1. Background Synergy Value Evaluation Equity Value Cost of Capital Calculation – WACC components Cost of equity Cost of debt D/E ratio Tax rate

2. Background Synergy Value Evaluation Equity Value Cost of Capital Calculation – Cost of Equity Cost of equity components – Beta: 2.60 (From Quamnet.com) – Risk-free rate: 2.96% – Market return: 15.19% Cost of equity calculation – CAPM = Risk free rate + Beta × (Market return – Risk-free rate) – 34.75%

3. Background Synergy Value Evaluation Equity Value Cost of Capital Calculation – Cost of Equity Risk-free rate: Exchange Fund Notes during 15 years on September, 2008

4. Background Synergy Value Evaluation Equity Value Cost of Capital Calculation – Cost of Equity Market return: Daily geometric average growth rate of Hang Seng Index of the last 30 years, then obtain effective annual growth rate

5. Background Synergy Value Evaluation Equity Value Cost of Capital Calculation – Cost of Debt Retrieved directly from Huiyuan’s 2007 annual report 6.49%

6. Background Synergy Value Evaluation Equity Value Cost of Capital Calculation – Cost of equity = 34.75% – Cost of debt = 6.49% – D/E ratio = 0.33 – Tax rate = 33% (from Huiyuan’s 2007 annual report)

7. Background Synergy Value Evaluation Equity Value Cost of Capital Calculation – D/E ratio calculation Book value of debt = HKD 2,225,987,000 – Total liabilities from Huiyuan's 2007 consolidated balance sheet Market value of equity = HKD 6,741,866,376 – Share price = HKD 4.59 » Average closing price as quoted on the Stock Exchange for the 60 trading days prior to and including the last trading date – Number of shares = 1,468,816,204 » Stated in Huiyuan’s 2007 annual report

8. Background Synergy Value Evaluation Equity Value Cost of Capital Calculation – WACC Formula – Cost of Capital = 27.20%

9. Background Synergy Value Evaluation Equity Value