For the year ended 31 March 2007, the Group recorded a turnover of HK$19.97 million which represented an increase of 31% when compared with HK$15.21 million in previous year. The increase in turnover was due to the increase in sales of pharmaceutical products during the year under review. On the other hand, the fair value of the Group’s investment property at 31 March 2007 was determined as HK$17.4 million on the basis of a valuation carried out by qualified professional valuers. The resulting gain arising from change in fair value of the investment property of HK$1.8 million was recognized in the income statement for theyear under review according to the Hong Kong Financial Reporting Standard.

The Group shared the loss of associated companies amounting to HK$16.2 million during the year under review (a share of profits of associated companies amounting to HK$1.8 million for the previous year), in which the Group shared the profit from Yunnan Xingning color Material Printing Co., Ltd amounting toHK$0.95 million and shared the loss from Shenzhen Xinpeng amounting to HK$17.1 million. Taking into account the income tax expense and the minority interests, the Group recorded a loss attributable to shareholders of the Company of HK$39.8 million for the financial year ended 31 March 2007, compared to a net profit of HK$4.4 million for the previous year. Loss per share for the current year was 7.86 cent with profit per share of 0.86 cent for the previous year.

The Group’s pharmaceutical business is carried out by its non-wholly owned subsidiary, Yunnan Meng Sheng Pharmaceutical Co., Limited (“Meng Sheng Pharmaceutical”), which is located in Kunming, the Yunnan Province. Sales orders for its new product “Cerebroprotein Hydrolysate for Injection” (launched in November 2004) surged up in an encouraging pace following its well response from the market. During the year under review, Meng Sheng Pharmaceutical recorded a turnover of HK$17.6 million, represented an increase of 33% over the comparative amount in last year. Accordingly, Meng Sheng Pharmaceutical recorded a net profit of HK$6.1 million during the year under review and continued to maintain its growing trend in its operating results.

The product selling price of Shenzhen Xinpeng Biotechnology Engineering Company Limited (“Xinpeng Biotechnology Engineering”, one of the Group’s associated companies) continued to face downward pressure during the period under review. Nevertheless, sales quantity of the corresponding product was able to record mild growth, which was attributable to the enhanced marketing efforts enforced by the entity’s sales team. However, turnover of Xinpeng Biotechnology Engineering dropped during the year under review in view of tough competition in the domestic pharmaceutical market. Despite that, the management of the entity continued to exercise stringent control on its operating costs during the year under review. As a result, Xinpeng Biotechnology Engineering recorded a loss of HK$35.7 million during the year under review, mainly arised from impairment loss on certain of its operating assets and investment amounted to HK$27.5 million. On the other hand, the Group’s another associated company Yunnan Xingning Color Material Printing Co., Limited (“Yunnan Xingning”) continued its increasing trend in operating results. Yunnan Xingning recorded a net profit of HK$3.8 million during the year under review (a net profit of Rmb3.45 million for the previous year) with HK$0.95 million shared by the Group, further indicating the full support of the joint venture partner in its business. Accordingly, the Group shares loss of associated companies amounting to HK$16.2 million during the year under review.

During the year ended 31 March 2007, the Group conducts a review of the recoverable amount of the investment in Yuxi Globe and determines that impairment loss of HK$22.48 million was charged to the consolidated income statement. The recoverable amount calculation requires the Group to estimate the future dividend income expected to receive from the investment and a suitable discount rate in order to calculate the present value. The expected dividend income is based on the past performance and the management’s expectations for market development.

Despite that an impairment loss on Yuxi Globe amounting of HK$22.48 million has to be recognized during the period under review, it is anticipated that Yuxi Globe will continue to record profit for its financial year ending 31 December 2007. Given the strong foundation of Yuxi Globe, the Group is still optimistic with regard to its prospect. With strong research and development foundation, Meng Sheng Pharmaceutical will continue to explore and develop other new products. Diversified product portfolio and modern production facilities enable the entity to cope with the intense competition in the domestic pharmaceutical market effectively. The Group therefore believes that the pharmaceutical business will be further enhanced in the future. Moreover, the operating results of the Group’s two main associated companies, Xinpeng Biotechnology Engineering and Yunnan Xingning, will expect to improve by Research & development of new medicine and increase under their existing experienced management team. The Group will also commit to maintain its effective cost control measures. The Group therefore believes that satisfactory results could be achieved in the coming years.

The Group continued to sustain a liquidity position. As at 31 March 2007, the Group had cash and bank balances of approximately HK$66 million. Approximately 55% and 44% of the total cash and bank balances were denominated in United States dollar and Renminbi respectively with the remaining in Hong Kong dollar. As in the past, the Group has no external borrowings. With this strong financial position, the Group has sufficient financial resources to meet its operations and future development needs.

The Group’s assets, liabilities and transactions are denominated either in Hong Kong dollar, Renminbi or United States dollar. The Group considers that the exchange rate risk is minimal and no hedging measures are necessary at this stage.

The Group did not have any charges on assets as at 31 March 2007 and 31 March 2006.