<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 20-F

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006

                        COMMISSION FILE NUMBER: 001-12126

                            CHINA ENTERPRISES LIMITED
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                                     BERMUDA
                 (JURISDICTION OF INCORPORATION OR ORGANIZATION)

    31ST FLOOR, BANK OF AMERICA TOWER, 12 HARCOURT ROAD, CENTRAL, HONG KONG
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)

 Securities registered or to be registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
                      NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS       WHICH REGISTERED
-------------------   ------------------------
<S>                   <C>
        N/A                     N/A
</TABLE>

Securities registered or to be registered pursuant to Section 12(g) of the Act:

                     COMMON STOCK, PAR VALUE $0.01 PER SHARE
                                (Title of Class)

Securities for which there is a reporting obligation pursuant to section l5(d)
of the Act:

                                      NONE
                                (Title of Class)

Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report.

                         Common Stock: 9,017,310 shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.

                                  [ ] Yes   [X] No

If this is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.

                                  [ ] Yes   [X] No

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                  [ ] Yes   [X] No

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act (check
one):

[ ] Large accelerated filer   [ ] Accelerated filer   [X] Non-accelerated filer

Indicate by check mark which financial statement item the registrant has elected
to follow.

[ ] Item 17   [X] Item 18

If this is an annual report, indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act).

[ ] Yes   [X] No

<PAGE>

                           FORWARD-LOOKING STATEMENTS

     This annual report contains certain forward-looking statements within the
meaning of Section 21E of the Securities Act of 1934, as amended. These
forward-looking statements are, by their nature, subject to significant risks
and uncertainties, and include, without limitation, statements relating to:

     -    our business strategy;

     -    our ability to finance out business strategy;

     -    future developments in the tire industry in China and changes in
          government policies;

     -    future developments in the Asian travel industry;

     -    future developments in the real estate industry in China, and

     -    other statements relating to our future business development and
          financial performance.

     The words "anticipate", "believe", "estimate", "expect", "intend", "plan",
"may" and similar expressions, as they relate to us, are intended to identify
certain of such forward-looking statements. We do not intend to update these
forward-looking statements except as required by the U.S. securities laws.

     These forward-looking statements reflect our current views with respect to
future events and are not a guarantee of future performance. They are based upon
various assumptions, many of which are based, in turn, upon further assumptions,
including without limitation, management's examination of historical operating
trends, data contained in the Company's records and other data available from
third parties. Although the Company believes that these assumptions were
reasonable when made, because these assumptions are inherently subject to
significant uncertainties and contingencies which are difficult or impossible to
predict and are beyond the Company's control, there can be no assurance that the
company will achieve or accomplish these expectations or beliefs.

     In addition to these important factors and matters discussed elsewhere
herein, there are a number of important factors that, in the Company's view,
could cause actual results to differ materially from those discussed in the
forward-looking statements, including without limitation, the strength of world
economies and currencies, general market conditions, changes in general domestic
and international political conditions, and other matters described in the "Risk
Factors" included in this annual report or otherwise described from time to time
in the reports the Company files with the Securities and Exchange Commission.
<PAGE>

                            EXCHANGE RATE INFORMATION

     Unless otherwise specified, all references in this document to "U.S.
Dollars", "Dollars", "US$" or "$" are to United States dollars; all references
to "Renminbi" or "Rmb" are to Renminbi, which is the legal tender currency of
the People's Republic of China (the "PRC" or "China"); all references to "HK$"
are to Hong Kong dollars, which is the legal tender currency of the Hong Kong
Special Administrative Region ("Hong Kong"). Translation of amounts from
Renminbi to U.S. Dollars for the convenience of the reader has been made in this
document at US$1.00 to Rmb7.8041, the exchange rate quoted by the noon buying
rate from Federal Reserve Bank of New York on December 29, 2006. No
representation is made that the Renminbi amounts could have been, or could be,
converted into U.S. Dollars at that or at any other rate. See section "Exchange
Rate Information" under "Item 3. Key Information" in this annual report for more
details on the exchange rate between Renminbi and US Dollars.

     References and statements contained in this document regarding China do not
apply to Taiwan or the Republic of China.

<PAGE>

                                TABLE OF CONTENTS

PART I
   Item 1   Identity of Directors, Senior Management and Advisers
   Item 2   Offer Statistics and Expected Timetable
   Item 3   Key Information
   Item 4   Information on the Company
   Item 5   Operating and Financial Review and Prospects
   Item 6   Directors, Senior Management and Employees
   Item 7   Major Shareholders and Related Party Transactions
   Item 8   Financial Information
   Item 9   The Offer and Listing
   Item 10  Additional Information
   Item 11  Quantitative and Qualitative Disclosure about Market Risk
   Item 12  Description of Securities Other than Equity Securities

PART II
   Item 13  Defaults, Dividend Arrearages and Delinquencies
   Item 14  Material Modifications to the Rights of Security Holders and Use of
            Proceeds
   Item 15  Controls and Procedures
   Item 16  Reserved
   Item 16A Audit Committee Financial Expert
   Item 16B Code of Ethics
   Item 16C Principal Accountant Fees and Services
   Item 16D Exemptions from the Listing Standards for Audit Committees
   Item 16E Purchases of Equity Securities by the Issuer and Affiliated
            Purchasers

 PART III
   Item 17  Financial Statements
   Item 18  Financial Statements
   Item 19  Exhibits

SIGNATURES

EXHIBIT INDEX

<PAGE>

                                     PART I

                ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT
                                  AND ADVISERS

     China Enterprises Limited (the "Company" or "we", which terms shall
include, when the context so requires, the subsidiaries of the Company during
the applicable period) is filing this Form as its annual report under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Accordingly,
the information called for by Part I, Item 1 of Form 20-F is not applicable.

<PAGE>

                 ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

     As the Company is filing this Form as an annual report under the Exchange
Act, the information called for by Part I, Item 2 of the Form 20-F is not
applicable.

<PAGE>

                             ITEM 3. KEY INFORMATION

SELECTED FINANCIAL DATA

     The following table represents the selected consolidated financial
information of the Company as of and for the years ended December 31, 2002,
2003, 2004, 2005 and 2006.

     The Consolidated Statements of Operations Data for each of the three years
in the period ended December 31, 2006 and the Consolidated Balance Sheet Data as
of December 31, 2005 and 2006 has been derived from the audited consolidated
financial statements (the "Consolidated Financial Statements") included in Item
18 "Financial Statements" of this annual report. The Consolidated Statements of
Operations Data for the years ended December 31, 2002 and 2003 and the
Consolidated Balance Sheet Data as of December 31, 2002, 2003 and 2004, as set
forth below, have been derived from audited consolidated financial statements
not included in this annual report. The Consolidated Financial Statements have
been prepared in conformity with US generally accepted accounting principles.
The selected financial information should be read in conjunction with, and is
qualified in its entirety by reference to, the respective consolidated financial
statements and their accompanying notes thereto.

SELECTED CONSOLIDATED FINANCIAL INFORMATION OF THE COMPANY

(AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES, THEIR PAR VALUES AND PER SHARE
DATA)

<TABLE>
<CAPTION>
                                                                                Year ended December 31,
                                                         ---------------------------------------------------------------------
                                                            2002        2003        2004        2005             2006
                                                           (a)(b)      (a)(b)       (b)         (b)              (b)
                                                         ---------   ---------   ---------   ---------   ---------------------
                                                            Rmb         Rmb         Rmb          Rmb        Rmb         US$
<S>                                                      <C>         <C>         <C>         <C>         <C>         <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues                                                 2,610,076   2,808,369          --          --          --          --
Income (loss) from operations                              172,096     100,746     (13,344)    (27,522)    (16,754)     (2,147)
(Loss) profit from continuing operations                   (62,943)    (56,781)    181,942     (26,324)    (21,226)     (2,720)
Loss from discontinued operations (a)                     (199,838)     (7,760)         --          --          --          --
Net (loss) income                                         (262,781)    (64,541)    181,942     (26,324)    (21,226)     (2,720)
Net income (loss) from operations per share                  19.09       11.17       20.18       (2.92)      (2.35)      (0.30)
Basic and diluted (loss) earnings from
   continuing
</TABLE>

<PAGE>

<TABLE>
<S>                                                      <C>         <C>         <C>         <C>         <C>         <C>
   operations per common share (b)                           (6.98)      (6.30)      20.18       (2.92)      (2.35)      (0.30)
Basic and diluted loss from discontinued
   operations per common share (a) & (b)                    (22.16)      (0.86)         --          --          --          --
Basic and diluted (loss) earnings per common share (b)      (29.14)      (7.16)      20.18       (2.92)      (2.35)      (0.30)
Weighted-average number of common share
   outstanding (b)                                       9,017,310   9,017,310   9,017,310   9,017,310   9,017,310   9,017,310
Dividend declared per common share
   - in Rmb                                                     --          --          --          --          --          --
   - in US$                                                     --          --          --          --          --          --

CONSOLIDATED BALANCE SHEETS DATA :

Total assets                                             2,880,680     509,666     791,326     684,273     819,181     104,968
Shareholders' equity (Net assets)                          535,206     472,825     667,981     662,598     599,297      76,793
Supervoting common stock - par value US$0.01 per share
                                                               244         244         244         244          --          --
Common stock - par value US$0.01 per share                     526         526         526         526         770          99
</TABLE>

Notes:

(a)  The Company disposed of Yantai C.S.I. Rubber Co., Limited ("Yantai CSI")
     and Shandong C.S.I. Synthetic Fiber Co., Limited ("Shandong Synthetic")
     during 2002, and the radial tire factory of Double Happiness, Yinchuan
     C.S.I. (Greatwall) Rubber Co. Limited ("Yinchuan CSI") and CSI Rubber
     Industries Limited ("CSI Rubber") during 2003. The Company has recorded the
     operating result of Yantai CSI, Shandong Synthetic, Yinchuan CSI and CSI
     Rubber separately from continued operations as loss from discontinued
     operations retrospectively for 2002 and 2003.

     During 2003, the Company sold a 25% interest in Hangzhou Zhongce Rubber
     Co., Limited ("Hangzhou Zhongce"), leaving the Company with a minority
     interest of 26% in Hangzhou Zhongce as of October 1, 2003. The Company
     consolidated the results of operations of Hangzhou Zhongce for the nine
     months period end September 30, 2003 and accounted for its share of equity
     in earnings of Hangzhou Zhongce as an affiliate for the period from October
     1, 2003 to December 31, 2003.

<PAGE>

(b)  The calculation of basic and diluted (loss) earnings from continuing
     operations per common share, basic and diluted loss from discontinued
     operations per common share and basic and diluted loss per common share
     from 2002 to 2006 is based on the weighted-average number of common stock
     outstanding during the years ended December 31, 2002 to 2006. The number of
     common stock outstanding for 2002, 2003, 2004, 2005 and 2006 was 9,017,310.
     There were no dilutive securities.

EXCHANGE RATE INFORMATION

     The Consolidated Financial Statements are published and denominated in
Renminbi. Translation of amounts from Renminbi to U.S. Dollars for the
convenience of the reader has been made in this document at US$1.00 to
Rmb7.8041, the exchange rate quoted by the noon buying rate from Federal Reserve
Bank of New York on December 29, 2006. For the purpose of this annual report,
the latest practicable date with respect to share and certain exchange rate
information is November 30, 2007. As of November 30, 2007, the exchange rate
quoted by the noon buying rate from Federal Reserve Bank of New York was at
US$1.00 to Rmb7.385. No representation is made that the Renminbi amounts could
have been, or could be, converted into U.S. Dollars at that or at any other
rate.

     The following table sets forth the average unified exchange rates for each
of the years ended December 31, 2002, 2003, 2004, 2005 and 2006

<TABLE>
<CAPTION>
                                         YEAR ENDED DECEMBER 31,
                                     --------------------------------
                                     2002   2003   2004   2005   2006
(Rmb equivalent of US$1.00)           RMB    RMB    RMB    RMB    RMB
---------------------------          ----   ----   ----   ----   ----
<S>                                  <C>    <C>    <C>    <C>    <C>
At unified exchange rate
   - average rate  calculated by
     using the average of the
     exchange rates on the last
     day of each month during each
     period                          8.28   8.28   8.28   8.18   7.96
</TABLE>

The following table sets forth the high and low exchange rates for each month
during the previous six months of 2007:

<TABLE>
<CAPTION>
                              AT UNIFIED EXCHANGE RATE
                              ------------------------
(Rmb equivalent of US$1.00)          HIGH    LOW
---------------------------          ----   ----
<S>                           <C>           <C>
November 30, 2007                    7.46   7.38
</TABLE>

<PAGE>

<TABLE>
<S>                           <C>           <C>
October 31, 2007                     7.52   7.47
September 30, 2007                   7.55   7.49
August 31, 2007                      7.62   7.54
July 31, 2007                        7.61   7.56
June 30, 2007                        7.67   7.61
</TABLE>

<PAGE>

RISK FACTORS

Investing in our shares involves various risks, including the risks described
below. You should carefully consider the following risks and the other
information contained in this annual report before investing in our shares.
Additional risks not currently known to us or that we currently believe are
immaterial also may impair our business operations, financial condition and our
liquidity.

RISKS RELATED TO OUR BUSINESS

IF THE ULTIMATE PARENT COMPAMY EASED TO PROVIDE FINANCIAL SUPPORT, IT COULD HAS
A SIGNIFICANT IMPACT ON OUR FINANCIAL AND OPERATIONAL CONDITION

     During the past fiscal year, the Company is financially depended on the
support from the ultimate parent company, Hanny Holdings Limited ("Hanny"). The
key risk is the failure of Hanny to provide such financial support, which it
appears to be a decision of Hanny at its discretion, and the possible
consequences to the shareholders of Company if that support is not provided.
Therefore, any significant decline in the financial support given from Hanny,
thereby it could has an adverse impact on our business. For more information,
please see "Item 5. Operating and financial review and prospects - Liquidity And
Capital Resources" in this annual report.

THE COMPANY MAY NOT BE ABLE TO IMPLEMENT SUCCESSFULLY ITS BUSINESS STRATEGY IN
WHICH CASE ITS BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION WOULD SUFFER

     During the past few years, the Company has diversified its operations into
businesses outside of tire manufacturing. In addition, the Company has disposed
the operations it deemed underperforming. In 2002, the Company diversified its
business into travel business by investing in Wing On Travel (Holdings) Limited
("Wing On"). During 2003, the Company reduced its interest in Hangzhou Zhongce
from a majority to a minority position. In June 2004, the Company entered into a
conditional agreement to acquire properties interest in a parcel of land under
construction in Shanghai, China, for the usage of both commercial and
residential purposes. A key part of the Company's business strategy is to expand
its operations through acquiring new businesses and business lines and the
Company has been actively seeking new investment opportunities. However, the
Company may not be able to identify and

<PAGE>

consummate new investments. To date, the Company has not consummated an
investment in a new business since the investment in Wing On.

     Even if the Company has successfully identified and consummated new
investments, the acquisition of new businesses and business lines carries
substantial risk and uncertainties. Depending on the specific acquisition, there
may be risks relating to the acquired business itself, risks relating to the
industry in which the business operates, and risks relating to the Company
itself.

THE COMPANY MAY NOT BE ABLE TO FINANCE ACQUISITIONS, STRATEGIC INVESTMENTS OR
OTHER EXPANSIONS OF OPERATIONS OR MAY INCUR FINANCIAL OBLIGATIONS OR LIABILITIES
IN CONNECTION WITH ANY ACQUISITION OR EXPANSION

     Due to the limitation of the Company's existing financial resources, the
Company may experience difficulty in funding acquisitions, investments or
expansion of existing operations. The Company anticipates that it would fund any
such activities through advance of bank loans. The Company could incur an
increase in debt or other liabilities in connection with any acquisition or
other similar matter.

FUTURE ACQUISITIONS OR STRATEGIC INVESTMENTS MAY NOT BE SUCCESSFUL AND MAY HARM
OUR OPERATING RESULTS

     An important element of our strategy is to review prospects for acquisition
or strategic investments that would complement our existing companies, augment
our market coverage and distribution ability or enhance our technological
capabilities. Future acquisitions or strategic investments could have a material
adverse effect on our business and financial results because of possible charges
to financial results for purchased technology, restructuring or impairment
charges related to goodwill or amortization expenses associated with intangible
assets; potential increase in our expenses and working capital requirement and
the incurrence of debt and contingent liabilities; difficulties in successfully
integrating any acquired operations, technologies, customers products and
businesses with our operations; diversion or our capital and management's
attention to other business concerns; risks of entering markets or geographic
areas in which we have limited prior experience; or potential loss of key
employees of acquired organizations or inability to hire key employees necessary
for expansion.

DIVERSIFICATION MAY RESULT IN LOWERED RESPONSIVENESS TO

<PAGE>

CYCLICAL CHANGES OF DIFFERENT BUSINESSES

     Diversification of the Company's businesses will result in assets,
resources and management being committed or allocated to businesses in different
fields. As a result, the Company's flexibility in responding to seasonal changes
or periodic fluctuations in the business cycle in a particular business
operation may be limited.

THE VOTING POWER TO THE COMPANY'S MAJOR SHAREHOLDER MAY MAKE IT DIFFICULT FOR
THE OTHER HOLDERS TO EXERCISE INFLUENCE ON CORPORATE MATTERS OR FOR THE COMPANY
TO ENGAGE IN BUSINESS COMBINATIONS THAT THE PUBLIC SHAREHOLDERS MAY DEEM
DESIRABLE

     Prior to May 19, 2006, China Strategic Holdings Limited ("CSH") directly
and beneficially held all 3,000,000 shares of supervoting common stock and
1,629,200 shares of common stock and also had an indirect interest equivalent to
349,630 share of common stock. Effective May 19, 2006, CSH transferred all of
those interests to a wholly-owned subsidiary of Group Dragon Investments Limited
("GDI"). As a result, GDI controls 88.8% of the voting rights of the outstanding
capital stock of the Company and GDI is able to elect a majority of the
Company's board of directors and will have sufficient voting control to affect
corporate transactions without the concurrence of the Company's minority
shareholders. In addition, GDI's voting rights tend to preclude any corporate
action by shareholders or a change in control of the Company unless it is
initiated or supported by GDI.

     Following the completion of the Group reorganization, Hanny Holdings
Limited ("Hanny"), an indirect shareholder of each of CSH and GDI, reported
ownership of 436,032,120 shares, or 98.92 % of the outstanding shares, of GDI,
and become the ultimate parent company of the Company. For more information
about the Group reorganization, see Item 4 "Information on the Company -
Important Events of the Company's Business since the Beginning of 2006."

AS A RESULT OF CHANGES IN THE COMPANY'S ASSETS AND SOURCES OF INCOME, THE
COMPANY COULD BECOME AN INVESTMENT COMPANY FOR PURPOSES OF THE UNITED STATES
INVESTMENT COMPANY ACT OF 1940

     While the Company believes that through its subsidiaries and affiliates it
is actively engaged in operating businesses, and does not meet the definition of
an investment company for purposes of the United States Investment Company Act
of

<PAGE>

1940 (the "1940 Act"), depending on the composition and valuation of the
Company's assets and the sources of the Company's income from time to time, the
Company could fall within the technical definition of the term "investment
company" for purposes of the 1940 Act. If the Company were to become subject to
the requirements of the 1940 Act, the Company's operations and results would be
negatively impacted, including among other possible effects, the inability of
the Company to raise capital through the offer and sale of its securities in the
United States. The Company would be unable to continue operating as it currently
does and might need to acquire or sell assets that it would not otherwise
acquire or sell in order to avoid becoming and "investment company" as defined
under the 1940 Act.

CHANGES IN COMPOSITION OF THE COMPANY'S ASSETS COULD RESULT IN THE COMPANY BEING
DEEMED A "PASSIVE FOREIGN INVESTMENT COMPANY" WHICH COULD HAVE A NEGATIVE IMPACT
ON U.S. HOLDERS

     Special U.S. federal income tax rules apply to U.S. holders of shares of a
non-U.S. corporation that is classified as a Passive Foreign Investment Company
("PFIC"), for U.S. federal income tax purposes. The determination of the PFIC
status of the Company principally depends upon the composition of the Company's
assets, including goodwill, and the amount and nature of the income of the
Company, from time to time. The Company disposed of most of its operating
subsidiaries, or its majority interest therein, during the past three years. If
we are characterized as a PFIC, our U.S. shareholders may suffer adverse tax
consequences, including having gains realized on the sale of our shares taxed at
ordinary income rates, rather than the capital gain rate. In addition, both
gains upon disposition and amounts received as distributions could be subject to
an additional interest charge by the Internal Revenue Service. A determination
that we are a PFIC could also have an adverse effect on the price and
marketability of our shares.

     We do not believe that we were a PFIC for 2006. However, since the
determination of whether we are a PFIC is based upon such factual matters as the
valuation of our assets and, in certain cases, the assets of companies held by
us, there can be no assurance with respect to the position of the Internal
Revenue Service on our status as a PFIC. Our analysis related to 2006 is based,
upon certain assumptions and methodologies that we have used, the appropriate
value of our ownership interest in companies we held, and the manner in which we
have allocated the value among our active assets and passive assets.

<PAGE>

     We cannot assure you that the Internal Revenue Service will not challenge
our assumptions and methodologies. If there were such a challenge, we could be
classified as a PFIC for 2006.

     With respect to 2007 and subsequent years, the tests for determining PFIC
status are applied annually and it is difficult to make accurate predictions of
future income and assets, which are relevant to this determination. The tests
are impacted by changes in value of our group companies which are difficult to
predict. Accordingly, there can be no assurance that we will not become a PFIC
in 2007 or a subsequent year.

OUR INSURANCE COVERAGE MAY NOT BE SUFFICIENT TO COVER THE RISKS RELATED TO OUR
FINANCIAL AND LOSSES

     The operations of our affiliates have not experienced any major accidents
in the course of their businesses which have caused significant property damage
or personal injuries. However, there is no assurance that they will not
experience major accidents in the future. Although they have purchased the
necessary insurances, the occurrence of certain incidents such as earthquake,
war and flood, and the consequences resulting from them, may not be covered
adequately, or at all, by insurance policies under which they are protected. Our
affiliates also face exposure to product liability claims in the event that any
of their products is alleged to have resulted in property damage, bodily injury
or other adverse effects. Losses incurred or payments we may be required to
make, may have a material adverse effect on our results of operation if such
losses or payments are not fully insured.

FAILURE TO ESTABLISH AND MAINTAIN EFFECTIVE INTERNAL CONTROLS OVER FINANCIAL
REPORTING COULD HAVE A MATERIAL AND ADVERSE EFFECT ON THE ACCURACY IN REPORTING
OUR FINANCIAL RESULTS OR PREVENTING FRAUD

     We are subject to the reporting obligations under the U.S. securities laws.
The SEC, as required under Section 404 of the Sarbanes-Oxley Act of 2002, has
adopted rules requiring public companies to include a report of management on
the effectiveness of such companies' internal control over financial reporting
in its annual report. In addition, an independent registered public accounting
firm for a public company must attest to and report on management's assessment
of the effectiveness of our company's internal control over financial reporting.
These requirements will

<PAGE>

first apply to our annual report on Form 20-F for the fiscal year ending
December 31, 2007 with respect to the report of management and for the fiscal
year ending December 31, 2008 with respect to the auditor's attestation. It's
possible that management may not be able to conclude that our internal control
over financial reporting is effective. Even if our management concludes that our
internal control over financial reporting is effective, our independent
registered public accounting firm may still decline to attest to our
management's assessment or may issue a report that is qualified if such firm is
not satisfied with our internal control over financial reporting or the level at
which our controls are documented, designed, operated or reviewed, or if such
firm interprets the relevant requirements differently from us. In addition,
during the course of such evaluation, documentation and testing, we may identify
deficiencies which we may not be able to remedy in time to meet the deadline
imposed by the Sarbanes-Oxley Act for compliance with the requirements.
Moreover, effective internal controls are necessary for us to produce reliable
financial reports and are important in helping prevent financial fraud. If we
are not able to conclude that our internal control over financial reporting is
effective or cannot provide reliable financial reports on a timely basis or
prevent financial fraud, our business and operating results could be harmed,
investors could lose confidence in our reported financial information, and the
trading price of our stock could drop significantly.

THE FINANCIAL COSTS AND ADMINISTRATIVE BURDENS OF IMPLEMENTING THE
SARBANES-OXLEY ACT OF 2002 COULD MATERIALLY AND ADVERSELY AFFECT OUR FINANCIAL
RESULTS AND FINANCIAL CONDITION

     To date, the Company has been exempted from some of the regulations under
the Sarbanes-Oxley Act of 2002 that are applicable to U.S. public companies.
Except for the provisions of Section 404 of the Sarbanes-Oxley Act, all of the
provisions of that act that will apply to the Company have now been implemented.
These rules require the Company to make a number of changes in some of its
corporate governance, securities disclosure and compliance practices. In
addition, the SEC and the U.S. stock exchanges have implemented additional
corporate governance requirements. Compliance with the U.S. corporate governance
rules applicable to the Company will significantly increase the Company's legal,
financial and accounting costs, and the Company expects these increased costs to
continue in the future.

RISKS FOR DOING BUSINESS IN CHINA

<PAGE>

THE COMPANY'S BUSINESS FOCUS ON THE GREATER CHINA REGION SUBJECTS THE COMPANY
AND ITS BUSINESS TO THE POLITICAL, ECONOMIC AND OTHER DEVELOPMENTS IN THE REGION

     As a result of the Company's traditional business focus on the Greater
China Region, the Company's business and its financial and operating results may
be affected by significant political, economic, social and cultural developments
in the region.

     A substantial portion of the Company's results is derived from its
affiliates, major businesses of which are located in China. These businesses are
dependent in large part on the performance of the Chinese economy, as well as
Chinese government policy. As a result, the future financial condition and
results of operations of the Company could be adversely affected by slowdowns in
the Chinese economy, Chinese macroeconomic policy that de-emphasize the
development of industries which utilize products or services of the Company's
affiliates or other governmental policies, including changes in laws,
regulations or the interpretation thereof; confiscatory taxation; restrictions
on currency conversion, imports or sources of supplies; or the expropriation or
nationalization of private enterprises.

     Although the Chinese government has been pursuing economic reform policies
for approximately two decades, the Chinese government has introduced measures in
certain sectors to avoid overheating of the economy, including tightening bank
lending policies and increases in bank interest rates. Any measures or actions
taken by the Chinese government to control industries that utilize products or
services of the Company's affiliates could restrict their business operations
and adversely affect the financial positions of the Company and its affiliates.

     Although the Company believes that the economic reforms and macroeconomic
policies and measures adopted by the Chinese government will continue to have a
positive effect on economic development in China and that the Company and its
affiliates will continue to benefit from these policies and measures, there is
no assurance that the government will continue to pursue such policies or that
such policies may not be significantly altered, especially in the event of a
change in leadership, social or political disruption, or other circumstances
affecting China's political, economic and social life.
<PAGE>

     In addition, the Company's financial results are significantly dependent on
the economy in the region. The economy of the Greater China Region differs
significantly from the economies of the United States and Western Europe in such
respects as structure, level of development, growth rate, capital reinvestment,
resource allocation, self-sufficiency, rate of inflation and balance of payments
position, among others. Adverse changes in economic in China, in the policies of
the Chinese government, could have a material adverse effect on the overall
economic growth of China. These developments could adversely affect the
financial condition, results of operations and business of the Company and its
affiliates, by reducing the demand for the products and services of the
Company's affiliates.

     As a member of the World Trade Organization, China's economic activity is
expected to become more and more export driven and China's internal market is
expected to see more competition through imports. The expected change in
economic activity in China and the Greater China Region and a greater
interdependence of the Chinese economy on the general world economy as a result
of such changes could also impact the Company's financial results.

RESTRICTIONS ON FOREIGN CURRENCY EXCHANGE MAY LIMIT OUR ABILITY TO RECEIVE AND
USE OUR RESOURCES EFFECTIVELY

     Any future restrictions on currency exchanges may limit our ability to use
resources generated in Renminbi to fund our business activities outside China or
other payments in Hong Kong dollars or other foreign currencies. Although the
PRC government introduced regulations in 1996 to allow greater convertibility of
the Renminbi for current account transactions, significant restrictions still
remain, including primarily the restriction that foreign invested enterprises
may only buy, sell and/or remit foreign currencies at those banks authorized to
conduct foreign exchange business after providing valid commercial documents. In
addition, remittance of foreign currencies abroad and conversion of Renminbi for
capital account items, including direct investment and loans, is subject to
governmental approval in China, and companies are required to open and maintain
separate foreign exchange accounts for capital account items. We cannot be
certain that the Chinese regulatory authorities will not impose more stringent
restrictions on the convertibility of the Renminbi, especially with respect to
foreign exchange transactions.

FLUCTUATIONS IN THE VALUE OF THE RENMINBI COULD NEGATIVELY IMPACT OUR RESULTS OF
OPERATIONS

<PAGE>

     Our reporting currency is the Renminbi as a substantial portion of our
investments are denominated in Renminbi. Our remaining assets and liabilities
and all of our operation expenses are denominated in Hong Kong dollars. As a
result, we may be exposed to foreign exchange risk, and our results of
operations may be negatively impacted by fluctuations in the exchange rate of
Renminbi against other currencies. As our major assets and liabilities comprise
a mixture of items that are denominated in Renminbi or Hong Kong dollars, our
business and operating result may be materially affected in the event of a
severe increase or decrease in the value of the Renminbi against other
currencies.

     The value of the Renminbi is subject to changes in China's governmental
policies and to international economic and political developments. Since January
1, 1994, the PRC government has used a unitary managed floating rate system.
Under this system, the People's Bank of China, or PBOC, publishes a daily based
exchange rate with reference primarily to the supply and demand of Renminbi
against U.S. dollars and other foreign currencies in the market during the
previous day. Authorized banks and financial institutions are allowed to quote
buy and sell rates for Renminbi within a specified band around the central
bank's daily exchange rate. On July 21, 2005, PBOC announced an adjustment of
the exchange rate of the U.S. dollars to Renminbi from 1:8.27 to 1:8.11 and
modified the system by which the exchange rates are determined.

     As the exchange rate of the Hong Kong dollars to the U.S. dollars has been
fixed by the Hong Kong government since 1983 at approximately HK$7.80 to
US$1.00, through the currency-issuing banks in Hong Kong, this adjustment has
resulted in an approximately 2.0% appreciation of the Renminbi against the Hong
Kong dollars. While the international reaction to the Renminbi revaluation has
generally been positive, there remains significant international pressure on the
PRC government to adopt an even more flexible currency policy, which could
result in a further and more significant appreciation of the Renminbi against
the U.S. dollars and other currencies.

NATURAL DISASTERS IN THE GREATER CHINA REGION COULD CAUSE SIGNIFICANT DAMAGE TO
THE COMPANY'S BUSINESS AND FINANCIAL RESULTS

     The products of the Company's affiliates are manufactured at the factories

<PAGE>

located in the PRC. During the past years, the PRC has experienced natural
disasters, including floods and fires. A disaster could cause significant damage
to manufacturing factories which may not be adequately covered by insurance
proceeds and could materially and adversely affect our business and financial
results. The disaster relief and assistance in the PRC is not well developed and
there can be no assurance that adequate government assistance would be available
in the absence of sufficient insurance coverage. In addition, any natural
disaster in the region would adversely impact the travel business of an
affiliate of the Company which is focused on the Asia Pacific region.

OUR RESULTS COULD BE HARMED IF WE HAVE TO COMPLY WITH NEW ENVIRONMENTAL
REGULATIONS

     The operations of our affiliates create some environmentally sensitive
waste that may increase in the future depending on the nature of our
manufacturing operations. The general issue of the disposal of hazardous waste
has received increasing attention from Chinese national and local governments
and foreign governments and agencies and has been subject to increasing
regulation. Currently, relevant Chinese environmental protection laws and
regulations impose fines on discharge of waste materials and empower certain
environmental authorities to close any facility which causes serious
environmental problems. Although it has not been alleged that our affiliates
have violated any current environmental regulations by China government
officials, there is no assurance that the Chinese government will not amend its
current environmental protection laws and regulations. Our financial results
could be materially and adversely affected if our affiliates were to increase
expenditures to comply with environmental regulations affecting their
operations.

LEGAL SYSTEM DIFFERENCES BETWEEN THE GREATER CHINA REGION AND THE UNITED STATES
OF AMERICA COULD IMPACT INVESTORS

     Unlike common law systems in the western world, China has a civil law
system based on written statutes and, therefore, decided legal cases are without
binding legal effect, although they are often followed by judges as guidance. As
the Chinese legal system develops, the promulgation of new laws, changes to
existing laws and the preemption of local regulations by national laws may
adversely affect the interests of foreign investors.

<PAGE>

RISKS RELATED TO OUR CAPITAL STOCK

LIMITED LIQUIDITY IN THE COMPANY'S SECURITIES MAY MAKE IT DIFFICULT TO SELL
SHARES

     As a foreign private issuer whose business is substantially in the China
and Asian market, the Company has less exposure in the U.S. capital markets than
comparable U.S. issuers. In addition, the Company has a relative small public
float of its securities. These and other general economic, industry or Company
factors may result in low trading volumes or prices of the Company's securities.
Accordingly, shareholders of the Company bear risks regarding the liquidity of
the Company's shares and may not be able to sell shares in desired quantities,
at desired times or desired prices or a combination thereof.

POSSIBLE VOLATILITY OF SHARE PRICES WORLDWIDE MAY HAVE SIGNIFICANT EFFECTS ON
THE COMPANY'S SHARE PRICE

     The trading price of the Company's shares has been and may continue to be
subject to wide fluctuations. Capital markets worldwide have generally
experienced extreme price and volume fluctuations that have often been unrelated
or disproportionate to the operating performance of the listed companies
themselves. There can be no assurance that trading prices and price earnings
ratios previously experienced by the Company's common shares will be matched and
maintained. Broad market and industry factors may adversely affect the market
price of shares in the Company, regardless of its operating performance.
Shareholders and potential investors of the Company are advised to exercise
caution when dealing in the securities of the Company.

<PAGE>

                       ITEM 4. INFORMATION ON THE COMPANY

HISTORY AND DEVELOPMENT OF THE COMPANY

     The Company was incorporated as an exempted company under the laws of
Bermuda on January 28, 1993. From July 15, 1993 to late 2002, the Company's
shares were listed on the New York Stock Exchange, Inc. (the "NYSE"). On
November 26, 2002, the Company's shares began trading on the OTC in the United
States. The legal name of the Company is "China Enterprises Limited" and the
Company is registered in Hong Kong under the commercial name of "China Tire
Holdings Limited" due to local company registration considerations.

     Information about the Company, is available through the Internet
http://www.chinaenterpriseslimited.com. The principal place of business and the
executive offices of the Company are located at 31st Floor, Bank of America
Tower, 12 Harcourt Road, Central, Hong Kong and its telephone number is (852)
2372 0130.

IMPORTANT EVENTS IN THE COMPANY'S BUSINESS IN 2006

     Additional Investment in Wing On

     On March 23, 2006, Wing On entered into agreements with the Company and its
other convertible notes holder for issuance of new convertible notes
("Convertible Notes"). Under these agreements, on June 8, 2006, Wing On issued
new convertible notes to the Company and its nominee with principal amount of
HK$300.0 million (Rmb312.3 million) for cash consideration. The new convertible
notes provide the Company rights to convert the notes into new shares of Wing On
during a period of five years from the date of issue, at the Company's
discretion, at an initial conversion price of HK$0.79 per share of Wing On,
subject to adjustments.

     The initial conversion price of the Convertible Notes is HK$0.79 per share,
subject to anti-dilutive adjustments. Unless previously converted or lapsed or
redeemed by Wing On, Wing On will redeem the Convertible Notes on the fifth
anniversary from the date of issue of the Convertible Notes (the "Maturity
Date") at the redemption amount which is 110% of the principal amount of the
Convertible Notes outstanding.

<PAGE>

     The Company shall have the right to convert, on any business day commencing
from the 7th day after the date of issue of the Convertible Notes up to and
including the date which is 7 days prior to the Maturity Date, the whole or any
part (in an amount or integral multiple of HK$1,000,000) of the principal amount
of the Convertible Notes into shares of Wing On at the then prevailing
conversion price.

     Subject to certain restrictions which are intended to facilitate compliance
of relevant rules and regulations, each noteholder shall have the right to
exchange from time to time all or part (in the amount of HK$10,000,000 or
integral multiples thereof) of 50% of the initial principal amount of its
Convertible Notes for shares in the share capital of any company which is an
affiliated company of Wing On as defined in the Rules Governing the Listing of
Securities on the Hong Kong Stock Exchange or subsidiary of Wing On that is to
be listed on a stock exchange through an initial public offering at the price
(the "Spin-off Shares"), subject to anti-dilutive adjustments, at which the
Spin-off Shares are actually issued to the public at the time of the listing on
that stock exchange. The decision on whether to list any of its affiliated
company or subsidiary in the future is at the sole discretion of the directors
of Wing On.

     Reorganization of the CSH Group

     On March 10, 2005, two substantial shareholders of China Strategic Holdings
Limited ("CSH"), the parent company of the Company, entered into the share sale
agreement. Pursuant to the share sale agreement, subject to the implementation
of the group reorganization as described below, the purchaser acquired from each
of the two substantial shareholders 135,000,000 shares (equivalent to 67,500,000
consolidated shares of CSH upon the Group Reorganization having become
effective), which shares represent approximately an aggregate of 30.6% of the
issued share capital of CSH, for an aggregate consideration of HK$52,110,000,
equivalent to about HK$0.193 per share (or HK$0.386 per consolidated share).

     On October 6, 2005, the following proposals (collectively as the "Group
Reorganization") were approved and passed at the Extraordinary General Meeting
of CSH:

(i)  CSH continuing to be a public listed company, which is listed on main board
     of the Stock Exchange of Hong Kong Limited ("HKSE"), with its subsidiaries
     concentrating on its business of manufacturing and trading of battery
     products, investments in securities and property and investment in unlisted
     investments;

(ii) all other subsidiaries of CSH carrying on sand mining business, property

<PAGE>

     development, and investment holding business (including the Company), and
     all other associates of CSH carrying on manufacturing and marketing of
     tires and business of providing package tour, travel and other related
     services (including the equity investment affiliates of the Company) being
     grouped under Group Dragon Investments Limited ("GDI"), a wholly-owned
     subsidiary of CSH, and its subsidiaries and operated by the former
     management of the Company; and

(iii) the distribution in specie of the GDI shares to the shareholders of CSH
     whose names appear on the register of members of CSH on the record date on
     the basis of one GDI share for one consolidated share of CSH.

The Group Reorganization was completed on May 19, 2006.

As a result of the Group Reorganization, GDI indirectly owns all 3,000,000
shares of supervoting common stock and 2,239,800 shares of our common stock.

Following the completion of the Group Reorganization, Hanny Holdings Limited, an
indirect shareholder of each of CSH and GDI ("Hanny"), Hanny made an offer for
the outstanding shares of GDI not held indirectly by Hanny and completed the
offer on June 16, 2006. As a result of the completion of the offer, Hanny
reported ownership of 436,032,120 shares, or 98.92 % of the outstanding shares,
of GDI, and become the ultimate parent company of the Company. In December 2006,
ITC Corporation Limited ("ITC"), a public listed company which is listed on main
board of the HKSE, acquired additional equity interest in Hanny through
acquisition of shares from an independent third party which triggered a
conditional mandatory cash offer ("Offer"). Pursuant to the Offer, Hanny became
a subsidiary of ITC, and ITC became the ultimate parent company of the Company.
In May 2007, the issued share capital of Hanny has been increased subsequent to
the conversion of the convertible bonds by certain holders and the shareholding
of ITC in Hanny has been diluted. Accordingly, Hanny has ceased to be a
subsidiary of ITC and ITC has also ceased to be the ultimate parent company of
the Company. As at December 31, 2006, Hanny was the ultimate parent company
of the Company.

Developments in Litigation relating to the Xiang Zhang Garden

     The Company, through The Rosedale Luxury Hotel & Suites Limited
("Rosedale"), an indirect wholly-owned subsidiary, entered into a conditional
sale and purchase agreement dated June 16, 2004 with an independent third party,
Shanghai Jiu Sheng Investment Company Limited ("Jiu Sheng"), for the proposed
acquisition by the Company of a parcel of land (the "Land") and a 24-story
building under

<PAGE>

construction on the Land (the "Building") located in Shanghai, the PRC (the Land
and the Building together referred to as the "Properties"). The estimated total
gross floor space of the Building is approximately 37,000 square meters, on a
parcel of approximately 5,500 square meters. The aggregate consideration for the
Properties is Rmb450 million. It is one of the conditions for completion of the
acquisition that Jiu Sheng should obtain approval for the change of authorized
usage of the properties from office to both commercial and residential within
150 days from the date of the sale and purchase agreement. Subject to zoning
approvals, which are a condition to the acquisition, the Company expects that
the first four floors of the Building will be rented for commercial purposes and
the remaining 20 floors will be developed and rented as serviced apartments.

     However, the conditions stated above for the change of use of Xiang Zhang
Garden had not been fulfilled within the said period and accordingly, Jiu Sheng
and the Company entered into another agreement dated February 3, 2005 pursuant
to which, among other things, (i) the Company will pay, on behalf of Jiu Sheng,
Rmb22 million to the main contractor of Xiang Zhang Garden (the "Main
Contractor"); and (ii) the amount paid by the Company in (i) will be deducted
from the sales consideration of Xiang Zhang Garden.

     The Company paid the first deposit of Rmb50 million in cash to Jiu Sheng
upon signing of the agreement; and subsequently in February 2005, Rmb8 million
of deposit was additionally paid by the Company pursuant to the aforesaid
agreement of February 3, 2005 resulting in a total amount of Rmb58 million paid
to the Jiu Sheng as at the date of this report. Rmb380 million of the
consideration will be payable upon the grant and drawdown of loans to be granted
by PRC banks or financial institutions and secured by the Properties. The
remainder will be financed by internal resources of the Company and will be due
upon completion of the transfer of the ownership of the Properties from the
seller to the Company.

     In June 2005, the Company had commenced legal proceedings against Jiu
Sheng, among other things, to demand Jiu Sheng to fulfill its obligations under
the above two agreements and applied to a PRC court an injunction order on Xiang
Zhang Garden to stop the Xiang Zhang Garden from being transferred (the
"Injunction Order(s)"). It had also come to the attention of the Company that
one of the three secured creditors of Jiu Sheng and the Main Contractor had
already applied to and been granted the Injunction Orders and they, together
with the other two secured creditors, had priority over the Company on Xiang
Zhang Garden.

<PAGE>

     As a condition precedent to the application of the Injunction Order, the
Company had issued a counter guarantee of Rmb402 million to an institution in
the PRC which provided a guarantee of the same amount to the PRC court on behalf
of the Company.

     On June 22, 2006, the People's High Court of Shanghai City ruled the case
in favor of the Company and demanded Jiu Sheng to continue fulfilling its
obligations under the agreement dated February 3, 2005 and to cooperate with the
Company to effect the release of the Injunction Orders and settlement of the
related liabilities with its creditors so as to proceed with the transfer of
legal title of Xiang Zhang Garden to the Company. The judgment also, among other
things, required Jiu Sheng to pay Rmb5,900,000, which is approximately
US$756,000, to the Company as compensation for the breach of the sale and
purchase agreements.

     In August 2006, the Group has applied to the People's High Court of
Shanghai City for a court execution order to enforce the June 2006 judgment
against Jiu Cheng. At the same time, Jiu Cheng has initiated various discussions
with the Group and its legal counsel with a view to settle this out of court but
there was no significant progress on the resolution of this matter.

     In April 2007, an independent third party ("Buyer") made a letter of offer,
inter alia, to acquire the Group's rights and obligations in Xiang Zhang Garden
for RMB70 million which is approximately US$8,970,000, and made a deposit of the
same amount into an escrow account held under the People's High Court of
Shanghai City as protection to the Group. Under the same letter of offer, Jiu
Cheng has also agreed to pay RMB13 million which is approximately US$1,666,000,
to the Group to compensate for the various costs incurred by the Group relating
to the legal proceedings against Jiu Cheng. The eventual execution of this offer
is also subject to the agreement by the other secured and unsecured creditors of
Jiu Cheng which the Buyer is in the process of getting those consents and there
can be no assurance that the offer can be consummated as planned. The directors
of the Company consulted with the Group's legal counsel and were of the view
that the carrying amount of deposit was not less than its recoverable amount and
considered no impairment loss is identified.

     In December 2007, the Company completed a transfer of certain of its assets
and liabilities, including the deposit paid for acquisition of Xiang Zhang
Garden, from its subsidiaries, Manwide and The Rosedale Luxury Hotel & Suites
Limited ("Rosedale") to another subsidiary of the Company. Subsequently, the
Company completed the disposition of Manwide and Rosedale to an independent
third party for a total consideration of HK$500 (equivalent to approximately
RMB504), resulting in a gain on such sale. In March 2008, the Group has entered
into an agreement with Jin Cheng through Rosedale, to disclaim its rights in
Xiang Zhang Garden for a compensation of RMB83,000 which was received in April
2008.

<PAGE>

Subscription Agreement with Hanny

     On August 29, 2006, the Company entered into an agreement with Hanny for
the subscription by Hanny of US$100 million of 1% convertible exchangeable notes
to be issued by the Company. (the "Subscription"). The convertible exchange
notes would be convertible at a conversion price of US$3 per share during a
period of five years from the date of issue. However, subsequently in respect of
the Subscription, a termination agreement was signed by Hanny and the Company to
terminate the transaction on December 29, 2006.

<PAGE>

PRINCIPAL CAPITAL EXPENDITURES

     Principal capital expenditures, investment and divestitures over the last
three years include the following:

<TABLE>
<CAPTION>
                                                   2004      2005     2006
                                                 RMB'000   RMB'000   RMB'000
                                                 -------   -------   -------
<S>                                              <C>       <C>       <C>
Purchase of property, plant and equipment             --      (344)      --
Investments in and advances to affiliates, net    72,142   (37,122)  (2,227)
</TABLE>

     The Company conducts its businesses through subsidiaries and affiliates.
Accordingly, much of the expenditures described above have been made at the
subsidiary level. For a description of the Company's subsidiaries, please refer
to the section "ORGANIZATION STRUCTURE" below.

BUSINESS OVERVIEW

     For the years ended December 31, 2004, 2005 and 2006, no turnover was
derived from the manufacturing and trading of tire products following the
disposal of interest of subsidiaries engaged in this operation in 2003. In the
middle of 2004, the Company continued its diversification by entering into the
sale and purchase agreement for the acquisition of Xiang Zhang Garden.

     The financial results of the Company in fiscal 2004, 2005 and 2006 were
greatly depended on the share of results of its affiliates, including the tire
business and the travel business. It is the intention of the management of the
Company to continue seeking appropriate investment opportunities in the hotel
and travel related businesses in the PRC in view of the positive outlook in this
sector in the coming future. The Company is actively seeking new investment
opportunities.

TIRE BUSINESS

Hangzhou Zhongce established Hangzhou Sunrise Rubber com., Ltd ("Hangzhou
Sunrise") with three other PRC enterprises in 1998 and acquired Fu Chun Jiang in
1999 that manufactures radial tire products and a number of raw materials
including

<PAGE>

tire rubbers and carbon black, respectively. In September 2003, the Company
disposed of its 25% interest in Hangzhou Zhongce and ceased to consolidate the
results of Hangzhou Zhongce and Fu Chun Jiang (collectively referred to as
"Hangzhou Zhongce") and Hangzhou Sunrise also ceased to be an affiliate of the
Group as of October 1, 2003, following the completion of the disposal. As a
result of this disposal, the Company holds 26% interest in Hangzhou Zhongce,
which became a major equity method affiliate of the Company thereof. Hangzhou
Zhongce manufactures and sells a broad line of tire products, consisting of
motor vehicle (bias and radial tires for trucks, tractors, passenger cars and
motorcycles), bicycle and wheelbarrow tires. See "Financial Statements" of
Hangzhou Zhongce in item 17 for more details.

TRAVEL BUSINESS

     In 2002, the Company diversified into the travel business through an
investment in Wing On. However, the global travel in the region had a difficult
time in 2003, which was affected by, among other factors, hostilities such as
the Iraqi war, concerns over terrorism and the Severe Acute Respiratory Syndrome
("SARS"). In response to the issues facing the industry, Wing On shifted its
business focus. An increased emphasis was placed on local tours in Hong Kong in
financial year 2003. Special promotions and initiatives were launched to rebuild
public confidence in travel in the region. In addition, Wing On introduced new
targeted adventure, photography tours and other tours. At the same time, in
order to achieve greater operational efficiencies and cost savings, Wing On
implemented restructuring changes during the financial year 2003. Several of its
less profitable local branches and overseas offices were closed and its
loss-making transportation business was sold.

     For the years of 2004 and 2005, Wing On continued to benefit from the
rebound in travel business in Hong Kong after the negative effect of SARS
subsided. Following the opening of the Hong Kong Disney Land and the Asia
World-Expo, and with the policy trend in the PRC, it is likely the limit on
foreign holding in a company operating with outbound travel license will be
gradually opened up. In fact, with the gradual easing of restrictions on the
individual mainland visitors traveling to Hong Kong, the Company expected a
great increase in arrivals once more parts of the PRC are opened up to
individual travelers, which is expected to directly benefit the local economy.

<PAGE>

     Throughout 2006, Hong Kong's economy picked up together with many countries
around the world. Wing On has put considerable resources into its inbound
business and the results are promising. In fact, Hong Kong welcomed 25.3 million
visitors in 2006, 8.1% more than in 2005. Mainland visitors continued to be the
focus with the help of the Hong Kong Disneyland, the Hong Kong Wetland Park and
the skyrail to Po Lin Monastery (Ngong Ping 360). For the outbound market, China
remained at the top in Asia in 2006 in terms of number of tourists. There were
34 million outbound tourists that traveled aboard in 2006, which represented a
10% increase over the previous year. The effect of the coming 2008 Beijing
Olympic Games and the 2010 Shanghai Disney, the grant of outbound operating
license to Hong Kong travel agents and the erection of further tourists spots in
Hong Kong will be to attract more and more visitors to the Mainland and the
city. See "Financial Statements" of Wing On in item 17 for more details.

<PAGE>

ORGANIZATIONAL STRUCTURE

     The chart below illustrates the position of the Company after the Group
Reorganization which was completed on May 19, 2006. As a result of the Group
Reorganization, GDI indirectly beneficially owns all 3,000,000 shares of
supervoting common stock and 2,239,800 shares of common stock.

     Following the completion of the Group Reorganization, according to an
announcement made by Hanny Holdings Limited, an indirect shareholder of each of
CSH and GDI, Hanny made an offer for the outstanding shares of GDI not held
indirectly by Hanny. The offer was completed on June 16, 2006. As a result of
the completion of the offer, Hanny reported ownership of 436,032,120 shares, or
98.92 % of the outstanding shares, of GDI. In December 2006, ITC Corporation
Limited ("ITC"), a public listed company which is listed on main board of the
HKSE, acquired additional equity interest in Hanny through acquisition of shares
from an independent third party which triggered a conditional mandatory cash
offer ("Offer"). Pursuant to the Offer, Hanny became a subsidiary of ITC, and
ITC became the ultimate parent company of the Company. The chart below
illustrates the position of the Company in ITC Group at December 31, 2006:

                     ----------------------------------------
                     |       ITC Corporation Limited        |
                     |               ("ITC")                |
                     |      (Incorporated in Bermuda)       |
                     |        (Investment Holding)          |
                     ----------------------------------------
                                      |
                                      |64%
                     ----------------------------------------
                     |       Hanny Holdings Limited         |
                     |              ("Hanny")               |
                     |      (Incorporated in Bermuda)       |
                     |        (Investment Holding)          |
                     ----------------------------------------
                                      |
                                      |98.92%
                     ----------------------------------------
                     |  Group Dragon Investments Limited    |
                     |               ("GDI")                |
                     |      (Incorporated in the BVI)       |
                     |        (Investment Holding)          |
                     ----------------------------------------
                                      |
                                      |55.22%
                     ----------------------------------------
                     |             The Company              |
                     |          (Traded on OTC)             |
                     |      (Incorporated in Bermuda)       |
                     ----------------------------------------
                                      |
                                      |
                     |--------------------------------------|
                     |26.0%                                 |20.36%
        ------------------------------       -----------------------------
        |    Hangzhou Zhongce        |       |          Wing On           |
        | (Incorporated in PRC)      |       |    (Listed in Hong Kong)   |
        |  (Tire Manufacturing)      |       |  (Incorporated in Bermuda  |
        |                            |       |     (Travel Business)      |
        |----------------------------|       |-----------------------------

<PAGE>

     The Company itself is a holding company, which has majority interests in a
number of subsidiaries as of December 31, 2006. The principal subsidiaries of
the Company are Century Lead Limited ("Century Lead"), Capital Canton Limited
("Capital Canton"), Easy Legend Limited ("Easy Legend"), Manwide Holdings
Limited ("Manwide"), Million Good Limited ("Million Good"), Sincere Ocean
Limited ("Sincere Ocean"), Supreme Solution Limited ("Supreme Solution"),
Wealth Faith Limited ("Wealth Faith"), Great Windfall Agents Limited
("Great Windfall"), Honest Map Limited ("Honest Map"), Ventures Kingdom Limited
("Ventures Kingdom"), which all subsidiaries are the British Virgin Islands
("BVI") incorporated companies; and The Rosedale Luxury Hotel & Suites Limited
("Rosedale"), which is established in the PRC.

<PAGE>

           CONSOLIDATED PRINCIPAL SUBSIDIARIES AS OF DECEMBER 31, 2006

<TABLE>
<CAPTION>
                                                                       COMPANY'S
                                                                   OWNERSHIP INTEREST
                           COUNTRY OF                            ---------------------
CONSOLIDATED SUBSIDIARY   INCORPORATION   PRINCIPAL ACTIVITIES   DIRECTLY   INDIRECTLY
-----------------------   -------------   --------------------   --------   ----------
<S>                       <C>             <C>                    <C>        <C>
Century Lead                   BVI        Investment holding       100%         --
Capital Canton                 BVI        Investment holding       100%         --
Easy Legend                    BVI        Investment holding       100%         --
Manwide                        BVI        Investment holding       100%         --
Million Good                   BVI        Investment holding       100%         --
Sincere Ocean                  BVI        Investment holding       100%         --
Supreme Solution               BVI        Investment holding       100%         --
Wealth Faith                   BVI        Investment holding       100%         --
Great Windfall                 BVI        Investment holding       100%         --
Honest Map                     BVI        Investment holding       100%         --
Ventures Kingdom               BVI        Investment holding       100%
Rosedale                       PRC        Property holding         100%         --
</TABLE>

PROPERTY, PLANT AND EQUIPMENT

BERMUDA

     The registered office of the Company is located at Clarendon House, 2
Church Street, Hamilton, HM11, Bermuda. Only corporate administrative matters
are conducted at this office, through the Company's agent, Butterfield Fund
Services (Bermuda) Limited. The Company neither owns nor leases property in
Bermuda.

HONG KONG

     The Company's principal executive office is located at 31st Floor, Bank of
America Tower, 12 Harcourt Road, Central, Hong Kong. The Company shares the
office with CSH and the Company has agreed to reimburse CSH for administrative
services rendered on behalf of the Company on a cost plus 5% basis.

<PAGE>

CHINA

     The Company has maintained a representative office in the PRC upon
establishment of Rosedale in Shanghai for the monitoring the acquisition of the
Xiang Zhang Garden.
<PAGE>

              ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Except for statements of historical facts, this section contains forward-looking
statements involving risks and uncertainties. You can identify these statements
by forward-looking words including "expect", "anticipate", "believe", "seek",
"estimate", "intends", "should" or "may". Forward-looking statements are not
guarantees of our future performance or results and our actual results could
differ materially from those anticipated in these forward-looking statements as
a result of certain factors, including those set forth under the section of this
Report entitled Item 3. Key Information - "Risk Factors." This section should be
read along with our Consolidation Financial Statements included as Item 18 of
this Report, including the accompanying notes, that are included in this annual
report on Form 20-F. The following discussion of operating results and the
financial review and prospects as well as our consolidated financial statements
have been presented and prepared in accordance with US GAAP.

OPERATING RESULTS

OVERVIEW

     The forward-looking statements in this Item 5 are not guarantees of future
performance. They involve both risk and uncertainty. Several important factors
could cause our actual results to differ materially from those anticipated by
these statements. Many of those factors are macroeconomic in nature and are,
therefore, beyond the control of our management. Please see the "Risk Factors"
in this Annual Report for more details.

     The Company has historically been engaged in the tire manufacturing and
trading and related business. During 2001, the Company decided to reorganize its
operations to improve its financial performance. The Company began to dispose of
loss-making subsidiaries and tried to diversify its business.

     In early 2002, the Company acquired a substantive equity interest
approximately 35% in Wing On, diversifying its business into the travel
industry. In fiscal 2003, the Company further completed its disposals of three
loss-making subsidiaries, Yinchuan CSI and the Company's remaining interests in
Double

<PAGE>

Happiness and ceased to account for the results of operations and the assets and
liabilities of these subsidiaries from their respective disposal dates.

     In order to realize part of its investment, the Company entered into a
contract to sell a 25% interest in Hangzhou Zhongce on June 15, 2003. As a
result, the Company reduced its interest in Hangzhou Zhongce from 51% to 26%.
The sale was completed in September 2003 and Hangzhou Zhongce became an equity
method affiliate of the Group at that time. The Company's Directors considered
the disposal as an attractive opportunity for the Company to realize part of its
investment. . The Company consolidated the results of operations of Hangzhou
Zhongce for the nine months period end September 30, 2003 and shared equity
earnings of Hangzhou Zhongce for the period from October 1, 2003 to December 31,
2003.

     After the completion of the above-mentioned restructuring activities, as at
December 31, 2006, the Company is still actively looking for new investments.

     With its changing political and socio-economic landscape, it is imperative
that the Company expands its vision to encompass investments in other high
growth industries in the region. Going forward, the Company intends to actively
search for potential investments in the PRC with emphasis on achieving a
diversified portfolio. Since the signing of the Closer Economic Partnership
Arrangement, economic exchanges between Hong Kong and the Mainland China have
gained in momentum. The Company believes that, in part as a result of this
development, the economy of the PRC will grow at an increased rate. The Company
is confident about the PRC market and shall continue exploring for appropriate
investment projects to expand its business network in the Mainland.

PROPERTY ACQUISITION IN SHANGHAI

     In 2004, the Company entered into a conditional agreement for the
acquisition of Xiang Zhang Garden situated in Shanghai, the PRC and the
properties being constructed thereon which comprises two levels of underground
car parks and a 24-storey building for a consideration of Rmb450 million (the
"Properties"). It was anticipated that the Properties will be used for
commercial and service apartment rental purposes.

<PAGE>

Please see the "Developments in Litigation relating to Xiang Zhang
Garden" of Item 4 in this Annual Report for more details. The financial results
of the Company for the financial year 2006 comprised solely of the Company's
share of the earnings and financial results of its affiliates in the tire and
travel businesses.

CRITICAL ACCOUNTING POLICIES

     The preparation of our financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and judgments that affect our
reported amounts of assets and liabilities, revenues and expenses, and related
disclosures of contingent assets and liabilities. On an on-going basis, we
evaluate our estimates and assumptions based upon historical experience and
various other factors and circumstances. Management believes that our estimates
and assumptions are reasonable under the circumstances; however, actual results
may vary from these estimates and assumptions under different future
circumstances. We have identified the following critical accounting policies
that affect the more significant judgments and estimates used in the preparation
of our consolidated financial statements. For further discussion of our
significant accounting policies, refer to Note 2 - "Summary of Significant
Accounting Policies" to the Consolidated Financial Statements included in "Item
18 - Financial Statements" of this annual report.

     The following critical accounting policies affect the more significant
judgments and estimates used in the preparation of the Company's consolidated
financial statements.

INCOME TAXES

     The Company records a valuation allowance to reduce its deferred tax assets
to the amount that the Company believes is more likely than not to be realized.
In the event the Company was to determine that it would be able to realize its
deferred tax assets in the future in excess of its recorded amount, an
adjustment to the deferred tax asset would increase income in the period such
determination was made. Likewise,

<PAGE>

should the Company determine that it would not be able to realize all or part of
its net deferred tax asset in the future, an adjustment to the deferred tax
asset would be charged to income in the period such determination was made.

DERIVATIVES EMBEDDED IN CERTAIN DEBT SECURITIES

     Convertible notes of Wing On held by the Company contain features that
enable the Company to convert the debt securities into common stock of Wing On.
These features represent embedded derivatives which are required to be accounted
for separately from the related debt securities. The estimated fair value of
these features is valued using an option-pricing model which requires us to make
assumptions on such variables such as share price volatility of common stock of
Wing On, the expected time to expiration, expected dividends yield of Wing On
and etc. Changes in these assumptions could significantly affect the amount of
changes in fair value of the conversion option we recognize in our consolidated
financial statements. The adjustments will be required until the features are
either triggered or expire.

ACCOUNTING PRONOUNCEMENTS

A detailed discussion of accounting policies adopted and recent accounting
pronouncements not yet adopted by the Company can be found in Note 2 - "Summary
of Significant Accounting Policies" of the Consolidated Financial Statements
included in "Item 18. Financial Statements" of this annual report.

RESULTS OF OPERATION

Fiscal year ended December 31, 2006 compared with fiscal year ended December 31,
2005

The Company

     General and administrative expenses, these costs comprise expenditure of
personnel and administrative functions, including accounting, information
technology, human resources, legal and administration, as well as pension,
healthcare and bonus. The selling, general and administrative expenses in 2006
amounted Rmb16.8 million, a decrease of Rmb10.7 million or 39%, compared to
Rmb27.5 million in 2005. The decrease in our administrative expenses during the
current year is mainly because certain legal and professional costs was incurred
on the acquisition of a property situated in Shanghai, the PRC in 2005.

<PAGE>

     Operating loss from continuing operations amounted to Rmb16.8 million in
fiscal year 2006 as compared with operating loss of Rmb27.5 million in fiscal
year 2005. The Rmb16.8 million on operating loss from continuing operations
mainly represented administrative expenses incurred for the year ended December
31, 2006.

     Interest income amounted to Rmb12.3 million in 2006, a decrease of Rmb0.7
million, compared to Rmb13.0 million in 2005.

     Loss from continuing operations for the year ended December 31, 2006
decreased to Rmb21.2 million compared to Rmb26.3 million for the last year. The
loss for the fiscal year 2006 consisted mainly of loss on change in fair value
of the conversion option associated with the convertible note of Wing On
totaling Rmb19.5 million which was partly offset by an interest income of
Rmb12.3 million.

     For the year ended December 31, 2006, the Company recorded a consolidated
net loss of Rmb21.2 million, or Rmb2.35 per share. By comparison, the net loss
and the net loss per share in 2005 was Rmb26.3 million and Rmb2.92,
respectively.

Tire Business

     For the year ended December 31, 2006, Hangzhou Zhongce recorded a
consolidated turnover of approximately Rmb8,823 million, an increase of
approximately 38% as compared to the same period in 2005 of approximately
Rmb6,506 million. The audited consolidated net profit for the year ended
December 31, 2006 decreased from approximately Rmb141.3 million for the last
corresponding period to approximately Rmb56.3 million for the current year.

Travel Business

     For the year ended December 31, 2006, Wing On recorded a consolidated
turnover of approximately HK$ 1,992 million (equivalent to Rmb2,004 million), an
increase of approximately 9.7% as compared to the same period in 2005 of
approximately HK$1,816 million (equivalent to Rmb1,890 million). The audited
consolidated net loss for the year ended December 31, 2006 increased from net
loss of approximately HK$14.3 million (equivalent to Rmb14.9 million) for the
last corresponding period to net loss of approximately HK$ 53.1million
(equivalent to Rmb53.4 million) for the current year.

<PAGE>

Fiscal year ended December 31, 2005 compared with fiscal year ended December 31,
2004

The Company

     The general and administrative expenses in 2005 amounted Rmb27.5 million,
an increase of Rmb14.2 million or 106.2%, compared to Rmb13.3 million in 2004.
The increase in our administrative expenses during the current year is mainly
due to certain legal and professional costs incurred to date on the transaction
acquiring a property situated in Shanghai, the PRC. In addition increased
activity at Rosedale resulted insignificant increases in their administrative
expenses.

     Operating loss from continuing operations amounted to Rmb27.5 million in
fiscal year 2005 as compared with operating loss of Rmb13.3 million in fiscal
year 2004. The Rmb27.5 million on operating loss from continuing operations
mainly represented administrative expenses incurred for the year ended December
31, 2005.

     Interest income amounted to Rmb13 million in 2005, a decrease of Rmb8.5
million or 39.4646%, compared to Rmb21.5 million in 2004. This decrease is
mainly due to significant declining balance of notes receivable during the
fiscal year 2005.

     Loss from continuing operations for the year ended December 31, 2005
increased to Rmb26.3 million compared to a profit of Rmb181.9 million for the
last year. The loss for the fiscal year 2005 consisted mainly of a loss on
change in fair value of the conversion option associated with the convertible
note of Wing On totaling Rmb42.9 million and the Company's share of profit of
Hangzhou Zhongce and Wing On in an amount of Rmb 35.1 million.

     For the year ended December 31, 2005, the Company recorded a consolidated
net loss of Rmb26.3 million, or Rmb2.92 per share. By comparison, the net income
and the net income per share in 2004 was Rmb181.9 million and Rmb20.18,
respectively.

Tire Business

     For the year ended December 31, 2005, Hangzhou Zhongce recorded a
consolidated turnover of approximately Rmb6,506 million, an increase of
approximately 29.6% as compared to the same period in 2004 of approximately
Rmb5,021 million. The audited consolidated net profit for the year ended
December 31, 2005 increased from approximately Rmb110.1 million for the last
corresponding

<PAGE>

period to approximately Rmb141.3 million for the current year.

Travel Business

     For the year ended December 31, 2005, Wing On recorded a consolidated
turnover of approximately HK$1,816 million (equivalent to Rmb1,890 million), an
increase of approximately 5.54% as compared to the same period in 2004 of
approximately HK$1,722 million (equivalent to Rmb1,832 million). The audited
consolidated net loss for the year ended December 31, 2005 decreased from net
loss of approximately HK$15.0 million (equivalent to Rmb15.9 million) for the
last corresponding period to net loss of approximately HK$14.3 million
(equivalent to Rmb14.9 million) for the current year.

IMPACT OF INFLATION

Inflation and deflation in the PRC and Hong Kong has not had a material effect
on our past business. During the times of inflation, the affiliated companies of
the Company have generally been able to increase the price of their products or
services in order to keep pace with inflation.

TAX REGULATIONS

     For the impact of tax regulations on the Company, see Note 10 to the
Consolidated Financial Statements of the Company included in "Item 18. Financial
Statements".

LIQUIDITY AND CAPITAL RESOURCES

     Over the last few years, cash flows financing the operations of the Company
was principally obtained from internally generated funds and bank borrowings.
The Company had negative working capital, calculated as current assets less
current liabilities, of Rmb212.1 million and a positive working capital Rmb112.3
million as of December 31, 2006 and 2005, respectively.

     In 2006, the net cash used in operating activities was approximately Rmb8.2
million compared with Rmb13.8 million provided by operating activities in 2005.
The net cash provided by investing activities and used in financing activities
in 2006

<PAGE>

was approximately Rmb2.4 million and Rmb1.8 million, respectively; compared with
Rmb46.7 million used in investing activities and Rmb33.8 million provided by
financing activities in 2005.

     The Company primarily used its cash and cash equivalents, banking
facilities and the cash flows from notes receivable to fund its capital
expenditures, investment in and advances to affiliates and subscription of note
receivables. Other than the subscription of a new convertible note from Wing On
and the consideration of the Properties located in Shanghai payable upon the
grant and drawdown of loans to be granted by PRC banks or financial institutions
and secured by the Properties, described in Item 4 of this Form 20-F, no
transactions, arrangements and other relationships with unconsolidated entities
or other persons that are reasonably likely to affect materially the liquidity
or the availability of or requirement for capital resources of the Company been
entered into during the year. Hanny has agreed to provide adequate funds for the
Company to meet in full its financial obligations as they fall due for the
foreseeable future. In management's opinion, Hanny has sufficient cash and cash
equivalents and loan receivable to support the Company and accordingly, the
Company considered its working capital is sufficient for its present
requirements.

     For the year ended December 31, 2006, the Company had nil expenditure for
the purchase of property, plant and equipment, compared with used of Rmb0.3
million for the year ended December 31, 2005.

     In addition, cash and cash equivalents of the Company from continuing
operations decreased from Rmb14.7 million at December 31, 2005 to Rmb7.1 million
at December 31, 2006 of which approximately Rmb0.17 million (approximately
US$0.02 million) were U.S. dollar deposit.

     There are no material restrictions, including foreign exchange controls, on
the ability of the Company's subsidiaries to transfer funds to the Company in
the form of cash dividends, loans, advances or product/material purchases.

     For related party information, please see "Item 7. Major Shareholders and
Related Party Transactions" in this annual report. In the opinion of management,
these related party transactions have no material effect on the Company's
liquidity or cash flows.

<PAGE>

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

     On June 16, 2004, the Company entered into a conditional agreement with an
independent third party in relation for the proposed acquisition of the
Properties for a total consideration of Rmb450 million. As of December 31, 2005
and 2006, the Company had outstanding capital commitments for acquisition of
properties amounting to approximately Rmb402 million and Rmb402 million,
respectively. Please see the "Developments in litigations relating to
Xiangzhang Garden" of Item 4 in this Annual Report for further development on
this contractual obligations.

<PAGE>

TREND INFORMATION

     Following its sale of a portion of its interest in Hangzhou Zhongce in
2003, the Company does not have a majority-owned operating subsidiary as of the
date of this report. Currently, the Company's financial results is largely
dependent on its portion of the earnings and other results of affiliated
companies, Hangzhou Zhongce and Wing On.

     Year 2006 has affirmed the Company's consistent positive outlook for the
economy in China. The on-going investment strategy in China is expected to be
maintained in the future. As China has already attained rich and fruited
development in 2006, the Company is strongly confident in the further growth in
the economy of China and Hong Kong in time to come. Having positioned itself as
a conglomerate investor in China, the Company would, however, maintain its
prevalent conservative and cautious investment posture in the coming year and to
contribute its effort to explore new investment opportunities.

OFF-BALANCE SHEET ARRANGEMENT

     For the year of 2006, the Company did not have any off-balance sheet
arrangements that have or are reasonably likely to have a current or future
effect on the Company's financial condition, changes in financial conditions,
revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources. Additionally, the Company did not undertake any guarantee as
of December 31, 2006.

As at December 31, 2006, as a condition precedent to the application of
injunction order, the Company had issued a counter guarantee of Rmb402 million
to an institution in the PRC which provided a guarantee of the same amount to
the PRC Court on behalf of the Company.

<PAGE>

               ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

     The directors and executive officers and senior management of the Company
as of December 31, 2006 are identified below.

DIRECTORS AND SENIOR MANAGEMENT

<TABLE>
<CAPTION>
NAME                   AGE   POSITION                            EMPLOYED SINCE
----                   ---   --------                            --------------
<S>                    <C>   <C>                                 <C>
Yap, Allan              53   Chairman, Chief Executive Officer      2001 (1)
                             and Director of the Company
Chan Ling, Eva          42   Deputy Chairman and Director of        2004 (2)
                             the Company
Dorothy Law             38   Director                               2000
Richard Whittall        49   Independent Director and Audit         2000
                             Committee Member of the Company
David Edwin Bussmann    55   Independent Director and Audit         2000 (3)
                             Committee Member of the Company
Lien Kait Long          60   Director                               1999
Chow Chun Man, Jimmy    38   Chief Financial Officer                2003
</TABLE>

----------
(1)  Dr. Yap, Allan is the Chairman of Hanny Holdings Limited and served as an
     executive director of CSH until his resignation on June 16, 2006 in
     connection with the reorganization discussed in Item 4.

(2)  Ms. Chan Ling, Eva is an executive director of CSH.

(3)  Mr. David Edwin Bussmann served as independent non-executive director of
     CSH until his resignation on June 16, 2006 in connection with the
     reorganization discussion in Item 4.

BIOGRAPHIES OF DIRECTORS AND SENIOR MANAGEMENT

     Dr. Yap, Allan, aged 53, is the chairman, chief executive officer and a
director of the Company. He obtained the honorary degree of Doctor of Laws and
has over 25 years experience in finance, investment and banking. Dr. Yap is the
Chairman of Hanny Holdings Limited ("Hanny") and an executive director of Wing
On and Big Media Group Limited, all are public listed companies in Hong Kong.
Dr. Yap is also the chairman and chief executive officer of Burcon NutraScience
Corporation ("Burcon"), a company whose shares are listed on the TSX Venture
Exchange in Canada and the Frankfurt Stock Exchange in Germany, and an executive
chairman of PSC Corporation Limited and Intraco Limited and Tat Seng Packaging
Group Limited, all of which are public listed companies in Singapore. He is also
the chairman of MRI

<PAGE>

Holdings Limited ("MRI"), a company whose shares are listed on Australian Stock
Exchange. Until June 16, 2006, Dr. Yap was also an executive director of CSH.
Dr. Yap was appointed as the chairman and chief executive officer of the Company
on December 1, 2004.

     Ms. Chan Ling, Eva, aged 42, is a deputy chairman and a director of the
Company. She has over 19 years' experience in auditing, accounting and finance
in both international accounting firms and listed companies. Ms. Chan is a
member of the Institute of Chartered Accountants in Australia, a fellow member
of the Association of Chartered Certified Accountants and also a practicing
member of the Hong Kong Institute of Certified Public Accountants. She is an
executive director of CSH and a director of MRI. She is also an independent
non-executive director of Trasy Gold Ex Limited, which is a public listed
company in Hong Kong. Ms. Chan was appointed as a deputy chairman of the Company
on December 1, 2004.

     Ms. Law, Dorothy, aged 38, is a director of the Company. She received her
Bachelor of Commerce and Bachelor of Laws degrees from the University of British
Columbia in Canada. Ms. Law is a Barrister and Solicitor licensed to practice
law in British Columbia and she has also been admitted as a Solicitor of the
High Court of Hong Kong. Ms. Law is also a director of Burcon and corporate
counsel of Hanny.

     Mr. David Edwin Bussmann, aged 55, is an independent director and an audit
committee member of the Company. Mr. Bussmann has more than 20 years experience
in Asia, and has familiarity with investment issues related to China, in many
industries and sectors. He previously worked in investment banking at Salomon
Brothers and Citibank, and in private equity at Prudential Asia. Until June 16,
2006, Mr. Bussmann was also an independent non-executive director of CSH. He
speaks and reads Mandarin Chinese.

     Mr. Richard Whittall, aged 49, is an independent director and the chairman
of the audit committee of the Company. He is the President of Watershed Capital
Partners Inc., an investment banking firm, based in Vancouver, British Columbia,
Canada. Mr. Whittall has 21 years experience in investment banking, advising
domestic and international companies in the areas of fund raising, mergers,
acquisitions, divestitures and strategic business alliances. Mr. Whittall
currently serves as a president of Watershed Capital Partners Inc. and director
of a number of

<PAGE>

public and private companies, including Burcon, Fortress Paper Inc., Maximizer
Software Inc., Glacier Ventures International Corp., Canadian General
Investments Limited and Canadian World Fund Limited.

     Mr. Lien Kait Long, aged 60, is a director of the Company. Mr. Lien holds a
bachelor's degree in commerce and is a fellow member of Institute of Certified
Public Accountants of Singapore and the CPA Australia. He has more than 30
years' experience in finance, corporate management and business investment. He
has held a number of senior management positions as well as executive
directorships in various public and private corporations in Singapore, Hong Kong
and China. He is also a director of MRI. Mr. Lien currently serves as an
independent director on the board of several Singapore and Chinese Companies
listed on the Singapore Exchange Securities Trading Limited.

     Mr. Chow Chun Man, Jimmy, aged 38, was appointed as the Chief Financial
Officer on September 24, 2003. Mr. Chow holds a Bachelor Degree in Accountancy
and is a member for both of the CPA Australia and the Hong Kong Institute of
Certified Public Accountants. He has over 13 years' of experiences in auditing,
financial reporting and corporate finance. Mr. Chow is also a Vice President of
Wing On Travel (Holdings) Ltd.

     There is no family relationship between any director or executive officer
listed above and any other director or executive officer listed above. None of
the directors or executive officers was elected or appointed pursuant to an
arrangement or understanding with any third party.

COMPENSATION OF DIRECTORS AND SENIOR MANAGEMENT

     For the year ended December 31, 2006, the aggregate amount of compensation
paid by the Company and its subsidiaries to the Company's directors and
executive officers, for service in all capacities, was approximately Rmb1
million (US$0.12 million). The grant of bonuses is determined at the discretion
of the board of directors. No bonuses were paid in the year 2006 or granted with
respect to the year 2006.

     The following table summarizes the compensation are received by our
executive and non-executive directors and senior management in the year 2006.

<PAGE>

COMPENSATION

<TABLE>
<CAPTION>
NAME                     SALARY (RMB)   TOTAL (RMB)
----                     ------------   -----------
<S>                      <C>            <C>
Executive Director
Yap, Allan                  156,082       156,082
Chan Ling, Eva              156,082       156,082
Non-Executive Director
Dorothy Law                 156,082       156,082
Lien Kait Long              156,082       156,082
Richard Whittall            156,082       156,082
David E. Bussmann           156,082       156,082
</TABLE>

BOARD PRACTICES

     All directors of the Company are elected to hold office until the next
annual general meeting of the shareholders and their successors are elected and
qualified. The 2007 annual general meeting of the Company was held on December
31, 2007, all six existing directors were re-elected to the board of directors
of the Company.

     No director of the Company entered into any service contract nor entitled
to any benefits upon termination of employment with the Company.

     The audit committee of the board of directors reviews, acts on and reports
to the board of directors with respect to various auditing and accounting
matters, including the selection of our auditors, the scope of the annual
audits, fees to be paid to the auditors, the performance of the auditors and our
accounting practices. During the year 2006 and through the date hereof, the
audit committee of the Company consisted of Mr. Richard Whittall and Mr. David
Edwin Bussmann.

EMPLOYEES

     As of December 31, 2004, 2005 and 2006, the Company had no employees.
Pursuant to a management and administrative services agreement between the
Company and CSH originally entered into in 1993, CSH provides certain management
and administrative services to the Company. See Note 12(b) to Consolidated
Financial Statements in "Item 18 Financial Statements" for more details.

<PAGE>

SHARE OWNERSHIP

     As of December 31, 2006, none of the Company's directors, officers or their
associates had any personal, family, corporate or other interests in any shares
of the Company or any of its associated corporations.
<PAGE>

            ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

MAJOR SHAREHOLDERS

     Based on filings on Schedule 13G under the Exchange Act and public
announcement of CSH and Hanny pursuant to Hong Kong Stock Exchange rules, as of
December 31, 2006 and up to reporting date, the following persons beneficially
owned shares representing 5% or more of the issued share capital of the Company:

<TABLE>
<CAPTION>
NAME OF HOLDER                   NUMBER OF SHARES HELD   PERCENTAGE OF CLASS
--------------                   ---------------------   -------------------
<S>                              <C>                     <C>
Hanny Holdings Limited (1)(2)(3)       5,239,800                55.22%
Peconic Partners LLC(4)                  503,275                 5.58%
</TABLE>

(1)  Consists of 3,000,000 shares of supervoting common stock, each share having
     10 votes on resolutions of shareholders, and 2,239,800 of common stock,
     each share having 1 vote on resolutions of shareholders, held by GDI. As
     part of the Group Reorganization, effective on May 19, 2006, CSH
     transferred to a wholly-owned subsidiary of GDI 2,239,800 shares of the
     Company's common stock previously held indirectly and 3,000,000 shares of
     the Company's supervoting common stock previously held directly. As a
     result of the Group Reorganization, GDI has shared voting and dispositive
     control over 3,000,000 shares of the Company's supervoting common stock, or
     100% of the total number of supervoting common stock outstanding, and
     2,239,800 shares of the Company's common stock, or 37.22% of the total
     common stock outstanding. As of June 16, 2006, Hanny Holdings Limited
     ("Hanny") indirectly owns 436,032,120 shares of GDI, or 98.92% of the
     total common stock outstanding of GDI. On September 13, 2006, the board of
     directors of the Company approved Group Dragon (B.V.I.) Limited, a
     wholly-owned subsidiary of GDI to convert 3,000,000 shares of supervoting
     common stock into 3,000,000 shares of common stock of the Company. For a
     discussion of the Group Reorganization, see "Item 4. Information on the
     Company - History and Development of the Company.

(2)  On March 26, 2008, Hanny disclosed by way of announcement posted on the
     website of The Stock Exchange of Hong Kong Limited that it would dispose
     to an independent third party its entire issued share capital in Kamthorn
     Limited, which held approximately 18.1% equity interest in the issued share
     capital of the Company. The transaction was completed in May 2008.

(3)  On July 30, 2008, Hanny further disclosed in its annual report 2007-08
     that 29.16% interest (which included the interest in (2) above) in the
     issued share capital of the Company was disposed subsequent to its year
     ended March 31, 2008.

(4)  According to Amendment No. 16 to a report on Schedule 13G filed on February
     9, 2007 (the "Amended Schedule 13G"), Peconic Partners LLC (formerly known
     as FLA Advisers LLC), an investment adviser registered with

<PAGE>

     the U.S. Securities and Exchange Commission ("Peconic Partners") had shared
     voting and dispositive control over 446,375 shares of common stock or 4.95%
     for the total number of shares outstanding. Peconic shares investment and
     dispositive power over the shares with various investment advisory clients
     of Peconic, including Peconic Partners International Fund, Ltd. (formerly
     FLA International Fund Ltd.), a Bermuda company which reported shared
     ownership with Peconic Partners of 56,900 shares or 0.63% of the total
     outstanding. According to Amended Schedule 13G, various client of the
     reporting persons (Peconic Partners and Peconic Partners International Fund
     Ltd.) have the right to receive or the power to direct the receipt of
     dividends from, or the proceeds from the sale of the shares of Company's
     common stock reflected in the Amended Schedule 13G.

     According to the shareholders list, dated November 15, 2007, provided to
the Company by its transfer agent, there are 66 shareholders (representing all
issued common stock of 9,017,310 shares) of record of the Company's common
stock.

RELATED PARTY TRANSACTIONS

CONVERTIBLE NOTE RECEIVABLE FROM AN AFFILIATE

     On March 23, 2006, Wing On entered into a subscription agreement with the
Company and other subscribers in relation to the subscription of the Convertible
Notes with an aggregate principal amount of HK$1,000,000,000. The Company agreed
to subscribe for the Convertible Notes with principal amount of HK$300,000,000
by cash.

     The initial conversion price of the Convertible Notes is HK$0.79 per share,
subject to anti-dilutive adjustments. Unless previously converted or lapsed or
redeemed by Wing On, Wing On will redeem the Convertible Notes on the fifth
anniversary from the date of issue of the Convertible Notes (the "Maturity
Date") at the redemption amount which is 110% of the principal amount of the
Convertible Notes outstanding.

     The Company shall have the right to convert, on any business day commencing
from the 7th day after the date of issue of the Convertible Notes up to and
including the date which is 7 days prior to the Maturity Date, the whole or any

<PAGE>

part (in an amount or integral multiple of HK$1,000,000) of the principal amount
of the Convertible Notes into shares of Wing On at the then prevailing
conversion price.

     Subject to certain restrictions which are intended to facilitate compliance
of relevant rules and regulations, each noteholder shall have the right to
exchange from time to time all or part (in the amount of HK$10,000,000 or
integral multiples thereof) of 50% of the initial principal amount of its
Convertible Notes for shares in the share capital of any company which is an
affiliated company of Wing On as defined in the Rules Governing the Listing of
Securities on the Hong Kong Stock Exchange or subsidiary of Wing On that is to
be listed on a stock exchange through an initial public offering at the price
(the "Spin-off Shares"), subject to anti-dilutive adjustments, at which the
Spin-off Shares are actually issued to the public at the time of the listing on
that stock exchange. The decision on whether to list any of its affiliated
company or subsidiary in the future is at the sole discretion of the directors
of Wing On.

DUE FROM/TO ULTIMATE PARENT COMPANY AND INTERMEDIATE PARENT COMPANY

     The amounts due from/to ultimate parent company and intermediate parent
company are unsecured, non-interest bearing and have no fixed terms of
repayment. The aggregate amount of amount due from ultimate parent company was
approximately Rmb37,426,000 as at December 31, 2004. As at December 31, 2005 and
2006, the Company has balance due to ultimate parent company amounted to
Rmb7,149,000 and Rmb203,000, respectively. As at December 31, 2006, the Company
has a balance due to an intermediate parent company amounted to Rmb203,025,000.

ADVANCE TO/AMOUNT DUE TO AN AFFILIATE

     The amount advanced to/from an affiliate was unsecured, interest bearing
and repayable upon demand. The aggregate advance to the affiliate was
approximately Rmb91,384,000 as at December 31, 2004. As at December 31, 2005,
the Company has a balance on advance to an affiliate of Rmb110,972,000 and other
than the amount of Rmb93,421,000 due on December 31, 2006, the remainder is
repayable upon demand. As at December 31, 2006, the Company has a balance of
amount due to an affiliate amounted Rmb2,121,000

MANAGEMENT AND ADMINISTRATIVE SERVICES AGREEMENT

     Pursuant to a management and administrative services agreement between the
Company and CSH in 1993 and renewed in 1997, 2000 and 2003 in each case

<PAGE>

for a term of three years, CSH provides certain management services to the
Company for an annual fee of US$30,000 (Rmb248,000). In addition, the Company
has agreed to reimburse CSH for administrative services not covered by the
management and administrative services agreement rendered on behalf of the
Company on a cost plus 5% basis, in the aggregate amount of approximately
Rmb6,200,000 Rmb4,798,000 and Rmb2,525,000 for the years ended December 31,
2004, 2005 and 2006, respectively.

<PAGE>

                          ITEM 8. FINANCIAL INFORMATION

CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

     See the Consolidated Financial Statements to the Company included in "Item
18. Financial Statements" of this annual report. See also "Item 17. Financial
Statements" of this annual report for financial statements of Wing On and
Hangzhou Zhongce, included pursuant to the requirements of Article 3-09 of
Regulation S-X.

DIVIDEND POLICY

     On July 3, 2001, the board of directors of the Company announced that the
Company would suspend the declaration and payment of any quarterly dividend
until the profitability of the Company and its subsidiaries reached an
acceptable level. During 2004, 2005 and 2006, no dividend was declared or paid
by the Company. Any future determination to pay a dividend to shareholders of
the Company will depend on the Company's results of operations and financial
condition, and other factors deemed relevant by its board of directors.

     Since the Company is a holding company, its ability to pay dividends
depends substantially on its receipt of distributions from its subsidiaries.
Applicable Chinese laws and regulations require that, before a Sino-foreign
equity joint venture enterprise (such as each PRC Subsidiary) distributes
profits to investors, it must: (1) satisfy all tax liabilities; (2) provide for
losses in previous years; and (3) make allocations, in proportions determined at
the sole discretion of the board of directors, to a general reserve fund, an
enterprise expansion fund and a staff welfare and incentive bonus fund. During
2004, 2005 and 2006, no distribution of dividends was made from any subsidiary
to the Company.

SIGNIFICANT CHANGES

     From May through June 2007, Wing On had issued ordinary shares to certain
of its employees and holders of Convertible Notes as a result of their exercise
of stock options and conversion right of the Convertible Notes, respectively. In
June and August 2007, Wing On also completed several placements of its sharers
to

<PAGE>

independent investors. From June through the date of this report, the Company
also converted HK$237 million in total of the Convertibles Notes of Wing On into
ordinary shares of HK$0.10 each of Wing On at a conversion price of HK$0.79 per
share and purchased and disposed of certain of its shares in Wing On. As a
result of the above significant transactions, the interest of Wing On held by
the Company was diluted from approximately 20.36% to 12.83% up to the date of
this report and the Company's interest in Wing On is accordingly accounted for
as other investments.

<PAGE>

                               ITEM 9. THE OFFER AND LISTING

     Since November 26, 2002, the Company's common stock has traded on the OTC
under the stock symbol "CSHEF". The OTC is a regulated quotation service that
displays real-time quotes, last sale prices and volume information in OTC equity
securities for companies which are registrants with the SEC. Prior thereto, the
Company's common stock traded on the NYSE under the symbol "CSH" from 1993 to
late 2002. However, the trading was suspended on September 27, 2002 by the NYSE
for the failure of the Company to meet the NYSE's continuing listing standards.
Effective December 30, 2002, the common stock of the Company was removed from
listing on the NYSE.

     The following table set forth, for the periods indicated, the high and low
closing sale prices of the common stock as reported by the OTC Securities Market
from November 26, 2002 to December 31, 2006 and by the NYSE from January 1, 2002
to September 27, 2002.

<TABLE>
<CAPTION>
                         HIGH    LOW
YEAR ENDED              (US$)   (US$)
----------              -----   -----
<S>                     <C>     <C>
December 31, 2006        2.59    0.40
December 31, 2005        2.30    0.31
December 31, 2004        6.90    1.03
December 31, 2003        3.50    0.25
December 31, 2002 (1)    2.00    0.20
</TABLE>

(1)  The high and low closing sales prices on the NYSE from January 1, 2002 to
     September 27, 2002 were $2.00 and $0.28; the high and low closing sales
     prices on the OTCBB from November 26, 2002 to December 31, 2002 were $0.74
     and $0.20

     The following table sets forth the high and low closing sale prices for the
common stock as reported during each of the quarters in the two-year period
ended December 31, 2006 and each of the most recent period.

<TABLE>
<CAPTION>
                      HIGH    LOW
QUARTER ENDED        (US$)   (US$)
-------------        -----   -----
<S>                  <C>     <C>
June 30, 2008         0.35    0.26
March 31, 2008        0.60    0.26
December 31, 2007     1.10    0.56
September 30, 2007    1.30    0.73
June 30, 2007         2.21    0.55
March 31, 2007        1.75    0.75
</TABLE>

<PAGE>

<TABLE>
<S>                  <C>     <C>
December 31, 2006     1.95    0.75
September 30, 2006    2.55    1.60
June 30, 2006         2.55    1.63
March 31, 2006        2.59    0.40
December 31, 2005     1.70    0.31
September 30, 2005    2.30    1.10
June 30, 2005         1.82    1.45
March 31, 2005        2.10    1.65
</TABLE>

     The following table sets forth the high and low closing sale prices for the
common stock as reported during each of the most recent six months.

<TABLE>
<CAPTION>
                      HIGH    LOW
MONTH ENDED          (US$)   (US$)
-----------          -----   -----
<S>                  <C>     <C>
August 31, 2008       0.33    0.33
July 31, 2008         0.35    0.33
June 30, 2008         0.35    0.33
May 31, 2008          0.33    0.29
April 30, 2008        0.30    0.26
March 31, 2008        0.35    0.30
</TABLE>

<PAGE>

                         ITEM 10. ADDITIONAL INFORMATION

MEMORANDUM AND ARTICLES OF ASSOCIATION

     For a summary of the Company's Memorandum and Articles of Association see
Item 10 of the Company's Form 20-F for the year ended 2001 to which specific
reference is made.

MATERIAL CONTRACTS

     The following is a summary of material contracts, other than contracts
entered into in the ordinary course of business, to which the Company or any
subsidiary of the Company is a party, for the two years immediately preceding
the filing of this report.

     1. Contract for placing and subscription dated February 4, 2005 among the
Company, Wing On and the placing agent pursuant to which the placing agent
agreed to place and the Company agreed to subscribe for 6,400 million shares of
Wing On at the price of HK$0.022 per share.

     2. A conditional subscription agreement dated March 23, 2006 entered into
between the Company and Wing On in relation to the subscription by the Company
for HK$300 million 2% convertible exchangeable notes due 2011 of Wing On which
entitle the holder thereof to convert the outstanding principal into Wing On
shares at the initial conversion price of HK$0.79 per share.

     3. Agreement dated December 5, 2007 entered into between the Company and
Martin Pacific Limited for the sale and purchase of the entire issued share
capital of Manwide Holdings Limited.

     4. Agreement dated March 25, 2008 entered into between the Company and
Hanny Magnetics (B.V.I.) Limited for the sale and purchase of the entire issued
share capital of Cosmos Regent Limited, Cyber Generation Limited and Whole Good
Limited.

EXCHANGE CONTROLS

CERTAIN FOREIGN ISSUER CONSIDERATIONS

     The Company has been designated as a non-resident for exchange control
purposes by the Bermuda Monetary Authority, Foreign Exchange Control, whose
permission for the issue of shares of common stock of the Company has been
obtained.

     The transfer of shares between persons regarded as resident outside Bermuda
for exchange control purposes and the issue of shares to or by such persons may
be effected without specific consent under the Exchange Control Act of 1972 and
regulations thereunder. Issues and transfers of shares involving any person
regarded as resident in Bermuda for exchange control purposes require specific
prior approval

<PAGE>

under the Exchange Control Act of 1972.

     There are no limitations on the rights of non-Bermuda owners of the
Company's common stock to hold or vote their shares. Because the Company has
been designated as a non-resident for Bermuda exchange control purposes, there
are no restrictions on its ability to transfer funds in and out of Bermuda or to
pay dividends to United States residents who are holders of the Company's common
stock, other than in respect of local Bermuda currency.

     In accordance with Bermuda law, share certificates are only issued in the
names of corporations or individuals. In the case of an applicant acting in a
special capacity (for example, as an executor or trustee), certificates may, at
the request of the applicant, record the capacity in which the applicant is
acting. Notwithstanding the recording of any such special capacity, the Company
is not bound to investigate or incur any responsibility in respect of the proper
administration of any such estate or trust.

     The Company will take no notice of any trust applicable to any of its
shares whether or not it had notice of such trust.

     As an exempted company, the Company is exempt from Bermuda laws which
restrict the percentage of share capital that may be held by non-Bermudan, but
as an exempted company the Company may not participate in certain business
transactions, including: (1) the acquisition or holding of land in Bermuda
(except land required for business and held by way of lease or tenancy for terms
of not more than 21 years) without the express authorization of the Bermuda
legislature; (2) the taking of mortgages on land in Bermuda to secure an amount
in excess of US$50,000 without the consent of the Minister of Finance of
Bermuda; (3) the acquisition of securities created or issued by, or any interest
in, any local company or business, other than certain types of Bermuda
government securities or securities of another exempted company, partnership or
other corporation resident in Bermuda but incorporated abroad; or (4) the
carrying on of business of any kind in Bermuda, except in furtherance of the
business of the Company carried on outside Bermuda or under a license granted by
the Minister of Finance of Bermuda.

     The Bermuda government actively encourages foreign investment in exempted
entities like the Company that are based in Bermuda but do not operate in
competition with local business. In addition to having no restrictions on the
degree of foreign

<PAGE>

ownership, the Company is subject neither to taxes on its
income or dividends nor to any foreign controls in Bermuda. In addition, there
is no capital gains tax in Bermuda, and profits can be accumulated by the
Company, as required, without limitation.

TAXATION

     The following discussion is a summary of certain tax consequences of an
investment in the Company's common stock under Bermuda tax laws and United
States Federal income tax laws. The discussion does not deal with all possible
tax consequences relating to an investment in the common stock and does not
purport to deal with the tax consequences applicable to all categories of
investors, some of which (such as dealers in securities, insurance companies and
tax-exempt entities) may be subject to special rules. In particular, the
discussion does not address the tax consequences under State, local and other
laws (e.g., non-Bermuda, non-United States Federal tax laws). This discussion is
based upon laws and relevant interpretations thereof in effect as of the date of
this Annual Report, all of which are subject to change.

BERMUDA TAXATION

     The Company is incorporated in Bermuda. Under current Bermuda law, the
Company is not subject to tax on income or capital gains, and no Bermuda
withholding tax will be imposed upon payments of dividends by the Company to its
shareholders. Furthermore, the Company has received from the Minister of Finance
of Bermuda under the Exempted Undertakings Tax Protection Act of 1966, as
amended, an undertaking that, in the event that Bermuda enacts any legislation
imposing any tax computed on profits or income, including any dividend or
capital gains withholding tax, or computed on any capital assets appreciation
thereof, or any tax in the nature of an estate, duty or inheritance tax, the
imposition of such tax will not be applicable to the Company or any of its
operations, nor to the shares, debentures or other obligations of the Company,
until March 28, 2016. This undertaking does not, however, prevent the imposition
of property taxes on Company-owned real property or leasehold interests in
Bermuda.

     The United States does not have a comprehensive income tax treaty with
Bermuda.

     As an exempted company, the Company is required to pay to the Bermuda

<PAGE>

government an annual registration fee calculated on a sliding-scale basis by
reference to its assessable capital, that is, its authorized capital plus any
share premium.

UNITED STATES FEDERAL INCOME TAXATION

Taxation of Shareholders

     The following discussion addresses the United States Federal income
taxation of a United States Investor (i.e., a United States citizen or resident,
corporation or partnership organized under the laws of the United States or any
state thereof, an estate subject to United States tax on all of its income
regardless of source or a trust subject to the primary supervision of a U.S.
court and the control of one or more U.S. persons) making an investment in the
Company's common stock. The summary does not address the United States tax
treatment of certain types of investors (e.g., a dealer or trader in securities,
a regulated investment company or a grantor trust, individual retirement and
other tax deferred accounts, a bank, financial institution or life insurance
company a tax-exempt organization a person liable for the alternative minimum
tax; a person who receives shares in compensation for services, certain U.S.
expatriates, or a person that holds shares as part of a straddle or a hedging or
conversion transaction) or of persons other than a U.S. Investor, all of whom
may be subject to tax rules that differ significantly from those summarized
below. If the U.S. investor holds its common stock through a foreign branch or
other foreign business unit, the following discussion may not be accurate in all
respects as to such investor. Investors are advised to consult their own tax
advisors with respect to their particular circumstances and with respect to the
effects of State, local or foreign tax laws to which they may be subject. In
addition, future changes to United States tax laws could have an effect on the
United States Federal income tax consequences of the purchase, ownership and
disposition of common stock.

     A U.S. Investor receiving a distribution in respect of the common stock
will be required to include such distribution in gross income as a taxable
dividend to the extent such distribution is paid from earnings and profits of
the Company as determined under United States Federal income tax principles.
Distributions in excess of the earnings and profits of the Company first will be
treated, for United States Federal income tax purposes, as a nontaxable return
on capital to the extent of the U.S. Investor's tax basis in the common stock
and then as gain from the sale or exchange of a capital asset, provided that the
common stock constitutes a capital asset in the hands of the U.S. Investor.
Dividends received on the common stock will not be

<PAGE>

eligible for the corporate dividends-received deduction nor is it likely that
dividends received by non-corporate shareholders will be entitled to the reduced
U.S. tax rate applicable to "qualified dividends." Any amount treated as a
dividend for United States Federal income tax purposes generally will constitute
foreign source "passive income" (or, in the case of certain holders, "financial
services income"). With respect to taxable years beginning after December 31,
2006, the foreign tax credit limitation categories will be limited to "passive
category income" and "general category income". Except for corporations that own
10% or more of the common stock of the Company, no shareholder will be entitled
to claim a foreign tax credit against United States Federal income tax for any
tax paid by the Company or any entity in which the Company invests, directly or
indirectly. For reporting purposes, any dividends that are paid in any currency
other than U.S. dollars must be translated into U.S. dollars at the spot rate on
the date the dividends are accrued or received by the U.S. Investor, regardless
of whether the dividend receipt is in fact converted into U.S. dollars.

     With certain exceptions, gain or loss on the sale or exchange of the common
stock will be treated as capital gain or loss (if the common stock is held as a
capital asset). Such capital gain or loss will be long-term capital gain or loss
if the U.S. Investor has held the common stock for more than one year at the
time of the sale or exchange. Gains or loss realized upon the disposition of
common stock will generally be U.S. source gain or loss for purposes of the
United States foreign tax credit limitation.

     The "controlled foreign corporation" ("CFC") and "passive foreign
investment company" ("PFIC") rules under United States Federal income tax law
could apply to the Company and U.S. investors who own Common Stock. Based on the
current and anticipated ownership of the Company, the Company does not believe
it will constitute a CFC In light of the Company's disposition of most of its
operating subsidiaries or its majority interests in such subsidiaries during the
prior three years, there is some risk that the Company could qualify as a PFIC
for 2006 or subsequent years. The Company does not believe it was a PFIC during
2006; however, since PFIC status is determined annually, there can be no
assurance that the Company might not become a PFIC in 2007 or subsequent years.

UNITED STATES BACKUP WITHHOLDING AND INFORMATION REPORTING

     Dividends on and proceeds from the sale, redemption or other disposition of

<PAGE>

common stock made within the United States, or by a U.S. payor or U.S.
middleman, to a holder of common stock generally will be reported to the U.S.
Internal Revenue Service unless the holder is a corporation or otherwise
establishes a basis for exemption. Backup withholding may apply to amounts
subject to reporting if the holder fails to furnish its correct taxpayer
identification number or otherwise fails to comply with, or establish an
exemption from, such backup withholding tax requirements. The backup withholding
tax rate is currently 28 per cent. Any amounts withheld under the backup
withholding tax rules will be refunded or allowed as a credit against the U.S.
Holder's U.S. federal income tax liability, provided that required information
is furnished to the Internal Revenue Service.

DOCUMENTS ON DISPLAY

     The Company is subject to certain of the information reporting requirements
of the Exchange Act. The Company, as a "foreign private issuer", is exempt from
the rules and regulations under the Exchange Act prescribing the furnishing and
content of proxy statements, and the officers, directors and principal
shareholders of the Company are exempt from the reporting and "short-swing"
profit recovery provisions contained in Section 16 of the Exchange Act, with
respect to their purchase and sale of the Company's shares. In addition, the
Company is not required to file reports and financial statements with the SEC as
frequently or as promptly as U.S. companies whose securities are registered
under the Exchange Act. However, the Company does file with the SEC an annual
report on Form 20-F containing consolidated financial statements audited by an
independent accounting firm.

     You may read and copy any document the Company files with the SEC at its
public reference facilities at 100 F Street, N.E., Washington, D.C. 20549. You
may also obtain copies of the documents at prescribed rates by writing to the
Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C.
20549. The SEC also maintains a web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC. The address of this web site is http://www.sec.gov.
Please call the SEC at 1-800-SEC-0330 for further information on the operation
of the public reference facilities.

<PAGE>

       ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company is exposed to fluctuations in interest rates and currency
exchange rates primarily with respect to any borrowings it may make and to our
operating results. Under its current policies, the Company does not use interest
rate derivative instruments to manage exposure to interest rate changes.

EXCHANGE RATE INFORMATION

     The Consolidated Financial Statements are prepared in Rmb. The financial
statements of foreign subsidiaries are translated into Rmb in accordance with
Statement of Financial Accounting Standards No. 52.

     The Hong Kong dollar is tied to and allowed to fluctuate within a narrow
range against the value of the U.S. dollar. Historically, there has been no
material fluctuation in the exchange rate between the Rmb and the U.S. dollar,
restrictions was set on the flow of Rmb between the PRC and the United States.
Starting from July 21, 2005, the PRC reformed the exchange rate regime by moving
into a managed floating exchange rate regime based on market supply and demand
with reference to a basket of other currencies. The Rmb is no longer pegged to
the U. S. dollar.

     Fluctuations in the value of foreign currencies cause U.S. dollar
translated amounts to change in comparison with previous periods. However, the
fluctuation in exchange rates did not have material effect on the financial
position of the Company in the past three years.

FOREIGN CURRENCY RISK

     As our major assets and liabilities comprise a mixture of items that are
denominated in Renminbi or Hong Kong dollars, our business and operating result
may be materially affected in the event of a severe increase or decrease in the
value of the Renminbi against other currencies. If Renminbi appreciated against
the Hong Kong dollar, our operating expenses and net income may be affected
depending upon the then composition of our assets and liabilities.

     Historically, both the Hong Kong dollar and Renminbi were pegged to the
U.S.

<PAGE>

dollar. As a result, the exchange rate of the Hong Kong dollar to Renminbi
fluctuated within a narrow range. However, on July 21, 2005, the PBOC adjusted
the exchange rate of U.S. dollars to Renminbi from 1:8.27 to 1:8.11, resulting
in an approximately 2% appreciation in the value of Renminbi against the U.S.
dollar. As Hong Kong dollars are pegged to the U.S. dollars, such adjustment has
effectively resulted in an approximately 2% appreciation in the value of
Renminbi against the Hong Kong dollar. For more details, see "RISK FACTORS -
FLUCTUATIONS IN THE VALUE OF THE RENMINBI COULD NEGATIVELY IMPACT OUR RESULTS OF
OPERATIONS".

     As of December 31, 2006, the Company had no open forward contracts or
option contracts. The Company's cash on hand as of December 31, 2006 was Rmb7.1
million of which approximately Rmb0.17 million equivalents (approximately
US$0.02 million) were held in U.S. dollar deposit.

INTEREST RATE FLUCTUATIONS

The Company did not have any short-term or long-term debt as of December 31,
2005 and 2006.

The Company will be exposed to interest rate fluctuations on any new borrowings
under any new loan facility and any change in interest rate could affect its
results of operations and cash flows.
<PAGE>

         ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

     As the Company is filing this Form as its annual report under the Exchange
Act, the information called for by Part I, Item 12 of Form 20-F is not
applicable.

<PAGE>

                                     PART II

            ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

     There has been no material default in the payment of principal or interest
or other material default requiring disclosure pursuant to this item. There have
been no arrears in the payment of dividends or other material delinquency
requiring disclosure pursuant to this item.

<PAGE>

  ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE
                                  OF PROCEEDS

     There has been no material modification to the rights of security holders
required to be disclosed pursuant to this item.

<PAGE>

                        ITEM 15. CONTROLS AND PROCEDURES

     Our Chief Executive Officer and our Chief Financial Officer, after
evaluating the effectiveness of the Company's disclosure controls and
procedures, as defined in Exchange Act Rule 13a-14(c), 13a-15(e) and 15d-15(e),
as of the end of the period covered by this Form 20-F, have concluded that, as
of such date, the Company's disclosure controls and procedures were effective,
except that the Company is not able to file its Form 20-F for the year ended
December 31, 2006 within the prescribed time period because the US GAAP audited
financial statements of an affiliate of the Company that anticipates being
included in the filing is not available within the prescribed time period.

     During 2006, there were no changes in the Company's internal control over
financial reporting that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.

<PAGE>

                                ITEM 16. RESERVED

<PAGE>

                   ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

     As the Company's common stock is not currently listed on a U.S. national
securities exchange, the Company is not obligated to have an audit committee of
the board of directors. The Company has, however, had an Audit Committee for
many years and continues to do so. The Company's Board of Directors has
determined that the two members of the Audit Committee, Mr. Richard Whittall and
Mr. David Edwin Bussmann, do not qualify as "audit committee financial experts"
as defined by Item 401(h) of Regulation S-K adopted pursuant to the Exchange
Act. The Company is currently in the process of seeking a qualified financial
expert for the audit committee.

<PAGE>

                             ITEM 16B CODE OF ETHICS

     The Company has adopted a Code of Ethics for the Chief Executive and Senior
Financial Officers, which applies to the Company's principal executive officer
and to its principal financial and accounting officers. A copy of the Code of
Ethics is attached as Exhibit 14.1 to this Annual Report on Form 20-F.

<PAGE>

                 ITEM 16C PRINCIPAL ACCOUNTANT FEES AND SERVICES

Deloitte Touche Tohmatsu has served as our independent registered public
accounting firm for each of the two fiscal years in the period ended December
31, 2006, for the audit of the consolidated financial statements of the Company
appearing in this annual report.

     The following table presents the aggregate fees for services rendered by
Deloitte Touche Tohmatsu in 2006 and 2005.

<TABLE>
<CAPTION>
                       2006      2005
                     US$'000   US$'000
                     -------   -------
<S>                  <C>       <C>
Audit Fees             411       469
Audit-Related Fees      --        --
Tax Fees (1)            --        --
All Other Fees          --        --
                       ---       ---
Total                  411       469
                       ===       ===
</TABLE>

(1)  Tax Fees include fees billed for tax compliance services, including the
     preparation and submission of tax returns and the supporting tax
     computation to the Inland Revenue Department of Hong Kong.

AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES

     The Audit Committee members are responsible for the review of the quality
and performance of external auditors. The Audit Committee has adopted a policy
regarding pre-approval of audit and permissible non-audit services provided by
our independent auditors.

     Under the policy, the Audit Committee pre-approves all auditing services.
The engagement of Deloitte Touche Tohmatsu as independent registered public

<PAGE>

accounting firm has been approved by the Audit Committee. If the Audit Committee
approves an audit service within the scope of the engagement of the audit
service, such audit service is deemed to have been pre-approved.

<PAGE>

       ITEM 16D EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

     As the Company's common stock is not listed on a U.S. national securities
exchange, the information called for by Part II, Item 16D of the Form 20-F is
not applicable.

<PAGE>

 ITEM 16E PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

     The Company has not made any repurchases of its equity securities during
the period covered by this report.

<PAGE>

                                    PART III

                                    ITEM 17.

See the Index to Consolidated Financial Statements accompany this report
beginning page F-1.

     Pursuant to Article 3-09 of Regulation S-X of the Exchange Act, separate
financial statements of significant unconsolidated companies of the Company
prepared in accordance with accounting principles generally accepted in the
United States of America ("U.S. GAAP") or reconciled to U.S. GAAP must be filed
as part of the Company's Form 20-F. For the years ended December 31, 2004, 2005
and 2006, Wing On and Hangzhou Zhongce were significant affiliates of the
Company in accordance with Article 3-09 of Regulation S-X. Wing On prepared its
financial statements in accordance with Hong Kong Financial Reporting Standards
("Wing On Statements") and Hangzhou Zhongce prepared its statutory financial
statements in accordance with the accounting principles and the relevant
financial regulations as established by the Ministry of Finance of the PRC ;
however, for the purposes of complying with Article 3-09 of Regulation S-X,
Hangzhou Zhongce prepared separate financial statements in accordance with U.S.
GAAP ("Hangzhou Zhongce Statements").

     Pursuant to Article 3-09 of Regulation S-X, Hangzhou Zhongce Statements and
Wing On Statements for the three years ended December 31, 2006, 2005 and 2004,
including reconciliation to U.S. GAAP, are set out as follows.
<PAGE>

                        WING ON TRAVEL (HOLDINGS) LIMITED
                (incorporated in Bermuda with limited liability)

               Report of Independent Registered Public Accounting
                   Firm and Consolidated Financial Statements
               For the years ended 31 December 2004, 2005 and 2006

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM AND CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006

<TABLE>
<CAPTION>
CONTENTS                                                                PAGE(S)
--------                                                              ----------
<S>                                                                    <C>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                   F-1
CONSOLIDATED STATEMENTS OF OPERATIONS                                     F-2
CONSOLIDATED BALANCE SHEETS                                            F-3 & F-4
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY                              F-5
CONSOLIDATED CASH FLOW STATEMENTS                                      F-6 & F-7
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        F-8 - F-75
</TABLE>

<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS OF WING ON TRAVEL (HOLDINGS) LIMITED
(incorporated in Bermuda with limited liability)

We have audited the accompanying consolidated balance sheets of Wing On Travel
(Holdings) Limited and its subsidiaries (the "Company") as at 31 December 2006
and 2005 and the related consolidated statements of operation, changes in
equity, and cash flows for the three years ended 31 December 2006, 2005 and
2004, all expressed in Hong Kong dollars. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at 31 December 2006
and 2005 and the results of its operations and its cash flows for the three
years ended 31 December 2006, 2005 and 2004 in conformity with Hong Kong
Financial Reporting Standards.

Hong Kong Financial Reporting Standards vary in certain significant respects
from accounting principles generally accepted in the United States of America.
The application of the latter would have affected the determination of loss for
the year ended 31 December 2006, profit for the year ended 31 December 2005 and
loss for the year ended 31 December 2004 and the determination of equity and
financial position at 31 December 2006 and 2005, to the extent summarized in
note 52.

DELOITTE TOUCHE TOHMATSU
Certified Public Accountants
Hong Kong, 24 April 2007 (28 July 2008 as to note 51)


                                       F-1

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006

<TABLE>
<CAPTION>
                                                                  NOTES      2006         2005         2004
                                                                  -----   ----------   ----------   ----------
                                                                            HK$'000      HK$'000      HK$'000
<S>                                                               <C>     <C>          <C>          <C>
Turnover                                                             6     1,992,354    1,815,718    1,722,177
Direct operating costs                                                    (1,636,455)  (1,469,298)  (1,426,652)
                                                                          ----------   ----------   ----------
Gross profit                                                                 355,899      346,420      295,525
Other income                                                         8        37,452       20,415       20,784
Distribution and selling expenses                                            (52,888)     (53,041)     (51,039)
Administrative expenses                                                     (287,401)    (259,810)    (241,063)
Reversal of impairment loss in respect of leasehold land and
   buildings                                                        15           894        4,874        4,511
Gain on disposal of subsidiaries                                                 100           --           --
Share of results of associates                                      17           (19)       8,006         (195)
(Impairment loss recognized) reversal of impairment loss
   recognized in respect of properties under construction           15        (3,800)         900       (1,100)
Impairment loss recognized in respect of goodwill arising from
   acquisition of subsidiaries                                                (5,808)          --           --
Decrease in fair value of investments held for trading                        (7,172)     (14,761)          --
Impairment loss recognized in respect of available-for-sale
   investments                                                      18       (19,902)      (1,167)          --
Finance costs                                                        9       (98,650)     (59,376)     (66,282)
Increase in fair value of investment property                       16            --          619        2,000
Realized gain on derivative financial instruments                                 --        5,650           --
Loss on partial disposal of subsidiaries                                          --       (3,177)          --
Discount on acquisition of subsidiaries                             42            --       34,574           --
Net unrealized holding loss on other investments                                  --           --         (127)
Impairment loss recognized in respect of investments in
   securities                                                                     --           --       (5,659)
Release of negative goodwill arising from acquisition of
   subsidiaries                                                                   --           --        1,863
Gain on disposal of associates                                                    --           --       37,930
                                                                          ----------   ----------   ----------
(Loss) profit before taxation                                       10       (81,295)      30,126       (2,852)
Taxation credit                                                     12         1,891        2,108           23
                                                                          ----------   ----------   ----------
(Loss) profit for the year                                                   (79,404)      32,234       (2,829)
                                                                          ==========   ==========   ==========
Attributable to:
   Shareholders of the parent                                                (71,748)      31,109        8,556
   Minority interests                                                         (7,656)       1,125      (11,385)
                                                                          ----------   ----------   ----------
                                                                             (79,404)      32,234       (2,829)
                                                                          ==========   ==========   ==========
Dividends                                                           13         9,188        8,752           --
                                                                          ==========   ==========   ==========
</TABLE>

<TABLE>
<CAPTION>
                                                                              HK$          HK$          HK$
<S>                                                               <C>     <C>          <C>          <C>
(Loss) earnings per share
   Basic and diluted                                                14         (0.13)        0.07         0.04
                                                                               =====         ====         ====
</TABLE>

See notes to consolidated financial statements.


                                       F-2

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

CONSOLIDATED BALANCE SHEETS
AT 31 DECEMBER 2006

<TABLE>
<CAPTION>
                                                NOTES       2006        2005
                                               -------   ---------   ---------
                                                          HK$'000     HK$'000
<S>                                            <C>       <C>         <C>
Non-current assets
   Property, plant and equipment                 15      1,698,374   1,702,860
   Investment property                           16             --          --
   Interest in associates                        17         74,034     220,422
   Available-for-sale investments                18         72,732      92,625
   Goodwill                                      19         44,213      50,862
   Investment deposits                           21        165,500     201,419
   Club debenture, at cost                                     713         713
                                                         ---------   ---------
                                                         2,055,566   2,268,901
                                                         ---------   ---------
Current assets
   Property held for sale, at cost                              98          98
   Inventories                                   22          7,429       6,113
   Amounts due from related companies            23         59,465      65,177
   Amounts due from associates                   24         28,763     122,449
   Trade and other receivables                   25        413,635     324,505
   Loan receivables                              26        372,480     180,926
   Investments held for trading                  27          7,126       9,086
   Tax recoverable                                              21          37
   Pledged bank deposits                       28 & 44      11,436       6,925
   Trading cash balances                         28            295         284
   Bank balances and cash                        28        555,229      43,103
                                                         ---------   ---------
                                                         1,473,977     758,703
Asset classified as held for sale                29        305,339       4,019
                                                         ---------   ---------
                                                         1,779,316     762,722
                                                         ---------   ---------
Current liabilities
   Trade and other payables                      30        308,984     277,368
   Loans from related companies                  31        106,324     361,500
   Amounts due to associates                     24         13,350      11,016
   Amounts due to related companies              32        193,282      48,289
   Obligations under finance leases - amount
      due within one year                        33             31          62
   Borrowings - amount due within one year       34         59,269      38,325
                                                         ---------   ---------
                                                           681,240     736,560
Liabilities associated with assets
   classified as held for sale                                 170          --
                                                         ---------   ---------
                                                           681,410     736,560
                                                         ---------   ---------
Net current assets                                       1,097,906      26,162
                                                         ---------   ---------
Total assets less current liabilities                    3,153,472   2,295,063
                                                         ---------   ---------
</TABLE>


                                       F-3
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

<TABLE>
<CAPTION>
                                               NOTES      2006        2005
                                               -----   ---------   ---------
                                                        HK$'000     HK$'000
<S>                                            <C>     <C>         <C>
Non-current liabilities
   Obligations under finance leases - amount
      due after one year                         33           --          31
   Borrowings - amount due after one year        34      406,480     271,308
   Convertible notes                             35      810,026          --
   Promissory note                               36           --     365,000
   Deferred taxation                             37      250,179     244,680
                                                       ---------   ---------
                                                       1,466,685     881,019
                                                       ---------   ---------
Net assets                                             1,686,787   1,414,044
                                                       =========   =========
Capital and reserves
   Share capital                                 38       61,059     437,586
   Reserves                                      40    1,194,253     541,390
                                                       ---------   ---------
Equity attributable to shareholders of the
   parent                                              1,255,312     978,976
Minority interests                                       431,475     435,068
                                                       ---------   ---------
Total equity                                           1,686,787   1,414,044
                                                       =========   =========
</TABLE>

See notes to consolidated financial statements.


                                      F-4

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2006

<TABLE>
<CAPTION>

                                                        Attributable to shareholders of the parent
                                         ------------------------------------------------------------------------

                                                                               Share    Convertible
                                           Share       Share       Special    options      notes      Translation
                                          capital     premium      reserve    reserve     reserve      reserve
                                         --------   ----------   ----------   -------   -----------   -----------
                                          HK$'000     HK$'000      HK$'000    HK$'000     HK$'000       HK$'000
                                                                 (Note 40b)
<S>                                      <C>        <C>          <C>          <C>       <C>           <C>
At 1 January 2004                         183,167    1,019,606       55,554        --      20,468          (324)
Exchange difference arising on
   translation of financial statements
   of operations outside Hong Kong             --           --           --        --          --          (757)
Profit (loss) for the year                     --           --           --        --          --            --
                                         --------   ----------   ----------    ------     -------        ------
Total recognized income and
   expense for the year                        --           --           --        --          --          (757)
                                         --------   ----------   ----------    ------     -------        ------
                                          183,167    1,019,606       55,554        --      20,468        (1,081)
Recognition of equity component
   of convertible notes                        --           --           --        --      75,863            --
Conversion into shares from
   convertible notes                      102,500      102,500           --        --     (62,213)           --
Issue of shares                            36,600       65,880           --        --          --            --
Share issue expenses                           --       (3,832)          --        --          --            --
Acquisition of subsidiaries                    --           --           --        --          --            --
Realization on liquidation of
   a subsidiary                                --           --           --        --          --          (847)
Transfer due to redemption of
   convertible notes                           --           --           --        --     (20,468)           --
                                         --------   ----------   ----------    ------     -------        ------
At 31 December 2004                       322,267    1,184,154       55,554        --      13,650        (1,928)
Opening balance adjustments
   arising from adoption of new
   accounting policies                         --           --           --        --          --            --
                                         --------   ----------   ----------    ------     -------        ------
At 1 January 2005, as restated            322,267    1,184,154       55,554        --      13,650        (1,928)
                                         --------   ----------   ----------    ------     -------        ------
Exchange difference arising on
   translation of financial statements
   of operations outside Hong Kong
   recognized directly in equity               --           --           --        --          --        11,015
Profit for the year                            --           --           --        --          --            --
                                         --------   ----------   ----------    ------     -------        ------
Total recognized income and
   expense for the year                        --           --           --        --          --        11,015
                                         --------   ----------   ----------    ------     -------        ------
Conversion into shares from
   convertible notes                       27,919       27,081           --        --     (13,650)           --
Issue of shares                            87,400      118,920           --        --          --            --
Share issue expenses                           --       (6,482)          --        --          --            --
Acquisition of subsidiaries                    --           --           --        --          --            --
Partial disposal of subsidiaries               --           --           --        --          --            --
Cancellation of share premium
   (note 40a)                                  --   (1,323,673)   1,323,673        --          --            --
Set off against accumulated
   losses                                      --           --   (1,120,764)       --          --            --
Dividends paid                                 --           --           --        --          --            --
Dividends paid to minority
   shareholders of subsidiaries                --           --           --        --          --            --
                                         --------   ----------   ----------    ------     -------        ------
At 31 December 2005                       437,586           --      258,463        --          --         9,087
Exchange difference arising on
   translation of financial statements
   of operations outside Hong Kong
   recognized directly in equity               --           --           --        --          --        21,122
Loss for the year                              --           --           --        --          --            --
                                         --------   ----------   ----------    ------     -------        ------
Total recognized income and
  expense for the year                         --           --           --        --          --        21,122
                                         --------   ----------   ----------    ------     -------        ------
Reduction in share capital               (393,827)          --      393,827        --          --            --
Issue of shares                            17,500      103,250           --        --          --            --
Share issue expenses                           --         (634)          --        --          --            --
Recognition of equity-settled
   share-based payments                        --           --           --    12,006          --            --
Recognition of equity component
   of convertible notes                        --           --           --        --     205,139            --
Share repurchase                             (200)        (900)          --        --          --            --
Share repurchase expense                       --          (11)          --        --          --            --
Dividends paid                                 --           --           --        --          --            --
Dividends paid to minority
   shareholders of subsidiaries                --           --           --        --          --            --
                                         --------   ----------   ----------    ------     -------        ------
At 31 December 2006                        61,059      101,705      652,290    12,006     205,139        30,209
                                         ========   ==========   ==========    ======     =======        ======

<CAPTION>
                                                    Attributable to
                                              shareholders of the parent
                                         ------------------------------------
                                                     (Accumulated
                                                        losses)
                                         Statutory     retained                 Minority
                                         reserves       profits       Total     interests     Total
                                         ---------   ------------   ---------   ---------   ---------
                                          HK$'000       HK$'000      HK$'000     HK$'000     HK$'000

<S>                                      <C>         <C>            <C>         <C>         <C>
At 1 January 2004                           150        (982,235)      296,386     29,778      326,164
Exchange difference arising on
   translation of financial statements
   of operations outside Hong Kong           --              --          (757)        --         (757)
Profit (loss) for the year                   --           8,556         8,556    (11,385)      (2,829)
                                            ---       ---------     ---------    -------    ---------
Total recognized income and
   expense for the year                      --           8,556         7,799    (11,385)      (3,586)
                                            ---       ---------     ---------    -------    ---------
                                            150        (973,679)      304,185     18,393      322,578
Recognition of equity component
   of convertible notes                      --              --        75,863         --       75,863
Conversion into shares from
   convertible notes                         --           9,506       152,293         --      152,293
Issue of shares                              --              --       102,480         --      102,480
Share issue expenses                         --              --        (3,832)        --       (3,832)
Acquisition of subsidiaries                  --              --            --    279,909      279,909
Realization on liquidation of
   a subsidiary                              --              --          (847)        --         (847)
Transfer due to redemption of
   convertible notes                         --          20,468            --         --           --
                                            ---       ---------     ---------    -------    ---------
At 31 December 2004                         150        (943,705)      630,142    298,302      928,444
Opening balance adjustments
   arising from adoption of new
   accounting policies                       --          72,651        72,651         --       72,651
                                            ---       ---------     ---------    -------    ---------
At 1 January 2005, as restated              150        (871,054)      702,793    298,302    1,001,095
                                            ---       ---------     ---------    -------    ---------
Exchange difference arising on
   translation of financial statements
   of operations outside Hong Kong
   recognized directly in equity             --              --        11,015      4,724       15,739
Profit for the year                          --          31,109        31,109      1,125       32,234
                                            ---       ---------     ---------    -------    ---------
Total recognized income and
   expense for the year                      --          31,109        42,124      5,849       47,973
                                            ---       ---------     ---------    -------    ---------
Conversion into shares from
   convertible notes                         --           1,623        42,973         --       42,973
Issue of shares                              --              --       206,320         --      206,320
Share issue expenses                         --              --        (6,482)        --       (6,482)
Acquisition of subsidiaries                  --              --            --    110,945      110,945
Partial disposal of subsidiaries             --              --            --     25,977       25,977
Cancellation of share premium
   (note 40a)                                --              --            --         --           --
Set off against accumulated
   losses                                    --       1,120,764            --         --           --
Dividends paid                               --          (8,752)       (8,752)        --       (8,752)
Dividends paid to minority
   shareholders of subsidiaries              --              --            --     (6,005)      (6,005)
                                            ---       ---------     ---------    -------    ---------
At 31 December 2005                         150         273,690       978,976    435,068    1,414,044
Exchange difference arising on
   translation of financial statements
   of operations outside Hong Kong
   recognized directly in equity             --              --        21,122     10,068       31,190
Loss for the year                            --         (71,748)      (71,748)    (7,656)     (79,404)
                                            ---       ---------     ---------    -------    ---------
Total recognized income and
  expense for the year                       --         (71,748)      (50,626)     2,412      (48,214)
                                            ---       ---------     ---------    -------    ---------
Reduction in share capital                   --              --            --         --           --
Issue of shares                              --              --       120,750         --      120,750
Share issue expenses                         --              --          (634)        --         (634)
Recognition of equity-settled
   share-based payments                      --              --        12,006         --       12,006
Recognition of equity component
   of convertible notes                      --              --       205,139         --      205,139
Share repurchase                             --              --        (1,100)        --       (1,100)
Share repurchase expense                     --              --           (11)        --          (11)
Dividends paid                               --          (9,188)       (9,188)        --       (9,188)
Dividends paid to minority
   shareholders of subsidiaries              --              --            --     (6,005)      (6,005)
                                            ---       ---------     ---------    -------    ---------
At 31 December 2006                         150         192,754     1,255,312    431,475    1,686,787
                                            ===       =========     =========    =======    =========
</TABLE>

See notes to consolidated financial statements.


                                      F-5

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

CONSOLIDATED CASH FLOW STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2006

<TABLE>
<CAPTION>
                                                                             2006      2005      2004
                                                                           -------   -------   --------
                                                                           HK$'000   HK$'000    HK$'000
<S>                                                                        <C>       <C>       <C>
Cash flows from operating activities
   (Loss) profit before taxation                                           (81,295)   30,126     (2,852)
   Adjustments for:
      Share of results of associates                                            19    (8,006)       195
      Depreciation of property, plant and equipment                         52,912    60,743     57,057
      Interest income                                                      (31,789)   (4,722)    (3,381)
      Interest expenses                                                     56,971    59,358     66,149
      Finance lease charges                                                     16        18        133
      Loss on disposal of property, plant and equipment                      2,944       480        220
      Loss on partial disposal of subsidiaries                                  --     3,177         --
      Gain on disposal of associates                                            --        --    (37,930)
      Loss on disposal of other investments                                     --        --         11
      Allowance for trade debts                                                737       476      1,262
      Increase in fair value of investment property                             --      (619)    (2,000)
      Impairment loss recognized in respect of available-for-sale
         investments                                                        19,902     1,167         --
      Impairment loss recognized in respect of goodwill arising from
         acquisition of subsidiaries                                         5,808        --         --
      Impairment loss recognized in respect of investments in securities        --        --      5,659
      Impairment loss recognized (reversal of impairment loss
         recognized) in respect of properties under construction             3,800      (900)     1,100
      Reversal of impairment loss recognized in respect of leasehold
         land and buildings                                                   (894)   (4,874)    (4,511)
      Discount on acquisition of subsidiaries                                   --   (34,574)        --
      Release of negative goodwill arising from acquisition
         of subsidiaries                                                        --        --     (1,863)
      Effective interest expenses of convertible notes                      41,663        --         --
      Decrease in fair value of investments held for trading                 7,172    14,761         --
      Net unrealized holding loss on other investments                          --        --        127
      Share option expenses                                                 12,006        --         --
                                                                           -------   -------   --------
Operating cash flows before movement in working capital                     89,972   116,611     79,376
                                                                           -------   -------   --------
Movement in working capital
   Increase in investments held for trading                                 (8,917)  (21,069)        --
   (Increase) decrease in inventories                                       (1,316)     (306)       254
   (Increase) decrease in amounts due from related companies                  (694)    1,439     (3,594)
   Decrease in amounts due from associates                                      --     8,980      1,916
   (Increase) decrease in trade and other receivables                       (5,988)  (47,407)   139,499
   Increase (decrease) in trade and other payables                          31,616    40,697   (111,100)
   Increase (decrease) in amounts due to associates                          2,504      (481)      (807)
   (Decrease) increase in amounts due to related companies                 (41,267)   30,113    (77,065)
                                                                           -------   -------   --------
                                                                           (24,062)   11,966    (50,897)
                                                                           -------   -------   --------
</TABLE>


                                      F-6

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

<TABLE>
<CAPTION>
                                                                 NOTES      2006       2005       2004
                                                                 -----   ---------   --------   --------
                                                                          HK$'000     HK$'000    HK$'000
<S>                                                              <C>     <C>         <C>        <C>
Cash generated from operations                                              65,910    128,577     28,479
Taxation in other jurisdictions (paid) refunded                                (39)       (63)        28
                                                                         ---------   --------   --------
Net cash from operating activities                                          68,871    128,514     28,507
                                                                         ---------   --------   --------
Cash flows from investing activities
   Cash outflow of loans advanced to certain companies and
      individuals                                                         (500,405)  (289,354)   (66,042)
   Advances to other receivables                                           (86,976)        --         --
   Purchase of property, plant and equipment                               (17,684)   (30,040)   (18,669)
   Advances to associates                                                   (4,671)        --         --
   Increase in pledged bank deposits                                        (4,511)      (125)    (6,410)
   Disposal of a subsidiary                                        41         (466)        --         --
   Cash inflow of loans repayment from certain companies
      and individuals                                                      276,867    239,428     29,992
   Interest received                                                        31,789      4,722      3,381
   Repayment from (advances to) related companies                            6,406    (60,090)        --
   Proceeds from disposal of investment properties                           4,019         --         --
   Proceeds from disposal of property, plant and equipment                     999      1,671      9,908
   Proceed on partial disposal of subsidiaries                                  --     22,800         --
   Acquisition of subsidiaries                                     42           --   (151,298)   (47,387)
   Capital contribution to an associate                                         --    (24,038)        --
   Payment for investment deposits                                              --       (474)  (221,695)
   Acquisition of associates and advances                                       --         --    (82,135)
   Purchase of other investments                                                --         --        (58)
   Purchase of investment securities                                            --         --         (1)
   Proceeds from disposals of associates and advances                           --         --    188,988
   Refund of other long term investment                                         --         --     70,500
   Proceeds from disposal of other investments                                  --         --         12
                                                                         ---------   --------   --------
Net cash used in investing activities                                     (294,633)  (286,798)  (139,616)
                                                                         ---------   --------   --------
Cash flows from financing activities
   Proceeds from issue of convertible notes                              1,000,000         --     70,200
   New bank loans and other loans raised                                   190,000     14,424      5,569
   Advance from a related company                                          171,260         --         --
   Proceeds from issue of new shares for cash                              120,750    206,320     98,648
   Repayment of promissory note                                           (365,000)        --         --
   Net cash (outflow) inflow from loans from related companies            (240,176)   (11,376)   141,564
   Interest paid                                                           (68,308)   (57,735)   (53,578)
   Repayment of bank loans and other loans                                 (33,884)   (34,071)   (89,599)
   Convertible notes issue expenses                                        (15,160)        --         --
   Dividends paid                                                           (9,188)    (8,752)        --
   Dividends paid to minority shareholders of subsidiaries                  (6,005)    (6,005)        --
   Repurchase of share                                                      (1,111)        --         --
   Share issue expenses                                                       (634)    (6,482)        --
   Repayment of obligations under finance leases                               (62)      (378)    (1,182)
   Finance lease charges paid                                                  (16)       (18)      (133)
   Redemption of convertible notes                                              --         --    (64,325)
                                                                         ---------   --------   --------
Net cash from financing activities                                         742,466     95,927    107,164
                                                                         ---------   --------   --------
Net increase (decrease) in cash and cash equivalents                       513,704    (62,357)    (3,945)
Cash and cash equivalents at beginning of the year                          43,387    106,382    112,125
Effect of foreign exchange rate changes                                     (1,567)      (638)    (1,798)
                                                                         ---------   --------   --------
Cash and cash equivalents at end of the year                               555,524     43,387    106,382
                                                                         =========   ========   ========
Represented by:
   Bank balances and cash                                                  555,229     43,103    134,317
   Trading cash balances                                                       295        284        246
   Bank overdrafts                                                              --         --    (28,181)
                                                                         ---------   --------   --------
                                                                           555,524     43,387    106,382
                                                                         =========   ========   ========
</TABLE>

See notes to consolidated financial statements.


                                      F-7

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2006

1.   GENERAL

     Wing On Travel (Holdings) Limited (together with its subsidiaries referred
     to as the "Company") is an exempted company incorporated in Bermuda with
     limited liability. Its shares are listed on The Stock Exchange of Hong Kong
     Limited (the "Stock Exchange"). The address of the registered office is
     Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda, and that of the
     principal place of business of the Company is 7th Floor, Paul Y. Centre, 51
     Hung To Road, Kwun Tong, Kowloon, Hong Kong.

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

     The Company is engaged in the business of providing package tours, travel
     and other related services and hotel operation.

     These consolidated financial statements have been prepared for the special
     purpose of filing with the United States Securities and Exchange Commission
     for complying with Article 3-09 of Regulation S-X of the Securities Act
     1933. This filing requirement is based on the Company being a significant
     equity method investee of China Enterprises Limited ("CEL").

2.   APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

     In the current year, the Company has applied, for the first time, a number
     of new standard, amendments and interpretations ("INTs") ("new HKFRSs"),
     issued by the Hong Kong Institute of Certified Public Accountants
     ("HKICPA"), which are either effective for accounting periods beginning on
     or after 1 December 2005 or 1 January 2006. The adoption of new HKFRSs had
     no material effect on how the results and financial position for the
     current or prior accounting periods have been prepared and presented.
     Accordingly, no prior year adjustment has been required.

     In 2005, the Company had adopted all of the new and revised standards and
     interpretations issued by the HKICPA that are relevant to its operations
     and effective for accounting periods beginning on 1 January 2005. The
     adoption of these new and revised standards and interpretations had
     resulted in changes to the Company's accounting policies in the following
     areas that had affected the amounts reported for the prior periods:

     -    goodwill (HKFRS 3); and

     -    excess of acquirer's interest in the net fair value of acquiree's
          identifiable assets, liabilities and contingent liabilities over cost
          of acquisition (previously known as negative goodwill) (HKFRS 3).

     The impacts of these changes in accounting policies are as follow:


                                      F-8

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

2.   APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS -
     continued

     Business combinations

     The Company has applied HKFRS 3 "Business combinations" ("HKFRS 3") which
     is effective for business combinations for which the agreement date is on
     or after 1 January 2005. The principal effects of the application of HKFRS
     3 to the Company are summarized below:

     Goodwill

     In previous years, goodwill arising on acquisition prior to 1 April 2001
     was held in reserves, and goodwill arising on acquisition after 1 April
     2001 was capitalized and amortized over its estimated useful life. The
     Company has applied the relevant transitional provisions in HKFRS 3.
     Goodwill previously recognized in reserves was transferred to investments
     in securities on reclassification of investments during the year ended 31
     December 2003. With respect to goodwill previously capitalized on the
     consolidated balance sheets, the Company has discontinued amortizing such
     goodwill from 1 January 2005 onwards and such goodwill will be tested for
     impairment at least annually. Goodwill arising on acquisition after 1
     January 2005 is measured at cost less accumulated impairment losses (if
     any) after initial recognition. As a result of this change in accounting
     policy, no amortization of goodwill has been charged in the years 2005 and
     2006. Comparative figures for 2004 have not been restated.

     Excess of the Company's interest in the net fair value of acquiree's
     identifiable assets, liabilities and contingent liabilities over cost
     (previously known as "negative goodwill")

     In accordance with HKFRS 3, any excess of the Company's interest in the net
     fair value of acquiree's identifiable assets, liabilities and contingent
     liabilities over the cost of acquisition ("discount on acquisition") is
     recognized immediately in profit or loss in the period in which the
     acquisition takes place. In previous years, negative goodwill arising on
     acquisition was presented as a deduction from assets and released to income
     based on an analysis of the circumstances from which the balance resulted.
     In accordance with the relevant transitional provisions in HKFRS 3, the
     Company has derecognized all negative goodwill on 1 January 2005, which was
     previously presented as a deduction from assets, with a corresponding
     adjustment to the Company's accumulated (losses) profits. Therefore, an
     adjustment of HK$72.7 million is made to opening retained earnings and
     negative goodwill at January 1, 2005.

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

<TABLE>
<S>                   <C>
HKAS 1 (Amendment)    Capital Disclosures (1)
HKAS 23 (Revised)     Borrowing Costs (2)
HKFRS 7               Financial Instruments: Disclosures (1)
HKFRS 8               Operating Segments (2)
HK(IFRIC) - INT 7     Applying the Restatement Approach under HKAS29
                      Financial Reporting in Hyperinflationary Economies (3)
HK(IFRIC) - INT 8     Scope of HKFRS 2 (4)
HK(IFRIC) - INT 9     Reassessment of Embedded Derivatives (5)
HK(IFRIC) - INT 10    Interim Financial Reporting and Impairment (6)
HK(IFRIC) - INT 11    HKFRS 2 - Group and Treasury Share Transactions (7)
HK(IFRIC) - INT 12    Service Concession Arrangements (8)
HK(IFRIC) - INT 13    Customer Loyalty Programmes (9)
HK(IFRIC) - INT 14    HKAS 19 - The Limit on a Defined Benefit Asset,
                      Minimum Funding Requirements and their Interaction (8)
</TABLE>


                                      F-9

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

2.   APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS -
     continued

(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 March 2006

(4)  Effective for annual periods beginning on or after 1 May 2006

(5)  Effective for annual periods beginning on or after 1 June 2006

(6)  Effective for annual periods beginning on or after 1 November 2006

(7)  Effective for annual periods beginning on or after 1 March 2007

(8)  Effective for annual periods beginning on or after 1 January 2008

(9)  Effective for annual periods beginning on or after 1 July 2008

3.   SIGNIFICANT ACCOUNTING POLICIES

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

     The consolidated financial statements have been prepared in accordance with
     Hong Kong Financial Reporting Standards ("HKFRSs") issued by HKICPA.

     Basis of consolidation

     The consolidated financial statements incorporate the financial statements
     of the Company and entities controlled by the Company (its subsidiaries).
     Control is achieved where the Company has the power to govern the financial
     and operating policies of an entity so as to obtain benefits from its
     activities.

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

     All inter-company transactions and balances within the Company are
     eliminated on consolidation.

     Minority interests in the net assets of consolidated subsidiaries are
     presented separately from the Company's equity therein. Minority interests
     in the net assets consist of the amount of those interests at the date of
     the original business combination and the minority's share of changes in
     equity since the date of the combination. Losses applicable to the minority
     in excess of the minority's interest in the subsidiary's equity are
     allocated against the interests of the Company except to the extent that
     the minority has a binding obligation and is able to make an additional
     investment to cover the losses.


                                      F-10

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

3.   SIGNIFICANT ACCOUNTING POLICIES - continued

     Goodwill

     Goodwill arising on acquisition prior to 1 January 2005

     Goodwill arising on an acquisition of a subsidiary for which the agreement
     date is before 1 January 2005 represents the excess of the cost of
     acquisition over the Company's interest in the fair value of the
     identifiable assets and liabilities of the relevant subsidiary at the date
     of acquisition.

     For previously capitalized goodwill arising on acquisition after 1 January
     2001, the Company has discontinued amortization from 1 January 2005
     onwards, and such goodwill is tested for impairment annually, and whenever
     there is an indication that the cash generating unit to which the goodwill
     relates may be impaired (see the accounting policy below).

     Goodwill arising on acquisition on or after 1 January 2005

     Goodwill arising on an acquisition of a subsidiary for which the agreement
     date is on or after 1 January 2005 represents the excess of the cost of
     acquisition over the Company's interest in the fair value of the
     identifiable assets, liabilities and contingent liabilities of the relevant
     subsidiary at the date of acquisition. Such goodwill is carried at cost
     less any accumulated impairment losses.

     Capitalized goodwill arising on an acquisition of a subsidiary is presented
     separately in the consolidated balance sheet.

     Impairment testing on capitalized goodwill

     For the purposes of impairment testing, goodwill arising from an
     acquisition is allocated to each of the relevant cash-generating units, or
     groups of cash-generating units, that are expected to benefit from the
     synergies of the acquisition. A cash-generating unit to which goodwill has
     been allocated is tested for impairment annually, and whenever there is an
     indication that the unit may be impaired. For goodwill arising on an
     acquisition in a financial year, the cash-generating unit to which goodwill
     has been allocated is tested for impairment before the end of that
     financial year. When the recoverable amount of the cash-generating unit is
     less than the carrying amount of the unit, the impairment loss is allocated
     to reduce the carrying amount of any goodwill allocated to the unit first,
     and then to the other assets of the unit pro rata on the basis of the
     carrying amount of each asset in the unit. Any impairment loss for goodwill
     is recognized directly in the consolidated income statement. An impairment
     loss for goodwill is not reversed in subsequent periods.

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

     Excess of an acquirer's interest in the net fair value of an acquiree's
     identifiable assets, liabilities and contingent liabilities over cost
     ("discount on acquisition")

     A discount on acquisition arising on an acquisition of a subsidiary for
     which an agreement date is on or after 1 January 2005 represents the excess
     of the net fair value of an acquiree's identifiable assets, liabilities and
     contingent liabilities over the cost of the business combination. Discount
     on acquisition is recognized immediately in profit or loss.


                                      F-11

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

3.   SIGNIFICANT ACCOUNTING POLICIES - continued

     Investments in associates

     An associate is an entity over which the investor has significant influence
     and that is neither a subsidiary nor an interest in a joint venture.

     The results and assets and liabilities of associates are incorporated in
     the consolidated financial statements using the equity method of
     accounting. Under the equity method, investments in associates are carried
     in the consolidated balance sheet at cost as adjusted for post-acquisition
     changes in the Company's share of the profit or loss and of changes in
     equity of the associate, less any identified impairment loss. When the
     Company's share of losses of an associate equals or exceeds its interest in
     that associate, the Company discontinues recognizing its share of further
     losses. An additional share of losses is provided for and a liability is
     recognized only to the extent that the Company has incurred legal or
     constructive obligations or made payments on behalf of that associate.

     Any excess of the cost of acquisition over the Company's share of the net
     fair value of the identifiable assets, liabilities and contingent
     liabilities of the associate recognized at the date of acquisition is
     recognized as goodwill. The goodwill is included within the carrying amount
     of the investment and is assessed for impairment as part of the investment.

     Where a group entity transacts with an associate of the Company, profits
     and losses are eliminated to the extent of the Company's interest in the
     relevant associate.

     Revenue recognition

     Revenue is measured at the fair value of the consideration received or
     receivable and represents amounts receivable for goods sold and services
     provided in the normal course of business, net of discounts and sales
     related taxes.

     Income from tour and travel services is recognized upon the departure date
     of each tour. Income from other travel related services is recognized when
     the services are rendered.

     Hotel revenue from rooms and other ancillary services are recognized when
     the services are rendered.

     Interest income from a financial asset is accrued on a time basis, by
     reference to the principal outstanding and at the effective interest rate
     applicable, which is the rate that exactly discounts the estimated future
     cash receipts through the expected life of the financial asset to that
     asset's net carrying amount.

     Income from disposal of investments is recognized when the risks and
     rewards of the ownership of the investments have been transferred.

     Rental income from operating leases is recognized in the consolidated
     income statement on a straight line basis over the term of the relevant
     lease.


                                      F-12

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

3.   SIGNIFICANT ACCOUNTING POLICIES - continued

     Property, plant and equipment

     Property, plant and equipment other than properties under construction are
     stated at cost or fair value less subsequent accumulated depreciation and
     amortization and accumulated impairment losses.

     Depreciation and amortization is provided to write off the cost or fair
     value of items of property, plant and equipment other than properties under
     construction over their estimated useful lives using the straight line
     method.

     Assets held under finance leases are depreciated over their estimated
     useful lives on the same basis as owned assets or where shorter, the term
     of the relevant lease.

     Properties under construction are stated at cost less accumulated
     impairment losses. Cost includes all development expenditure and other
     direct costs attributable to such projects. Properties under construction
     are not depreciated until completion of construction. Cost on completed
     properties is transferred to other categories of property, plant and
     equipment.

     The land and buildings elements of a lease of land and buildings are
     considered separately for the purposes of lease classification, unless the
     lease payments cannot be allocated reliably between the land and buildings
     elements, in which case, the entire lease is generally treated as a finance
     lease.

     An item of property, plant and equipment is derecognized 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 consolidated income
     statement in the year in which the item is derecognized.

     Investment properties

     On initial recognition, investment properties are measured at cost,
     including any directly attributable expenditure. Subsequent to initial
     recognition, investment properties are measured using the fair value model.
     Gains or losses arising from changes in the fair value of investment
     property are included in profit or loss for the period in which they arise.

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

     Financial instruments

     Financial assets and financial liabilities are recognized when a group
     entity becomes a party to the contractual provisions of the instrument.
     Financial assets and financial liabilities are initially measured at fair
     value. Transaction costs that are directly attributable to the acquisition
     or issue of financial assets and financial liabilities (other than
     financial assets and financial liabilities at fair value through profit or
     loss) are added to or deducted from the fair value of the financial assets
     or financial liabilities, as appropriate, on initial recognition.
     Transaction costs directly attributable to the acquisition of financial
     assets or financial liabilities at fair value through profit or loss are
     recognized immediately in profit or loss.


                                      F-13

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

3.   SIGNIFICANT ACCOUNTING POLICIES - continued

     Financial instruments - continued

     FINANCIAL ASSETS

     The Company's financial assets are classified into one of the three
     categories, including financial assets at fair value through profit or
     loss, loans and receivables and available-for-sale financial assets. All
     regular way purchases or sales of financial assets are recognized and
     derecognized on a trade date basis. Regular way purchases or sales are
     purchases or sales of financial assets that require delivery of assets
     within the time frame established by regulation or convention in the
     marketplace. The accounting policies adopted in respect of each category of
     financial assets are set out below.

     Financial assets at fair value through profit or loss

     The Company's financial assets at fair value through profit or loss
     represent financial assets held for trading. At each balance sheet date
     subsequent to initial recognition, financial assets at fair value through
     profit or loss are measured at fair value, with changes in fair value
     recognized directly in profit or loss in the period in which they arise.

     Loans and receivables

     Loans and receivables are non-derivative financial assets with fixed or
     determinable payments that are not quoted in an active market. At each
     balance sheet date subsequent to initial recognition, loans and receivables
     (including amounts due from related companies, amounts due from associates,
     trade and other receivables, loan receivables, pledged bank deposits and
     bank balances) are carried at amortized cost using the effective interest
     method, less any identified impairment losses. An impairment loss is
     recognized in profit or loss when there is objective evidence that the
     asset is impaired, and is measured as the difference between the asset's
     carrying amount and the present value of the estimated future cash flows
     discounted at the original effective interest rate. Impairment losses are
     reversed in subsequent periods when an increase in the asset's recoverable
     amount can be related objectively to an event occurring after the
     impairment was recognized, subject to a restriction that the carrying
     amount of the asset at the date the impairment is reversed does not exceed
     what the amortized cost would have been had the impairment not been
     recognized.

     Available-for-sale financial assets

     Available-for-sale financial assets are non-derivatives that are either
     designated or not classified as financial assets at fair value through
     profit or loss, loan and receivables or held-to-maturity investment.

     Available-for-sale equity investments that do not have a quoted market
     price in an active market and whose fair value cannot be reliably measured,
     are measured at cost less any identified impairment losses at each balance
     sheet date subsequent to initial recognition. An impairment loss is
     recognized in profit or loss when there is objective evidence that the
     asset is impaired. The amount of the impairment loss is measured as the
     difference between the carrying amount of the asset and the present value
     of the estimated future cash flows discounted at the current market rate of
     return for a similar financial asset. Such impairment losses will not
     reverse in subsequent periods.


                                      F-14
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

3.   SIGNIFICANT ACCOUNTING POLICIES - continued

     Financial instruments - continued

     FINANCIAL LIABILITIES AND EQUITY

     Financial liabilities and equity instruments issued by a group entity are
     classified according to the substance of the contractual arrangements
     entered into and the definitions of a financial liability and an equity
     instrument.

     An equity instrument is any contract that evidences a residual interest in
     the assets of the Company after deducting all of its liabilities. The
     Company's financial liabilities generally include other financial
     liabilities. The accounting policies adopted in respect of financial
     liabilities and equity instruments are set out below.

     Convertible notes

     Convertible notes issued by the Company that contain both the liability and
     conversion option components are classified separately into respective
     items on initial recognition. Conversion option will be settled by the
     exchange of a fixed amount of cash or another financial asset for a fixed
     number of the Company's own equity instruments is classified as an equity
     instrument.

     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 conversion option for the holder to convert the notes into equity, is
     included in equity (convertible notes equity reserve).

     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 convertible notes
     reserve until the embedded option is exercised (in which case the balance
     stated in convertible notes equity reserve will be transferred to share
     premium). Where the option remains unexercised at the expiry date, the
     balance stated in convertible notes equity reserve will be released to the
     retained profits. No gain or loss is recognized 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 amortized over the period of the convertible notes using the
     effective interest method.

     Other financial liabilities

     Other financial liabilities including trade and other payables, loans from
     related companies, amounts due to associates, amounts due to related
     companies, obligations under finance leases, borrowings and promissory note
     are subsequently measured at amortized cost, using the effective interest
     rate method.

     Equity instruments

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


                                      F-15
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

3.   SIGNIFICANT ACCOUNTING POLICIES - continued

     Financial instruments - continued

     DERECOGNITION

     Financial assets are derecognized when the rights to receive cash flows
     from the assets expire or, the financial assets are transferred and the
     Company has transferred substantially all the risks and rewards of
     ownership of the financial assets. On derecognition of a financial asset,
     the difference between the asset's carrying amount and the sum of the
     consideration received and receivable and the cumulative gain or loss that
     had been recognized directly in equity is recognized in profit or loss.

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

     Non-current assets held for sale

     Non-current assets and disposal groups are classified as held for sale if
     their carrying amount will be recovered principally through a sale
     transaction rather than through continuing use. This condition is regarded
     as met only when the sale is highly probable and the asset (or disposal
     group) is available for immediate sale in its present condition.

     Non-current assets (and disposal groups) classified as held for sale are
     measured at the lower of the assets'(disposal groups') previous carrying
     amount and fair value less costs to sell.

     Properties held for sale

     Properties held for sale are stated at the lower of cost and net realizable
     value. Cost comprises all costs of purchase. Net realizable value is
     calculated at the actual or estimated selling price less related costs of
     marketing and selling.

     Inventories

     Inventories are stated at the lower of cost and net realizable value. Cost
     is calculated using the weighted average cost method.

     Impairment (other than goodwill)

     At each balance sheet date, the Company reviews the carrying amounts of its
     assets to determine whether there is any indication that those assets have
     suffered an impairment loss. If the recoverable amount of an asset is
     estimated to be less than its carrying amount, the carrying amount of the
     asset is reduced to its recoverable amount. An impairment loss is
     recognized as an expense immediately.

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


                                      F-16
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

3.   SIGNIFICANT ACCOUNTING POLICIES - continued

     Taxation

     Income tax expense represents the sum of the tax currently payable and
     deferred tax.

     The tax currently payable is based on taxable profit for the year. Taxable
     profit differs from profit as reported in the consolidated income statement
     because it excludes items of income or expense that are taxable or
     deductible in other years and it further excludes items that are never
     taxable or deductible. The Company's liability for current tax is
     calculated using tax rates that have been enacted or substantively enacted
     by the balance sheet date.

     Deferred tax is recognized on differences between the carrying amount of
     assets and liabilities in the consolidated financial statements and the
     corresponding tax bases used in the computation of taxable profit, and is
     accounted for using the balance sheet liability method. Deferred tax
     liabilities are generally recognized for all taxable temporary differences
     and deferred tax assets are recognized to the extent that it is probable
     that taxable profit will be available against which deductible temporary
     differences can be utilized. Such assets and liabilities are not recognized
     if the temporary difference arises from goodwill or from the initial
     recognition (other than in a business combination) of other assets and
     liabilities in a transaction that affects neither the taxable profit nor
     the accounting profit.

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

     Deferred tax is calculated at the tax rates that are expected to apply in
     the period when the liability is settled or the asset is realized. Deferred
     tax is charged or credited to profit or loss, except when it relates to
     items charged or credited directly to equity, in which case the deferred
     tax is also dealt with in equity.


                                      F-17
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

3.   SIGNIFICANT ACCOUNTING POLICIES - continued

     Leasing

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

     The Company as lessor

     Rental income from operating leases is recognized in the consolidated
     income statement on a straight line basis over the term of the relevant
     lease.

     The Company as lessee

     Assets held under finance leases are recognized as assets of the Company at
     their fair value at the inception of the lease or, if lower, at the present
     value of the minimum lease payments. The corresponding liability to the
     lessor is included in the consolidated balance sheet as a finance lease
     obligation. Lease payments are apportioned between finance charges and
     reduction of the lease obligation so as to achieve a constant rate of
     interest on the remaining balance of the liability. Finance charges are
     charged directly to profit or loss.

     Rentals payable under operating leases are charged to profit or loss on a
     straight line basis over the term of the relevant lease. Benefits received
     and receivable as an incentive to enter into an operating lease are
     recognized as a reduction of rental expense over the lease term on a
     straight line basis.

     Borrowing costs

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

     Foreign currencies

     In preparing the financial statements of each individual group entity,
     transactions in currencies other than the functional currency of that
     entity (foreign currencies) are recorded in its functional currency (i.e.
     the currency of the primary economic environment in which the entity
     operates) at the rates of exchanges prevailing on the dates of the
     transactions. At each balance sheet date, monetary items denominated in
     foreign currencies are re-translated at the rates prevailing on the balance
     sheet date. Non-monetary items carried at fair value that are denominated
     in foreign currencies are re-translated at the rates prevailing on the date
     when the fair value was determined. Non-monetary items that are measured in
     terms of historical cost in a foreign currency are not re-translated.

     Exchange differences arising on the settlement of monetary items, and on
     the translation of monetary items, are recognized in profit or loss in the
     period in which they arise. Exchange differences arising on the
     re-translation of non-monetary items carried at fair value are included in
     profit or loss for the period except for differences arising on the
     re-translation of non-monetary items in respect of which gains and losses
     are recognized directly in equity, in which cases, the exchange differences
     are also recognized directly in equity.


                                      F-18
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

3.   SIGNIFICANT ACCOUNTING POLICIES - continued

     Foreign currencies - continued

     For the purposes of presenting the consolidated financial statements, the
     assets and liabilities of the Company's foreign operations are translated
     into the presentation currency of the Company (i.e. Hong Kong dollars) at
     the rate of exchange prevailing at the balance sheet date, and their income
     and expenses are translated at the average exchange rates for the year,
     unless exchange rates fluctuate significantly during the period, in which
     case, the exchange rates prevailing at the dates of transactions are used.
     Exchange differences arising, if any, are recognized as a separate
     component of equity (the translation reserve). Such exchange differences
     are recognized in profit or loss in the period in which the foreign
     operation is disposed of.

     Retirement benefit costs

     Payments to the Company's defined contribution retirement benefit plans,
     state-managed retirement benefit schemes and/or the Mandatory Provident
     Fund Scheme are charged as expenses when employees have rendered service
     entitling them to the contributions.

     Equity settled share-based payment transactions

     Share options granted to directors and 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 expensed on a straight
     line basis over the vesting period with a corresponding increase in equity
     (share options reserve).

     At the time when the share options are exercised, the amount previously
     recognized in share options reserve will be transferred to share premium.
     When the share options are forfeited after the vesting date or are still
     not exercised at the expiry date, the amount previously recognized in share
     options reserve will continue to be held in share options reserve.

     Other eligible participants represent individuals who render services to
     the entity and the services rendered are similar to those rendered by
     employees.

4.   KEY SOURCES OF ESTIMATION UNCERTAINTY

     In the process of applying the Company's accounting policies which are
     described in note 3, management has made the following estimation that has
     a significant effect on the amounts recognized in the consolidated
     financial statements. The key assumptions concerning the future, and other
     key sources of estimation uncertainty at the balance sheet date, that have
     a significant risk of causing a material adjustment to the carrying amounts
     of assets and liabilities within the next financial year, are also
     discussed below.

     Estimated impairment of goodwill

     Determining whether goodwill is impaired requires an estimation of the
     value in use of the cash-generating units to which goodwill has been
     allocated. The value in use calculation requires the Company to estimate
     the future cash flows expected to arise from the cash-generating unit and a
     suitable discount rate in order to calculate the present value. Where the
     actual future cash flows are less than expected, a material impairment loss
     may arise. As at 31 December 2006, the carrying amount of goodwill is
     HK$44,213,000 (net of accumulated impairment loss of HK$5,808,000). Details
     of the recoverable amount calculation are disclosed in note 20.


                                      F-19
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

4.   KEY SOURCES OF ESTIMATION UNCERTAINTY - continued

     Estimated impairment of trade and other receivables and loan receivables

     In determining whether there is an objective evidence of impairment loss,
     the Company takes into consideration the estimation of its future cash
     flows. The amount of the impairment 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).
     Where the actual future cash flows are less than expected, a material
     impairment loss may arise.

5.   FINANCIAL INSTRUMENTS

     a.   Financial risk management objectives and policies

          The Company's major financial instruments include trade and other
          receivables, loan receivables, amounts due from associates, amounts
          due from related companies, trade and other payables, loans from
          related companies, obligations under finance leases, borrowings,
          convertible notes and promissory note. 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.


                                      F-20
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

5.   FINANCIAL INSTRUMENTS - continued

     a.   Financial risk management objectives and policies - continued

          Fair value interest rate risk

          The Company's fair value interest rate risks relate primarily to fixed
          rate convertible notes. The Company currently does not have an
          interest rate hedging policy. However, the management monitors
          interest rate change exposure and will consider hedging significant
          interest rate change exposure should the need arise.

          Cash flow interest rate risk

          The Company's cash flow interest rate risk relates primarily to
          variable rate bank borrowings, that exposed the Company to cash flow
          interest rate risk. It is the Company's policy to arrange borrowings
          at floating rate to minimize fair value risk.

          The Company's bank balances are carried at prevailing market rate,
          that exposed the Company to cash flow interest rate risk. However,
          such exposure is minimal to the Company as the bank balances are all
          short-term in nature.

          Credit risk

          The Company's maximum exposure to credit risk in the event of the
          counterparties failure to perform their obligations as at 31 December
          2006 in relation to each class of recognized 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
          Company has delegated a team responsible for determination of credit
          limits, credit approvals and other monitoring procedures to ensure
          that follow-up action is taken to recover overdue debts. In addition,
          the Company 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 Company's credit risk is
          significantly reduced.

          The Company has no significant concentration of credit risk on amounts
          due from associates and loans receivables, with exposure spread over a
          number of counterparties.

          The credit risk for bank deposits and bank balances exposed is
          considered minimal as such amounts are placed with banks with good
          credit ratings.

          Price risk

          The Company is exposed to equity security price risk through its
          available-for-sale investments and held-for-trading investments. The
          management manages this exposure by maintaining a portfolio of
          investments with different risks. The Company currently does not have
          a hedging policy and will consider hedging significant equity security
          price change should the need arise.


                                      F-21
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

5.   FINANCIAL INSTRUMENTS - continued

     b.   Fair value

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

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

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

     The Company's available-for-sale investments and held-for-trading
     investments are measured at fair value. The directors consider that the
     carrying amounts of other financial assets and financial liabilities
     recorded at amortized cost in the consolidated financial statements
     approximate their fair values.

6.   TURNOVER

     Turnover represents the amounts received and receivable from outside
     customers, less trade discounts and returns during the year. An analysis of
     the Company's turnover is as follows:

<TABLE>
<CAPTION>
                                 2006       2005         2004
                              ---------   ---------   ---------
                               HK$'000     HK$'000     HK$'000
<S>                           <C>         <C>         <C>
Travel and related services   1,740,656   1,591,962   1,532,143
Hotel and leisure services      251,698     223,756     190,034
                              ---------   ---------   ---------
                              1,992,354   1,815,718   1,722,177
                              =========   =========   =========
</TABLE>


                                      F-22
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

7.   BUSINESS AND GEOGRAPHICAL SEGMENTS

     Business segments

     During the three years ended 31 December 2006, for management purposes, the
     Company was organized into two operating divisions - travel and related
     services, and hotel and leisure services. These divisions are the basis on
     which the Company reports its primary segment information.

     Segment information about these businesses is presented as follows:

<TABLE>
<CAPTION>
                                           Travel and   Hotel and
                                             related     leisure
                                            services     services   Elimination   Consolidated
                                           ----------   ---------   -----------   ------------
                                             HK$'000     HK$'000      HK$'000        HK$'000
<S>                                        <C>          <C>         <C>           <C>
For the year ended 31 December 2006
TURNOVER
External sales                              1,740,656    251,698          --        1,992,354
Inter-segment sales                                --        168        (168)              --
                                            ---------    -------        ----       ----------
Total                                       1,740,656    251,866        (168)       1,992,354
                                            =========    =======        ====       ==========
Inter-segment sales are charged at
   prevailing market price.

RESULTS
Segment results                                16,956     40,923          --           57,879
                                            =========    =======        ====
Interest income                                                                        31,789
Impairment loss recognized in respect
   of available-for-sale investments                                                  (19,902)
Decrease in fair value of investments
   held for trading                                                                    (7,172)
Unallocated corporate and other expenses                                              (45,220)
Finance costs                                                                         (98,650)
Share of results of associates                 (4,771)     1,752          --              (19)
                                                                                   ----------
Loss before taxation                                                                   (81,295)
Taxation credit                                                                          1,891
                                                                                   ----------
Loss for the year                                                                     (79,404)
                                                                                   ==========
</TABLE>


                                      F-23
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

7    BUSINESS AND GEOGRAPHICAL SEGMENTS - continued

     Business segments - continued

<TABLE>
<CAPTION>
                                                 Travel and   Hotel and
                                                   related     leisure
                                                  services     services   Consolidated
                                                 ----------   ---------   ------------
                                                   HK$'000     HK$'000      HK$'000
<S>                                              <C>          <C>         <C>
At 31 December 2006
ASSETS
Segment assets                                      587,780   1,981,913     2,569,693
Interest in associates                               74,034          --        74,034
Unallocated corporate assets                                                1,191,155
                                                                            ---------
Consolidated total assets                                                   3,834,882
                                                                            =========
LIABILITIES
Segment liabilities                                 252,814      58,947       311,761
Unallocated corporate liabilities                                           1,836,334
                                                                            ---------
Consolidated total liabilities                                              2,148,095
                                                                            =========
OTHER INFORMATION
Allowance for irrecoverable trade debts                 737          --           737
Capital additions                                     6,651      11,033        17,684
Depreciation of property, plant and
   equipment                                          6,843      46,069        52,912
Impairment loss recognized in respect of
   goodwill arising from acquisition of
   subsidiaries                                       5,808          --         5,808
(Gain) loss on disposal of property, plant and
   equipment                                            (18)      2,962         2,944
Impairment loss in respect of properties
   under construction                                    --       3,800         3,800
                                                 ==========   =========     =========
</TABLE>


                                      F-24
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

7.   BUSINESS AND GEOGRAPHICAL SEGMENTS - continued

     Business segments - continued

<TABLE>
<CAPTION>
                                           Travel and   Hotel and
                                             related     leisure
                                            services     services   Elimination   Consolidated
                                           ----------   ---------   -----------   ------------
                                             HK$'000     HK$'000      HK$'000        HK$'000
<S>                                        <C>          <C>         <C>           <C>
For the year ended 31 December 2005
TURNOVER
External sales                              1,591,962     223,756          --       1,815,718
Inter-segment sales                                --       1,264      (1,264)             --
                                            ---------     -------      ------       ---------
Total                                       1,591,962     225,020      (1,264)      1,815,718
                                            =========     =======      ======       =========
Inter-segment sales are charged at
   prevailing market price.
RESULTS
Segment results                                56,427      28,249          --          84,676
                                            =========     =======      ======
Interest income                                                                         4,722
Discount on acquisition of subsidiaries            --      34,574          --          34,574
Gain on fair value change on derivative
   financial instruments                                                                5,650
Increase in fair value of investment
   property                                                                               619
Impairment loss recognized in respect
   of available-for-sale investments                                                   (1,167)
Decrease in fair value of investments
   held for trading                                                                   (14,761)
Unallocated corporate expenses                                                        (29,640)
Finance costs                                                                         (59,376)
Share of results of associates                   (396)      8,402          --           8,006
Loss on partial disposal of subsidiaries           --      (3,177)         --          (3,177)
                                                                                    ---------
Profit before taxation                                                                 30,126
Taxation credit                                                                         2,108
                                                                                    ---------
Profit for the year                                                                    32,234
                                                                                    =========
</TABLE>


                                      F-25
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

7.   BUSINESS AND GEOGRAPHICAL SEGMENTS - continued

     Business segments - continued

<TABLE>
<CAPTION>
                                                Travel and   Hotel and
                                                  related     leisure
                                                 services     services   Consolidated
                                                ----------   ---------   ------------
                                                  HK$'000     HK$'000       HK$'000
<S>                                             <C>          <C>         <C>
At 31 December 2005
ASSETS
Segment assets                                    444,016    1,792,339     2,236,355
Interest in associates                             20,823      199,599       220,422
Unallocated corporate assets                                                 574,846
                                                                           ---------
Consolidated total assets                                                  3,031,623
                                                                           =========
LIABILITIES
Segment liabilities                               279,116       57,546       336,662
Unallocated corporate liabilities                                          1,280,917
                                                                           ---------
Consolidated total liabilities                                             1,617,579
                                                                           =========
OTHER INFORMATION
Capital additions                                  24,672        6,761        31,433
Goodwill arising from acquisition of
   subsidiaries                                       647           --           647
Depreciation of property, plant and
   equipment                                        6,088       54,655        60,743
Loss on disposal of property, plant and
   equipment                                          175          305           480
Allowance for irrecoverable trade debts               476           --           476
                                                  =======    =========     =========
</TABLE>


                                      F-26
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

7.   BUSINESS AND GEOGRAPHICAL SEGMENTS - continued

     Business segments - continued

<TABLE>
<CAPTION>
                                                Travel and   Hotel and
                                                  related     leisure
                                                 services    services    Elimination   Consolidated
                                                ----------   ---------   -----------   ------------
                                                  HK$'000     HK$'000      HK$'000        HK$'000
<S>                                             <C>          <C>         <C>           <C>
For the year ended 31 December 2004
TURNOVER
External sales                                  1,532,143     190,034           --      1,722,177
Inter-segment sales                                    --       1,234       (1,234)            --
                                                ---------     -------       ------      ---------
Total                                           1,532,143     191,268       (1,234)     1,722,177
                                                =========     =======       ======      =========
Inter-segment sales are charged at prevailing
   market price.
RESULTS
Segment results                                    49,349       3,582           --         52,931
                                                =========     =======       ======
Interest income                                                                             3,381
Increase in fair value of investment property                                               2,000
Net unrealized holding loss on other
   investments                                                                               (127)
Impairment loss recognized in respect of
   investments in securities                                                               (5,659)
Unallocated corporate expenses                                                            (26,831)
Finance costs                                                                             (66,282)
Share of results of associates                       (195)         --           --           (195)
Gain on disposal of associates                     37,930          --           --         37,930
                                                                                        ---------
Loss before taxation                                                                       (2,852)
Taxation credit                                                                                23
                                                                                        ---------
Loss for the year                                                                          (2,829)
                                                                                        =========
</TABLE>


                                      F-27
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

7.   BUSINESS AND GEOGRAPHICAL SEGMENTS - continued

     Business segments - continued

<TABLE>
<CAPTION>
                                                Travel and   Hotel and
                                                  related     leisure
                                                 services    services    Consolidated
                                                ----------   ---------   ------------
                                                  HK$'000     HK$'000       HK$'000
<S>                                             <C>          <C>         <C>
At 31 December 2004
ASSETS
Segment assets                                   728,181     1,667,209    2,395,390
Interest in associates                             1,989            --        1,989
Unallocated corporate assets                                                174,943
                                                                          ---------
Consolidated total assets                                                 2,572,322
                                                                          =========
LIABILITIES
Segment liabilities                              198,949        62,723      261,672
Unallocated corporate liabilities                                         1,382,206
                                                                          ---------
Consolidated total liabilities                                            1,643,878
                                                                          =========
OTHER INFORMATION
Capital additions                                  5,221     1,696,828    1,702,049
Goodwill arising from acquisition of
   subsidiaries                                   50,215            --       50,215
Depreciation of property, plant and equipment      4,204        52,853       57,057
Impairment losses recognized                       6,759            --        6,759
Reversal of impairment loss in respect of
   leasehold land and buildings                   (4,511)           --       (4,511)
Loss (profit) on disposal of property, plant
   and equipment                                     365          (145)         220
Allowance for irrecoverable trade debts            1,262            --        1,262
                                                 =======     =========    =========
</TABLE>


                                      F-28
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

7.   BUSINESS AND GEOGRAPHICAL SEGMENTS - continued

     Geographical segments

     Over 90% of the Company's revenue were derived from Hong Kong. The
     following table provides an analysis of the Company's revenue by
     geographical market, irrespective of the origin of the services:

<TABLE>
<CAPTION>
                                   2006         2005        2004
                                 ---------   ---------   ---------
                                  HK$'000     HK$'000     HK$'000
<S>                              <C>         <C>         <C>
The People's Republic of China
   (excluding Hong Kong) (the
   "PRC")                          163,606     138,583     129,591
Hong Kong                        1,795,216   1,650,598   1,575,650
Others                              33,532      26,537      16,936
                                 ---------   ---------   ---------
                                 1,992,354   1,815,718   1,722,177
                                 =========   =========   =========
</TABLE>

     The analysis of carrying amount of segment assets and additions to
     property, plant and equipment by the geographical area in which the assets
     are located is as follows:

<TABLE>
<CAPTION>
                                                            Additions to
                                    Carrying amount       property, plant
                                   of segment assets       and equipment
                                 ---------------------   -----------------
                                    2006        2005       2006      2005
                                 ---------   ---------   -------   -------
                                  HK$'000     HK$'000    HK$'000   HK$'000
<S>                              <C>         <C>         <C>       <C>
The PRC (excluding Hong Kong)    1,009,589   1,338,420     8,656     2,262
Hong Kong                        1,181,256     731,624     8,997    28,855
South-east Asia                    354,160     141,224        10       925
Japan and Korea                     22,551      23,771        --        --
Others                               2,137       1,316        21        38
                                 ---------   ---------    ------    ------
                                 2,569,693   2,236,355    17,684    32,080
                                 =========   =========    ======    ======
</TABLE>

8.   OTHER INCOME

<TABLE>
<CAPTION>
                                                 2006      2005      2004
                                               -------   -------   -------
                                               HK$'000   HK$'000   HK$'000
<S>                                            <C>       <C>       <C>
An analysis of the Company's other income is
   as follows:
Exchange gain                                       92        81       135
Interest income                                 31,789     4,722     3,381
Sundry income                                    5,571     3,394    17,268
Income on sales of computer systems for
   online travel reservation and
   communication software                           --    12,218        --
                                                ------    ------    ------
                                                37,452    20,415    20,784
                                                ======    ======    ======
</TABLE>


                                      F-29
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

9.   FINANCE COSTS

<TABLE>
<CAPTION>
                                                 2006      2005      2004
                                               -------   -------   -------
                                               HK$'000   HK$'000   HK$'000
<S>                                            <C>       <C>       <C>
Interest on obligations under finance leases        16        18       133
Interest on borrowings wholly repayable
   within five years                            40,949    41,386    39,997
Effective interest on convertible notes         41,663     1,982    16,331
Interest on promissory note                     16,022    15,990     9,821
                                                ------    ------    ------
Total finance costs                             98,650    59,376    66,282
                                                ======    ======    ======
</TABLE>

10.  (LOSS) PROFIT BEFORE TAXATION

<TABLE>
<CAPTION>
                                                        2006      2005      2004
                                                      -------   -------   -------
                                                      HK$'000   HK$'000   HK$'000
<S>                                                   <C>       <C>       <C>
(Loss) profit before taxation has been arrived at
   after charging:
Allowance for irrecoverable trade debts                   737        476     1,262
Auditors' remuneration                                  4,175      4,644     2,878
Cost of inventories recognized as expenses             26,794     21,768    20,490
Depreciation on:
   Owned assets                                        52,875     60,533    56,408
   Assets held under finance leases                        37        210       649
Loss on disposal of other investments                      --         --        11
Loss on disposal of property, plant and equipment       2,944        480       220
Minimum lease payments paid in respect of rented
   premises                                            23,711     14,190    12,913
Share of tax of associates (included in share of
   results of associates)                                  (1)        61        --
Staff costs *                                         149,964    135,399   128,023
and after crediting:
Rental income from investment property and premises
   within the hotel properties less outgoings
   of HK$538,000
   (2005: HK$495,000 and 2004: HK$79,000)              14,180     15,218    12,993
Rental income from motor vehicles                          --        388        74
                                                      =======    =======   =======
</TABLE>

*    The amount includes retirement benefit scheme contributions (net of
     forfeiture) of HK$7,334,000 (2005: HK$6,908,000 and 2004: HK$5,910,000).


                                      F-30
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

11.  DIRECTORS' REMUNERATION AND HIGHEST PAID EMPLOYEES

     Details of emoluments paid by the Company to each of the directors are as
     follows:

     For the year ended 31 December 2006

<TABLE>
<CAPTION>
                                                                  Retirement
                                          Salaries    Share-       benefit
                                         and other     based        scheme         Total
                                 Fees     benefits   payments   contributions   emoluments
                               -------   ---------   --------   -------------   ----------
                               HK$'000    HK$'000     HK$'000      HK$'000        HK$'000
<S>                            <C>       <C>         <C>        <C>             <C>
Executive directors:
Mr. Yu Kam Kee, Lawrence
   B.B.S., M.B.E., J.P            --         --          818          --             818
Mr. Cheung Hon Kit                --         --          818          --             818
Dr. Yap, Allan                    --         --          818          --             818
Mr. Chan Pak Cheung, Natalis      --         --          307          --             307
Mr. Lui Siu Tsuen, Richard        --         --          941                         941
Ms. Luk Yee Lin, Ellen            --        251           --           4             255
Non-executive director:
Mr. Chan Yeuk Wai                 --        600           --           4             604
Independent non-executive
   directors:
Mr. Kwok Ka Lap, Alva             --         31          102          --             133
Mr. Sin Chi Fai                   51         --          102          --             153
Mr. Wong King Lam, Joseph         50         --           --          --              50
                                 ---        ---        -----         ---           -----
                                 101        882        3,906           8           4,897
                                 ===        ===        =====         ===           =====
</TABLE>


                                      F-31
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

11.  DIRECTORS' REMUNERATION AND HIGHEST PAID EMPLOYEES - continued

     For the year ended 31 December 2005

<TABLE>
<CAPTION>
                                                       Retirement
                                          Salaries      benefit
                                         and other       scheme         Total
                                 Fees     benefits   contributions   emoluments
                               -------   ---------   -------------   ----------
                               HK$'000    HK$'000       HK$'000        HK$'000
<S>                            <C>       <C>         <C>             <C>
Executive directors:
Mr. Yu Kam Kee, Lawrence
   B.B.S., M.B.E., J.P            --          --           --              --
Mr. Cheung Hon Kit                --       1,265            5           1,270
Dr. Yap, Allan                    --          --           --              --
Mr. Chan Pak Cheung, Natalis      --          --           --              --
Mr. Lui Siu Tsuen, Richard        --          --           --              --
Ms. Luk Yee Lin, Ellen            --         664           12             676
Non-executive director:
Mr. Chan Yeuk Wai                 --       1,800           12           1,812
Independent non-executive
   directors:
Mr. Kwok Ka Lap, Alva             --          39           --              39
Mr. Sin Chi Fai                   47          --           --              47
Mr. Wong King Lam, Joseph         50          --           --              50
                                 ---       -----          ---           -----
                                  97       3,768           29           3,894
                                 ===       =====          ===           =====
</TABLE>


                                      F-32
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

11.  DIRECTORS' REMUNERATION AND HIGHEST PAID EMPLOYEES - continued

     For the year ended 31 December 2004

<TABLE>
<CAPTION>
                                                       Retirement
                                          Salaries      benefit
                                         and other       scheme         Total
                                 Fees     benefits   contributions   emoluments
                               -------   ---------   -------------   ----------
                               HK$'000    HK$'000       HK$'000        HK$'000
<S>                            <C>       <C>         <C>             <C>
Executive directors:
Mr. Yu Kam Kee, Lawrence
   B.B.S., M.B.E., J.P            --          --           --              --
Mr. Cheung Hon Kit                --       2,890           12           2,902
Dr. Yap, Allan                    --          --           --              --
Mr. Chan Pak Cheung, Natalis      --          --           --              --
Mr. Lui Siu Tsuen, Richard        --          --           --              --
Ms. Luk Yee Lin, Ellen            --         664           12             676
Dr. Chan Kwok Keung,
   Charles *                      --          --           --              --
Non-executive directors:
Mr. Chan Yeuk Wai                 --       2,923           45           2,968
Mr. Fok Kin-ning, Canning *       --          --           --              --
Ms. Shih, Edith *                 --          --           --              --
Independent non-executive
   directors:
Mr. Kwok Ka Lap, Alva             30          --           --              30
Mr. Sin Chi Fai                   --          --           --              --
Mr. Wong King Lam, Joseph         --          --           --              --
                                 ---       -----          ---           -----
                                  30       6,477           69           6,576
                                 ===       =====          ===           =====
</TABLE>

*    The directors resigned in 2004.

No directors waived any emoluments in the years ended 31 December 2006, 2005 and
2004.

Note: The directors' salaries and other benefits include the operating lease
     rentals amounting to nil (2005: HK$500,000 and 2004: HK$1,200,000) in
     respect of rental premises provided to directors. The amounts were also
     included in the minimum lease payments paid in respect of rental premises
     under note 10 above.


                                      F-33

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

11.  DIRECTORS' REMUNERATION AND HIGHEST PAID EMPLOYEES - continued

     Of the five highest paid employees in the Company, none (2005: two, 2004:
     two) were directors of the Company whose emoluments are set out above.
     Details of emoluments paid by the Company to the five highest paid
     individuals are as follows:

<TABLE>
<CAPTION>
                                            2006      2005      2004
                                          -------   -------   -------
                                          HK$'000   HK$'000   HK$'000
<S>                                       <C>       <C>       <C>
Salaries and other benefits                6,672     7,127     10,003
Retirement benefit scheme contributions      158       141        179
Share-base payment                         1,381        --         --
                                           -----     -----     ------
                                           8,211     7,268     10,182
                                           =====     =====     ======
</TABLE>

<TABLE>
<CAPTION>
                                            2006      2005      2004
                                          -------   -------   -------
<S>                                       <C>       <C>       <C>
Emoluments of the five highest paid
   individuals were within the
   following bands:
Nil - HK$1,000,000                           --        --        --
HK$1,000,001 - HK$1,500,000                   3         3         2
HK$1,500,001 - HK$2,000,000                   1         2         1
HK$2,000,001 - HK$2,500,000                  --        --        --
HK$2,500,001 - HK$3,000,000                   1        --         2
                                            ===       ===       ===
Number of directors                          --         2         2
Number of employees                           5         3         3
                                            ---       ---       ---
                                              5         5         5
                                            ===       ===       ===
</TABLE>

12.  TAXATION CREDIT

<TABLE>
<CAPTION>
                                            2006      2005      2004
                                          -------   -------   -------
                                          HK$'000   HK$'000   HK$'000
<S>                                       <C>       <C>       <C>
(Under)overprovision for taxation in
   other jurisdictions in prior years        (55)      (63)      23
Deferred tax (note 37)                     1,946     2,171       --
                                           -----     -----      ---
Taxation credit                            1,891     2,108       23
                                           =====     =====      ===
</TABLE>

     No provision for Hong Kong Profits Tax has been made as the Company or its
     subsidiaries either have no assessable profit in the year or the estimated
     assessable profits were wholly absorbed by tax losses brought forward.

     Taxation for other jurisdictions represents (under)overprovision for
     taxation in prior years. No provision for overseas taxation has been made
     as the Company has no taxable profit during the three years ended 31
     December 2006, 2005 and 2004 in other jurisdictions.


                                      F-34

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

12.  TAXATION CREDIT - continued

     Taxation credit for the year can be reconciled to the (loss) profit before
     taxation per the consolidated income statement as follows:

<TABLE>
<CAPTION>
                                                   2006      2005      2004
                                                 -------   -------   ------
                                                 HK$'000   HK$'000   HK$'000
<S>                                              <C>       <C>       <C>
(Loss) profit before taxation                    (81,295)   30,126   (2,852)
                                                 =======   =======   ======
Tax at the domestic income tax rate of
   17.5% (2005: 17.5% and 2004: 17.5%)            14,227   (5,272)     499
Tax effect of share of results of associates          (3)    1,401      (34)
Tax effect of expenses that are not deductible
   in determining taxable profit                 (29,891)  (13,706)  (8,358)
Tax effect of income that is not taxable in
   determining taxable profit                     14,155    12,688   13,999
Tax effect of tax losses not recognized          (14,859)   (7,965)  (6,645)
Tax effect of tax losses utilized but not
   previously recognized                          10,489    13,548    3,604
Effect of different tax rates of subsidiaries
   operating in other jurisdictions                7,828     1,477   (3,065)
(Under)overprovision in prior years                  (55)      (63)      23
                                                 -------   -------   ------
Taxation credit for the year                       1,891     2,108       23
                                                 =======   =======   ======
</TABLE>

13.  DIVIDENDS

<TABLE>
<CAPTION>
                                           2006      2005      2004
                                         -------   -------   -------
                                         HK$'000   HK$'000   HK$'000
<S>                                      <C>       <C>       <C>
Dividend recognized as distribution
   during the year:
Interim - nil cents per share
   (2005: HK2 cents and 2004: nil)
   per share                                 --    8,752        --
Final - dividend for 2005 of
   HK1.5 cents per share
   (2005 and 2004: nil)                   9,188       --        --
                                          =====    =====       ===
</TABLE>

     The final dividend of HK1.5 cents per share amounting to HK$9,159,000 has
     been proposed by the directors and approved by the shareholders in general
     meeting on 27 May 2007. The Company proposes that a scrip dividend option
     will be offered to all shareholders.


                                      F-35

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

14.  (LOSS) EARNINGS PER SHARE

     The calculation of the basic (loss) earnings per share is based on the
     following data:

<TABLE>
<CAPTION>
                                            2006       2005      2004
                                           -------   -------   -------
                                           HK$'000   HK$'000   HK$'000
<S>                                        <C>       <C>       <C>
(Loss) earnings for the purpose of basic
   (loss) earnings per share
   attributable to shareholders of the
   parent                                  (71,748)   31,109     8,556
                                           =======   =======   =======
</TABLE>

<TABLE>
<CAPTION>
                                                       Number of shares
                                           ---------------------------------------
                                               2006          2005          2004
                                           -----------   -----------   -----------
<S>                                        <C>           <C>           <C>
Weighted average number of ordinary
   shares for the purpose of basic
   (loss) earnings per share               556,934,054   418,541,133   201,251,437
                                           ===========   ===========   ===========
</TABLE>

Note: The calculation of diluted (loss) earnings per share for the year ended 31
     December 2006, 2005 and 2004 has not assumed the conversion of the
     Company's convertible notes and the exercise of share options, which would
     decrease the loss per share and increase the earnings per share,
     respectively.


                                      F-36
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

15.  PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
                                                                                                       Office
                             Leasehold               Properties   Furniture                          equipment
                              land and     Hotel        under        and       Leasehold     Motor      and
                             buildings  properties  construction   fixtures  improvements  vehicles  machinery  Vessels    Total
                             ---------  ----------  ------------  ---------  ------------  --------  ---------  -------  ---------
                              HK$'000     HK'000       HK$'000     HK$'000      HK$'000     HK$'000   HK$'000   HK$'000   HK$'000
                                         Note (a)
<S>                          <C>        <C>         <C>           <C>        <C>           <C>       <C>        <C>      <C>
COST
At 1 January 2005             38,025     1,604,752     46,728      55,000       31,480       2,979    23,306     6,467   1,808,737
Currency realignment              --        20,363         --         910          518          82     1,378        --      23,251
Acquisition of subsidiaries       --            --         --          --          393          --     1,000        --       1,393
Additions                         --            --         --       4,674        5,470       5,921     2,593    11,382      30,040
Disposals                         --            --         --      (3,040)         (30)     (1,925)   (1,134)     (153)     (6,282)
                              ------     ---------    -------      ------       ------      ------    ------    ------   ---------
At 31 December 2005           38,025     1,625,115     46,728      57,544       37,831       7,057    27,143    17,696   1,857,139
Currency realignment              --        42,471         --       1,880        1,253         211     3,001        --      48,816
Disposal of subsidiaries          --            --         --          --          (37)         --       (44)       --         (81)
Additions                         --            --         --       3,993        9,753       1,846     2,006        86      17,684
Disposals                         --            --         --      (7,110)      (3,055)     (1,280)   (1,743)       --     (13,188)
Reclassified to assets
   classified as held for
   sale                       (4,800)           --         --         (36)          --          --        --        --      (4,836)
                              ------     ---------    -------      ------       ------      ------    ------    ------   ---------
At 31 December 2006           33,225     1,667,586     46,728      56,271       45,745       7,834    30,363    17,782   1,905,534
                              ------     ---------    -------      ------       ------      ------    ------    ------   ---------
DEPRECIATION, AMORTIZATION
   AND IMPAIRMENT
At 1 January 2005             21,566        30,119      9,228      13,509        4,631         682    14,664     5,656     100,055
Currency realignment              --         1,502         --         711           86          60     1,027        --       3,386
Provided for the year            364        30,119         --      15,718        7,565       1,200     5,343       434      60,743
Reversal of impairment loss
   for the year (note (c))    (4,874)           --       (900)         --           --          --        --        --      (5,774)
Eliminated on disposals           --            --         --      (2,734)         (19)       (230)   (1,053)      (95)     (4,131)
                              ------     ---------    -------      ------       ------      ------    ------    ------   ---------
At 31 December 2005           17,056        61,740      8,328      27,204       12,263       1,712    19,981     5,995     154,279
Currency realignment              --         4,223         --       1,504          408         140     2,347        --       8,622
Provided for the year            478        31,690         --       4,852        8,817       1,462     4,947       666      52,912
(Reversal of) impairment
   loss for the year
   (note (c))                   (894)           --      3,800          --           --          --        --        --       2,906
Eliminated on disposals           --            --         --      (4,278)      (2,887)       (404)   (1,676)       --      (9,245)
Eliminated on disposal of
   subsidiaries                   --            --         --          --           (6)         --        (6)       --         (12)
Reclassified to assets
   classified as held for
   sale                       (2,300)           --         --          (2)          --          --        --        --      (2,302)
                              ------     ---------    -------      ------       ------      ------    ------    ------   ---------
At 31 December 2006           14,340        97,653     12,128      29,280       18,595       2,910    25,593     6,661     207,160
                              ------     ---------    -------      ------       ------      ------    ------    ------   ---------
CARRYING VALUES
At 31 December 2006           18,885     1,569,933     34,600      26,991       27,150       4,924     4,770    11,121   1,698,374
                              ======     =========    =======      ======       ======      ======    ======    ======   =========
At 31 December 2005           20,969     1,563,375     38,400      30,340       25,568       5,345     7,162    11,701   1,702,860
                              ======     =========    =======      ======       ======      ======    ======    ======   =========
</TABLE>

The above items of property, plant and equipment are depreciated on a straight
line basis of the following rates per annum:

<TABLE>
<S>                              <C>
Leasehold land and buildings     Over the remaining unexpired terms of
                                    the leases

Hotel properties                 Over the remaining unexpired terms
                                    of the leases

Furniture and fixtures           10% - 20%

Leasehold improvements           10% - 20% or the term of the lease or land
                                    use rights, if shorter

Motor vehicles                   8.33% - 20%

Office equipment and machinery   20%

Vessels                          5%
</TABLE>


                                      F-37

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

15.  PROPERTY, PLANT AND EQUIPMENT - continued

     An analysis of the properties of the Company held at the balance sheet date
     is as follows:

<TABLE>
<CAPTION>
                                       Leasehold                Hotel              Properties
                                  land and buildings         properties        under construction
                                  ------------------   ---------------------   ------------------
                                     2006      2005       2006        2005       2006       2005
                                   -------   -------   ---------   ---------   --------   -------
                                   HK$'000   HK$'000    HK$'000     HK$'000     HK$'000   HK$'000
<S>                               <C>        <C>       <C>         <C>         <C>        <C>
Long leases in Hong Kong            13,865    16,879     609,202     614,856         --        --
Medium term leases in Hong Kong      5,020     4,090          --          --         --        --
Medium term leases in
   the PRC (note b)                     --        --     960,731     948,519     34,600    38,400
                                    ------    ------   ---------   ---------     ------    ------
                                    18,885    20,969   1,569,933   1,563,375     34,600    38,400
                                    ======    ======   =========   =========     ======    ======
</TABLE>

Notes:

(a)  Included in the hotel properties at the balance sheet date is a hotel
     property with a carrying value of HK$145,415,000 (2005: HK$142,195,000)
     situated in Luoyang, the PRC and held under a medium term land use rights.
     The land use rights of the hotel property is currently held by Luoyang
     Power Supply Bureau, a minority shareholder of the subsidiary holding the
     hotel property. Pursuant to a land use rights agreement entered into
     between Luoyang Power Supply Bureau and the subsidiary on 15 April 1999
     (before the Company acquired the said subsidiary in 2004), Luoyang Power
     Supply Bureau agreed to permit the said subsidiary to use the land use
     rights of the hotel property for a term commencing from April 1999 to April
     2049 for hotel use.

(b)  Included in the hotel properties held under medium term leases in the PRC
     of HK$960,731,000 (2005: HK$948,519,000) is a hotel property with a
     carrying value of approximately HK$219,720,000 (2005: HK$210,860,000)
     located in Guangzhou, the PRC.

(c)  The directors reviewed the carrying amounts of its property, plant and
     equipment as at 31 December 2006 and identified that the value of
     properties under construction was impaired and certain properties has
     increased (2005: the value of properties under construction and certain
     properties was increased). Accordingly, the carrying amounts of properties
     under construction and properties were stated to their recoverable amounts.

     The carrying value of motor vehicles, and office equipment and machinery of
     the Company held under finance leases as at 31 December 2006 was HK$99,000
     (2005: HK$137,000).

     Depreciation expenses on hotel properties of HK$31,690,000 (2005:
     HK$30,119,000 and 2004: HK$30,119,000) are included in administrative
     expenses during the year.

     The Company did not lease motor vehicles to outsiders to earn rental income
     as at 31 December 2006. The carrying value of motor vehicles of the Company
     leased to outsiders to earn rental income as at 31 December 2005 was
     HK$703,000.


                                      F-38

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

16.  INVESTMENT PROPERTY

<TABLE>
<CAPTION>
                                       2006      2005
                                     -------   -------
                                     HK$'000   HK$'000
<S>                                  <C>       <C>
Fair value of investment property:
   At beginning of the year               --    3,400
   Increase in fair value                 --      619
   Reclassified as held for sale          --   (4,019)
                                     -------   -------
   At end of the year                     --       --
                                     =======   =======
</TABLE>

     On 13 July 2005, the Company entered into a sale agreement to dispose of
     the investment property. The disposal was completed on 20 January 2006, and
     there is no material difference between the fair value of investment
     property at 31 December 2005 and its fair value at 20 January 2006, on
     which date the beneficial ownership was passed to the acquirer.

     The investment property of the Company is freehold and held outside Hong
     Kong.

17.  INTEREST IN ASSOCIATES

<TABLE>
<CAPTION>
                                                2006      2005
                                              -------   -------
                                              HK$'000   HK$'000
<S>                                           <C>       <C>
Cost of investments in associates Listed
   and traded on the Pink Sheet in the
   United States of America                    57,982        --
   Unlisted                                    14,786   219,137
Share of post-acquisition reserves              1,266     1,285
                                               ------   -------
                                               74,034   220,422
                                               ======   =======
Fair value of listed investment                10,954        --
                                               ======   =======
</TABLE>

     Particulars of the Company's associates as at 31 December 2006 are as
     follows:

<TABLE>
<CAPTION>
                                                                                       Proportion of
                                                                    Issued and       issued/registered
                                                  Place of            paid up          capital held
                                               incorporation/     share capital/      by the Company
                                Form of         establishment   registered capital   -----------------
Name of associate         business structure    and operation          '000              2006  2005      Principal activities
-----------------         ------------------   --------------   ------------------      -----  ----      --------------------
<S>                       <C>                  <C>              <C>                  <C>       <C>       <C>
Ananda Travel Service     Limited liability    Australia                A$400             40%    40%     Travel and related
   (Aust.) Pty. Limited      company                                                                        services
Travoo International      Limited liability    British Virgin        US$6,120             50%    --      Investment holding
   Limited                   company              Islands
Wing On International     Sino-foreign         PRC                   RMB5,000             49%    49%     Travel and related
   Travel Service Ltd.       equity joint                                                                   services
   Guangdong                 venture
Winner World Group        Limited liability    British Virgin          US$nil             20%    --      Investment holding
   Limited                   company              Islands
Sino Express Travel       Limited liability    United States            US$84           41.9%    --      Travel and related
   Limited                   company              of America                                                services
</TABLE>


                                      F-39

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

17.  INTEREST IN ASSOCIATES - continued

     Included in the cost of investment in associates is goodwill of
     HK$29,610,000 (2005: Nil) arising on acquisition of associates. The
     movement of goodwill is set out below.

<TABLE>
<CAPTION>
                                                         HK$'000
<S>                                                      <C>
COST
At 1 January 2005, 31 December 2005 and 1 January 2006        --
Arising on acquisition of associates (Note a)             29,610
                                                          ------
At 31 December 2006                                       29,610
                                                          ======
</TABLE>

     Note a:

     On 31 August 2006, the Company disposed of its entire 100% interest in
     Guangzhou Travel Information Systems Network Limited ("GTZI"), a limited
     liability company and a wholly foreign owned enterprise established under
     the laws of the PRC, and its shareholder's loan amounting to HK$51,419,000
     to Sino Express Travel Limited ("Sino") at a consideration of US$7,500,000.
     The consideration was settled by Sino Express Travel Limited ("Sino USA")
     issuing to the Company a total of 32,608,696 common shares of common stock
     in Sino USA. Sino USA is a company incorporated in the United States of
     America with its shares traded on the Pink Sheets in the United States of
     America. The consideration shares represented approximately 38.99% of the
     issued share capital of Sino USA. Before the completion, the Company held
     2,500,000 shares of Sino USA. After completion, the Company held a total of
     35,108,696 shares of Sino USA and Sino USA became an associate of the
     Company. The Company is in the process of assessing the fair value of the
     identifiable intangible assets of Sino USA at date of completion; thus, the
     allocation of the goodwill disclosed herein is preliminary and subject to
     the revision once the Company completes its valuation exercise.

     The summarized financial information in respect of the Company's associates
     is set out below:

<TABLE>
<CAPTION>
                                                2006      2005
                                              -------   -------
                                              HK$'000   HK$'000
<S>                                           <C>       <C>
Total assets                                  273,268   562,873
Total liabilities                             168,037   161,554
                                              -------   -------
Net assets                                    105,231   401,319
                                              =======   =======
Share of net assets                            44,424   220,422
                                              =======   =======
Turnover                                      408,129   111,531
                                              =======   =======
Profit for the year                             4,590    13,381
                                              =======   =======
Share of results of associates for the year       (19)    8,006
                                              =======   =======
</TABLE>


                                      F-40

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

18.  AVAILABLE-FOR-SALE INVESTMENTS

<TABLE>
<CAPTION>
                                          2006      2005
                                        -------   -------
                                        HK$'000   HK$'000
<S>                                     <C>       <C>
Equity securities
   Unlisted shares, at cost              99,460   126,425
   Less: Impairment losses recognized   (26,728)  (33,800)
                                        -------   -------
                                         72,732    92,625
                                        =======   =======
</TABLE>

     Particulars of the Company's major available-for-sale investments as at 31
     December 2006 are as follows:

<TABLE>
<CAPTION>
                                                                  Proportion of
                                                Issued          issued/registered       Interest
                                              and paid up         capital held        attributable
                             Place of       share capital/     by the subsidiaries   to the Company
                          establishment   registered capital   -------------------   --------------
Name of entity            and operation          '000              2006    2005       2006   2005     Principal activities
--------------            -------------   ------------------      ------   ----       ----   ----     --------------------
<S>                       <C>             <C>                  <C>         <C>       <C>     <C>      <C>
Guangxi Guijia Property        PRC             US$8,021            26%     26%        18.2%  18.2%    Property holding and
   Management Company                                             (Note)                                 operation of
   Limited ("Guangxi                                                                                     leisure services
   Guijia")
</TABLE>

Note:

     Though a subsidiary of the Company holds a 26% interest in Guangxi Guijia.
     The directors consider that the Company cannot exercise significant
     influence on the financial and operating policies of Guangxi Guijia as it
     has no right to appoint directors in Guangxi Guijia, and accordingly, it is
     classified as an available-for-sale investment. At 31 December 2006, the
     directors reviewed its carrying amount and the present value of the
     estimated future cash flows expected to arise from the investment and
     considered that it is unlikely to recover the interest in Guangxi Guijia.
     Accordingly an impairment loss of HK$19,902,000 was recognized in the
     consolidated financial statements to write down the carrying amount of the
     investment to its recoverable amount. At 31 December, 2005, an impairment
     loss of HK$1,167,000 was recognized in the consolidated financial
     statements.

     At 31 December 2005, the Company also held a 49.5% interest in Guilin
     Osmanthus Hotel, the directors considered that the Company cannot exercise
     influence on the financial and operating policies of Guilin Osmanthus Hotel
     and accordingly, it is classified as an available-for-sale investment. The
     directors reviewed its carrying amount and considered that it is unlikely
     to recover the interest in Guilin Osmanthus Hotel and the present value of
     the estimated future cash flows expected to arise from the investment is
     minimal. Accordingly, at 31 December 2005, accumulated impairment loss
     amounted to HK$26,974,000.

     In November 2006, all interest in Guilin Osmanthus Hotel was being disposed
     of and a gain of HK$100,000 was recognized in the consolidated income
     statements.


                                      F-41

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

19.  GOODWILL

<TABLE>
<CAPTION>
                                             2006      2005
                                           -------   -------
                                           HK$'000   HK$'000
<S>                                        <C>       <C>
COST
At beginning of the year                   50,862     50,215
Acquired on acquisition of a subsidiary
   (note 42)                                   --        647
Eliminated on disposal of a subsidiary
   (note 41)                                 (841)        --
                                           ------     ------
At end of the year                         50,021     50,862
                                           ------     ------
IMPAIRMENT
At beginning of the year                       --         --
Impairment loss recognized                 (5,808)        --
                                           ------     ------
At end of the year                         (5,808)        --
                                           ------     ------
CARRYING VALUES
At end of the year                         44,213     50,862
                                           ======     ======
</TABLE>

     Particulars regarding impairment testing on goodwill are disclosed in note
     20.

20.  IMPAIRMENT TESTING ON GOODWILL

     As explained in note 7, the Company uses business segments as its primary
     segment for reporting segment information. For the purposes of impairment
     testing, goodwill as set out in note 19 has been allocated to the cash
     generating unit ("CGU") of International Travel Systems Inc. ("ITS") which
     engaged in travel and related services segment.

     The recoverable amount of this CGU has been determined on the basis of
     value in use calculation. The key assumptions for the value in use
     calculation are those regarding the discount rates, growth rates and
     expected changes to revenue and direct costs during the year. Management
     estimates discount rates using pre-tax rates that reflect current market
     assessments of the time value of money and the risks specific to the CGU.
     The growth rates are based on industry growth forecasts. Changes in revenue
     and direct costs are based on past practices and expectations of future
     changes in the market.

     During the year, the Company performed impairment review for goodwill based
     on cash flow forecasts derived from the most recent financial budgets for
     the next five years approved by management using a discount rate of 15.7%
     (2005: 15.5%). The cash flows beyond the five year period have been
     extrapolated using a steady 5% per annum growth rate.

     The directors reviewed the business valuation, the anticipated
     profitability and the anticipated future operating cash flows of ITS. With
     reference to the financial results and business operated by ITS, the
     Directors of the Company identified an impairment loss in respect of
     goodwill of approximately HK$5,808,000 (2005: Nil), such an amount was
     dealt with in the consolidated income statement for the year ended 31
     December 2006.


                                      F-42

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

21.  INVESTMENT DEPOSITS

<TABLE>
<CAPTION>
                                                                2006      2005
                                                              -------   -------
                                                              HK$'000   HK$'000
<S>                                                           <C>       <C>
Deposits for the acquisition of 100% interests in companies
   holding land use rights in the PRC (note a)                150,000   150,000
Deposits for the acquisition of a subsidiary (note b)          15,500        --
Deposits for the acquisition of a hotel booking business
   (note c)                                                        --    51,419
                                                              -------   -------
                                                              165,500   201,419
                                                              =======   =======
</TABLE>

Notes:

(a)  The amount represents deposits paid for the acquisition of 100% equity
     interests in certain companies holding land use rights in the PRC for
     various development projects, with the objective of developing hotels,
     shopping malls, recreational and other tourists related amenities
     respectively. The aggregate consideration for the purchase amounted to
     HK$180,000,000. The transactions have not been completed as at the date of
     this report.

(b)  The amount represented the deposits paid for the acquisition of a 51%
     interest in Sichuan Henxin Travel Co., Ltd.. The transaction has not been
     completed as at the date of this report.

(c)  The amount represents the deposits paid for the acquisition of a 51%
     interest in an enterprise established in the PRC engaging in full scale
     on-line and off-line hotel booking services for a consideration of
     approximately HK$51,500,000. The transaction has not been completed and the
     subsidiary holding such deposits has been disposed of in 2006.

22.  INVENTORIES

     The inventories were carried at cost and represent principally food,
     beverages, general stores and carnival tickets which are to be utilized in
     the ordinary course of operations.


                                      F-43

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

23.  AMOUNTS DUE FROM RELATED COMPANIES

     The balances represent the aggregate amounts due from related parties.
     Certain directors of the Company are also directors of and/or have
     beneficial interests in these companies. The amounts are unsecured and
     interest free. Included in the amounts due from related companies as at 31
     December 2006 were advances of HK$53,684,000 (2005: HK$60,090,000) which
     are repayable on demand, and the remaining balances were principally
     trading balances.

     The aged analysis of the trading balances at the reporting dates is as
     follows:

<TABLE>
<CAPTION>
                 2006      2005
               -------   -------
               HK$'000   HK$'000
<S>            <C>       <C>

0 - 30 days       254     3,019
31 - 60 days      375       183
61 - 90 days      368       144
Over 90 days    4,784     1,741
                -----     -----
                5,781     5,087
                =====     =====
</TABLE>

24.  AMOUNTS DUE FROM (TO) ASSOCIATES

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

25.  TRADE AND OTHER RECEIVABLES

<TABLE>
<CAPTION>
                                   2006      2005
                                 -------   -------
                                 HK$'000   HK$'000
<S>                              <C>       <C>
Trade receivables                 26,627    20,596
Advance cost to tour operators        --   114,600
Advances to certain companies    308,112   113,053
Deposits and prepayments          44,254    49,173
Interest receivable               11,492     7,379
Other receivables                 41,150    19,704
                                 -------   -------
                                 431,635   324,505
                                 =======   =======
</TABLE>


                                      F-44
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

25.  TRADE AND OTHER RECEIVABLES - continued

     The aged analysis of the trade receivables at the reporting dates is as
     follows:

<TABLE>
<CAPTION>
                 2006      2005
               -------   -------
               HK$'000   HK$'000
<S>            <C>       <C>
0 - 30 days     11,076    12,241
31 - 60 days     3,861     3,051
61 - 90 days     2,168     1,453
Over 90 days     9,522     3,851
               -------   -------
                26,627    20,596
               =======   =======
</TABLE>

     The Company allows an average credit period of 60 days to local customers
     and 90 days to overseas customers.

     Included in other receivables was a balance of HK$19,194,000 (2005:
     HK$17,456,000) which is secured by a 16.26% equity interest in Triumph Up.

26.  LOAN RECEIVABLES

<TABLE>
<CAPTION>
                                                              2006      2005
                                                            -------   -------
                                                            HK$'000   HK$'000
<S>                                                         <C>       <C>
Loan to certain companies and individuals (notes a and b)   372,480   167,926
Loan to a land operator (note c)                                 --    13,000
                                                            -------   -------
                                                            372,480   180,926
                                                            =======   =======
Fixed-rate loan receivables                                      --    15,427
Variable-rate loan receivables                              372,480   165,499
                                                            -------   -------
                                                            372,480   180,926
                                                            =======   =======
</TABLE>


                                      F-45

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

26.  LOAN RECEIVABLES - continued

Notes:

(a)  (i)  Included in the balances were loans of HK$22,590,000 (2005:
          HK$40,000,000) which are secured by equity interests in an enterprise
          established in the PRC.

     (ii) Included in the balances was a loan of HK$22,887,000 (2005:
          HK$21,120,000) which is secured by a 50% equity interest in Feng Ze
          which holds a 5.75% attributable interest in the Kingsway Hotel.

     (iii) Included in the balances were loans of HK$45,318,000 (2005:
          HK$21,236,000) which are secured by the right in a property project in
          Macau of a consideration of HK$40,000,000.

     (iv) Included in the balances was a loan of HK$22,689,000 (2005:
          HK$10,327,000) which is secured by certain equity securities listed in
          Hong Kong.

     (v)  Included in the balances as at 31 December 2005 was approximately
          HK$5,074,000 due from a related company. A director of the Company has
          beneficial interests in and is also director of the related company.

(b)  Save for the loans mentioned in note 26(a)(i) to (iv), the amount are
     unsecured, carrying interest at market rates and repayable on demand.

(c)  The loan to a land operator represents an advance made to one of the
     Company's land operators for the designated purpose of purchase of coaches.
     The amount is secured, bears interest at 10% per annum on the principal
     amount was fully repaid in 2006.

27.  INVESTMENTS HELD FOR TRADING

<TABLE>
<CAPTION>
                                            2006      2005
                                           -------   -------
                                           HK$'000   HK$'000
<S>                                        <C>       <C>
Listed securities
   Equity securities listed in Hong Kong    7,126     5,576
   Equity securities listed elsewhere           -     3,510
                                            -----     -----
                                            7,126     9,086
                                            =====     =====
</TABLE>


                                      F-46
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

28.  PLEDGED BANK DEPOSITS/TRADING CASH BALANCES/BANK BALANCES

     Pledged bank deposits/bank balances

     Bank balances carry interest at market rates which range from 2.35% to
     2.63%. The pledged bank deposits carry fixed interest rate of 2.85%.
     Pledged bank deposits represent deposits pledged to banks to secure banking
     facilities granted to the Company and will be released upon the settlement
     of relevant bank borrowings.

     Trading cash balances

     The amounts represent foreign currencies held for money exchange purposes.

29.  ASSETS CLASSIFIED AS HELD FOR SALE/LIABILITIES ASSOCIATED WITH ASSETS
     CLASSIFIED AS HELD FOR SALE

<TABLE>
<CAPTION>
                                       2006      2005
                                     -------   -------
                                     HK$'000   HK$'000
<S>                                  <C>        <C>
Assets classified as held for sale   305,339    4,019
                                     =======   =======
</TABLE>

     On 13 June 2006, the Company entered into an agreement with China Star
     Entertainment Limited, a company incorporated in Bermuda with its shares
     listed on the Stock Exchange, in relation to the disposal of approximately
     56.91% interest in a subsidiary, Triumph Up Investments Limited ("Triumph
     Up") at a consideration of approximately HK$252,789,000. Triumph Up
     indirectly holds approximately 55.75% interest in Kingsway Hotel Limited
     ("Kingsway") which is classified as an associate as the directors consider
     that the Company cannot exercise control to govern its financial and
     operating policies. Accordingly, the Company's approximately 31.73%
     effective interest in Kingsway will be entirely disposed of. The
     transaction has not been completed as at the date of report.

     The considerations are expected to exceed the Company's share of net
     carrying amount of the relevant assets and liabilities and, accordingly, no
     impairment loss has been required.

     The major classes of assets and liabilities comprising the disposal group
     classified as held for sale are as follows:

<TABLE>
<CAPTION>
                                                                       HK$'000
<S>                                                                    <C>
Property, plant and equipment                                            2,534
Interest in associates                                                 204,351
Trade and other receivables                                                 97
Amounts due from associates                                             98,357
                                                                       -------
Total assets classified as held for sale                               305,339
                                                                       =======
Amounts due to associates                                                  170
                                                                       -------
Total liabilities associated with assets classified as held for sale       170
                                                                       =======
</TABLE>


                                      F-47
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

30.  TRADE AND OTHER PAYABLES

<TABLE>
<CAPTION>
                                                  2006      2005
                                                 -------   -------
                                                 HK$'000   HK$'000
<S>                                              <C>       <C>
Trade payables                                   162,111   130,741
Amounts payable for acquisition of investments      -       19,231
Accrued liabilities                               79,051    53,388
Other payables                                     6,047    19,687
Receipt in advance                                61,775    54,321
                                                 -------   -------
                                                 308,984   277,368
                                                 =======   =======
</TABLE>

     The aged analysis of the trade payables at the reporting dates is as
     follows:

<TABLE>
<CAPTION>
                 2006      2005
               -------   -------
               HK$'000   HK$'000
<S>            <C>       <C>
0 - 30 days     97,177    71,157
31 - 60 days    32,351    26,706
61 - 90 days    17,144    19,022
Over 90 days    15,439    13,856
               -------   -------
               162,111   130,741
               =======   =======
</TABLE>

31.  LOANS FROM RELATED COMPANIES

     Certain directors of the Company are also directors of and/or have
     beneficial interests in those companies. The loans are variable-rate loans
     which are unsecured, bear interest at market rates and repayable within one
     year. The Company's variable-rate loans from related companies carried
     interest at prime rate to prime rate plus 2% per annum for both years.
     Effective interest ate is 7.4% (2005: 6.6%).

32.  AMOUNTS DUE TO RELATED COMPANIES

     The balances represent principally trading balances including trade
     payables and loan interest payable, which are unsecured, interest free and
     repayable on demand.


                                      F-48
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

33.  OBLIGATIONS UNDER FINANCE LEASES

<TABLE>
<CAPTION>
                                                              Present value
                                             Minimum            of minimum
                                          lease payments      lease payments
                                        -----------------   -----------------
                                         2006      2005      2006      2005
                                        -------   -------   -------   -------
                                        HK$'000   HK$'000   HK$'000   HK$'000
<S>                                     <C>       <C>       <C>       <C>
Amounts payable under finance leases:
Within one year                            35        86        31        62
Between one to two years                   --        19        --        31
                                          ---       ---       ---       ---
                                           35       105        31        93
Less: Future finance charges               (4)      (12)       --        --
                                          ---       ---       ---       ---
Present value of lease obligations         31        93        31        93
                                          ===       ===
Less: Amount due within one
      year shown under current
      liabilities                                             (31)      (62)
                                                              ---       ---
Amount due after one year                                      --        31
                                                              ===       ===
</TABLE>

     The Company entered into finance leases to acquire certain of its property,
     plant and equipment. The terms of the finance leases ranged from 2 to 4
     years and the average effective borrowing rate was 6.8% (2005: 6.8%) per
     annum. Interest rate was fixed at the contract date. The leases were on a
     fixed repayment basis and no arrangement was entered into for contingent
     rental payments. The Company's obligations under the finance leases were
     secured by the lessors' charge over the leased assets.

34.  BORROWINGS

<TABLE>
<CAPTION>
                                                 2006      2005
                                               -------   -------
                                               HK$'000   HK$'000
<S>                                            <C>       <C>
Bank loans                                     451,309   300,209
Other loans                                     14,440     9,424
                                               -------   -------
                                               465,749   309,633
Less: Amount due within one year shown under
      current liabilities                      (59,269)  (38,325)
                                               -------   -------
Amount due after one year                      406,480   271,308
                                               =======   =======
Secured                                        455,749   306,633
Unsecured                                       10,000     3,000
                                               -------   -------
                                               465,749   309,633
                                               =======   =======
</TABLE>


                                      F-49
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

34.  BORROWINGS - continued

<TABLE>
<CAPTION>
                                         2006      2005
                                       -------   -------
                                       HK$'000   HK$'000
<S>                                    <C>       <C>
Borrowings are repayable as follows:
Within one year or on demand            59,269    38,325
Between one to two years                44,640    28,828
Between two to five years              361,840   242,480
                                       -------   -------
                                       465,749   309,633
                                       =======   =======
</TABLE>

     The Company's borrowings are variable-rate borrowings which are denominated
     in Hong Kong dollars. Included in the borrowings is a bank loan of
     HK$451,120,000 (2005: HK$299,760,000) which bears an annual interest rate
     of 0.8% over the Hong Kong Inter-bank Offered Rate and is repayable over
     the coming years until 17 April 2009.

     The Company's borrowings carried interest at HIBOR plus 0.8% to prime rate
     plus 3% for both year. Effective interest rate is 5.1% (2005: 3.9%).

35.  CONVERTIBLE NOTES

<TABLE>
<CAPTION>
                                2006      2005
                               -------   -------
                               HK$'000   HK$'000
<S>                            <C>       <C>
                               Note (a)  Note (b)
Convertible notes              810,026    41,350
Less: Conversion into shares        --   (41,350)
                               -------   -------
                               810,026        --
                               =======   =======
</TABLE>

----------
     (a)  During the year ended 31 December 2006, the Company issued new
          convertible exchangeable notes of nominal value amounting to
          HK$1,000,000,000 (the "Notes"). The Notes carried interest at 2% per
          annum and should be repayable on 7 June 2011 (the "Maturity Date").
          CEL, a substantial shareholder of the Company, subscribed for the
          notes of nominal value amounting to HK$300,000,000 by cash.

          The convertible notes were split between the liability and equity
          elements. The equity element is presented in equity heading
          "convertible notes reserve". The effective interest rate of the
          liability component is 9.35%.

          The initial conversion price of the Notes is HK$0.79 per share and
          subject to anti-dilutive adjustments. The notes are issued on the date
          after share subdivision as mentioned in note 38. Unless converted or
          lapsed or redeemed by the Company, the Company will redeem the Notes
          on the Maturity Date at the redemption amount which is 110% of the
          principal amount of the Notes outstanding.

          Each of the noteholders shall have the right to convert, on any
          business day commencing from the 7th day after the date of issue of
          the Notes up to and including the date which is 7 days prior to the
          Maturity Date, the whole or any part (in an amount or integral
          multiple of HK$1,000,000) of the principal amount of the Notes into
          the shares of the Company at the then prevailing conversion price.


                                      F-50
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

35.  CONVERTIBLE NOTES - continued

          Subject to certain restrictions which are intended to facilitate
          compliance of relevant rules and regulations, each noteholder shall
          have the right to exchange from time to time all or part (in the
          amount of HK$10,000,000 or integral multiples thereof) of 50% of the
          initial principal amount of its Notes for shares in the share capital
          of any company which is an affiliated company as defined in Rule
          13.11(2)(a) of the Rules Governing the Listing of Securities on the
          Stock Exchange (the "Listing Rules") or subsidiary of the Company that
          is to be listed on a stock exchange through an initial public offering
          at the price (the "Spin-off Shares"), subject to anti adjustments, at
          which the Spin-off Shares are actually issued to the public at the
          time of the listing on that stock exchange. The decision on whether to
          list any of its affiliated company or subsidiary in the future is at
          the sole discretion of the directors of the Company.

     (b)  During the year ended 31 December 2004, the Company issued convertible
          notes of nominal value amounting to HK$260,000,000 to finance the
          redemption of the convertible notes issued in 2002 and due in 2004.
          The new convertible notes carried interest at 2% per annum and should
          be repayable on 14 June 2007. The holders of the convertible notes
          were entitled to convert on any business day the convertible notes
          into new shares of the Company at any time from the date of issue of
          the convertible notes, at an initial conversion price of HK$0.02 per
          share.

          Following the issue of shares in the Company pursuant to the placing
          and subscription agreement dated 4 February 2005, the conversion price
          of the convertible notes was adjusted to HK$0.0197 per share in
          accordance with its terms and conditions. On 14 March 2005, the day
          immediately preceding the effective date of the share consolidation as
          mentioned under note 38, the conversion price was adjusted to HK$1.97
          per new consolidated share.

          The convertible notes were split between the liability and equity
          elements. The equity element is presented in equity heading
          "convertible notes reserve". The effective interest rate of the
          liability component is 14.7%.

          During the year ended 31 December 2005, all the convertible notes were
          converted into 27,918,781 new consolidated shares in the Company of
          HK$1 each at a conversion price of HK$1.97 per share after adjusting
          for the share consolidation as mentioned under note 38.

36.  PROMISSORY NOTE

     The promissory note was issued during the year ended 31 December 2002 to
     Hutchison Hotels Holdings (International) Limited as partial consideration
     for the acquisition of the entire issued share capital of and shareholder's
     loan to Makerston Limited ("Makerston"), which holds indirectly a 95%
     interest in Rosedale Hotel Beijing Co., Ltd. ("Rosedale Beijing"). The
     promissory note was interest bearing at HIBOR plus 2% per annum and secured
     by the entire issued share capital of, and shareholder's loan to Makerston
     and its subsidiaries which holds the 95% equity interest in Rosedale
     Beijing. The promissory note was fully repaid on 15 December 2006.


                                      F-51

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

37.  DEFERRED TAXATION

     The followings are the major deferred tax liabilities and assets recognized
     and movement thereon during the current and prior years:

<TABLE>
<CAPTION>
                                              Accelerated
                                           tax depreciation
                                               on hotel
                                              properties
                                           ----------------
                                                HK$'000
<S>                                        <C>
At 1 January 2005                              243,354
Currency realignment                             3,497
Credit to the income statement (note 12)        (2,171)
                                               -------
At 31 December 2005 and 1 January 2006         244,680
Currency realignment                             7,445
Credit to the income statement (note 12)        (1,946)
                                               -------
At 31 December 2006                            250,179
                                               =======
</TABLE>

     As at 31 December 2006, the Company has unused tax losses of approximately
     HK$896,381,000 (2005: HK$912,324,000) available for offset against future
     profits. No deferred tax asset has been recognized in respect of the tax
     losses due to the unpredictability of future profit streams. Pursuant to
     the relevant laws and regulations in the PRC, the unutilized tax losses of
     approximately HK$72,003,000 (2005: HK$39,000,000) can be carried for a
     period of five years. The losses arising from overseas subsidiaries are
     insignificant, which will expire after a specific period of time, other
     unrecognized tax losses may be carried forward indefinitely.

38.  SHARE CAPITAL

<TABLE>
<CAPTION>
                                                   Number of shares     Amount
                                                   ----------------   ---------
                                                                       HK$'000
<S>                                                <C>                <C>
Authorized
   Shares of HK$0.01 each at 1 January 2005         50,000,000,000      500,000
   Consolidation of shares                         (49,500,000,000)          --
   Increase in authorized share capital              1,000,000,000    1,000,000
                                                   ---------------    ---------
   Shares of HK$1 each at 31 December 2005           1,500,000,000    1,500,000
   Subdivision of shares                            13,500,000,000           --
                                                   ---------------    ---------
   Shares o HK$0.1 each at 31 December 2006         15,000,000,000    1,500,000
                                                   ===============    =========
Issued and fully paid
   Shares of HK$0.01 each at 1 January 2005         32,226,732,770      322,267
   Issue of shares                                   8,740,000,000       87,400
                                                   ---------------    ---------
                                                    40,966,732,770      409,667
   Consolidation of shares                         (40,557,065,443)          --
   Conversion into shares from convertible notes        27,918,781       27,919
                                                   ---------------    ---------
   Shares of HK$1 each at 31 December 2005 and
      1 January 2006                                   437,586,108      437,586
   Reduction in share capital                                   --     (393,827)
                                                   ---------------    ---------
                                                       437,586,108       43,759
Issue of shares                                        175,000,000       17,500
Share repurchase                                        (2,000,000)        (200)
                                                   ---------------    ---------
Shares of HK$0.1 each at 31 December 2006              610,586,108       61,059
                                                   ===============    =========
</TABLE>


                                      F-52

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

38.  SHARE CAPITAL - continued

     On 31 January 2005, 2,340 million shares were issued and allotted at the
     price of HK$0.028 per share in accordance with the second placing and
     subscription agreement and the proceeds, net of expense, amounted to
     approximately HK$63.1 million. The new shares issued rank pari passu in all
     respects with the then existing shares.

     On 4 February 2005, the Company entered into a placing and subscription
     agreement with CEL and Tai Fook Securities Company Limited ("Tai Fook")
     pursuant to which Tai Fook agreed to place up to 6,400 million shares in
     the Company then held by CEL at the price of HK$0.022 per share to
     independent investors and CEL would subscribe for up to 6,400 million new
     shares of the Company at the same price of HK$0.022 per share. The net
     proceeds from the placement amounted to approximately HK$136.8 million, net
     of expense. HK$50 million of the net proceeds will be used for financing
     the refurbishment, renovation and upgrading of Kingsway Hotel and the
     balance of approximately HK$86.8 million will be used for future investment
     opportunities relating to existing businesses. The subscription was
     completed on 18 February 2005. The new shares issued rank pari passu in all
     respects with the then existing shares.

     On 4 February 2005, the directors proposed to the shareholders of the
     Company for approval of the consolidation of every one hundred shares of
     HK$0.01 each in the issued and unissued ordinary share capital of the
     Company into one share of HK$1 each. The consolidation of shares of the
     Company was approved by the shareholders of the Company in the special
     general meeting on 14 March 2005.

     On 17 May 2005, the directors proposed to the shareholders of the Company
     to increase the authorized share capital of the Company from HK$500,000,000
     divided into 500,000,000 shares of HK$1 each to HK$1,500,000,000 divided
     into 1,500,000,000 shares of HK$1 each by the creation of an additional
     1,000,000,000 shares of HK$1 each. The increase in the authorized share
     capital of the Company was approved by the shareholders of the Company in
     the special general meeting on 5 July 2005.

     On 1 March 2006, the Company entered into a placing agreement with Success
     Securities Limited ("Success Securities") pursuant to which Success
     Securities conditionally agreed to place up to 175 million shares (the
     "Placing Shares") in the Company at a price of HK$0.69 per share to
     independent investors (the "Placing"). In order to facilities the issue of
     the Placing Shares, the Company conducted the capital reorganisation which
     involved (i) the reduction of the issued share capital of the Company by
     HK$0.90 per existing share by cancelling an equivalent amount of paid-up
     capital per existing share so that the nominal value of each existing share
     in issue will be reduced from HK$1 to HK$0.10; and (ii) the subdivision of
     every unissued existing share into 10 adjusted shares.

     The placing was completed on 25 April 2006. The new shares issued rank pari
     passu in all respects with the then existing shares. The net proceeds of
     approximately HK$120 million from the Placing have been used as general
     working capital of the Company.


                                      F-53

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

38.  SHARE CAPITAL - continued

     On 27 September 2006, the Company repurchased its own shares through the
     Stock Exchange of Hong Kong Limited as follows:

<TABLE>
<CAPTION>
                           No. of        Price per share
                      ordinary shares   ----------------        Aggregate
Month of repurchase   at HK$0.1 each    Highest   Lowest   consideration paid
-------------------   ---------------   -------   ------   ------------------
                           '000           HK$       HK$          HK'000
<S>                   <C>               <C>       <C>      <C>
September 2006             2,000         0.55      0.55           1,100
</TABLE>

     The above shares were cancelled upon repurchase and accordingly, the issued
     capital of the Company was diminished by the nominal value thereof. The
     premium payable on repurchase was charged against the share premium account
     of the Company as set out in the consolidated statement of changes in
     equity. None of the Company's subsidiaries repurchased, sold or redeemed
     any of the Company's listed shares during the year.

39.  SHARE OPTION SCHEME

     The Company has a share option scheme (the "Scheme"), which was approved
     and adopted by shareholders of the Company on 3 May 2002, enabling the
     directors to grant options to employees, executives or officers of the
     Company or any of its subsidiaries (including executive and non-executive
     directors of the Company or any of its subsidiaries) and any suppliers,
     consultants, agents or advisers who will contribute or have contributed to
     the Company or any of its subsidiaries as incentives and rewards for their
     contribution to the Company or such subsidiaries. The maximum number of
     shares in respect of which options may be granted under the Scheme, when
     aggregated with any shares subject to any other schemes, shall not exceed
     10% of the issued share capital of the Company on the date of approval and
     adoption of the Scheme (the "General Limit"). The Company proposed to
     refresh the General Limit so that the number of shares which may be issued
     upon exercise of all options to be granted under the Scheme and any other
     share option schemes of the Company would be increased to 10% of the shares
     in issue as at the date of approval of the General Limit as "refreshed".
     The refreshment of the General Limit was approved by the shareholders of
     the Company in the annual general meeting held on 27 May 2005. The Scheme
     is valid and effective for a period of 10 years after the date of adoption.

     In the general meeting held on 19 May 2006, the shareholders of the Company
     has approved that the existing scheme General Limit in respect of the
     granting of options to subscribe for shares in the Company ("Shares") under
     the Scheme be refreshed and renewed provided that the total number of
     Shares which may be allotted and issued upon exercise of all options to be
     granted under the Scheme and any other share option schemes of the Company
     (excluding options previously granted, outstanding, cancelled, lapsed or
     exercised under the Scheme) must not exceed 10% of the ordinary shares in
     issue as at the date of approval of such refreshment of the General Limit
     (subject to adjustment for consolidation and sub-division of share
     subsequent to that date) and that any Director be authorised to do all such
     acts and execute such document to effect the refreshed General Limit.

     At 31 December 2006, the number of shares in respect of which options had
     been granted and remained outstanding under the Scheme was 58,680,000
     (2005: Nil), representing 9.6% (2005: Nil) of the Shares in issue at that
     date. Option granted must be taken up within 30 days of the date of offer.
     The consideration payable for the option is HK$1. Options may be exercised
     at any time from the date of acceptance of the share option to such date as
     determined by the board of directors but in any event not exceeding 10
     years. The exercise price is determined by the directors of the Company and
     will not be less than the higher of (i) the average closing price of the
     shares for the five business days immediately preceding the date of grant,
     (ii) the closing price of the shares on the date of grant or (iii) the
     nominal value of the shares of the Company.


                                      F-54

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

39.  SHARE OPTION SCHEME - continued

     Details of options granted and a summary of the movements of the
     outstanding options under the Scheme during the period are as follows:

<TABLE>
<CAPTION>
                                           Number of share options
                       --------------------------------------------------------------
                                                              Cancelled/  Outstanding
                         Outstanding     Granted   Exercised    lapsed      as at 31    Exercise
                            as at        during      during     during    31 December    price     Date of
Eligible participants  1 January 2006   the year    the year   the year       2006     per share    grant    Exercisable period
---------------------  --------------  ----------  ---------  ----------  -----------  ---------  ---------  ---------------------
                                                                                          HK$      (Note 1)         (Note 2)
<S>                    <C>             <C>         <C>        <C>         <C>          <C>        <C>        <C>
DIRECTOR
Mr. Yu Kam Kee,
   Lawrence                   --        4,000,000      --            --     4,000,000    0.728    22.6.2006  22.6.2006 - 21.6.2008
Mr. Cheung Hon Kit            --        4,000,000      --            --     4,000,000    0.728    22.6.2006  22.6.2006 - 21.6.2008
Dr. Yap, Allan                --        4,000,000      --            --     4,000,000    0.728    22.6.2006  22.6.2006 - 21.6.2008
Mr. Chan Pak Cheung,
   Natalis                    --        1,500,000      --            --     1,500,000    0.728    22.6.2006  22.6.2006 - 21.6.2008
Mr. Lui Siu Tsuen,
   Richard                    --        4,600,000      --            --     4,600,000    0.728    22.6.2006  22.6.2006 - 21.6.2008
Mr. Kwok Ka Lap, Alva         --          500,000      --            --       500,000    0.728    22.6.2006  22.6.2006 - 21.6.2008
Mr. Sin Chi Fai               --          500,000      --            --       500,000    0.728    22.6.2006  22.6.2006 - 21.6.2008
EMPLOYEES                     --       30,680,000      --      (200,000)   30,480,000    0.728    22.6.2006  22.6.2006 - 21.6.2008
ELIGIBLE PARTICIPANT          --        9,100,000      --            --     9,100,000    0.728    22.6.2006  22.6.2006 - 21.6.2008
                             ---       ----------     ---      --------   ----------
                              --       58,880,000      --      (200,000)  58,680,000
                             ===       ==========     ===      ========   ==========
</TABLE>

Notes:

1.   On 22 June 2006, a total of 58,880,000 share options were granted. The
     closing price of the shares of the Company immediately before the date of
     grant (as of 21 June 2006) was HK$0.72.

2.   The options are to vest as follows:

     Up to a maximum of 50% of the options are exercisable during the first
     calendar year period of the option period commencing from 22 June 2006 to
     21 June 2007. The balance of the 50% of the option not yet exercised in the
     first calendar year period and the other 50% could be exercised in the
     second calendar year period commencing from 22 June 2007 to 21 June 2008.


                                      F-55

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

39.  SHARE OPTION SCHEME - continued

     Notes: - continued

     3.   The estimated fair value of the 58,880,000 share options granted
          during the year is HK$15,706,696, which was calculated using the
          Black-Scholes option pricing model (the "Model") as at the date of the
          grant of the share options. The following are the inputs to the Model:

<TABLE>
<S>                                  <C>
Share price:                         HK$0.71
Exercise price:                      HK$0.728
Expected volatility:                 65.28%
Expected dividend yield:             0%
Risk free interest rate:             4.599%
Expected life of the share options:  2 years
</TABLE>

          Expected volatility was determined by using the annualised historical
          volatility of the closing price of the shares of the Company as at 22
          June 2006.

          The Company recognized a total expense of approximately HK$12,006,000
          for the year ended 31 December 2006 (2005: Nil) in relation to share
          options granted by the Company.

          The Model has been used to estimate the fair value of the options. The
          variables and assumptions used in computing the fair value of the
          share options are based on the directors' best estimate. The value of
          an option varies with different variables of certain subjective
          assumptions.

     4.   Other eligible participates represent individuals who render personal
          services to the entity and the services rendered are similar to those
          rendered by employees.

40.  RESERVES

     (a)  On 17 May 2005, the directors proposed to the shareholders of the
          Company for approval of the cancellation of share premium account (the
          "Cancellation") pursuant to which the entire amount standing to the
          credit of the share premium account of the Company would be cancelled
          and the credit arising from the Cancellation would be transferred to
          the contributed surplus account of the Company and such credit would
          be partially used to set off against the accumulated losses of the
          Company (the "Set off"). The Cancellation and the Set Off were
          approved by the shareholders of the Company in the special general
          meeting held on 5 July 2005.

     (b)  The special reserve represents the difference between the nominal
          value of the shares of the acquired subsidiaries and the nominal value
          of the shares of the Company issued for the acquisition under the
          group reorganization in September 1997.

     (c)  The accumulated profits, translation reserve and statutory reserves of
          the Company include profits of HK$1,081,000 (2005: profits of
          HK$1,062,000), surplus of HK$73,000 (2005: HK$73,000) and HK$150,000
          (2005: HK$150,000) respectively attributable to the associates of the
          Company.


                                      F-56

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

41.  DISPOSAL OF A SUBSIDIARY

     As described in note 17, the Company disposed of its entire 100% interest
     in GZTI and its shareholder's loan of HK$51,419,000 to Sino at a
     consideration of US$7,500,000 in August 2006. The consideration was settled
     by Sino USA issuing to the Company a total of 32,608,696 common stock in
     Sino USA. After completion, Sino USA became an associate of the Company.
     The net assets of GZTI at the date of disposal were as follows:

<TABLE>
<CAPTION>
                                           31.8.2006
                                           ---------
                                            HK$'000
<S>                                        <C>
Net assets disposal of:
Property, plant and equipment                    69
Investment deposits                          51,419
Loan receivables                              1,484
Bank balances and cash                          466
Shareholder's loan                          (51,419)
                                            -------
                                              2,019
Attributable goodwill                           841
                                            -------
Total consideration                           2,860
                                            =======
Satisfied by:
Interest in an associate                     54,279
Assumption of shareholder's loan to GTZI    (51,419)
                                            -------
                                              2,860
                                            =======
Net cash outflow arising on disposal:
Bank balances and cash disposed of             (466)
                                            =======
</TABLE>

     The impact of GTZI on the Company's results and cash flow in the current
     and prior periods was insignificant.


                                      F-57

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

42.  ACQUISITION OF SUBSIDIARIES

     (a)  The Company acquired a 65.04% interest in Triumph Up on 17 February
          2005 and 100% interest in Cyber Business Network (Hong Kong) Limited
          on 28 February 2005.

          The net assets acquired in the transactions, and the discount and
          goodwill arising on acquisition, are as follows:

<TABLE>
<CAPTION>
                                             Acquiree's
                                              carrying
                                           amount before   Fair value
                                            combination    adjustments   Fair value
                                           -------------   -----------   ----------
                                              HK$'000        HK$'000       HK$'000
<S>                                        <C>             <C>           <C>
Property, plant and equipment                   1,393             --         1,393
Interest in associates                         15,887        175,309       191,196
Trade and other receivables                       114             --           114
Amount due from the Company                       960             --           960
Amounts due from related companies                  4             --             4
Amounts due from associates                   126,231             --       126,231
Bank balances and cash                             24             --            24
Trade and other payables                          (16)            --           (16)
Amount due to the Company                      (2,214)            --        (2,214)
Amounts due to associates                        (170)            --          (170)
Amounts due to related companies                 (578)            --          (578)
                                              -------        -------      --------
Net assets acquired                           141,635        175,309       316,944
                                              =======        =======
Minority interests                                                        (110,945)
Discount on acquisition                                                    (34,574)
Goodwill arising on acquisition                                                647
                                                                          --------
Cash consideration                                                         172,072
                                                                          ========
Satisfied by:
   Cash paid                                                               151,322
   Investment deposits                                                      20,750
                                                                          --------
                                                                           172,072
                                                                          ========
Net cash outflow arising on acquisition:
   Cash consideration                                                      151,322
   Bank balances and cash acquired                                             (24)
                                                                          --------
                                                                           151,298
                                                                          ========
</TABLE>

          The discount on acquisition is attributable to the increase in fair
          value of a hotel property which was held by an associate of the
          subsidiaries acquired.

          The subsidiaries acquired during year 2005 contributed HK$125,000 to
          the Company's turnover and HK$43,673,000, including discount on
          acquisition of HK$34,574,000, to the Company's profit before taxation.

          If the acquisition had been completed on 1 January 2005, the Company's
          turnover for the year ended 31 December 2005 would have been
          HK$1,815,784,000 and profit for the year would have been
          HK$33,004,000. The proforma information is for illustrative purposes
          only and is not necessarily an indicative revenue and results of
          operations of the Company that actually would have been achieved had
          the acquisition been completed on 1 January 2005, nor is it intended
          to be a projection of future results.


                                      F-58

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

42.  ACQUISITION OF SUBSIDIARIES - continued

     (b)  During the year ended 31 December 2004, the Company acquired through a
          cash offer further interest in its former associate, Apex Quality
          Group Limited ("Apex"). On 9 January 2004, Apex became a subsidiary of
          the Company. The effect of the acquisition is summarized as follows:

<TABLE>
<CAPTION>
                                                       2004
                                                    ---------
                                                     HK$'000
<S>                                                 <C>
Property, plant and equipment                       1,683,105
Club debenture                                            713
Investments in securities                                 212
Properties held for sale                                   98
Inventories                                             5,394
Trade and other receivables                            65,423
Bank balances and cash                                 22,258
Trade and other payables                             (104,544)
Amount due to the Company                              (9,425)
Obligations under a finance lease                      (1,467)
Bank and other borrowings                            (378,829)
Amounts due to related companies                      (81,654)
Promissory note                                      (365,000)
Deferred taxation                                    (243,354)
Minority interests                                   (279,909)
                                                    ---------
Net assets acquired                                   313,021
Less: Interest previously acquired and classified
   as interest in an associate                       (218,360)
                                                    ---------
                                                       94,661
Negative goodwill arising on acquisition              (74,514)
                                                    ---------
Cash consideration                                     20,147
                                                    =========
Net cash inflow arising on acquisition:
   Cash consideration                                 (20,147)
   Bank balances and cash acquired                     22,258
                                                    ---------
                                                        2,111
                                                    =========
</TABLE>

          Apex contributed HK$190,034,000 to the Company's turnover and
          HK$24,192,000 to the Company's loss before taxation for 2004.


                                      F-59

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

42.  ACQUISITION OF SUBSIDIARIES - continued

     (c)  In December 2004, the Company acquired 100% of the issued share
          capital of International Travel Systems Inc. ("ITS Inc."). The effect
          of the acquisition is summarized as follows:

<TABLE>
<CAPTION>
                                             2004
                                           -------
                                           HK$'000
<S>                                        <C>
Property, plant and equipment                   89
Trade and other receivables                  1,000
Bank balances and cash                         502
Trade and other payables                    (1,806)
                                           -------
Net liabilities acquired                      (215)
Goodwill arising on acquisition             50,215
                                           -------
Cash consideration                          50,000
                                           =======
Net cash outflow arising on acquisition:
   Cash consideration                      (50,000)
   Bank balances and cash acquired             502
                                           -------
                                           (49,498)
                                           =======
</TABLE>

          ITS Inc. contributed an insignificant amount to the Company's turnover
          and loss before taxation for 2004.


                                      F-60
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

43.  MAJOR NON-CASH TRANSACTIONS

     (a)  During the year ended 31 December 2006, the Company disposed of a
          subsidiary and related shareholder's loan to Sino at a consideration
          of US$7,500,000. The consideration was satisfied by Sino USA issuing
          to the Company a total of 32,608,696 common stock of Sino USA. The
          Company originally held 2,500,000 common stock of Sino USA, and was
          recorded as investments held for trading at 31 December 2005. After
          the above transaction, such investments have been transferred to
          investment in associates.

     (b)  During the year ended 31 December 2005, the Company disposed of a
          computer system for online travel reservation to Sino, a Hong Kong and
          Macau travel products supplier and wholesale distributor, at a
          consideration of US$500,000, which was settled by 2,500,000 common
          shares (valued at US$0.2 per share) of Sino USA, the holding company
          of Sino.

44.  PLEDGE OF ASSETS

     Save as otherwise disclosed, at 31 December 2006, the Company's credit
     facilities were secured by the Company's assets as follows:

<TABLE>
<CAPTION>
                       2006      2005
                     HK$'000   HK$'000
                     -------   -------
<S>                  <C>       <C>
Hotel property       609,202   614,856
Property interests    17,849    18,290
Bank balances         11,436     6,925
                     -------   -------
                     638,487   640,071
                     =======   =======
</TABLE>

     In addition, the Company has also effected a pledged of fixed charge over
     all the revenue and a floating charge over all the assets of Rosedale Park
     Limited for bank borrowings. Rosedale Park Limited is a subsidiary of the
     Company, engaging in hotel operation in Hong Kong which has revenue of
     approximately HK$87,420,000 for 2006 and total assets of approximately
     HK$11,863,000 at 31 December 2006.


                                      F-61

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

45.  OPERATING LEASE COMMITMENTS

     As lessee

     At 31 December 2006, the Company had commitments for future minimum lease
     payments under non-cancellable operating leases which fall due as follows:

<TABLE>
<CAPTION>
                                           2006      2005
                                         -------   -------
                                         HK$'000   HK$'000
<S>                                      <C>       <C>
Land and buildings
Within one year                           19,029    14,660
In the second to fifth years inclusive    15,501     4,866
                                         -------    ------
                                          34,530    19,526
                                         =======    ======

Equipment
Within one year                              358       358
In the second to fifth years inclusive       538       896
                                         -------    ------
                                             896     1,254
                                         =======    ======
</TABLE>

     Operating lease payments represent rentals payable by the Company for
     certain of its office properties, shops and employees' quarters as well as
     equipment. Leases are negotiated for an average term of two years.

     As lessor

     Property rental income earned during the year was HK$15,202,000 (2005:
     HK$15,713,000 and 2004: HK$13,072,000).

     At the balance sheet date, the Company had contracted with tenants for the
     following future minimum lease payments for its investment property and
     premises within the hotel properties:

<TABLE>
<CAPTION>
                                           2006      2005
                                         -------   -------
                                         HK$'000   HK$'000
<S>                                      <C>       <C>
Within one year                           15,108    13,289
In the second to fifth years inclusive    50,671    41,570
After five years                           8,476    12,622
                                          ------    ------
                                          74,255    67,481
                                          ======    ======
</TABLE>


                                      F-62

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

46.  CAPITAL COMMITMENTS

<TABLE>
<CAPTION>
                                                         2006      2005
                                                       -------   -------
                                                       HK$'000   HK$'000
<S>                                                    <C>       <C>
Contracted for but not provided in the consolidated
   financial statements in respect of acquisition of
   subsidiaries                                         30,000    30,000
Contracted for but not provided in the consolidated
   financial statements in respect of investments           --     5,462
Contracted for but not provided in the consolidated
   financial statement in respect of acquisition of
   property, plant and equipment                         7,741        --
                                                        ------    ------
                                                        37,741    35,462
                                                        ======    ======
</TABLE>

47.  PROVIDENT FUND SCHEMES

     The Company has retirement schemes covering a substantial portion of its
     employees in Hong Kong. The principal schemes are defined contribution
     schemes. The assets of these schemes are held separately from those of the
     Company in funds under the control of independent trustees.

     With effect from 1 December 2000, the Company joined a Mandatory Provident
     Fund Scheme ("MPF Scheme") for all its new employees in Hong Kong employed
     therefrom or existing employees wishing to join the MPF Scheme. The MPF
     Scheme is registered with the Mandatory Provident Fund Scheme Authority
     under the Mandatory Provident Fund Schemes Ordinance. The assets of the MPF
     Scheme are held separately from those of the Company in funds under the
     control of an independent trustee. Under the rules of the MPF Scheme, the
     employer and its employees are required to make contributions to the MPF
     Scheme at rates specified in the rules. The only obligation of the Company
     in respect of MPF Scheme is to make the required contributions under the
     MPF Scheme.

     The employees of the Company's subsidiaries in the PRC are members of the
     state-managed retirement benefit scheme operated by the government of the
     PRC. The subsidiaries are required to contribute certain percentage of
     their payroll costs to the retirement benefit scheme to fund the benefits.
     The only obligation of the Company with respect to the retirement benefit
     scheme is to make the specified contributions.

     The amounts charged to the income statement represent contributions payable
     to schemes and the MPF Scheme by the Company at rates specified in the
     rules of the schemes less forfeiture of HK$127,040 (2005: HK$125,032 and
     2004: HK$277,134) arising from employees leaving the Company prior to
     completion of the qualifying service period, if any.

     At the balance sheet date, the total amount of forfeited contributions,
     which arose upon employees leaving the retirement benefit schemes and which
     are available to reduce the contributions payable in future years was
     HK$542,825 (2005: HK$548,759).


                                      F-63

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

48.  RELATED PARTY TRANSACTIONS

     (a)  During the year, the Company had transactions with related parties as
          follows:

<TABLE>
<CAPTION>
(I)   Nature of transactions              Notes   Name of company                    2006      2005      2004
      ----------------------              -----   ---------------                  -------   -------   -------
                                                                                   HK$'000   HK$'000   HK$'000
<S>   <C>                                 <C>     <C>                              <C>       <C>       <C>
      Property rental expenses paid and    (i)    Cycle Company Limited and
      payable by the Company                      Gunnell Properties Limited        2,404     3,734     2,266
                                                  Mass Success International
                                                  Limited                             190       258     2,268
                                                  Paul Y. Building Management
                                                  Limited                              10       259        --
                                                                                    -----     -----     -----
                                                                                    2,604     4,251     4,534
                                                                                    =====     =====     =====

      Air ticketing and travel service     (ii)   Hanny Holdings Limited and its
      income received and receivable              subsidiaries                      1,210     1,582     1,240
      by the Company                              Paul Y. - ITC Management
                                                  Limited                             667     1,415        --
                                                  PYI Corporation Limited
                                                  (formerly known as
                                                  "Paul Y. - ITC Construction
                                                  Holdings Limited") and its
                                                  subsidiaries                        767     1,147     1,965
                                                  See Corporation Limited
                                                  (formerly known as "Ruili
                                                  Holdings Limited")                  827       492        --
                                                  China Strategic Holdings
                                                  Limited and its subsidiaries         --       236       174
                                                  ITC Corporation Limited438
                                                  and its subsidiaries                438        56       153
                                                  Paul Y. Management Limited        1,029        21        --
                                                  Cheung Wah Ho Dyestuffs
                                                  Company Limited                      --        --       233
                                                  PSC Corporation Limited Cyber        --        --        68
                                                  Business Network (Hong Kong)
                                                  Limited                              --        --         3
                                                                                    -----     -----     -----
                                                                                    4,938     4,949     3,836
                                                                                    =====     =====     =====

      Interest paid on convertible
      notes                               (iii)   Million Good Limited                 --        359     2,177
                                                                                    ======    ======    ======

      Loan interest paid and payable by    (iv)   Nation Cheer Investment
      the Company                                 Limited                            2,040     5,138     2,051
                                                  Million Good Limited               3,056     4,323     5,256
                                                  Hanny Holdings Limited and its
                                                  subsidiaries                       2,451     2,799     9,742
                                                  Paul Y. - ITC Management
                                                  Limited                            1,320     1,269        --
                                                  Cheung Tai Hong (BVI) Limited      2,996       769        --
                                                  China Strategic Holdings
                                                  Limited and its subsidiaries          --     6,103     1,465
                                                                                    ------    ------    ------
                                                                                    11,863    20,401    18,514
                                                                                    ======    ======    ======

      Interest on loan receivables         (v)    See Corporation Limited
                                                  (formerly known as "Ruili
                                                  Holdings Limited")                    --        --        76
                                                                                    ======    ======    ======

      Website maintenance services paid    (vi)   Cyber Business Network (Hong
      by the Company                              Kong) Limited                         --        --     1,200
                                                                                    ======    ======    ======

      Secondment fee paid                 (vii)   Mass Success International
                                                  Limited                            2,458     2,492        --
                                                                                    ======    ======    ======

      Secondment fee received             (vii)   Manwide Holdings Limited              --     1,154        --
                                                                                    ======    ======    ======
</TABLE>


                                      F-64

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

48.  RELATED PARTY TRANSACTIONS - continued

     Certain directors of the Company are also directors of and/or have
     beneficial interests in those companies.

     (b)  During the year, the Company received loans from related companies.
          Details of their relationships and the terms of the loans are set out
          in note 31.

     (c)  The Company maintained current accounts with related companies and
          associates and made certain advances to related companies. Their
          balances as at 31 December 2006 are set out in notes 23, 24 and 32.

          Certain directors of the Company are also directors of and/or have
          beneficial interests in those companies.

     (d)  During the year ended 31 December 2006, the Company issued convertible
          notes of nominal value amounting to HK$300,000,000 (2005:
          HK$55,000,000) to CEL, a substantial shareholder of the Company who
          can exercise significant influence on the Company. Details of the
          convertible notes are set out in note 35.

     (e)  During the year ended 31 December 2005, the Company made a loan to a
          related company. Details of its relationship are set out in note
          26(a)(v).

     (f)  Compensation of key management personnel

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

<TABLE>
<CAPTION>
                             2006      2005      2004
                           -------   -------   -------
                           HK$'000   HK$'000   HK$'000
<S>                        <C>       <C>       <C>
Short-term benefits           983     3,865     6,507
Share-based payments        3,906        --        --
Post-employment benefits        8        29        69
                            -----     -----     -----
                            4,897     3,894     6,576
                            =====     =====     =====
</TABLE>

          The remuneration of directors and key executives is determined by the
          remuneration committee having regard to the performance of individuals
          and market trends.


                                      F-65

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

49.  PRINCIPAL SUBSIDIARIES

     Details of the Company's principal subsidiaries as at 31 December 2006 are
     as follows:

<TABLE>
<CAPTION>
                                                                          Proportion of
                                                                         nominal value of
                                                                      issued share capital/
                                                                        registered capital
                                                     Issued and          held by Company
                                   Place of            paid up        ---------------------
                                incorporation/      share capital/    Directly   Indirectly           Principal activities
Name of company                  registration    registered capital       %           %              and place of operation
---------------                 --------------   ------------------   --------   ----------   ------------------------------------
<S>                             <C>              <C>                  <C>        <C>          <C>
Allied Glory Investment         Hong Kong                      HK$2       --        55.7      Investment holding in the PRC
Limited ("Allied Glory")
Apex Quality Group Limited      British Virgin         US$5,548,172       --        67.9      Investment holding
                                Islands
Benchmark Pacific Limited       British Virgin                 US$1       --         100      Investment holding in Hong Kong
                                Islands
Clever Basin Holdings Limited   British Virgin                 US$1       --        67.9      Investment holding in Hong Kong
                                Islands
Cyber Business Network          Hong Kong             HK$14,000,000       --         100      Provision of internet services in
(Hong Kong) Limited                                                                           Hong Kong
DS Eastin Limited               Hong Kong                     HK$20       --        67.9      Investment holding in the PRC
Hey Wealth  Limited             Hong Kong                      HK$2       --        67.9      Property holding in Hong Kong
HKWOT (BVI) Limited             British Virgin                 US$1      100          --      Investment holding in Hong Kong
                                Islands
HMH China Investments Limited   Bermuda               CAD$1,152,913       --        55.7      Investment holding
Hong Kong Wing On Travel        Hong Kong                Ordinary -       --         100      Outbound travel and related services
Service Limited                                      HK$180,000,100
                                                         Deferred -
                                                      HK$20,000,000*
International Travel Systems    British Virgin                 US$1       --         100      Investment holding
Inc.                            Islands
Kingsgrove International        Hong Kong                      HK$2       --         100      Property investment in Hong Kong
Limited
Lucky Million Investments       British Virgin                 US$1       --        67.9      Investment holding in Hong Kong
Limited                         Islands
Luoyang Golden Gulf Hotel       PRC #                RMB145,000,000       --        40.8      Hotel ownership and operation in the
Co., Ltd.                                                                                     PRC
Makerston Limited               British Virgin                 US$1       --        67.9      Investment holding in Hong Kong
                                Islands
Many Good Money Exchange        Hong Kong                HK$100,000       --         100      Money exchange services in Hong Kong
Limited
Millennium Target Holdings      British Virgin                 US$1       --         100      Investment holding
Limited                         Islands
Rosedale Group Management       Hong Kong                      HK$2       --        67.9      Provision of management services in
Limited                                                                                       Hong Kong
Rosedale Hotel Beijing Co.,     PRC #                 US$17,200,000       --        64.5      Hotel ownership and operation in
Ltd.                                                                                          the PRC
</TABLE>


                                      F-66

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

49.  PRINCIPAL SUBSIDIARIES - continued

<TABLE>
<CAPTION>
                                                                          Proportion of
                                                                         nominal value of
                                                                      issued share capital/
                                                     Issued and         registered capital
                                   Place of            paid up           held by Company
                                incorporation/      share capital/    ---------------------           Principal activities
Name of company                  registration    registered capital   Directly   Indirectly          and place of operation
---------------                 --------------   ------------------   --------   ----------   ------------------------------------
<S>                             <C>              <C>                  <C>        <C>          <C>
Rosedale Hotel Group Limited    British Virgin                 US$1       --        67.9      Investment holding in Hong Kong
                                Islands
Rosedale Hotel Guangzhou        PRC ##                US$11,500,000       --          55      Hotel ownership and operation in the
Co., Ltd. ("Rosedale                                                                          PRC
Guangzhou")
Rosedale Park Limited           Hong Knog                      HK$2       --        67.9      Hotel operation in Hong Kong
Shropshire Property Limited     British Virgin           Ordinary -       --        67.9      Investment holding in Hong Kong
                                Islands                       US$10
                                                       Preference -
                                                           US$1,000
Success Fund Industrial         Hong Kong                    HK$100       --         100      Property investment in the PRC
Limited
Super Grade Investment          British Virgin                 US$1       --         100      Property investment in Hong Kong
Limited                         Islands
Triumph Up Investments          British Virgin               US$615       --        56.9      Investment holding in Macau
Limited                         Islands
Watertours of Hong Kong         Hong Kong                Ordinary -       --         100      Watertour services in Hong Kong
Limited                                                HK$1,500,000
                                                       "B" - HK$100*
Wing On Holidays (Macau)        Macau                  MOP1,300,000       --         100      Travel and related services in Macau
Limited
Wing on Travel Finance          Hong Kong                      HK$2       --         100      Money lending in Hong Kong
Limited
Wing On Travel International    British Virgin                 US$1      100          --      Investment holding
Limited                         Islands
Wing On Travel (BVI) Limited    British Virgin            US$10,000       --         100      Investment holding
                                Islands
Wing On Travel (U.K.) Limited   United Kingdom                   L2       --         100      Travel and related services in U.K.
WOT Holidays (Canada) Limited   Canada                     C$15,000       --         100      Travel and related services in
                                                                                              Canada
</TABLE>

*    The deferred shares and "B" shares are owned by the Company, practically
     carry no rights to dividends or to receive notice of or to attend or vote
     at any general meeting of the respective companies or to participate in any
     distribution in winding up.

#    The subsidiaries are PRC Sino-foreign equity joint ventures.

##   This subsidiary is a PRC Sino-foreign co-operative joint venture. Allied
     Glory is entitled to recoup its total investment (including capital and
     interest) from the after-tax earnings of Rosedale Guangzhou before any
     amounts are distributed. Thereafter, the after-tax earnings of Rosedale
     Guangzhou are to be distributed at 80% and 20% to Allied Glory and other
     joint venture partner respectively.

     The above table lists the subsidiaries of the Company which, in the opinion
     of the directors, principally affected the results or assets and
     liabilities of the Company. To give details of other subsidiaries would, in
     the opinion of the directors, result in particulars of excessive length.

     No debt securities have been issued by any of the subsidiaries during the
     year.


                                      F-67

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

50.  COMPARATIVE FIGURES

     Certain comparative figures in 2005 and 2004 have been reclassified to
     conform with the current year's presentation. In particular, interest paid
     of HK$57,735,000 in 2005 (2004: HK$53,578,000), and finance lease charges
     paid of HK$18,000 in 2005 (2004: HK$133,000) previously classified as cash
     flow from operating activities were reclassified as cash flows from
     financing activities.

51.  POST BALANCE SHEET EVENTS

     On 15 August 2007, the Company, through its 67.9% owned subsidiary, Matrix
     Profits Limited, completed the acquisition of the entire issued share
     capital of Shenyang Limited, a company engaged in hotel operation business
     in PRC, and the benefits of and interest in the shareholder's loan in the
     sum of HK$337,462,006, due from Shenyang Limited to Affirm Profits Limited
     as at 21 May 2007 for an aggregate consideration of HK$178,000,000. The
     consideration was settled by HK$50,000 cash, HK$21,545 consideration note
     and HK$106,455 promissory note.

     On 28 August 2007, the Company, through its wholly owned subsidiary,
     International Travel Systems Inc., completed the acquisition of the entire
     issued share capital of Asia Times Limited, a company engaged in hotels
     management and operation in the PRC and Macau, for a cash consideration of
     HK$70,000,000.

     On 15 November 2007, the Company, through its wholly owned subsidiary,
     Fortuneup International Limited, completed the acquisition of 72% of the
     enlarged issued share capital of Tangula Group Limited, a company
     engaged in railway operation in the PRC, for a cash consideration
     of US$52.9 million.

     The Company is in the process of assessing the fair values of the
     identifiable assets and liabilities of the acquirees, therefore the
     financial effects of the acquisitions are not presented for the above
     mentioned acquisitions by the Company.

     In May 2007, the Company entered into placing agreements with Kingston
     Securities Limited ("Kingston") pursuant to which Kingston conditionally
     agreed to place up to 320,000,000 shares (the "Placing Shares") in the
     Company at a price of HK$0.80 per share to independent investors. The
     placing of the first tranche of 120,000,000 shares was completed on 31 May
     2007 and the remainder of 200,000,000 shares was completed on 6 August
     2007.

     On 27 June 2007, the Company entered into another placing agreement with
     Kingston pursuant to which Kingston conditionally agreed to place up to
     130,000,000 new shares in the Company at a price of HK$0.80 per share to
     independent investors. The placing has been completed on 6 August 2007.

     On 14 November 2007, the Company entered into another placing agreement
     with Kingston pursuant to which Kingston conditionally agreed to place up
     to 300,000,000 new shares in the Company at a price of HK$0.40 per share to
     independent investors. The placing has been completed on 12 December 2007.

     On 31 December 2007, a wholly owned subsidiary of the Company, Eagle Spirit
     Holdings Limited ("Eagle Spirit") entered into an agreement with Ms. Mak
     Yin Ling, Ursula under which Eagle Spirit has agreed to acquire the entire
     issued share capital of More Star Limited ("More Star") and the entire
     amount owing by More Star to Ms. Mak immediately prior to completion for a
     total consideration of HK$20 million. The sole asset of More Star is its
     investment in the entire issued share capital of Fortress State
     International Limited ("Fortress State"). Fortress State has been awarded
     the tender and entered into the Memorandum of Agreement to acquire the
     property located at No. 84 Tai Kok Tsui Road, Kowloon, Hong Kong and No. 86
     Tai Kok Tsui Road, Kowloon, Hong Kong (the "Property") for a total
     consideration of HK$163,880,000. The acquisition of the Property by
     Fortress State was completed on 29 February 2008.

     In July 2008, the Company completed a rights issue of its shares with gross
     proceeds of approximately HK$437 million, at the subscription price of
     HK$0.06 per rights share on the basis of four rights shares for every share
     held with bonus warrants to subscribe for new shares in the proportion of
     one bonus warrant for every four rights shares subscribed. The warrants can
     be exercised any time for a period of 18 months from the date of issurance
     to acquire a maximum of 1,823,968,247 shares at an exercise price of
     HK$0.091 per share. The proceeds would be used for (i) the expansion of the
     Group's travel and related business in the PRC; (ii) investment
     opportunities in the hotel and/or leisure resort related properties both in
     Hong Kong and in the PRC; and (iii) as general working capital of the
     Group.


                                      F-68

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

52.  SUMMARY OF DIFFERENCES BETWEEN HKFRSs AND ACCOUNTING PRINCIPLES GENERALLY
     ACCEPTED IN THE UNITED STATES ("US GAAP")

     The significant differences between HKFRSs and US GAAP as they relate to
     the Company are principally attributable to the accounting for the goodwill
     and negative goodwill arising on acquisition, convertible notes, additional
     share of results of associates, valuation of investment properties and
     reversal of impairment losses.

     (a)  Under HKFRSs, the excess of purchase consideration paid over the fair
          value of the net assets acquired before 1 January 2005 is recorded as
          goodwill and is amortized on a straight line basis over its useful
          economic life until 1 January 2005. The amortization of goodwill is
          discontinued from 1 January 2005 onwards and such goodwill is tested
          for impairment at least annually. Goodwill arising on acquisition
          after 1 January 2005 is measured at cost less accumulated impairment
          losses (if any) after initial recognition. Under US GAAP, intangible
          assets, including goodwill, with indefinite useful lives are not
          amortized but instead tested for impairment at least annually in
          accordance with the provisions of Statement of Financial Accounting
          Standards ("SFAS") 142, "Goodwill and Other Intangible Assets".

          Under HKFRSs, the excess of the fair value of the net assets acquired
          over the purchase consideration paid for the acquisition before 1
          January 2005 is recorded as negative goodwill, which is presented as a
          deduction from the assets of the Company in the consolidated balance
          sheets. The Company releases the negative goodwill to the statement of
          income on a systematic basis over the remaining weighted average
          useful life of the identifiable acquired depreciable/amortizable
          assets. Upon the adoption of the new HKFRSs on 1 January 2005, the
          negative goodwill is derecognized on 1 January 2005 with a
          corresponding adjustment to the accumulated (losses) profits. Under US
          GAAP, the excess of assigned value of identifiable assets over the
          cost of an acquired company, should be allocated on a pro rata basis
          to the fair values of all acquired assets except financial assets
          other than investments accounted for by the equity method, assets to
          be disposed of by sale, deferred tax assets, prepaid assets relating
          to pension or other postretirement benefit plans, and any other
          current assets. Since the negative goodwill is allocated to the fair
          values of the acquired assets, the loss on partial disposal of
          subsidiaries is adjusted accordingly.

          The allocation of negative goodwill to the fair values of the acquired
          assets also results in the additional share of result of associates,
          as the negative goodwill is allocated to the hotel properties of the
          associate, depreciation of hotel properties is adjusted accordingly.


                                      F-69
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

52.  SUMMARY OF DIFFERENCES BETWEEN HKFRSs AND ACCOUNTING PRINCIPLES GENERALLY
     ACCEPTED IN THE UNITED STATES ("US GAAP") - continued

     (b)  Under HKFRSs, prior to the adoption of new HKFRSs on 1 January 2005,
          the Company did not separately account for non-detachable conversion
          features embedded in convertible notes that are in-the-money on the
          date of issuance (a "beneficial conversion feature"). After the
          adoption of the new HKFRSs on 1 January 2005, convertible notes that
          contain both financial liability and equity components are classified
          separately into respective liability and equity components on initial
          recognition. In subsequent periods, the liability component of the
          convertible notes is carried at amortised cost using the effective
          interest method. The equity component will remain in convertible notes
          reserve until the embedded option is exercised. Under US GAAP, the
          embedded beneficial conversion feature should be valued separately
          upon issuance. The discount resulting from allocation of proceeds to
          the beneficial conversion feature should be recognized as interest
          expense over the maturity of the convertible notes. All of the
          unamortized discount remaining at the date of conversion should be
          immediately recognized as interest expense. Further, under US GAAP,
          equity component will arise only for instruments with a beneficial
          conversion feature that exists at the inception of the instrument. For
          the convertible notes of the Company issued in 2006, there was no
          beneficial conversion feature exists at the inception of the
          instrument, and the equity component are reclassified to liabilities
          component, and the imputed interest is adjusted in the income
          statement.

     (c)  Under HKFRSs, in accordance with the Company's accounting policies,
          revaluation of investment properties is performed annually, instead of
          providing depreciation on the historical cost. The revalued amount
          becomes the deemed cost base of the assets of the Company or its
          affiliates and no depreciation is provided. Under US GAAP, financial
          statements are required to be prepared on a historical cost basis.
          Accordingly, an adjustment is provided so that the investment
          properties are stated at cost, less accumulated depreciation.

     (d)  Under HKFRSs, prior to the adoption of the new HKFRSs on 1 January
          2005, hotel properties are stated at cost less accumulated impairment
          loss. No depreciation or amortization is provided on the hotel
          properties. Under US GAAP, hotel properties are stated at historical
          cost less accumulated depreciation and impairment loss. Such
          difference in accounting for hotel properties under HKFRSs and US GAAP
          had a significant impact on the Company's equity method affiliate's
          results of operations or financial position for the year ended 31
          December 2004. The equity method affiliate became a subsidiary of the
          Company in 2005 and the adjustments attributable to this equity method
          affiliate were reversed to the negative goodwill arising on its
          acquisition which were then allocated on a pro rata basis to the fair
          values of all acquired assets except financial assets other than
          investments accounted for by the equity method, assets to be disposed
          of by sale, deferred tax assets, prepaid assets relating to pension or
          other post-retirement benefit plans, and any other current assets.

          After the adoption of the new HKFRSs on 1 January 2005, hotel
          properties are also stated at cost less accumulated depreciation and
          impairment loss under HKFRSs. However, as the depreciable cost of
          hotel properties under US GAAP is adjusted by the negative goodwill
          and deferred taxation, additional depreciation of hotel properties
          (net of minority interests) is charged under US GAAP.

     (e)  Under HKFRSs, where an impairment loss subsequently reverses, the
          carrying amount of the assets is increased to the revised estimate of
          its recoverable amount, but so that the increased carrying amount does
          not exceed the carrying amount that would have been determined had no
          impairment loss been recognized for the asset in prior years. A
          reversal of an impairment loss is recognized as income immediately,
          unless the relevant asset is carried at a revalued amount, in which
          case the reversal of the impairment loss is treated as a revaluation
          increase. Under US GAAP, any reversal of impairment loss is
          prohibited, and as such, the effects of such reversals are eliminated.


                                      F-70

<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

52.  SUMMARY OF DIFFERENCES BETWEEN HKFRSs AND ACCOUNTING PRINCIPLES GENERALLY
     ACCEPTED IN THE UNITED STATES ("US GAAP") - continued

     The adjustments necessary to present net profit (loss) and shareholders'
     equity in accordance with US GAAP, for the three years ended 31 December
     2006, 2005 and 2004, respectively, are shown in the tables set out below.

<TABLE>
<CAPTION>
                                                       2006      2005      2004
                                                     -------   -------   -------
                                                     HK$'000   HK$'000   HK$'000
<S>                                                  <C>       <C>       <C>
(Loss) profit attributable to shareholders
   of the parent as reported under HKFRSs            (71,748)   31,109     8,556
US GAAP adjustments:
Additional depreciation of hotel properties
   (net of minority interests) (Note 52d)             (2,455)   (7,732)   (9,789)
Impact of reversing the impairment loss in
   respect of leasehold land and
   buildings (Note 52 e)                                (894)   (4,874)   (4,511)
Impact of reversing the imputed interest
   (Note 52 b)                                        18,390        --        --
Gain on disposal of investment property
   (Note 52 c)                                         3,362        --        --
Additional share of results of associates
   (net of minority interests) (Note 52 a)               226       398        --
Impact of reversing the impairment loss in
   respect of properties under construction
   (Note 52 e)                                            --      (900)       --
Increase in fair value of investment property
   (Note 52 c)                                            --      (619)   (2,000)
Excess of fair value of net assets acquired over
   cost of acquisition being allocated to interest
   in associates (Note 52 a)                              --   (34,574)       --
Impact of negative goodwill amortization
   (Note 52 a)                                            --        --    (1,863)
Adjusted loss on partial disposal of subsidiaries
   (Note 52 a)                                            --     2,811       --
Interest expense attributable to amortization
   of the beneficial conversion feature
   embedded in the convertible notes (Note 52 b)          --        --    (5,368)
                                                     -------   -------   ------
Net loss under US GAAP                               (53,119)  (14,381)  (14,975)
                                                     ========  ========  =======
</TABLE>


                                      F-71
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

52.  SUMMARY OF DIFFERENCES BETWEEN HKFRSs AND ACCOUNTING PRINCIPLES GENERALLY
     ACCEPTED IN THE UNITED STATES ("US GAAP") - continued

<TABLE>
<CAPTION>
                                            HK$     HK$     HK$
<S>                                        <C>     <C>     <C>
Loss per share under US GAAP - basic and
   diluted                                 (0.10)  (0.03)  (0.07)
                                            ====    ====    ====
</TABLE>

     In addition, interest income and exchange gain for the year ended 31
     December 2006 of HK$31,789,000 and HK$92,000 respectively (2005:
     HK$4,722,000 and HK$81,000; and 2004: HK$3,381,000 and HK$135,000)
     classified as a component of other income for HKFRSs purposes is considered
     to be non-operating income for US GAAP purposes.

<TABLE>
<CAPTION>
                                                                     2006       2005
                                                                  ---------   -------
                                                                   HK$'000    HK$'000
<S>                                                               <C>         <C>
Equity attributable to shareholders of the parent as reported
   under HKFRSs                                                   1,255,312   978,976
US GAAP adjustments:
   Reversal of net US GAAP adjustments attributable
      to equity method affiliate which became a
      subsidiary in 2004                                              7,712     7,712
   Impact of derecognition of negative goodwill                     (72,651)  (72,651)
   Impact of negative goodwill from acquisition of subsidiaries     (34,574)  (34,574)
   Adjusted loss on partial disposal of subsidiaries                  2,811     2,811
   Additional share of results of associates (net of minority
      interests)                                                        624       398
   Additional depreciation of hotel properties (net of
      minority interests)                                           (19,976)  (17,521)
   Impact of reversing the impairment loss in respect of
      leasehold land and buildings                                  (10,279)   (9,385)
   Impact of reversing the impairment loss in respect of
      properties under construction                                    (900)     (900)
   Impact of negative goodwill amortization                          (1,863)   (1,863)
   Impact of reversing the convertible notes reserve               (205,139)       --
   Impact of reversing the imputed interest                          18,390        --
   Impact of reversing (increase in) the fair value of
     investment property                                                573    (2,789)
                                                                  ---------   -------
Equity attributable to shareholders of the parent
   under US GAAP                                                    940,040    850,214
                                                                  =========   =======
</TABLE>


                                      F-72
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

52.  SUMMARY OF DIFFERENCES BETWEEN HKFRSs AND ACCOUNTING PRINCIPLES GENERALLY
     ACCEPTED IN THE UNITED STATES ("US GAAP") - continued

     Other comprehensive loss

<TABLE>
<CAPTION>
                                            2006      2005      2004
                                          -------   -------   -------
                                          HK$'000   HK$'000   HK$'000
<S>                                       <C>       <C>       <C>
US GAAP loss                              (74,871)  (14,381)  (14,975)
Foreign currency translation adjustment    21,122    11,015      (757)
                                           ------    ------    ------
Comprehensive loss                        (53,749)   (3,366)  (15,732)
                                           ======    ======    ======
</TABLE>

<TABLE>
<CAPTION>
                                     2006        2005
                                  ---------   ---------
                                   HK$'000     HK$'000
<S>                               <C>         <C>
Total assets
Total assets under US GAAP        3,703,702   2,904,220
                                  =========   =========
Total liabilities
Total liabilities under US GAAP   2,334,844   1,617,579
                                  =========   =========
</TABLE>

     Valuation allowances

     Roll forward schedule of allowances for doubtful assets (all related to
     continuing operations)

     For the year ended 31 December 2006

<TABLE>
<CAPTION>
                                                 Charged to
                                                  costs and
                                      1.1.2006    expenses    Write-off   31.12.2006
                                      --------   ----------   ---------   ----------
                                       HK$'000     HK$'000     HK$'000      HK$'000
<S>                                   <C>        <C>          <C>         <C>
Allowance for doubtful debts            34,428       737          --         35,165
Allowance for advances to service
   suppliers                           209,385        --          --        209,385
Allowance for short term investment
   deposit                              23,000        --          --         23,000
                                       =======       ===         ===        =======
</TABLE>


                                      F-73
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

52.  SUMMARY OF DIFFERENCES BETWEEN HKFRSs AND ACCOUNTING PRINCIPLES GENERALLY
     ACCEPTED IN THE UNITED STATES ("US GAAP") - continued

     For the year ended 31 December 2005

<TABLE>
<CAPTION>
                                                 Charged to
                                                  costs and
                                      1.1.2005    expenses    Write-off   31.12.2005
                                      --------   ----------   ---------   ----------
                                       HK$'000     HK$'000     HK$'000      HK$'000
<S>                                   <C>        <C>          <C>         <C>
Allowance for doubtful debts            33,952       476          --         34,428
Allowance for advances to service
   suppliers                           209,385        --          --        209,385
Allowance for short term investment
   deposit                              23,000        --          --         23,000
                                       =======       ===         ===        ========
</TABLE>

     For the year ended 31 December 2004

<TABLE>
<CAPTION>
                                                 Charged to
                                                  costs and
                                      1.1.2004    expenses    Write-off   31.12.2004
                                      --------   ----------   ---------   ----------
                                       HK$'000     HK$'000     HK$'000      HK$'000
<S>                                   <C>        <C>          <C>         <C>
Allowance for doubtful debts            32,690      1,262         --         33,952
Allowance for advances to service
  suppliers                            209,385         --         --        209,385
Allowance for short term investment
  deposit                               23,000         --         --         23,000
                                       =======      =====        ===        =======
</TABLE>

     Recently issued accounting pronouncements

     In September 2005, the FASB's Emerging Issues Task Force ("EITF") reached a
     final consensus on Issue 04-13, "Accounting for Purchases and Sales of
     Inventory with the Same Counterparty". EITF 04-13 requires that two or more
     legally separate exchange transactions with the same counterparty be
     combined and considered a single arrangement for purposes of applying APB
     Opinion No. 29, "Accounting for Nonmonetary Transactions", when the
     transactions are entered into in contemplation of one another. EITF 04-13
     is effective for new arrangements entered into, or modifications or
     renewals of existing arrangements, in interim or annual periods beginning
     after March 15, 2006. The adoption of this statement did not have a
     material effect on the Company's financial position or results of
     operations.

     In February 2006, the Financial Accounting Standards Board ("FASB") issued
     SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments - which
     amends FASB Statements No. 133 and 140". This statement is effective for
     all financial instruments acquired or issued after the beginning of an
     entity's first fiscal year that begins after September 15, 2006. This
     statement simplifies accounting for certain hybrid financial instruments by
     permitting fair value measurement for a hybrid instrument that contains an
     embedded derivative that would otherwise require bifurcation. The Company
     does not expect that the adoption of SFAS 155 will have a material impact
     on its consolidated financial position, results of operations or cash
     flows.


                                      F-74
<PAGE>

WING ON TRAVEL (HOLDINGS) LIMITED

52.  SUMMARY OF DIFFERENCES BETWEEN HKFRSs AND ACCOUNTING PRINCIPLES GENERALLY
     ACCEPTED IN THE UNITED STATES ("US GAAP") - continued

     In June 2006, the FASB issued FASB Interpretation No. 48, "Accounting for
     Uncertainty in Income Taxes an interpretation of FASB Statement No. 109",
     or FIN 48. FIN 48 clarifies the accounting for uncertainty in income taxes
     recognized in an enterprise's financial statements in accordance with FASB
     Statement No. 109, "Accounting for Income Taxes", or SFAS 109. The
     interpretation prescribes a recognition threshold and measurement attribute
     for the financial statement recognition and measurement of a tax position
     taken or expected to be taken in a tax return. FIN 48 also provides
     accounting guidance on de-recognition, classification, interest and
     penalties, accounting in interim periods, disclosure and transition. FIN 48
     is effective for fiscal years beginning after December 15, 2006. The
     adoption of this statement is not expected to have a material effect on the
     Company's financial position or results of operations.

     In September 2006, the U. S. Securities and Exchange Commission issued
     Staff Accounting Bulletin No. 108, "Considering the Effects of Prior Year
     Misstatements when Quantifying Misstatements in Current Year Financial
     Statements" ("SAB 108"). SAB 108 provides interpretive guidance on how the
     effects of the carryover or reversal of prior year misstatements should be
     considered in quantifying a current year misstatement. The SEC staff
     believes that registrants should quantify errors using both a balance sheet
     and an income statement approach and evaluate whether either approach
     results in quantifying a misstatement that, when all relevant quantitative
     and qualitative factors are considered, is material. SAB 108 is effective
     for fiscal years ending after November 15, 2006. The adoption of SAB 108
     did not have a material impact on the Company's consolidated financial
     position, results of operations or cash flows.

     In September 2006 the FASB issued FASB Statement No. 157, ("SFAS 157"),
     "Fair Value Measurement. " SFAS 157 addresses standardizing the measurement
     of fair value for companies who are required to use a fair value measure of
     recognition for recognition or disclosure purposes. The FASB defines fair
     value as "the price that would be received to sell an asset or paid to
     transfer a liability in an orderly transaction between market participants
     at the measure date. " SFAS 157 is effective for financial statements
     issued for fiscal years beginning after November 15, 2007 and interim
     periods within those fiscal years. The Company is currently evaluating the
     impact, if any, of SFAS 157 on its financial position, results of
     operations and cash flows.

     In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
     Financial Assets and Financial Liabilities" ("SFAS 159"), an amendment of
     FASB No. 115. This statement permits entities to choose to measure many
     financial instrument and certain other items at fair value. The objective
     is to improve financial reporting by providing entities with the
     opportunity to mitigate volatility in reported earnings caused by measuring
     related assets and liabilities without having to apply complex hedge
     accounting provisions. SFAS No. 159 is effective from fiscal year
     commencing November 15, 2007. The Company is currently evaluating the
     impact of adopting SFAS No. 159 on its consolidated financial position,
     cash flows, and results of operations.


                                      F-75
<PAGE>

                           HANGZHOU ZHONGCE RUBBER CO., LTD.

                           Report of Independent Registered Public
                           Accounting Firm and Consolidated Financial Statements
                           for the years ended December 31, 2004, 2005 and 2006


<PAGE>

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

HANGZHOU ZHONGCE RUBBER CO., LTD.

<TABLE>
<S>                                                                  <C>
Report of Independent Registered Public Accounting Firm...........       F-76
Consolidated Statements of Operations and Comprehensive Income
   for the years ended December 31, 2004, 2005 and 2006...........       F-77
Consolidated Balance Sheets as of December 31, 2005 and 2006......   F-78 & F-79
Consolidated Statements of Owners' Equity for the years
   ended December 31, 2004, 2005 and 2006.........................       F-80
Consolidated Statements of Cash Flows for the years ended
   December 31, 2004, 2005 and 2006...............................   F-81 & F-82
Notes to Consolidated Financial Statements........................   F-83 - F-97
</TABLE>

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Hangzhou Zhongce Rubber Co., Ltd.

We have audited the accompanying consolidated balance sheets of Hangzhou Zhongce
Rubber Co., Ltd. and its subsidiaries (collectively referred as the "Group") as
of December 31, 2005 and 2006, and the related consolidated statements of
operations and comprehensive income, owners' equity and comprehensive income,
and cash flows for each of the three years in the period ended December 31,
2006, all expressed in Renminbi. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Group as of December 31, 2005
and 2006, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2006 in conformity with
accounting principles generally accepted in the United States of America.

Our audits also comprehended the translation of Renminbi amounts into United
States Dollar amounts and, in our opinion, such translation has been made in
conformity with the basis stated in Note 2(k). Such United States Dollar amounts
are presented solely for the convenience of the readers in the United States of
America.

DELOITTE TOUCHE TOHMATSU
Hong Kong
December 31, 2007 (July 28, 2008 as to note 11)


                                      F-76
<PAGE>

                        HANGZHOU ZHONGCE RUBBER CO., LTD.

         CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                                                 -------------------------------------------------
                                                    2004         2005         2006         2006
                                                 ----------   ----------   ----------   ---------
                                                     RMB          RMB          RMB          US$
<S>                                              <C>          <C>          <C>          <C>
REVENUES:
   - third parties............................    4,960,335    6,406,337    8,822,599    1,130,508
   - related parties..........................       60,900      100,015      116,106       14,878
                                                 ----------   ----------   ----------   ----------
Total.........................................    5,021,235    6,506,352    8,938,705    1,145,386
COST OF REVENUES..............................   (4,450,538)  (5,771,884)  (8,190,449)  (1,049,506)
                                                 ----------   ----------   ----------   ----------
Gross profit..................................      570,697      734,468      748,256       95,880
Selling, general and administrative expenses..     (342,123)    (437,536)    (544,178)     (69,730)
                                                 ----------   ----------   ----------   ----------
OPERATING INCOME..............................      228,574      296,932      204,078       26,150
NON-OPERATING INCOME (EXPENSES):
Interest income...............................        1,845        3,692        4,584          587
Interest expenses.............................      (82,471)     (94,680)    (130,400)     (16,709)
Other income..................................        6,612        1,690          334           43
                                                 ----------   ----------   ----------   ----------
INCOME BEFORE INCOME TAXES
   AND MINORITY INTERESTS.....................      154,560      207,634       78,596       10,071
Income tax expenses (note 6)..................      (35,676)     (46,892)     (16,337)      (2,093)
Minority interests............................       (8,814)     (19,413)      (5,964)        (764)
                                                 ----------   ----------   ----------   ----------
NET INCOME AND COMPREHENSIVE INCOME...........      110,070      141,329       56,295        7,214
                                                 ==========   ==========   ==========   ==========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-77
<PAGE>

                        HANGZHOU ZHONGCE RUBBER CO., LTD.

                           CONSOLIDATED BALANCE SHEETS

                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                        AS OF DECEMBER 31,
                                                 -------------------------------
                                                    2005        2006       2006
                                                 ---------   ---------   -------
                                                    RMB         RMB        US$
<S>                                              <C>         <C>         <C>
ASSETS
Current assets:
   Cash and cash equivalents..................     344,974     304,464    39,013
   Restricted cash............................      68,841      76,155     9,758
   Accounts receivable, net of allowance for
     doubtful receivables of Rmb57,045 in 2005
     and Rmb53,719 (US$6,883) in 2006.........     739,728     917,534   117,571
   Other receivables..........................       9,015      36,608     4,691
   Inventories (note 3).......................   1,379,381   1,718,457   220,199
   Prepaid expenses and other current assets..      58,340      72,078     9,236
   Due from related companies (note 9)........       9,178       9,680     1,240
   Deferred tax assets (note 6)...............      42,988      63,291     8,110
                                                 ---------   ---------   -------
   Total current assets.......................   2,652,445   3,198,267   409,818
Prepayments for equipment.....................      88,684     146,306    18,747
Property, plant and equipment, net (note 4)...   2,386,051   2,561,863   328,271
Land use rights (note 4)......................      63,613     126,711    16,237
Deferred tax assets (note 6)..................       7,408       6,788       870
Other assets..................................         441       2,231       286
                                                 ---------   ---------   -------
  Total assets................................   5,198,642   6,042,166   774,229
                                                 =========   =========   =======
</TABLE>


                                      F-78
<PAGE>

                        HANGZHOU ZHONGCE RUBBER CO., LTD.

                     CONSOLIDATED BALANCE SHEETS - CONTINUED

                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                               AS OF DECEMBER 31,
                                                         -------------------------------
                                                            2005        2006       2006
                                                         ---------   ---------   -------
                                                            RMB         RMB        US$
<S>                                                      <C>         <C>         <C>
LIABILITIES AND OWNERS' EQUITY
Current liabilities:
   Short-term bank loans (note 5).....................   1,753,789   2,181,066   279,477
   Current portion of long-term bank loans (note 5)...      97,000     164,000    21,015
   Accounts payable...................................   1,072,080   1,111,894   142,476
   Other payables.....................................     415,182     535,175    68,575
   Accrued liabilities................................     163,004     254,362    32,593
   Income taxes payable ..............................      29,220      25,585     3,278
   Loans from related companies (note 9)..............      87,201      30,592     3,920
                                                         ---------   ---------   -------
   Total current liabilities..........................   3,617,476   4,302,674   551,334
Long-term bank loans, net of current portion
   (note 5)...........................................     437,000     533,000    68,297
Due to a shareholder..................................          67         134        17
                                                         ---------   ---------   -------
   Total liabilities..................................   4,054,543   4,835,808   619,648
                                                         ---------   ---------   -------
Commitments and contingencies (note 7)
Minority interests....................................     208,999     214,963    27,545
                                                         ---------   ---------   -------
Owners' equity:
   Registered capital.................................     613,603     613,603    78,626
   Additional paid-in capital.........................      20,266      20,266     2,597
   Retained earnings..................................     301,231     357,526    45,813
                                                         ---------   ---------   -------
   Total owners' equity...............................     935,100     991,395   127,036
                                                         ---------   ---------   -------
   Total liabilities and owners' equity...............   5,198,642   6,042,166   774,229
                                                         =========   =========   =======
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-79
<PAGE>

                       HANGZHOU ZHONGCE RUBBER CO., LTD.

                    CONSOLIDATED STATEMENTS OF OWNERS' EQUITY

                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                              ADDITIONAL
                                 REGISTERED     PAID-IN    RETAINED
                                   CAPITAL      CAPITAL    EARNINGS    TOTAL
                                 ----------   ----------   --------   -------
                                     RMB          RMB         RMB       RMB
<S>                              <C>          <C>          <C>        <C>
Balance at January 1, 2004....     613,603      20,266       49,832   683,701
Net income....................          --          --      110,070   110,070
                                   -------      ------      -------   -------
Balance at December 31, 2004..     613,603      20,266      159,902   793,771
Net income....................          --          --      141,329   141,329
                                   -------      ------      -------   -------
Balance at December 31, 2005..     613,603      20,266      301,231   935,100
Net income....................          --          --       56,295    56,295
                                   -------      ------      -------   -------
Balance at December 31, 2006..     613,603      20,266      357,526   991,395
                                   =======      ======      =======   =======
Balance at December 31, 2006
   (in US$)...................      78,626       2,597       45,813   127,036
                                   =======      ======      =======   =======
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-80
<PAGE>

                        HANGZHOU ZHONGCE RUBBER CO., LTD.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                                       ----------------------------------------
                                                         2004       2005       2006       2006
                                                       --------   --------   --------   -------
                                                          RMB        RMB        RMB       US$
<S>                                                    <C>        <C>        <C>        <C>
Cash flows from operating activities:
   Net income ......................................    110,070    141,329     56,295     7,214
   Adjustments to reconcile net income to net cash
      provided by operating activities:
      Minority interests ...........................      8,814     19,413      5,964       764
      Deferred income taxes ........................    (18,199)   (11,872)   (19,683)   (2,517)
      Loss (gain) on disposal of property, plant and
         equipment .................................        (67)     3,327       (924)     (118)
      Depreciation .................................    178,075    246,658    271,045    34,731
      Amortization .................................      2,197      2,196      3,037       389
   Changes in operating assets and liabilities:
      Accounts and other receivables, net ..........   (180,190)   (78,837)  (205,399)  (26,319)
      Inventories ..................................   (182,410)  (454,404)  (339,076)  (43,449)
      Prepaid expenses and other current assets ....    (24,256)    28,887    (13,738)   (1,760)
      Due from related companies ...................    (59,833)      (653)      (502)      (64)
      Other assets .................................      6,812        149     (1,790)     (229)
      Accounts payable and other payables ..........    304,757    519,409    159,807    20,477
      Accrued liabilities ..........................     45,192     10,585     91,358    11,706
      Income taxes payable .........................     24,701     (1,488)    (3,635)     (466)
                                                       --------   --------   --------   -------
   Net cash provided by operating activities .......    215,663    424,699      2,759       359
                                                       --------   --------   --------   -------
</TABLE>


                                      F-81
<PAGE>

                        HANGZHOU ZHONGCE RUBBER CO., LTD.

                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                                                         ----------------------------------------
                                                           2004       2005       2006       2006
                                                         --------   --------   --------   -------
                                                            RMB        RMB        RMB        US$
<S>                                                      <C>        <C>        <C>        <C>
Cash flows from investing activities:
   Purchase of property, plant and equipment .........   (625,792)  (722,394)  (506,733)  (64,939)
   Purchase of land use rights .......................         --         --    (66,134)   (8,474)
   Decrease (increase) in restricted bank deposits ...     12,360    (29,917)    (7,314)     (937)
   Proceeds from disposal of property, plant and
      equipment ......................................     15,637      1,296      3,177       407
   Consolidation of variable interest entity, net cash
      acquired .......................................     35,058         --         --        --
                                                         --------   --------   --------   -------
Net cash used in investing activities ................   (562,737)  (751,015)  (577,004)  (73,943)
                                                         --------   --------   --------   -------
Cash flows from financing activities:
   Net increase in short-term bank loans .............    474,306    176,437    427,277    54,750
   Proceeds from long-term bank loans ................    147,000    245,000    260,000    33,316
   Dividends paid ....................................    (20,116)        --         --        --
   Repayment of long-term bank loans .................   (120,000)   (64,000)   (97,000)  (12,428)
   Repayment of loans from a related company .........       (523)    81,360    (56,609)   (7,254)
   Increase in amount due to a shareholder ...........         --         --         67         9
                                                         --------   --------   --------   -------
Net cash provided by financing activities ............    480,667    438,797    533,735    68,393
                                                         --------   --------   --------   -------
Net increase (decrease) in cash and cash
   equivalents .......................................    133,593    112,481    (40,510)   (5,191)
Cash and cash equivalents, beginning of the year .....     98,900    232,493    344,974    44,204
                                                         --------   --------   --------   -------
Cash and cash equivalents, end of the year ...........    232,493    344,974    304,464    39,013
                                                         ========   ========   ========   =======
Supplemental disclosures of cash flow information:
   Cash paid during the year for:
      Interest paid - net of amounts capitalized .....     82,525     94,129    128,827    16,508
      Income tax paid ................................     30,563     60,252     39,655     5,081
                                                         ========   ========   ========   =======
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-82
<PAGE>

                        HANGZHOU ZHONGCE RUBBER CO., LTD.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)

1.   ORGANIZATION AND BASIS OF PREPARATION

     Hangzhou Zhongce Rubber Co., Ltd. (the "Company") was incorporated in the
     People's Republic of China (the "PRC") on June 12, 1992. The Company has a
     51.24% equity interest in Hangzhou Fu Chun Jiang Chemical Industrial Co.,
     Ltd. ("FCJ"), incorporated in the PRC for a term of 20 years commencing
     from September 28, 2001. The Company is engaged in the manufacture and sale
     of rubber tires in the PRC. FCJ is engaged in the manufacture and sale of
     tire rubber and carbon powder.

     In 1998, an agreement was entered into by the Company with three other PRC
     enterprises to establish a Sino-foreign equity joint venture, Hangzhou
     Sunrise Rubber Co., Ltd. ("Hangzhou Sunrise") in Hangzhou, the PRC, to
     construct and operate a radial tire factory. The total investment and
     registered capital of this joint venture was US$29,980 (Rmb248,000). The
     equity interest owned by the Company was 49.2% and its investment
     commitment was satisfied by the contribution of its existing radial tire
     project under construction into Hangzhou Sunrise while the other three
     shareholders contributed cash for the remaining 50.8% interest in Hangzhou
     Sunrise. The radial tire factory of Hangzhou Sunrise commenced operations
     in 2000.

     In January 2004, the Financial Accounting Standards Board ("FASB") issued
     Financial Interpretation No. 46 ("FIN 46") which requires certain variable
     interest entities to be consolidated by the primary beneficiary of the
     entity if the ownership interest held by the equity investors in the entity
     does not have characteristics of a controlling financial interest or does
     not have sufficient equity at risk for the entity to finance its activities
     without additional subordinated financial support from other parties. In
     December 2004, the FASB issued FIN 46 (revised) which provides for the
     deferral of the implementation date to the end of the first reporting
     period after March 15, 2005, unless the Company has a special purpose
     entity, in which case the provisions must be applied for fiscal years ended
     December 31, 2004. The Company had early adopted FIN 46 (revised) effective
     January 1, 2005 and has consolidated Hangzhou Sunrise as its variable
     interest entity for the years ended December 31, 2005 and 2006.

     The following financial statements amounts and balances of Hangzhou Sunrise
     for the year ended December 31, 2005 and 2006 were included in the
     consolidated financial statements:

<TABLE>
<CAPTION>
                          2005        2006
                       ---------   ---------
                          Rmb         Rmb
<S>                    <C>         <C>
Total assets .......   1,148,657   1,225,539
Total liabilities ..    (792,840)   (868,230)
Total revenue ......     561,084     645,693
Net income .........      33,095       1,491
</TABLE>

     The Company is the primary beneficiary of Hangzhou Sunrise because (i) the
     Company receives a majority of the expected residual returns of Hangzhou
     Sunrise by virtue of its 49.2% equity interest in Hangzhou Sunrise; and
     (ii) the Company has guaranteed more than majority portion of bank loans of
     Hangzhou Sunrise since fiscal 2000, and accordingly, the Company will
     absorb a majority of Hangzhou Sunrise's expected losses disproportional to
     its expected return if Hangzhou Sunrise is unable to repay its bank loans
     as they fall due.


                                      F-83
<PAGE>

                        HANGZHOU ZHONGCE RUBBER CO., LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)

1.   ORGANIZATION AND BASIS OF PREPARATION - continued

     The consolidated financial statements were prepared in accordance with
     accounting principles generally accepted in the United States of America
     ("US GAAP") for the special purpose of filing with the United States
     Securities and Exchange Commission for complying with Article 3-09 of
     Regulation S-X of the Securities Act 1933 as the Company is a significant
     equity method investee of China Enterprises Limited.

     These consolidated financial statements are prepared assuming that the
     Group will continue as a going concern, which assumes the realization of
     assets and the settlement of liabilities in the normal course of
     operations. The Group has net current liabilities of Rmb1,104,407 as of
     December 31, 2006, which may not allow it to meet its financial commitments
     as and when these fall due.

     The consolidated financial statements do not include any adjustments in the
     carrying amounts of the assets and liabilities to their realizable amounts
     and the classification that might be necessary if the Group be unable to
     continue as a going concern.

     The Group's continuation as a going concern is dependent upon its ability
     to generate sufficient cash flows to meet its obligations on a timely basis
     and to obtain additional financing as may be required.

     The Group has historically met cash needs from borrowings and operating
     cash flows. Subsequent to the balance sheet date, certain banks have
     extended or provided additional funding to the Group. In addition, the
     Group obtained the letter of support from a shareholder to provide
     financial support to meet its debts when they fall due in the foreseeable
     future.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     (A)  BASIS OF CONSOLIDATION

          The consolidated financial statements include the assets, liabilities,
          revenue and expenses of the Company, its majority owned subsidiary,
          FCJ, and a variable interest entity, Hangzhou Sunrise. Intercompany
          transactions and balances have been eliminated on consolidation.

     (B)  REVENUES

          Revenues represent the invoiced value of goods, net of value-added tax
          ("VAT") and other sales taxes, supplied to customers. Revenues are
          recognized upon delivery and acceptance of goods by the customers. The
          Group permits the return of damaged or defective products and accounts
          for these returns as deduction from sales. The estimated return is
          accrued at the time the sale is recognized, based on historical
          experience.


                                      F-84
<PAGE>

                        HANGZHOU ZHONGCE RUBBER CO., LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

     (C)  SHIPPING AND HANDLING FEES AND COSTS

          Costs for transportation of products to customers is recorded as
          selling, general and administrative expenses, and amounted to
          Rmb141,031, Rmb165,377 and Rmb198,870 (US$25,483) for the years ended
          December 31, 2004, 2005 and 2006, respectively.

     (D)  CASH AND CASH EQUIVALENTS

          The Group considers cash on hand and demand deposits with banks with
          an original maturity of three months or less when purchased to be cash
          and cash equivalents.

     (E)  INVENTORIES

          Inventories are stated at the lower of cost, on an average cost basis,
          or market value. Costs of work-in-progress and finished goods comprise
          direct materials, direct labor and an attributable proportion of
          production overheads.

     (F)  PROPERTY, PLANT AND EQUIPMENT

          Property, plant and equipment is stated at cost less accumulated
          depreciation.

          Depreciation is computed using the straight-line method over the
          assets' remaining estimated economic useful lives. The estimated
          useful lives are as follows:
<TABLE>
<S>                                        <C>
Buildings                                  20 years
Machinery and equipment                    10 years
Motor vehicles                              5 years
Furniture, fixtures and office equipment    5 years
</TABLE>

          Construction-in-progress represents factory and office buildings under
          construction and plant and machinery pending installation. Interest
          capitalized was Rmb7,904, Rmb16,217 and Rmb15,133 (US$1,939) for the
          years ended December 31, 2004, 2005 and 2006, respectively. Assets
          under construction are not depreciated until construction completed
          and the assets is ready for their intended use.

     (G)  LAND USE RIGHTS

          Land use rights represent prepaid rent for land under operating lease
          arrangements. Land use rights are amortized and recognized as rent
          expense over the lease term.


                                      F-85
<PAGE>

                       HANGZHOU ZHONGCE RUBBER CO., LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

     (H)  IMPAIRMENT OF LONG LIVED ASSETS

          The Group evaluates the impairment of long-lived assets based on the
          projection of undiscounted cash flows whenever events or changes in
          circumstances indicate that the carrying amounts of such assets may
          not be recoverable. In the event such cash flows are not expected to
          be sufficient to recover the carrying amount of the assets, the assets
          are written down to their estimated fair values.

     (I)  INCOME TAXES

          Deferred tax assets and liabilities are recognized for the future tax
          consequences attributable to differences between the financial
          statement carrying amounts of existing assets and liabilities and
          their respective tax bases and unutilized tax loss and tax credit
          carry forwards. Deferred tax assets and liabilities are measured using
          enacted tax rates expected to apply when those temporary differences
          are expected to reverse. Valuation allowances are recorded to reduce
          the amount of deferred tax assets if it is considered more likely than
          not that some portion of, or all of, the deferred tax asset will not
          be realized.

     (J)  PRODUCT WARRANTY

          The estimated cost of product warranty claims is accrued at the time
          the sale is recognized, based on historical experience.

     (K)  FOREIGN CURRENCIES

          The functional currency of the Company and its subsidiaries is
          Renminbi.. Foreign currency transactions have been converted into
          Renminbi at the exchange rates prevailing at the dates of
          transactions. Monetary assets and liabilities denominated in foreign
          currencies are translated into Renminbi using the exchange rates
          prevailing at the balance sheet dates. Exchange differences are
          included in the consolidated statement of income. The Group had
          foreign exchange gains (loss) of Rmb2,782, Rmb(5,557) and Rmb(6,257)
          (US$(802)) in 2004, 2005 and 2006, respectively.

          The Renminbi is not a freely convertible currency. The State
          Administration for Foreign Exchange, under the authority of the
          People's Bank of China, controls the conversion of Renminbi into
          foreign currencies. The value of the Renminbi is subject to changes in
          central government policies and to international economic and
          political developments affecting supply and demand in the China
          Foreign Exchange Trading System market.


                                      F-86

<PAGE>

                        HANGZHOU ZHONGCE RUBBER CO., LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

     (K)  FOREIGN CURRENCIES - continued

          Convenience translation

          The translation of Renminbi (Rmb) amounts into United States dollar
          (US$) amounts are included solely for the convenience of readers in
          the United States of America and have been made at US$1.00 =
          Rmb7.8041, the noon buying rates from Federal Reserve Bank of New York
          on December 29, 2006. No representation is made that the Renminbi
          amounts could have been, or could be, converted into United States
          dollar at that or at any other rate.

     (L)  RESTRICTED CAPITAL

          In accordance with the relevant laws and regulations for Sino-foreign
          equity joint venture enterprises, the Group maintains discretionary
          capital, which includes a general reserve fund, an enterprise
          expansion fund, and a staff welfare and incentive bonus fund. The
          Company and FCJ have to set aside 5% of or a higher percentage as
          determined by the respective board of directors of the Company and FCJ
          of its net income after tax as reflected in their statutory financial
          statements for each of general reserve fund and enterprise expansion
          fund (except where the fund has reached 50% of the registered capital
          of the Company and FCJ, respectively). There is no specific
          requirement for appropriation for Hangzhou Sunrise. The Group's
          appropriations to the general reserve fund and the enterprise
          expansion fund are included in retained earnings and are
          non-distributable.

          Included in the retained earnings of the Group as of December 31, 2005
          and 2006, was non-distributable amounts of Rmb13,233 (US$1,696).

     (M)  USE OF ESTIMATES

          The preparation of financial statements in conformity with US GAAP
          requires management to make estimates and assumptions that affect the
          reported amounts of assets and liabilities and disclosures of
          contingent assets and liabilities at the date of the financial
          statements and the reported amounts of revenues and expenses during
          the reporting period. Actual results may differ from those estimates.
          Significant items subject to such estimates and assumptions include
          the carrying value and estimated useful lives of long-lived assets;
          valuation allowances for receivables and deferred tax assets;
          liability for product warranty; and the valuation of certain financial
          instruments.


                                      F-87

<PAGE>

                        HANGZHOU ZHONGCE RUBBER CO., LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

     (N)  CONCENTRATION OF CREDIT RISK

          The Group's financial instruments that are exposed to concentration of
          credit risk consist primarily of its cash and cash equivalents,
          restricted cash, accounts and other receivables and advances to
          related parties. The Group's cash and cash equivalents and restricted
          cash are high-quality deposits placed with banking institutions with
          high credit ratings; therefore, the credit risk is limited. The
          accounts receivable largely represent amounts due from the Group's
          customers and the concentrations of credit risk associated with the
          accounts receivable are considered minimal due to the Group's diverse
          customer base. In no period did sales to any one customer accounts for
          10% or more of the Group's sales. The Group maintains allowances to
          cover potential bad debts and believes that no significant credit risk
          exists as a result of its diverse group of customers. Credit losses,
          when realized, have historically been within the range of management's
          expectations. The other receivables comprise principally deposits to
          suppliers and other tax receivable. The Company does not believe there
          is a significant credit risk from any of these counterparties as they
          are either major suppliers of the Group or local government
          authorities. The Group has reviewed the credit worthiness and
          financial position of its affiliate for credit risks associated with
          advances to these entities. This affiliate has good credit standing
          and the Group does not expect to incur significant loss for
          uncollected advances from these entities.

          The Group does not purchase derivative instruments to manage risks.

     (O)  FAIR VALUE OF FINANCIAL INSTRUMENTS

          The carrying value of current financial assets and current financial
          liabilities approximates fair value due to the short-term nature of
          these instruments. Bank loans approximate their carrying value as the
          interest rates approximate those which would have been available for
          loans of similar remaining maturity at the respective year ends. The
          fair value of the financial guarantees issued by the Group is
          determined based on the sum of probability-weighted present values in
          a range of estimated cash flows, all discounted using the same
          interest rate convention.

     (P)  COMPREHENSIVE INCOME

          Comprehensive income consists of net income and other gains and losses
          affecting owners' equity that are excluded from net income.
          Comprehensive income only represents the Group's net income and has
          been disclosed within the consolidated statements of operations and
          comprehensive income.


                                      F-88

<PAGE>

                        HANGZHOU ZHONGCE RUBBER CO., LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

     (Q)  ADVERTISING EXPENSES

          Advertising expenses were Rmb2,856, Rmb1,927 and Rmb3,204 (US$411) for
          the years ended December 31, 2004, 2005 and 2006, respectively.

     (R)  GOVERNMENT SUBSIDIES

          Government subsidies are recognized when received and all the
          conditions for their receipt have been met. Government subsidies are
          recognized as other income in the consolidated statements of income
          and comprehensive income in the period in which the related
          expenditure are recorded. Capital grants for the acquisition of
          equipment are recorded as a liability until earned and are recognized
          as income over the periods and in the proportions in which
          depreciation on those assets is charged.

     (S)  RESTRICTED CASH

          Bank deposits pledged as security for bank guarantees and bank drafts,
          and those bank balances for staff housing benefits (see note 10)
          amounted to Rmb68,841 and Rmb76,155 (US$9,758) as of December 31,
          2005, and 2006, respectively, and are presented as restricted cash in
          the consolidated balance sheets.

     (T)  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

          In February 2006, the FASB issued SFAS No. 155, "Accounting for
          Certain Hybrid Financial Instruments - which amends FASB Statements
          No. 133 and 140". This statement is effective for all financial
          instruments acquired or issued after the beginning of an entity's
          first fiscal year that begins after September 15, 2006. This statement
          simplifies accounting for certain hybrid financial instruments by
          permitting fair value measurement for a hybrid instrument that
          contains an embedded derivative that would otherwise require
          bifurcation. The Company does not expect that the adoption of SFAS 155
          will have a material impact on its consolidated financial position,
          results of operations or cash flows.

          In June 2006, the FASB issued FASB Interpretation No. 48, "Accounting
          for Uncertainty in Income Taxes an interpretation of FASB Statement
          No. 109", or FIN 48. FIN 48 clarifies the accounting for uncertainty
          in income taxes recognized in an enterprise's financial statements in
          accordance with FASB Statement No. 109, "Accounting for Income Taxes",
          or SFAS 109. The interpretation prescribes a recognition threshold and
          measurement attribute for the financial statement recognition and
          measurement of a tax position taken or expected to be taken in a tax
          return. FIN 48 also provides accounting guidance on de-recognition,
          classification, interest and penalties, accounting in interim periods,
          disclosure and transition. FIN 48 is effective for fiscal years
          beginning after December 15, 2006. The adoption of this statement is
          not expected to have a material effect on the Company's financial
          position or results of operations.


                                      F-89

<PAGE>

                        HANGZHOU ZHONGCE RUBBER CO., LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

     (T)  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - continued

          In June 2006, the Emerging Issues Task Force ("EITF") reached a
          consensus on Issue No. 06-3, "How Taxes Collected from Customers and
          Remitted to Governmental Authorities Should be Presented in the Income
          Statement (That Is, Gross Versus Net Presentation)" ("EITF 06-3"). The
          scope of EITF 06-3 includes sales, use, value added and some excise
          taxes that are assessed by a governmental authority on specific
          revenue-producing transactions between a seller and customer. EITF
          06-3 states that a company should disclose its accounting policy (i.e.
          gross or net presentation) regarding the presentation of taxes within
          its scope, and if significant, these disclosures should be applied
          retrospectively to the financial statements for all periods presented.
          EITF 06-3 is effective for interim and annual reporting periods
          beginning after December 15, 2006. The Group is currently evaluating
          the impact, if any, of this statement on its consolidated financial
          statements and related disclosures.

          In September 2006 the FASB issued FASB Statement No. 157, ("SFAS
          157"), "Fair Value Measurement". SFAS 157 addresses standardizing the
          measurement of fair value for companies who are required to use a fair
          value measure of recognition for recognition or disclosure purposes.
          The FASB defines fair value as "the price that would be received to
          sell an asset or paid to transfer a liability in an orderly
          transaction between market participants at the measure date". SFAS 157
          is effective for financial statements issued for fiscal years
          beginning after November 15, 2007 and interim periods within those
          fiscal years. The Company is currently evaluating the impact, if any,
          of SFAS 157 on its financial position, results of operations and cash
          flows.

          In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option
          for Financial Assets and Financial Liabilities" ("SFAS 159"), an
          amendment of FASB No. 115. This statement permits entities to choose
          to measure many financial instrument and certain other items at fair
          value. The objective is to improve financial reporting by providing
          entities with the opportunity to mitigate volatility in reported
          earnings caused by measuring related assets and liabilities without
          having to apply complex hedge accounting provisions. SFAS No. 159 is
          effective from fiscal year commencing November 15, 2007. The Company
          is currently evaluating the impact of adopting SFAS No. 159 on its
          consolidated financial position, cash flows, and results of
          operations.


                                      F-90

<PAGE>

                        HANGZHOU ZHONGCE RUBBER CO., LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

     (T)  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - continued

          In December 2007, the FASB issued SFAS No. 141R, "Business
          Combination", to improve reporting creating greater consistency in the
          accounting and financial reporting of business combinations. The
          standard requires the acquiring entity in a business combination to
          recognize all (and only) the assets acquired and liabilities assumed
          in the transaction; establishes the acquisition-date fair value as the
          measurement objective for all assets acquired and liabilities assumed;
          and requires the acquirer to disclose to investors and other users all
          of the information they need to evaluate and understand the nature and
          financial effect of the business combination. SFAS No. 141R applies
          prospectively to business combinations for which the acquisition date
          is on or after the beginning of the first annual reporting period
          beginning on or after December 15, 2008. An entity may not apply it
          before that date. The Company is currently evaluating whether the
          adoption of SFAS No. 141R will have a significant effect on its
          consolidated financial position, results of operations or cash flows.

          In December 2007, the FASB issued SFAS No. 160, "Noncontrolling
          Interests in Consolidated Financial Statements" to improves the
          relevance, comparability, and transparency of financial information
          provided to investors by requiring all entities to report
          noncontrolling (minority) interests in subsidiaries in the same way as
          required in the consolidated financial statements. Moreover, SFAS No.
          160 eliminates the diversify that currently exists in accounting for
          transactions between an entity and noncontrolling interests by
          requiring they be treated as equity transaction. SFAS No. 160 is
          effective for fiscal years, and interim periods within those fiscal
          years, beginning on or after December 15, 2008. Earlier adoption is
          prohibited. The Company is currently evaluating whether the adoption
          of SFAS No. 160 will have a significant effect on its consolidated
          financial position, results of operations or cash flows.

3.   INVENTORIES

     Inventories by major categories are summarized as follows:

<TABLE>
<CAPTION>
                         2005        2006
                      ---------   ---------
                         Rmb         Rmb
<S>                   <C>         <C>
Raw materials .....     492,807     652,165
Work-in-progress ..      80,322      79,809
Finished goods ....     806,252     986,483
                      ---------   ---------
                      1,379,381   1,718,457
                      =========   =========
</TABLE>


                                      F-91

<PAGE>

                        HANGZHOU ZHONGCE RUBBER CO., LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)

4.   PROPERTY, PLANT AND EQUIPMENT AND LAND USE RIGHTS

<TABLE>
<CAPTION>
                                                              2005        2006
                                                           ---------   ----------
                                                              Rmb          Rmb
<S>                                                        <C>         <C>
Property, plant and equipment consists of the following:

At cost:

Buildings ..............................................     520,312      599,486
Machinery and equipment ................................   2,470,736    2,805,671
Motor vehicles .........................................      23,201       25,891
Furniture, fixtures and office equipment ...............      69,045      112,199
                                                           ---------   ----------
Total ..................................................   3,083,294    3,543,247

Less: Accumulated depreciation and amortization ........    (961,486)  (1,225,769)
Construction-in-progress ...............................     264,243      244,385
                                                           ---------   ----------
Total ..................................................   2,386,051    2,561,863
                                                           =========   ==========
</TABLE>

     Depreciation and amortization expenses were Rmb180,272, Rmb248,854 and
     Rmb274,082 (US$35,120) for the years ended December 31, 2004, 2005 and
     2006, respectively.

     As of December 31, 2005 and 2006, the Group has not yet obtained land use
     right certificates on certain of their land use rights with a carrying
     amount of Rmb62,227, and Rmb2,300 (US$295), respectively. As of December
     31, 2005 and 2006, Hangzhou Sunrise has pledged land use rights having a
     carrying amount of Rmb58,251 (US$7,464) to secure bank loans to the Group.

5.   BANK LOANS

     As of December 31, 2005 and 2006, long-term bank loans of Rmb39,000 and
     Rmb29,000 (US$3,716) were secured by land use right, respectively.
     Long-term bank loans carry fixed interest rates and had average annual
     interest rates of approximately 5.85% in 2005 and 5.90% in 2006.

     The outstanding balances of long-term bank loans as of December 31, 2006
     were repayable as follows:

<TABLE>
<CAPTION>
                           Rmb
                        -------
<S>                     <C>
2007 ................   164,000
2008 ................   408,000
2009 ................    65,000
2010 ................        --
2011 ................    60,000
                        -------
                        697,000
                        =======
</TABLE>


                                      F-92

<PAGE>

                        HANGZHOU ZHONGCE RUBBER CO., LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)

5.   BANK LOANS - continued

     As of December 31, 2005 and 2006, short-term bank loans are repayable on
     demand or within twelve months from the balance sheet dates.

     As of December 31, 2005 and 2006, Rmb610,000 and Rmb614,000 (US$78,677) of
     the short-term bank loans were guaranteed by related parties. Also,
     short-term bank loans of Rmb26,000 (US$3,332) were secured by land use
     right of the Group as of December 31, 2005 and 2006. The short-term bank
     loans carried fixed interest rates and the average annual interest rates
     were approximately 5.17% in 2005 and 5.25% in 2006, respectively.

6.   INCOME TAXES

     Income taxes consists of:

<TABLE>
<CAPTION>
                 2004      2005      2006
               -------   -------   -------
                 Rmb       Rmb       Rmb
<S>            <C>       <C>       <C>
Current ....    53,875    58,764    36,020
Deferred ...   (18,199)  (11,872)  (19,683)
               -------   -------   -------
                35,676    46,892    16,337
               =======   =======   =======
</TABLE>

     The Group is subject to income tax rates from 15% to 33%. The Company was
     subject to State united income tax rate of 15% and a local income tax rate
     of 1.5% except for two branches of the Company, Xin An Jiang and Yong Gu,
     were subject to State united income tax rate of 30% and the local income
     tax rate of 3%. FCJ and Hangzhou Sunrise were subject to State united
     income tax rate of 30% and the local income tax rate of 3%.

     The reconciliation of the effective income tax rate based on profit before
     income taxes and minority interests stated in the consolidated statements
     of operations to the statutory income tax rates in the PRC is as follows:

<TABLE>
<CAPTION>
                                               2004   2005   2006
                                               ----   ----   ----
<S>                                            <C>    <C>    <C>
Tax provision at PRC enterprise income
   tax rates ...............................    33%    33%    33%
Effect of Company's lower income tax rate ..   (12%)  (12%)  (12%)
Underprovision from prior years ............     5%     1%    --
Valuation allowance ........................    --     (2%)   --
Others .....................................    (3%)    3%    --
                                               ---    ---    ---
Effective tax rate .........................    23%    23%    21%
                                               ===    ===    ===
</TABLE>


                                      F-93

<PAGE>

                        HANGZHOU ZHONGCE RUBBER CO., LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)

6.   INCOME TAXES - continued

     The tax impact of temporary differences give rise to the following deferred
     tax assets:

<TABLE>
<CAPTION>
                                          2005    2006
                                        ------   ------
                                          Rmb      Rmb
<S>                                     <C>      <C>
Allowance for doubtful receivables ..    9,709    9,026
Warranty expenses ...................   24,967   40,741
Accrued liabilities .................    4,440   11,396
Depreciation ........................    7,615    6,787
Others ..............................    3,872    2,129
                                        ------   ------
Total deferred tax assets ...........   50,603   70,079
Valuation allowance .................     (207)      --
                                        ------   ------
                                        50,396   70,079
                                        ======   ======
</TABLE>

     Deferred tax asset is classified as follows:

<TABLE>
<CAPTION>
                  2005     2006
                 ------   ------
                   Rmb      Rmb
<S>              <C>      <C>
Current ......   42,988   63,292
Non-current ..    7,408    6,787
                 ------   ------
                 50,396   70,079
                 ======   ======
</TABLE>

7.   COMMITMENTS AND CONTINGENCIES

     As of December 31, 2005 and 2006, the Group had outstanding capital
     commitments for construction of factory premises and purchase of equipment
     amounting to approximately Rmb247,445 and Rmb283,225 (US$36,291),
     respectively.

     The Group leases certain of its warehouses under non-cancelable operating
     leases expiring at various dates through fiscal 2008. Rental expense was
     Rmb12,079, Rmb19,960 and Rmb25,920 (US$3,321) for the years ended December
     31, 2004, 2005 and 2006, respectively.

     Minimum lease payments as of December 31, 2006 is:

<TABLE>
<CAPTION>
                                   Rmb
                                  -----
<C>                               <C>
2007 ..........................   4,524
2008 ..........................   2,304
                                  -----
Total minimum lease payments ..   6,828
                                  =====
</TABLE>


                                      F-94

<PAGE>

                        HANGZHOU ZHONGCE RUBBER CO., LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)

7.   COMMITMENTS AND CONTINGENCIES - continued

     The Group also records an estimate of the product warranty obligation at
     the time of sale based on the Group's historical experience. Changes in
     product warranty provision are as follows:

<TABLE>
<CAPTION>
                                    2005       2006
                                  --------   --------
                                     Rmb        Rmb
<S>                               <C>        <C>
Balance at beginning of year ..     43,600     48,800
Warranties paid ...............   (141,294)  (156,572)
Warranty provision ............    146,494    169,072
                                  --------   --------
Balance at end of year ........     48,800     61,300
                                  ========   ========
</TABLE>

     In addition, the Group provided guarantees to related companies as of
     December 31, 2006, details of which are detailed in note 9(c). These
     guarantees are full and unconditional and would require the Group to make
     scheduled payments immediately if the related companies failed to do so.

     As of December 31, 2006, the Group estimated the maximum potential future
     payments of the guarantees to be Rmb650,000 (US$83,290). Historically, the
     Group had not made any payment for these guarantees and considered the
     probability of the default by the related companies to below. As a result,
     the Group estimated that the fair value of the obligations assumed under
     guarantees as of December 31, 2006 to be Rmb4,465 (US$572) and recognized a
     liability for such amount in the financial statements.

     In addition, the Company and its subsidiary are parties to a variety of
     contractual agreements under which the Group may be obligated to indemnify
     the other party for certain matters. These contracts primarily relate to
     the operating leases, financial agreements and various other agreements.
     Under these contracts the Group may provide certain routine
     indemnifications relating to representations and warranties (e.g.,
     ownership of assets, environmental or tax indemnifications) or personal
     injury matters. Historically, the Group has not made any payment for these
     indemnifications and believes that if the Group were to incur a loss in any
     of these matters, the loss would not have a material effect on our
     financial condition or results of operations.

8.   DISTRIBUTION OF PROFIT

     The Group declares dividends based on the profits as reported in their
     statutory financial statements. Such profits will be different from the
     amounts reported under US GAAP. The Group had an aggregate retained
     earnings on a consolidation basis of Rmb308,083 and Rmb348,566 (US$44,664)
     as of December 31, 2005 and 2006, as reported in their statutory financial
     statements.


                                      F-95

<PAGE>

                        HANGZHOU ZHONGCE RUBBER CO., LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)

9.   RELATED PARTY BALANCES, TRANSACTIONS AND ARRANGEMENTS

     (A)  DUE FROM RELATED COMPANIES

          The amounts due from related companies primarily arise from sales of
          tires and are unsecured, non-interest bearing and repayable at the end
          of credit periods granted ranging from 90 days to 180 days.

          The loans from related companies represent funds advanced to the Group
          and are unsecured and repayable within 1 year. The balance is
          interest-free

     (B)  PURCHASES FROM RELATED PARTIES/SALES OF PROPERTY, PLANT AND EQUIPMENT
          TO A RELATED PARTY

          The Company paid sub-contracting charges to a related company of
          approximately Rmb23,486, Rmb26,350 and Rmb25,476 (US$3,264) for tire
          processing for the year ended December 31, 2004, 2005 and 2006,
          respectively.

          The Group recorded purchases from a related company of approximately
          Rmb28,188, Rmb54,101 and Rmb42,884 (US$5,495) for the years ended
          December 31, 2004, 2005 and 2006, respectively.

          The Company recorded sales of property, plant and equipment to a
          shareholder of approximately RmbNil, RmbNil and Rmb428 (US$55) that
          have been reflected in the Group's consolidated financial statements
          for the years ended December 31, 2004, 2005 and 2006, respectively.

     (C)  CONTINGENT LIABILITIES

          As of December 31, 2005 and 2006, the Group had outstanding bank
          guarantees to related parties amounting to Rmb650,000 (US$83,290).

     (D)  USE OF TRADEMARKS

          For the years ended December 31, 2004, 2005 and 2006, the Group is
          entitled to use the trademarks owned by one of its owners free of
          charge for a period up to June 27, 2009.


                                      F-96

<PAGE>

                        HANGZHOU ZHONGCE RUBBER CO., LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)

10.  STAFF RETIREMENT PLANS

     All of the Chinese employees of the Group are entitled to an annual pension
     on retirement, which is equal to their ending basic salaries at their
     retirement dates. The Chinese government is responsible for the pension
     liabilities to these retired employees. The Group is only required to make
     specified contributions to the state-sponsored retirement plan calculated
     at rates ranging from 20% to 23.5% of basic monthly salaries for the year
     ended December 31, 2004, at rates ranging from 14% to 22% of basic monthly
     salaries for the year ended December 31, 2005 and at rates ranging from 14%
     to 20% of basic monthly salaries for the year ended December 31, 2006. The
     expenses reported in the consolidated statements of operations and
     comprehensive income related to these arrangements were Rmb23,934,
     Rmb40,075 and Rmb64,006 (US$8,202) for the years ended December 31, 2004,
     2005 and 2006, respectively.

     The Group and their employees are also required to contribute 5% of the
     monthly salaries to designated bank accounts opened by the Group under a
     regulation implemented by certain PRC municipal governments. Upon
     resignation or retirement of the employees, they are entitled to withdraw
     the principal and related interest from these bank accounts to purchase
     housing. These bank deposits cannot be withdrawn for other uses by the
     Group. As of December 31, 2005 and 2006, such restricted bank deposits
     amounted to Rmb12,579 and Rmb12,678 (US$1,625), respectively.

11.  POST BALANCE SHEET EVENTS

     Subsequent to December 2006, the Company became a defendant in a number of
     product liability lawsuits and claims seeking compensatory and, in some
     cases, punitive damages based on allegations that personal injury, property
     damage and/or other loss resulted from accidents caused by tire failures.
     Such claims, even if lacking merit, could result in the expenditure of
     significant financial and managerial resources. The Company believes that
     the resolution of these other matters currently pending will not
     individually or in the aggregate have a material adverse effect on the
     Company's financial condition or results of operations.


                                      F-97
<PAGE>

CHINA ENTERPRISES LIMITED

Report of Independent Registered Public Accounting Firm and Consolidated
Financial Statements
For the years ended December 31, 2004, 2005 and 2006

<PAGE>

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                            CHINA ENTERPRISES LIMITED

<TABLE>
<S>                                                                <C>
Report of Independent Registered Public Accounting Firm .........      F-98
Consolidated Financial Statements:
Consolidated Statements of Operations for the years ended
  December 31, 2004, 2005 and 2006 ..............................   F-99 & F-100
Consolidated Balance Sheets as of December 31, 2005 and 2006 ....      F-101
Consolidated Statements of Shareholders' Equity and Comprehensive
  (Loss) Income for the years ended December 31, 2004, 2005 and
  2006 ..........................................................      F-102
Consolidated Statements of Cash Flows for the years ended
  December 31, 2004, 2005 and 2006 ..............................  F-103 & F-104
Notes to Consolidated Financial Statements ......................  F-105 - F-124
</TABLE>

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of China Enterprises Limited

We have audited the accompanying consolidated balance sheets of China
Enterprises Limited (the "Company") and its subsidiaries (collectively referred
as the "Group") as of December 31, 2005 and 2006 and the related consolidated
statements of operations, shareholders' equity and comprehensive (loss) income,
and cash flows for each of the three year in the period ended December 31, 2006,
all expressed in Renminbi. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Group as of
December 31, 2005 and 2006, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2006 in
conformity with accounting principles generally accepted in the United States of
America.

Our audits also comprehended the translation of Renminbi amounts into United
States dollar amounts and, in our opinion, such translation has been made in
conformity with the basis stated in Note 2(g). Such United States dollar amounts
are presented solely for the convenience of readers in the United States of
America.

DELOITTE TOUCHE TOHMATSU
Hong Kong
November 28, 2007 (July 28, 2008 as to note 15)


                                      F-98

<PAGE>

                      CONSOLIDATED STATEMENTS OF OPERATIONS

       (AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31,
                                                  ---------------------------------------------
                                                     2004        2005        2006        2006
                                                  ---------   ---------   ---------   ---------
                                                     RMB         RMB         RMB         US$
<S>                                               <C>         <C>         <C>         <C>
Revenue .......................................          --          --          --          --
General and administrative expenses ...........     (13,344)    (27,522)    (16,754)     (2,147)
                                                  ---------   ---------   ---------   ---------
OPERATING LOSS ................................     (13,344)    (27,522)    (16,754)     (2,147)
NON-OPERATING INCOME (EXPENSES):
Interest income ...............................      21,533      13,036      12,286       1,574
Interest expenses .............................        (601)         --          --          --
Other income ..................................          48          --         551          70
Change in fair value of conversion option
   (note 5) ...................................      59,929     (42,873)    (19,459)     (2,493)
Allowance for interest receivables from notes
   receivable .................................        (502)         --          --          --
Gain on disposal of partial interests in an
   equity method affiliate ....................      23,040          --          --          --
Allowance for advance to affiliate ............        (530)         --          --          --
                                                  ---------   ---------   ---------   ---------
Profit (loss) before income tax and equity in
   earnings at equity method affiliates .......      89,573     (57,359)    (23,376)     (2,996)
Income tax expense (note 8) ...................          --      (4,083)     (1,164)       (149)
Equity in earnings of equity method
   affiliates .................................      92,369      35,118       3,314         425
                                                  ---------   ---------   ---------   ---------
NET (LOSS) INCOME .............................     181,942     (26,324)    (21,226)     (2,720)
                                                  =========   =========   =========   =========
</TABLE>


                                      F-99

<PAGE>

                      CONSOLIDATED STATEMENTS OF OPERATIONS

       (AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31,
                                                  ---------------------------------------------
                                                     2004        2005        2006        2006
                                                  ---------   ---------   ---------   ---------
                                                     RMB         RMB         RMB         US$
<S>                                               <C>         <C>         <C>         <C>
Basic (loss) earnings per common share ........       20.18       (2.92)      (2.35)      (0.30)
                                                  =========   =========   =========   =========
Number of common shares
   used in the calculation of basic (loss)
   earnings per common share ..................   9,017,310   9,017,310   9,017,310   9,017,310
                                                  =========   =========   =========   =========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-100

<PAGE>

                           CONSOLIDATED BALANCE SHEETS

      (AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES AND THEIR PAR VALUES)

<TABLE>
<CAPTION>
                                                                           AS OF DECEMBER 31,
                                                                    -------------------------------
                                                                       2005        2006       2006
                                                                    ---------   ---------   -------
                                                                       RMB         RMB        US$
<S>                                                                 <C>         <C>         <C>
ASSETS
Current assets:
   Cash and cash equivalents ....................................      14,668       7,120       912
   Other receivables (less allowance for interest receivable of
      Rmb502 in 2005 and Nil in 2006) ...........................       3,832          --        --
   Prepaid expenses and other current assets ....................         337         288        37
   Due from related parties (note 12) ...........................          --           2        --
   Due from former ultimate parent company, an immediate parent
      company and fellow subsidiaries (note 12) .................          --         329        42
   Advance to an affiliate (note 4) .............................     110,972          --        --
   Notes receivable (note 3) ....................................       4,164          --        --
                                                                    ---------   ---------   -------
   Total current assets .........................................     133,973       7,739       991
Investments in and advances to equity method affiliates (less
   allowance of RMB7,601 in 2005 and Rmb7,601 in 2006)
   (note 4) .....................................................     491,992     461,961    59,195
Convertible note receivable from an affiliate, net (note 5) .....          --     247,781    31,750
Derivative instruments (note 5) .................................          --      43,454     5,568
Deposit paid for acquisition of properties (note 6) .............      58,000      58,000     7,432
Plant and equipment, net (note 7) ...............................         302         240        31
Other assets ....................................................           6           6         1
                                                                    ---------   ---------   -------
   Total assets .................................................     684,273     819,181   104,968
                                                                    =========   =========   =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Due to an affiliate (note 4) .................................          --       2,121       272
   Due to an intermediate parent company (notes 5 and 12) .......          --     203,025    26,015
   Accounts payable .............................................         303          --        --
   Other payables ...............................................       1,291          --        --
   Accrued liabilities ..........................................       6,096       6,535       837
   Due to former ultimate parent company (note 12) ..............       7,149          --        --
   Due to ultimate parent company (note 12) .....................          --         203        26
   Other taxes payable ..........................................       2,753       2,753       353
   Income taxes payable (note 8) ................................       4,083       5,247       672
                                                                    ---------   ---------   -------
   Total current liabilities ....................................      21,675     219,884    28,175
                                                                    ---------   ---------   -------
Commitments and contingencies (note 10)
Shareholders' equity:
   Supervoting common stock - par value US$0.01 per share
      (20,000,000 shares authorized; 3,000,000 shares outstanding
      at December 31, 2005 and Nil shares outstanding at
      December 31, 2006) (note 9) ...............................         244          --        --
   Common stock - par value US$0.01 per share (50,000,000 shares
      authorized; 6,017,310 shares outstanding at December 31,
      2005 and 9,017,310 shares outstanding at December 31,
      2006) (note 9) ............................................         526         770        99
   Additional paid-in capital ...................................   1,065,319   1,026,237   131,500
   Accumulated other comprehensive income .......................       3,220         227        29
   Accumulated deficit ..........................................    (406,711)   (427,937)  (54,835)
                                                                    ---------   ---------   -------
   Total shareholders' equity ...................................     662,598     599,297    76,793
                                                                    ---------   ---------   -------
   Total liabilities and shareholders' equity ...................     684,273     819,181   104,968
                                                                    =========   =========   =======
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-101

<PAGE>

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                         AND COMPREHENSIVE (LOSS) INCOME

                 (AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES)

<TABLE>
<CAPTION>
                                                                                     ACCUMULATED
                                                                                        OTHER
                                  SHARES OF                                            COMPRE-
                                 SUPERVOTING SHARES OF SUPERVOTING        ADDITIONAL   HENSIVE                       COMPREHENSIVE
                                    COMMON     COMMON     COMMON   COMMON   PAID-IN    (LOSSES)  ACCUMULATED             (LOSS)
                                    STOCK      STOCK      STOCK     STOCK   CAPITAL     INCOME     DEFICIT    TOTAL      INCOME
                                 ----------- --------- ----------- ------ ---------- ----------- ----------- ------- -------------
                                                           RMB       RMB      RMB        RMB         RMB       RMB        RMB
<S>                              <C>         <C>       <C>         <C>    <C>        <C>         <C>         <C>     <C>
Balance at January 1, 2004 .....  3,000,000  6,017,310     244       526  1,033,253     1,131     (562,329)  472,825
Net income .....................         --         --      --        --         --        --      181,942   181,942    181,942
Dilution of interest in an
   equity method affiliate .....         --         --      --        --     14,306        --           --    14,306         --
Foreign currency translation
   adjustment relating to an
   equity method affiliate .....         --         --      --        --         --    (1,092)          --    (1,092)    (1,092)
                                 ----------  ---------    ----       ---  ---------    ------     --------   -------    -------
Balance at December 31, 2004 ...  3,000,000  6,017,310     244       526  1,047,559        39     (380,387)  667,981    180,850
                                                                                                                        =======
Net loss .......................         --         --      --        --         --        --      (26,324)  (26,324)   (26,324)
Dilution of interest in an
   equity method affiliate .....         --         --      --        --     17,760        --           --    17,760         --
Foreign currency translation
   adjustment relating to an
   equity method affiliate .....         --         --      --        --         --     3,181           --     3,181      3,181
                                 ----------  ---------    ----       ---  ---------    ------     --------   -------    -------
Balance at December 31, 2005 ...  3,000,000  6,017,310     244       526  1,065,319     3,220     (406,711)  662,598    (23,143)
                                                                                                                        =======
Net loss .......................         --         --      --        --         --        --      (21,226)  (21,226)   (21,226)
Transfer from supervoting common
   stock to common stock ....... (3,000,000) 3,000,000    (244)      244         --        --           --        --         --
Recognition of equity-settled
   share based payments ........         --         --      --        --      2,455        --           --     2,455         --
Dilution of interest in an
   equity method affiliate .....         --         --      --        --    (41,537)       --           --   (41,537)        --
Foreign currency translation
   adjustment relating to an
   equity method affiliate .....         --         --      --        --         --    (2,993)          --    (2,993)    (2,993)
                                 ----------  ---------    ----       ---  ---------    ------     --------   -------    -------
Balance at December 31, 2006 ...         --  9,017,310      --       770  1,026,237       227     (427,937)  599,297    (24,219)
                                 ==========  =========    ====       ===  =========    ======     ========   =======    =======
Balance at December 31, 2006
   (in US$) ....................                            --        99    131,500        29      (54,835)   76,793     (3,103)
                                                          ====       ===  =========    ======     ========   =======    =======
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-102
<PAGE>

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                                                        ------------------------------------
                                                          2004      2005      2006     2006
                                                        -------   -------   -------   ------
                                                          RMB       RMB       RMB       US$
<S>                                                     <C>       <C>       <C>       <C>
Cash flows from operating activities:
   Net income (loss) ................................   181,942   (26,324)  (21,226)  (2,720)
   Adjustments to reconcile net income (loss) to
      net cash used in operating activities:
      Change in fair value of conversion option .....   (59,929)   42,873    19,459    2,493
      Equity in earnings of equity method
         affiliates .................................   (92,369)  (35,118)   (3,314)    (425)
      Dividend received from associate ..............        --        --     1,868      239
      Gain on disposal of partial interest in an
         equity method affiliate ....................   (23,040)       --        --       --
      Allowance for advances to equity method
         affiliates .................................       530        --        --       --
      Depreciation and amortization .................        --        42        62        8
      Amortization of discount on subscription of
         convertible note receivable ................   (16,354)   (1,912)   (8,894)  (1,140)
   Changes in operating assets and liabilities:
      Other receivables .............................    (4,893)    2,642     3,832      492
      Prepaid expenses and other current assets .....        --      (317)       49        6
      Accounts and other payables ...................        10       (37)   (3,041)    (390)
      Accrued liabilities ...........................     1,213       282     1,886      242
      Income taxes payable ..........................        --     4,083     1,164      148
                                                        -------   -------   -------   ------
  Net cash used in operating activities .............   (12,890)  (13,786)   (8,155)  (1,047)
                                                        -------   -------   -------   ------
Cash flows from investing activities:
   Subscription of convertible note receivable ......   (74,926)       --        --       --
   Increase (decrease) in subscription payable ......    62,989   (62,989)       --       --
   (Increase) decrease in notes receivable ..........   (55,952)   24,298     4,164      534
   Payment for the deposit on acquisition of
      properties ....................................        --    (8,000)       --       --
   Investments in and advances to equity method
      affiliates, net ...............................    72,142   (37,122)   (2,227)    (285)
   Purchase of property, plant and equipment ........        --      (344)       --       --
   Proceeds from disposal of interest in an equity
      method affiliate ..............................    47,532        --        --       --
   Increase in due from related parties .............        --        --        (2)      --
   Increase in due from former ultimate parent
      company .......................................        --        --    (7,332)    (940)
   Increase in due from fellow subsidiaries .........        --        --       (30)      (4)
   Increase in due from immediate holding company ...        --        --      (116)     (15)
   Decrease in advance to an affiliate ..............        --        --     7,971    1,022
   (Increase) decrease in amount due from (to)
      ultimate parent company .......................   (33,396)   37,426        --       --
                                                        -------   -------   -------   ------
Net cash from (used in) investing activities ........    18,389   (46,731)    2,428      312
                                                        -------   -------   -------   ------
</TABLE>


                                     F-103

<PAGE>

                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                                                        ------------------------------------
                                                          2004      2005      2006     2006
                                                        -------   -------   -------   ------
                                                          RMB       RMB       RMB       US$
<S>                                                     <C>       <C>       <C>       <C>
Cash flows from financing activities:
   Decrease in bank and other short-term loans ......   (27,708)       --        --       --
   Advance from former ultimate parent company ......        --    33,771        --       --
   Increase in due to ultimate parent holding
      company .......................................        --        --       203       26
   Decrease in due to intermediate parent company ...        --        --    (2,024)    (259)
                                                        -------   -------   -------   ------
Net cash (used in) provided by financing
   activities .......................................   (27,708)   33,771    (1,821)    (233)
                                                        -------   -------   -------   ------
Net decrease in cash and cash equivalents ...........   (22,209)  (26,746)   (7,548)    (968)
Cash and cash equivalents, beginning of year ........    63,623    41,414    14,668    1,880
                                                        -------   -------   -------   ------
Cash and cash equivalents, end of year ..............    41,414    14,668     7,120      912
                                                        =======   =======   =======   ======
Supplemental schedule of non-cash investing
   and financing activities:
   Conversion of convertible note receivable,
      and the related transfer from derivative
      instruments, to equity interest in an affiliate
      (see note 5) ..................................   119,161    72,244        --       --
   Deposit paid for acquisition of properties
      by a fellow subsidiary on behalf of the
      Company .......................................    50,000        --        --       --
   Assignment of notes receivable and related
      interest receivable to fellow subsidiaries
      through current accounts of a fellow
      subsidiary and ultimate parent company ........        --    76,662        --       --
   Subscription of convertible note receivable
      from an affiliate partially by intermediate
      holding company on behalf of the Company
      and the remainder to offsetting with
      advance to an affiliate .......................        --        --   309,120   39,610
                                                        =======   =======   =======   ======
</TABLE>

          See accompanying notes to consolidated financial statements.


                                     F-104

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 (AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES,
                   PER SHARE DATA AND UNLESS OTHERWISE STATED)

1.   ORGANIZATION AND PRINCIPAL ACTIVITIES

     China Enterprises Limited (the "Company") was incorporated in Bermuda on
     January 28, 1993. Its common stock trades on the OTC (Over-the-Counter)
     Bulletin Board in the United States of America (the "US") since November
     26, 2002 upon its suspension from trading, and subsequent delisting, from
     the New York Stock Exchange (the "NYSE") in 2002 as a result of the
     Company's failure to meet the NYSE's continuing listing standards.

     China Strategic Holdings Limited, a public company listed on The Stock
     Exchange of Hong Kong Limited (the "HKSE"), was the Company's ultimate
     parent company before its completion of a group reorganization in May 2006
     following which the Company became a wholly-owned subsidiary of Group
     Dragon Investments Limited ("GDI"), a then equity affiliate of Hanny
     Holdings Limited ("HHL"), a public company listed on HKSE. In June 2006,
     HHL acquired a controlling interest in GDI and became the parent company.
     On December 8, 2006, HHL became a subsidiary of ITC Corporation Limited
     ("ITC"), a public company listed on HKSE and ITC became the ultimate parent
     company. On May 18, 2007, HHL ceased to be a subsidiary of ITC and HHL
     becomes the ultimate parent company.

     The accompanying financial statements include the financial statements of
     the Company and its wholly owned subsidiaries which mainly consist of
     Manwide Holdings Limited ("Manwide", incorporated in the British Virgin
     Islands, "BVI"), Million Good Limited ("Million Good", incorporated in the
     BVI) and The Rosedale Luxury Hotel & Suites Limited ("Rosedale",
     incorporated in the People's Republic of China, "PRC"). The Company and all
     of its subsidiaries are collectively referred to as the "Group".

     As shown in the consolidated financial statements for the year ended
     December 31, 2006, the Group's current liabilities exceeded its current
     assets of approximately Rmb212,145, which may indicate that the Company
     will be unable to continue as a going concern.

     The consolidated financial statements have been prepared on a going concern
     basis, which contemplates the realization of assets and the satisfaction of
     liabilities in the normal course of business as HHL, the Company's
     intermediate parent company, has agreed to provide adequate funds for the
     Company to meet in full its financial obligations as they fall due for the
     foreseeable future.

     As of December 31, 2006, the Company had the following significant equity
     method affiliates:

     -    Wing On Travel (Holdings) Limited (a company incorporated in Bermuda,
          hereinafter together with its subsidiaries collectively referred to as
          "Wing On"); and

     -    Hangzhou Zhongce Rubber Co., Limited ("HZ", located in Hangzhou,
          Zhejiang Province, the PRC).

     As of December 31, 2005, the Company had a 27.74% equity interest in Wing
     On. As a result of the transactions as detailed in note 4, the Company's
     equity interest in Wing On had been changed to 20.36% as of December 31,
     2006 and further reduced to below 20% subsequent to December 31, 2006. Wing
     On is engaged in the provision of package tours, travel and other related
     services and hotel operation with its shares listed on HKSE.

     As of December 31, 2005 and 2006, the Company had a 26% equity interest in
     HZ. HZ and its consolidated subsidiaries (the "PRC entities") are engaged
     in the manufacture of rubber tires in the PRC.

     The PRC entities conduct their operations in the PRC. The Company is,
     accordingly, subject to special considerations and significant risks not
     typically associated with investments in equity securities of the US and
     western European companies. These include, among others, risks associated
     with the political and economic environment, foreign currency exchange,
     import restrictions and legal system of the PRC.


                                     F-105

<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES,
                   PER SHARE DATA AND UNLESS OTHERWISE STATED)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     (A)  BASIS OF PRESENTATION

          The consolidated financial statements have been prepared in accordance
          with accounting principles generally accepted in the United States of
          America ("U.S. GAAP").

     (B)  BASIS OF CONSOLIDATION

          The Company consolidates all entities in which it is the primary
          beneficiary of variable interests in variable interest entities and in
          those entities in which it has a controlling financial interest. The
          Company does not have variable interest in any variable interest
          entity during the periods presented.

          The consolidated financial statements include the assets, liabilities,
          revenue and expenses of the Company and its consolidated subsidiaries.

          All significant intercompany balances and transactions have been
          eliminated on consolidation.

     (C)  EQUITY METHOD INVESTMENTS IN AFFILIATES

          Investments in 50% or less owned companies over which the Company
          exercises significant influence but not control, are accounted for
          using the equity method. Under the equity method, the Company's
          proportionate share of the affiliate's net income or loss is included
          in the consolidated statement of operations.

          The Company records the gains or losses arising from issuance by an
          equity affiliate of its own stock in additional paid-in capital
          account within shareholders' equity in the consolidated financial
          statements.

     (D)  CASH AND CASH EQUIVALENTS

          The Company considers cash on hand, demand deposits with banks with an
          original maturities of three months or less when purchased to be cash
          and cash equivalents.

     (E)  PLANT AND EQUIPMENT, NET

          Plant and equipment, net are carried at cost less accumulated
          depreciation. Depreciation is calculated on a straight-line basis over
          the estimated useful lives of assets of 5 years.


                                     F-106
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES,
                   PER SHARE DATA AND UNLESS OTHERWISE STATED)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

     (F)  INCOME TAXES

          The Company follows the liability method of accounting for income
          taxes. Under this method, deferred tax assets and liabilities are
          recognized for the future tax consequences attributable to differences
          between the financial statement carrying amounts of existing assets
          and liabilities and their respective tax bases, and to operating loss
          and tax credit carry forwards. Deferred tax assets and liabilities are
          measured using enacted tax rates expected to apply when those
          temporary differences are expected to reverse. Valuation allowances
          are established to reduce the amount of deferred tax assets if it is
          considered more likely than not that some portion of, or all of, the
          deferred tax asset will not be realized.

     (G)  FOREIGN CURRENCIES

          The functional currency of the Company is Hong Kong dollars. The
          functional currency of the subsidiaries in PRC is the Renminbi. The
          Company has chosen Renminbi as its reporting currency.

          Foreign currency transactions are translated into Renminbi at the
          applicable exchange rates quoted by the People's Bank of China (the
          "unified exchange rates") prevailing at the dates of the transactions.
          Monetary assets and liabilities denominated in foreign currencies are
          translated into Renminbi using the applicable unified exchange rates
          prevailing at the respective balance sheet dates. Non-monetary assets
          and liabilities are translated at the unified exchange rates
          prevailing at the time the assets or liabilities were acquired. The
          resulting exchange differences are included in the consolidated
          statement of operations.

          The translation of Renminbi (Rmb) amounts into United States dollar
          (US$) amounts are included solely for the convenience of readers in
          the United States of America and have been made at US$1.00 =
          Rmb7.8041, the noon buying rate from the Federal Reserve Bank of New
          York on December 29, 2006. No representation is made that the Renminbi
          amounts could have been, or could be, converted into United States
          dollar at that rate or at any other rate.

     (H)  BASIC (LOSS) EARNINGS PER SHARE

          Basic (loss) earnings per share is computed using the weighted-average
          number of common shares outstanding during the year. There were no
          dilutive potential common shares during fiscal 2004, 2005 and 2006.


                                     F-107
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES,
                   PER SHARE DATA AND UNLESS OTHERWISE STATED)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

     (I)  USE OF ESTIMATES

          The preparation of financial statements in conformity with U.S. GAAP
          requires management to make estimates and assumptions that affect the
          reported amounts of assets and liabilities and disclosures of
          contingent assets and liabilities at the date of the financial
          statements and the reported amounts of revenues and expenses for the
          years presented. Actual results may differ from those estimates.
          Material estimates in these financial statements that are susceptible
          to change as more information becomes available are allowances for
          uncollectible receivables and valuation of derivative instruments.

     (J)  FINANCIAL INSTRUMENTS

          The Company recognizes all derivative instruments on the balance sheet
          at fair value with changes in fair values reported in the statement of
          operations.

          The Group's financial instruments that are exposed to concentration of
          credit risk consist primarily of its cash and cash equivalents,
          advances to affiliates, note receivables, amounts due from related
          parties, amount due from former ultimate parent company, amounts due
          from fellow subsidiaries, amount due from immediate parent company and
          convertible notes. The Group's cash and cash equivalents are
          high-quality deposits placed with banking institutions with high
          credit ratings; therefore, the credit risk is limited. The Group has
          also reviewed the credit worthiness and financial position of its
          former ultimate parent company and affiliates for credit risks
          associated with amounts due from related parties, amount due from
          former ultimate holding company, amounts due from fellow subsidiaries,
          amount due from immediate holding company and convertible notes
          receivable from an affiliate. These entities have good credit standing
          and the Group does not expect to incur significant losses for
          uncollected advances from these entities.

          The carrying value of current financial assets and current financial
          liabilities approximate their fair value due to the short-term
          maturity of these instruments. The fair value of convertible notes
          receivable as of December 31, 2006 was Rmb291,235, which was
          determined based on the estimated net amount the Company would receive
          as of December 31, 2006 from the note issuer, the interest rates of
          similar instruments from market, and the estimated fair value of the
          call option embedded in the convertible note.


                                     F-108
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES,
                   PER SHARE DATA AND UNLESS OTHERWISE STATED)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

     (K)  COMPREHENSIVE (LOSS) INCOME

          Comprehensive income consists of net (loss) income and other gains and
          losses affecting shareholders' equity that, under U.S. GAAP are
          excluded from net (loss) income. Comprehensive (loss) income has been
          disclosed within the consolidated statement of shareholders' equity.

     (L)  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

          In February 2006, the Financial Accounting Standards Board ("FASB")
          issued SFAS No. 155, "Accounting for Certain Hybrid Financial
          Instruments - which amends FASB Statements No. 133 and 140". This
          statement is effective for all financial instruments acquired or
          issued after the beginning of an entity's first fiscal year that
          begins after September 15, 2006. This statement simplifies accounting
          for certain hybrid financial instruments by permitting fair value
          measurement for a hybrid instrument that contains an embedded
          derivative that would otherwise require bifurcation. The Company does
          not expect that the adoption of SFAS 155 will have a material impact
          on its consolidated financial position, results of operations or cash
          flows.

          In June 2006, the FASB issued FASB Interpretation No. 48, "Accounting
          for Uncertainty in Income Taxes an interpretation of FASB Statement
          No. 109", or FIN 48. FIN 48 clarifies the accounting for uncertainty
          in income taxes recognized in an enterprise's financial statements in
          accordance with FASB Statement No. 109, "Accounting for Income Taxes",
          or SFAS 109. The interpretation prescribes a recognition threshold and
          measurement attribute for the financial statement recognition and
          measurement of a tax position taken or expected to be taken in a tax
          return. FIN 48 also provides accounting guidance on de-recognition,
          classification, interest and penalties, accounting in interim periods,
          disclosure and transition. FIN 48 is effective for fiscal years
          beginning after December 15, 2006. The adoption of this statement is
          not expected to have a material effect on the Company's financial
          position or results of operations.

          In September 2006 the FASB issued FASB Statement No. 157, ("SFAS
          157"), "Fair Value Measurement". SFAS 157 addresses standardizing the
          measurement of fair value for companies who are required to use a fair
          value measure of recognition for recognition or disclosure purposes.
          The FASB defines fair value as "the price that would be received to
          sell an asset or paid to transfer a liability in an orderly
          transaction between market participants at the measure date". SFAS 157
          is effective for financial statements issued for fiscal years
          beginning after November 15, 2007 and interim periods within those
          fiscal years. The Company is currently evaluating the impact, if any,
          of SFAS 157 on its financial position, results of operations and cash
          flows.


                                     F-109
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES,
                   PER SHARE DATA AND UNLESS OTHERWISE STATED)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

     (L)  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - CONTINUED

          In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option
          for Financial Assets and Financial Liabilities" ("SFAS 159"), an
          amendment of FASB No. 115. This statement permits entities to choose
          to measure many financial instrument and certain other items at fair
          value. The objective is to improve financial reporting by providing
          entities with the opportunity to mitigate volatility in reported
          earnings caused by measuring related assets and liabilities without
          having to apply complex hedge accounting provisions. SFAS No. 159 is
          effective from fiscal year commencing November 15, 2007. The Company
          is currently evaluating the impact of adopting SFAS No. 159 on its
          consolidated financial position, cash flows, and results of
          operations.

          In September 2006, the US Securities and Exchange Commission issued
          Staff Accounting Bulletin No. 108, "Considering the Effects of Prior
          Year Misstatements when Quantifying Misstatements in Current Year
          Financial Statements" ("SAB 108"). SAB 108 provides interpretive
          guidance on how the effects of the carryover or reversal of prior year
          misstatements should be considered in quantifying a current year
          misstatement. The SEC staff believes that registrants should quantify
          errors using both a balance sheet and an income statement approach and
          evaluate whether either approach results in quantifying a misstatement
          that, when all relevant quantitative and qualitative factors are
          considered, is material. SAB 108 is effective for fiscal years ending
          after November 15, 2006. The adoption of SAB 108 did not have a
          material impact on the Company's consolidated financial position,
          results of operations or cash flows.

3.   NOTES RECEIVABLE

     The notes, carrying interest at commercial rates, were unsecured and
     receivable from unrelated parties.

     On December 31, 2005, the Group assigned note receivable of Rmb75,506 plus
     accrued interest to certain other subsidiaries of its parent company in
     settlement of amounts to the parent and one of its subsidiaries. The
     remaining note was settled in March 2006.


                                     F-110
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES,
                   PER SHARE DATA AND UNLESS OTHERWISE STATED)

4.   INVESTMENTS IN AND ADVANCES TO AFFILIATES

<TABLE>
<CAPTION>
                                                               2005      2006
                                                             -------   -------
                                                               Rmb        Rmb
<S>                                                          <C>       <C>
Investments in equity method affiliates ..................   491,858   461,827
Advances to equity method affiliates .....................     7,735     7,735
                                                             -------   -------
Total ....................................................   499,593   469,562
Less: Allowance for advances to equity method affiliate ..    (7,601)   (7,601)
                                                             -------   -------
                                                             491,992   461,961
                                                             =======   =======
</TABLE>

     WING ON:

     In April 2002, the Group subscribed for 4,800,000,000 new ordinary shares
     of HK$0.01 each ("Subscription Shares") in Wing On, representing
     approximately 34.6% of the then outstanding share capital of Wing On, at an
     issue price of HK$0.027 per Subscription Shares for an aggregate
     subscription price of HK$132,715 (equivalent to approximately Rmb140,784,
     including transaction costs of Rmb3,304), pursuant to an agreement entered
     into in February 2002. The excess of the equity in the fair value of net
     assets of Wing On over Million Good's aggregate investment costs of
     Rmb146,552 was allocated on a pro rata basis to Wing On's non-current
     assets pursuant to the rules specified in SFAS No. 141, "Business
     Combinations" and out of which Rmb84,538 was allocated to property, plant
     and equipment that are subject to deprecation and amortization. As a
     result, Million Good has a different basis in those assets than Wing On
     has, and such difference is amortized over the average depreciable lives of
     the underlying property, plant and equipment. The remainder was allocated
     to other equity method affiliates and long-term investments of Wing On.

     As part of the acquisition of an equity interest in Wing On, Million Good
     also subscribed for a two-year convertible note (the "Old Note") issued by
     Wing On in the principal amount of HK$120,000 (equivalent to approximately
     Rmb127,284). In July 2002, Million Good exercised certain of its conversion
     rights under the terms of the Old Note, resulting in the issuance of
     1,100,000,000 new ordinary shares of Wing On to Million Good. No conversion
     rights were exercised by Million Good or other convertible note holders
     during fiscal 2003.

     On January 13, 2004, March 17, 2004 and May 4, 2004, Wing On entered into
     agreements with the Company and another holder of its convertible notes in
     relation to the issuance of new convertible notes, whereby Wing On issued
     new convertible notes to the Company (the "New Note") for a consideration
     of HK$155,000 (equivalent to approximately Rmb164,873), of which HK$84,800
     (equivalent to approximately Rmb89,947) was settled by the cancellation of
     the Company's then unsettled Old Note and the remaining balance was
     satisfied in cash by the Company. The New Note is convertible into new
     shares of Wing On during a period of three years from the date of issue, at
     an initial conversion price of HK$0.02 per share, subject to adjustments.


                                     F-111
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES,
                   PER SHARE DATA AND UNLESS OTHERWISE STATED)

4.   INVESTMENTS IN AND ADVANCES TO AFFILIATES - CONTINUED

     WING ON: - CONTINUED

     In October and November 2004, the Company exercised certain of its
     conversion rights under the terms of the New Note, resulting in the
     issuance of 5,000,000,000 new ordinary shares of Wing On to Million Good.
     The additional investment amounted to HK$100,000 (equivalent to
     approximately Rmb106,370) which represented the carrying value of the New
     Note. In November 2005, the Group disposed of its 2,250,000,000 shares in
     Wing On at the price of HK$0.02 per share to unrelated parties, resulting
     in a gain on disposal of Rmb23,040.

     In November 2004, the Company also entered into two placing and
     subscription agreements with Wing On and a placing broker (the "Placing
     Agent") pursuant to which the Placing Agent agreed to place 6,000,000,000
     shares of HK$0.01 each in Wing On then held by the Company at the price of
     HK$0.028 per share to independent investors and the Company would subscribe
     for up to 6,000,000,000 new shares in Wing On at the same price of HK$0.028
     per share. This "top-up placing" arrangement was agreed by the Company as
     the major shareholder of Wing On in order to expedite the capital raising
     activities of Wing On. The first placing and subscription agreement and the
     second placing and subscription agreement related to the placing and the
     conditional subscription of 3,660,000,000 and 2,340,000,000 shares in Wing
     On, respectively. The subscription of the shares under the second placing
     and subscription agreement was conditional upon, among others, the approval
     of the independent shareholders of Wing On. As such, the Company is
     entitled to complete the second placement without the obligation to
     complete the second subscription.

     At the special general meeting held on January 11, 2005, the independent
     shareholders of Wing On approved the second subscription, and accordingly,
     the Company applied the proceeds received from the second placement to
     subscribe 2,340,000,000 of new shares of HK$0.01 each in Wing On at the
     price of HK$0.028 per share on January 31, 2005.

     On February 4, 2005, the Company entered into a placing and subscription
     agreement with Wing On and Tai Fook Securities Company Limited ("Tai Fook")
     pursuant to which Tai Fook agreed to place up to 6,400,000,000 shares in
     Wing On then held by the Company at the price of HK$0.022 per share to
     independent investors and the Company would subscribe for up to
     6,400,000,000 new shares of Wing On at the same price of HK$0.022 per
     share. The subscription was completed on February 18, 2005. As a result of
     the aforesaid capital raising activities of Wing On, there was a dilution
     of the Company's interest in Wing On and the creation of an "implied sale"
     of a portion of the Company's investment. In accordance with its accounting
     policy, the Company recorded a net unrealized gain totaling Rmb17,760 as an
     increase of additional paid-in capital during the fiscal year 2005. The net
     unrealized gain represents the difference between the Company's carrying
     basis and the fair value of the portion of the investment in Wing On deemed
     to have been sold.


                                     F-112
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES,
                   PER SHARE DATA AND UNLESS OTHERWISE STATED)

4.   INVESTMENTS IN AND ADVANCES TO AFFILIATES - CONTINUED

     WING ON: - CONTINUED

     Following the issue of shares in Wing On pursuant to the placing and
     subscription agreement dated February 4, 2005, the conversion price of the
     convertible notes was adjusted to HK$0.0197 per share in accordance with
     its terms and conditions. On March 14, 2005, the day immediately preceding
     the effective date of the share consolidation of every one hundred shares
     of HK$0.01 each in the issued and unissued ordinary share capital of Wing
     On into one share of HK$1.00 each, the conversion price at the note was
     adjusted to HK$1.97 per new consolidated share.

     From April 1 through April 28, 2005, the Company purchased a total of
     6,967,700 ordinary shares of Wing On for cash consideration of
     approximately HK$12,680 (equivalent to approximately Rmb13,451), resulting
     in excess over cost approximately HK$786 (equivalent to approximately
     RMB819) which was allocated to property, plant and equipment that are
     subject to depreciation and amortization. On April 29, 2005, the Company
     also exercised all of the conversion rights of the convertible note of
     HK$55,000 (equivalent to approximately Rmb58,344) at the adjusted
     conversion price of HK$1.97 per share under the terms of the New Note,
     resulting in the issuance of 27,918,781 new ordinary shares of Wing On to
     Million Good. This additional investment amounted to HK$69,399 (equivalent
     to approximately Rmb72,244) which comprised HK$44,920 (equivalent to
     approximately Rmb46,762) of the carrying value of the Old Note (net of
     unamortized discount on subscription) and the fair value of the related
     convertible feature of HK$24,479 (equivalent to approximately Rmb25,482).

     On March 1, 2006, Wing On entered into a placing agreement with Success
     Securities Limited ("Success Securities") pursuant to which Success
     Securities conditionally agreed to place up to 175,000,000 shares (the
     "Placing Shares") in Wing On at a price of HK$0.69 per share to independent
     investors (the "Placing"). The Placing was completed on April 25, 2006. On
     September 27, 2006, Wing On also repurchased a total of 2,000,000 of its
     own ordinary shares and such shares were cancelled upon repurchase. As a
     result of these capital activities of Wing On, there was a net dilution of
     the percentage of Company's equity ownership in Wing On from 27.74% to
     20.36% and the net unrealised loss totaling RMB41,537 was recognized as a
     decrease in additional paid in capital during the fiscal year 2006.

     From May 24 through June 6, 2006, the Company purchased a total of
     2,948,000 ordinary shares of Wing On for cash consideration of
     approximately RMB2,227, resulting in negative goodwill of approximately
     RMB2,431 which was allotted to property, plant and equipment that are
     subject to depreciation and amortization.


                                     F-113
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES,
                   PER SHARE DATA AND UNLESS OTHERWISE STATED)

4.   INVESTMENTS IN AND ADVANCES TO AFFILIATES - CONTINUED

     WING ON: - CONTINUED

     The following table presents summarized comparative financial information
     for the Company's investments in 50% or less owned investments, over which
     the Company has the ability to exercise significant influence but does not
     control, which are accounted for using the equity method:

<TABLE>
<CAPTION>
                                2004        2005        2006
                             ---------   ---------   ----------
                                Rmb         Rmb         Rmb
<S>                          <C>         <C>         <C>
Revenues .................   6,853,459   8,396,696   10,982,860
Operating profit .........     232,267     280,406      251,705
Net income ...............      94,148     126,357        1,795
Current assets ...........   2,590,185   3,442,255    4,680,343
Non-current assets .......   4,206,376   4,779,558    5,087,746
Current liabilities ......   3,410,373   4,384,235    4,988,172
Non-current liabilities ..   1,439,385   1,354,208    2,196,489
Shareholders' equity .....   1,438,236   1,820,173    1,937,075
</TABLE>

     As of December 31, 2005 advance to an affiliate was Rmb110,972. Other than
     the aggregated advances to an affiliate of Rmb93,421 which bore interest at
     Hong Kong Prime Rate, the amounts as of December 31, 2005 were interest
     free. As of December 31, 2005, Rmb93,421 of the advances were due on
     December 31, 2006 and the remainder was repayable upon demand. Accordingly,
     the whole advances were presented as current assets.

     As of December 31, 2006, advances from an affiliate is Rmb2,121 which was
     unsecured, interest free and repayable on demand.

     An allowance relating to these advances amounting to Rmb530, RmbNil and
     RmbNil was charged as general and administrative expenses for fiscal 2004,
     2005 and 2006, respectively.

     Equity ownership percentages for these affiliates are presented below:

<TABLE>
<CAPTION>
                               Place of
                            incorporation/
AFFILIATE                    registration     2005    2006
---------                   --------------   -----   -----
<S>                         <C>              <C>     <C>
Wing On .................      Bermuda       27.74%  20.36%
X One Holdings Limited ..      Hong Kong     33.33%  33.33%
HZ ......................      PRC              26%     26%
</TABLE>

     The fair values of the investment in Wing On were approximately HK$74,046
     (equivalent to Rmb74,490) and HK$70,871 (equivalent to Rmb71,296) for
     fiscal 2005 and 2006, respectively. The fair values were determined with
     the reference to quoted market bid prices.


                                     F-114
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES,
                   PER SHARE DATA AND UNLESS OTHERWISE STATED)

5.   CONVERTIBLE NOTE RECEIVABLE FROM AN AFFILIATE, NET/DERIVATIVE INSTRUMENTS

     In April 2005, the Company exercised all of the conversion rights of the
     remaining New Note of Rmb45,008 principal amount at the adjusted conversion
     price of HK$1.97 under the terms of the New Note.

     On March 23, 2006, Wing On entered into a subscription agreement with the
     Company and other subscribers in relation to the subscription of 2%
     convertible exchangeable notes (the "Convertible Notes") with an aggregate
     principal amount of HK$1,000,000. The Company and other subscribers agreed
     to subscribe for the Convertible Notes with principal amount of HK$300,000
     and HK$700,000 by cash, respectively.

     The initial conversion price of the Notes is HK$0.79 per share, subject to
     anti-dilutive adjustments. Unless previously converted or lapsed or
     redeemed by Wing On, Wing On will redeem the Notes on the fifth anniversary
     from the date of issue of the Notes (the "Maturity Date") at the redemption
     amount which is 110% of the principal amount of the Notes outstanding.

     The Company shall have the right to convert, on any business day commencing
     from the 7th day after the date of issue of the Notes up to and including
     the date which is 7 days prior to the Maturity Date, the whole or any part
     (in an amount or integral multiple of HK$1,000) of the principal amount of
     the Notes into shares of Wing On at the then prevailing conversion price.
     Had the Convertible Notes subscribed by the Company been converted into new
     shares of Wing On in full at December 31, 2006, the equity ownership
     percentage on Wing On would increase from 20.36% to 50.90%.

     Subject to certain restrictions which are intended to facilitate compliance
     of relevant rules and regulations, each noteholder shall have the right to
     exchange from time to time all or part (in the amount of HK$10,000 or
     integral multiples thereof) of 50% of the initial principal amount of its
     Convertible Notes for shares in the share capital of any company which is
     an affiliated company of Wing On as defined in the Rules Governing the
     Listing of Securities on the HKSE or subsidiary of Wing On that is to be
     listed on a stock exchange through an initial public offering at the price
     (the "Spin-off Shares"), subject to anti-dilutive adjustments, at which the
     Spin-off Shares are actually issued to the public at the time of the
     listing on that stock exchange. The decision on whether to list any of its
     affiliated company or subsidiary in the future is at the sole discretion of
     the directors of Wing On.


                                     F-115

<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES,
                   PER SHARE DATA AND UNLESS OTHERWISE STATED)

5.   CONVERTIBLE NOTE RECEIVABLE FROM AN AFFILIATE, NET/DERIVATIVE INSTRUMENT -
     CONTINUED

     The subscription of the Convertible Notes by the Company was completed on
     June 8, 2006 which was paid by its intermediate holding company on behalf
     of the Company as to HK$198,999 (equivalent to Rmb205,049), with the
     remainder being offset by advance previously made to Wing On.

     In accordance with SFAS No. 133 "Accounting for Derivative Instruments and
     Hedging Activities", as amended, the conversion option element of the Old
     Note, New Note and Convertible Notes represents an embedded derivative
     instrument which must be accounted for separately from the Old Note, New
     Note and Convertible Notes and, as such, to be measured at fair value when
     initially recorded and at subsequent reporting dates. The note element of
     the Old Note, New Note and Convertible Notes were also measured at fair
     value initially and subsequently at amortized cost, and was presented as
     convertible note receivable from an associate on the consolidated balance
     sheet. The fair value of this conversion options were estimated using the
     Black-Scholes option pricing model at the date of its issuance and at each
     subsequent balance sheet date. The impact of changes in fair value of this
     conversion option, taking into account the portion of the conversion option
     exercised during fiscal 2004, 2005 and 2006 (see note 4), was gain of
     Rmb59,929, loss of Rmb42,873 and Rmb19,459 which have been recognized in
     the consolidated statement of operations for fiscal 2004, 2005 and 2006,
     respectively.

6.   DEPOSIT PAID FOR ACQUISITION OF PROPERTIES

     On June 16, 2004, Manwide entered into a conditional sale and purchase
     agreement with Shanghai Jiu Cheng Investment Limited ("Jiu Cheng"), an
     unrelated property developer, for the acquisition of a parcel of land
     situated in Shanghai, the PRC (the "Land") and the 24-storey building and
     carpark being constructed (the "Building", hereinafter with the Land are
     collectively referred to as the "Xiang Zhang Garden").

     The total consideration for the acquisition of Xiang Zhang Garden, on a
     completion basis, is Rmb450,000. A deposit of Rmb50,000 was paid by Manwide
     to Jiu Cheng on June 18, 2004 and recorded as deposit paid for acquisition
     of properties as of December 31, 2004.

     The remaining consideration of Rmb400,000 is to be settled by the
     assumption of bank loans of Rmb380,000 and cash consideration of Rmb20,000
     upon the grant of bank loan and the transfer of the ownership of Xiang
     Zhang Garden to Manwide. The closing of the acquisition is subject to
     certain conditions precedent.

     According to the conditional sale and purchase agreement, prior to the
     completion of acquisition, Jiu Cheng should (i) obtain the certificate in
     respect of the land use rights of the Land and the ownership of the
     Building; (ii) obtain an approval from the relevant government authorities
     in Shanghai that the authorized usage of the properties be changed from
     office to both commercial and residential and that all relevant fees and
     charges arising from the sale of the Land payable to the relevant
     government authorities having been settled in full; (iii) agree with
     Manwide on the specification of installation, fixtures and furniture and
     other internal decoration of the properties; (iv) procure all the
     contractors engaged in the development/construction of the properties to
     enter into agreements with Manwide to bind these contractors with
     obligations to Manwide to rectify all defects of the properties which may
     arise after the completion of the development/construction; and (v) procure
     the granting of a loan ("Loan") to be granted by PRC banks to Manwide to
     finance the remaining consideration.


                                     F-116
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES,
                   PER SHARE DATA AND UNLESS OTHERWISE STATED)

6.   DEPOSIT PAID FOR ACQUISITION OF PROPERTIES - CONTINUED

     Provided that if the conditions are not fulfilled on or before June 1,
     2005, Manwide shall agree to a further extension of not less than 60 days
     without imposing any fine on Jiu Cheng. If the conditions are not fulfilled
     within the extended period, Manwide shall be entitled to terminate the
     agreement and Jiu Cheng shall refund the deposit to Manwide together with
     interests accrued during the period from the date of the agreement to the
     date of deposit is refunded and calculated on the relevant prevailing
     market interest rate.

     It is one of the conditions for completion of the acquisition that Jiu
     Cheng should obtain approval for the change of authorized usage of the
     properties from office to both commercial and residential. Should Jiu Cheng
     fail to obtain such approval within 150 days from the date of the
     agreement, Manwide is entitled to either (i) to proceed with the agreement
     in accordance with the existing terms and conditions; or (ii) to acquire
     the 1st to 7th floors and the 23rd floor of the properties together with
     the two levels underground carparks for a consideration of Rmb70,000.

     However, the conditions stated above for the change of use of Xiang Zhang
     Garden had not been fulfilled within the said period and accordingly, Jiu
     Cheng and the Group entered into another agreement dated February 3, 2005
     pursuant to which, among other things, (i) the Group will pay, on behalf of
     Jiu Cheng, Rmb22,000 to the main contractor of Xiang Zhang Garden (the
     "Main Contractor"); and (ii) the amount paid by the Group in (i) will be
     deducted from the purchases consideration of Xiang Zhang Garden.

     Further, the Group had advanced an additional Rmb8,000 to Jiu Cheng
     pursuant to this additional agreement and the aggregate sum paid by the
     Group to Jiu Cheng amounted to Rmb58,000 as of December 31, 2005.

     In June 2005, the Group had commenced legal proceedings against Jiu Cheng,
     among other things, to demand Jiu Cheng to fulfill its obligations under
     the above two agreements and applied to a PRC court an injunction order on
     Xiang Zhang Garden to stop Xiang Zhang Garden from being transferred (the
     "Injunction Order(s)"). It had also come to the attention of the Group that
     one of the three secured creditors of Jiu Cheng and the Main Contractor had
     already applied to and being granted the Injunction Orders and they,
     together with the other two secured creditors, had priority over the Group
     on Xiang Zhang Garden.

     As a condition precedent to the application of the Injunction Order, the
     Group had issued a counter guarantee of Rmb402,000 to an institution in the
     PRC which provided a guarantee of the same amount to the PRC court on
     behalf of the Group.

                                     F-117
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES,
                   PER SHARE DATA AND UNLESS OTHERWISE STATED)

6.   DEPOSIT PAID FOR ACQUISITION OF PROPERTIES - CONTINUED

     On June 22, 2006, the People's High Court of Shanghai City ruled the case
     in favor of the Group and demanded Jiu Cheng to continue fulfilling its
     obligations under the agreement dated February 3, 2005 and to cooperate
     with the Group to effect the release of the Injunction Orders and
     settlement of the related liabilities with its creditors so as to proceed
     with the transfer of legal title of Xiang Zhang Garden to the Group. The
     judgment also, among other things, demanded Jiu Cheng to pay RMB5,900 to
     the Group as compensation for the breach of the sale and purchase
     agreements.

     In August 2006, the Group has applied to the People's High Court of
     Shanghai City for a court execution order to enforce the June 2006 judgment
     against Jiu Cheng. At the same time, Jiu Cheng has initiated various
     discussions with the Group and its legal counsel with a view to settle this
     out of court but there was no significant progress on the resolution of
     this matter.

     In April 2007, an independent third party ("Buyer") made a letter of offer,
     inter alia, to acquire the Group's rights and obligations in Xiang Zhang
     Garden for RMB70,000 and made a deposit of the same amount into an escrow
     account held under the People's High Court of Shanghai City as protection
     to the Group. Under the same letter of offer, Jiu Cheng has also agreed to
     pay RMB13,000 to the Group to compensate for the various costs incurred by
     the Group relating to the legal proceedings against Jiu Cheng. The eventual
     execution of this offer is also subject to the agreement by the other
     secured and unsecured creditors of Jiu Cheng which the Buyer is in the
     process of getting those consents and there can be no assurance that the
     offer can be proceeded as planned. The directors of the Company consulted
     with the Group's legal counsel and were of the view that the carrying
     amount of deposit was not less than its recoverable amount and considered
     no impairment loss is identified.

7.   PLANT AND EQUIPMENT, NET

     Plant and equipment, net consist of the following:

<TABLE>
<CAPTION>
                                    2005   2006
                                    ----   ----
                                     Rmb    Rmb
<S>                                 <C>    <C>
Furniture and fixtures ..........     12     12
Motor vehicle ...................    332    332
                                     ---   ----
Total ...........................    344    344
Less: Accumulated depreciation ..    (42)  (104)
                                     ---   ----
                                     302    240
                                     ===   ====
</TABLE>

     Depreciation expense was RmbNil, Rmb42 and Rmb62 for years ended December
     31, 2004, 2005 and 2006 respectively.


                                     F-118
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES,
                   PER SHARE DATA AND UNLESS OTHERWISE STATED)

8.   INCOME TAXES PAYABLE

     The components of profit (loss) from continuing operations before income
     taxes and minority interests are as follows:

<TABLE>
<CAPTION>
                               YEAR ENDED DECEMBER 31,
                             ---------------------------
                               2004      2005      2006
                             -------   -------   -------
                               Rmb       Rmb       Rmb
<S>                          <C>       <C>        <C>
The PRC ..................    29,696    30,207     7,510
All other jurisdictions ..   152,246   (52,448)  (27,572)
                             -------   -------   -------
                             181,942   (22,241)  (20,062)
                             =======   =======   =======
</TABLE>

     The Company was incorporated under the laws of Bermuda and, under current
     Bermuda law, is not subject to tax on income or on capital gains. The
     Company has received an undertaking from the Ministry of Finance of Bermuda
     pursuant to the provisions of the Exempted Undertakings Tax Protection Act,
     1966, as amended, that in the event that Bermuda enacts any legislation
     imposing tax computed on profits or income, including any dividend or
     capital gains withholding tax, or computed on any capital asset, gain or
     appreciation, or any tax in the nature of estate duty or inheritance tax,
     then the imposition of any such tax shall not be applicable to the Company
     or to any of its operations or the shares, debentures or other obligations
     of the Company until March 28, 2016. This undertaking is not to be
     construed so as to (i) prevent the application of any such tax or duty on
     such person as an ordinary resident in Bermuda; or (ii) prevent the
     application of any tax payable in accordance with the provision of the Land
     Tax Act, 1967 or otherwise payable in relation to any land leased to the
     Company in Bermuda.

     The Group's PRC entities and subsidiaries are subject to income taxes
     calculated at tax rates (ranging from 17.5% to 44%) on the taxable income
     as reported in the statutory financial statements adjusted for taxation
     based on tax laws prevailing at their respective places of incorporation
     and operations.


                                     F-119
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES,
                   PER SHARE DATA AND UNLESS OTHERWISE STATED)

8.   INCOME TAXES PAYABLE - CONTINUED

     The reconciliation of the effective income tax rate based on profit (loss)
     from operations before income taxes and equity in earnings at equity method
     affiliates to the statutory income tax rates in Hong Kong is as follows:

<TABLE>
<CAPTION>
                                           YEAR ENDED DECEMBER 31,
                                           -----------------------
                                            2004     2005     2006
                                           -----    -----    -----
<S>                                         <C>     <C>      <C>
Profit tax rate in Hong Kong ...........    17.5%    17.5%    17.5%
Permanent differences relating to
   non-taxable income and non-deductible
   expenses ............................   (17.5%)  (29.6%)    4.6%
Change in valuation allowance ..........      --    (10.0%)   (6.5%)
Tax rate difference between tax
   jurisdictions .......................      --     16.1%   (21.4%)
Others .................................      --    (12.4%)     --
                                           -----    -----    -----
Effective tax rate .....................      --    (18.4%)   (5.8%)
                                           =====    =====    =====
</TABLE>

     The tax impact of temporary differences gives rise to the following
     deferred tax assets:

<TABLE>
<CAPTION>
                                                  2005     2006
                                                 ------   ------
                                                   Rmb      Rmb
<S>                                              <C>      <C>
Pre-operating expenses .......................    2,220    3,541
Valuation allowance for deferred tax assets ..   (2,220)  (3,541)
                                                 ------   ------
                                                     --       --
                                                 ======   ======
</TABLE>

     Income taxes expense consists of:

<TABLE>
<CAPTION>
                YEAR ENDED DECEMBER 31,
               ------------------------
                2004     2005     2006
               -----    -----    -----
                 Rmb     Rmb      Rmb
<S>            <C>      <C>      <C>
Current ...      --     4,083    1,164
Deferred ..      --        --       --
                ---     -----    -----
                 --     4,083    1,164
                ===     =====    =====
</TABLE>


                                     F-120

<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES,
                   PER SHARE DATA AND UNLESS OTHERWISE STATED)

9.   CAPITAL STOCK

     CAPITAL STOCK

     Each share of Supervoting Common Stock is entitled to 10 votes whereas each
     share of Common Stock is entitled to one vote. The Common Stock is
     identical to the Supervoting Common Stock as to the payment of dividends.
     Except for the difference in voting rights described above, the Supervoting
     Common Stock and the Common Stock rank pari passu in all respects.

     SHARE CAPITAL

     The Company was incorporated with an initial share capital of 1,200,000
     Common Stock with a par value of US$0.01 each which was later reclassified
     to Supervoting Common Stock. On May 14, 1993, the authorized share capital
     of the Company was further increased from US$12 to US$700 by the creation
     of 50,000,000 shares of Common Stock of par value US$0.01 each and
     18,800,000 shares of Supervoting Common Stock of par value US$0.01 each.
     6,000,000 shares of Supervoting Common Stock (including the 1,200,000
     Common Stock reclassified to Supervoting Common Stock) were issued to the
     then ultimate parent company of the Company as a consideration for the
     transfer of two PRC entities to the Company and on June 23, 1993, the
     Company redeemed 3,000,000 shares of its outstanding Supervoting Common
     Stock at their par value of US$0.01 per share.

     In September 2006, the Company converted the entire outstanding 3,000,000
     shares of Supervoting Common Stock into the same number of Common Stock of
     par value of US$0.01 each pursuant to the bye-laws of the Company upon
     receipt of a written notification from the sole holder of Supervoting
     Common Stock.

10.  COMMITMENTS AND CONTINGENCIES

     As of December 31, 2005 and 2006, the Group had outstanding capital
     commitments for acquisition of properties amounting to approximately
     Rmb402,000 and Rmb402,000.


                                     F-121
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES,
                   PER SHARE DATA AND UNLESS OTHERWISE STATED)

11.  DISTRIBUTION OF PROFIT

     (A)  DIVIDENDS

          Dividends from the PRC entities will be declared based on the profits
          as reported in their statutory financial statements. Such profits will
          be different from the amounts reported under U.S. GAAP. As of December
          31, 2004, 2005 and 2006, the Company's only subsidiary established in
          the PRC had no distributable profit and the Company's affiliates in
          the PRC had an accumulated profits on a consolidated basis of
          Rmb162,964, Rmb308,083 and Rmb348,566, respectively, as reported in
          their statutory financial statements.

          The Company did not propose or pay any dividends for the years ended
          December 31, 2004, 2005 and 2006 on the outstanding Supervoting Common
          Stock and Common Stock.

     (B)  PROFIT APPROPRIATION

          In accordance with the relevant laws and regulations for Sino-foreign
          equity joint venture enterprises, the PRC entities are required to
          make appropriation of 5% of after tax profit as prepared in accordance
          with accounting principles generally accepted in the PRC to
          non-distributable reserve funds as determined by the Board of Director
          of the PRC entities. These reserves include a general reserve fund, an
          enterprise expansion fund, and a staff welfare and incentive bonus
          fund. The general reserve fund is used to offset future extraordinary
          losses. The PRC entities may, upon resolution passed by the
          shareholders, convert the general reserve fund into capital. The
          enterprises expansion fund is used for the expansion of the PRC
          entities' operation and can be converted to capital subject to
          approval by the relevant authorities. The staff welfare and incentive
          bonus fund is used for the collective welfare of the employees of the
          PRC entities. In addition, certain of the PRC entities were granted
          special reserve fund by the government for specific projects carried
          out by the relevant PRC entities. The appropriation for the staff
          welfare and incentive bonus fund is charged to consolidated statements
          of operations of the PRC entities. All other reserve fund are included
          in retained earnings of the PRC entities but can only be used for
          specific purpose and are not distributable as cash dividend.

          Included in the accumulated deficit of the Group as of December 31,
          2004, 2005 and 2006 was non-distributable reserves attributable of
          Rmb1,403, Rmb1,403 and Rmb1,288, respectively.


                                     F-122
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES,
                   PER SHARE DATA AND UNLESS OTHERWISE STATED)

12.  RELATED PARTY BALANCES, TRANSACTIONS AND ARRANGEMENTS

     Parties are considered to be related to the Company if the parties that,
     directly or indirectly, through one or more intermediaries, control, are
     controlled by, or are under common control with the Company. Related
     parties also include principal owners of the Company, its management,
     members of the immediate families of principal owners of the Company and
     its management and other parties with which the Company may deal if one
     party controls or can significantly influence the management or operating
     policies of the other to an extent that one of the transacting parties
     might be prevented from fully pursuing its own separate interests. A party
     which can significantly influence the management or operating policies of
     the transacting parties or if it has an ownership interest in one of the
     transacting parties and can significantly influence the other to an extent
     that one or more of the transacting parties might be prevented from fully
     pursuing its own separate interests is also a related party.

     Other than those disclosed elsewhere in the consolidated financial
     statements, the Company also entered into the following related party
     transactions:

     (A)  DUE FROM/TO RELATED COMPANIES

          As of December 31, 2005 and 2006, the amounts due from/to ultimate
          parent company, fellow subsidiaries, related parties, an intermediate
          holding company, immediate holding company and former ultimate parent
          company were unsecured, non-interest bearing and had no fixed
          repayment terms.

     (B)  MANAGEMENT AND ADMINISTRATIVE SERVICES AGREEMENT

          Pursuant to a management and administrative services agreement between
          the Company and the former ultimate parent company in 1993 and renewed
          in 1997, 2000 and 2004, for a term of three years, the former ultimate
          parent company will provide certain management services to the Company
          for an annual fee of US$15 (Rmb120). In addition, the Company has
          agreed to reimburse the former ultimate parent company for
          administrative services of approximately Rmb6,200, Rmb4,798 and
          Rmb2,525 for the years ended December 31, 2004, 2005 and 2006,
          respectively, rendered on behalf of the Company on a cost plus 5%
          basis.


                                     F-123
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                 (AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES,
                   PER SHARE DATA AND UNLESS OTHERWISE STATED)

13.  STAFF RETIREMENT PLANS

     All of the Chinese employees of the PRC entities and Rosedale are entitled
     to an annual pension on retirement, which is equal to their ending basic
     salaries at their retirement dates. The Chinese government is responsible
     for the pension liabilities to these retired employees. The PRC entities
     and Rosedale are only required to make specified contributions to the
     state-sponsored retirement plan calculated at rates ranging from 14% to
     23.5% of average monthly salaries for the years ended December 31, 2004,
     2005 and 2006. The expense reported in the consolidated statements of
     operations related to these arrangements was RmbNil, Rmb18 and Rmb24 for
     the years ended December 31, 2004, 2005 and 2006 respectively.

14.  OTHER SUPPLEMENTAL INFORMATION

     The following items are included in the consolidated statements of
     operations:

<TABLE>
<CAPTION>
                                       YEAR ENDED DECEMBER 31,
                                       -----------------------
                                        2004     2005     2006
                                        ----    ------    ----
                                         Rmb      Rmb      Rmb
<S>                                    <C>      <C>       <C>
Foreign exchange gain (loss), net ..      21    (3,834)    551
</TABLE>

15.  SUBSEQUENT EVENTS

     Subsequent to December 2006, the following events have taken place:

     a) In addition to that disclosed in note 6, subsequent to December 31,
     2006, the Company converted a total of HK$237,000 (equivalent to
     approximately RMB239,000) Convertible Notes of Wing On into ordinary shares
     of HK$0.10 each of Wing On at conversion price of HK$0.79 per share and
     disposed of certain shares of Wing On thereafter. In addition, Wing On
     entered into placing agreements with Kingston Securities Limited
     ("Kingston") pursuant to which Kingston conditionally agreed to place up to
     450,000,000 shares in Wing On at a price of HK$0.80 per share to
     independent investors. As a result of these transactions, the interest of
     Wing On held by the Company was diluted from approximately 20.36% to 1.47%
     and Wing On became an other investments of the Company on June 30, 2007.

     b) In December 2007, the Company completed a transfer of certain of its
     assets and liabilities, including the deposit paid for acquisition of Xiang
     Zhang Garden, from its subsidiaries Manwide and The Rosedale Luxury Hotel &
     Suites Limited ("Rosedale") to another subsidiary of the Company.
     Subsequently, the Company completed the disposition of Manwide and Rosedale
     to an independent third party for a total consideration of HK$500
     (equivalent to approximately RMB504).

     c) In March 2008, the Company has entered into a share purchase agreement
     with Hanny Magnetics (B.V.I.) Limited, a fellow subsidiary, to acquire the
     entire 100% of outstanding shares in three investment companies, at a total
     cash consideration of HK$38,000. The acquisition was consummated in April
     2008.

     d) In March 2008, the Group has entered into an agreement with Jin Cheng
     through Rosedale, to disclaim its rights in Xiang Zhang Garden for a
     compensation of RMB83,000 which was received in April 2008.


                                     F-124
<PAGE>

                               ITEM 19. EXHIBITS

The following exhibits are filed as part of this annual report:

<TABLE>
<CAPTION>
EXHIBIT
 NUMBER   DESCRIPTION
-------   -----------
<S>       <C>
1         Memorandum and Articles of Association (incorporated by reference to
          Exhibit 1 to the Company's Form 20-F for the fiscal year ended
          December 31, 2001, Document Control Number: 02048962)

4(a)1     Contract dated June 16, 2004 between Shanghai Jiu Sheng Investment
          Company Limited and the Company for the acquisition of the Properties
          (incorporated by reference to Exhibit 4(a)2 to the Company's Form 20-F
          for the fiscal year ended December 31, 2005)

4(a)2     Contract dated November 30, 2004 among the Company, Wing On and the
          placing agent for the placing and subscription of 3,660 million shares
          of Wing On at a price of HK$0.028 per share
          (incorporated by reference to Exhibit 4(a)3 to the Company's Form 20-F
          for the fiscal year ended December 31, 2005)

4(a)3     Contract dated November 30, 2004 among the Company, Wing On and the
          placing agent for the placing and subscription of 2,340 million shares
          of Wing On at a price of HK$0.028 per share
          (incorporated by reference to Exhibit 4(a)4 to the Company's Form 20-F
          for the fiscal year ended December 31, 2005)

4(a)4     Contract dated February 4, 2005 among the Company, Wing On and the
          placing agent for the placing and subscription of 6,400 million shares
          of Wing On at a price of HK$0.022 per share
          (incorporated by reference to Exhibit 4(a)5 to the Company's Form 20-F
          for the fiscal year ended December 31, 2005)

4(a)5     Contract dated March 23, 2006 entered into between the Company and
          Wing On in relation to the subscription by the Company of the HK$300
          million 2% convertible exchangeable notes due 2011 of Wing On which
          entitle the holders thereof to convert the outstanding principal into
          Wing On shares at the initial conversion price of HK$0.79 per share of
          Wing On.
          (incorporated by reference to Exhibit 4(a)6 to the Company's Form 20-F
          for the fiscal year ended December 31, 2005)

4(c)1     Executive Share Option Scheme (incorporated by reference to Exhibit
          4(c) to the Company's Form 20-F for the fiscal year ended December 31,
          2001, Document Control Number: 02048962)

8         Subsidiaries of the Company

10(a)1    Agreement dated December 5, 2007 entered into between the Company and
          Martin Pacific Limited for the sale and purchase of the entire issued
          share capital of Manwide Holdings Limited

10(a)2    Agreement dated March 25, 2008 entered into between the Company and
          Hanny Magnetics (B.V.I.) Limited for the sale and purchase of the
          entire issued share capital of Cosmos Regent Limited, Cyber Generation
          Limited and Whole Good Limited

12(1)     Certification of the CEO of the Company pursuant to Rule 13a-14(a) of
          the Securities Exchange Act of 1934, as amended

12(2)     Certification of the CFO of the Company pursuant to Rule 13a-14(a) of
          the Securities Exchange Act of 1934, as amended

13(1)     Certification of the CEO of the Company pursuant to Section 906 of the
          Sarbanes-Oxley Act of 2002

13(2)     Certification of the CFO of the Company pursuant to Section 906 of the
          Sarbanes-Oxley Act of 2002

14(1)     Code of Ethics for Chief Executive and Senior Financial Officers
</TABLE>

<PAGE>

                                   SIGNATURES

     The registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.

                                        CHINA ENTERPRISES LIMITED
                                        (REGISTRANT)


                                        /s/ Chow Chun Man, Jimmy
                                        ----------------------------------------
                                        CHOW CHUN MAN, JIMMY
                                        Chief Financial Officer

Date: October 17, 2008

<PAGE>

                                 EXHIBITS INDEX

<TABLE>
<CAPTION>
EXHIBIT
 NUMBER   DESCRIPTION
-------   -----------
<S>       <C>
1         Memorandum and Articles of Association (incorporated by reference to
          Exhibit 1 to the Company's Form 20-F for the fiscal year ended
          December 31, 2001, Document Control Number: 02048962)

4(a)1     Contract dated June 16, 2004 between Shanghai Jiu Sheng Investment
          Company Limited and the Company for the acquisition of the Properties

4(a)2     Contract dated November 30, 2004 among the Company, Wing On and the
          placing agent for the placing and subscription of 3,660 million shares
          of Wing On at a price of HK$0.028 per share

4(a)3     Contract dated November 30, 2004 among the Company, Wing On and the
          placing agent for the placing and subscription of 2,340 million shares
          of Wing On at a price of HK$0.028 per share

4(a)4     Contract dated February 4, 2005 among the Company, Wing On and the
          placing agent for the placing and subscription of 6,400 million shares
          of Wing On at a price of HK$0.022 per share

4(a)5     Contract dated March 23, 2006 entered into between the Company and
          Wing On in relation to the subscription by the Company of the HK$300
          million 2% convertible exchangeable notes due 2011 of Wing On which
          entitle the holders thereof to convert the outstanding principal into
          Wing On shares at the initial conversion price of HK$0.79 per share of
          Wing On.

4(c)1     Executive Share Option Scheme (incorporated by reference to Exhibit
          4(c) to the Company's Form 20-F for the fiscal year ended December 31,
          2001, Document Control Number: 02048962)

8         Subsidiaries of the Company

10(a)1    Agreement dated December 5, 2007 entered into between the Company and
          Martin Pacific Limited for the sale and purchase of the entire issued
          share capital of Manwide Holdings Limited

10(a)2    Agreement dated March 25, 2008 entered into between the Company and
          Hanny Magnetics (B.V.I.) Limited for the sale and purchase of the
          entire issued share capital of Cosmos Regent Limited, Cyber Generation
          Limited and Whole Good Limited

12(1)     Certification of the CEO of the Company pursuant to Rule 13a-14(a) of
          the Securities Exchange Act of 1934, as amended.

12(2)     Certification of the CFO of the Company pursuant to Rule 13a-14(a) of
          the Securities Exchange Act of 1934, as amended.

13(1)     Certification of the CEO of the Company pursuant to Section 906 of the
          Sarbanes-Oxley Act of 2002

13(2)     Certification of the CFO of the Company pursuant to Section 906 of the
          Sarbanes-Oxley Act of 2002

14(1)     Code of Ethics for Chief Executive and Senior Financial Officers
</TABLE>