such impairment. If conditions which have impact on the net realisable
          value of inventories have deteriorated, additional impairment may be required.




                                            – 306 –
APPENDIX IV             FINANCIAL INFORMATION ON THE TARGET COMPANIES


    5.    Revenue and other income


          Revenue represents the total invoiced value of services rendered. An analysis of
    revenue and other income is as follows:


                                                                             Three months
                                             Year ended 31 December         ended 31 March
                                            2004       2005        2006       2007        2006
                                         RMB’000    RMB’000    RMB’000    RMB’000     RMB’000
                                                                                    (unaudited)


          Revenue
          Subcontracting income            35,868     36,044     33,145      3,529        2,103


          Other income
          Interest income                      8         13           9          1           2
          Exchange gain                        –         70         437         93          44
          Other income                        44         48          20        180           –


                                              52        131         466        274          46


    6.    Finance costs


                                                                             Three months
                                             Year ended 31 December         ended 31 March
                                            2004       2005        2006       2007        2006
                                         RMB’000    RMB’000    RMB’000    RMB’000     RMB’000
                                                                                    (unaudited)


          Interest charges on
            bank borrowings repayable
            within five years                     –       –         113         17          33




                                        – 307 –
APPENDIX IV             FINANCIAL INFORMATION ON THE TARGET COMPANIES


    7.   Profit/(loss) before income tax


                                                                                      Three months
                                                     Year ended 31 December          ended 31 March
                                                    2004       2005        2006        2007        2006
                                                 RMB’000    RMB’000    RMB’000     RMB’000     RMB’000
                                                                                             (unaudited)


         Profit/(loss) before income tax is
           arrived at after charging:


         Auditors’ remuneration                            6        6         6           –            –
         Cost of inventories recognised as
           expenses                                29,534      28,202    32,492       4,608        3,097
         Depreciation of property,
           plant and equipment                      2,225       2,106     1,595         309         446
         Exchange loss                                 85           –         –           –           –
         Loss on disposal of property,
           plant and equipment                             –       48         –           –            –
         Operating lease charges in respect of
           rented premises                            707         571       737         195         185
         Impairment of inventories                     23       2,464       646         395           –
         Impairment of other receivables              285         119         –           –           –


         Staff costs (including directors’
           emoluments and contributions to
           retirement benefit scheme) (note 9)     16,419      18,913    22,521       4,016        5,547
         Amount capitalised in inventories           (775)     (4,753)   (3,531)       (962)      (2,746)


         Amount charged to income statement        15,644      14,160    18,990       3,054        2,801




                                                 – 308 –
APPENDIX IV           FINANCIAL INFORMATION ON THE TARGET COMPANIES


    8.   Income tax expense

         (a)    Income tax in the income statement represents:

                                                                                       Three months
                                                      Year ended 31 December          ended 31 March
                                                     2004       2005        2006        2007        2006
                                                  RMB’000    RMB’000    RMB’000     RMB’000     RMB’000
                                                                                              (unaudited)

                Current tax
                  – PRC                                687       731           –           –            –


                Income tax in the PRC is calculated at the rates of income tax prevailing in the
         PRC.

         (b)    Reconciliation between income tax expense and accounting profit/(loss) at
                applicable tax rate is as follows:

                                                                                       Three months
                                                      Year ended 31 December          ended 31 March
                                                     2004       2005        2006        2007        2006
                                                  RMB’000    RMB’000    RMB’000     RMB’000     RMB’000
                                                                                              (unaudited)

                Profit/(loss) before income tax      1,773      2,160     (2,922)     (1,990)      (1,676)


                Tax on profit/(loss) before
                  income tax, calculated at
                  the statutory tax rate of 33%        585       713        (964)       (657)        (553)
                Tax effect of non-deductible
                  expenses                             128        67         240         139          12
                Tax effect of unused tax losses
                  not recognised                         –          –        724         518         541
                Others                                 (26)       (49)         –           –           –


                Income tax expense                     687       731           –           –            –


                Suzhou Hongyang has unused tax losses of approximately RMB1,640,000,
         RMB2,194,000 and RMB3,764,000 as at 31 March 2006, 31 December 2006 and 31
         March 2007, respectively available for offset against future profits. Deferred tax
         assets in respect of these tax losses are not recognised due to the unpredictability of
         future profit streams.


                                                  – 309 –
APPENDIX IV             FINANCIAL INFORMATION ON THE TARGET COMPANIES


    9.    Employee benefit expense (including directors’ emoluments)

                                                                                        Three months
                                                    Year ended 31 December             ended 31 March
                                                   2004       2005        2006           2007        2006
                                                RMB’000    RMB’000    RMB’000        RMB’000     RMB’000
                                                                                               (unaudited)
          Wages and salaries                       16,166      18,689       22,292      3,900        5,491
          Contribution to retirement scheme           136          81           92         23           23
          Other allowance                             117         143          137         93           33

                                                  16,419       18,913       22,521      4,016        5,547

    10.   Director’s remuneration and senior management’s emoluments
                                                           Contribution
                                              Salaries and to retirement            Other
                                               allowances         scheme       allowances         Total
                                                 RMB’000        RMB’000          RMB’000        RMB’000
          Year ended 31 December 2004
          Executive director
          Hsieh Tai-chun                                  96            –               6             102

          Total                                           96            –               6             102

          Year ended 31 December 2005
          Executive director
          Hsieh Tai-chun                                  96            –               6             102

          Total                                           96            –               6             102

          Year ended 31 December 2006
          Executive director
          Hsieh Tai-chun                                  99            –               6             105

          Total                                           99            –               6             105

          Three months ended
            31 March 2007
          Executive director
          Hsieh Tai-chun                                  27            –               2              29

          Total                                           27            –               2              29

          Three months ended
            31 March 2006 (Unaudited)
          Executive director
          Hsieh Tai-chun                                  24            –               1              25

          Total                                           24            –               1              25




                                                – 310 –
APPENDIX IV               FINANCIAL INFORMATION ON THE TARGET COMPANIES


         There was no arrangement under which a director waived or agreed to waive any
    remuneration during the Relevant Periods and the 31 March 2006 Corresponding Period.


           The five individuals whose emoluments were the highest in Suzhou Hongyang for the
    Relevant Periods and the 31 March 2006 Corresponding Period did not include any director
    whose emoluments have been reflected above. The emoluments payable to the five individuals
    are as follows:


                                                                                    Three months
                                                    Year ended 31 December         ended 31 March
                                                   2004       2005        2006       2007        2006
                                                RMB’000    RMB’000    RMB’000    RMB’000     RMB’000
                                                                                           (unaudited)


            Wages and salaries                       745       736         726        101         182
            Contribution to retirement scheme         23        25          28          7           6
            Other allowances                          84        86          71         13          17


                                                     852       847         825        121         205


            The number of highest paid individuals which fell within the following emolument
    band:


                                                                                    Three months
                                                    Year ended 31 December         ended 31 March
                                                   2004       2005        2006       2007        2006
                                                RMB’000    RMB’000    RMB’000    RMB’000     RMB’000
                                                                                           (unaudited)


            Nil to RMB1,000,000                           5      5           5          5           5


           During the Relevant Periods and the 31 March 2006 Corresponding Period, no
    emoluments were paid by Suzhou Hongyang to the five highest paid individuals and the
    director, as an inducement to join or upon joining Suzhou Hongyang or as compensation for
    loss of office.




                                                – 311 –
APPENDIX IV           FINANCIAL INFORMATION ON THE TARGET COMPANIES


    11.   Property, plant and equipment

                                                  Furniture,
                                                     fixtures
                                                   and office     Motor
                                                  equipment      vehicles     Total
                                                    RMB’000     RMB’000     RMB’000

          At 1 January 2004
          Cost                                        18,429       2,580      21,009
          Accumulated depreciation                   (11,421)     (1,326)    (12,747)

          Net carrying amount                          7,008       1,254      8,262


          Year ended 31 December 2004
          Opening net carrying amount                  7,008       1,254       8,262
          Additions                                      933           –         933
          Depreciation                                (1,991)       (234)     (2,225)

          Closing net carrying amount                  5,950       1,020      6,970


          At 31 December 2004
          Cost                                        19,362       2,580      21,942
          Accumulated depreciation                   (13,412)     (1,560)    (14,972)

          Net carrying amount                          5,950       1,020      6,970


          Year ended 31 December 2005
          Opening net carrying amount                  5,950       1,020       6,970
          Additions                                      460           –         460
          Disposals                                        –         (48)        (48)
          Depreciation                                (1,872)       (234)     (2,106)

          Closing net carrying amount                  4,538         738      5,276


          At 31 December 2005
          Cost                                        19,822       2,102      21,924
          Accumulated depreciation                   (15,284)     (1,364)    (16,648)

          Net carrying amount                          4,538         738      5,276




                                        – 312 –
APPENDIX IV         FINANCIAL INFORMATION ON THE TARGET COMPANIES


                                                Furniture,
                                                   fixtures
                                                 and office     Motor
                                                equipment      vehicles     Total
                                                  RMB’000     RMB’000     RMB’000

        Year ended 31 December 2006
        Opening net carrying amount                  4,538         738       5,276
        Additions                                       60           –          60
        Depreciation                                (1,361)       (234)     (1,595)


        Closing net carrying amount                  3,237         504      3,741


        At 31 December 2006
        Cost                                        19,882       2,102      21,984
        Accumulated depreciation                   (16,645)     (1,598)    (18,243)


        Net carrying amount                          3,237         504      3,741


        Three months ended 31 March 2007
        Opening net carrying amount                  3,237         504      3,741
        Additions                                       10           –         10
        Depreciation                                  (250)        (59)      (309)


        Closing net carrying amount                  2,997         445      3,442


        At 31 March 2007
        Cost                                        19,892       2,102      21,994
        Accumulated depreciation                   (16,895)     (1,657)    (18,552)


        Net carrying amount                          2,997         445      3,442




                                      – 313 –
APPENDIX IV               FINANCIAL INFORMATION ON THE TARGET COMPANIES


    12.   Inventories

                                                                                                                     As at
                                                                      As at 31 December                          31 March
                                                                 2004         2005      2006                         2007
                                                              RMB’000    RMB’000     RMB’000                      RMB’000

          Raw materials and consumables                                108           153               180                169
          Work in progress                                           9,351        12,024            19,365             21,093

                                                                     9,459        12,177            19,545             21,262


          The work-in-progress represents production and other direct costs in relation to the
    production of animations.

    13.   Other receivables and prepayments

                                                                                                                     As at
                                                                             As at 31 December                   31 March
                                                                 2004                2005      2006                  2007
                                                              RMB’000           RMB’000     RMB’000               RMB’000

          Other receivables                                           475                363            441              295
          Prepayments                                                   –                  –            805              610

                                                                      475                363         1,246               905


    14.   Amounts due from/(to) immediate holding company/related companies/a director

           The related companies are companies under common control of the ultimate beneficial
    owner of Suzhou Hongyang. The amount due to immediate holding company was trade
    receipts in advance. The amounts due from/to related company and due to a director were
    non-trade related.

          The amounts were unsecured, interest-free and repayable on demand.

          The maximum amount outstanding during the Relevant Periods of the amount due
    from a related company are:–

                                           As at 1         As at 31         As at 31         As at 31            As at
                                          January Maximum December Maximum December Maximum December Maximum 31 March
                                             2004 balance     2004 balance     2005 balance     2006 balance     2007
                                         RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


           (Shanghai Sanding Animation
           Creation Company Limited)         (23)   3,772    1,660     6,919     6,863     14,823   14,179    15,622    14,964



                                                     – 314 –
APPENDIX IV           FINANCIAL INFORMATION ON THE TARGET COMPANIES


    15.   Cash and cash equivalents


          Cash at bank earns interest at floating rates based on daily bank deposit rates.


          As at 31 December 2004, 2005, 2006 and 31 March 2007, the cash and bank balances
    of Suzhou Hongyang denominated in Renminbi (“RMB”) amounted to RMB4,409,000,
    RMB1,021,000, RMB351,000 and RMB634,000 respectively. RMB is not freely convertible
    into foreign currencies. Under the PRC Foreign Exchange Control Regulations and
    Administration of Settlement, Sales and Payment of Foreign Exchange Regulations, Suzhou
    Hongyang is permitted to exchange RMB for foreign currencies through banks that are
    authorised to conduct foreign exchange business.


    16.   Trade and other payables


                                                                                            As at
                                                           As at 31 December            31 March
                                                      2004         2005      2006           2007
                                                   RMB’000    RMB’000     RMB’000        RMB’000


          Trade payables                                 291      1,318        1,397            948
          Advanced receipts from customers             2,304      3,045        8,519         11,484
          Other payables                               1,183      1,347        1,395          1,828
          Accruals                                     1,751      1,982        1,637          1,424


                                                       5,529      7,692       12,948         15,684


           As at 31 December 2004, 2005, 2006 and 31 March 2007, the ageing analysis of the
    trade payables was as follows:


                                                                                            As at
                                                           As at 31 December            31 March
                                                      2004         2005      2006           2007
                                                   RMB’000    RMB’000     RMB’000        RMB’000


          0 – 30 days                                   180         574          375           572
          31 – 60 days                                   24         376          304            46
          61 – 90 days                                    –          92           71            37
          Over 90 days                                   87         276          647           293


                                                        291       1,318        1,397           948



                                             – 315 –
APPENDIX IV            FINANCIAL INFORMATION ON THE TARGET COMPANIES


    17.   Bank borrowings


                                                                                         As at
                                                            As at 31 December        31 March
                                                       2004         2005      2006       2007
                                                    RMB’000    RMB’000     RMB’000    RMB’000


          Bank loans                                        –        –       1,000      1,000


          As at 31 December 2006 and 31 March 2007, the bank borrowings were secured by
    personal property of the director, interest bearing at 6.975% per annum and repayable
    within a year.


    18.   Registered capital


                                                                                         As at
                                                            As at 31 December        31 March
                                                       2004         2005      2006       2007
                                                    RMB’000    RMB’000     RMB’000    RMB’000


          Registered and paid-up capital of
            USD1,500,000                                12,424   12,424     12,424      12,424


    19.   Operating lease commitments


          At the respective balance sheet dates, the total future minimum lease payments under
    non-cancellable operating lease payable by Suzhou Hongyang are as follows:


                                                                                         As at
                                                            As at 31 December        31 March
                                                       2004         2005      2006       2007
                                                    RMB’000    RMB’000     RMB’000    RMB’000


          Within one year                                 780      780         130       1,382
          In the second to fifth years                    910      130           –       2,650


                                                         1,690     910         130       4,032


          Suzhou Hongyang leases a property under an operating lease. The lease runs for a
    period of three years and does not include contingent rentals.



                                              – 316 –
APPENDIX IV           FINANCIAL INFORMATION ON THE TARGET COMPANIES


    20.   Contingent liabilities


          On 12 December 2006, the related company of Suzhou Hongyang,
                  (Nanjing Hong Ying Anime Entertainment Co., Limited) entered into an
    agreement with                                 for the production of an animation. Suzhou
    Hongyang has provided a guarantee on the liabilities that may arise if
                (Nanjing Hong Ying Anime Entertainment Co., Limited) is in breach of the
    agreement. As at 31 December 2006 and 31 March 2007, no provision for Suzhou Hongyang’s
    obligation has been made as the director considered that it was not probable that
                         (Nanjing Hong Ying Anime Entertainment Co., Limited) will be in
    breach of the agreement.


    21.   Financial risk management objectives and policies


          Suzhou Hongyang does not have written financial risk management policies and
    guidelines. However, the director periodically analyses and formulates measures to manage
    Suzhou Hongyang’s exposure to market risk, including principally changes in interest rates
    and currency exchange rates. Generally, Suzhou Hongyang employs a conservative strategy
    regarding its risk management.


          (a)   Interest rate risk


                 Suzhou Hongyang’s interest rate risk relates primarily to bank balances and
          bank borrowings. Suzhou Hongyang has not used any derivative contracts to hedge its
          exposure in interest rate risk. However, management monitors interest rate exposure
          closely. Details of Suzhou Hongyang’s bank borrowings have been disclosed in note
          17.


          (b)   Credit risk


                 Suzhou Hongyang’s maximum exposure to credit risk in the event of the
          counterparties failure to perform their obligations in relation to each class of recognised
          financial assets is the carrying amount of those assets as stated in the balance sheets.
          In order to minimise the credit risk, the management has monitored the credit status
          of customers and performed necessary procedures to ensure that follow-up action is
          taken to recover overdue debts. In addition, the management reviews the recoverable
          amount of each individual trade debt at each balance sheet date to ensure that adequate
          impairment losses are made for irrecoverable amounts. In this regard, the directors
          consider that Suzhou Hongyang’s exposure to bad debts is minimal.


                Suzhou Hongyang is not exposed to concentration of credit risk.



                                            – 317 –
APPENDIX IV           FINANCIAL INFORMATION ON THE TARGET COMPANIES


          (c)    Foreign currency risk

                Suzhou Hongyang is not exposed to significant foreign currency risk since
          most of its business operations are transacted in RMB.

          (d)    Liquidity risk

                 Liquidity risk arises in the general funding of Suzhou Hongyang’s operating
          activities. It includes the risk of not being able to fund the operating activities at
          settlement dates and liquidate positions in a timely manner at a reasonable price.
          Suzhou Hongyang has no significant exposure to liquidity risk. Short-term fundings
          will be obtained from financial institutions, when required.

          (e)    Fair value

                The fair value of Suzhou Hongyang’s financial assets and liabilities are not
          materiality different from their carrying amounts because of the immediate or short
          term maturity.

    22.   Related party transactions

         Except as disclosed elsewhere in this report, details of transactions between Suzhou
    Hongyang and related parties are set out below:

                                                                                 Three         Three
                                                                                months       months
                                                                                 ended         ended
                                               Years ended 31 December        31 March     31 March
                                              2004        2005       2006         2007          2006
                                           RMB’000    RMB’000     RMB’000      RMB’000      RMB’000
                                                                                          (unaudited)

          Subcontracting income from
            immediate holding company        35,623     27,233      22,366       3,529             –
          Subcontracting fee to a
            related company                  (5,202)     (3,394)    (1,675)       (658)         (134)


          The related company is a company under common control of the ultimate beneficial
    owner of Suzhou Hongyang. The related party transactions were conducted in the normal
    course of business at prices and terms agreed between the parties.

           The director considered he is the key management of Suzhou Hongyang. Details of
    his remuneration are set out in note 10.




                                          – 318 –
APPENDIX IV           FINANCIAL INFORMATION ON THE TARGET COMPANIES


    23.   Segment information


           No separate analysis of segment information by business or geographical segments is
    presented as Suzhou Hongyang’s sole business is the production of animation. Suzhou
    Hongyang’s revenue, expenses, results, assets, liabilities and capital expenditure are
    principally attributable to a single geographical region, which is the PRC.


    24.   Subsequent events


          No significant event has taken place subsequent to 31 March 2007.


    25.   Subsequent financial statements


          No audited financial statements have been prepared for Suzhou Hongyang in respect
    of any period subsequent to 31 March 2007.


                                                               Yours faithfully,




                                                               Grant Thornton
                                                         Certified Public Accountants
                                                                  Hong Kong




                                          – 319 –
      APPENDIX IV                      FINANCIAL INFORMATION ON THE TARGET COMPANIES


      2.       NANJING HONGYING ANMIE-CARTOON ENTERTAINMENT COMPANY
               LIMITED


            The following is the text of the accountants’ report dated 31 August 2007 from Grant
      Thornton, Certified Public Accountants, prepared for Nanjing Hongying Anmie-cartoon
      Entertainment Company Limited as extracted from the Previous Circular.




                                                                                    31 August 2007     A1B


      The Directors
      Jade Dynasty Group Limited
      11/F, Safety Godown Industrial Building
      56 Ka Yip Street
      Chai Wan
      Hong Kong


      Dear Sirs,
YSL




             We set out below our report on the financial information of
      (Nanjing Hongying Anmie-cartoon Entertainment Company Limited #, “Nanjing Hongying”) in
      Sections I and II below, including the balance sheets of Nanjing Hongying as at 31 December
      2006 and 31 March 2007, income statements, cash flow statements and statements of changes in
      equity for the period from 23 March 2006 (date of establishment) to 31 December 2006 and the
      three months ended 31 March 2007 (the “Relevant Periods”) and notes thereto, prepared for
      inclusion in the circular (the “Circular”) dated 31 August 2007 issued by Jade Dynasty Group
      Limited (the “Company”) in connection with the acquisition of the entire registered capital of
      Nanjing Hongying by the Company (the “Acquisition”).


             Nanjing Hongying is a domestic enterprise established in the People’s Republic of China
      (the “PRC”) with a registered capital of RMB10,000,000 for a period of 10 years on 23 March
      2006. The address of Nanjing Hongying’s registered office and principal place of business is
      3-4/F., Yanfa Building, No. 2 Lijing Road, Gaoxin Development Area, Nanjing City, Jiangsu, the
      PRC. Nanjing Hongying is principally engaged in the production of various types of animation.




      #    The unofficial English translation is for identification purpose only



                                                                 – 320 –
APPENDIX IV               FINANCIAL INFORMATION ON THE TARGET COMPANIES


       The financial statements of Nanjing Hongying were prepared in accordance with the relevant
accounting rules and regulations applicable to enterprises in the PRC. Nanjing Hongying has
adopted 31 December as its financial year-end date. The financial statements of Nanjing Hongying
for the period from 23 March 2006 (date of establishment) to 31 December 2006 and for the three
months ended 31 March 2007 have not been audited.


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


       The financial information and the notes thereto for the Relevant Periods (the “Financial
Information”) as set out in this report has been prepared by the directors of Nanjing Hongying
based on the Underlying Financial Statements and in accordance with HKFRSs. For the purpose of
this report, we have examined the Financial Information of Nanjing Hongying and carried out such
additional procedures as are necessary in accordance with Auditing Guideline 3.340 “Prospectuses
and the Reporting Accountant” issued by the HKICPA.


       The directors of Nanjing Hongying are responsible for the preparation of the Underlying
Financial Statements and the Financial Information which give a true and fair view. The directors
of the Company are responsible for the contents of the Circular in which this report is included. In
preparing the Financial Information which gives a true and fair view, it is fundamental that
appropriate accounting policies are selected and applied consistently. It is our responsibility to
form an independent opinion, based on our examination, on the Financial Information and to
report our opinion to you.


       In our opinion, the Financial Information, for the purpose of this report, gives a true and fair
view of the state of affairs of Nanjing Hongying as at 31 December 2006 and 31 March 2007 and
of the results and cash flows of Nanjing Hongying for each of the Relevant Periods.




                                               – 321 –
APPENDIX IV           FINANCIAL INFORMATION ON THE TARGET COMPANIES


I.   FINANCIAL INFORMATION


     INCOME STATEMENTS


                                                   Period from     Three months
                                              23 March 2006 to            ended
                                             31 December 2006     31 March 2007
                                     Notes            RMB’000          RMB’000


     Revenue                           5                     1            2,632
     Cost of sales                                         (15)          (2,656)


     Gross loss                                            (14)             (24)
     Other income                      5                    73               15
     Administrative and
       other operating expenses                         (1,912)            (259)


     Loss before income tax            6                (1,853)            (268)
     Income tax expense                7                     –                –


     Loss for the period                                (1,853)            (268)




                                  – 322 –
APPENDIX IV            FINANCIAL INFORMATION ON THE TARGET COMPANIES


    BALANCE SHEETS


                                                              As at        As at
                                                       31 December     31 March
                                                              2006         2007
                                               Notes       RMB’000      RMB’000


    Non-current assets
    Property, plant and equipment                10           1,114        1,060


    Current assets
    Inventories                                  11           3,019        1,531
    Trade and other receivables                  12               7        1,113
    Amount due from a related company            13           4,776        5,062
    Cash and cash equivalents                    14             917        1,578


                                                              8,719        9,284


    Current liabilities
    Other payables and accruals                  15            667         1,243
    Amount due to a related company              13             74           223


                                                               741         1,466


    Net current assets                                        7,978        7,818


    Total assets less current liabilities                     9,092        8,878


    Non-current liabilities
    Other payables and accruals                  15            945          999


    Net assets                                                8,147        7,879


    EQUITY
    Equity attributable to the equity
      holders of Nanjing Hongying
    Registered capital                           16          10,000       10,000
    Reserves                                                 (1,853)      (2,121)


    Total equity                                              8,147        7,879


                                            – 323 –
APPENDIX IV           FINANCIAL INFORMATION ON THE TARGET COMPANIES


    CASH FLOW STATEMENTS

                                                             Period from     Three months
                                                        23 March 2006 to            ended
                                                       31 December 2006     31 March 2007
                                               Notes            RMB’000          RMB’000

    Cash flows from operating activities
    Loss before income tax                                        (1,853)            (268)
    Adjustments for:
      Interest income                            5                   (23)              (2)
      Amortisation of government grants          5                   (50)             (13)
      Depreciation of property,
        plant and equipment                      6                  129                56
      Operating lease charges in respect
        of rented premises                       6                  245                67

    Operating loss before working
       capital changes                                            (1,552)            (160)
    (Increase)/Decrease in inventories                            (3,019)           1,488
    Increase in trade and other receivables                           (7)          (1,106)
    Increase in amount due from
       a related company                                          (4,776)            (286)
    Increase in other payables and accruals                          667              576
    Increase in amount due to
       a related company                                             74               149

    Cash (used in)/generated from operations                      (8,613)             661

    Cash flows from investing activities
    Purchases of property, plant and equipment                    (1,243)              (2)
    Interest received                                                 23                2

    Net cash used in investing activities                         (1,220)               –

    Cash flows from financing activities
    Proceeds from capital contribution                            10,000                –
    Proceeds from government grants                                  750                –

    Net cash generated from financing activities                  10,750                –

    Net increase in cash and cash equivalents                       917               661
    Cash and cash equivalents
      at beginning of period                                           –              917

    Cash and cash equivalents at end of period                      917             1,578



                                            – 324 –
APPENDIX IV         FINANCIAL INFORMATION ON THE TARGET COMPANIES


    STATEMENTS OF CHANGES IN EQUITY


                                                 Registered       Accumulated       Total
                                                    capital            losses      equity
                                                  RMB’000            RMB’000     RMB’000


    At 23 March 2006 (Date of establishment)                  –             –           –
    Capital contribution                            10,000                  –      10,000
    Loss for the period and total recognised
      expense for the period                             –             (1,853)     (1,853)


    At 31 December 2006 and 1 January 2007          10,000             (1,853)      8,147
    Loss for the period and total recognised
      expense for the period                             –               (268)       (268)


    At 31 March 2007                                10,000             (2,121)      7,879




                                       – 325 –
APPENDIX IV                 FINANCIAL INFORMATION ON THE TARGET COMPANIES


II.   NOTES TO THE FINANCIAL INFORMATION


      1.    Basis of presentation


            The Financial Information set out in this report has been prepared in accordance with
      all applicable HKFRSs, which include all applicable individual Hong Kong Financial
      Reporting Standards, Hong Kong Accounting Standards and Interpretations issued by the
      HKICPA and have been consistently applied throughout the Relevant Periods.


             The Financial Information also complies with the applicable disclosure requirements
      of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong
      Limited.


      2.    Adoption of new and amended HKFRSs


            Nanjing Hongying has not early adopted the following HKFRSs that have been issued
      but are not yet effective. The directors of Nanjing Hongying are currently assessing the
      impact of these HKFRSs but are not yet in a position to state whether they would have
      material financial impact on Nanjing Hongying’s financial statements.


            HKAS 23 (Revised)                        Borrowing Costs1
            HKFRS 8                                  Operating Segments 1
            HK(IFRIC) – Int 11                       Group and Treasury Share Transactions2
            HK(IFRIC) – Int 12                       Service concession arrangements3

            Notes :

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


      3.    Summary of significant accounting policies


            (a)       Basic of preparation


                   The significant accounting policies that have been adopted in the preparation
            of the Financial Information are summarised below. These policies have been
            consistently applied to all the periods presented unless otherwise stated. The Financial
            Information have been prepared on the historical cost basis.




                                                     – 326 –
APPENDIX IV         FINANCIAL INFORMATION ON THE TARGET COMPANIES


              The unaudited comparative figures for the period from 23 March 2006 (date of
        establishment) to 31 March 2006 consisted of paid up registered capital of
        RMB10,000,000 and cash and bank balance of RMB10,000,000.


               It should be noted that accounting estimates and assumptions are used in
        preparation of the Financial Information. Although these estimates are based on
        management’s best knowledge and judgement of current events and actions, actual
        results may ultimately differ from those estimates. The areas involving a higher
        degree of judgement or complexity, or areas where assumptions and estimates are
        significant to the Financial Information, are disclosed in note 4.


        (b)   Revenue recognition


               Revenue comprises the fair value for the rendering of services and the use by
        others of Nanjing Hongying’s assets yielding royalties. Provided it is probable that
        the economic benefits will flow to Nanjing Hongying and the revenue can be measured
        reliably, revenue is recognised as follows:


              Subcontracting service income is recognised when services are rendered.


              Royalty income is recognised on a basis in accordance with the terms of the
        relevant agreements.


               Interest income is recognised on a time-proportion basis using the effective
        interest method.


        (c)   Foreign currency translation


              The Financial Information of Nanjing Hongying are presented in Renminbi
        (“RMB”), which is also the functional currency of Nanjing Hongying. Foreign currency
        transactions are translated into the functional currency of Nanjing Hongying using
        the exchange rates prevailing at the dates of the transactions. Foreign exchange gains
        and losses resulting from the settlement of such transactions and from the translation
        of monetary assets and liabilities denominated in foreign currencies at year-end
        exchange rates are recognised in the income statement. Non-monetary items that are
        measured in terms of historical cost in foreign currencies are not translated.




                                        – 327 –
APPENDIX IV        FINANCIAL INFORMATION ON THE TARGET COMPANIES


        (d)   Property, plant and equipment


              Measurement bases


                     Property, plant and equipment are stated at cost less accumulated
              depreciation and accumulated impairment losses. The cost of an item of property,
              plant and equipment comprises its purchase price and any directly attributable
              costs of bringing the asset to the working condition and location for its intended
              use.


                     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 Nanjing Hongying and the cost
              of the item can be measured reliably. All other costs, such as repairs and
              maintenance, are charged to the income statement during the period in which
              they are incurred.


              Depreciation


                     Depreciation is provided to write off the cost of items of property, plant
              and equipment, over their estimated useful lives and after taking into account
              of their estimated residual value, using the straight-line method, as follows:


                                                                         Estimated useful lives


                     Furniture, fixtures and office equipment                             5 years
                     Motor vehicles                                                       5 years


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


              Gain or loss on disposal


                     An item of property, plant and equipment is derecognised upon disposal
              or when no future economic benefits are expected to arise from the continued
              use of the asset. Any gain or loss arising on derecognition of the asset (calculated
              as the difference between the net disposal proceeds and the carrying amount of
              the item) is included in the income statement in the period in which the item is
              derecognised.




                                         – 328 –
APPENDIX IV         FINANCIAL INFORMATION ON THE TARGET COMPANIES


        (e)   Impairment of non-financial assets


              Property, plant and equipment are subject to impairment testing.


               For the purposes of assessing impairment, where an asset does not generate
        cash flows largely independent from those from other assets, the recoverable amount
        is determined for the smallest group of assets that generated cash inflows independently
        (i.e. a cash-generating unit). As a result, some assets are tested individually for
        impairment and some are tested at cash-generating unit level.


               An impairment loss is recognised as an expense immediately for the amount by
        which the asset’s carrying amount exceeds its recoverable amount. The recoverable
        amount is the higher of fair value, reflecting market conditions less costs to sell, and
        value in use. In assessing value in use, the estimated future cash flows are discounted
        to their present value using a pre-tax discount rate that reflects current market
        assessment of time value of money and the risk specific to the asset.


              An impairment loss is reversed in subsequent periods if there has been a
        favourable change in the estimates used to determine the asset’s recoverable amount
        and only to the extent that the asset’s carrying amount does not exceed the carrying
        amount that would have been determined, net of depreciation or amortisation, if no
        impairment loss had been recognised.


        (f)   Leases


               An arrangement, comprising a transaction or a series of transactions, is or
        contains a lease if Nanjing Hongying determines that the arrangement conveys a right
        to use a specific asset or assets for an agreed period of time in return for a payment
        or a series of payments. Such a determination is made based on an evaluation of the
        substance of the arrangement and is regardless of whether the arrangement takes the
        legal form of a lease. Leases which do not transfer substantially all the risks and
        rewards of ownership to Nanjing Hongying are classified as operating leases.




                                         – 329 –
APPENDIX IV        FINANCIAL INFORMATION ON THE TARGET COMPANIES


              Operating lease charges as the lessee


                     Where Nanjing Hongying has the right to use the assets held under
              operating leases, payments made under the leases are charged to the income
              statement on a straight line basis over the lease terms except where an alternative
              basis is more representative of the pattern of benefits to be derived from the
              leased assets. Lease incentives received are recognised in the income statement
              as an integral part of the aggregate net lease payments made. Contingent rental
              are charged to the income statement in the accounting period in which they are
              incurred.


        (g)   Financial assets


              The accounting policies for financial assets are set out below.


              Recognition and measurement


                      Nanjing Hongying’s financial assets include trade and other receivables
              and amount due from a related company. They are classified as loans and
              receivables. Management determines the classification of its financial assets at
              initial recognition depending on the purpose for which the financial assets
              were acquired.


                     All financial assets are recognised when, and only when, Nanjing
              Hongying becomes a party to the contractual provisions of the instrument.
              When financial assets are recognised initially, they are measured at fair value
              plus directly attributable transaction costs.


                     Loans and receivables are non-derivative financial assets with fixed or
              determinable payments that are not quoted in an active market. They are
              subsequently measured at amortised cost using the effective interest method,
              less any impairment losses. Amortised cost is calculated taking into account
              any discount or premium on acquisition and includes fees that are an integral
              part of the effective interest rate and transaction cost.




                                         – 330 –
APPENDIX IV         FINANCIAL INFORMATION ON THE TARGET COMPANIES


              Derecognition


                     Derecognition of financial assets occurs when the rights to receive cash
              flows from the investments expire or are transferred and substantially all of the
              risks and rewards of ownership have been transferred.


              Impairment of financial assets


                    At each balance sheet date, financial assets other than at fair value
              through profit or loss are reviewed to determine whether there is any objective
              evidence of impairment. If any such evidence exists, the impairment loss is
              measured and recognised as follows:


                     For financial assets carried at amortised cost:


                            If there is objective evidence that an impairment loss on loans
                     and receivables carried at amortised cost has been incurred, the amount
                     of the loss is measured as the difference between the asset’s carrying
                     amount and the present value of estimated future cash flows (excluding
                     future credit losses that have not been incurred) discounted at the financial
                     asset’s original effective interest rate (i.e. the effective interest rate
                     computed at initial recognition). The amount of the loss is recognised in
                     income statement of the period in which the impairment occurs.


                            If, in subsequent period, the amount of the impairment loss
                     decreases and the decrease can be related objectively to an event occurring
                     after the impairment was recognised, the previously recognised
                     impairment loss is reversed to the extent that it does not result in a
                     carrying amount of the financial asset exceeding what the amortised
                     cost would have been had the impairment not been recognised at the
                     date the impairment is reversed. The amount of the reversal is recognised
                     in income statement in the period in which the reversal occurs.


        (h)   Inventories


               Inventories are stated at the lower of cost and net realisable value. Costs
        comprise direct materials and, where applicable, direct labour costs and those overheads
        that have been incurred in bringing the inventories to their present location and
        condition. Cost is calculated using the weighted average method. Net realisable value
        represents the estimated selling price in the ordinary course of business less all
        estimated costs of completion and applicable selling expenses.



                                         – 331 –
APPENDIX IV         FINANCIAL INFORMATION ON THE TARGET COMPANIES


        (i)   Cash and cash equivalents


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


        (j)   Financial liabilities


               Nanjing Hongying’s financial liabilities include other payables and amount
        due to a related company. They are recognised initially at fair value and subsequently
        measured at amortised cost using effective interest method.


               Financial liabilities are recognised when Nanjing Hongying becomes a party to
        the contractual provisions of the instrument. All interest related charges are recognised
        as an expense in finance costs in the income statement.


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


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


        (k)   Accounting for income taxes


              Income tax comprises current tax and deferred tax.


               Current income tax assets and/or liabilities comprise those obligations to, or
        claims from, tax authorities relating to the current or prior reporting period, that are
        unpaid at the balance sheet date. They are calculated according to the tax rates and
        tax laws applicable to the fiscal periods to which they relate, based on the taxable
        profit for the year. All changes to current tax assets or liabilities are recognised as a
        component of tax expense in the income statement.




                                         – 332 –
APPENDIX IV          FINANCIAL INFORMATION ON THE TARGET COMPANIES


                Deferred tax is calculated using the liability method on temporary differences
        at the balance sheet date between the carrying amounts of assets and liabilities in the
        financial statements and their respective tax bases. Deferred tax liabilities are generally
        recognised for all taxable temporary differences. Deferred tax assets are recognised
        for all deductible temporary differences, tax losses available to be carried forward as
        well as other unused tax credits, to the extent that it is probable that taxable profit
        will be available against which the deductible temporary differences, unused tax
        losses and unused tax credits can be utilised.


                Deferred tax assets and liabilities are not recognised if the temporary difference
        arises from initial recognition (other than in a business combination) of assets and
        liabilities in a transaction that affects neither taxable nor accounting profit or loss.


              Deferred tax is calculated, without discounting, at tax rates that are expected to
        apply in the period the liability is settled or the asset realised, provided they are
        enacted or substantively enacted at the balance sheet date.


               Changes in deferred tax assets or liabilities are recognised in the income
        statement, or in equity if they relate to items that are charged or credited directly to
        equity.


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


        (l)     Retirement benefit costs


                Retirement benefits to employees are provided through a defined contribution
        plan.


               Nanjing Hongying is required to participate in a central pension scheme operated
        by the local municipal government. Nanjing Hongying is required to contribute certain
        percentage of its payroll costs to the central pension scheme. The contributions are
        charged to the income statement as they become payable in accordance with the rules
        of the central pension scheme. Nanjing Hongying has no legal or constructive
        obligations to pay further contributions after payment of the fixed contribution.




                                           – 333 –
APPENDIX IV         FINANCIAL INFORMATION ON THE TARGET COMPANIES


        (m)   Provisions and contingent liabilities


               Provisions are recognised when Nanjing Hongying has a present obligation
        (legal or constructive) as a result of a past event, and it is probable that an outflow of
        economic benefits will be required to settle the obligation and a reliable estimate can
        be made. When the time value of money is material, provisions are stated at the
        present value of the expenditure expected to settle the obligation.


               All provisions are reviewed at each balance sheet date and adjusted to reflect
        the current best estimate.


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


        (n)   Government grants


               Grants from the government are recognised at their fair value where there is a
        reasonable assurance that the grants will be received and Nanjing Hongying will
        comply with all attached conditions. Government grants relating to costs are deferred
        and recognised in the income statement over the period necessary to match them with
        the costs that they are intended to compensate. Government grants relating to the
        business development of Nanjing Hongying are included in non-current liabilities as
        deferred government grants and are recognised in the income statement on a straight
        line basis over the expected investment period of 15 years of Nanjing Hongying in
                                  .




                                          – 334 –
APPENDIX IV           FINANCIAL INFORMATION ON THE TARGET COMPANIES


        (o)   Related parties


               For the purposes of these Financial Information, parties are considered to be
        related to Nanjing Hongying if:


              (i)     the party, directly, or indirectly through one or more intermediaries:


                      –      controls, is controlled by, or is under common control with,
                             Nanjing Hongying;


                      –      has an interest in Nanjing Hongying that gives it significant
                             influence over Nanjing Hongying; or


                      –      has joint control over Nanjing Hongying;


              (ii)    the party is an associate;


              (iii)   the party is a jointly controlled entity;


              (iv)    the party is a member of the key management personnel of Nanjing
                      Hongying or its parent;


              (v)     the party is a close member of the family of any individual referred to in
                      (i) or (iv);


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


              (vii) the party is a post-employment benefit plan for the benefit of employees
                    of Nanjing Hongying, or of any entity that is a related party of Nanjing
                    Hongying.




                                          – 335 –
APPENDIX IV            FINANCIAL INFORMATION ON THE TARGET COMPANIES


    4.    Critical accounting estimates and judgements


          Estimates and judgements are continually evaluated and are based on historical
    experience and other factors, including expectations of future events that are believed to be
    reasonable under the circumstances.


           Nanjing Hongying makes estimates and assumptions concerning the future. The
    resulting accounting estimates will, by definition, seldom equal to the related actual results.
    The estimates and assumptions that have a significant effect on the carrying amounts of
    assets and liabilities are discussed below:


          (i)     Impairment of assets


                 Property, plant and equipment are reviewed for impairment whenever events or
          changes in circumstance indicate that the carrying amount of the assets exceeds its
          recoverable amount. The recoverable amount of an asset or a cash-generating unit has
          been determined based on value-in-use calculations. These calculations require the
          use of estimates.


          (ii)    Impairment of receivables


                 Allowance for impairment of receivables is determined by management based
          on the credit history of its debtors and the current market condition. It could change
          significantly as a result of changes in the financial position of the debtors. Management
          would re-assess the amount of impairment allowance of receivables, if any, at each
          balance sheet date.


          (iii)   Impairment of inventories


                 In determining the amount of impairment required for obsolete and slow-moving
          inventories, management would compare the carrying value of the aged inventories to
          their respective net realisable values. A considerable amount of judgement is required
          in determining such impairment. If conditions which have impact on the net realisable
          value of inventories have deteriorated, impairment may be required.




                                            – 336 –
APPENDIX IV           FINANCIAL INFORMATION ON THE TARGET COMPANIES


    5.    Revenue and other income


          Revenue represents the net amounts received and receivable for services rendered and
    the use by others of Nanjing Hongying’s assets yielding royalties. An analysis of revenue
    and other income is as follows:


                                                             Period from       Three months
                                                        23 March 2006 to              ended
                                                       31 December 2006       31 March 2007
                                                                RMB’000            RMB’000


          Revenue
          Subcontracting income                                          1              2,621
          Royalty income                                                 –                 11


                                                                         1              2,632


          Other income
          Interest income                                               23                  2
          Amortisation of government grants                             50                 13


                                                                        73                 15




                                          – 337 –
APPENDIX IV         FINANCIAL INFORMATION ON THE TARGET COMPANIES


    6.   Loss before income tax


                                                              Period from     Three months
                                                         23 March 2006 to            ended
                                                        31 December 2006     31 March 2007
                                                                 RMB’000          RMB’000


         Loss before income tax is arrived
           at after charging:


         Auditors’ remuneration                                         –                –
         Cost of inventories recognised
           as expenses                                                15             2,656
         Depreciation of property,
           plant and equipment                                       129                56
         Operating lease charges in respect
           of rented premises                                        245                67


         Staff costs (including directors’ emoluments
           and contributions to retirement
           benefit scheme) (note 8)                                 1,354              588
         Amount capitalised in inventories                           (248)            (161)


         Amount charged to income statement                         1,106              427




                                         – 338 –
APPENDIX IV          FINANCIAL INFORMATION ON THE TARGET COMPANIES


    7.    Income tax expense


          No income tax is provided as Nanjing Hongying did not derive any assessable profit
    during the Relevant Periods.


          Reconciliation between income tax expense and accounting loss for the Relevant
    Periods at applicable tax rate is as follows:


                                                            Period from       Three months
                                                       23 March 2006 to              ended
                                                      31 December 2006       31 March 2007
                                                               RMB’000            RMB’000


          Loss before income tax                                   (1,853)             (268)


          Tax credit, calculated at the statutory
            tax rate of 33%                                         (611)               (88)
          Tax effect of non-deductible expenses                      368                 89
          Tax effect of deferred government grants                   231                 (4)
          Others                                                      12                  3


          Income tax expense                                            –                 –


    8.    Employee benefit expense (including directors’ emoluments)


                                                            Period from       Three months
                                                       23 March 2006 to              ended
                                                      31 December 2006       31 March 2007
                                                               RMB’000            RMB’000


          Wages and salaries                                       1,259                520
          Contribution to retirement scheme                           95                 68


                                                                   1,354                588




                                         – 339 –
APPENDIX IV          FINANCIAL INFORMATION ON THE TARGET COMPANIES


    9.   Directors’ remuneration and senior management’s emoluments


                                                      Contribution
                                         Salaries and to retirement        Other
                                          allowances         scheme   allowances     Total
                                            RMB’000        RMB’000      RMB’000    RMB’000


         Period ended 31 December 2006
         Executive directors
                                                      –          –            –          –
                                                     25          –            –         25
                                                     72          6            7         85


         Total                                       97          6            7        110


         Three months ended
           31 March 2007
         Executive directors
                                                      –          –            –          –
                                                      6          –            –          6
                                                     18          1            2         21


         Total                                       24          1            2         27


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




                                           – 340 –
APPENDIX IV            FINANCIAL INFORMATION ON THE TARGET COMPANIES


           Out of the five individuals whose emoluments were the highest in Nanjing Hongying
    for the Relevant Periods, one was a director of the Company whose emoluments have been
    included in the disclosure above. The emoluments payable to the remaining four individuals
    are as follows:


                                                             Period from       Three months
                                                        23 March 2006 to              ended
                                                       31 December 2006       31 March 2007
                                                                RMB’000            RMB’000


            Wages and salaries                                         155                 67
            Contribution to retirement scheme                           12                  5
            Other allowance                                             12                  7


                                                                       179                 79


            The number of highest paid individuals which fell within the following emolument
    band:

                                                             Period from       Three months
                                                        23 March 2006 to              ended
                                                       31 December 2006       31 March 2007
                                                                RMB’000            RMB’000


            Nil to RMB1,000,000                                          4                  4


           During the Relevant Periods, no emoluments were paid by Nanjing Hongying to the
    five highest paid individuals and the directors, as an inducement to join or upon joining
    Nanjing Hongying or as compensation for loss of office.




                                           – 341 –
APPENDIX IV           FINANCIAL INFORMATION ON THE TARGET COMPANIES


    10.   Property, plant and equipment


                                                    Furniture,
                                                       fixtures
                                                     and office     Motor
                                                    equipment      vehicle     Total
                                                      RMB’000     RMB’000    RMB’000


          Period ended 31 December 2006
          Opening net carrying amount                        –          –          –
          Additions                                      1,115        128      1,243
          Depreciation                                    (112)       (17)      (129)


          Closing net carrying amount                    1,003        111      1,114


          At 31 December 2006
          Cost                                           1,115        128      1,243
          Accumulated depreciation                        (112)       (17)      (129)


          Net carrying amount                            1,003        111      1,114


          Three months ended 31 March 2007
          Opening net carrying amount                    1,003        111      1,114
          Additions                                          2          –          2
          Depreciation                                     (50)        (6)       (56)


          Closing net carrying amount                      955        105      1,060


          At 31 March 2007
          Cost                                           1,117        128      1,245
          Accumulated depreciation                        (162)       (23)      (185)


          Net carrying amount                              955        105      1,060




                                          – 342 –
APPENDIX IV             FINANCIAL INFORMATION ON THE TARGET COMPANIES


    11.   Inventories


                                                                    As at               As at
                                                             31 December            31 March
                                                                    2006                2007
                                                                 RMB’000             RMB’000


          Work in progress                                           3,019              1,531


          The work-in-progress represents production and other direct costs in relation to the
    production of animation.


    12.   Trade and other receivables


                                                                    As at               As at
                                                             31 December            31 March
                                                                    2006                2007
                                                                 RMB’000             RMB’000


          Trade receivables                                              1              1,040
          Other receivables                                              6                  1
          Prepayments                                                    –                 72


                                                                         7              1,113


           As at 31 December 2006 and 31 March 2007, the ageing of the trade receivables was
    all within 0 to 30 days.

    13.   Amounts due from/(to) a related company


           The related companies are companies under common control of the ultimate beneficial
    owner of Nanjing Hongying. The amounts due from/to related company were non-trade
    related, unsecured, interest-free and repayable on demand.




                                          – 343 –
APPENDIX IV           FINANCIAL INFORMATION ON THE TARGET COMPANIES


    14.   Cash and cash equivalents

          Cash at bank earns interest at floating rates based on daily bank deposit rates.

          As at 31 December 2006 and 31 March 2007, the cash and bank balances of Nanjing
    Hongying denominated in Renminbi (“RMB”) amounted to RMB912,000, and RMB1,496,000
    respectively. RMB is not freely convertible into foreign currencies. Under the PRC Foreign
    Exchange Control Regulations and Administration of Settlement, Sales and Payment of
    Foreign Exchange Regulations, Nanjing Hongying is permitted to exchange RMB for foreign
    currencies through banks that are authorised to conduct foreign exchange business.

    15.   Other payables and accruals


                                                                      As at                As at
                                                               31 December             31 March
                                                                      2006                 2007
                                                     Notes         RMB’000              RMB’000

          Current:
          Advanced receipts from customers                               238                  295
          Other payables                                                 309                  787
          Accruals                                                       120                  161


                                                                         667                 1,243


          Non-current:
          Deferred government grants                  (a)                700                  687
          Rental expense payable                      (b)                245                  312


                                                                         945                  999


          (a)   Pursuant to the agreement entered into between
                           and                               (the beneficial owner of Nanjing
                Hongying) dated 18 December 2005 (the “Investment Agreement”), Nanjing
                Hongying was entitled to receive government grants based on 15% of Nanjing
                Hongying’s paid-up capital injected within 3 years from the date of its
                establishment. The grants are to be used in the business development of Nanjing
                Hongying. Pursuant to the Investment Agreement, Nanjing Hongying’s operating
                tenure should be not less than 15 years during which the principal place of
                business should be retained in                               . The RMB750,000
                government grants received during the period ended 31 December 2006 were
                amortised over 15 years accordingly.


                                           – 344 –
APPENDIX IV           FINANCIAL INFORMATION ON THE TARGET COMPANIES


          (b)   Pursuant to the agreement entered into between
                    and Nanjing Hongying dated 8 February 2006 (the “Rental Agreement”),
                Nanjing Hongying leases the office premises from
                      for a period of 5 years from 8 February 2006 to 7 February 2011. Pursuant
                to the Rental Agreement, Nanjing Hongying is entitled to an initial rent-free
                period of 3 years. This lease incentive received is recognised in the income
                statement as an integral part of the aggregate net lease payments.


    16.   Registered capital


                                                                       As at            As at
                                                                31 December         31 March
                                                                       2006             2007
                                                                    RMB’000          RMB’000


          Registered and paid-up capital of
            RMB10,000,000                                             10,000            10,000


          The capital raised was for working capital purpose.


    17.   Operating lease commitments


          At the respective balance sheet dates, the total future minimum lease payments under
    non-cancellable operating lease payable by Nanjing Hongying are as follows:


                                                                       As at            As at
                                                                31 December         31 March
                                                                       2006             2007
                                                                    RMB’000          RMB’000


          Within one year                                                  –                 –
          In the second to fifth years                                 1,211             1,211


                                                                       1,211             1,211


           Pursuant to the agreement entered into between                                  and
    Nanjing Hongying dated 8 February 2006 (the “Rental Agreement”), Nanjing Hongying
    leases the office premises from                                    for a period of 5 years
    from 8 February 2006 to 7 February 2011. Pursuant to the Rental Agreement, Nanjing
    Hongying is entitled to an initial rent-free period of 3 years. The lease does not include
    contingent rentals.


                                          – 345 –
APPENDIX IV           FINANCIAL INFORMATION ON THE TARGET COMPANIES


    18.   Financial risk management objectives and policies


          Nanjing Hongying does not have written financial risk management policies and
    guidelines. However, the directors periodically analyse and formulate measures to manage
    Nanjing Hongying’s exposure to market risk, including principally changes in interest rates
    and currency exchange rates. Generally, Nanjing Hongying employs a conservative strategy
    regarding its risk management.


          (a)   Interest rate risk


                 Nanjing Hongying’s interest rate risk relates primarily to bank balances. Nanjing
          Hongying has not used any derivative contracts to hedge its exposure in interest rate
          risk. However, management monitors interest rate exposure closely.


          (b)   Credit risk


                 Nanjing Hongying’s maximum exposure to credit risk in the event of the
          counterparties failure to perform their obligations in relation to each class of recognised
          financial assets is the carrying amount of those assets as stated in the balance sheets.
          In order to minimise the credit risk, the management has monitored the credit status
          of customers and performed necessary procedures to ensure that follow-up action is
          taken to recover overdue debts. In addition, the management reviews the recoverable
          amount of each individual trade debt at each balance sheet date to ensure that adequate
          impairment losses are made for irrecoverable amounts. In this regard, the directors
          consider that Nanjing Hongying’s exposure to bad debts is minimal.


                Nanjing Hongying is not exposed to concentration of credit risk.


          (c)   Foreign currency risk


                Nanjing Hongying is not exposed to significant foreign currency risk since
          most of its business operations are transacted in RMB.


          (d)   Liquidity risk


                 Liquidity risk arises in the general funding of Nanjing Hongying’s operating
          activities. It includes the risk of not being able to fund the operating activities at
          settlement dates and liquidate positions in a timely manner at a reasonable price.
          Nanjing Hongying has no significant exposure to liquidity risk. Short-term fundings
          will be obtained from financial institutions, when required.




                                            – 346 –
APPENDIX IV            FINANCIAL INFORMATION ON THE TARGET COMPANIES


           (e)   Fair value


                 The fair value of Nanjing Hongying’s financial assets and liabilities are not
           materially different from their carrying amounts because of the immediate or short
           term maturity.


    19.    Segment information


           No separate analysis of segment information by business or geographical segments is
    presented as Nanjing Hongying’s sole business is the production of animation films. Nanjing
    Hongying’s revenue, expenses, results, assets, liabilities and capital expenditure are principally
    attributable to a single geographical region, which is the PRC.


    20.    Subsequent events


           No significant event has taken place subsequent to 31 March 2007.


    21.    Subsequent financial statements


          No audited financial statements have been prepared for Nanjing Hongying in respect
    of any period subsequent to 31 March 2007.


                                                                    Yours faithfully,




                                                                    Grant Thornton
                                                              Certified Public Accountants
                                                                       Hong Kong




                                             – 347 –
      APPENDIX IV                      FINANCIAL INFORMATION ON THE TARGET COMPANIES


      3.       SHANGHAI SANDING ANIMATION CREATION COMPANY LIMITED

           The following is the text of the accountants’ report dated 31 August 2007 from Grant
      Thornton, Certified Public Accountants, prepared for Shanghai Sanding Animation Creation
      Company Limited as extracted from the Previous Circular.




                                                                                         31 August 2007      A1B


      The Directors
      Jade Dynasty Group Limited
      11/F, Safety Godown Industrial Building
      56 Ka Yip Street
      Chai Wan
      Hong Kong

      Dear Sirs,

             We set out below our report on the financial information of
      (Shanghai Sanding Animation Creation Company Limited # , “Shanghai Sanding”) in Sections I
      and II below, including the balance sheets of Shanghai Sanding as at 31 December 2004, 2005 and
      2006 and 31 March 2007, income statements, cash flow statements and statements of changes in
YSL




      equity for each of the three years ended 31 December 2004, 2005 and 2006 and the three months
      ended 31 March 2007 (the “Relevant Periods”), and notes thereto, together with the unaudited
      financial information of Shanghai Sanding including the income statement, cash flow statement
      and statement of changes in equity for the three months ended 31 March 2006 (the “31 March
      2006 Corresponding Information”), prepared for inclusion in the circular (the “Circular”) dated 31
      August 2007 issued by Jade Dynasty Group Limited (the “Company”) in connection with the
      acquisition of the entire registered capital of Shanghai Sanding by the Company (the “Acquisition”).

             Shanghai Sanding is a domestic enterprise established in the People’s Republic of China
      (the “PRC”) with an initial registered capital of RMB500,000 for a period of 15 years on 7 June
      1994. The registered capital was increased to RMB1,000,000 on 1 June 2002 and was further
      increased to RMB3,000,000 on 19 May 2005. The address of Shanghai Sanding’s registered office
      and principal place of business is 5/F Guangtong Building, No. 15 Guijing Road, Xuhui, Shanghai,
      the PRC. Shanghai Sanding is principally engaged in the production of various types of animation.

             The financial statements of Shanghai Sanding were prepared in accordance with the relevant
      accounting rules and regulations applicable to enterprises in the PRC. Shanghai Sanding has
      adopted 31 December as its financial year-end date. No audited financial statements have been
      prepared for the years ended 31 December 2004, 2005 and the three months ended 31 March 2007.
      The financial statements for the year ended 31 December 2006 were audited by Shanghai Rui He
      Certified Public Accountants Co., Ltd. (“Shanghai Rui He”) for management purpose. Shanghai
      Rui He is a firm of certified public accountants registered in the PRC.

      #    The unofficial English translation is for identification purpose only

                                                                 – 348 –
APPENDIX IV              FINANCIAL INFORMATION ON THE TARGET COMPANIES


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

       The financial information and the notes thereto for the Relevant Periods (the “Financial
Information”) as set out in this report has been prepared by the directors of Shanghai Sanding
based on the Underlying Financial Statements and in accordance with HKFRSs. For the purpose of
this report, we have examined the Financial Information of Shanghai Sanding and carried out such
additional procedures as are necessary in accordance with Auditing Guideline 3.340 “Prospectuses
and the Reporting Accountant” issued by the HKICPA.

       The directors of Shanghai Sanding are responsible for the preparation of the Underlying
Financial Statements and the Financial Information which give a true and fair view. The directors
of the Company are responsible for the contents of the Circular in which this report is included. In
preparing the Financial Information which gives a true and fair view, it is fundamental that
appropriate accounting policies are selected and applied consistently. It is our responsibility to
form an independent opinion, based on our examination, on the Financial Information and to
report our opinion to you.

      In our opinion, the Financial Information, for the purpose of this report, gives a true and fair
view of the state of affairs of Shanghai Sanding as at 31 December 2004, 2005 and 2006, and 31
March 2007 and of the results and cash flows of Shanghai Sanding for each of the Relevant
Periods.

        For the purpose of this report, we have reviewed the 31 March 2006 Corresponding
Information, which are prepared in accordance with accounting principles generally accepted in
Hong Kong and for which the directors of Shanghai Sanding are responsible, in accordance with
Statement of Auditing Standard 700 “Engagements to Review Interim Financial Reports” issued
by the HKICPA. Our review consists principally of making enquiries of management and applying
analytical procedures to the 31 March 2006 Corresponding Information and, based thereon assessing
whether the accounting policies and presentation have been consistently applied unless otherwise
disclosed. A review excludes audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit and therefore provides a
lower level of assurance than an audit. Accordingly we do not express an audit opinion on the 31
March 2006 Corresponding Information.

       For the purpose of this report and on the basis of our review which does not constitute an
audit, we are not aware of any material modifications that should be made to the unaudited 31
March 2006 Corresponding Information presented for the three months ended 31 March 2006.


                                               – 349 –
APPENDIX IV                 FINANCIAL INFORMATION ON THE TARGET COMPANIES


I.   FINANCIAL INFORMATION


     INCOME STATEMENTS


                                                                                   Three months
                                                  Year ended 31 December          ended 31 March
                                                 2004       2005        2006        2007        2006
                                      Notes   RMB’000    RMB’000    RMB’000     RMB’000     RMB’000
                                                                                          (unaudited)


     Revenue                           5          7,147     8,239      3,528         798         467
     Cost of sales                               (7,093)   (7,394)    (3,360)       (871)       (264)


     Gross profit/(loss)                            54       845         168         (73)        203
     Other income                       5            2       128         159           6         176
     Selling and distribution costs                  –       (46)       (531)        (57)        (89)
     Administrative and other
       operating expenses                        (1,443)   (2,400)    (1,705)       (497)       (358)


     Operating loss                              (1,387)   (1,473)    (1,909)       (621)         (68)
     Share of loss of an associate                    –      (370)      (190)          –            –


     Loss before income tax            6         (1,387)   (1,843)    (2,099)       (621)         (68)
     Income tax expense                7           (231)     (330)      (136)        (26)         (19)


     Loss for the year/period                    (1,618)   (2,173)    (2,235)       (647)         (87)




                                              – 350 –
APPENDIX IV             FINANCIAL INFORMATION ON THE TARGET COMPANIES


    BALANCE SHEETS

                                                                                      As at
                                                        As at 31 December         31 March
                                                   2004         2005      2006        2007
                                        Notes   RMB’000    RMB’000     RMB’000     RMB’000

    Non-current assets
    Property, plant and equipment        10          1,872     1,514     1,297        1,236
    Interest in an associate             11            700       330       140            –


                                                     2,572     1,844     1,437        1,236

    Current assets
    Inventories                          12             48     5,593    10,701      10,893
    Trade and other receivables          13          1,126       754       977       1,454
    Amount due from a related company    14              –         –        74         223
    Cash and cash equivalents            15            479        33       224         265


                                                     1,653     6,380    11,976      12,835


    Current liabilities
    Trade and other payables             16          2,155     1,163     1,261       1,787
    Amount due to a related company      14          1,660     6,863    14,179      14,964
    Amount due to a related party        14            797       759       757         756
    Tax payable                                         19        18        30          25


                                                     4,631     8,803    16,227      17,532



    Net current liabilities                         (2,978)   (2,423)   (4,251)      (4,697)


    Net liabilities                                   (406)     (579)   (2,814)      (3,461)


    EQUITY
    Equity attributable to the equity
      holders of Shanghai Sanding
    Registered capital                   17          1,000     3,000     3,000       3,000
    Reserves                                        (1,406)   (3,579)   (5,814)     (6,461)


    Shareholders’ deficiency                         (406)     (579)    (2,814)     (3,461)




                                          – 351 –
APPENDIX IV               FINANCIAL INFORMATION ON THE TARGET COMPANIES


    CASH FLOW STATEMENTS


                                                                                        Three months
                                                       Year ended 31 December          ended 31 March
                                                      2004       2005        2006        2007        2006
                                           Notes   RMB’000    RMB’000    RMB’000     RMB’000     RMB’000
                                                                                               (unaudited)

    Cash flows from
      operating activities
    Loss before income tax                            (1,387)    (1,843)   (2,099)       (621)         (68)
    Adjustments for:
      Interest income                       5             (2)      (13)        (2)          –            –
      Share of loss of an associate                        –       370        190           –            –
      Impairment loss on interest in
        an associate                                         –        –         –         140            –
      Impairment of trade and
        other receivables                   6           469        712          –           –            –
      Impairment of inventories             6             –        354        780           –
      Depreciation of property,
        plant and equipment                 6           296        473        505         112         115

    Operating (loss)/profit before
      working capital changes                          (624)         53      (626)       (369)          47
    Increase in inventories                             (20)     (5,899)   (5,888)       (192)      (1,732)
    Increase in trade and
      other receivables                                (775)      (340)      (223)       (477)         (75)
    Increase in amount due from
      a related company                                      –        –       (74)       (149)         (65)
    Increase/(Decrease) in trade and
      other payables                                    731       (992)        98         526          (80)
    Increase in amount due to
      a related company                               1,669      5,203      7,316         785        2,278
    Increase/(Decrease) in amount due to
      a related party                                   797         (38)       (2)         (1)          (1)

    Cash generated from/(used in)
      operations                                      1,778      (2,013)      601         123         372
    Income tax paid                                    (398)       (331)     (124)        (31)        (32)

    Net cash generated from/(used in)
      operating activities                            1,380      (2,344)      477          92         340


                                                   – 352 –
APPENDIX IV               FINANCIAL INFORMATION ON THE TARGET COMPANIES


                                                                                         Three months
                                                        Year ended 31 December          ended 31 March
                                                       2004       2005        2006        2007        2006
                                            Notes   RMB’000    RMB’000    RMB’000     RMB’000     RMB’000
                                                                                                (unaudited)
    Cash flows from investing activities
    Purchases of property,
      plant and equipment                              (1,273)     (115)      (288)        (51)          –
    Capital contribution                                    –     2,000          –           –           –
    Additional investment in an associate                (150)        –          –           –           –
    Interest received                                       2        13          2           –           –


    Net cash used in investing activities              (1,421)    1,898       (286)        (51)          –


    Net (decrease)/increase in cash and
      cash equivalents                                    (41)     (446)       191          41         340
    Cash and cash equivalents
      at beginning of year/period                        520       479          33         224          33


    Cash and cash equivalents
      at end of year/period                              479        33         224         265         373




                                                    – 353 –
APPENDIX IV                 FINANCIAL INFORMATION ON THE TARGET COMPANIES


      STATEMENTS OF CHANGES IN EQUITY

                                                                                       Retained
                                                                                       earnings/
                                                             Registered    Capital (Accumulated
                                                                capital    reserve        losses) Total equity
                                                              RMB’000     RMB’000      RMB’000       RMB’000

      At 1 January 2004                                           1,000         32          180          1,212
      Loss for the year and total recognised expense
        for the year                                                 –           –        (1,618)       (1,618)

      At 31 December 2004 and 1 January 2005                      1,000         32        (1,438)         (406)
      Capital contribution                                        2,000          –             –         2,000
      Loss for the year and total recognised expense
        for the year                                                 –           –        (2,173)       (2,173)

      At 31 December 2005 and 1 January 2006                      3,000         32        (3,611)         (579)
      Loss for the year and total recognised expense
        for the year                                                 –           –        (2,235)       (2,235)

      At 31 December 2006 and 1 January 2007                      3,000         32        (5,846)       (2,814)
      Loss for the period and total recognised
        expense for the period                                       –           –          (647)         (647)

      At 31 March 2007                                            3,000         32        (6,493)       (3,461)

      For the three months ended 31 March 2006 (Unaudited)

                                                             Registered    Capital Accumulated
                                                                capital    reserve      losses Total equity
                                                              RMB’000     RMB’000     RMB’000     RMB’000

      At 1 January 2006                                           3,000         32        (3,611)         (579)

      Loss for the period and
        total recognised expense for the period                      –           –           (87)          (87)

      At 31 March 2006                                            3,000         32        (3,698)         (666)

       The capital reserve is non-distributable and may be used to reduce losses incurred or to be
capitalised as paid up capital.




                                                       – 354 –
APPENDIX IV                FINANCIAL INFORMATION ON THE TARGET COMPANIES


II.   NOTES TO THE FINANCIAL INFORMATION AND THE 31 MARCH 2006
      CORRESPONDING INFORMATION


      1.    Basis of presentation


             The Financial Information and the 31 March 2006 Corresponding Information set out
      in this report have been prepared in accordance with all applicable HKFRSs, which include
      all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting
      Standards and Interpretations issued by the HKICPA and have been consistently applied
      throughout the Relevant Periods.


            The Financial Information and the 31 March 2006 Corresponding Information also
      comply with the applicable disclosure requirements of the Rules Governing the Listing of
      Securities on The Stock Exchange of Hong Kong Limited.


      2.    Adoption of new and amended HKFRSs


            Shanghai Sanding has not early adopted the following HKFRSs that have been issued
      but are not yet effective. The directors of Shanghai Sanding are currently assessing the
      impact of these HKFRSs but are not yet in a position to state whether they would have
      material financial impact on Shanghai Sanding’s financial statements.


            HKAS 23 (Revised)                       Borrowing Costs1
            HKFRS 8                                 Operating Segments 1
            HK(IFRIC) – Int 11                      Group and Treasury Share Transactions2
            HK(IFRIC) – Int 12                      Service concession arrangements3

            Notes:

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




                                                    – 355 –
APPENDIX IV          FINANCIAL INFORMATION ON THE TARGET COMPANIES


    3.   Summary of significant accounting policies

         (a)   Basic of preparation

                The significant accounting policies that have been adopted in the preparation
         of the Financial Information and the 31 March 2006 Corresponding Information are
         summarised below. These policies have been consistently applied to all the years/
         periods presented unless otherwise stated. The Financial Information and the 31 March
         2006 Corresponding Information have been prepared on the historical cost basis.

                It should be noted that accounting estimates and assumptions are used in
         preparation of the Financial Information and the 31 March 2006 Corresponding
         Information. Although these estimates are based on management’s best knowledge
         and judgement of current events and actions, actual results may ultimately differ from
         those estimates. The areas involving a higher degree of judgement or complexity, or
         areas where assumptions and estimates are significant to the financial information,
         are disclosed in note 4.

                Shanghai Sanding incurred loss of RMB1,618,000, RMB2,173,000,
         RMB2,235,000, RMB87,000 and RMB647,000 for the years ended 31 December
         2004, 2005, 2006 and the three months ended 31 March 2006 and 2007, respectively.
         In addition, Shanghai Sanding had net liabilities of RMB406,000, RMB579,000,
         RMB2,814,000 and RMB3,461,000 as at 31 December 2004, 2005, 2006 and 31
         March 2007, respectively. Notwithstanding these, the Financial Information and the
         31 March 2006 Corresponding Information have been prepared on a going concern
         basis on the assumption that Shanghai Sanding will continue to operate as a going
         concern. The going concern basis has been adopted on the basis of continuing financial
         support from the equity owners. Should Shanghai Sanding be unable to continue in
         business as a going concern, adjustments would have to be made to reduce the value
         of assets to their recoverable amount, to provide for any further liabilities which
         might arise and to reclassify non-current assets as current assets.

         (b)   Revenue recognition

                Revenue comprises the fair value for the rendering of services and the use by
         others of Shanghai Sanding’s assets yielding royalties. Provided it is probable that
         the economic benefits will flow to Shanghai Sanding and the revenue can be measured
         reliably, revenue is recognised as follows:

               Subcontracting service income is recognised when services are rendered.

               Royalty income is recognised on a basis in accordance with the terms of the
         relevant agreements.

                Interest income is recognised on a time-proportion basis using the effective
         interest method.


                                         – 356 –
APPENDIX IV         FINANCIAL INFORMATION ON THE TARGET COMPANIES


        (c)   Foreign currency translation

               The financial information of Shanghai Sanding are presented in Renminbi
        (“RMB”), which is also the functional currency of Shanghai Sanding. Foreign currency
        transactions are translated into the functional currency of Shanghai Sanding using the
        exchange rates prevailing at the dates of the transactions. Foreign exchange gains and
        losses resulting from the settlement of such transactions and from the translation of
        monetary assets and liabilities denominated in foreign currencies at year-end exchange
        rates are recognised in the income statement. Non-monetary items that are measured
        in terms of historical cost in foreign currencies are not translated.

              The functional currency of the associate is also RMB.

        (d)   Property, plant and equipment

              Measurement bases

                     Property, plant and equipment are stated at cost less accumulated
              depreciation and accumulated impairment losses. The cost of an item of property,
              plant and equipment comprises its purchase price and any directly attributable
              costs of bringing the asset to the working condition and location for its intended
              use.

                     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 Shanghai Sanding and the cost of
              the item can be measured reliably. All other costs, such as repairs and
              maintenance, are charged to the income statement during the period in which
              they are incurred.

              Depreciation

                     Depreciation is provided to write off the cost of items of property, plant
              and equipment, over their estimated useful lives and after taking into account
              of their estimated residual value, using the straight-line method, as follows:

                                                                        Estimated useful lives

                     Furniture, fixtures and office equipment                           5 years
                     Motor vehicle                                                      5 years

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



                                        – 357 –
APPENDIX IV         FINANCIAL INFORMATION ON THE TARGET COMPANIES


              Gain or loss on disposal


                     An item of property, plant and equipment is derecognised upon disposal
              or when no future economic benefits are expected to arise from the continued
              use of the asset. Any gain or loss arising on derecognition of the asset (calculated
              as the difference between the net disposal proceeds and the carrying amount of
              the item) is included in the income statement in the period in which the item is
              derecognised.


        (e)   Interest in an associate


               An associate is an entity, not being a subsidiary or a jointly controlled entity,
        in which Shanghai Sanding has a long term interest of generally not less than 20% of
        the equity voting rights and over which it is in a position to exercise significant
        influence.


              Investment in an associate is accounted for in Shanghai Sanding’s financial
        statements under the equity method of accounting. Under equity method of accounting,
        investment is initially recorded at cost and adjusted thereafter for the post-acquisition
        changes in Shanghai Sanding’s share of the associate’s net assets. Shanghai Sanding’s
        income statement includes its share of the post-acquisition results of the associate for
        the year/period, less any identified impairment loss. Shanghai Sanding’s share of the
        post-acquisition reserves of the associate is included in the Shanghai Sanding’s
        reserves.


               Unrealised gains on transactions between Shanghai Sanding and its associate
        are eliminated to the extent of Shanghai Sanding’s interest in the associate. Unrealised
        losses are also eliminated unless the transaction provides evidence of an impairment
        of the asset transferred, in which case they are recognised immediately in the income
        statement.


               When Shanghai Sanding’s share of losses in an associate equals or exceeds its
        interest in the associate, Shanghai Sanding does not recognise further losses, unless it
        has incurred legal or constructive obligations or made payments on behalf of the
        associate.




                                         – 358 –
APPENDIX IV         FINANCIAL INFORMATION ON THE TARGET COMPANIES


        (f)   Impairment of non-financial assets

               Property, plant and equipment and interest in associate are subject to impairment
        testing.

               For the purposes of assessing impairment, where an asset does not generate
        cash flows largely independent from those from other assets, the recoverable amount
        is determined for the smallest group of assets that generated cash inflows independently
        (i.e. a cash-generating unit). As a result, some assets are tested individually for
        impairment and some are tested at cash-generating unit level.

               An impairment loss is recognised as an expense immediately for the amount by
        which the asset’s carrying amount exceeds its recoverable amount. The recoverable
        amount is the higher of fair value, reflecting market conditions less costs to sell, and
        value in use. In assessing value in use, the estimated future cash flows are discounted
        to their present value using a pre-tax discount rate that reflects current market
        assessment of time value of money and the risk specific to the asset.

              An impairment loss is reversed in subsequent periods if there has been a
        favourable change in the estimates used to determine the asset’s recoverable amount
        and only to the extent that the asset’s carrying amount does not exceed the carrying
        amount that would have been determined, net of depreciation or amortisation, if no
        impairment loss had been recognised.

        (g)   Leases

               An arrangement, comprising a transaction or a series of transactions, is or
        contains a lease if Shanghai Sanding determines that the arrangement conveys a right
        to use a specific asset or assets for an agreed period of time in return for a payment
        or a series of payments. Such a determination is made based on an evaluation of the
        substance of the arrangement and is regardless of whether the arrangement takes the
        legal form of a lease. Leases which do not transfer substantially all the risks and
        rewards of ownership to Shanghai Sanding are classified as operating leases.

              Operating lease charges as the lessee

                     Where Shanghai Sanding has the right to use the assets held under
              operating leases, payments made under the leases are charged to the income
              statement on a straight line basis over the lease terms except where an alternative
              basis is more representative of the pattern of benefits to be derived from the
              leased assets. Lease incentives received are recognised in the income statement
              as an integral part of the aggregate net lease payments made. Contingent rental
              are charged to the income statement in the accounting period in which they are
              incurred.


                                         – 359 –
APPENDIX IV        FINANCIAL INFORMATION ON THE TARGET COMPANIES


        (h)   Financial assets


              The accounting policies for financial assets are set out below.


              Recognition and measurement


                      Shanghai Sanding’s financial assets include trade and other receivables,
              and amount due from a related company. They are classified as loans and
              receivables. Management determines the classification of its financial assets at
              initial recognition depending on the purpose for which the financial assets
              were acquired.


                     All financial assets are recognised when, and only when, Shanghai
              Sanding becomes a party to the contractual provisions of the instrument. When
              financial assets are recognised initially, they are measured at fair value plus
              directly attributable transaction costs.


                     Loans and receivables are non-derivative financial assets with fixed or
              determinable payments that are not quoted in an active market. They are
              subsequently measured at amortised cost using the effective interest method,
              less any impairment losses. Amortised cost is calculated taking into account
              any discount or premium on acquisition and includes fees that are an integral
              part of the effective interest rate and transaction cost.


              Derecognition


                     Derecognition of financial assets occurs when the rights to receive cash
              flows from the investments expire or are transferred and substantially all of the
              risks and rewards of ownership have been transferred.




                                        – 360 –
APPENDIX IV         FINANCIAL INFORMATION ON THE TARGET COMPANIES


              Impairment of financial assets


                    At each balance sheet date, financial assets other than at fair value
              through profit or loss are reviewed to determine whether there is any objective
              evidence of impairment. If any such evidence exists, the impairment loss is
              measured and recognised as follows:


                     For financial assets carried at amortised cost:


                            If there is objective evidence that an impairment loss on loans
                     and receivables carried at amortised cost has been incurred, the amount
                     of the loss is measured as the difference between the asset’s carrying
                     amount and the present value of estimated future cash flows (excluding
                     future credit losses that have not been incurred) discounted at the financial
                     asset’s original effective interest rate (i.e. the effective interest rate
                     computed at initial recognition). The amount of the loss is recognised in
                     profit or loss of the period in which the impairment occurs.


                            If, in subsequent period, the amount of the impairment loss
                     decreases and the decrease can be related objectively to an event occurring
                     after the impairment was recognised, the previously recognised
                     impairment loss is reversed to the extent that it does not result in a
                     carrying amount of the financial asset exceeding what the amortised
                     cost would have been had the impairment not been recognised at the
                     date the impairment is reversed. The amount of the reversal is recognised
                     in income statement in the period in which the reversal occurs.


        (i)   Inventories


               Inventories are stated at the lower of cost and net realisable value. Costs
        comprise direct materials and, where applicable, direct labour costs and those overheads
        that have been incurred in bringing the inventories to their present location and
        condition. Cost is calculated using the weighted average method. Net realisable value
        represents the estimated selling price in the ordinary course of business less all
        estimated costs of completion and applicable selling expenses.


        (j)   Cash and cash equivalents


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




                                         – 361 –
APPENDIX IV         FINANCIAL INFORMATION ON THE TARGET COMPANIES


        (k)   Financial liabilities


              Shanghai Sanding’s financial liabilities include trade and other payables, amount
        due to a related company and a related party. They are recognised initially at fair
        value and subsequently measured at amortised cost using effective interest method.


               Financial liabilities are recognised when Shanghai Sanding becomes a party to
        the contractual provisions of the instrument. All interest related charges are recognised
        as an expense in finance costs in the income statement.


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


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


        (l)   Accounting for income taxes


              Income tax comprises current tax and deferred tax.


               Current income tax assets and/or liabilities comprise those obligations to, or
        claims from, tax authorities relating to the current or prior reporting period, that are
        unpaid at the balance sheet date. They are calculated according to the tax rates and
        tax laws applicable to the fiscal periods to which they relate, based on the taxable
        profit for the year. All changes to current tax assets or liabilities are recognised as a
        component of tax expense in the income statement.


                Deferred tax is calculated using the liability method on temporary differences
        at the balance sheet date between the carrying amounts of assets and liabilities in the
        financial statements and their respective tax bases. Deferred tax liabilities are generally
        recognised for all taxable temporary differences. Deferred tax assets are recognised
        for all deductible temporary differences, tax losses available to be carried forward as
        well as other unused tax credits, to the extent that it is probable that taxable profit
        will be available against which the deductible temporary differences, unused tax
        losses and unused tax credits can be utilised.


                Deferred tax assets and liabilities are not recognised if the temporary difference
        arises from initial recognition (other than in a business combination) of assets and
        liabilities in a transaction that affects neither taxable nor accounting profit or loss.

                                          – 362 –
APPENDIX IV          FINANCIAL INFORMATION ON THE TARGET COMPANIES


              Deferred tax is calculated, without discounting, at tax rates that are expected to
        apply in the period the liability is settled or the asset realised, provided they are
        enacted or substantively enacted at the balance sheet date.


               Changes in deferred tax assets or liabilities are recognised in the income
        statement, or in equity if they relate to items that are charged or credited directly to
        equity.


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


        (m)     Retirement benefit costs


                Retirement benefits to employees are provided through a defined contribution
        plan.


               Shanghai Sanding is required to participate in a central pension scheme operated
        by the local municipal government. Shanghai Sanding is required to contribute certain
        percentage of its payroll costs to the central pension scheme. The contributions are
        charged to the income statement as they become payable in accordance with the rules
        of the central pension scheme. Shanghai Sanding has no legal or constructive
        obligations to pay further contributions after payment of the fixed contribution.


        (n)     Provisions and contingent liabilities


               Provisions are recognised when Shanghai Sanding has a present obligation
        (legal or constructive) as a result of a past event, and it is probable that an outflow of
        economic benefits will be required to settle the obligation and a reliable estimate can
        be made. When the time value of money is material, provisions are stated at the
        present value of the expenditure expected to settle the obligation.


               All provisions are reviewed at each balance sheet date and adjusted to reflect
        the current best estimate.




                                           – 363 –
APPENDIX IV           FINANCIAL INFORMATION ON THE TARGET COMPANIES


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


        (o)   Related parties


              For the purposes of these Financial Information and the 31 March 2006
        Corresponding Information, parties are considered to be related to Shanghai Sanding
        if:


              (i)     the party, directly, or indirectly through one or more intermediaries:


                      –      controls, is controlled by, or is under common control with,
                             Shanghai Sanding;


                      –      has an interest in Shanghai Sanding that gives it significant
                             influence over Shanghai Sanding; or


                      –      has joint control over Shanghai Sanding;


              (ii)    the party is an associate;


              (iii)   the party is a jointly controlled entity;


              (iv)    the party is a member of the key management personnel of Shanghai
                      Sanding or its parent;


              (v)     the party is a close member of the family of any individual referred to in
                      (i) or (iv);


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


              (vii) the party is a post-employment benefit plan for the benefit of employees
                    of Shanghai Sanding, or of any entity that is a related party of Shanghai
                    Sanding.



                                          – 364 –
APPENDIX IV            FINANCIAL INFORMATION ON THE TARGET COMPANIES


    4.    Critical accounting estimates and judgements


          Estimates and judgements are continually evaluated and are based on historical
    experience and other factors, including expectations of future events that are believed to be
    reasonable under the circumstances.


           Shanghai Sanding makes estimates and assumptions concerning the future. The
    resulting accounting estimates will, by definition, seldom equal to the related actual results.
    The estimates and assumptions that have a significant effect on the carrying amounts of
    assets and liabilities are discussed below:


          (i)     Impairment of assets


                 Property, plant and equipment and interest in an associate are reviewed for
          impairment whenever events or changes in circumstance indicate that the carrying
          amount of the assets exceeds its recoverable amount. The recoverable amount of an
          asset or a cash-generating unit has been determined based on value-in-use calculations.
          These calculations require the use of estimates.


          (ii)    Impairment of receivables


                 Allowance for impairment of receivables is determined by management based
          on the credit history of its debtors and the current market condition. It could change
          significantly as a result of changes in the financial position of the debtors. Management
          would re-assess the amount of impairment allowance of receivables, if any, at each
          balance sheet date.


          (iii)   Impairment of inventories


                 In determining the amount of impairment required for obsolete and slow-moving
          inventories, management would compare the carrying value of the aged inventories to
          their respective net realisable values. A considerable amount of judgement is required
          in determining such impairment. If conditions which have impact on the net realisable
          value of inventories have deteriorated, additional impairment may be required.




                                            – 365 –
APPENDIX IV             FINANCIAL INFORMATION ON THE TARGET COMPANIES


    5.    Revenue and other income
          Revenue represents the net amounts received and receivable for the services rendered
    to customers and the use by others of Shanghai Sanding’s assets yielding royalties. An
    analysis of revenue and other income is as follows:
                                                                                       Three months
                                                      Year ended 31 December          ended 31 March
                                                     2004       2005        2006        2007        2006
                                                  RMB’000    RMB’000    RMB’000     RMB’000     RMB’000
                                                                                              (unaudited)

          Revenue
          Subcontracting income                      7,147      8,209      3,425         773         467
          Royalty income                                 –         30        103          25           –

                                                     7,147      8,239      3,528         798         467

          Other income
          Interest income                                   2      13          2           –           –
          Other income                                      –     115        157           6         176

                                                            2     128        159           6         176

    6.    Loss before income tax
                                                                                       Three months
                                                      Year ended 31 December          ended 31 March
                                                     2004       2005        2006        2007        2006
                                                  RMB’000    RMB’000    RMB’000     RMB’000     RMB’000
                                                                                              (unaudited)

          Loss before income tax is arrived at
            after charging:

          Auditors’ remuneration                            –        –         1           –            –
          Cost of inventories recognised
            as expenses                              7,093      7,040      2,580         871         264
          Depreciation of property,
            plant and equipment                        296        473        505         112         115
          Operating lease charges in
            respect of rented premises                 860      1,016        836         196         214
          Impairment loss on interest in
            an associate (note 11)                          –       –          –         140            –
          Impairment of inventories                         –     354        780           –            –
          Impairment of trade and
            other receivables                          469        712          –           –            –

          Staff costs (including directors’
            emoluments and contributions to
            retirement benefit scheme) (note 8)      4,477       8,761     7,115       1,113        1,591
          Amount capitalised in inventories              –      (4,560)   (3,660)        (73)        (989)

          Amount charged to income statement         4,477      4,201      3,455       1,040         602


                                                  – 366 –
APPENDIX IV             FINANCIAL INFORMATION ON THE TARGET COMPANIES


    7.    Income tax expense


          Income tax in the income statement represents:


                                                                                      Three months
                                                      Year ended 31 December         ended 31 March
                                                     2004       2005        2006       2007        2006
                                                  RMB’000    RMB’000    RMB’000    RMB’000     RMB’000
                                                                                             (unaudited)


          Current tax
          – PRC                                        231       330         136         26          19


           Income tax in the PRC is calculated at the rates of income tax prevailing in the PRC.
    It was charged at 2% on turnover for the period from January to May 2004, 4% on turnover
    for the period from June 2004 to December 2006. With effect from January 2007, it was
    charged at progressive rates ranging from 18% to 33% on deemed profits calculated at 10%
    on turnover.


                                                                                      Three months
                                                      Year ended 31 December         ended 31 March
                                                     2004       2005        2006       2007        2006
                                                  RMB’000    RMB’000    RMB’000    RMB’000     RMB’000
                                                                                             (unaudited)


          Turnover                                   7,147      8,239      3,528        798         467


          Income tax expense, calculated at the
            statutory tax rate of 2% to 4%
            on turnover                                231       330         136          –          19
          Income tax expense, calculated at the
            statutory tax rates of 18% to 33%
            on deemed profits                               –      –           –         26           –


          Income tax expense                           231       330         136         26          19




                                                  – 367 –
APPENDIX IV            FINANCIAL INFORMATION ON THE TARGET COMPANIES


    8.   Employee benefit expense (including directors’ emoluments)

                                                                                      Three months
                                                   Year ended 31 December            ended 31 March
                                                  2004       2005        2006          2007        2006
                                               RMB’000    RMB’000    RMB’000       RMB’000     RMB’000
                                                                                             (unaudited)

         Wages and salaries                       3,777       8,114        6,723      1,022        1,515
         Contribution to retirement scheme          120         209          149         31           35
         Other allowance                            580         438          243         60           41

                                                  4,477       8,761        7,115      1,113        1,591


    9.   Directors’ remuneration and senior management’s emoluments

                                                          Contribution
                                             Salaries and to retirement           Other
                                              allowances         scheme      allowances         Total
                                                RMB’000        RMB’000         RMB’000        RMB’000

         Year ended 31 December 2004
         Executive directors
                                                         60            5              5              70
                                                         22            5              –              27
                                                         37            1              2              40

         Total                                       119              11              7             137


         Year ended 31 December 2005
         Executive directors
                                                          –            5              –               5
                                                         26            5              1              32
                                                         37            2              3              42

         Total                                           63           12              4              79


         Year ended 31 December 2006
         Executive directors
                                                          –            5              –               5
                                                         36            6              2              44
                                                         60            2              4              66

         Total                                           96           13              6             115




                                               – 368 –
APPENDIX IV             FINANCIAL INFORMATION ON THE TARGET COMPANIES


                                                           Contribution
                                              Salaries and to retirement        Other
                                               allowances         scheme   allowances           Total
                                                 RMB’000        RMB’000      RMB’000          RMB’000


          Three months ended
            31 March 2007
          Executive directors
                                                           –          1             –               1
                                                          11          2             1              14
                                                          15          1             1              17

          Total                                           26          4             2              32


          Three months ended
            31 March 2006 (Unaudited)
          Executive director
                                                           –          1             –               1
                                                           9          1             1              11
                                                          15          1             1              17

          Total                                           24          3             2              29


         There was no arrangement under which a director waived or agreed to waive any
    remuneration during the Relevant Periods and the 31 March 2006 Corresponding Period.

           The five individuals whose emoluments were the highest in Shanghai Sanding for the
    Relevant Periods and the 31 March 2006 Corresponding Period did not include any director
    whose emoluments have been reflected above. The emoluments payable to the five individuals
    are as follows:

                                                                                    Three months
                                                    Year ended 31 December         ended 31 March
                                                   2004       2005        2006       2007        2006
                                                RMB’000    RMB’000    RMB’000    RMB’000     RMB’000
                                                                                           (unaudited)

          Wages and salaries                         414        450        468          140       144
          Contribution to retirement scheme           14         10         13            3         3
          Other allowances                            43         56         77           14        20

                                                     471        516        558          157       167




                                                – 369 –
APPENDIX IV             FINANCIAL INFORMATION ON THE TARGET COMPANIES


            The number of highest paid individuals which fell within the following emolument
    band:

                                                                                Three months
                                                Year ended 31 December         ended 31 March
                                               2004       2005        2006       2007        2006
                                            RMB’000    RMB’000    RMB’000    RMB’000     RMB’000
                                                                                       (unaudited)

            Nil to RMB1,000,000                     5            5       5          5           5

           During the Relevant Periods and the 31 March 2006 Corresponding Period, no
    emoluments were paid by Shanghai Sanding to the five highest paid individuals and the
    directors, as an inducement to join or upon joining Shanghai Sanding or as compensation
    for loss of office.

    10.     Property, plant and equipment

                                                        Furniture,
                                                           fixtures
                                                         and office      Motor
                                                        equipment       vehicles          Total
                                                          RMB’000      RMB’000          RMB’000

            At 1 January 2004
            Cost                                             1,452            –             1,452
            Accumulated depreciation                          (557)           –              (557)

            Net carrying amount                                895            –               895

            Year ended 31 December 2004
            Opening net carrying amount                        895            –               895
            Additions                                        1,273            –             1,273
            Depreciation                                      (296)           –              (296)

            Closing net carrying amount                      1,872            –             1,872

            At 31 December 2004
            Cost                                             2,725            –             2,725
            Accumulated depreciation                          (853)           –              (853)

            Net carrying amount                              1,872            –             1,872

            Year ended 31 December 2005
            Opening net carrying amount                      1,872            –             1,872
            Additions                                          115            –               115
            Depreciation                                      (473)           –              (473)

            Closing net carrying amount                      1,514            –             1,514



                                          – 370 –
APPENDIX IV         FINANCIAL INFORMATION ON THE TARGET COMPANIES


                                                Furniture,
                                                   fixtures
                                                 and office     Motor
                                                equipment      vehicles     Total
                                                  RMB’000     RMB’000     RMB’000


        At 31 December 2005
        Cost                                         2,840           –       2,840
        Accumulated depreciation                    (1,326)          –      (1,326)


        Net carrying amount                          1,514           –      1,514


        Year ended 31 December 2006
        Opening net carrying amount                  1,514           –      1,514
        Additions                                      158         130        288
        Depreciation                                  (493)        (12)      (505)


        Closing net carrying amount                  1,179         118      1,297


        At 31 December 2006
        Cost                                         2,998         130       3,128
        Accumulated depreciation                    (1,819)        (12)     (1,831)


        Net carrying amount                          1,179         118      1,297


        Three months ended 31 March 2007
        Opening net carrying amount                  1,179         118      1,297
        Additions                                       51           –         51
        Depreciation                                  (106)         (6)      (112)


        Closing net carrying amount                  1,124         112      1,236


        At 31 March 2007
        Cost                                         3,049         130       3,179
        Accumulated depreciation                    (1,925)        (18)     (1,943)


        Net carrying amount                          1,124         112      1,236




                                      – 371 –
APPENDIX IV            FINANCIAL INFORMATION ON THE TARGET COMPANIES


    11.   Interest in an associate

                                                                                                                As at
                                                                   As at 31 December                        31 March
                                                              2004         2005      2006                       2007
                                                           RMB’000    RMB’000     RMB’000                    RMB’000

          Unlisted equity, at cost                                 700             700              700             700
          Share of net liabilities                                   –            (370)            (560)           (560)

                                                                   700             330              140             140
          Less: Impairment                                           –               –                –            (140)

                                                                   700             330              140                –


          Particulars of the associate are as follows:

                                                                                                           Principal
                                           Paid-up                                                         activities
                      Place of           registered             Percentage of interest held by             and places of
          Name        incorporation         capital                 the Company directly                   operation
                                                      31/12/2004 31/12/2005 31/12/2006         31/3/2007

                      PRC             RMB2,000,000          35%           35%         35%           35%    Production of
                                                                                                             animation in
                                                                                                             the PRC

           Summarised financial information in respect of Shanghai Sanding’s associate is set
    out below:

                                                                                                               Three
                                                                                                              months
                                                                                                               ended
                                                                Year ended 31 December                      31 March
                                                              2004        2005       2006                       2007
                                                           RMB’000    RMB’000     RMB’000                    RMB’000

          Results for the year/period
          Revenue                                                    –             581              365                –

          Loss for the year/period                                   –          (1,064)            (539)               –

          Financial position
          Assets                                                  2,000          5,047            5,009          5,009
          Liabilities                                                 –         (4,114)          (4,620)        (4,620)

                                                                  2,000            933              389             389


                                                  – 372 –
APPENDIX IV             FINANCIAL INFORMATION ON THE TARGET COMPANIES


    12.   Inventories


                                                                                      As at
                                                        As at 31 December         31 March
                                                   2004         2005      2006        2007
                                                RMB’000    RMB’000     RMB’000     RMB’000


          Raw materials and consumables               48         32          73          11
          Work in progress                             –      5,561      10,628      10,882


                                                      48      5,593      10,701      10,893


    13.   Trade and other receivables


                                                                                      As at
                                                        As at 31 December         31 March
                                                   2004         2005      2006        2007
                                                RMB’000    RMB’000     RMB’000     RMB’000

          Trade receivables                          853        202         238        238
          Other receivables                           70        220         281        347
          Deposits                                   147        175         138        138
          Prepayments                                 56        157         320        731


                                                    1,126       754         977       1,454


           As at 31 December 2004, 2005, 2006 and 31 March 2007, the ageing analysis of the
    trade receivables was as follows:


                                                                                      As at
                                                        As at 31 December         31 March
                                                   2004         2005      2006        2007
                                                RMB’000    RMB’000     RMB’000     RMB’000


          0 – 30 days                                141        202           3          –
          31 – 60 days                                 –          –           –          3
          61 – 90 days                                 –          –           –          –
          Over 90 days                               712          –         235        235


                                                     853        202         238        238



                                          – 373 –
APPENDIX IV           FINANCIAL INFORMATION ON THE TARGET COMPANIES


    14.   Amounts due from/(to) a related company/a related party


           The related party is the ultimate beneficial owner of Shanghai Sanding. The related
    companies are companies under common control of this ultimate beneficial owner. The
    amounts due to a related company were trade receipts in advance. The amounts due from a
    related company and due to a related party were non-trade in nature.


          The amounts were unsecured, interest-free and repayable on demand.


    15.   Cash and cash equivalents


          Cash at bank earns interest at floating rates based on daily bank deposit rates.


          As at 31 December 2004, 2005, 2006 and 31 March 2007, the cash and bank balances
    of Shanghai Sanding denominated in Renminbi (“RMB”) amounted to RMB479,000,
    RMB33,000, RMB224,000 and RMB265,000 respectively. RMB is not freely convertible
    into foreign currencies. Under the PRC Foreign Exchange Control Regulations and
    Administration of Settlement, Sales and Payment of Foreign Exchange Regulations, Shanghai
    Sanding is permitted to exchange RMB for foreign currencies through banks that are
    authorised to conduct foreign exchange business.


    16.   Trade and other payables


                                                                                            As at
                                                           As at 31 December            31 March
                                                      2004         2005      2006           2007
                                                   RMB’000    RMB’000     RMB’000        RMB’000

          Trade payables                                   –         11            –            38
          Advanced receipts from customers             1,429        314          660         1,191
          Other payables                                 194        103          131           127
          Accruals                                       532        735          470           431


                                                       2,155      1,163        1,261         1,787




                                             – 374 –
APPENDIX IV             FINANCIAL INFORMATION ON THE TARGET COMPANIES


           As at 31 December 2004, 2005, 2006 and 31 March 2007, the ageing analysis of the
    trade payables was as follows:

                                                                                                    As at
                                                                 As at 31 December              31 March
                                                            2004         2005      2006             2007
                                                         RMB’000    RMB’000     RMB’000          RMB’000

          0 – 30 days                                              –           11           –         38


    17.   Registered capital

                                                                                                    As at
                                                                 As at 31 December              31 March
                                                            2004         2005      2006             2007
                                                         RMB’000    RMB’000     RMB’000          RMB’000

          Registered and paid-up capital:
            Beginning of the year/period                      1,000          1,000      3,000       3,000
            Contribution during the year/period*                  –          2,000          –           –

              End of the year/period                          1,000          3,000      3,000       3,000


          *       The additional capital was for working capital purpose.


    18.   Operating lease commitments

          At the respective balance sheet dates, the total future minimum lease payments under
    non-cancellable operating leases payable by Shanghai Sanding are as follows:

                                                                                                    As at
                                                                       As at 31 December        31 March
                                                            2004               2005      2006       2007
                                                         RMB’000          RMB’000     RMB’000    RMB’000

          Within one year                                       125           156         676        688
          In the second to fifth years                            –             –         784        616


                                                                125           156       1,460       1,304


            Shanghai Sanding leases properties under operating leases. The leases run for an
    initial period of one to three years. None of the leases include contingent rentals.


                                                 – 375 –
APPENDIX IV           FINANCIAL INFORMATION ON THE TARGET COMPANIES


    19.   Contingent liabilities


           On 12 December 2006, the related company of Shanghai Sanding,
                  (Nanjing Hong Ying Anime Entertainment Co., Limited) entered into an
    agreement with                                 for the production of an animation. Shanghai
    Sanding has provided a guarantee on the liabilities that may arise if
            (Nanjing Hong Ying Anime Entertainment Co., Limited) is in breach of the agreement.
    As at 31 December 2006 and 31 March 2007, no provision for Shanghai Sanding’s obligation
    has been made as the directors considered that it was not probable that
               (Nanjing Hong Ying Anime Entertainment Co., Limited) will be in breach of the
    agreement.


    20.   FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES


          Shanghai Sanding does not have written financial risk management policies and
    guidelines. However, the directors periodically analyse and formulate measures to manage
    Shanghai Sanding’s exposure to market risk, including principally changes in interest rates
    and currency exchange rates. Generally, Shanghai Sanding employs a conservative strategy
    regarding its risk management.


          (a)   Interest rate risk


                 Shanghai Sanding’s interest rate risk relates primarily to bank balances. Shanghai
          Sanding has not used any derivative contracts to hedge its exposure in interest rate
          risk. However, management monitors interest rate exposure closely.


          (b)   Credit risk


                 Shanghai Sanding’s maximum exposure to credit risk in the event of the
          counterparties failure to perform their obligations in relation to each class of recognised
          financial assets is the carrying amount of those assets as stated in the balance sheets.
          In order to minimise the credit risk, the management has monitored the credit status
          of customers and performed necessary procedures to ensure that follow-up action is
          taken to recover overdue debts. In addition, the management reviews the recoverable
          amount of each individual trade debt at each balance sheet date to ensure that adequate
          impairment losses are made for irrecoverable amounts. In this regard, the directors
          consider that Shanghai Sanding’s exposure to bad debts is minimal.


                Shanghai Sanding is not exposed to concentration of credit risk.




                                            – 376 –
APPENDIX IV            FINANCIAL INFORMATION ON THE TARGET COMPANIES


          (c)    Foreign currency risk


                Shanghai Sanding is not exposed to significant foreign currency risk since
          most of its business operations are transacted in RMB.


          (d)    Liquidity risk


                  Liquidity risk arises in the general funding of Shanghai Sanding’s operating
          activities. It includes the risk of not being able to fund the operating activities at
          settlement dates and liquidate positions in a timely manner at a reasonable price. As
          mentioned in note 3(a), Shanghai Sanding’s going concern and liquidity is dependent
          upon the continuing financial support from its equity owners. Provided that the equity
          owners are able to meet their commitment to provide financial support to Shanghai
          Sanding, the directors are satisfied that Shanghai Sanding will be able to meet in full
          its financial obligations as and when they fall due in the foreseeable future.


          (e)    Fair value


                The fair value of Shanghai Sanding’s financial assets and liabilities are not
          materiality different from their carrying amounts because of the immediate or short
          term maturity.


    21.   Related party transactions


          Except as disclosed elsewhere in this report, details of transactions between Shanghai
    Sanding and related parties are set out below:


                                                                                Three months
                                               Year ended 31 December          ended 31 March
                                              2004       2005        2006        2007        2006
                                           RMB’000    RMB’000    RMB’000     RMB’000     RMB’000
                                                                                       (unaudited)


          Subcontracting income from
            an associate                             –    2,650          –          –           –
          Subcontracting income from
            a related company                  5,202      3,394      1,675        658         134


          The related company is a company under common control of the ultimate beneficial
    owner of Shanghai Sanding. The related party transactions were conducted in the normal
    course of business at prices and terms agreed between the parties.


                                           – 377 –
APPENDIX IV            FINANCIAL INFORMATION ON THE TARGET COMPANIES


           The directors considered they are the key management of Shanghai Sanding. Details
    of their remuneration are set out in note 9.


    22.   Segment information


           No separate analysis of segment information by business or geographical segments is
    presented as Shanghai Sanding’s sole business is the production of animation films. Shanghai
    Sanding’s revenue, expenses, results, assets, liabilities and capital expenditure are principally
    attributable to a single geographical region, which is the PRC.


    23.   Subsequent events


          No significant event has taken place subsequent to 31 March 2007.


    24.   Subsequent financial statements


          No audited financial statements have been prepared for Shanghai Sanding in respect
    of any period subsequent to 31 March 2007.


                                                                    Yours faithfully,




                                                                   Grant Thornton
                                                             Certified Public Accountants
                                                                      Hong Kong




                                             – 378 –
APPENDIX V                              VALUATION REPORT ON THE ASSETS


      The following is the text of a business valuation report prepared by the Valuer in respect of   A1B
the Assets for the purpose of inclusion in this circular.


Room 2105, 21/F,
Office Tower, Langham Place,
8 Argyle Street, Mongkok
Kowloon, Hong Kong


20 March, 2008                                                                                        A1B


The Board of Directors
Jade Dynasty Group Limited
11/F, Safety Godown Industrial Building,
56 Ka Yip Street,
Chai Wan, Hong Kong


Dear Sirs,


      In accordance with the instructions of the board of directors of Jade Dynasty Group Limited,
we have made an appraisal for the objective as stipulated below.


OBJECTIVE


      This report was prepared to make an independent opinion on the fair market value of the
exclusive entitlement to all of the economic benefits (the “Assets”) derived from:


      –      the dealership of Bentley cars in Beijing, the PRC and the dealership of Lamborghini
             cars in Beijing, the PRC by Beijing Mei He Zhen Yong Motors Trading Limited
                                                and;


      –      the dealership of Rolls-Royce cars in Beijing, PRC of Beijing De Te Motors Trading
             Limited                                  (collectively, the “Dealership Agreements”)


      as of 4 January 2008 (the “Appraisal Date”) for the purpose of corporate internal reference
      only.


     It is our understanding that the Assets are being considered to be acquired by Jade Dynasty
Group Limited (the “Company”).




                                             – 379 –
APPENDIX V                              VALUATION REPORT ON THE ASSETS


BACKGROUND


       The Companies are principally engaged in the operation of the dealership of Bentley,
Rolls-Royce vehicles in Beijing, and Lamborghini vehicles in Beijing, and provide after-sales
services.


      The principal terms of the Dealership Agreements are as follows.


Bentley Dealership Agreement


      •     This agreement was entered into between Dah Chong Hong Motors (Bentley) Limited
            (“DCH Motors”) and Beijing Bin Li Group Limited                                 (“BJBG”)
            on 14 November 2001, pursuant to which DCH Motors granted BJBG the right to
            market and sell the Bentley automobiles, parts and accessories at retail level, and to
            provide after-sales services in Beijing, the People’s Republic of China (the “PRC”).
            On 23 March 2007, BJBG has entered into another agreement with Shanghai Bin Li
            Motors Trading Limited                                    (“          ”), which according
            to the directors of BJBG, is an affiliate company of DCH Motors, pursuant to which
                        granted BJBG the right to market and sell the Bentley automobiles, parts
            and accessories at retail level, and to provide after-sales services in Beijing, the PRC,
            without specified termination date. The agreement can be terminated with 12 months
            advance written notice by either party.


      •     The sale and marketing of the contractual products of Bentley is limited to end users
            and shall not sell to any resellers.


      •     The dealer is required to keep adequate stocks of contractual products of Bentley in
            view of the business operation and its market and servicing responsibilities.


      •     The dealer is required to commit no less than 1% of annual target sales revenue for
            advertising and marketing of the Bentley contractual products in Beijing.


      •     The dealer is required to meet the annual sales targets of Bentley motor cars products
            as reviewed and agreed by the parties to the agreement.


      •     The new dealership agreement for transferring the dealership to Beijing Mei He Zhen
            Yong Motors Trading Limited dated 1 February 2008 (subject to the completion of
            the regulatory procedures by Ministry of Commerce of the PRC) were signed in
            accordance with information provided by the Company.




                                             – 380 –
APPENDIX V                             VALUATION REPORT ON THE ASSETS


Rolls-Royce Dealership Agreement

     •     This agreement was entered into between BMW China Automative Trading Limited
           and Beijing Ying Shang Tong Trade Development Limited for the sale and marketing
           of the contractual products of Rolls-Royce and the provision of after-sales services
           for the contractual products, effective from 20 January 2006 for a period up to 31
           December 2006 in Beijing. On 5 December 2006, the relevant parties have entered
           into another agreement to extend the right for a term of 2 years from 5 December
           2006.

     •     Rolls-Royce Motor Cars China reserves the rights to sell and deliver Rolls-Royce
           Motor Cars Products in Beijing to some selective clients, such as internet customers,
           bulk purchasers & fleet users, local or national governmental bodies or agencies, etc.

     •     The dealer is required to keep adequate stocks of contractual products of Rolls-Royce
           in view of the business operation and its market and servicing responsibilities.

     •     The dealer shall arrange for adequate advertising and marketing of the Rolls-Royce
           Motor Cars Products in Beijing and is required to meet the annual sales targets as
           reviewed and agreed by the parties to the agreement.

     •     Application has been made for the transfer of the dealership to Beijing De Te Motors
           Trading Limited and the consent is expected to be obtained in the near future and in
           any event no later than 31 December 2008 in accordance with information provided
           by the Company.

Lamborghini Dealership Agreement

     •     This agreement was entered into between VAD (Tianjin) Company Limited and Beijing
           Bin Li Group Limited                               for the sale and marketing of the
           contractual products of Lamborghini and the provision of after-sales services for the
           contractual products, effective from 21 February 2005 in Beijing for an initial term of
           1 year which shall be automatically renewed for subsequent terms of 1 year unless
           terminated by either party. The directors of BJBG are of the view that BJBG has, in
           substance, obtained the right to the Lamborghini Dealership after the expiry of the
           agreement on 20 February 2007 since there is a transitional arrangement for the
           continuation of the existing mode of operations until the transfer of the Lamborghini
           Dealership to Company B.

     •     In-principle written consent to the transfer of the dealership to Beijing Mei He Zhen
           Yong Motors Trading Limited was obtained on 11 January 2008 and the new dealership
           agreement for the transfer of the dealership is expected to be obtained in or about
           June 2008 in accordance with information provided by the Company.


                                            – 381 –
APPENDIX V                                   VALUATION REPORT ON THE ASSETS


INDUSTRY REVIEW


       China has become an important force in pushing up the growth of the world’s automobile
industry. According to the China Automotive Industry Association (“CAIA”), China is the second
biggest new vehicle consumption market in the world, and the new vehicle consumption of China
represents 10.5% of the market in 2006, a 24.7% growth year-on-year in terms of the number of
units sold. According to the China Automotive Industry Association, China’s total vehicle ownership
grew a CAGR of 12.2% from 10.4m units in 1995 to 37.0m units in 2006. Total sales of passenger
cars observed a robust growth of 37%, reached 3.9m in 2006 and 80% were bought by individuals.
According to research report, the CAGR of passenger cars consumption market was 38% from
2000-2005.


       Statistics from the General Administration of Customs showed for the first eleven months in
2007, China imported 276,000 units of vehicles which valued at US$9.6 billion, an increase of
38% and 44% respectively year on year. In Chinese car market, the imported vehicle market is
mainly for niche products, which include luxury passenger cars and high-tech heavy duty trucks
due to sophisticated technology and craftsmanship involved.


                                                                        Total Sales   Year-on-year
      Rank              Country                             Unit sold      Volume           change
                                                             (in Mn)         (in %)          (in %)


      1                 United States                              17       24.7%           – 2.2%
      2                 China                                     7.2       10.5%            24.7%
      3                 Japan                                     5.7        8.3%           – 1.9%
      4                 Germany                                   3.8        5.5%             4.4%
      5                 United Kingdom                            2.7        3.9%           – 3.4%


                        Total                                   36.4        52.9%


      Source: 2007 China Automotive Industry Yearbook




                                                  – 382 –
APPENDIX V                                         VALUATION REPORT ON THE ASSETS


                                                  Volume of Automobile Sales in China

                                8,000
                                                                                          7,184
                                7,000

                                6,000                                             5,758
           thousands of units




                                                                      5,072
                                5,000
                                                           4,392
                                4,000
                                                3,249
                                3,000   2,371
                                2,000

                                1,000

                                   0
                                        2001    2002        2003      2004        2005    2006

      Source: 2003, 2005, 2006, 2007 China Automotive Industry Yearbook


BEIJING KEY ECONOMIC INDICATORS


       The premium automobile market segment is dominated by some international branded
automobile makers. The high-end automobiles consumption market targets affluent individuals,
therefore, the characteristics of the wealth segment would have an important impact on the demand
side.


       According to a world wealth research report in 2007, High New Worth Individuals (HNWIs)
and Ultra-HNWIs in China accounted for 13.4% and 28.2% respectively in Asia-Pacific Region in
2006. HNWI and ultra-HNWI are respectively defined as those with over US$1m and US$30m in
financial holdings.


      The average new worth of HNWIs was US$5 million. In particular, China has the highest
concentration of young HNWIs which 83% of HNWIs were younger than 55 years. The young
generation is more willing to spend on non-durable products and help spur sales of luxury products.


       In 2006, Beijing’s real GDP and GDP per capita were RMB787 billion and RMB50,467
respectively, a year-on-year growth of 12.8% and 11.1% respectively. Beijing is one of the biggest
consumer markets in China, in terms of per capita disposable income of urban residents was
Rmb19,978, a real increase of 12.9% from the previous year. Robust economic growth of the PRC
continues to outpace the growth rate of all countries in the Asia-Pacific region and spur consumption
and demand for imports. Total retail sales in Beijing reached RMB327.5 billion in 2006, accounting
for 4.3% of the country’s total. Beijing’s imports grew by 30% to US$45.6 billion in 2006, where


                                                        – 383 –
APPENDIX V                              VALUATION REPORT ON THE ASSETS


Japan, Germany and the US, major motor vehicle manufacturing countries in the world, are the top
3 sources of Import. With the strong economic growth and the launch of the 2008 Olympic Games
in Beijing, high level of growth in retail sales for the foreseeable future is expected. Beijing’s
service sector accounted for 70% of the city’s GDP in 2006 of which 13.5% is by the whole-sale
trade and retail trade sector.


                                                2006                       Jan – Aug 2007
                                                   Year-on-year                    Year-on-year
      Economic Indicators                  Value         change            Value         change
                                                          (in %)                          (in %)


      Gross Domestic Product
        (RMB bn)                           787.0             12.81          406.43           12.11
      Per Capita GDP                      50,467             11.1
      Added Value Output
      – Primary industry (RMB bn)            9.8              0.61            3.53            -1.71
      – Secondary industry
        (RMB bn)                           219.2             10.51          108.33           12.91
      – Tertiary industry (RMB bn)         558.1             14.11          294.63           11.91


      Value-added Industrial
        Output2 (RMB bn)                   176.7             14.11          124.5            13.91
      Fixed-assets Investment
        (RMB bn)                           308.6             18.9           194.3            18.6


      Retail Sales (RMB bn)                327.5             12.8           245.2            15.0

      Inflation (Consumer Price
        Index, %)                              –              0.9               –             1.3


      Exports (US$ bn)                      24.9             35.6            18.8            21.7
      – By FIEs (US$ bn)                    16.6             39.7            13.3            32.0
      Imports (US$ bn)                      45.6             30.0            33.6            13.9
      – By FIEs (US$ bn)                    22.3             47.4            17.7            27.8


      Foreign Direct Investment
      – Number of projects                 2,106             -1.4             4834            2.1
      – Contracted amount
        (US$ bn)                             7.3             12.0
      – Utilized amount (US$ bn)             4.6             29.1             1.54           10.5




                                             – 384 –
APPENDIX V                                     VALUATION REPORT ON THE ASSETS


                 1
      Notes:         In real terms

                 2
                     For all state-owned enterprises and other forms with annual sales over RMB 5 million

                 3
                     First half of 2007

                 4
                     First quarter of 2007


      Sources:       Beijing Statistical Yearbook 2007, China’s customs statistics 8.2007


       The private car ownership in China has been growing significantly since 2000. Strong
economic growth along with increase in disposable income implies a rise in living standards and
purchasing power, together with improved road transportation infrastructure, these factors should
catalyze the robust demand for automobiles.


       The auto industry is prosperous in China. In particular, a rosy prospect is anticipated in the
high grade car market as exclusive automobiles are designed to cater to the very specific clientele,
which demand outpaces supply due to scarcity. The relatively limited in volume in addition to the
premium price means it is not accessible to everyone. In view of this unique feature, the niche
market faces relatively low pressure on price cut and less keen competition as observed in the low
to middle grade car market, thus the profit margin can be maintained. These premium priced
vehicles have high collection value as it must possess sophisticated quality and are manufactured
by fine craftsmanship.


       According to a white paper the world’s top auto markets by 2030, China and India are
expected to account for 69% by 2030 (from 26% in 2005) of the consumption market, replacing
the mature market of United States, Europe and Japan. Particularly, China is expected to play an
influential role in the market, for instance, BMW Group achieved its highest growth in the Chinese
markets (China, Hong Kong, Taiwan) in 2006, which unit sales surged by 35% year-on-year. China
is also currently the second largest market for BMW’s 7 series. The robust economic growth and
high disposable income are expected to accelerate the consumption of higher-end vehicles.




                                                     – 385 –
APPENDIX V                               VALUATION REPORT ON THE ASSETS


DEFINITION AND BASIS OF APPRAISAL


       We have been asked to evaluate the fair market value of the Assets. Fair market value is
defined as the estimated amount at which an asset might be expected to exchange between a
willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein
the parties had each acted knowledgeably, prudently and without compulsion.


       Regarding the appraisal on the Assets, as part of our analysis we have been furnished with
information prepared by the Company, including but not limited to the dealership agreements of
Rolls-Royce, Bentley, Lamborghini, and historical car sales figures. We have also conducted personal
interviews with senior management of the Company and the companies in relation to the Assets.
We have relied to a considerable extent on such information provided by the Company and the
companies in relation to the Assets and our internal market research in China auto market from
various channels, such as Bloomberg, CAIA, General Administration of Customs and websites.


APPRAISAL METHODOLOGY


      There are three generally accepted valuation methodologies, namely market approach, cost
approach and income approach.


       Market Approach considers prices recently paid for similar assets, with adjustment made to
the indicated market prices to reflect condition and utility of the appraised assets relative to the
market comparables. Assets for which there are an established used market may be appraised by
this approach.


      Cost Approach considers the cost to reproduce or replace in new condition the assets appraised
in accordance with current market prices for similar assets, as evidenced by observed condition or
obsolescence present, whether arising from physical, functional or economic causes. Actual costs
incurred for the upgrading of the assets to be appraised will also be considered in this approach.
The cost approach generally furnishes the most reliable indication of value for assets without a
known used market.


       Income approach serves to estimate value by discounted cash flow method. With this method,
the fair market value of the Assets is equal to the present value of the future economic benefits of
the ownership of the Assets. This approach involves estimation of future benefits of the assets and
determination of appropriate discount rate. The discount rate has to reflect systematic as well as
unsystematic risks.




                                              – 386 –
APPENDIX V                                 VALUATION REPORT ON THE ASSETS


       The cost of equity explaining systematic risk was developed through the Capital Asset
Pricing Model (“CAPM”). The CAPM states that an investor requires excess returns to compensate
for any risk that is correlated to the risk in the return from the stock market as a whole, but
requires no excess return for other risks. Risks that are correlated with the return from the stock
market are referred to as systematic; other risks are referred to as nonsystematic. According to the
CAPM, the cost of equity is equal to the return on risk-free securities, plus the average comparable
company’s systematic risk (beta), multiplied by the market risk premium.


       In this appraisal, we have considered income approach and market approach. Finally, we
concluded market approach would be more appropriate in view of the difficulty of estimation of
reliable future income streams of the Assets and available comparable companies in the market.


       With the market approach, it is commonly accepted that price-to-earning ratio (“PE”) would
be a fair indicators to appraise the fair market value of the Assets.


      PE comparison fully reflects the market information about the fair market value of the
similar assets, including potential growth of future economic benefits from the Assets and its
relevant discount rate.


       Size risk, lack of marketability and company-specific risks have accounted for unsystematic
risk and appropriate adjustments had been made in determination of concluded opinion on the
value of the Assets.


INVESTIGATION


       We confirm that we have made relevant inquiries and obtained further information we
considered necessary for the purpose of providing our opinion. We have discussed with the
management of the Company and the companies in relation to the Assets in respect of the history
and nature of the business and the operation of the Assets, and reviewed the information provided
by them. We have assumed that such information, opinions and representation provided to us are
true and accurate and will continue to be true in the future.


      Before arriving at our opinion of value, we have considered, inter alia, the following factors:


      •      the nature of the business;


      •      the economic outlook of Beijing in the PRC in general;


      •      the general outlook of auto industry in China;


      •      future challenges and developments of the business of the Assets;



                                              – 387 –
APPENDIX V                               VALUATION REPORT ON THE ASSETS


      •     the financial condition of the Assets;


      •     market-derived investment returns of entities engaged in a similar line of business;
            and


      •     the specific risk of the Assets.


ASSUMPTIONS


       In preparing this appraisal, a number of assumptions had to be established for supporting
our concluded opinion on the fair market value of the Assets. The following assumptions were
considered to be applicable to the appraisals in connection with the Assets and have significant
sensitivity effects in this appraisal. These assumptions have been re-evaluated and validated in
order to provide a reasonable basis in arriving at our assessed value. The major assumptions
adopted in this appraisal were as follows:


      1.    Political Environment


            There will be no major changes in the existing political, legal, and economic conditions
      in China.


      2.    Continuity of the Dealership Agreements


            It was assumed that the Dealership Agreements would not be terminated in future.


      3.    Management


            The Company will retain competent management, key personnel, and technical staff
      to support their ongoing operation.


      4.    Market Trend


            Trends and market conditions for the operation of the relevant market in China will
      not deviate significantly from economic forecasts. Variations between existing and future
      consumption behaviors were insignificant.


      5.    No Significant Failure in the Business


            The Company did not suffer from any significant business failure in the past period
      which we could not access its relevant internal information.




                                               – 388 –
APPENDIX V                               VALUATION REPORT ON THE ASSETS


      6.     In-line Development with the Market

             The business development of the Company was in line with the general development
      in the market.

      7.     PE ratio

             Having considered comparable companies, including Dah Chong Hong (1828.HK as
      at 4 January 2008) (13.84X PE as at 4 January 2008), Tan Chong (693.HK) (15.80X PE as
      at 4 January 2008), Denway Motors (203.HK) (16.57X PE as at 4 January 2008) and
      Launch Tech (8196.HK) (14.53X PE as at 4 January 2008), an average PE of 15.19 was
      concluded for this appraisal. These four companies included two, one and one companies
      principally engaged in car dealership, car spare parts and equipment, and car manufacture
      and selling business in China respectively. All of them were profitable and provided relevant
      PE ratio for comparison with the Assets. Besides, such mix of comparable companies would
      provide more reliable reference in our opinion.

      8.     Discount to Lack of Marketability

            In view of lack of marketability of the Assets and the proposed acquisition of the
      Company, 40% discount for lack of marketability was considered as appropriate to be
      applied in this appraisal.

APPRAISAL COMMENTS

       From the above Industry Review, it is obvious that there is a great opportunity in the
automobile industry in China. Luxury vehicles would definitely be one of fastest growing sectors
in the industry.

       Rapidly growing market provides huge opportunities as well as high risks in the automobile
industry in China. Major risk factors to the high grade vehicle consumption market in general
includes but not limit to increased fuel prices, high inflation, etc. The high growth of automobile
industry in China was attributed to the continuously economic growth in general in China. It is
difficult to predict whether such high growth can be sustainable in the midst of uncertain global
economy and high inflation in China. In our opinion, it would not be very serious in the short run
in view of the economic development of China in the past years and the forthcoming years as
generally predicted by economists in the globe. Nevertheless, the value of the Assets being appraised
includes the future economic benefits in long run which might not be easily estimated. At this
moment, most of the assets would be valued at the high-end side in China due to China play in
most of capital markets and investment industry. It is worthy to pay attention to this phenomenon.




                                              – 389 –
APPENDIX V                               VALUATION REPORT ON THE ASSETS


       Besides, non-exclusive dealership has to face competition from dealerships of other brands
and dealership in nearby territories of the same brand. Whether the companies managing the
Assets will continue to develop successfully will highly depend on the management’s ability to
ensure a long-term dealer relationship with the premium car manufacturers and maintain the
exclusive clientele. However, it is our understanding that it is a common practice to be granted
non-exclusive dealership agreements in the industry. Thus, we reckon that the Assets would not
stand in an adverse position in competition due to this respect.


       The most important factor for the value concluded is the continuity of the Dealership
Agreements. In our opinion, the Dealership Agreements would not be terminated or would be
renewed provided that the manufacturers would not change their strategy of adopting external
distributors as their major channel of distribution and the performance of the companies of the
Assets would not be substantially deteriorated in future.


LIMITING CONDITIONS


      •     We have not investigated the title to or any liabilities against the Assets.


      •     This appraisal reflects facts and conditions existing at the date of this report.
            Subsequent events have not been considered, and we have no obligation to update our
            report for such events and conditions.


      •     GA Appraisal Limited shall not be required to give testimony or attendance in court
            or to any government agency by reason of this appraisal, with reference to the Assets
            described herein, unless prior arrangements have been made.


      •     No opinion is intended to be expressed for matters which require legal or other
            specialized expertise or knowledge, beyond that customarily employed by appraisers.


      •     Our conclusions assume continuation of prudent management policies over whatever
            period of time is reasonable and necessary to maintain the character and integrity of
            the assets valued.


      •     We assume that there were no hidden or unexpected conditions associated with the
            relevant companies that might adversely affect the reported value of the Assets. Further,
            we assume no responsibility for changes in market conditions which may require an
            adjustment in the appraisal.




                                              – 390 –
APPENDIX V                                        VALUATION REPORT ON THE ASSETS


        •       This report is confidential to the client for the specific purpose to which it refers. In
                accordance with our standard practice, we must state that this report and appraisal
                were for the use only of the party to whom it is addressed and no responsibility is
                accepted to any third party for the whole or any part of its contents. In case that there
                were losses arising from the breach of this provision, we cannot accept any
                responsibility whatsoever to any person.


OPINION OF VALUE


      Based on the aforesaid investigation, analysis and appraisal method employed, it is our
opinion that, as of 4 January 2008, the fair market value of the Assets is reasonably stated in the
range of HONG KONG DOLLARS FOUR HUNDRED AND TWENTY-SIX MILLION (HKD426
million) AND HONG KONG DOLLARS FOUR HUNDRED AND EIGHTY MILLION (HKD480
million).


       The opinion of value was based on generally accepted appraisal procedures and practices
with reference to the Uniform Standards of Professional Appraisal Practice (USPAP), published by
the Appraisal Foundation authorized by the Congress in US which is widely adopted by international
appraisal industry for valuation of different kinds of tangible and intangible assets, that rely
extensively on the use of numerous assumptions and the consideration of many uncertainties, not
all of which can be easily quantified or ascertained.


       We hereby certify that we have neither present nor prospective interests in the Assets or the
value reported.


                                                                               Yours faithfully,
                                                                             For and on behalf of
                                                                          GA APPRAISAL LIMITED
                                                                             K. Y. Mak CFA CPA
                                                                                   Director

Note:   Mr. K.Y. Mak, CFA CPA, have conducted business appraisal in the Greater China region since 1997. Mr. Mak has
        extensive experience in appraisal for the industries of automobile, retails, manufacture, information technology,
        pharmaceuticals, energy, infrastructure, etc.




                                                        – 391 –
APPENDIX VI                         VALUATION REPORT ON THE PROPERTY
                                     INTERESTS OF THE ENLARGED GROUP


       The following is the text of a letter, a summary of value and a valuation certificate prepared   R14
by the Valuer in respect of the property interests of the Enlarged Group for the purpose of inclusion   R14
in this circular.                                                                                       A1B


Room 2105, 21st Floor
Office Tower
Langham Place
8 Argyle Street
Mongkok
Kowloon
Hong Kong


Date          :     20 March 2008                                                                       A1B


The Board of Directors
Jade Dynasty Group Limited
11th Floor
Safety Godown Industrial Building
56 Ka Yip Street
Chai Wan
Hong Kong


Dear Sirs,


       In accordance with your instructions to value the properties in which Jade Dynasty Group
Limited (the “Company”) and its subsidiaries (hereinafter together referred to as the “Group”)
have interests in Hong Kong and the People’s Republic of China (the “PRC”) or are planning to
acquire in 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 the capital value of the property interests as at 31 January 2008 (the “date
of valuation”).


       The valuation is our opinion of market value which in accordance with the Valuation Standards
on Properties of the Hong Kong Institute of Surveyors is defined as “the estimated amount for
which a property should exchange on the date of valuation between a willing buyer and a willing
seller in an arm’s-length transaction after proper marketing wherein the parties had each acted
knowledgeably, prudently, and without compulsion”.




                                              – 392 –
APPENDIX VI                          VALUATION REPORT ON THE PROPERTY
                                      INTERESTS OF THE ENLARGED GROUP


       We have valued the property interests in Group I by the direct comparison approach assuming
sale of the property interests in their existing state, with the benefit of immediate vacant possession
and by making reference to comparable sale transactions as available in the relevant market.


       We have attributed no commercial value to the property interests in Groups II & III, which
are leased or planning to be acquired by the Group, due either to the short-term nature of the
leases or the prohibition against assignment or sub-letting or otherwise due to the lack of substantial
profit rents.


      Our valuation has been made on the assumption that the seller sell the property interests in
the market without the benefit of a deferred term contract, leaseback, joint venture, management
agreement or any similar arrangement which could serve to affect the value of the property interests.


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


      In valuing the property interests, we have complied with all the requirements contained in
Chapter 5 and Practice Note 12 to the Rules Governing the Listing of Securities issued by The
Stock Exchange of Hong Kong Limited; the RICS Appraisal and Valuation Standards (5th Edition
May 2003) published by the Royal Institution of Chartered Surveyors; and the HKIS Valuation
Standards on Properties (1st Edition January 2005) published by the Hong Kong Institute of
Surveyors.


      We have relied to a very considerable extent on the information given by the Group and
have accepted advice given to us on such matters as tenure, planning approvals, statutory notices,
easements, particulars of occupancy, lettings, floor area and all other relevant matters.


       We have been provided with copies of title documents and tenancy agreements relating to
the property interests and have caused searches to be made at the Hong Kong Land Registry in
relation to the property interests located in Hong Kong. However, we have not searched the
original documents to verify ownership or to ascertain any amendment.




                                               – 393 –
APPENDIX VI                          VALUATION REPORT ON THE PROPERTY
                                      INTERESTS OF THE ENLARGED GROUP


        We have been, in some instances, provided by the Group with copy extracts of title documents
and tenancy agreements relating to the properties in the PRC. Where possible, we have examined
the original documents to verify the existing titles to the property interests in the PRC and any
material encumbrances that might be attached to the property interests or any lease amendments
which may not appear on the copies handed to us. We have relied considerably on the advice given
by the Company’s PRC legal advisor – Logion Law Firm, concerning the validity of the Group’s
title and interests to the property.


       We have not carried out detailed site measurements to verify the correctness of the floor
areas in respect of the properties but have assumed that the floor areas shown on the documents
and official floor plans handed to us are correct. All documents and contracts have been used as
reference only and all dimensions, measurements and areas are approximations. No on-site
measurement has been taken. We have also assumed that there was not any material change of the
properties in between date of our inspection and the valuation date.


       We have inspected the exterior and, where possible, the interior of the properties. However,
no structural survey has been made, but in the course of our inspection, we did not note any
serious defects. We are not, however, able to report whether the properties are free of rot, infestation
or any other structural defects. No tests were carried out on any of the services. We have assumed
that utility services, such as electricity, telephone, water, etc., are available.


       We have not arranged for any investigation to be carried out to determine whether or not
high alumina cement concrete or calcium chloride additive or pulverized fly ash, or any other
deleterious material has been used in the construction of the properties. We are therefore unable to
report that the properties are free from risk in this respect. For the purpose of this valuation, we
have assumed that deleterious material has not been used in the construction of the properties.

      We have had no reason to doubt the truth and accuracy of the information provided to us by
the Group. We have also sought confirmation from the Group that no material factors have been
omitted from the information supplied. We consider that we have been provided with sufficient
information to reach an informed view, and we have no reason to suspect that any material
information has been withheld.


      We have not undertaken a survey to determine whether the mechanical and electrical systems
within the properties (or the building or development in which they are located) would be adversely
affected on or after the year 2000 and as such have assumed that the properties and those systems
would be unaffected.




                                                – 394 –
APPENDIX VI                                VALUATION REPORT ON THE PROPERTY
                                            INTERESTS OF THE ENLARGED GROUP


      When the property is located in a relatively under-developed market, such as the PRC, those
assumptions are often based on imperfect market evidence. A range of values may be attributable
to the property depending upon the assumptions made. While the valuer has exercised his
professional judgement in arriving at the value, investors/readers are urged to consider carefully
the nature of such assumptions that are disclosed in the valuation report and should exercise
caution in interpreting the valuation report.


      Wherever the content of this report is extracted and translated from the relevant documents
supplied in Chinese context and there are discrepancies in wordings, those parts of the original
documents will take prevalent.


        Unless otherwise stated, all monetary sums stated in this report are in Hong Kong Dollars.


        Our valuations are summarized below and the valuation certificates are attached.


                                                                                     Yours faithfully,
                                                                                   For and on behalf of
                                                                                 GA Appraisal Limited
                                                                              Evan K L Yuen MRICS MHKIS
                                                                             Registered Professional Surveyor
                                                                             General Manager – Real Estate

Note:   Mr. Evan K L Yuen is a Chartered Valuation Surveyor and a Registered Professional Surveyor, who has more than
        13 years’ experience in the valuation of properties in the PRC, Hong Kong and the South East Asia. Mr. Evan K L
        Yuen is also a valuer on the List of Property Valuers for Undertaking Valuations for Incorporation or Reference in
        Listing Particulars and Circulars and Valuations in Connection with Takeovers and Mergers published by the
        HKIS.




                                                        – 395 –
APPENDIX VI                      VALUATION REPORT ON THE PROPERTY
                                  INTERESTS OF THE ENLARGED GROUP


                                  SUMMARY OF VALUES


Group I: Property interests owned and occupied by the Group in Hong Kong


                                                                               Capital value
                                                                            in existing state
                                                                                        as at
No.   Property                                                             31 January 2008
                                                                                        HK$


1.    Eleventh Floor, Safety Godown Industrial Building,                         32,800,000
      No. 56 Ka Yip Street, Chaiwan, Hong Kong


                                                           Sub-total:            32,800,000


Group II: Property interests rented and occupied by the Group in the PRC


                                                                               Capital value
                                                                            in existing state
                                                                                        as at
No.   Property                                                             31 January 2008
                                                                                        HK$


2.    Room Nos. 501-2 and 509-12, Level 5, Oriental Plaza,              No commercial value
      No. 1072 Jian She Road, Lo Wu District, Shenzhen Shi,
      Guangdong Province, The People’s Republic of China


3.    Room No. 505, Level 5, Oriental Plaza,                            No commercial value
      No. 1072 Jian She Road, Lo Wu District,
      Shenzhen Shi, Guangdong Province,
      The People’s Republic of China


4.    Flat Unit No. 201, Level 2,                                       No commercial value
      Villa Block No. D3, Jin Xing Garden,
      No. 1001 Chun Feng Road, Lo Wu District, Shenzhen Shi,
      Guangdong Province, The People’s Republic of China




                                           – 396 –
APPENDIX VI                       VALUATION REPORT ON THE PROPERTY
                                   INTERESTS OF THE ENLARGED GROUP


                                                                          Capital value
                                                                       in existing state
                                                                                   as at
No.   Property                                                        31 January 2008
                                                                                   HK$


5.    Flat Unit No. 301, Level 3,                                  No commercial value
      Villa Block No. D3, Jin Xing Garden,
      No. 1001 Chun Feng Road, Lo Wu District, Shenzhen Shi,
      Guangdong Province, The People’s Republic of China


6.    Flat Unit No. 302, Level 3,                                  No commercial value
      Villa Block No. D3, Jin Xing Garden,
      No. 1001 Chun Feng Road, Lo Wu District, Shenzhen Shi,
      Guangdong Province, The People’s Republic of China


7.    Eastern Portion of Villa Block No. C4, Jin Xing Garden,      No commercial value
      No. 1001 Chun Feng Road, Lo Wu District, Shenzhen Shi,
      Guangdong Province, The People’s Republic of China


8.    Flat Unit No. 16A, Level 16,                                 No commercial value
      Zi Jin Court, Guangdong Garden,
      No. 1B Nan Hu Road, Lo Wu District, Shenzhen Shi,
      Guangdong Province, The People’s Republic of China


9.    Flat Unit No. 22D, Level 22,                                 No commercial value
      Fu Rong Court, Guangdong Garden,
      No. 1B Nan Hu Road, Lo Wu District, Shenzhen Shi,
      Guangdong Province, The People’s Republic of China


10.   Flat Unit No. 13A, Level 13, North Tower, Oriental Palace,   No commercial value
      No. 3028 Nan Hu Road, Lo Wu District, Shenzhen Shi,
      Guangdong Province, The People’s Republic of China


11.   Flat Unit No. 1302, Level 13, Block C, Carrianna Plaza,      No commercial value
      No. 2002 Ren Min South Road, Lo Wu District, Shenzhen Shi,
      Guangdong Province, The People’s Republic of China




                                            – 397 –
APPENDIX VI                      VALUATION REPORT ON THE PROPERTY
                                  INTERESTS OF THE ENLARGED GROUP


                                                                             Capital value
                                                                          in existing state
                                                                                      as at
No.   Property                                                           31 January 2008
                                                                                      HK$


12.   Room No. 510, Level 5, Guan Cheng Building,                     No commercial value
      Nos. 23-25 Ci You Second Road, Rams New City,
      Yue Xiu District, Guangzhou Shi,
      Guangdong Province, The People’s Republic of China


13.   Portion of Levels 1-6, No. 162 Long Xi Road,                    No commercial value
      Wu Zhong District, Suzhou Shi,
      Jiangsu Province, The People’s Republic of China


14.   Unit No. 4B, Level 4,                                           No commercial value
      Block 28 Nan Chan Si Commercial City, Huai Gu Road,
      Nan Chang District, Wuxi Shi,
      Jiangsu Province, The People’s Republic of China


15.   Levels 3 & 4, Block B, Research & Development Building,         No commercial value
      No. 2 Chuang Ye South Road, High-tech Zone,
      Pu Kou District, Nanjing Shi,
      Jiangsu Province, The People’s Republic of China


16.   Portion of Level 5,                                             No commercial value
      Shanghai Optical Communication Company Building,
      No. 15 Gui Qing Road, Xuhui District,
      Shanghai Municipality, The People’s Republic of China


17.   Portion of Level 25, Office Tower 1, Henderson Centre,          No commercial value
      No. 18 Jian Guo Men Nei Avenue, Dong Cheng District,
      Beijing Municipality, The People’s Republic of China



                                                         Sub-total:                    Nil




                                           – 398 –
APPENDIX VI                      VALUATION REPORT ON THE PROPERTY
                                  INTERESTS OF THE ENLARGED GROUP


Group III: Leased property interests to be acquired by the Group in the PRC


                                                                              Capital value
                                                                           in existing state
                                                                                       as at
No.   Property                                                            31 January 2008
                                                                                       HK$


18.   Portion of Levels 24, 25 and 26,                                No commercial value
      Office Tower 1, Henderson Centre,
      No. 18 Jian Guo Men Nei Avenue, Dong Cheng District,
      Beijing Municipality, The People’s Republic of China


19.   Shop Unit No. 9 on Level 1, The Regent Beijing,                 No commercial value
      No. 99 Jin Bao Street, Dong Cheng District,
      Beijing Municipality, The People’s Republic of China


20.   Shop Unit Nos. 6, 7 & 8 on Level 1, The Regent Beijing,         No commercial value
      No. 99 Jin Bao Street, Dong Cheng District,
      Beijing Municipality, The People’s Republic of China


21.   Portion of Level 1, Scitech Plaza,                              No commercial value
      No. 22 Jian Guo Men Wai Avenue, Chao Yang District,
      Beijing Municipality, The People’s Republic of China


22.   Level 1, Area No. 2, Block A, Chuang Xin Building,              No commercial value
      No. 12 Hong Da North Road,
      Economic and Technology Development Area, Daxing District,
      Beijing Municipality, The People’s Republic of China


23.   Unit Nos. 101 & 102, Level 1, Block A, Hao Li Building,         No commercial value
      No. 18 Long Qing Street,
      Economic and Technology Development Area, Daxing District,
      Beijing Municipality, The People’s Republic of China



                                                        Sub-total:                      Nil


                                                     Grand-total:               32,800,000




                                           – 399 –
APPENDIX VI                              VALUATION REPORT ON THE PROPERTY
                                          INTERESTS OF THE ENLARGED GROUP


                                     VALUATION CERTIFICATE


Group I: Property interests owned and occupied by the Group in Hong Kong

                                                                                                       Capital value in
                                                                                                     existing state as at
     Property                Description and tenure                Particular of occupancy             31 January 2008
                                                                                                                    HK$


1.   Eleventh Floor,         The property comprises an             We have been informed                     32,800,000
     Safety Godown           industrial floor on Eleventh          that the property was
     Industrial Building,    Floor of a 13-storey industrial       owner-occupied primarily               (100% interest
     No. 56 Ka Yip Street,   building completed in about           as ancillary office,                      attributable
     Chaiwan,                1988.                                 workstations and storage,               to the Group:
     Hong Kong                                                     as at the date of valuation.             32,800,000)
                             The property has a gross floor
     99/1510th equal         area of approximately 3,388.15
     undivided shares of     sq.m. (36,470.00 sq.ft.).
     and in Chai Wan
     Inland Lot Nos. 112     The property is held under
     and 115                 Conditions of Sale Nos. 11487
                             and 11494 both for a term of 75
                             years renewable for 75 years
                             commencing from 12 February
                             1981 and 27 March 1981
                             respectively.


                             Total Ground Rent of the 2 Lots
                             payable to Government is
                             HK$2,000 per annum.


     Notes:–


     1.   The current registered owner of the property is Jade Dynasty Publications Limited, in which the Company
          holds 100% interest.


     2.   The property is subject to 6 Modification Letters and Deed of Mutual Covenant with Plan.


     3.   The property is subject to Mortgage to secure general banking facilities to an unlimited extent in favour of
          Chong Hing Bank Limited which was previously known as Liu Chong Hing Bank Limited.


     4.   The building falls within an area zoned for “Industrial” on Chai Wan Outline Zoning Plan No. S/H20/17 dated
          November 2005.




                                                         – 400 –
APPENDIX VI                                   VALUATION REPORT ON THE PROPERTY
                                               INTERESTS OF THE ENLARGED GROUP


Group II: Property interests rented and occupied by the Group in the PRC

                                                                                                        Capital value in
                                                                                                      existing state as at
     Property                   Description                         Particular of occupancy             31 January 2008
                                                                                                                     HK$


2.   Room Nos. 501-2            The property comprises 6            The property is leased to        No commercial value
     and 509-12, Level 5,       adjoined office units on Level 5    the Group from an
     Oriental Plaza, No.        of a 26-storey mixed commercial     independent third party                (100% interest
     1072 Jian She Road,        and office building built over a    for a term of 2 years              attributable to the
     Lo Wu District,            level of basement and completed     commencing from 1 July                         Group:
     Shenzhen Shi,              in about 1991.                      2007 at a monthly rent of        No commercial value)
     Guangdong Province,                                            RMB45,339 (exclusive of
     The People’s               The property has a total gross      management fees and
     Republic of China          floor area of approximately         utility charges).
                                889.00 sq.m. (9,569.20 sq.ft.).
                                                                    We have been informed
                                                                    that the property was
                                                                    occupied by the Group
                                                                    primarily as workstations
                                                                    and office, as at the date
                                                                    of valuation.


     Notes:–


     1.   The owner of the property is Success Mark Industries Limited.


     2.   Pursuant to a tenancy agreement signed between Success Mark Industries Limited and
                        (Yuk Long Culture Development (Shenzhen) Company Limited) dated 19 March 2007, the property
          is leased to the Group for a term of 2 years commencing from 1 July 2007 to 30 June 2009 at a monthly rent of
          RMB45,339 (exclusive of management fees and utility charges). Subletting or assignment of the lease is
          prohibited.


     3.   The Landlord, Success Mark Industries Limited, is an independent third party which is not connected with and
          is independent of, any of directors, chief executives or shareholders of the Company or any of its subsidiaries,
          or any of their respective associates.


     4.   The Tenant is                                   (Yuk Long Culture Development (Shenzhen) Company Limited),
          in which the Company holds 100% interest.


     5.   We have been provided with a legal opinion on the legality of the tenancy of the property issued by the
          Company’s PRC legal adviser, which contains, inter alia, the following:–


          (i)    The Landlord has obtained the Real Estate Ownership Certificate in question and has the right to lease
                 out the property.


          (ii)   The tenancy agreement which had been registered with the relevant government authority is legal, valid,
                 enforceable and binding upon both the Landlord and Tenant.


                                                         – 401 –
APPENDIX VI