prospectus dated backed by extensive r&d and brand name...

Prospectus dated8 March 2005(Registered by the Monetary Authority of Singapore on 8 March 2005)

Specialist in the design, R&D as well as manufacture of customised energy saving andenvironmental protection products with heat transfer technologies currently used in thefollowing industries:• Petrochemical • Steel • Transportation

Range of products include • Heat Pipes and Heat Pipe Exchangers used in the recovery of residual heat in

petrochemical, steel, chemical and transportation projects• Proprietary Pipe Supports used to insulate pipes from either high or low

temperatures and supporting structure to lower the energy loss duringtransportation and to protect pipelines by absorbing vibrations

• Waste Gas and Energy Recovery Systems used to recycle the residual heatand recover useful petrochemical by-products

• Pressure Vessels used to hold fluid and gas contents under pressure, in particular,corrosion resistant heat exchangers and high efficiency heat exchangers

The growth of the PRC economy has led to an increasing demand for energy and energysaving measures. As our products are mostly used in energy projects and have energysaving features, we expect demand for each of our product range to grow.

Heat Pipes and Heat Pipe Exchangers– Demand from petrochemical and steel projects being implemented to address

the energy needs of the PRC, which include both energy related pipelineinfrastructure as well as demand for pipe supports for existing pipeline networks

– Increasing awareness and emphasis on energy saving measures, whichwill lead to increasing demand for heat pipes in electricpower, CPU heat discharge, use of solar energy, air-conditioning system and chemical projects

– There is also a huge replacement market as heat pipesare highly customised and have a limited life span ofbetween three and five years

– Expected stable demand from on-goingconstruction of Qinghai-Tibet railway

Industry Prospects

Corporate Prof i le

Invitation in respect of 113,165,000 ordinary shares of US$0.01 each comprising49,000,000 New Shares and 64,165,000 Vendor Shares as follows:-

(1) 2,000,000 Offer Shares at S$0.22 each by way of public offer; and (2) 111,165,000 Placement Shares at S$0.22 each by way of placement,

payable in full on application.

This document is important. If you are in any doubt as to the action you should take, you shouldconsult your stockbroker, bank manager, solicitor, accountant, or other professional adviser.

We have made an application to the Singapore Exchange Securities Trading Limited (“SGX-ST”) forpermission to deal in and for quotation of the ordinary shares of US$0.01 each (the “Shares”) in thecapital of Sunpower Group Ltd. (the “Company”) already issued (including the Vendor Shares), the newShares which are the subject of the Invitation (the “New Shares”) and the Shares which may be issuedupon the exercise of the options to be granted under the Sunpower Employee Share Option Scheme(the “Option Shares”). Such permission will be granted when we have been admitted to the Official Listof the SGX-ST Dealing and Automated Quotation System (”SGX-SESDAQ”). The dealing in and quotationof the Shares will be in Singapore dollars.

Acceptance of applications will be conditional upon permission being granted by the SGX-ST to deal in,and for quotation of, all of the issued Shares (including the Vendor Shares), the New Shares and the Option

Shares. If the completion of the Invitation does not occur because such permission is not granted or for anyother reasons, moneys paid in respect of any application accepted will be returned to you at your own risk,

without interest or any share of revenue or other benefit arising therefrom and you will not have any claimswhatsoever against us, the Vendors or the Manager.

The SGX-ST assumes no responsibility for the correctness of any of the statements or opinions made or reportscontained in this Prospectus. Admission to the Official List of the SGX-SESDAQ is not to be taken as an indication

of the merits of the Invitation, our Company, our subsidiaries, our Shares (including the Vendor Shares), the NewShares or the Option Shares.

A copy of this Prospectus has been lodged with and registered by the Monetary Authority of Singapore (the “Authority”).The Authority assumes no responsibility for the contents of this Prospectus. Registration of this Prospectus by the

Authority does not imply that the Securities and Futures Act (Chapter 289), or any other legal or regulatory requirements,have been complied with. The Authority has not, in any way, considered the merits of the shares or units of shares, as

the case may be, being offered or in respect of which an invitation is made, for investment.

The Bermuda Monetary Authority has given its consent to the issue of the New Shares and the sale of the Vendor Sharespursuant to the Invitation on the terms referred to in this Prospectus. A copy of this Prospectus has been filed or will, assoon as reasonably practicable, be filed with the Registrar of Companies in Bermuda. In accepting this Prospectus for filingand in granting such consent, the Registrar of Companies in Bermuda and the Bermuda Monetary Authority accept noresponsibility for the financial soundness of our Group or any proposal or for the correctness of any of the statements madeor opinions expressed herein or any of the other documents referred to in this Prospectus.

Investing in our Shares involves risks which are described in the section entitled “RISK FACTORS” of this Prospectus.No Shares will be allotted or allocated on the basis of this Prospectus later than six months after the date of registrationof this Prospectus.

(Incorporated in Bermuda on 28 April 2004)

Backed by EXTENSIVE R&D and brandname, Sunpower Group Ltd. specialisesin the design and manufacturing ofENERGY SAVING and ENVIRONMENTALPROTECTION products with heat transfertechnologies to customers in the petrochemical,steel and transportation industries.

Underwriter and Placement Agent

Manager

Rm301, Suning Universal Mansion, No. 188Guangzhou Road, Nanjing, China 210024

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Strong emphasis on R&D• Established track record for

producing innovat ive andcommercially viable products. Todate, we have developed about10 patents which have beencommercialised and adopted inour products

• Executive Chairman, Guo HongXin has accumulated extensiveknowledge in respect of heattransfer technology

• Collaboration with prestigiousuniversities and institutes toconduct research in heat pipesand various environmentalprotection and energy savingproducts

Recognised brand names andstrong customer base• Established brand names of

“Sunpower” and “Shengnuo” witha reputation as a reliable solutionsprovider supported by proprietaryproducts

• Customers include major namesin the industry such as

SINOPEC; CNPC; ShanghaiSECCO Petrochemical Co.,

Ltd (a joint venture between BPand Shanghai Petrochemical); YPC-BASF Co., Ltd (a joint venturebetween Yangtze Petrochemicaland BASF); PRAXAIR, andBaosteel Shanghai Meishan(Group) Ltd

• A member of both SINOPECmaterials supply network andCNPC first tier network. Thesepre-qualify us to supply productsto companies in the SINOPECand CNPC groups

Proven solutions provider• We focus on providing our

customers with innovative solutionswhich incorporate our products

• We focus our marketing efforts ondesign centres of petrochemical,steel and chemical projects in thePRC to promote the adoption ofour solutions in their design plans

PRC as our home turf• Our management team is

familiar with the PRC businessenvironment and industry and isable to grasp market opportunitiesand provide customised products

Strengthen R&D capabilities and increase product range• Continue to strengthen our R&D capabilities by investing in

advanced technology to facilitate the development of newtechnologies and designs

• Increase the strength of our R&D team and increase our R&D efforts withPRC research institutions and universities

Increase production capacity

• Through additional production space and production equipment

Develop PRC market further and expand to overseas markets• Expand our market share in petrochemical and steel projects and diversify into other

industries including electric power, chemical companies and transportation industries• Penetrate into overseas markets as our advanced technology coupled with the

relatively low labour cost in the PRC will give us a competitive edge in these markets

Explore acquisitions, joint ventures, strategic investments or alliances• Post-listing, to take advantage of favourable financing resources to seek out synergistic

businesses to bolster our growth potential via acquisitions or through other avenues• These could include the acquisition of manufacturing facilities with quality assets

where we could extract synergistic value with our proven management capability

Pipe Supports– Demand from energy related

pipeline infrastructure being built,as well as demand for pipesupports for existing pipelinenetworks due to growingawareness and emphasis on theneed to save energy

Waste Gas and Energy RecoverySystems– Demand is expected to grow in

line with the national policy forenvironmental protection as oursystem is environmental friendly

as they reduce the amount ofpollutants discharged as well ascosts by recovering and recyclingwaste energy

Pressure Vessels– Continued market growth due to

increasing demand for corrosionresistant heat exchangers amongoil refineries in the PRC

– As these pressure vessels arehighly customised and have a lifespan of between two and fiveyears, there is a replacementmarket for such products

Competit ive Strengths

Our Strategiesand Future Plans

0

20

40

60

80

100

RMB’mRevenue

FY2001 FY2002 FY2003 FP2003* FP2004*

* Six months ended 30 June 2003 and 30 June 2004

44.4

64.4

96.8

44.7

100.5

0

5

10

15

20

25

RMB’m (Loss)/Profit Before Income Tax

* Six months ended 30 June 2003 and 30 June 2004

FY2001 FY2002 FY2003 FP2003* FP2004*

(0.8) 0.1

14.3

23.1

6.6

Financial Highl ightsFinancial Year ended 31 December - Pro Forma Group

Prospectus dated8 March 2005(Registered by the Monetary Authority of Singapore on 8 March 2005)

Specialist in the design, R&D as well as manufacture of customised energy saving andenvironmental protection products with heat transfer technologies currently used in thefollowing industries:• Petrochemical • Steel • Transportation

Range of products include • Heat Pipes and Heat Pipe Exchangers used in the recovery of residual heat in

petrochemical, steel, chemical and transportation projects• Proprietary Pipe Supports used to insulate pipes from either high or low

temperatures and supporting structure to lower the energy loss duringtransportation and to protect pipelines by absorbing vibrations

• Waste Gas and Energy Recovery Systems used to recycle the residual heatand recover useful petrochemical by-products

• Pressure Vessels used to hold fluid and gas contents under pressure, in particular,corrosion resistant heat exchangers and high efficiency heat exchangers

The growth of the PRC economy has led to an increasing demand for energy and energysaving measures. As our products are mostly used in energy projects and have energysaving features, we expect demand for each of our product range to grow.

Heat Pipes and Heat Pipe Exchangers– Demand from petrochemical and steel projects being implemented to address

the energy needs of the PRC, which include both energy related pipelineinfrastructure as well as demand for pipe supports for existing pipeline networks

– Increasing awareness and emphasis on energy saving measures, whichwill lead to increasing demand for heat pipes in electricpower, CPU heat discharge, use of solar energy, air-conditioning system and chemical projects

– There is also a huge replacement market as heat pipesare highly customised and have a limited life span ofbetween three and five years

– Expected stable demand from on-goingconstruction of Qinghai-Tibet railway

Industry Prospects

Corporate Prof i le

Invitation in respect of 113,165,000 ordinary shares of US$0.01 each comprising49,000,000 New Shares and 64,165,000 Vendor Shares as follows:-

(1) 2,000,000 Offer Shares at S$0.22 each by way of public offer; and (2) 111,165,000 Placement Shares at S$0.22 each by way of placement,

payable in full on application.

This document is important. If you are in any doubt as to the action you should take, you shouldconsult your stockbroker, bank manager, solicitor, accountant, or other professional adviser.

We have made an application to the Singapore Exchange Securities Trading Limited (“SGX-ST”) forpermission to deal in and for quotation of the ordinary shares of US$0.01 each (the “Shares”) in thecapital of Sunpower Group Ltd. (the “Company”) already issued (including the Vendor Shares), the newShares which are the subject of the Invitation (the “New Shares”) and the Shares which may be issuedupon the exercise of the options to be granted under the Sunpower Employee Share Option Scheme(the “Option Shares”). Such permission will be granted when we have been admitted to the Official Listof the SGX-ST Dealing and Automated Quotation System (”SGX-SESDAQ”). The dealing in and quotationof the Shares will be in Singapore dollars.

Acceptance of applications will be conditional upon permission being granted by the SGX-ST to deal in,and for quotation of, all of the issued Shares (including the Vendor Shares), the New Shares and the Option

Shares. If the completion of the Invitation does not occur because such permission is not granted or for anyother reasons, moneys paid in respect of any application accepted will be returned to you at your own risk,

without interest or any share of revenue or other benefit arising therefrom and you will not have any claimswhatsoever against us, the Vendors or the Manager.

The SGX-ST assumes no responsibility for the correctness of any of the statements or opinions made or reportscontained in this Prospectus. Admission to the Official List of the SGX-SESDAQ is not to be taken as an indication

of the merits of the Invitation, our Company, our subsidiaries, our Shares (including the Vendor Shares), the NewShares or the Option Shares.

A copy of this Prospectus has been lodged with and registered by the Monetary Authority of Singapore (the “Authority”).The Authority assumes no responsibility for the contents of this Prospectus. Registration of this Prospectus by the

Authority does not imply that the Securities and Futures Act (Chapter 289), or any other legal or regulatory requirements,have been complied with. The Authority has not, in any way, considered the merits of the shares or units of shares, as

the case may be, being offered or in respect of which an invitation is made, for investment.

The Bermuda Monetary Authority has given its consent to the issue of the New Shares and the sale of the Vendor Sharespursuant to the Invitation on the terms referred to in this Prospectus. A copy of this Prospectus has been filed or will, assoon as reasonably practicable, be filed with the Registrar of Companies in Bermuda. In accepting this Prospectus for filingand in granting such consent, the Registrar of Companies in Bermuda and the Bermuda Monetary Authority accept noresponsibility for the financial soundness of our Group or any proposal or for the correctness of any of the statements madeor opinions expressed herein or any of the other documents referred to in this Prospectus.

Investing in our Shares involves risks which are described in the section entitled “RISK FACTORS” of this Prospectus.No Shares will be allotted or allocated on the basis of this Prospectus later than six months after the date of registrationof this Prospectus.

(Incorporated in Bermuda on 28 April 2004)

Backed by EXTENSIVE R&D and brandname, Sunpower Group Ltd. specialisesin the design and manufacturing ofENERGY SAVING and ENVIRONMENTALPROTECTION products with heat transfertechnologies to customers in the petrochemical,steel and transportation industries.

Underwriter and Placement Agent

Manager

Rm301, Suning Universal Mansion, No. 188Guangzhou Road, Nanjing, China 210024

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TABLE OF CONTENTS

Page

CORPORATE INFORMATION ........................................................................................................ 4

DEFINITIONS .................................................................................................................................. 7

GLOSSARY OF TECHNICAL TERMS ............................................................................................ 13

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS ................................ 14

PURCHASE BY OUR COMPANY OF OUR OWN SHARES .......................................................... 15

ATTENDANCE AT GENERAL MEETINGS .................................................................................... 16

TAKE-OVERS .................................................................................................................................. 17

SELLING RESTRICTIONS .............................................................................................................. 18

DETAILS OF THE INVITATION ........................................................................................................ 19

LISTING ON THE SGX-SESDAQ .............................................................................................. 19

INDICATIVE TIMETABLE FOR LISTING .................................................................................... 21

PROSPECTUS SUMMARY ............................................................................................................ 22

OVERVIEW OF OUR GROUP .................................................................................................... 22

OUR PRODUCTS ...................................................................................................................... 22

OUR COMPETITIVE STRENGTHS ............................................................................................ 22

OUR STRATEGIES AND FUTURE PLANS ................................................................................ 23

WHERE YOU CAN FIND US ...................................................................................................... 24

THE INVITATION ............................................................................................................................ 25

PLAN OF DISTRIBUTION .............................................................................................................. 26

USE OF PROCEEDS ...................................................................................................................... 28

ISSUE STATISTICS ........................................................................................................................ 29

RISK FACTORS .............................................................................................................................. 30

RISKS RELATING TO OUR BUSINESSES AND OPERATIONS ................................................ 30

RISKS RELATING TO THE PRC ................................................................................................ 34

RISKS RELATING TO OUR SHARES ........................................................................................ 35

EXCHANGE RATES ........................................................................................................................ 38

SELECTED GROUP FINANCIAL INFORMATION ........................................................................ 39

REVIEW OF PAST OPERATING PERFORMANCE AND FINANCIAL CONDITION .................... 44

OVERVIEW ................................................................................................................................ 44

REVIEW OF PAST PERFORMANCE ........................................................................................ 48

LIQUIDITY AND CAPITAL RESOURCES .................................................................................. 54

MATERIAL CAPITAL EXPENDITURES ...................................................................................... 56

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CREDIT MANAGEMENT ............................................................................................................ 57

INVENTORY MANAGEMENT .................................................................................................... 58

DIVIDENDS ................................................................................................................................ 58

CAPITALISATION AND INDEBTEDNESS .................................................................................. 59

FOREIGN EXCHANGE MANAGEMENT .................................................................................... 60

EXCHANGE CONTROLS .......................................................................................................... 60

PROPERTIES AND FIXED ASSETS .......................................................................................... 61

MANUFACTURING FACILITIES AND CAPACITY ...................................................................... 62

DILUTION ........................................................................................................................................ 63

GENERAL INFORMATION ON OUR GROUP ................................................................................ 64

SHARE CAPITAL ........................................................................................................................ 64

SHAREHOLDERS ...................................................................................................................... 66

VENDORS.................................................................................................................................... 69

MORATORIUM ............................................................................................................................ 69

GROUP STRUCTURE ................................................................................................................ 71

HISTORY AND BUSINESS ............................................................................................................ 75

OUR HISTORY ............................................................................................................................ 75

OUR BUSINESS ........................................................................................................................ 77

OUR PRODUCTS ...................................................................................................................... 78

QUALITY CONTROL .................................................................................................................. 83

RESEARCH AND DEVELOPMENT .......................................................................................... 84

SALES AND MARKETING .......................................................................................................... 86

INTELLECTUAL PROPERTY .................................................................................................... 87

MAJOR CUSTOMERS ................................................................................................................ 89

MAJOR SUPPLIERS .................................................................................................................. 91

GOVERNMENT REGULATIONS ................................................................................................ 92

COMPETITION .......................................................................................................................... 93

COMPETITIVE STRENGTHS .................................................................................................... 94

PROSPECTS AND FUTURE PLANS ........................................................................................ 95

DIRECTORS, MANAGEMENT AND STAFF .................................................................................. 99

OUR MANAGEMENT STRUCTURE .......................................................................................... 99

DIRECTORS .............................................................................................................................. 100

MANAGEMENT .......................................................................................................................... 104

REMUNERATION ........................................................................................................................ 105

EMPLOYEES .............................................................................................................................. 106

SERVICE AGREEMENTS .......................................................................................................... 106

CORPORATE GOVERNANCE .................................................................................................... 107

THE SUNPOWER EMPLOYEE SHARE OPTION SCHEME ...................................................... 108

INTERESTED PERSON TRANSACTIONS .................................................................................... 114

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CONFLICT OF INTERESTS ............................................................................................................ 115

REVIEW BY AUDIT COMMITTEE .................................................................................................. 116

GENERAL AND STATUTORY INFORMATION .............................................................................. 117

INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS .............................................. 117

SHARE CAPITAL ........................................................................................................................ 118

LITIGATION ................................................................................................................................ 118

EXPENSES ................................................................................................................................ 118

MATERIAL CONTRACTS .......................................................................................................... 119

MISCELLANEOUS ...................................................................................................................... 121

CONSENTS ................................................................................................................................ 121

DOCUMENTS AVAILABLE FOR INSPECTION ........................................................................ 121

STATEMENT BY OUR DIRECTORS AND THE VENDORS ...................................................... 122

APPENDIX A

COMPILATION REPORT OF REPORTING AUDITORS ON PRO FORMA FINANCIAL INFORMATION ............................................................................................................................ A-1

APPENDIX B

TAXATION .................................................................................................................................. B-1

APPENDIX C

SUMMARY OF THE CONSTITUTION OF THE COMPANY ...................................................... C-1

APPENDIX D

SUMMARY OF BERMUDA COMPANY LAW .............................................................................. D-1

APPENDIX E

RULES OF THE SUNPOWER EMPLOYEE SHARE OPTION SCHEME .................................. E-1

APPENDIX F

TERMS AND CONDITIONS AND PROCEDURES FOR APPLICATION .................................. F-1

APPENDIX G

SUMMARY OF RELEVANT PRC LAWS AND REGULATIONS ................................................ G-1

APPENDIX H

THE AUDITED FINANCIAL STATEMENTS OF SUNPOWER PETROCHEMICAL FOR THE THREE YEARS ENDED 31 DECEMBER 2001, 2002 AND 2003 .............................................. H-1

APPENDIX I

THE AUDITED FINANCIAL STATEMENTS OF SUNPOWER PETROCHEMICAL FOR THE FOUR-MONTH PERIOD ENDED 30 APRIL 2004 .................................................................... I-1

APPENDIX J

THE AUDITED FINANCIAL STATEMENTS OF SUNPOWER TECHNOLOGY FROM 16 APRIL 2004 (DATE OF ESTABLISHMENT) TO 30 JUNE 2004 ............................................ J-1

APPENDIX K

THE AUDITED FINANCIAL STATEMENTS OF SUNPOWER GROUP LTD. FROM 28 APRIL 2004 (DATE OF INCORPORATION) TO 30 JUNE 2004 ............................................ K-1

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CORPORATE INFORMATION

BOARD OF DIRECTORS : Guo Hong Xin (Executive Chairman)Li Lai Suo (Executive Director)Ma Ming (Executive Director)Jiang Ning (Independent Director)Lau Ping Sum Pearce (Independent Director)Tham Hock Chee (Independent Director)Chin Sek Peng (Independent Director)

BERMUDA RESIDENT REPRESENTATIVE : Jonathan Evans*

BERMUDA ASSISTANT RESIDENT : Appleby Corporate Services (Bermuda) Ltd.REPRESENTATIVE AND ASSISTANT Canon’s CourtSECRETARY 22 Victoria Street

Hamilton HM 12Bermuda

JOINT COMPANY SECRETARIES : Tong Min Lee, LLB (Hons)Chew Bee Leng, ACISRovonne Roberts*

REGISTERED OFFICE : Canon’s Court22 Victoria StreetHamilton HM 12Bermuda

REGISTRAR FOR THE INVITATION AND : Lim Associates (Pte) LtdSINGAPORE SHARE TRANSFER AGENT 10 Collyer Quay #19-08

Ocean BuildingSingapore 049315

BERMUDA SHARE REGISTRAR AND : Reid Management LimitedTRANSFER AGENT Argyle House

41A Cedar Avenue Hamilton HM 12Bermuda

MANAGER : Stirling Coleman Capital Limited4 Shenton Way #07-03SGX Centre 2 Singapore 068807

UNDERWRITER AND PLACEMENT AGENT : UOB Kay Hian Private Limited80 Raffles Place #30-01UOB Plaza 1Singapore 048624

SOLICITORS TO THE INVITATION AND : Wong PartnershipLEGAL ADVISERS TO OUR COMPANY 80 Raffles Place #58-01AS TO SINGAPORE LAW UOB Plaza 1

Singapore 048624

* Mr Jonathan Evans and Ms Rovonne Roberts will resign as Bermuda Resident Representative and Company Secretaryrespectively upon listing of the Shares on the SGX-SESDAQ, upon which Appleby Corporate Services (Bermuda) Ltd. will remainas the Assistant Secretary of our Company and will also be appointed as the Bermuda Resident Representative.

4

REPORTING ACCOUNTANTS AND : Deloitte & ToucheAUDITORS Certified Public Accountants

6 Shenton Way #32-00DBS Building Tower Two Singapore 068809

LEGAL ADVISERS TO OUR COMPANY : Pudong Law OfficeAS TO PRC LAW Room 608 Tomson Financial Building

710 Dong Fang RoadShanghai, PRC200122

LEGAL ADVISERS TO OUR COMPANY : Appleby Spurling HunterAS TO BERMUDA LAW 5511 The Center

99 Queens RoadCentral, Hong Kong

PRINCIPAL BANKERS : Bank of CommunicationJiangning BranchNo. 1 Zhongxin Road NorthJiangning Development ZoneNanjing, Jiangsu, PRC

Nanjing City Commercial BankGuanghua BranchNo. 11 Daguang RoadNanjing, Jiangsu, PRC

RECEIVING BANKER : The Bank of East Asia, LimitedSingapore Branch137 Market StreetBank of East Asia BuildingSingapore 048943

VENDORS : Allgreat Pacific LimitedCommence Chambers, P.O. Box 2208, Road Town, Tortola, British Virgin Islands

Armour Asia LimitedCommence Chambers, P.O. Box 2208, Road Town, Tortola, British Virgin Islands

Claremont Consultancy LimitedCommence Chambers, P.O. Box 2208, Road Town, Tortola, British Virgin Islands

Ang Poon Tiak 1-F, Tanglin Hill, Singapore 248024

Aw Cheok Huat 7 Ringwood Road, Singapore 437402

Phillip Roger Bennett125 Colt Lane, Gladstone, New Jersey, USA, 07934

Chu Tee Seng 34 Draycott Park, Singapore 259388

5

Goh Soo Siah 23 Greenleaf Drive, Singapore 279536

Robin Lim Kai Wun 685C Woodlands Drive 73, #09-32, Singapore 733685

Tan Tiong Cheng47 Watten Rise, Singapore 287368

Tan Eng Kian19 Margoliouth Road, Singapore 258545

Tay Hui Peng 48A Dorset Road, #25-117, Singapore 211048

Wong Keng Yin 389 Kew Crescent, Singapore 466284

Zacchaeus Boon Suan Zin 6E, Jalan Novena Barat, Singapore 308605

Vertex Resources LimitedCommence Chambers, P.O.Box 2208, Road Town,Tortola, British Virgin Islands

Equity-Link Asia LimitedCommence Chambers, P.O.Box 2208, Road Town,Tortola, British Virgin Islands

Chua Kian Peng84A Surin Avenue, Singapore 535653

Chau-Chan Sui Yung3 Khiang Guan Avenue, Singapore 308381

Ng E-Ming Joyce21A Fernhill Road, Singapore 259073

Chen JiongRoom 2205, Building No. 2, 185 Zao Yang Road,Shanghai, 200062, China

Tan Lweng NgohBlock 131, Simei Street 1, #08-214, Singapore 520131

Wong Hiu KinUnit 3503, 35/F., Cosco Tower, 183 Queen’s Road, Central, Hong Kong

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DEFINITIONS

In this Prospectus and the accompanying Application Forms and, in relation to Electronic Applications,the instructions appearing on the screens of the ATMs or the IB websites of the relevant ParticipatingBanks, the following definitions apply where the context so admits:-

Our Group Companies

“Company” or “Sunpower” : Sunpower Group Ltd.

“Group” or “Pro Forma Group” : Our Company and its subsidiaries following the completion ofthe Restructuring Exercise, treated for the purpose of thisProspectus, as if it had been in existence since 1 January 2001on the basis described in the Compilation Report

“Perimeter Pacific” : Perimeter Pacific Limited

“Sun Superior” : Sun Superior Holdings Ltd

“Sunpower Technology” : Jiangsu Sunpower Technology Co., Ltd

“Nanjing Shengnuo” : Nanjing Shengnuo Heat Pipe Co., Ltd

Other Corporations and Agencies

“Authority” or “MAS” : The Monetary Authority of Singapore

“CDP” : The Central Depository (Pte) Limited

“CNPC” : China National Petroleum Corporation

“Jiangsu Shengnuo” : Jiangsu Shengnuo Heat Pipe Co., Ltd (formerly known as Jiangsu Shengnuo Heat Pipe Group Co.,Ltd)

“Nanjing University of : Formerly known as Nanjing Chemical University

Technology” before May 2001

“SCCS” : Securities Clearing & Computer Services (Pte) Ltd

“SGX-ST” or “Singapore : Singapore Exchange Securities Trading LimitedExchange”

“SINOPEC” : China Petroleum and Chemical Corporation

“Stirling Coleman” or “Manager” : Stirling Coleman Capital Limited

“Sunpower Petrochemical” : Jiangsu Sunpower Petrochemical Engineering Co., Ltd

“UOB Kay Hian” : UOB Kay Hian Private Limited

8

General

“Application Forms” : The printed application forms to be used for the purpose of theInvitation and which form part of this Prospectus

“Application List” : The list of applications for subscription for and/or purchase ofthe Invitation Shares

“ATM” : Automated teller machine of a Participating Bank

“ATM Application” : An application for the Offer Shares made through an ATM ofone of the Participating Banks, subject to and on the terms andconditions of this Prospectus

“Audit Committee” : The audit committee of our Company

“Bermuda Companies Act” : The Companies Act 1981 of Bermuda (as amended)

“Board” : Board of Directors of our Company

“Bye-laws” : Bye-laws of our Company, as amended, supplemented ormodified from time to time

“Compilation Report” : The compilation report on examination of the proforma financialstatements of our Group as set out in Appendix A

“Convertible Loans” : The Founding Shareholders Convertible Loan, ForeignInvestors Convertible Loan and PRC Investor Convertible Loancollectively

“Convertible Loan Agreements” : The Founding Shareholders Convertible Loan Agreement,Foreign Investors Convertible Loan Agreement and PRCInvestor Convertible Loan Agreement collectively

“Directors” : The directors of our Company as at the Latest Practicable Date

“Electronic Applications” : Applications for the Invitation Shares made through an ATMApplication or IB Application, subject to and on the terms andconditions of this Prospectus

“EPS” : Earnings per Share

“ESOS” : The Sunpower Employee Share Option Scheme

“Executive Directors” : The executive Directors of our Company as at the LatestPracticable Date

“Executive Officers” : The executive officers of our Company as at the LatestPracticable Date, who are also key executives as defined underthe Securities and Futures Act (Offers of Investment) (Sharesand Debentures) Regulations 2002

“Foreign Investors” : Innovus, Vertex Resources Limited, Chua Kian Peng, Chau-Chan Sui Yung, Equity-Link Asia Limited, Ng E-Ming Joyce,Chen Jiong and Tan Lweng Ngoh collectively

“Foreign Investors Convertible : The US$2,000,000 convertible loan from the Foreign InvestorsLoan” to our Company pursuant to the Foreign Investors Convertible

Loan Agreement dated 1 June 2004

9

“Foreign Investors Convertible : The convertible loan agreement dated 1 June 2004 between Loan Agreement” the Founding Shareholders, our Company, the Foreign

Investors and Innovus and as amended by a supplementaldeed dated 7 July 2004 between the same parties, pursuant towhich the Foreign Investors loaned US$2,000,000 to ourCompany

“Founders” : Guo Hong Xin, Li Lai Suo and Ma Ming

“Founding Shareholders” : Guo Hong Xin, Li Lai Suo, Ma Ming, Allgreat Pacific Limited,Armour Asia Limited, Claremont Consultancy Limited andTrestle Asia Limited

“Founding Shareholders : The US$300,000 convertible loan from the Founding Convertible Loan” Shareholders to our Company pursuant to the Founding

Shareholders Convertible Loan Agreement dated 1 June 2004

“Founding Shareholders : The convertible loan agreement dated 1 June 2004 between Convertible Loan Agreement” the Founding Shareholders and our Company pursuant to

which the Founding Shareholders loaned US$300,000 to ourCompany

“FP” : Six-month financial period ended 30 June

“FY” : Financial year ended or, as the case may be, ending 31December

“IB” : Internet Banking

“IB Application” : An application for Offer Shares made through an IB website ofone of the relevant Participating Banks, subject to and on theterms and conditions of this Prospectus

“Independent Directors” : The independent Directors of our Company as at the LatestPracticable Date

“Innovus” : Innovus Capital Private Limited, an exempt boutique fundmanager incorporated in Singapore

“Invitation” : The invitation by our Company and the Vendors to the public tosubscribe for and/or purchase the Invitation Shares, subject toand on the terms and conditions of this Prospectus

“Invitation Shares” : The 113,165,000 Shares which are the subject of the Invitation,comprising the New Shares and the Vendor Shares

“Issue Price” : S$0.22 for each Invitation Share

“Latest Practicable Date” : 31 January 2005, being the latest practicable date prior to thelodgement of this Prospectus

“Lenders” : Wong Hiu Kin, Innovus, Vertex Resources Limited, Chua KianPeng, Chau-Chan Sui Yung, Equity-Link Asia Limited, Ng E-Ming Joyce, Chen Jiong and Tan Lweng Ngoh

“Listing Manual” : Listing Manual of the SGX-ST

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“Market Day” : A day on which the SGX-ST is open for trading in securities

“Michael Chin” or : Chin Sek Peng, one of our Independent Directors“Michael Chin Sek Peng”

“New Shares” : The 49,000,000 new Shares which our Company invitesapplications to subscribe for pursuant to the Invitation, subjectto and on the terms and conditions of this Prospectus

“NTA” : Net tangible assets

“OEM” : Original Equipment Manufacturer

“Offer” : The offer by our Company and the Vendors to the public inSingapore of the Offer Shares at the Issue Price, subject to andon the terms and conditions of this Prospectus

“Offer Shares” : 2,000,000 of the Invitation Shares which are the subject of theOffer

“Option Shares” : The new Shares to be issued pursuant to the exercise of theoptions granted under the ESOS

“Participating Banks” : DBS Bank Ltd (including POSB) (“DBS”); Oversea-ChineseBanking Corporation Limited (“OCBC”); and United OverseasBank Limited and its subsidiary, Far Eastern Bank Limited(“UOB Group”)

“PBT” : Profit before tax

“PER” : Price earnings ratio

“Placement” : The placement by the Placement Agent on behalf of ourCompany and the Vendors of the Placement Shares at theIssue Price, subject to and on the terms and conditions of thisProspectus

“Placement Agent” : UOB Kay Hian Private Limited

“Placement Shares” : 111,165,000 of the Invitation Shares which are the subject ofthe Placement

“PRC” or “China” : People’s Republic of China, excluding Hong Kong and Macaufor the purposes of this Prospectus and for geographicalreference only

“PRC Investor” : Wong Hiu Kin

“PRC Investor Convertible Loan” : The US$500,000 convertible loan from the PRC Investor to ourCompany pursuant to the PRC Investor Convertible LoanAgreement dated 1 June 2004

“PRC Investor Convertible Loan : The convertible loan agreement dated 1 June 2004 between Agreement” the Founding Shareholders, our Company and the PRC

Investor and as amended by a supplemental deed dated 7 July2004 between the same parties pursuant to which the PRCInvestor loaned US$500,000 to our Company

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“Pre-IPO Investors” : Wong Hiu Kin, Ang Poon Tiak, Aw Cheok Huat, Phillip RogerBennett, Chu Tee Seng, Goh Soo Siah, Robin Lim Kai Wun,Tan Tiong Cheng, Tan Eng Kian, Tay Hui Peng, Wong Keng Yin,Zacchaeus Boon Suan Zin, Vertex Resources Limited, ChuaKian Peng, Chau-Chan Sui Yung, Equity-Link Asia Limited, NgE-Ming Joyce, Chen Jiong and Tan Lweng Ngoh

“R&D” : Research and development

“Restructuring Exercise” : The restructuring exercise of our Group undertaken inconnection with the Invitation, as described on pages 71 to 74of this Prospectus

“Securities Account” : Securities account maintained by a depositor with CDP

“Securities and Futures Act” : Securities and Futures Act, Chapter 289 of Singapore

“Service Agreements” : The service agreements entered into between our Companyand the Executive Directors as set out on pages 106 and 107of this Prospectus

“Shareholders” : Registered holders of Shares except that where the registeredholder is CDP, the term “Shareholders” shall, in relation to suchShares, mean the Depositors whose securities accountsmaintained with CDP are credited with the Shares

“Shares” : Ordinary shares of US$0.01 each in the capital of our Company

“Singapore Companies Act” : The Companies Act, Chapter 50 of Singapore

“Underwriter” : UOB Kay Hian Private Limited

“Vendors” : Allgreat Pacific Limited, Armour Asia Limited, ClaremontConsultancy Limited, Ang Poon Tiak, Aw Cheok Huat, PhillipRoger Bennett, Chu Tee Seng, Goh Soo Siah, Robin Lim KaiWun, Tan Tiong Cheng, Tan Eng Kian, Tay Hui Peng, WongKeng Yin, Zacchaeus Boon Suan Zin, Vertex ResourcesLimited, Equity-Link Asia Limited, Chua Kian Peng, Chau-ChanSui Yung, Ng E-Ming Joyce, Chen Jiong, Tan Lweng Ngoh andWong Hiu Kin

“Vendor Shares” : The 64,165,000 issued and fully paid-up Shares for which theVendors invite applications to purchase, subject to and on theterms and conditions of this Prospectus

Currencies and Units of Measurements

“%” or “per cent.” : Per centum

“BD” : Bermuda Dollars

“ml” : Millilitre

“Mpa” : Mega Pascal

“RMB” : PRC Renminbi

“sqm” : Square metre

“S$” or “$” and “cents” : Singapore dollars and cents respectively

References in this prospectus to “we”, “our” and “us” refer to our Group or Pro Forma Group.

Any reference in this Prospectus, the Application Forms and Electronic Applications to any statute orenactment is a reference to that statute or enactment for the time being amended or re-enacted. Anyword defined under the Bermuda Companies Act, the Singapore Companies Act, the Securities andFutures Act or any statutory modification thereof and used in this Prospectus, the Application Forms andElectronic Applications shall have the meaning assigned to it under the Bermuda Companies Act, theSingapore Companies Act, the Securities and Futures Act, or such statutory modification, as the casemay be.

Any reference in this Prospectus, the Application Forms and Electronic Applications to Shares beingallotted to an applicant includes allotment to CDP for the account of that applicant.

Any reference to a time of day in this Prospectus shall be a reference to Singapore time unless otherwisestated.

The terms “Depositor”, “Depository Agent” and “Depository Register” shall have the meanings ascribed tothem respectively in Section 130A of the Singapore Companies Act.

Words importing the singular shall, where applicable, include the plural and vice versa and wordsimporting the masculine gender shall, where applicable, include the feminine and neuter genders.References to persons shall include corporations.

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GLOSSARY OF TECHNICAL TERMS

The glossary contains an explanation of certain terms used in this Prospectus in connection with ourGroup and our business. The terms and their assigned meanings may not correspond to standardindustry or common meanings, as the case may be, or usage of these terms.

“CPU” : Central Processing Unit

“Flue gas” : The exhaust gas discharged from furnace

“Heat Pipe” : A high efficiency thermal transfer device that transfers heatquickly from one point to another, as described on pages 78and 79 of this Prospectus under the section “Our Business”

“Heat Pipe Exchanger” : A device that comprise many Heat Pipes as described onpages 79 and 80 of this Prospectus under the section “OurBusiness”

“LNG” : Liquefied natural gas

“LPG” : Liquefied petroleum gas

“Permafrost” : Ground that is permanently frozen

“Pipe Support” : A device which supports and ensures the safety of pipesystems, as described on pages 80 and 81 of this Prospectusunder the section “Our Business”

“Pipeline compressor” : A pump or other machine that increases the pressure of a gaswithin the pipeline network

“Pressure Vessel” : A container that holds its fluid contents under pressure

“Torch Gas” : The waste gas commonly generated in a petrochemical refineryor production process

“Waste Gas and Energy : A system that is used to recycle the residual heat and recover Recovery System” useful petrochemical by-products contained in torch gas.

Please refer to page 83 of this Prospectus under “OurBusiness” for further details

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

All statements contained in this Prospectus, statements made in press releases and oral statements thatmay be made by us or our Directors, Executive Officers or employees acting on our behalf, that are notstatements of historical fact, constitute ‘forward-looking statements’. You can identify some of thesestatements by forward-looking terms such as ‘expect’, ‘believe’, ‘plan’, ‘intend’, ‘estimate’, ‘anticipate’,‘may’, ‘will’, ‘would’, and ‘could’ or similar words. However, you should note that these words are not theexclusive means of identifying forward-looking statements. All statements regarding our expectedfinancial position, business strategy, plans and prospects are forward-looking statements. These forward-looking statements, including statements as to our revenue and profitability, cost measures, plannedstrategy and any other matters discussed in this Prospectus regarding matters that are not historicalfacts are only predictions. These forward-looking statements involve known and unknown risks,uncertainties and other factors that may cause our actual results, performance or achievements to bematerially different from any future results, performance or achievements expressed or implied by suchforward-looking statements. These risks, uncertainties and other factors include, among others:-

(a) changes in political, social and economic conditions and the regulatory environment in Singaporeand other countries in which we conduct business;

(b) changes in currency exchange rates;

(c) our anticipated growth strategies and expected internal growth;

(d) changes in the availability and prices of raw materials/components we need to operate ourbusiness;

(e) changes in customer requirements;

(f) changes in competitive conditions and our ability to compete under these conditions;

(g) changes in our future capital needs and the availability of financing and capital to fund theseneeds; and

(h) other factors beyond our control.

Given the risks and uncertainties that may cause our actual future results, performance or achievementsto be materially different from that expected, expressed or implied by the forward-looking statements inthis Prospectus, we advise you not to place undue reliance on those statements. Neither our Company,our Directors, the Vendors, the Manager, the Placement Agent, the Underwriter nor any other personrepresents or warrants to you that our actual future results, performance or achievements will be asdiscussed in those statements.

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PURCHASE BY OUR COMPANY OF OUR OWN SHARES

Under the laws of Bermuda, a company may, if authorised by its memorandum of association orbye-laws, purchase its own shares. Our Company has such power to purchase our own Sharesaccording to Clause 7h of our memorandum of association. Such power of our Company topurchase our own Shares shall, subject to the Bermuda Act and (if applicable) the rules andregulations of the SGX-ST and other competent regulatory authorities and our memorandum ofassociation, be exercisable by our Directors upon such terms and subject to such conditions asthey think fit, in accordance with Bye-Law 7(B).

Under the laws of Bermuda, such purchases may be effected out of the capital paid-up on the purchasedshares or out of the funds of our Company otherwise available for dividend or distribution or out ofproceeds of a fresh issue of Shares made for that purpose. Any premium payable on such a purchaseover the par value of the Shares to be purchased must be provided for out of the funds of our Companyotherwise available for dividend or distribution or out of our Company’s share premium account beforethe Shares are purchased. Any amount due to a shareholder on a purchase of our Shares may (i) bepaid in cash; (ii) be satisfied by the transfer of any part of the undertaking or property of our Companyhaving the same value; or (iii) be satisfied partly under (i) and partly under (ii). Further, such purchasemay not be made if, on the date on which the purchase is to be effected, there are reasonable groundsfor believing that our Company is, or after the purchase would be, unable to pay our liabilities as theybecome due. The shares so purchased will be treated as cancelled and our Company’s issued, but notits authorised, capital will be diminished accordingly.

For further details, please see “Purchase by the company of its own shares and warrants” in paragraph(iv) of “Appendix D – Summary of Bermuda Company Law” on page D-2 of this Prospectus.

Our Company presently has no intention of purchasing our own shares’ after the listing. However, if wedecide to do so later, we will seek our board’s approval in accordance with the laws of Bermuda, theBye-Laws of our Company and the rules of the SGX-ST. Our Company will make prompt publicannouncement of any such Share purchase and has given an undertaking to the SGX-ST to comply withall requirements that the SGX-ST may impose in the event of any such share purchase.

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ATTENDANCE AT GENERAL MEETINGS

Under the Bermuda Act, only those persons who agree to become shareholders of a Bermuda companyand whose names are entered on the register of members of such a company may be shareholders, withrights to attend and vote at general meetings. Accordingly, depositors registered and holding sharesthrough CDP would not be recognised as Shareholders of our Company, and would not have the right toattend and to vote at general meetings of our Company. In the event that depositors wish to attend andvote at general meetings of our Company, they would have to do so through CDP appointing them asproxies, pursuant to the Bye-Laws and the Bermuda Act. The proxy form appointing depositors as theproxies of CDP would be enclosed with the Shareholders’ circular which would contain a noticeconvening the relevant general meeting. The proxy form would need to be completed by CDP asShareholder and deposited within the specified time frame, to enable such a depositor to attend and voteas a proxy at the relevant general meeting of our Company.

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TAKE-OVERS

There are presently no requirements under any Bermuda laws or regulations on take-over offers for ourShares which would be applicable to us. In addition, Sections 138, 139 and 140 of the SingaporeSecurities and Futures Act, Section 215 of the Singapore Companies Act, and the Singapore Code onTake-overs and Mergers (collectively the “Singapore Take-over and Merger Laws and Regulations”) donot apply to companies incorporated outside Singapore. As our Company is incorporated in Bermuda,the Singapore Take-over and Merger Laws and Regulations do not apply to take-over offers for ourCompany.

Bye-Law 189 (as described below) will, due to its binding effect on our registered Shareholders(our “Members”), require our Members who make take-over offers in respect of our Shares tocomply with the Singapore Take-over and Merger Laws and Regulations. However, it is uncertainwhether this can be implemented in practice. This is because Bye-Law 189 only binds ourMembers, and a person (including a corporation) who is not our Member will not be bound tocomply with the Singapore Take-over and Merger Laws and Regulations. This may affect youbecause in the event that a person (not being one of our Members), whether alone or togetherwith parties acting in concert with him, acquires or gains control of 30% or more of our Shares,you may not be offered an opportunity to sell your Shares to such an acquiror at the price he hadpaid for those Shares. In addition, even if a take-over offer is made for our Shares, such a take-over may not be made in accordance with the procedure stipulated in the Singapore Take-overand Merger Laws and Regulations.

Bye-Law 189 provides that for so long as our Shares are listed on the Designated Stock Exchange (asdefined in the Bye-Laws), the Singapore Take-over and Merger Laws and Regulations, including anyamendments, modifications, revisions, variations or re-enactments thereof, shall apply, mutatis mutandis,to all take-over offers for our Company.

Our substantial shareholders, Messers Guo Hong Xin, Li Lai Suo and Ma Ming have undertaken to theSGX-ST that, as long as they continue to be substantial Shareholders of our Company, they willendeavour to persuade potential offerors in connection with a take-over offer for our Company to complywith the requirements of the Singapore Take-over and Merger Laws and Regulations in the event of anytake-over offers for our Company.

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SELLING RESTRICTIONS

This Prospectus does not constitute an offer, solicitation or invitation to subscribe for and/or purchase ourShares in any jurisdiction in which such offer, solicitation or invitation is unlawful or is not authorised or toany person to whom it is unlawful to make such offer, solicitation or invitation. No action has been or willbe taken under the requirements of the legislation or regulations of, or of the legal or regulatoryauthorities of, any jurisdiction, except for the filing and/or registration of this Prospectus in Singapore andBermuda in order to permit a public offering of our Shares and the public distribution of this Prospectusin Singapore. The distribution of this Prospectus and the offering of our Shares in certain jurisdictionsmay be restricted by the relevant laws in such jurisdictions. Persons who may come into possession ofthis Prospectus are required by us, the Vendors, the Manager or the Underwriter and Placement Agent toinform themselves about, and to observe and comply with, any such restrictions.

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DETAILS OF THE INVITATION

LISTING ON THE SGX-SESDAQ

Application has been made to the SGX-ST for permission to deal in and for quotation of, all our Sharesalready issued (including the Vendor Shares), the New Shares and the Option Shares. Such permissionwill be granted when our Company has been admitted to the Official List of the SGX-SESDAQ.Acceptance of applications for the Invitation Shares will be conditional upon, inter alia, permission beinggranted to deal in, and for quotation of, all of our existing issued Shares (including the Vendor Shares),the New Shares and the Option Shares. Moneys paid in respect of any application accepted will bereturned to you, without interest or any share of revenue or other benefit arising therefrom and at yourown risk, if the said permission is not granted, and you will not have any claims whatsoever against us,the Vendors, the Manager or the Underwriter and the Placement Agent.

The SGX-ST assumes no responsibility for the correctness of any of the statements made, reportscontained or opinions expressed in this Prospectus. Admission to the Official List of the SGX-SESDAQ isnot to be taken as an indication of the merits of the Invitation, our Company, our subsidiaries, ourShares, New Shares or Option Shares.

A copy of this Prospectus has been lodged with and registered by the Authority. The Authority assumesno responsibility for the contents of this Prospectus. Registration of this Prospectus by the Authority doesnot imply that the Securities and Futures Act, or any other legal or regulatory requirements, have beencomplied with. The Authority has not, in any way, considered the merits of the Invitation Shares beingoffered or in respect of which an invitation is made, for investment.

The Bermuda Monetary Authority has given its consent to the issue of the New Shares and the sale ofthe Vendor Shares pursuant to the Invitation on the terms referred to in this Prospectus. A copy of thisProspectus will be filed with the Registrar of Companies in Bermuda. In accepting this Prospectus forfiling and in granting such consent, the Registrar of Companies in Bermuda and the Bermuda MonetaryAuthority accept no responsibility for the financial soundness of our Group or any proposal or for thecorrectness of any of the statements made or opinions expressed herein or any of the other documentsreferred to in this Prospectus.

This Prospectus has been seen and approved by our Directors and the Vendors and they individually andcollectively accept full responsibility for the accuracy of the information given in this Prospectus andconfirm, having made all reasonable enquiries, that to the best of their knowledge and belief, the factsstated and the opinions expressed in this Prospectus are fair and accurate in all material respects as atthe date of this Prospectus and that there are no material facts the omission of which would make anystatements in this Prospectus misleading.

No person has been or is authorised to give any information or to make any representation not containedin this Prospectus in connection with the Invitation and, if given or made, such information orrepresentation must not be relied upon as having been authorised by us, the Vendors, the Manager orthe Underwriter and the Placement Agent. Neither the delivery of this Prospectus and the ApplicationForms nor the Invitation shall, under any circumstances, constitute a continuing representation or createany suggestion or implication that there has been no change in our affairs or in the statements of fact orinformation contained in this Prospectus since the date of this Prospectus.

Where such changes occur, we may make an announcement of the same to the SGX-ST and the public,and if required, lodge a supplementary document or replacement document pursuant to Section 241 ofthe Singapore Securities and Futures Act and take immediate steps to comply with the requirements ofSection 241 of the Singapore Securities and Futures Act. In the event that the Authority issues a stoporder pursuant to Section 242 of the Singapore Securities and Futures Act, the Invitation will be deemedcancelled. We will take immediate steps to effect refund of application moneys to the applicants tocomply with Section 242 of the Singapore Securities and Futures Act. All applicants should take note ofany such announcement and, upon release of such an announcement, shall be deemed to have notice ofsuch changes. If our Company is required by applicable Singapore laws to cancel the Invitation andrepay application moneys to applicants (including instances where a stop order under the Singapore

Securities and Futures Act is issued), subject to compliance with the Bermuda Act, our Company and theVendors will purchase the Invitation Shares at the Issue Price. Information relating to the purchase ofShares by our Company is set out in “Purchase By Our Company of Our Own Shares” on page 15 of thisProspectus. Save as expressly stated in this Prospectus, nothing herein is, or may be relied upon as, apromise or representation as to our future performance or policies.

This Prospectus has been prepared solely for the purpose of the Invitation and may not be relied uponby any persons other than the applicants in connection with their application for the Invitation Shares forany other purpose. This Prospectus does not constitute an offer, solicitation or invitation tosubscribe for and/or purchase the Invitation Shares in any jurisdiction in which such offer,solicitation or invitation is unlawful or is not authorised or to any person to whom it is unlawful tomake such offer, solicitation or invitation.

Copies of this Prospectus and the Application Forms may be obtained on request, subject to availability,from: -

Stirling Coleman Capital Limited UOB Kay Hian Private Limited4 Shenton Way #07-03 80 Raffles Place #30-01

SGX Centre 2 UOB Plaza 1Singapore 068807 Singapore 048624

and from members of the Association of Banks in Singapore, members of the SGX-ST and merchantbanks in Singapore. A copy of this Prospectus is also available on the SGX-ST websitehttp://www.sgx.com.

The Application List will open at 10.00 a.m. on 14 March 2005 and will remain open until noon onthe same day or for such further period or periods as our Directors and the Vendors may, inconsultation with the Manager, in their absolute discretion decide, subject to any limitation underall applicable laws. In the event a supplementary prospectus or replacement prospectus islodged, the Application List will remain open for at least 14 days after the lodgement of thesupplementary or replacement prospectus.

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INDICATIVE TIMETABLE FOR LISTING

In accordance with the SGX-ST News Release of 28 May 1993 on the trading of initial public offeringshares on a “when issued” basis, an indicative timetable is set out below for your reference:

Indicative date/time Event

12.00 noon on 14 March 2005 Close of Application List

15 March 2005 Balloting of applications, if necessary (in the event of over-subscription for the Offer Shares)

9.00 a.m. on 16 March 2005 Commence trading on a “when issued” basis

24 March 2005 Last day of trading on a “when issued” basis

9.00 a.m. on 28 March 2005 Commence trading on a “ready” basis

31 March 2005 Settlement date for all trades done on a “when issued” basisand for trades done on a “ready” basis on 28 March 2005

The above timetable is only indicative as it assumes that the date of closing of the Application List is 14 March 2005, the date of admission of our Company to the Official List of the SGX-SESDAQ is 16March 2005, the SGX-ST’s shareholding spread requirement will be complied with and the InvitationShares will be issued and fully paid-up prior to 16 March 2005. The actual date on which our Shares willcommerce trading on a “when issued” basis will be announced when it is confirmed by the SGX-ST.

The above timetable and procedure may be subject to such modifications as the SGX-ST may in itsdiscretion decide, including the decision to permit trading on a “when issued” basis and thecommencement date of such trading. All persons trading in the Shares on a “when issued” basis do so attheir own risk. In particular, persons trading in the Shares before their Securities Accounts withCDP are credited with the relevant number of Shares do so at the risk of selling Shares whichneither they nor their nominees, as the case may be, have been allotted or are otherwisebeneficially entitled to. Such persons are also exposed to the risk of having to cover their net sellpositions earlier if “when issued” trading ends sooner than the indicative date mentioned above.Persons who have a net sell position traded on a “when issued” basis should close their positionon or before the first day of “ready” basis trading.

In the event of any changes in the closure of the Application List or the time period during which theInvitation is open, we will publicly announce the same:-

(i) through a SGXNET announcement to be posted on the Internet at the SGX-ST websitehttp://www.sgx.com; and

(ii) in a local English newspaper, namely, The Straits Times.

Investors should consult the SGX-ST announcement of the “ready” listing date on the Internet (atthe SGX-ST website http://www.sgx.com), INTV or newspapers, or check with their brokers on thedate on which trading on a “ready” basis will commence.

We will provide details of the results of the Invitation through the channels stated in (i) and (ii) above.

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PROSPECTUS SUMMARY

This summary highlights certain information found in greater detail elsewhere in this Prospectus. Inaddition to this summary, we urge you to read the entire Prospectus carefully, especially the discussionof risk of investing in our shares under “Risk Factors”, before deciding to invest in our Shares.

OVERVIEW OF OUR GROUP

Our Company was incorporated in Bermuda on 28 April 2004 under the Bermuda Companies Act as anexempted company with limited liability under the name “Sunpower Group Ltd.”. Pursuant to theRestructuring Exercise as described on pages 71 to 74 of this Prospectus, our Company acquired, interalia, the business, assets and undertakings of Sunpower Petrochemical relating to its business of PipeSupports, Waste Gas and Energy Recovery Systems and Pressure Vessels as well as certain of JiangsuShengnuo’s business, assets and undertakings related to Heat Pipes and Heat Pipe Exchangers.

OUR PRODUCTS

We specialise in the design, R&D as well as manufacture of customised energy saving andenvironmental protection products with heat transfer technologies. Our products are currently used invarious industries such as petrochemical, steel and transportation, and may be classified as follows:-

Heat Pipes and Heat Pipe Exchangers

Pipe Supports

Waste Gas and Energy Recovery Systems

Pressure Vessels

For more details on our products, please refer to the section “Our Products” on pages 78 to 83 of thisProspectus.

OUR COMPETITIVE STRENGTHS

We believe that the following are our competitive strengths:-

Strong emphasis on R&D

We have a R&D team which conducts R&D on Pipe Supports, Heat Pipes and Heat PipeExchangers, Waste Gas and Energy Recovery Systems and Pressure Vessels, and focuses on thedesign and improvement of these products. Our Executive Chairman, Mr Guo Hong Xin hasaccumulated extensive knowledge in respect of heat transfer technology.

We have an established track record for producing innovative and commercially viable products. Asat the Latest Practicable Date, our R&D staff have developed about 10 patents as a result of ourR&D efforts. These patents have been commercialised and adopted in our products.

We have an equity joint venture with Nanjing Chemical University Science and Technology GroupCo., Ltd, which is a company established by Nanjing University of Technology. Nanjing University ofTechnology is well known for its research and development in heat pipes. We believe that our jointventure company, Nanjing Shengnuo, will benefit from the research and development capabilitiesof Nanjing University of Technology.

To tap into the expertise of external professionals and experts, we have entered into technologycooperation agreements with Jiangsu Polytechnic University in November 2003 and South EastUniversity of China in May 2004 to jointly conduct research on various environmental protectionand energy saving products. Under these agreements, we cooperate extensively with thoseuniversities and are free to use the intellectual properties/technologies developed in our products.

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We have built up strong brand names and have a strong customer base

Our Directors believe that we have established our “Sunpower” and “Shengnuo” as reputablebrands in the industry we operate. Our reputation as a reliable solution provider is supported byour proprietary products.

We have a strong customer base, which include SINOPEC, CNPC, Shanghai SECCOPetrochemical Co., Ltd (a joint venture between BP and Shanghai Petrochemical), YPC-BASF Co.,Ltd (a joint venture between Yangtze Petrochemical and BASF), PRAXAIR, EngineeringHeadquarter of Qinghai-Tibet Railway, Baosteel Shanghai Meishan (Group) Ltd, Benxi Iron & SteelCo., Ltd, Handan Iron & Steel Co., Ltd, Wuhan Iron & Steel Co., Ltd and Shoudu Iron & Steel Co.,Ltd.

We are a member of both SINOPEC materials supply network and CNPC first tier network. Thesememberships pre-qualify us to supply our products to companies in the SINOPEC and CNPCgroups. Our Executive Directors believe that our memberships give us a significant advantage overother competitors which do not have such memberships.

We are a solutions provider

Our products are customer-focused and market oriented. In this respect, we focus on providing ourcustomers with innovative solutions which incorporate our products. For example, the application ofour Heat Pipes to stabilise permafrost was an innovative application of our Heat Pipes.

Petrochemical projects, power plants, steel projects and chemical projects in the PRC aregenerally designed by design centres in the PRC. As such, we focus our marketing efforts ondesign centres by highlighting the features of our products and how our products may beeffectively incorporated into their design plans to achieve the technical requirements of theircustomers. We believe that the adoption of our solutions in the design plans increases the chanceof customers’ adopting of our products.

Familiarity with the PRC business environment and our industry in PRC

We have an experienced management team which is familiar with our business and understandsour customers’ needs and requirements. Our management team consists of mainly PRC nationals,namely Mr Guo Hong Xin, Mr Li Lai Suo and Mr Ma Ming, who have the relevant knowledge ofand experience in the PRC market. Over the years, our management team has gained in-depthknowledge related to the petrochemical and metallurgy industries in the PRC. We are thereforeable to grasp the market opportunities and provide customised products.

For more details, please refer to the section “Competitive Strengths” on pages 94 and 95 of thisProspectus.

OUR STRATEGIES AND FUTURE PLANS

Our strategies and future plans for the growth and expansion of our businesses are described below:-

Strengthen our R&D capabilities and increase our product range

Our R&D team is one of the main engines for our future growth. We will continue to strengthen ourR&D capabilities by investing in advanced technology, where necessary, to facilitate thedevelopment of new technologies and designs. This would enable us to increase the range of ourproduct offerings in response to the sophisticated demands of our customers and improve theefficiency of our production process.

We also plan to increase the strength of our current R&D team by recruiting additionalprofessionals with relevant skills and expertise to augment the knowledge of our existing team. Wewill also increase our joint R&D efforts with PRC research institutions and universities.Furthermore, we will continue to train and update our staff with the latest developments, trendsand advances in our industry.

Increase our production capacity

Our existing manufacturing facility in Nanjing, PRC, is operating at close to full capacity. To meetthe anticipated increase in market demand, we intend to increase the production capacity of ourproducts.

We have plans to build or rent new factories to increase our production capacity. We will also beacquiring new machinery and equipment for our new factories along with employing additionalskilled personnel. The additional production space and production equipment would allow us tomeet our production targets so as to serve our customers better.

In particular, we have been granted an option to lease factory buildings from SunpowerPetrochemical located at Jianshe Road, Jiangning Science Park, Nanjing. Please refer to page 114of this Prospectus under “Interested Person Transactions” for further details.

Continue to develop the PRC market and expand to overseas markets

We will continue to increase our existing market share in the PRC through business developmentactivities in the PRC market. Currently, our major customers are engaged in the petrochemical andsteel projects. We will continue to expand our market share in more petrochemical and steelprojects. We also intend to intensify our marketing efforts in the PRC by promoting our products toelectric power and chemical companies. In addition, we also intend to promote our products moreactively through further participation in relevant industry events and seminars. Our sales andmarketing personnel will continue to cultivate new customers and develop existing customersthrough better service support.

Despite the potential offered in the PRC market, we believe that our advanced technology coupledwith the relatively low labour cost in the PRC where our manufacturing facilities are located, giveus a competitive edge in overseas markets. We view the penetration into overseas markets as animportant contributing factor towards our sustained progress and brand-building.

Acquisitions, joint ventures, strategic investments or alliances to accelerate our Group’sexpansion

After listing, we may take advantage of favourable financing resources and keep a lookout forsynergistic businesses to bolster our growth potential via acquisitions or through other avenues.For example, we may acquire manufacturing facilities of other PRC manufacturers in our industrywith quality assets but poor management. Our Directors believe that we may be able to extractsynergistic value from such asset acquisitions with our proven management capability.

For more details, please refer to the section “Our Strategies and Future Plans” on pages 97 and 98 ofthis Prospectus.

WHERE YOU CAN FIND US

We currently have operations in the PRC. Our registered office is at Canon’s Court, 22 Victoria Street,Hamilton HM 12, Bermuda and our business address in the PRC is at Room 301, Suning UniversalMansion, 188 Guangzhou Road, Nanjing, Jiangsu, 210024, PRC. Our telephone number is 86-25-83206131. Our facsimile number is 86-25-83206172. Our Internet address is at www.sunpower.com.cn.Information contained on our website does not constitute part of this Prospectus.

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THE INVITATION

Size Invitation in respect of 113,165,000 Invitation Shares, comprising49,000,000 New Shares and 64,165,000 Vendor Shares. The NewShares will, upon allotment and issue rank pari passu in allrespects with our existing issued Shares.

Issue Price S$0.22 for each Invitation Share.

The Offer The Offer comprises an invitation by our Company and theVendors to the public in Singapore to subscribe for and/orpurchase the 2,000,000 Offer Shares at the Issue Price, subject toand on the terms and conditions of this Prospectus.

The Placement The Placement comprises a placement of 111,165,000 PlacementShares at the Issue Price, subject to and on the terms andconditions of this Prospectus.

Purpose of the Invitation Our Directors believe that the listing of our Company and thequotation of our Shares on the SGX-SESDAQ will enhance thepublic image of our Group and enable our Group to raise fundsfrom the capital markets to finance our business expansion. It willalso provide members of the public, employees and businessassociates of our Group, as well as others who have contributed toour success, with an opportunity to participate in the equity of ourCompany.

Listing Status Our Shares will be quoted on the SGX-SESDAQ in Singaporedollar, subject to admission of our Company to the Official List ofSGX-SESDAQ and permission for dealing in, and for quotation of,our Shares being granted by the SGX-ST.

Risk Factors Investing in our Shares involves risks which are described in thesection “Risk Factors” beginning on page 30 of this Prospectus.

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PLAN OF DISTRIBUTION

The Invitation

Prior to the Invitation, there has been no public market for the Invitation Shares. The Issue Price wasdetermined by us and the Vendors in consultation with the Manager and the Underwriter and PlacementAgent, based on the market conditions and estimated market demand for our Shares determined througha book-building process. The Issue Price is the same for all Invitation Shares and is payable in full onapplication.

Innovus is an exempt fund management advisory firm incorporated in Singapore. The shareholders ofInnovus are Stirling Coleman Investment Management Private Limited (70%) and Zacchaeus Boon SuanZin (30%). Innovus is a related company of Stirling Coleman, the Manager, as Stirling Coleman andStirling Coleman Investment Management Private Limited are both subsidiaries of Stirling ColemanLimited. Pursuant to the Foreign Investors Convertible Loan Agreement, (a) Innovus, on behalf of 11individuals as disclosed under the section “Incorporation and Investments” on pages 71 and 72 of thisProspectus, had loaned the amount of US$560,000 to our Company, which was subsequently convertedinto ordinary shares of US$1.00 each in our Company; and (b) Innovus was paid the amount ofUS$80,000 as finder’s fees for the Foreign Investors Convertible Loan.

Save as disclosed, we do not have any material relationship with any of the Manager, the Underwriterand Placement Agent. As at the date of lodgement of this Prospectus, we are not aware of any personwho intends to subscribe and/or purchase for more than five per cent. (5%) of the Invitation Shares. Saveas disclosed below, no commission, discount or brokerage, has been paid or other special terms grantedwithin the two years preceding the Latest Practicable Date or is payable to any Director, promoter, expert,proposed Director or any other person for subscribing or agreeing to subscribe or procuring or agreeingto procure subscriptions for any shares or debentures in our Company.

Offer Shares

The Offer Shares are made available to the members of the public in Singapore for subscription at theIssue Price. The terms and conditions and procedures for application and acceptance are described in“Appendix F - Terms and Conditions and Procedures for Application” of this Prospectus.

Pursuant to the management and underwriting agreement dated 8 March 2005 between our Company,the Vendors, the Manager and the Underwriter (the “Management and Underwriting Agreement”), wehave appointed the Manager to manage the Invitation. The Manager will receive a management fee fromour Company for its services rendered in connection with the Invitation and pursuant to the Managementand Underwriting Agreement, the Underwriter has also agreed to underwrite the Offer Shares for acommission of 3.75% of the Issue Price for each Offer Share, payable by our Company and the Vendorspursuant to the Invitation. The Underwriter may, at its absolute discretion, appoint one or more sub-underwriters for the Offer Shares.

Brokerage will be paid by our Company and the Vendors to members of the SGX-ST, merchant banksand members of the Association of Banks in Singapore in respect of accepted applications made onApplication Forms bearing their respective stamps, or to Participating Banks in respect of successfulapplications made through Electronic Applications at the rate of 0.25% of the Issue Price for each OfferShare.

The Management and Underwriting Agreement may be terminated by the Manager at any time beforethe close of the Application List on the occurrence of certain events including, inter alia:-

(a) the issue of a stop order by the Authority in accordance with Section 242 of the Securities andFutures Act; or

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(b) event or events which shall in the opinion of the Manager (1) result or be likely to result in amaterial adverse fluctuation or adverse conditions in the stock market in Singapore or elsewhereor (2) be likely to prejudice the success of the offer or subscription for and/or purchase of theInvitation Shares (whether in the primary market or in respect of dealings in the secondary market)or (3) make it impracticable, inadvisable, inexpedient or uncommercial to proceed with any of thetransactions contemplated in the Management and Underwriting Agreement or (4) be likely to havean adverse effect on the business, trading position, operations or prospects of our Company or ofour Group as a whole or (5) be such that no reasonable underwriter would have entered into theManagement and Underwriting Agreement or (6) make it uncommercial or otherwise contrary to oroutside the usual commercial practices of underwriting in Singapore for the Underwriter to observeor perform or be obliged to observe or perform the terms of the Management and UnderwritingAgreement.

Placement Shares

The Placement Shares are reserved for placement to members of the public in Singapore andinstitutional investors. Application for the Placement Shares may only be made by way of applicationform. The terms and conditions and procedures for application and acceptance are described in“Appendix F -Terms and Conditions and Procedures for Application” of this Prospectus.

Pursuant to the placement agreement dated 8 March 2005 between our Company, the Vendors and thePlacement Agent (the “Placement Agreement”), the Placement Agent has agreed to subscribe or procuresubscriptions for the Placement Shares for a placement commission of 4% of the Issue Price for eachPlacement Share, payable by our Company and the Vendors. The Placement Agent may, at its absolutediscretion, appoint one or more sub-placement agents for the Placement Shares.

Subscribers of Placement Shares may be required to pay a commission of up to 1% of the Issue Price tothe Placement Agent (subject to Singapore Goods and Service Tax of 5%, if applicable).

The Placement Agreement is conditional upon the Management and Underwriting Agreement not havingbeen terminated or rescinded pursuant to the provisions of the Management and UnderwritingAgreement.

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USE OF PROCEEDS

The net proceeds from the issue of the New Shares of approximately S$8.4 million will be used tofinance our Group’s continued growth and development as follows:-

(a) approximately S$4.5 million to expand our existing production facilities through the acquisition ofmachinery and equipment, and to build or rent new factories;

(b) approximately S$1.7 million to fund our R&D activities;

(c) approximately S$1.0 million to fund our business development and marketing efforts in both thePRC and overseas markets; and

(d) the balance of approximately S$1.2 million for general working capital purposes, including, wherethe opportunity arises, for acquisitions, joint ventures, strategic investments and/or alliances.

Details of above (a), (b) and (c) are set out on pages 97 and 98 under “Our Strategies and Future Plans”of this Prospectus.

Pending the specific deployment of the net proceeds from the issue of New Shares for the purposes setout above, the net proceeds may be invested in short-term money markets or debt instruments, as ourDirectors deem appropriate.

In the opinion of our Directors, no minimum amount must be raised by the Invitation.

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ISSUE STATISTICS

Issue Price for each Invitation Share

Net Tangible Assets

The NTA per Share based on the proforma consolidated balance sheet of our Group asat 30 June 2004 and after adjusting for the Restructuring Exercise as referred to onpages 71 to 73 of this Prospectus and the conversion of convertible loan, the BonusIssue and Share Split (the “Adjusted NTA”):-

(a) before adjusting for the estimated net proceeds from the issue of the New Sharesand based on the pre-Invitation share capital of 280,000,000 Shares

(b) after adjusting for the estimated net proceeds from the issue of the New Sharesand based on the post-Invitation enlarged share capital of 329,000,000 Shares

Premium of Issue Price over the Adjusted NTA per Share:-

(a) before adjusting for the estimated net proceeds from the issue of the New Sharesand based on the pre-Invitation share capital of 280,000,000 Shares

(b) after adjusting for the estimated net proceeds from the issue of the New Sharesand based on the post-Invitation enlarged share capital of 329,000,000 Shares

Earnings(1)

Historical net EPS of our Group for FY2003 based on the pre-Invitation share capital of280,000,000 Shares

Historical net EPS of our Group for FY2003 based on the pre-Invitation share capital of280,000,000 Shares, assuming that the Service Agreements (as set out on pages 106and 107 of this Prospectus) had been in place in FY2003

Price Earnings Ratio

Historical net PER based on the historical net EPS of our Group for FY2003

Historical net PER based on the historical net EPS of our Group for FY2003 assumingthat the Service Agreements (as set out on pages 106 and 107 of this Prospectus) hadbeen in place in FY2003

Net Operating Cash Flow(2)

Historical net operating cash flow per Share of our Group for FY2003 based on the pre-Invitation share capital of 280,000,000 Shares

Ratio of Issue Price to historical net operating cash flow per Share for FY2003

Market Capitalisation

Our Company’s market capitalisation based on the post-Invitation share capital of329,000,000 Shares and the Issue Price

Notes: -

(1) Had the service agreements set out on pages 106 and 107 of this Prospectus been effected in FY2003, the estimated totalremuneration for our Directors would have been RMB1,118,000 (S$235,000), and profit after tax in respect of FY2003 wouldhave been RMB11.3 million (S$2.4 million), instead of RMB12.1 million (S$2.5 million). The adjusted net EPS for FY2003based on the pre-Invitation Share capital of 280,000,000 Shares would have been RMB4.04 cents (0.86 cents) instead ofRMB4.32 cents (0.91 cents).

(2) Net operating cash flow for FY2003 is defined as net profit after income tax, adding back depreciation of property, plant andequipment.

22.00 cents

3.15 cents

5.25 cents

598.41%

319.05%

0.91 cents

0.86 cents

24.18 times

25.58 times

0.99 cents

22.22 times

S$72.4 million

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RISK FACTORS

To the best of our Directors’ knowledge and belief, all the risk factors that are material to investors inmaking an informed decision to invest in our Shares are set out below. Prior to making an investmentdecision, prospective investors should carefully consider and evaluate the following considerations and allother information contained in this Prospectus before deciding to invest in our Shares. If any of thefollowing risk factors and uncertainties develops into actual events, our business, financial condition,results of operations or cash flows may be materially and adversely affected. Any of these considerationscould cause the trading price of our Shares to decline, and investors may lose part or all of theirinvestment.

RISKS RELATING TO OUR BUSINESSES AND OPERATIONS

Our growth may be limited by our production facilities

Our manufacturing facilities located in Nanjing, Jiangsu, PRC are operating close to full capacity as weoperate almost 7 days a week. We generally manufacture products and components that relate to ourproprietary technologies ourselves and outsource the other products and components to sub-contractorswhich are OEMs. Our future growth and prospects will be limited by our production facilities if ourproduction capacities are not increased to keep pace with demand for our products.

Our R&D activities may not produce commercially viable products

We may from time to time undertake research and development on products which we have identified ashaving good potential in the market. As the success of our R&D activities are affected by various factorssuch as restrictions of our production or testing environment, under-development of the relevanttechnology and lack of understanding of the relevant market, there is no assurance that we will be able tosuccessfully develop new products or that the new products, when launched, will be commerciallysuccessful. Failure to utilise the results of our R&D activities may also have an adverse impact on ourfinancial performance.

Further, as our Group expands, we would also be focusing more efforts on our R&D activities, the resultsof which would be incorporated in the manufacture of our products. There is no certainty that such newproducts will be acceptable to or meet the requirements of our customers. Should such new products failto meet the requirements of or they are not acceptable to our customers, our financial performance willbe adversely affected.

We may not be able to sustain our growth in revenue and profit

We have experienced an increase in revenue of approximately 50.3% from approximately RMB64.4million in FY2002 to approximately RMB96.8 million in FY2003. In FP2004, our revenue reached arecord high of approximately RMB100.5 million. Our net profit attributable to our Pro Forma Group inFY2003 and FP2004 were RMB12.1 million and RMB22.8 million respectively. As we continue toexpand our business, gain new markets and market share and develop new products, our revenue andnet profit base are expected to grow. There is, however, no assurance that our revenue or net profit willcontinue to grow at these rates in the future.

We are subject to project risks which may adversely affect revenue

Cost overruns

As we cannot accurately forecast the project costs involved in the development of customised products,in particular, our Waste Gas and Energy Recovery Systems, expenditure on the design, research anddevelopment of our products and technical solutions may exceed or exceed substantially our plannedbudget. Such cost overruns will result in unanticipated reductions in our profit margin and would impactadversely our profitability and the results of our operations.

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Delay in completion of projects and unanticipated termination of projects

Some of our customers may delay the completion of projects due to unforeseen circumstances. Delaysmay also result from incomplete specifications or unanticipated difficulties in developing the customisedproducts and technical solutions. Customers may also terminate their contracts with us due to changes inbusiness plans, insufficient funding or dissatisfaction with the progress.

The unanticipated termination of any projects, customers’ decision not to proceed with an anticipatedproject or delay in the completion of several major projects could have a material adverse effect on ourbusiness, financial condition and results of operations.

Failure to secure new contracts, termination or reduction of the scope of existing contracts

Our business is contract-based and our products are mainly customised to each contract. As some of ourcustomers are one-off customers, we therefore have to continuously and consistently secure newcustomers and contracts. There is no assurance that we will be able to secure new contracts andcustomers. Furthermore, although approximately 80.2% of our revenue in FY2003 was generated fromrepeat customers, there is no assurance that we will be able to successfully secure new project from ourexisting customers. In the event that we are unable to secure new customers and contracts, our financialperformance will be adversely affected.

We are dependent on our major customers

Our major customers, the SINOPEC group and CNPC group, accounted for an aggregate ofapproximately 70.2%, 62.6%, 49.2% and 54.0% of our total turnover for the three financial years ended31 December 2001, 2002, 2003 and the 6 months ended 30 June 2004 respectively. Please refer to“Major Customers” on pages 89 and 90 of this Prospectus for further details. There is no assurance thatwe will continue to retain these customers and that they will maintain or increase their current level ofbusiness with our Group. In the event of a reduction or cancellation of orders from any of our majorcustomers or if we lose any of our major customers, our business, financial condition and results ofoperations will be adversely affected.

We are reliant on major suppliers

We are reliant on our major suppliers. If any major supplier ceases to supply us and no alternativesupplier can be sourced in a timely manner, our Group’s business operations will be interrupted and ourfinancial performance will be adversely affected. In the event that any major supplier increases its priceand we are unable to pass such cost increases to our customers, our profit margins and profitability willbe adversely affected.

In particular, the performance of our Pressure Vessels segment relies to a certain extent, on the qualityof the work done by our subcontractors. In the event that we are unable to find suitable subcontractorsor if fees charged by subcontractors increase substantially, or if there is any significant claim or lawsuitagainst us for work performed by our subcontractors, our operations and profitability may be adverselyaffected. Please refer to “Major Suppliers” on pages 91 and 92 of this Prospectus for further details.

We are subject to increases in the prices of raw materials

The raw materials used in our manufacturing processes of Heat Pipes and Heat Pipe Exchangers, PipeSupports, Waste Gas and Energy Recovery Systems and Pressure Vessels are steel plates and steelpipes which accounted for between approximately 55% and 75% of our cost of sales for FY2003 andFP2004 respectively. We are therefore vulnerable to fluctuations in the prices of these key raw materials.The prices of steel plates and steel pipes have generally been increasing for the past three financialyears and FP2004.

Should we not be able to pass on any significant price increases to our customers, our profit margins andprofitability will be adversely affected. Alternatively, if demand from our customers is reduced as a resultof the price increase being passed on to our customers, our financial results will also be adverselyaffected.

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We may not be able to adapt to the technology changes

The introduction of new technologies and the emergence of new industry standards may render ourexisting technical solutions and products obsolete and unmarketable. We expect new technical solutionsand products, and enhancements to existing technical solutions and products, which will compete withour products to be developed and introduced by others. The life cycles of our technical solutions andproducts are difficult to estimate. Our future success will depend upon our ability to enhance our existingtechnical solutions and products, and to develop and introduce new technical solutions and products thatare able to keep pace with technological developments and emerging industry standards and addressthe increasingly sophisticated needs of our customers.

We may not be able to adequately protect our intellectual property rights (“IPRs”) which couldadversely affect our business

In the course of our business, we rely on certain IPRs, details of which are set out under “IntellectualProperty” on pages 87 to 89 of this Prospectus. However, the protection of IPRs in the PRC is not ascertain or effective as in some developed countries. There is no assurance that we will be able toeffectively enforce our IPRs against third parties who violate our IPRs.

In the event that we undertake litigation to enforce our IPRs, such litigation may be costly and timeconsuming. If we are unable to adequately protect our IPRs, our business will be adversely affected.

We may face intellectual property claims that may be costly to resolve or that limit our ability touse intellectual property in the future

We develop and use our own proprietary products and technical solutions in the course of our business.We cannot assure you that third parties will not assert infringement claims against us in the future or thatthese claims will not be successful. We could incur substantial costs and our time and managementresources may be diverted in defending any such infringement claims. If any party asserts a claimagainst us, we have to pay substantial damages, cease the production of the product that is the subjectof the infringement claim and may be required to enter into royalty or licensing agreements in order toobtain the right to use the proprietary technology. If so required, we cannot assure you that we will beable to obtain these licences on commercially reasonable terms, if at all. In the event that we become thesubject of an infringement claim and are unable to resolve it successfully, our business results andprospects will be adversely affected.

We may face product liability claims if our products are found to contain defects or unfit for theirintended purposes

In the event that our products are found to be unfit for their intended purpose, non-compliant withindustry regulations or contain material defects, we may face product liability claims from our customers.We do not have any product liability insurances. We may also have to spend significant time andresources to defend ourselves in the event that legal proceedings are instituted against us. There is noassurance that we will not face such claims in future, which may have an adverse impact on ourbusiness, financial condition and results of operations.

Furthermore, our reputation may also be affected by such claims and this will adversely affect ourbusiness.

Our business will be negatively affected if we are unable to manage our capital resources

We intend to increase our production capacity and where opportunities arise, we intend to acquire orinvest in related business. Please refer to “Our Strategies and Future Plans” on pages 97 and 98 forfurther details.

Such expansion plan may strain our capital resources as we increase our volume of business without acorresponding increase in our capital resources. We will also incur significant capital expenditure toacquire new production facilities. Such capital expenditure may further strain our capital resources.

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While we have planned our expansion based on the estimated net proceeds from the issue of the NewShares as outlined on page 28 of this Prospectus under the section “Use of Proceeds”, we may chanceupon other opportunities to grow our business which may result in us seeking additional equity or debtfinancing to capitalise on such unforeseen growth opportunities.

Additional equity financing will result in dilution to our existing Shareholders while additional debtfinancing will result in additional conditions imposed on our ability to manage our capital resources. Forexample, additional debt financing may limit our ability to pay dividends or require us to seek consentsfrom the relevant financial institutions or lenders, if necessary, for the payment of dividends. It will alsoincrease our vulnerability to general adverse economic and industrial conditions, limit our ability to pursueour growth plan, require us to dedicate a substantial portion of our cash flow from operations topayments of our debt, thereby reducing the availability of our cash flow to fund capital expenditures,working capital and other general corporate purposes which limit our flexibility in planning for, or reactingto, changes in our business and industry. We cannot assure you that we will be able to secure additionalfunding on terms that are acceptable to us when required to meet our business requirements and if thatis so, we may not be able to fully implement our future plans.

We are dependent on our ability to retain key management

Our continued success is dependent, to a large extent, on our ability to retain the services of our keymanagement and operational personnel. The loss of certain existing key personnel including ourExecutive Directors and Executive Officers, who may be affected by health or other reasons, withoutsuitable replacements, the inability to attract and retain qualified personnel or the inability of suchpersonnel to perform their responsibilities and duties for any reason, will adversely affect our operationsand hence, revenue and profits. In particular, the loss of the services of our Executive Directors, being MrGuo Hong Xin, Mr Li Lai Suo and Mr Ma Ming will have an adverse impact on our performance.

We believe that our future success will depend upon our ability to attract, retain and motivate seniormanagement staff. Our inability to do so would adversely affect our business and financial performance.

We are reliant on qualified professional staff

Our plans for expansion require us to hire more skilled specialised personnel. We recognise that thereare competing demands for such personnel amongst manufacturers in our industry. In the event that weare unable to hire or retain the services of adequate skilled specialised personnel and we are required totrain new staff, the time required to train such personnel may affect our cost competitiveness, which mayin turn adversely affect our financial performance.

We may be required to pay penalties or liquidated damages for failure to meet delivery deadlines

We are required to adhere to the delivery schedules stipulated in contracts with our customers and ourfailure to meet such delivery deadlines could result in us having to pay penalties or liquidated damagesto such customers. Some of our sales contracts render us liable up to a maximum of 10% of the contractvalue in liquidated damages in the event of our late delivery. There is no assurance that we will not facesuch claims in future, which may have an adverse impact on our business, financial condition and resultsof operations.

Any disruption in or rationing of the supply of electricity to our Group will adversely affect ouroperations

From time to time, there is a shortage of power supply in China, and in particular, the coastal areas. Anydisruption in or rationing of the supply of electricity to our Group, whether resulting from a government-sanctioned suspension of electricity supply or a disruption in the power supply network, will result in adisruption of or a halt to our operations. Although we have not experienced any serious disruption of orhalt to our operations due to shortage of power supply, we cannot predict with certainty if and when thePRC government will order further suspension(s) of electricity supply. While the authorities will typicallynotify us of the suspension of electricity in advance, any disruption in the supply of electricity willnevertheless adversely affect our operations and financial performance.

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RISKS RELATING TO THE PRC

Economic conditions of the PRC are subject to uncertainties that may arise from changes ingovernment policies and social conditions

Since 1978, the PRC government has promulgated various reforms of its economic systems. Suchreforms have resulted in economic growth for the PRC in the last two decades. However, many of thereforms are unprecedented or experimental, and are expected to be refined and modified from time totime. Other political, economic and social factors may also lead to further readjustment of the reformmeasures. This refinement and readjustment process may consequently have a material impact on ouroperations in the PRC or a material adverse impact on our financial performance. Our results andfinancial performances may be adversely affected by changes in the PRC’s political, economic and socialconditions and by changes in policies of the PRC government or changes in laws, regulations or theinterpretation or implementation thereof.

Introduction of new laws or changes to existing laws by the PRC government may adverselyaffect our business

Our business and operations in the PRC are governed by the legal system of the PRC. The PRC legalsystem is a codified system with written laws, regulations, circulars, administrative directives and internalguidelines. The PRC government is still in the process of developing its legal system, so as to meet theneeds of investors and to encourage foreign investment. As the PRC economy is undergoingdevelopment generally at a faster pace than its legal system, some degree of uncertainty exists inconnection with whether and how existing laws and regulations will apply to certain events orcircumstances. Some of the laws and regulations, and the interpretation, implementation andenforcement thereof, are still at an experimental stage and are therefore subject to policy changes.Further, precedents on the interpretation, implementation and enforcement of the PRC laws andregulations are limited, and court decisions in the PRC do not have any binding effect on lower courts.Accordingly, the outcome of dispute resolution may not be as consistent or predictable as in the othermore developed jurisdictions and it may be difficult to obtain swift and equitable enforcement of the lawsin the PRC, or to obtain enforcement of a judgment by a court or another jurisdiction. Any introduction ofnew laws or amendments to existing laws by the PRC government which is detrimental to the businessenvironment which we operate in will adversely affect our profitability.

PRC foreign exchange control may limit our ability to utilise our revenue effectively and affect ourability to receive dividends and other payments from our PRC subsidiaries

Our PRC subsidiaries are subject to the PRC rules and regulations on currency conversion. In the PRC,the State Administration for Foreign Exchange (“SAFE”) regulates the conversion of the RMB into foreigncurrencies. Currently, foreign investment enterprises (“FIEs”) are required to apply to SAFE for “ForeignExchange Registration Certificates for FIEs”. With such registration certifications (which need to berenewed annually), FIEs are allowed to open foreign currency accounts including the “basic account” and“capital account”. Currently conversion within the scope of the “basic account” (e.g. remittance of foreigncurrencies for payment of dividends, etc.) can be effected without requiring the approval of SAFE.However, conversion of currency in the “capital account” (e.g. for capital items such as direct investments,loans, securities, etc.) still requires the approval of SAFE.

The applicable law in respect of conversion of RMB into other currencies is the Regulation for ForeignExchange Controls of the PRC (“Regulation”) which came into effect on 1st April 1996 and amended asof 14 January 1997. Under the Regulation:

conversion of RMB into foreign currencies for the use of recurring items, including the distributionof dividends and profits to foreign investors of foreign investment enterprises is permissible andforeign investment enterprises are permitted to remit foreign currencies from their foreign currencybank accounts in the PRC upon presentation of board resolutions which authorise the distributionof profits or dividends and subject to other requirements being satisfied; and

conversion of RMB into foreign currencies for capital items, such as repatriation of capital,repayment of loans and for securities investment, is still under control.

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We cannot provide any assurance that the PRC regulatory authorities will not impose further restrictionson the convertibility of the RMB. As our subsidiaries in the PRC generate a significant proportion of ourrevenue and these revenues are denominated in mainly RMB, any future restrictions on currencyexchanges may limit our ability to repatriate such revenues for the distribution of dividends to ourshareholders or for funding our other business activities outside the PRC.

Expected increase in competition following the PRC’s entry into the World Trade Organisation(“WTO”) may have an adverse effect on our business and financial performance

The PRC has gained entry into the WTO. Our Directors believe that trade tariffs and import controls offoreign goods and services into the PRC will be lowered or removed over time pursuant to the PRC’sentry into the WTO. A lowering of import tariffs and barriers will intensify competition and may force us tolower prices of our products and services. In the event that we are forced to lower our prices, our profitmargins will be reduced, and our operations and profitability will be adversely affected.

Cessation of income tax exemptions for our PRC subsidiaries will have an adverse impact on ourprofitability

Our subsidiaries in the PRC, Sunpower Technology and Nanjing Shengnuo, which are foreign investmententerprises, are exempted from paying income tax for the first two profitable years of operations andgranted a 50% relief from income tax for the following three profitable years of operations, subsequent towhich it will not be entitled to any income tax relief. Any removal, loss, suspension or reduction of theabove tax exemptions will have an adverse impact on our Group’s profitability.

There have been recent reports that the PRC government may abolish preferential tax treatmentaccorded to foreign investment enterprises and bring these enterprises under the same taxation regimecurrently applied to domestic enterprises. The details of any such plans are not currently known. We areuncertain whether the new measures, when introduced, will seek to cancel all or any unexpired taxincentives, or whether the PRC government will only cease granting tax incentives to newly establishedforeign investment enterprises.

RISKS RELATING TO OUR SHARES

Our Shares have never been publicly traded and our Share price might be volatile

Prior to the Invitation, there has not been a public market for our Shares. We cannot predict the extent towhich a trading market will develop or how liquid the market might become. The Issue Price has beendetermined by us and the Vendors, in consultation with the Manager and the Underwriter and PlacementAgent, based on several factors and may not be indicative of the market price at which our Shares willtrade after the Invitation. Although we have made an application to the SGX-ST to list our Shares on theSGX-SESDAQ, there is no assurance that an active trading market for our Shares will develop or, if itdevelops, can be sustained. There is also no assurance that the market price for our Shares will notdecline below the Issue Price.

Our Share price may be volatile which could result in substantial losses for investors purchasingShares in the Invitation

The market price of our Shares may fluctuate significantly and rapidly as a result of the following factors,among others, some of which are beyond our control:-

variations of our operating results (including variations arising from foreign exchange fluctuations);

changes in securities analysts’ estimates of our financial performance;

announcement by us of significant acquisitions, strategic alliances or joint ventures;

addition or departure of key personnel;

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fluctuations in stock market prices and volume;

involvement in litigation; and

general economic and stock market conditions.

We will be affected by the future sale of the Shares which could adversely affect the Share price

Any future sale or availability of Shares can have an adverse effect on our Share price. The sale of asignificant amount of Shares in the public market after the Invitation, or the perception that such salesmay occur, could adversely affect the market price of the Shares. These factors also affect our ability tosell additional equity securities. Except as otherwise described on pages 69 and 70 of this Prospectusunder the Section on “Moratorium”, there are no restrictions imposed on our substantial Shareholders todispose of their shareholdings.

Control by existing Shareholders may limit your ability to influence the outcome of decisionsrequiring the approval of shareholders

Upon completion of the Invitation, Messers Guo Hong Xin, Li Lai Suo, Ma Ming, Allgreat Pacific Limited,Armour Asia Limited and Claremont Consultancy Limited are our Controlling Shareholders and will ownin aggregate approximately 61.5% of our issued share capital. The sole shareholder of Allgreat PacificLimited, Armour Asia Limited and Claremont Consultancy Limited are Messers Guo Hong Xin, Li Lai Suoand Ma Ming respectively. They will be able to significantly influence certain matters requiring theapproval of our shareholders, including the election of directors and the approval of significant corporatetransactions. They will also have veto power with respect to any shareholder action or approval requiringa majority vote. This concentration of ownership could have the effect of delaying or preventing a changein control of our Company or otherwise discouraging a potential acquirer from attempting to obtaincontrol of us through corporate actions such as merger or takeover attempts (notwithstanding that thesame may be synergistic or beneficial to our Group) in a manner that could conflict with the interests ofour public shareholders.

New investors will incur immediate dilution and may experience further dilution

The Issue Price of our Shares is substantially higher than the Adjusted NTA per Share based on thepost-Invitation issued share capital. If we are liquidated for NTA immediately following the Invitation, eachshareholder subscribing to the Invitation would receive less than the price they paid for their Shares.Thus, there is an immediate and substantial dilution in the book value per Share.

Negative publicity, including those relating to any of our substantial Shareholders/key personnel,may adversely affect our Share price

Any negative publicity or announcement relating to any of our substantial Shareholders/key personnelmay adversely affect the stock performance of our Company, whether or not this is justifiable. Thesenegative publicity or announcement may include involvement in insolvency proceedings, failed attemptsin takeovers or joint ventures.

Apart from the specific factors listed above and general business and economic conditions to which allcommercial businesses are exposed to, we are of the view that we are not vulnerable in any material wayto any other factors which can be reasonably anticipated.

In the event of a take-over, the protection afforded under the Singapore Take-Over and MergerLaws and Regulations is limited

There are presently no requirements under any Bermuda laws or regulations of general applicationrequiring persons who acquire significant shareholdings in our Company to make take-over offers for ourShares. As our Company is incorporated in Bermuda, the provisions of Sections 138, 139 and 140 ofthe Singapore Securities and Futures Act, Section 215 of the Singapore Companies Act and theSingapore Code on Take-overs and Mergers (collectively the “Singapore Take-over and Merger Laws andRegulations”) will not apply for our Shares.

Although Bye-law 189 of our Bye-laws incorporates the Singapore Take-over and Merger Laws andRegulations by reference and will, due to its binding effect on our registered shareholders, require any ofour registered shareholders who make take-over offers for our Shares to comply with the SingaporeTake-over and Merger Laws and Regulations, it is uncertain whether this will be effective in securingcompliance with the Singapore Take-over and Merger Laws and Regulations. Bye-law 189 only binds ourregistered shareholders and a person (including a corporation) who is not our registered shareholder willnot be bound to comply with the Singapore Take-over and Merger Laws and Regulations by virtue of theBye-laws. This may affect you because in the event that a person (not being one of our registeredshareholders), whether alone or together with parties acting in concert with him acquires or gains controlof 30% or more of our Shares, you may not be offered an opportunity to sell your Shares to such personat the price he had paid for those Shares. In addition, even if any take-over offer is made for our Shares,the take-over offer may not be made in accordance with the procedure stipulated in the Singapore Take-over and Merger Laws and Regulations. Please refer to the section “Take-Overs” on page 17 of thisProspectus for more details.

We are a Bermuda incorporated company and the rights and protection accorded to ourShareholders may not be the same as those applicable to shareholders of a Singaporeincorporated company

We are incorporated in Bermuda as an exempted company with limited liability and are subject to theBermuda Companies Act. The Singapore Companies Act may provide shareholders of Singaporeincorporated companies with certain rights and protection of which there may be no corresponding orsimilar provisions under Bermuda Companies Act. As such, if you invest in our Shares, you may or maynot be accorded the same level of shareholder rights and protection that a shareholder of a Singaporeincorporated company would be accorded under the Singapore Companies Act. We have set out inAppendix D a summary of certain provisions under the Bermuda company law and in Appendix C asummary of the Constitution of our Company. Each of the summaries is not intended to be and does notconstitute legal advice and any person wishing to have advice on the differences between the BermudaCompanies Act and the Singapore Companies Act and/or the laws of any jurisdiction with which he is notfamiliar is recommended to seek independent legal advice. Copies of the Memorandum of Associationand the Bye-laws of our Company and the Bermuda Companies Act are available for inspection at suchplace and time as set out on pages 121 and 122 of this Prospectus under the Section “General andStatutory Information” paragraph 12.

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EXCHANGE RATES

The following table sets out the high and low exchange rates between RMB and S$ for each month in thesix months prior to the Latest Practicable Date. The table indicates how many RMB may be bought withone S$.

RMB/S$ RatePeriod High Low

August 2004 4.846 4.804

September 2004 4.915 4.850

October 2004 4.977 4.895

November 2004 5.059 4.962

December 2004 5.073 5.003

January 2005 5.079 5.016

The following table sets forth, for each of the financial period under review, the closing rates betweenRMB and S$ and the average exchange rates between RMB and S$ calculated by using the average ofthe exchange rates between the RMB and the S$ on the last day of each month.

RMB/S$ RateAverage Closing

FY2001 4.602 4.484

FY2002 4.632 4.769

FY2003 4.751 4.873

FP2003 4.725 4.699

FP2004 4.874 4.817

As at the Latest Practicable Date, the exchange rates between RMB and S$ was RMB5.054 to S$1.00.

The exchange rates as set out above quoted from the Bloomberg should not be construed asrepresentations that the RMB amounts actually represent such S$ amounts or could be converted intoS$ at the rate indicated or at any other rate.

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SELECTED GROUP FINANCIAL INFORMATION

The following tables present our summary proforma financial data. The data presented in these tableshave been prepared as if our Group corporate structure as at the date of the proforma financialinformation had been in existence since FY2001, or since the date of incorporation of the companiesincluded within our corporate structure, whichever is later. Our proforma financial information reflectedthe results of operations, financial position and cash flows of the businesses transferred to us pursuant tothe Restructuring Exercise. As a result, our proforma financial information have been derived from theaudited financial statements of the companies in our Pro Forma Group except where financialinformation cannot be extracted directly from the audited financial statements in which case referencesare made to the underlying accounting records. Our proforma financial information for the FY2001,FY2002, FY2003, FP2003 and FP2004 varies from our audited historical financial statements as ourproforma financial information include certain assets, liabilities, turnover and expenses which areprimarily associated with businesses and subsidiaries that were transferred to our Company pursuant tothe Restructuring Exercise. You should read this Section in conjunction with “Review of Past OperatingPerformance and Financial Condition” and our unaudited proforma consolidated financial statements setout at Appendix A of this Prospectus as well as the full text of this Prospectus.

The objective of the proforma financial information is to show what our historical information might havebeen had our Group, as restructured, existed at an earlier date. The proforma financial informationincluded herein may not necessarily reflect our results of operations, financial position and cash flowstoday or in the future or what the results of operations, financial position and cash flows would have beenhad our Pro Forma Group been in existence during the periods presented.

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Proforma Operating Results of Our Group(1)

Proforma

(RMB’000) FY2001 FY2002 FY2003 FP2003 FP2004

Revenue 44,423 64,382 96,776 44,747 100,492

Cost of sales (35,192) (53,146) (68,892) (32,374) (67,689)

Gross profit 9,231 11,236 27,884 12,373 32,803

Other operating income 10 20 1,022 12 480

Administrative expenses (3,351) (4,293) (5,598) (2,145) (5,165)

Research expenses (627) (1,249) (2,117) (621) (944)

Selling and distribution expenses (5,714) (5,443) (6,541) (2,855) (3,865)

Other operating expenses (326) (64) (93) (47) (50)

(Loss) / Profit from operations (777) 207 14,557 6,717 23,259

Finance cost (62) (96) (253) (106) (180)

(Loss) / Profit before income tax (839) 111 14,304 6,611 23,079

Income tax expense (511) (467) (2,209) (994) (311)

(Loss) / Profit after income tax but before minority interests (1,350) (356) 12,095 5,617 22,768

Minority interests – – – – 19

Net (loss) / profit attributable to the Pro Forma Group(2) (1,350) (356) 12,095 5,617 22,787

(Loss) / Earnings per Share (RMB cents)(3) (0.48) (0.13) 4.32 2.01 8.14

Notes:-

1. The operating results of our Pro Forma Group for FY2001 to FY2003 and the six months ended 30 June 2003 and 2004have been prepared on a proforma basis assuming that the current Group structure had been in place throughout theperiods under review.

2. Had the Service Agreements been in effect for FY2003, the profit before income tax, net profit attributable to our Pro FormaGroup and EPS would have been RMB13.4 million, RMB11.3 million and RMB4.04 cents respectively.

3. For comparative purposes, EPS for the period under review have been computed based on the net profit attributable to ourPro Forma Group and the pre-Invitation share capital of 280,000,000 Shares.

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Proforma Financial Position of Our Group(1)

Proforma Proforma (RMB’000) As at As at

31 December 2003 30 June 2004

Current assets

Cash and bank balances(2) – 20,697Trade receivables 36,079 49,293Other receivables and prepayments 5,934 9,879Inventories 24,701 18,098

Total current assets 66,714 97,967

Non-current assets

Property, plant and equipment 10,348 13,169Intangible asset – 2,924

Total non-current assets 10,348 16,093

Total assets 77,062 114,060

Current liabilities

Trade payables 47,014 43,224Other payables 3,572 34,182Short-term loans 7,850 6,850Current portion of long term loans 100 –Convertible loans – 7,545

Total current liabilities 58,536 91,801

Non-current liability

Long term loans 130 –

Shareholders’ equity

Paid up capital 10,000 –General reserve 1,490 3,342Accumulated profits 6,906 18,917

Total shareholders’ equity 18,396 22,259

Total liabilities and shareholders’ equity 77,062 114,060

NTA per Share (RMB cents) (3) 14.84 15.18

Notes:-

1. The financial position of our Pro Forma Group has been prepared on a proforma basis assuming that the current Groupstructure had been in place as at the above dates.

2. There were no cash and bank balances as at 31 December 2003 as cash balances were not part of the assets transferredby Sunpower Petrochemical to Sunpower Technology under the Restructuring Exercise.

3. For comparative purposes, NTA per Share for the period under review have been computed based on the proformashareholders’ equity as at the end of the period under review and as adjusted for the conversion of the convertible loans ofUS$2,800,000 (equivalent to RMB23,167,000), and the pre-Invitation share capital of 280,000,000 Shares.

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Proforma Operating Results of Our Group(1)

(translated to Singapore dollars)

Proforma

($’000) FY2001 FY2002 FY2003 FP2003 FP2004

Revenue 9,653 13,900 20,371 9,468 20,616

Cost of sales (7,647) (11,474) (14,502) (6,850) (13,887)

Gross profit 2,006 2,426 5,869 2,618 6,729

Other operating income 2 4 215 3 98

Administrative expenses (728) (927) (1,178) (454) (1,060)

Research expenses (136) (270) (446) (131) (194)

Selling and distribution expenses (1,242) (1,175) (1,377) (604) (793)


(Loss) / Profit from operations (169) 44 3,063 1,422 4,770

Finance cost (13) (21) (53) (22) (37)

(Loss) / Profit before income tax (182) 23 3,010 1,400 4,733

Income tax expense (111) (101) (465) (210) (64)

(Loss) / Profit after income tax but before minority interests (293) (78) 2,545 1,190 4,669

Minority interests – – – – 4

Net (loss) / profit attributable to the Pro Forma Group(2) (293) (78) 2,545 1,190 4,673

(Loss) / Earnings per Share (cents)(3) (0.10) (0.03) 0.91 0.43 1.67

Notes:-

1. The operating results of our Pro Forma Group for FY2001 to FY2003 and the six months ended 30 June 2003 and 2004have been prepared on a proforma basis assuming that the current Group structure had been in place throughout theperiods under review.

2. Had the Service Agreements been in effect for FY2003, the profit before income tax, net profit attributable to our Pro FormaGroup and EPS would have been S$2.8 million, S$2.4 million and 0.86 cents respectively.

3. For comparative purposes, EPS for the period under review have been computed based on the net profit attributable to ourPro Forma Group and the pre-Invitation share capital of 280,000,000 Shares.

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Proforma Financial Position of Our Group(1)

(translated to Singapore dollars)

Profoma Proforma($’000) As at As at

31 December 2003 30 June 2004

Current assets

Cash and bank balances(2) – 4,297Trade receivables 7,404 10,233Other receivables and prepayments 1,218 2,051Inventories 5,069 3,757


Non-current assets

Property, plant and equipment 2,124 2,734Intangible asset – 607

Total non-current assets 2,124 3,341


Current liabilities

Trade payables 9,648 8,974Other payables 733 7,096Short-term loans 1,611 1,422Current portion of long term loans 21 –Convertible loans – 1,566


Non-current liability

Long term loans 27 –

Shareholders’ equity

Paid up capital 2,052 –General reserves 306 694Accumulated profits 1,417 3,927

Total shareholders’ equity 3,775 4,621

Total liabilities and shareholders’ equity 15,815 23,679

NTA per Share (cents) (3) 3.07 3.15

Notes:-

1. The financial position of our Pro Forma Group has been prepared on a proforma basis assuming that the current Groupstructure had been in place as at the above dates.

2. There were no cash and bank balances as at 31 December 2003 as cash balances were not part of the assets transferredby Sunpower Petrochemical to Sunpower Technology under the Restructuring Exercise.

3. For comparative purposes, NTA per Share for the period under review have been computed based on the proformashareholders’ equity as at the end of the period under review and as adjusted for the conversion of the convertible loans ofUS$2,800,000 (equivalent to S$4,809,000), and the pre-Invitation share capital of 280,000,000 Shares.

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REVIEW OF PAST OPERATING PERFORMANCE AND FINANCIAL CONDITION

The following discussion of our results of operations and financial condition should be read in conjunctionwith the selected Pro Forma Group Financial Information and the Compilation Report from the ReportingAuditors in relation to our Pro Forma Group Financial Information for FY2001, FY2002, FY2003, FP2003and FP2004 and the related notes thereto included elsewhere in this Prospectus.

OVERVIEW

Sources of our revenue

Our Group specialises in the design, research and development, and manufacture of customised energysaving and environmental protection products with heat transfer technologies. Our products are largelyemployed in the petrochemical, steel and transportation industries. Our business activities areconcentrated solely in the PRC for the last three financial years and our sales are denominated in RMB.Our customers include, amongst others, the SINOPEC group, CNPC group, Shanghai SECCOPetrochemical Co., Ltd (a joint venture between BP and Shanghai Petrochemical), YPC-BASF Co., Ltd (ajoint venture between Yangtze Petrochemical and BASF), Engineering Headquarter of Qinghai-TibetRailway, Baosteel Shanghai Meishan (Group) Ltd, Handan Iron & Steel Co., Ltd and Wuhan Iron & SteelCo., Ltd.

Our range of products and services can be broadly categorised as follows:-

(a) Heat Pipes and Heat Pipe Exchangers;

(b) Pipe Supports;

(c) Waste Gas and Energy Recovery Systems; and

(d) Pressure Vessels

The products sold under the above product segments are described under the section entitled “OurProducts” from pages 78 to 83 of this Prospectus.

Revenue earned from the sale of our products is recognised upon the delivery, installation andcommissioning of the final products. We will normally collect a deposit of between 10% and 30% basedon the contract sum. Upon the delivery, installation and commissioning of our products, we will billanother 70% to 90% of the contract sum. The remaining 5% to 10% of total contract sum billed is aperformance guarantee fee which is collectible one year after the installation of the products. The projectdesign and manufacturing stages for our three products namely Heat Pipes and Heat Pipe Exchangers,Pipe Supports and Pressure Vessels generally require approximately two to four months to completebefore the products are ready for installation. Our Waste Gas and Energy Recovery Systems requireapproximately five months to complete the project design, manufacturing stages to installation andcommissioning.

The pricing of our products is determined based on contract requirements such as the type and quantityof materials used, the labour costs involved and the product type and dimension. We do not have astandard pricing for our products.

Our Pressure Vessels segment was the major revenue contributor in FY2001 and FY2002, accounting forapproximately 40.3% and 46.1% respectively of our Group’s revenue for the two years. In FY2003,revenue contribution from Heat Pipes and Heat Pipe Exchangers segment increased substantially,accounting for 38.6% of our Group’s revenue due mainly to the success of our marketing strategies andexpansion of our market share in FY2002.

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In FY2002, we adopted a market strategy to promote our new Heat Pipes and Pressure Vessel productsto secure new customers and to expand our overall market share in the industries we serve. Ourapproach was characterised by competitive pricing to achieve high sales volume and an enlargedcustomer base. The impact was evidenced in the significant revenue growth for our Heat Pipes and HeatPipe Exchangers and Pressure Vessels segments in FY2003.

Revenue contribution from our Waste Gas and Energy Recovery Systems segment representedapproximately 0.8%, 6.2%, 3.9% and 4.9% of our Group’s revenue in FY2001, FY2002, FY2003 andFP2004 respectively. In FY2001 and FY2002, sales of our Waste Gas and Energy Recovery Systemscomprised mainly critical system parts and components. In FY2003, we began to develop and market acomplete system for this segment.

Our gross profit margin declined from 20.8% in FY2001 to 17.5% in FY2002 owing largely to the drop ingross profit margins of Heat Pipes and Heat Pipe Exchangers, and Pressure Vessels segments duringthe year. Gross profit margin improved to 28.8% in FY2003 attributed mainly to the improvement in thegross margins in the same segments. Further explanation on the gross profit margin can be found under“Review of Past Performance”.

Our revenue and gross profit (in dollars and percentage terms) according to the above product segmentsfor FY2001, FY2002 and FY2003, and FP2003 and FP2004 are set out below:-

Revenue

Proforma FY2001 FY2002 FY2003 FP2003 FP2004

RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 %

Heat Pipes and Heat Pipe Exchangers 11,488 25.9 13,061 20.3 37,351 38.6 10,404 23.2 36,886 36.7

Pipe Supports 14,665 33.0 17,666 27.4 18,226 18.8 11,456 25.6 22,629 22.5

Waste Gas and Energy Recovery Systems 374 0.8 3,964 6.2 3,726 3.9 2,857 6.4 4,920 4.9

Pressure Vessels 17,896 40.3 29,691 46.1 37,473 38.7 20,030 44.8 36,057 35.9

Total 44,423 100.0 64,382 100.0 96,776 100.0 44,747 100.0 100,492 100.0

Gross Profit

Proforma FY2001 FY2002 FY2003 FP2003 FP2004

RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 %

Heat Pipes and Heat Pipe Exchangers 2,995 32.4 1,230 10.9 10,151 36.4 1,200 9.7 8,699 26.5

Pipe Supports 3,614 39.2 7,655 68.1 7,503 26.9 6,823 55.1 11,517 35.1

Waste Gas and Energy Recovery Systems 34 0.4 602 5.4 1,410 5.1 1,130 9.1 3,201 9.8

Pressure Vessels 2,588 28.0 1,749 15.6 8,820 31.6 3,220 26.1 9,386 28.6

Total 9,231 100.0 11,236 100.0 27,884 100.0 12,373 100.0 32,803 100.0

All our sales are made in the PRC for FY2001, FY2002, FY2003 and FP2004. In March 2004, wesecured a contract to export our Heat Pipes to Russia for delivery in the second half of FY2004.

A detailed account of the risk factors affecting our business activities are set out under the sectionentitled “Risk Factors” from pages 30 to 37 of this Prospectus. The major factors affecting our revenueare as follows:-

(a) Our ability to seek new customers and new contracts to provide our energy saving andenvironmental protection solutions;

(b) Our ability to expand our production capacity to cater to existing customers’ demands as well asnew contracts secured from new customers;

(c) Our ability to continually develop our technologies to improve our existing products and generatenew products;

(d) Our ability to gain market acceptance for our newly developed products;

(e) Our ability to be ahead of our competitors in keeping pace with technological developments andemerging industry standards. Our future growth will be adversely affected if our competitors areable to respond more successfully to technological or industrial developments than us, or if we failto respond in a timely or cost effective manner by improving and enhancing our existing productsto meet the increasingly sophisticated needs of our customers; and

(f) The general economic and political conditions of the PRC and the environmental protectionpolicies implemented by the PRC government may affect our operations.

Seasonality

In general, we do not experience any seasonality in our revenue and profitability. However, as ourbusiness is contract-based and our products are mainly customised to each contract, our revenue will beaffected by the number and product requirements of the contracts completed.

Cost of sales

The main components of our cost of sales are direct material costs, direct labour costs andmanufacturing overheads.

We generally manufacture products and components that relate to our proprietary technologies andoutsource the other products and components to subcontractors so that we can focus more on thedesign, R&D of our products, and to ensure that our proprietary technologies are kept confidential.

Direct material costs accounted for approximately 75.0%, 83.0%, 85.9% and 88.8% of our total cost ofsales in FY2001, FY2002, FY2003 and FP2004 respectively. Our direct materials comprised mainly steelpipes, steel plates, insulation materials such as polyurethane and chemicals, which are procured fromlocal suppliers according to our contract requirements. Our direct material costs include subcontractingcosts which relate to the outsourcing of part of our manufacturing processes to subcontractors asmentioned above. Subcontracting costs accounted for 50.3%, 75.5%, 71.3% and 63.2% of our directmaterial costs for FY2001, FY2002, FY2003 and FP2004 respectively. The subcontracting costs includethe cost of materials which the subcontractors purchased on our behalf.

Direct labour costs constituted approximately 2.3%, 1.2%, 3.0% and 1.7% of our cost of sales in FY2001,FY2002, FY2003 and FP2004 respectively. These relate mainly to the salaries of the production staff.

Manufacturing overheads comprised mainly indirect labour costs which are salaries of productionsupervisory personnel, freight charges, depreciation charges on machinery and equipment andinstallation costs which accounted for approximately 22.7%, 15.8%, 11.1% and 9.5% of our cost of salesin FY2001, FY2002, FY2003 and FP2004 respectively.

Factors that may affect our cost of sales include, inter alia, the following:-

(a) Fluctuations in the prices of key materials and consumables required for our production processes.Any significant increase in the prices of the materials and consumables which cannot be passedon to our customers by way of a price increase of our products will adversely affect our financialperformance and hence our profitability;

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(b) The quality and specification of direct materials;

(c) The number of production and factory personnel;

(d) The use of subcontractors and the amount of fees paid; and

(e) The general wage rate and government regulations concerning the employment of labour.

The above should be read in conjunction with the section entitled “Risk Factors” on pages 30 to 37 of thisProspectus.

In FY2003, we experienced a significant increase in the prices of steel materials used for the productionof Heat Pipes and Heat Pipe Exchangers and Pressure Vessels. However, we were able to graduallypass on the increase in prices to our customers in the second half of FY2003. Prices of other rawmaterials used in the production of our products had remained relatively stable in the past three years.

For the past three financial years and FP2004, we have not encountered any cost overruns on projectswhich had a material adverse impact on the financial results and position of our Group.

Other non-operating income

In the last three financial years, other operating income comprised mainly interest income andgovernment grant. In FY2003 and FP2004, we received a government grant of RMB1.0 million andRMB0.4 million respectively to fund our R&D work relating to Heat Pipes and to finance the upgrading ofour R&D facilities. Such grant is unlikely to recur in the future.

Operating expenses

Our operating expenses comprised administrative, research, selling and distribution, and other operatingexpenses.

Administrative expenses accounted for approximately 33.4%, 38.8%, 39.0% and 51.5% of our totaloperating expenses in FY2001, FY2002, FY2003 and FP2004 respectively. Administrative expensesconsist mainly of staff salaries and benefits, bad debts allowance, depreciation expenses, officeexpenses and travelling and transportation expenses. These expenses represented approximately 83.5%,81.0%, 76.7% and 72.3% of the total administrative expenses in FY2001, FY2002, FY2003 and FP2004respectively. Staff salaries and benefits increased from RMB0.7 million in FY2001 to RMB2.0 million inFY2003 owing to additional administrative and management personnel recruited over the periods. Baddebts allowance amounted to RMB0.8 million, RMB0.6 million and RMB0.1 million and nil during theperiods of review. Our policy on credit management and trade debts monitoring is described under thesection entitled “Credit Management” on pages 57 and 58 of this Prospectus.

Research expenses accounted for approximately 6.3%, 11.3%, 14.8% and 9.4% of our total operatingexpenses in FY2001, FY2002, FY2003 and FP2004 respectively. These comprised mainly salaries ofR&D personnel, technical service fee paid to external consultants, depreciation on research equipment,travelling expenses incurred by R&D personnel and research material costs. Further explanation for ourresearch expenses can be found under the section entitled “Review of Past Performance” below.

Selling and distribution expenses accounted for approximately 57.0%, 49.3%, 45.6% and 38.6% of ourtotal operating expenses in FY2001, FY2002, FY2003 and FP2004 respectively. The major expensescomprised salaries and staff benefits of our sales and marketing staff, travelling, entertainment,advertisement and promotional, and delivery expenses. These major expenses in aggregate constituted85.6%, 85.2%, 85.7% and 81.6% in FY2001, FY2002, FY2003 and FP2004 respectively.

Other operating expenses accounted for approximately 3.3%, 0.6%, 0.6% and 0.5% of our total operatingexpenses in FY2001, FY2002, FY2003 and FP2004 respectively. It consists mainly of a generaldevelopment fund which was contributed to the Jiangsu provincial government for the development of theprovince.

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Finance cost

Our finance cost comprised mainly interest expenses on bank term loans. Our finance cost was higher inFY2003 as compared to FY2001 and FY2002 owing to additional loans taken up during the year tofinance working capital requirements as well as the increase in interest rates.

Income tax

Prior to Restructuring Exercise, our business was conducted by Sunpower Petrochemical and JiangsuShengnuo. Sunpower Petrochemical was taxed at the statutory tax rate of 33% for FY2001 and FY2002,and at the concession rate of 15% for FY2003 and FP2004 (as it was recognised as an advanced hi-techenterprise). Jiangsu Shengnuo was taxed at the statutory rate of 33% during the relevant track recordperiod.

Subsequent to the Restructuring Exercise, our business was conducted by Sunpower Technology andNanjing Shengnuo.

Sunpower Technology was incorporated on 16 April 2004 as a wholly foreign-owned enterprise. Being aforeign investment enterprise, Sunpower Technology is entitled to exemptions from PRC income tax forthe two years commencing from the profit-making year of operations, after offsetting all unexpired taxlosses carried forward from the previous years, and thereafter, entitled to a 50% relief from PRC incometax for the next three years. FY2004 is the first tax exemption year.

Nanjing Shengnuo was incorporated on 18 June 2004, as an equity joint venture. As a foreign investmententerprise, Nanjing Shengnuo is entitled to exemptions from PRC income tax for the two yearscommencing from their first profit-making year of operations, after offsetting all unexpired tax lossescarried forward from the previous years, and thereafter, entitled to a 50% relief from PRC income tax forthe next three years. FY2004 is the first tax exemption year.

REVIEW OF PAST PERFORMANCE

The following is a year-on-year review of our Group’s financial performance, which should be read inconjunction with the Compilation Report beginning on page A-1 of this Prospectus.

FY2001 vs FY2002

Revenue

Our revenue increased by approximately RMB20.0 million or 45.0% from approximately RMB44.4 millionin FY2001 to approximately RMB64.4 million in FY2002. The increase was attributed largely to revenuegrowth of approximately RMB11.8 million or 65.9% from our Pressure Vessels segment and revenuegrowth of approximately RMB3.0 million or 20.5% from our Pipe Supports segment. Our Waste Gas andEnergy Recovery Systems segment also recorded a significant increase in revenue by RMB3.6 millionfrom a small base of RMB0.4 million in FY2001.

The increase in revenue from the Pressure Vessels segment was attributed mainly to increase in sales toour customer, CNPC Dalian Petrochemical Engineering Co., Ltd for mainly corrosion resistant heatexchangers. Sales to this customer accounted for approximately 17.1% of our total sales in FY2002amounting to RMB11.0 million.

Our Pipe Supports segment had generated additional revenue of approximately RMB3.0 million as aresult of an increased sales contribution of approximately RMB2.9 million from SINOPEC YangtzePetrochemical Co. Ltd and approximately RMB1.8 million from SINOPEC Shanghai Petrochemical Co.Ltd. The increase in sales to these two major customers was partially offset by a decrease in revenuecontribution from contracts with other customers.

Revenue for our Waste Gas and Energy Recovery Systems had increased significantly by approximatelyRMB3.6 million in FY2002 owing largely to the completion of three contracts amounting to RMB3.4million.

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Revenue growth for our Heat Pipes and Heat Pipe Exchangers segment was less significant due to on-going competition, in particular from Jiangsu Shengnuo who has an established track record in themarket. Jiangsu Shengnuo was our competitor before it was subsequently acquired by us in FY2004. Formore details of the acquisition, please refer to page 76 of this Prospectus, under “Our History” section.

Gross profit and gross profit margin

Our gross profit increased by approximately RMB2.0 million or 21.7% from approximately RMB9.2 millionin FY2001 to approximately RMB11.2 million in FY2002. On the other hand, gross profit margin haddeclined from 20.8% in FY2001 to 17.5% in FY2002. The lower gross profit margin recorded in FY2002was mainly attributed to the decline in gross profit margins of our Heat Pipes and Heat Pipe Exchangerssegment from 26.1% to 9.4% and Pressure Vessels segment from 14.5% to 5.9%. Firstly, we launchedour new working fluid Heat Pipe products at competitive prices to expand our market share for this newproduct. Being the first year of production, we incurred high manufacturing costs arising from materialwastages and production inefficiencies. Secondly, faced with strong competition in our Heat Pipebusiness from Jiangsu Shengnuo, we kept our contract prices low during tendering and as a result, ourprofit margin was adversely affected. In addition, in our bid to secure our market share for our Heat Pipebusiness in the steel industry, we offered relatively low contract prices to our new customers, such as, AnYang Steel Group Co., Ltd, Xuan Hua Steel Co., Ltd and Hangzhou Steel Co., Ltd who continued tocontract with us in subsequent years.

Despite the increase in revenue for our Pressure Vessels segment, our gross profit margin for thissegment declined from 14.5% to 5.9%. This was because we offered lower contract prices to CNPCDalian Petrochemical Engineering Co., Ltd in an effort to secure this customer in view of future salesopportunities.

The adverse impact on our gross profit was, however, partially offset by an improvement in gross profitmargin of our Pipe Supports segment from 24.6% to 43.3% in FY2002. This was mainly achievedthrough our contract with SINOPEC Shanghai Petrochemical Co., Ltd for the supply of low temperaturePipe Supports which yielded high profit margin.

Other operating income

The increase in other operating income was insignificant and it was attributable to an increase in interestincome.

Operating expenses

Our administrative expenses increased by approximately RMB0.9 million or 26.5% from approximatelyRMB3.4 million in FY2001 to approximately RMB4.3 million in FY2002. This was due to the increase instaff salaries and benefits of approximately RMB0.6 million owing to an increase in staff headcount from23 to 31 and higher average salaries. The increase in staff headcount was to support the increase in thelevel of business activities and sales volume. Depreciation charges were increased by approximatelyRMB0.2 million attributed to additions to office equipment and furniture. The remaining increase ofapproximately RMB0.2 million had resulted from higher travelling and transportation expenses as ourbusiness activities increased. On the other hand, we recorded a decrease in bad debts allowance ofRMB0.2 million.

Our research expenses doubled by approximately RMB0.6 million from approximately RMB0.6 million inFY2001 to approximately RMB1.2 million in FY2002 due mainly to increased research work in relation tothe development of low temperature Heat Pipes and Waste Gas and Energy Recovery Systems. InFY2003, we secured our first contract to supply our low temperature Heat Pipes for use in the Qinghai-Tibet railway.

Our selling and distribution expenses had decreased by approximately RMB0.3 million or 5.3% fromapproximately RMB5.7 million in FY2001 to approximately RMB5.4 million in FY2002 due to a decreasein delivery expenses of RMB1.0 million, partially offset by the increase in staff salaries and benefits ofRMB0.3 million and entertainment expenses of RMB0.4 million. Delivery expenses had decreased as

50

most of the deliveries were undertaken by the customers and hence such costs were borne by them.Staff salaries and benefits had increased by approximately RMB0.3 million due to salary increments andan additional three sales personnel employed over the periods. Entertainment expenses had increasedby approximately RMB0.4 million in line with the increase in sales activities.

Other operating expenses had decreased by approximately RMB0.2 million or 66.7% from approximatelyRMB0.3 million in FY2001 to approximately RMB0.1 million in FY2002 due to legal fees andcompensation of RMB0.2 million incurred in the litigation claim by Jiangsu Shengnuo against us for theunauthorised use of photographs of their products. Apart from the legal fees and compensation incurred,there were no other resulting penalties payable to Jiangsu Shengnuo.

Finance cost

Finance cost had increased by a marginal RMB34,000 or 54.8% from approximately RMB62,000 inFY2001 to approximately RMB96,000 in FY2002 due mainly to an increase in short term loan to financeworking capital requirements.

Profit before income tax (“PBT”) and PBT margin

We turned around from a loss of approximately RMB0.8 million to a profit before taxation ofapproximately RMB0.1 million on the back of a significant revenue growth. Consequently, we recorded aPBT margin of 0.17% attributable mainly to higher revenue and slower rate of increase in operatingexpenses.

Income tax expense

Our income tax expense decreased marginally by RMB44,000, despite the higher operating profit, due tolower non-allowable expenses.

(Loss) / Profit after income tax

In view of the above reasons, we reduced our loss from approximately RMB1.4 million in FY2001 toapproximately RMB0.4 million in FY2002.

FY2002 vs FY2003

Revenue

Our revenue increased by approximately RMB32.4 million or 50.3% from approximately RMB64.4 millionin FY2002 to approximately RMB96.8 million in FY2003. This was attributable mainly to revenue growthof approximately RMB24.3 million and RMB7.8 million achieved for our Heat Pipes and Heat PipeExchangers and Pressure Vessels segments respectively.

Our Heat Pipes and Heat Pipe Exchangers segment achieved a significant increase in revenue inFY2003 due mainly to the success of our marketing strategies and expansion of our market share inFY2002. In addition, we also experienced more demand for our products arising from the expansion ofproduction facilities within the steel industry. Revenue contribution from our steel industry customersrepresented approximately 75.5% or RMB28.2 million of our revenue derived from Heat Pipes and HeatPipe Exchangers segment in FY2003 as compared to 68.7% or RMB9.0 million in FY2002. In addition,the average values of contracts secured in FY2003 were higher than that of FY2002.

Our Pressure Vessels segment had continued to grow in FY2003 with new customers such as YPC-BASF Company Limited (a joint venture company between Yangtze Petrochemical Co., Ltd and BASF),SINOPEC Qilu Petrochemical Co., Ltd and Lianyungang Dupont Zhongshan Spandex Company Limited.These customers, in aggregate, contributed revenue of approximately RMB10.4 million in FY2003 whichwas partially offset by a decline in sales to other customers.

Our Pipe Supports segment registered a marginal revenue growth of approximately RMB0.6 million inFY2003.

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Revenue of our Waste Gas and Energy Recovery Systems segment decreased by approximatelyRMB0.2 million in FY2003. While we secured a large contract from SINOPEC Shanghai PetrochemicalCo., Ltd of RMB2.8 million in FY2003, there were less small-scale contracts completed in FY2003 ascompared to FY2002.


Our gross profit increased by approximately RMB16.7 million or 149.1% from approximately RMB11.2million in FY2002 to approximately RMB27.9 million in FY2003. Gross profit margin had also improvedfrom 17.5% in FY2002 to 28.8% in FY2003 due mainly to the improvement in gross profit margins of ourHeat Pipes and Heat Pipe Exchangers segment and Pressure Vessels segment. Gross profit marginswere initially adversely affected by a significant increase in prices of raw materials used for theproduction of Heat Pipes and Heat Pipe Exchangers and Pressure Vessels in the first half of FY2003.However, this was offset by more favourable contract prices and our measures to effectively monitorcosts by reducing material wastage, managing direct material costs and improving production efficiency.

Gross profit margin of our Heat Pipes and Heat Pipe Exchangers improved from 9.4% to 27.2% dueprimarily to better contract prices as we expanded our market share, evidenced by an increase in thenumber of customers, and reduced competition from competitors, in particular, from Jiangsu Shengnuo.In March 2003, we began negotiating with Jiangsu Shengnuo with a view to acquiring a stake in thelatter. As such, competition with Jiangsu Shengnuo in contract tendering had gradually eased off. Theincrease in revenue, resulting from better contract prices, outweighed the cost incurred and gave rise toimprovement in gross profit contribution.

Gross profit margin for our Pressure Vessels segment improved from 5.9% to 23.5% due mainly to costefficiencies and savings from lower subcontractors’ costs as a result of the increase in our sales volumeand production requirements. The increase in production volume of our subcontractors had in turnallowed them to enjoy cost savings from economies of scale which was passed on to us.

Though revenue contribution from our Waste Gas and Energy Recovery Systems segment remainedrelatively small, we recorded an improvement in gross profit margin from 15.2% to 37.8%. Our grossprofit margin was low in FY2002 as we had a one-off major contract valued at RMB2.2 million whichrelated to installation work. This major contract had a low gross profit margin as it was our first suchcontract. The low profit margin outweighed the high profit margins derived through several other design-related contracts. Such design-related contracts involved minimal material and manufacturing costs asthe required design work was performed by our engineering personnel. In FY2003, our gross profitmargin had improved owing primarily to more revenue generated from design-related contracts andbetter profit margin yielded from a major contract with SINOPEC Shanghai Petrochemical Co., Ltd.


Other operating income increased from approximately RMB20,000 in FY2002 to approximately RMB1.0million in FY2003 with the government grant received to fund our R&D work and expansion in our R&Dfacilities.

Operating expenses

Our administrative expenses increased by approximately RMB1.3 million or 30.2% from approximatelyRMB4.3 million in FY2002 to approximately RMB5.6 million in FY2003. This was due mainly to theincrease in staff salaries and benefits by approximately RMB0.7 million with five additional staff, travellingand transportation expenses for management staff by approximately RMB0.3 million, office expenses byapproximately RMB0.3 million and other miscellaneous small items by approximately RMB0.4 million.These increases in expenses, in line with our expanding business operations, were, however, offset by areduction in bad debts allowance by approximately RMB0.4 million.

Our research expenses increased by approximately RMB0.9 million or 75.0% from approximatelyRMB1.2 million in FY2002 to approximately RMB2.1 million in FY2003 due to our research work on thewelding process relating to heat exchangers and further development work on our Waste Gas andEnergy Recovery Systems.

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Our selling and distribution expenses had increased by approximately RMB1.1 million or 20.4% fromapproximately RMB5.4 million in FY2002 to approximately RMB6.5 million in FY2003. This was duemainly to increase in promotional expenses of approximately RMB0.3 million, travelling expenses ofapproximately RMB0.2 million, freight expenses of approximately RMB0.3 million and staff salaries andbenefits of RMB0.3 million with 11 additional sales personnel employed. These expenses had increasedto support the higher level of sales activities.

The increase in other operating expenses was marginal.

Finance cost

Finance cost increased by approximately RMB0.2 million from approximately RMB0.1 million in FY2002to approximately RMB0.3 million in FY2003 as a result of additional bank loan of approximately RMB6.7million taken up to finance working capital requirements.

Profit before income tax and PBT margin

Profit before taxation increased by approximately RMB14.2 million from approximately RMB0.1 million inFY2002 to approximately RMB14.3 million in FY2003. This was attributable mainly to strong gross profitgrowth of approximately RMB16.7 million and other operating income of approximately RMB1.0 millionwhich outweighed the increase in expenses of approximately RMB3.5 million.

Income tax expense

Our income tax expense increased by approximately RMB1.7 million from approximately RMB0.5 millionin FY2002 to RMB2.2 million in FY2003. Our effective tax rate has decreased to 15.4% as the currentyear’s income tax expense based on our profit was offset by a tax concession enjoyed by SunpowerPetrochemical as explained under the section entitled “Overview” on page 48 of this Prospectus.

Profit after income tax

Our Group posted a strong profit after income tax of approximately RMB12.1 million after deducting theincome tax expenses of RMB2.2 million.

FP2003 vs FP2004

Revenue

Our revenue increased by approximately RMB55.8 million or 124.8% from approximately RMB44.7million in FP2003 to approximately RMB100.5 million in FP2004. The increase was attributed to therevenue growth in all our product segments.

Our Heat Pipes and Heat Pipe Exchangers segment had generated revenue growth of approximatelyRMB26.5 million or 254.8% as a result of the increase in our market share. We completed 51 contracts inFP2004 as compared to 24 in FP2003. In addition, pursuant to the Shengnuo Undertakings, salescontribution from Jiangsu Shengnuo of RMB13.6 million in FP2004 had boosted our revenue derivedfrom this segment. For more details of the Shengnuo Undertakings, please refer to pages 72 and 73 ofthis Prospectus under “Restructuring Exercise”.

Our Pressure Vessels segment generated revenue growth of approximately RMB16.0 million attributedmainly to sales to YPC-BASF Company Limited amounting to approximately RMB16.7 million.

Our Pipe Supports segment also generated additional revenue of approximately RMB11.2 million duemainly to sales to the new customers, SINOPEC Engineering Incorporation and CTCI Overseas Corp.Ltd, which in aggregate amounted to RMB10.7 million.

Our Waste Gas and Energy Recovery Systems segment registered a growth of approximately RMB2.1million in FP2004 owing to our contracts with SINOPEC Yangtze Petrochemical Co., Ltd which amountedto RMB2.0 million, for providing our system solutions and the related design services.

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Our gross profit increased by approximately RMB20.4 million or 164.5% from approximately RMB12.4million in FP2003 to approximately RMB32.8 million in FP2004. Gross profit margin had also improvedfrom 27.7% in FP2003 to 32.6% in FP2004.

Gross profit margin of our Heat Pipes and Heat Pipe Exchangers and Pressure Vessels segments hadimproved substantially from 11.5% to 23.6%, and 16.1% to 26.0% respectively in FP2004. Prices of rawmaterials used for the production of Heat Pipes and Heat Pipe Exchangers, and Pressure Vessels hadincreased in FP2003. This price increase was gradually passed on to our customers in the second half ofFY2003 by way of higher contract prices. As such, the impact of this price increase was not carried intoFP2004.

Gross profit margin of our Waste Gas and Energy Recovery Systems segment improved from 39.6% to65.1% due mainly to our contracts with SINOPEC Yangtze Petrochemical Co., Ltd where we wereengaged to provide our system solutions and the related design services. There were minimal materialand manufacturing costs involved for these contracts as the related design work was performed by ourengineering personnel.


Other operating income increased from approximately RMB12,000 in FP2003 to approximately RMB0.5million in FP2004 due to a government grant of approximately RMB0.4 million to finance the upgrading ofour R&D facilities.

Operating expenses

Our administrative expenses increased by approximately RMB3.1 million or 147.6% from approximatelyRMB2.1 million in FP2003 to approximately RMB5.2 million in FP2004. The administrative expensesincluded increase in office expenses by approximately RMB0.8 million, staff salaries and benefits byapproximately RMB0.5 million, travelling and transportation expenses by approximately RMB0.6 million,rental by approximately RMB0.2 million, depreciation by approximately RMB0.1 million, impairment ofintangible asset of approximately RMB0.2 million, amortisation of intangible asset by approximatelyRMB0.1 million and other smaller expense items aggregating to RMB0.6 million. The increase inadministrative expenses was attributable to expansion of our business activities, including the acquisitionof Jiangsu Shengnuo, which incurred approximately RMB1.3 million in administrative expenses. Theintangible asset relates to the “Shengnuo” trademark transferred to Nanjing Shengnuo as part of theShengnuo Undertakings and is amortised over a period of 10 years commencing from 30 June 2004. Theimpairment of intangible asset arose as a result of the write down of net book value by JiangsuShengnuo prior to the transfer to Nanjing Shengnuo under the Shengnuo Undertakings to the valuationamount of approximately RMB2.9 million by Jiangsu Shengnuo, which was taken in as part of our ProForma Group’s expenses.

Our research expenses increased by approximately RMB0.3 million or 50.0% from approximatelyRMB0.6 million in FP2003 to approximately RMB0.9 million in FP2004 due to increase in R&D expensesincurred for the development of Pipe Support products.

Our selling and distribution expenses had increased by approximately RMB1.0 million or 34.5% fromapproximately RMB2.9 million in FP2003 to approximately RMB3.9 million in FP2004 owing to the sellingand distribution expenses of RMB1.2 million that arose from the acquisition of Jiangsu Shengnuo. As aresult, our staff salaries and benefits, office expenses and travelling expenses had increased.

Finance cost

Finance cost doubled from approximately RMB0.1 million in FP2003 to approximately RMB0.2 million inFP2004 attributed to an increase in bank loans of RMB3.9 million to finance our working capitalrequirements.

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Profit before income tax and PBT margin

Profit before taxation increased by approximately RMB16.5 million from approximately RMB6.6 million inFP2003 to approximately RMB23.1 million in FP2004. This was mainly attributable to strong gross profitgrowth of approximately RMB20.4 million and operating income of approximately RMB0.5 million whichoutweighed the increase in operating expenses of approximately RMB4.4 million.

Income tax expense

Our income tax expense decreased by approximately RMB0.7 million from approximately RMB1.0 millionin FP2003 to RMB0.3 million in FP2004. The effective tax rate of FP2004 was 1.3% as compared to the15.0% in FP2003. This was mainly attributable to tax exemption granted to Sunpower Technology as itwas a foreign investment enterprise.

Profit after income tax

As a result of the above factors, our Group posted a profit after income tax of RMB22.8 million afterdeducting the income tax expenses of RMB0.3 million.

LIQUIDITY AND CAPITAL RESOURCES

Our operations and expansion strategies are mainly financed through shareholders’ loans, external bankborrowings and internal cash resources. The principal uses of these cash are for the purchases ofmaterials and consumables, acquisition of machinery and equipment and meeting operating expenses.

As at the Latest Practicable Date, we have total bank borrowings of approximately RMB6.0 million. Ourcash and cash equivalents as at the Latest Practicable Date was RMB17.8 million. Please refer to“Capitalisation and Indebtedness” on pages 59 and 60 of this Prospectus for further details.

Based on the above and to the best of their knowledge, our Directors are of the opinion that we haveadequate working capital for our present requirements after taking into account the present bankingfacilities, shareholders’ funds and internal cash resources.

We set out below a summary of our Pro Forma Group net cash flow summary for the period underreview:-

FY2003 FP2004RMB’000 RMB’000

Net cash (used in) / generated from operating activities (13,026) 27,267

Net cash used in investing activities (3,178) (13,229)

Net cash generated from financing activities 6,659 6,659

Net (decrease) / increase in cash and cash equivalents (9,545) 20,697

Cash and cash equivalents at beginning of financial year / period 9,545 –

Cash and cash equivalents at end of financial year / period – (1) 20,697

Note:-

1. There were no cash and cash equivalents as at 31 December 2003 as cash balances were not part of the assets transferredfrom Sunpower Petrochemical to Sunpower Technology under the Restructuring Exercise.

The above summary and the following cash flow discussion should be read in conjunction with theCompilation Report beginning on page A-1 of this Prospectus.

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Net cash (used in) / generated from operating activities

In FY2003, net cash used in operating activities amounted to approximately RMB13.0 million. This wasdue mainly to operating profits of approximately RMB14.3 million recorded for the year adjusted fordepreciation expense and interest expense of approximately RMB1.1 million and RMB0.3 millionrespectively. This was reduced by decreases in working capital requirement of approximately RMB26.2million due to cash outflows arising from an increase of approximately RMB21.9 million andapproximately RMB0.7 million in trade receivables, and other receivables and prepayments respectivelyand a decrease of approximately RMB11.7 million in other payables. The cash outflows were partiallyoffset by cash inflows arising from the decrease in inventories of approximately RMB1.1 million andincrease in trade payables of approximately RMB7.0 million. In addition, we have also paid tax andfinancial expenses of RMB2.2 million and RMB0.3 million respectively. The increase in trade receivableswas in line with the increase in revenue, and increase in other receivables and prepayments were due tomore advance payments for purchases. The increase in trade payables was due mainly to increase inpurchases to meet sales requirements. The decrease in inventories was due to inventories drawn downto cater to the high sales volume in November and December 2003. The decrease in other payables wasdue mainly to the decrease in accruals for late contract costs, which relates to costs incurred for invoiceswhich were not received from suppliers as at year end.

In FP2004, operating activities amounted to a positive net cash flow of approximately RMB27.3 million.This was due mainly to operating profits of approximately of RMB23.1 million recorded for the yearadjusted for depreciation expense, impairment and amortisation of intangible asset, gain on disposal ofmotor vehicles and interest expense of approximately RMB0.8 million, RMB0.3 million, RMB24,000 andRMB0.2 million respectively. This was improved by increases in working capital requirement ofapproximately RMB2.9 million due to cash outflows arising mainly from an increase of approximatelyRMB20.6 million in trade receivables and a decrease of trade payables of approximately RMB17.5 millionand partially offset by cash inflows arising from decreases of approximately RMB16.6 million in otherreceivables and prepayments, and inventories of approximately RMB15.4 million, an increase of otherpayables of approximately RMB9.5 million, tax payment of approximately RMB0.3 million and payment ofinterest expense of approximately RMB0.2 million. The increase in trade receivables was in line with theincrease in revenue. The increase in other payables arose from the accruals for late contract costs. Thedecrease in other receivables and prepayments were due to less advance payments for purchases andafter adjusting for the Sunpower and Shengnuo Undertakings. Decreases in inventories and tradepayables were due to decrease in work-in-progress and deposits received from customers in recognitionof advances through delivery of sales respectively.

Net cash used in investing activities

In FY2003, we recorded a net cash outflow from investing activities of approximately RMB3.2 millionmainly for the purchase of plant and machinery of approximately RMB1.6 million and expenditure ofapproximately RMB1.2 million incurred for the expansion of our Heat Pipe factory located at Nanjing,Jiangning.

In FP2004, we recorded a net cash outflow from investing activities of approximately RMB13.2 million.This was due mainly to the purchase of machinery of approximately RMB0.8 million, renovation of theoffice building and refurbishment of the Heat Pipe factory of approximately RMB0.9 million, expenditureof approximately RMB0.3 million incurred for the expansion of our Pipe Support factory located atNanjing Ningqiao North Road and partial payment made pursuant to the Sunpower Undertakings whichamounted to RMB10.8 million.

Net cash generated from financing activities

In FY2003, our net cash inflow from financing activities amounted to approximately RMB6.7 million. Thiswas due mainly to proceeds from bank loans for working capital requirements.

In FP2004, our net cash inflow from financing activities amounted to approximately RMB6.7 million. Thiswas due mainly to proceeds from convertible loans for the acquisition of assets pursuant to theRestructuring Exercise.

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MATERIAL CAPITAL EXPENDITURES

The table below sets out the major capital expenditures in the last three financial years ended 31December 2001, 2002, 2003, six months ended 30 June 2004 and the period from 1 July 2004 to theLatest Practicable Date. The purchase of the assets above was financed mainly through funds fromoperations and bank loans.

1 July 2004 to the RMB’000 FY2001 FY2002 FY2003 FP2004 Latest Practicable Date

Additions

Land-use rights – 400 – – 2,395Leasehold land and buildings 1,643 335 – 938 360Plant and machinery 115 1,333 1,646 833 549Motor vehicles 558 – 110 228 699Furniture, fixtures and equipment 437 406 184 170 432Construction-in-progress 223 324 1,238 290 293

2,976 2,798 3,178 2,459 4,728

The land-use rights and construction-in-progress for the period from 1 July 2004 to the Latest PracticableDate pertained mainly to our Heat Pipe factory located at Nanjing Jiangning and our Pipe Supportfactory at Nanjing Ningqiao North Road. The plant and machinery, motor vehicles, and furniture, fixturesand equipment were purchased to equip these two factories.

We have not made any material divestments in the last three financial years ended 31 December 2001,2002 and 2003. In FP2004, we have disposed off motor vehicles amounting to net book value ofRMB46,000. For the period from 1 July 2004 to the Latest Practicable Date, no material divestment wasmade.

Commitments

As at 30 June 2004, our commitments in relation to non-cancellable operating leases contracted for butnot recognised as liabilities, are payable as follows:-

RMB’000

Within one year 754In the second to fifth years inclusive 91After five years –

845

As at 30 June 2004, our capital commitments are as follows:-

RMB’000

Expenditure for property, plant and equipment contracted for 5,554Capital injection into subsidiaries 44,166

49,720

Save as disclosed above, our Group has no other borrowings or indebtedness and liabilities underacceptances (other than normal trading bills) or acceptance credits, mortgages, charges, obligationsunder finance leases, guarantees or other material contingent liabilities as at the Latest Practicable Date.

We intend to fund the commitments from internal resources and/or bank borrowings.

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CREDIT MANAGEMENT

We usually extend credit terms of between 30 to 90 days to our customers. Our credit term is extendedto customers according to several factors which include their financial position, their financial credibility,volume and frequency of transaction, and the length of our relationship with the customer. For certainnew customers, we may require full payment (excluding performance guarantee fee) before the delivery,installation and/or commissioning of our products.

We will normally collect a deposit ranging from between 10% and 30% of the contract sum subject to ourassessment of the factors mentioned in the paragraph above. Upon the delivery, installation and/orcommissioning of our products, we will bill approximately 70% to 90% of the contract sum. The final sumof 5% to 10% of total contract sum billed is a performance guarantee fee which is collectible one yearafter the completion of the contracts.

Our finance department is responsible for the monitoring of our outstanding trade debts while our salesdepartment is responsible for the collection of trade debts. The sales managers are overall in-charge inmonitoring the credit policy as they maintain a personalised relationship with the customers. Individualsales personnel are assigned to monitor and collect trade debts of their respective customers. Actionssuch as notice of payment and letter of demand will be issued to the customers who exceeded theircredit terms. We have not experienced any material bad debts in the past three financial years and sixmonths ended 30 June 2004.

Our average collection period and allowance for doubtful debts for the last three financial years and thesix months ended 30 June 2004 were as follows:-

FY2001 FY2002 FY2003 FP2004

Trade Receivables Turnover (Days) 78(1) 68(1) 95(1) 77(2)

Allowance for doubtful Trade Receivables (RMB’000) 302 529 138 –

As percentage of revenue of our Pro Forma Group 0.7% 0.8% 0.1% –

Allowance for doubtful Non-Trade Receivables (RMB’000) 473 46 11 –

Notes:-

(1) Trade receivables turnover days = (average trade receivables / revenue) x 365 days

(2) Trade receivables turnover days = (average trade receivables / revenue) x 182 days

Our credit period to customers in FY2001 and FY2002 ranges within our usual credit terms. However, inFY2003, our average collection period has increased to 95 days which was slightly over our credit terms.This was due mainly to more sales revenue recognised in the months of November and December ofFY2003. As we devoted more resources to the collection of trade receivables, our trade receivablesturnover had decreased to 77 days in FP2004.

Allowance for doubtful debts for each period is based on performance guarantee fee that was overduebased on the date stipulated in the contract. The allowance for doubtful trade receivables had increasedfrom RMB0.3 million in FY2001 to RMB0.5 million in FY2002 due to additional allowance made on thereceivables due from two customers. The amount of allowance for doubtful trade receivables decreasedto RMB0.1 million in FY2003 as we were more stringent in monitoring and collecting the performanceguarantee fee. In FP2004, we wrote off RMB30,000 from the allowance as bad debts as they were nolonger recoverable from that customer. As at 30 June 2004, we have recovered approximately RMB0.2million of those trade receivables which were provided as bad debt allowance in the past three years.

As at the Latest Practicable Date, approximately RMB30.6 million of the outstanding trade receivables asat 30 June 2004 have been collected.

The bad debts allowance include allowance for doubtful debts on non-trade receivables of approximatelyRMB0.5 million, RMB46,000, RMB11,000 and nil for FY2001, FY2002, FY2003 and FP2004 respectively.The bad debt allowance on non-trade receivables were related to advances made to staff and someexternal consultants.

INVENTORY MANAGEMENT

Our inventories comprise raw materials, work-in-progress and finished goods where raw materialsinclude steel pipes, steel plates, insulation materials such as polyurethane and chemicals. Our stocks arestated at the lower of cost (determined on a weighted average basis) and net realisable value. As at 30June 2004, work-in-progress constituted 77.3% of our inventories and, raw materials and finished goodsconstituted 10.3% and 12.4% respectively. We generally procure the required materials upon securingthe contracts.

For the last three financial years ended 31 December 2003 and the six months ended 30 June 2004, ourinventory turnover (in days) are as follows:-

FY2001 FY2002 FY2003 FP2004

Inventory Turnover (Days) 111(1) 134(1) 135(1) 58(2)

Notes:-

(1) Inventory turnover days = (average inventory / cost of sales) x 365 days

(2) Inventory turnover days = (average inventory / cost of sales) x 182 days

Our inventory turnover days in FY2001, FY2002 and FY2003 are acceptable as our average productionperiod is generally between one to four months. Our inventory turnover days declined to 58 days inFP2004 as a result of inventories drawn down to meet the sales delivery requirements in May and June2004.

DIVIDENDS

Our Company has not declared or paid any dividends on our Shares since the date of its incorporation.

We currently do not have a formal dividend policy. Subject to the Bermuda Companies Act, shareholdersin general meeting may from time to time declare a dividend or other distribution but the amount of suchdividends or distribution shall not exceed the amount recommended by our Directors. Subject to theBermuda Companies Act, our Directors may also from time to time declare a dividend or otherdistribution. The declaration and payment of future dividends will depend upon our operating results,financial conditions, other cash requirements including capital expenditure, the terms of borrowingarrangements (if any), dividend yield of comparable companies (if any) listed in Singapore and otherfactors deemed relevant by the Directors. For further details, please see “Dividends and distributions” inparagraph (vi) of Appendix D - “Summary of Bermuda Company Law” of this Prospectus.

Information relating to taxes payable on dividends are set out on page B-2 of this Prospectus under“Taxation”.

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59

CAPITALISATION AND INDEBTEDNESS

The following table shows our cash and cash equivalents, capitalisation and indebtedness of (i) our ProForma Group as at 30 June 2004 as adjusted for the Restructuring Exercise, Conversion of ConvertibleLoans and Bonus Issue and (ii) our Pro Forma Group after the Invitation.

You should read the following table in conjunction with our unaudited proforma consolidated financialstatements and related notes as set out in Appendix A of this Prospectus and under the section entitled“Review of Past Operating Performance and Financial Condition” as set out on pages 44 to 54 of thisProspectus.

As at 30 June 2004

(RMB’000) Our Proforma Group as adjusted

Our Proforma for the Restructuring Group as Exercise, the

adjusted for the Conversion ofRestructuring Convertible Exercise, the Loans, Bonus

Conversion of Issue and the netConvertible proceeds from the

Loans and Bonus issue of the New Proforma Issue Shares

Cash and cash equivalents 20,697 36,319 78,949

Short-term borrowingsSecured 6,850 6,850 6,850Unsecured 7,545 (1) – –

Long-term borrowingsSecured – – –Unsecured – – –

Total Indebtedness 14,395 6,850 6,850

Shareholders’ funds 22,259 45,426 88,056

Total capitalisation and indebtedness 36,654 52,276 94,906

Note:

(1) This relates to part of the Convertible Loans. For details refer to Note 15 of pages A-26 to A-29.

The short-term loan of approximately RMB0.9 million, which bore an interest of 6.64% per annum, wassecured over our office units at Senbao building with a carrying value of approximately RMB0.9 million.This loan was repaid in October 2004. Short-term loan of approximately RMB6.0 million bore interest at4.2% per annum, was supported by a guarantee issued by a PRC guarantor company, Nanjing QuanxinInvestment Guarantee Co. Ltd, for which we had paid a guarantee fee of approximately RMB0.1 million.This short-term loan of RMB6.0 million was repaid in August 2004.

Subsequent to 30 June 2004, we obtained a short-term loan of approximately RMB1.0 million for workingcapital purposes. The loan bears an interest of 6.9% per annum and is secured over our Pipe Supportfactory. This loan was repaid in October 2004.

In October 2004, we drew down a short-term loan of RMB6.0 million from Nanjing City CommercialBank. The loan is due on 28 September 2005, bears an interest rate equivalent to approximately 6.11%per annum and is guaranteed by Nanjing Shengnuo.

As at the Latest Practicable Date, our total outstanding bank borrowings was RMB6.0 million.

Based on the above and to the best of their knowledge, our Directors are of the opinion that we haveadequate working capital for our present requirements after taking into account the present bankingfacilities, shareholders’ funds and internal cash resources.

As at the Latest Practicable Date, based on management accounts of our Pro Forma Group, there wereno material changes in our total capitalisation and indebtedness as disclosed above, save for:-

(i) the decrease in cash and cash equivalents of approximately RMB3.0 million from approximatelyRMB20.7 million as at 30 June 2004 to RMB17.7 million as at the Latest Practicable Date;

(ii) the changes in bank borrowings as detailed above; and

(iii) the changes in our retained earnings arising from our day-to-day the operations in the ordinarycourse of our business.

Contingent Liabilities

As at the Latest Practicable Date, save as disclosed above, our Group does not have any guarantees orcontingent liabilities.

FOREIGN EXCHANGE MANAGEMENT

Our Group’s dominant transactional currency for the past three financial years and financial period underreview was RMB. With the natural hedging of the revenue and costs being denominated in RMB, ourGroup’s transactional foreign currency exposure for the past three financial years and financial periodunder review was insignificant.

In the event our Group expands into overseas markets outside the PRC in future, such overseas salesmay be denominated in currencies other than RMB. Hence our Group may be exposed to foreignexchange fluctuations in the future.

Presently, we do not have any hedging policy with respect to our foreign exchange exposure. In future,we may hedge our material foreign exchange transactions after considering the foreign currency amount,exposure period and transaction costs.

EXCHANGE CONTROLS

Bermuda

Please refer to “Appendix D – Summary of Bermuda Company Law” of this Prospectus for more detailson the exchange controls in relation to Bermuda.

PRC

Please refer to “PRC foreign exchange control may limit our ability to utilise our revenue effectively andaffect our ability to receive dividends and other payments from our PRC subsidiaries” of “Risks Relatingto the PRC” on pages 34 and 35 of this Prospectus for more details on the foreign exchange controlsystem of the PRC.

As our operations are primarily located in the PRC, we are required to comply with the PRC foreignexchange restrictions when we transfer funds from our PRC subsidiaries to our non-PRC GroupCompanies (whether in the form of dividends or not). Save as disclosed above, there are no restrictionson the ability of our subsidiaries to transfer funds to our Company in the form of cash dividends, loans oradvances.

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PROPERTIES AND FIXED ASSETS

We own the following properties as at the Latest Practicable Date:-

Location Description Gross Built-up Tenure UseArea (sq m)

Ningqiao North Road, Factory building 3,890 from 13 October 2004 industrialJiangning, Nanjing, to 12 October 2054PRC(1)

Jiangning, Nanjing, Factory building 2,386 from 18 October industrialPRC(1) to 19 August 2052

Room 2002, 2012 Building 240.94 from 20 October 2004 residenceand 2001, Senbao to 18 September 2042Building, South Zhongshan Road, Nanjing, PRC(1)

Note:-

(1) The above properties are insured against damages to the building structure.

We rent the following material properties as at the Latest Practicable Date:-

Description and Gross Tenure Annual Rental Lessor UseLocation Area

(sq m)

88 Zhushan Road, 40 20 years from RMB4,800 Nanjing Non- officeJiangning Science 1 April 2004 governmental Park, Nanjing Technology

Park Development Co., Ltd

Room 301, Suning 552.32 1 year from RMB524,151.60 Nanjing Suning Real officeUniversal Mansion, 20 February 2004 Estate Development 188 Guangzhou Company LimitedRoad, Nanjing(1)

Room 06, 11th floor, 178.46 1 year from RMB84,774.12 Ms Yi Su Qing crush roomSuning Universal 19 January 2005 andMansion, 188 warehouseGuangzhou Road, Nanjing

30, Ding Jia Qiao 500 1 year from RMB90,000 Nanjing Chemical officeRoad, Nanjing 1 January 2005 University Huaxin

Technology Co., Ltd

Note:-

(1) As at the Latest Practicable Date, we are in the process of renewing this lease and we do not foresee any problem doing so.

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MANUFACTURING FACILITIES AND CAPACITY

Our manufacturing facilities are located in Nanjing, Jiangsu, PRC and are primarily used to produce PipeSupports, and Heat Pipes and Heat Pipe Exchangers. The manufacturing facilities and productionprocess for Pipe Supports, and Heat Pipes and Heat Pipe Exchangers are different. Our existingmanufacturing facilities have an aggregate production area of approximately 6,358 sqm, out of which themanufacturing facilities of our Pipe Supports and Heat Pipes and Heat Pipe Exchangers occupy an areaof 3,889 sqm and 2,469 sqm respectively.

Our products comprising Heat Pipes and Heat Pipe Exchangers, Pressure Vessels, Waste Gas andEnergy Recovery Systems, and Pipe Supports are made in accordance with the technical specificationsof our customers. As our products are highly customised and every product differs in its size, materialsused, length, design plan, application and performance, our products cannot be standardised accordingto tonnage, length or numbers for the purpose of computing manufacturing capacity. Our Directorsbelieve that our manufacturing facilities in the past three financial years are operating close to fullcapacity as we had operated almost 7 days a week during this period.

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DILUTION

Dilution is the amount by which the Issue Price to be paid by the applicants for the Invitation Shares inthe Invitation exceeds our NTA per Share after the Invitation. The Adjusted NTA per Share of our ProForma Group as at 30 June 2004, before adjusting for the net proceeds from the issue of the NewShares is 3.15 cents.

Based on the issue of 49,000,000 New Shares at an Issue Price of S$0.22 per New Share pursuant tothe Invitation and after deducting estimated issue expenses attributable to our Company, the adjustedNTA of our Pro Forma Group as at 30 June 2004 would have been 5.25 cents per Share. Thisrepresents an immediate increase in NTA of 2.10 cents per Share to our existing shareholders and animmediate dilution in NTA of 16.75 cents per Share to our public investors. The following table illustratesthis per Share dilution:-

Issue Price per Share (cents) 22.00

Adjusted NTA per Share as at 30 June 2004, before adjusting for the Invitation (cents) 3.15

Increase in NTA per Share to existing shareholders (cents) 2.10

NTA per Share after the Invitation (cents) 5.25

Dilution in NTA per Share to public investors (cents) 16.75

Dilution in NTA per Share to public investors as a percentage of Issue Price (%) 76.1

The following table summarises the effective cash cost to our Directors, new shareholders pursuant tothe Invitation, the Pre-IPO Investors and to the existing shareholders of our Company (excludingDirectors), of shares acquired by them at any time during the period of three years before the date of thisProspectus.

Effective cashShares Consideration cost per ShareNumber S$(2) (Cents)

Founding Shareholders 245,834,710 492,000 0.20

Pre-IPO Investors (1) 34,165,290 4,100,000 12.00

Public investors 113,165,000 24,896,300 22.00

Notes:-

(1) Please refer to the post-conversion adjustments made under “Incorporation and investments” on pages 71 and 72 of thisProspectus.

(2) Translated based on US$1:S$1.64 as at the date of conversion of the Convertible Loans.

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GENERAL INFORMATION ON OUR GROUP

SHARE CAPITAL

Our Company (Registration No. 35230) was incorporated in Bermuda on 28 April 2004 under theBermuda Companies Act as an exempted company with limited liability. As at the date of incorporation,we had an authorised share capital of US$12,000 comprising 12,000 ordinary shares of par valueUS$1.00 each, and all such shares were issued of which 12,000 nil paid to Guo Hong Xin. Pursuant to awritten resolution dated 23 July 2004, the shareholders of our Company approved the increase in theauthorised share capital of our Company from US$12,000 divided into 12,000 ordinary shares ofUS$1.00 each to US$1,000,000 divided into 1,000,000 ordinary shares of US$1.00 each.

Pursuant to written resolutions dated 27 July 2004, the shareholders of our Company approved, interalia, the following:-

(i) an increase in the authorised share capital of our Company from US$1,000,000 divided into1,000,000 ordinary shares of US$1.00 each to US$8,000,000 divided into 8,000,000 ordinaryshares of US$1.00 each;

(ii) the allotment and issue of 288,000 ordinary shares of US$1.00 each and the crediting as fullypaid-up of the 12,000 ordinary shares of US$1.00 each which had been issued as nil paid held byGuo Hong Xin, pursuant to the conversion of the loans under the Founding ShareholdersConvertible Loan Agreement (the “Founding Shareholders’ Conversion”); and

(iii) the allotment and issue of 41,693 ordinary shares of US$1.00 each pursuant to the conversion ofthe loans under the PRC Investor Convertible Loan Agreement and the Foreign InvestorsConvertible Loan Agreement (the “Investors’ Conversion”).

Pursuant to written resolutions dated 2 February 2005, the shareholders of our Company approved interalia, the following:-

(i) the sub-division of every one ordinary share of US$1.00 each in the authorised and issued sharecapital of our Company into 100 ordinary shares of US$0.01 each (“Share Split”);

(ii) the capitalisation of US$2,458,307 out of our share premium account by way of a bonus issue of245,830,700 ordinary shares of US$0.01 each fully paid to the shareholders of our Company (the“Bonus Issue”);

(iii) the adoption of a new set of Bye-laws for our Company;

(iv) the allotment and issue of the New Shares. The New Shares, when issued and fully paid-up, willrank pari passu in all respects with the existing issued and fully paid-up Shares;

(v) the adoption of the ESOS, and that authority be given to our Directors to allot and issue Sharesupon the exercise of options granted under the ESOS; and

(vi) that authority be given to our Directors to (i) allot and issue shares in our Company; and (ii) issueconvertible securities and any shares in our Company pursuant to the convertible securities,(whether by way of rights, bonus or otherwise) at any time and upon such terms and conditionsand for such purposes and to such persons as our Directors shall in their absolute discretion deemfit, provided that the aggregate number of shares and convertible securities to be issued pursuantto such authority shall not exceed 50 per cent. of the post-Invitation issued share capital of ourCompany and that the aggregate number of shares and convertible securities to be issued otherthan on a pro-rata basis to the then existing shareholders of our Company shall not exceed 20 percent. of the post-Invitation issued share capital of our Company. Unless revoked or varied by our

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Company in general meeting, such authority shall continue in full force until the conclusion of thenext Annual General Meeting of our Company or the date by which the next Annual GeneralMeeting is required by law or by our Articles to be held, whichever is earlier, except that ourDirectors shall be authorised to allot and issue new shares pursuant to the convertible securitiesnotwithstanding that such authority has ceased.

For the purposes of this resolution and pursuant to Rules 806(3) and 806(4) of the Listing Manualof the SGX-ST, “post-Invitation issued share capital” shall mean the enlarged issued and paid-upshare capital of our Company after the Invitation, after adjusting for any subsequent consolidationor sub-division of shares.

As at the Latest Practicable Date, our Company has only one class of shares, being ordinary shares ofUS$0.01 each. The rights and privileges of our Shares are stated in our Bye-laws. There are no founder,management or deferred shares. No person has been, or is entitled to be, given an option to subscribefor or purchase any securities of our Company or any of our subsidiaries.

The present issued and paid-up capital of our Company is US$2,800,000 comprising 280,000,000Shares. Upon the allotment of the New Shares, the resultant issued and paid-up share capital of ourCompany will be increased to US$3,290,000 comprising 329,000,000 Shares.

Details of the changes in the issued and paid-up share capital of our Company since incorporation andthe resultant issued and paid-up share capital immediately after the Invitation are as follows:-

Resultantissued

and paid-up Par value Issue price / Number of share capital

Purpose of Issue (US$) Consideration shares (US$)

Issued and paid-up share capital as at 1.00 – 12,000 – incorporation

Issued and paid-up ordinary shares of 1.00 US$288,000 288,000 288,000 US$1.00 each pursuant to the Founding Shareholders’ Conversion

Credited as fully paid-up pursuant to the 1.00 US$12,000 12,000 300,000 Founding Shareholders’ Conversion, the 12,000 ordinary shares of US$1.00 each

Issued and paid-up ordinary shares of 1.00 US$2,500,000 41,693 341,693 US$1.00 each pursuant to the Pre-IPO Investors’ Conversion

Share Split 0.01 – 34,169,300 341,693

Bonus Issue 0.01 – 245,830,700 2,800,000

New Shares to be issued pursuant to 0.01 S$10,780,000 49,000,000 3,290,000 the Invitation

Issued and paid-up share capital after 0.01 329,000,000 3,290,000 the Invitation

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The authorised share capital and the shareholders’ funds of our Company, as at (i) 30 June 2004; (ii)after the Restructuring Exercise, the Conversion of Convertible Loans, the Bonus Issue and the ShareSplit; and (iii) the Invitation are set forth below.

As at 30 June 2004 After (ii) above After the Invitation(US$’000) (US$’000) (US$’000)

AUTHORISED SHARE CAPITAL

Ordinary shares of US$1.00 each 12 – –

Ordinary shares of US$0.01 each – 8,000 8,000

ISSUED SHARE CAPITAL

Issued and fully paid-up share capital – 2,800 3,290

Share premium – – 4,651

Accumulated losses (2) (2) (2)

Total Shareholders’ Equity (2) 2,798 7,939

SHAREHOLDERS

Our Directors and Shareholders as well as their respective shareholdings immediately before theInvitation (as at the Latest Practicable Date) and immediately after the Invitation are set out as follows:-

Before the Invitation After the Invitation Direct Interest Deemed Interest Direct Interest Deemed Interest

Number of Number of Number of Number ofShares % Shares % Shares % Shares %

Directors

Guo Hong Xin(1) 73,440,661 26.23 12,847,322 4.59 73,440,661 22.32 2,847,322 0.87

Li Lai Suo(2) 66,154,120 23.63 12,943,198 4.62 66,154,120 20.11 2,943,198 0.89

Ma Ming(3) 53,977,927 19.28 13,134,949 4.69 53,977,927 16.41 3,135,239 0.95

Jiang Ning – – – – – – – –

Lau Ping Sum Pearce – – – – – – – –

Tham Hock Chee – – – – – – – –

Chin Sek Peng – – – – – – – –

Other Founding Shareholders

Allgreat Pacific Limited(1) 12,847,322 4.59 – – 2,847,322 0.87 – –

Armour Asia Limited(2) 12,943,198 4.62 – – 2,943,198 0.89 – –

Claremont Consultancy Limited(3) 13,134,949 4.69 – – 3,135,239 0.95

Trestle Asia Limited(4) 13,336,533 4.76 – – 13,336,533 4.05 – –

Pre-IPO Investors

Wong Hiu Kin 6,833,386 2.44 – – – – – –

Vertex Resources Limited(5) 6,149,965 2.20 – – – – – –

Chua Kian Peng 4,783,124 1.71 – – – – – –

Chau-Chan Sui Yung 4,783,124 1.71 – – – – – –

Equity-Link Asia Limited(6) 2,050,261 0.73 – – – – – –

Ng E-Ming Joyce 1,093,145 0.39 – – – – – –

Ang Poon Tiak 695,712 0.25 – – – – – –

Aw Cheok Huat 695,712 0.25 – – – – – –

Philip Roger Bennet 695,712 0.25 – – – – – –

Chu Tee Seng(7) 695,712 0.25 – – – – – –

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Before the Invitation After the Invitation Direct Interest Deemed Interest Direct Interest Deemed Interest

Number of Number of Number of Number ofShares % Shares % Shares % Shares %

Pre-IPO Investors

Goh Soo Siah 695,713 0.25 – – – – – –

Robin Lim Kai Wun 695,712 0.25 – – – – – –

Tan Tiong Cheng 695,712 0.25 – – – – – –

Tan Eng Kian 695,713 0.25 – – – – – –

Tay Hui Peng(7) 695,712 0.25 – – – – – –

Wong Keng Yin 695,712 0.25 – – – – – –

Zacchaeus Boon Suan Zin(7) 695,713 0.25 – – – – – –

Chen Jiong 409,725 0.15 – – – – – –

Tan Lweng Ngoh(7) 409,725 0.15 – – – – – –

Public – – – – 113,165,000 34.40 – –

TOTAL 280,000,000 100.00* 329,000,000 100.00

* Does not add up due to rounding

Notes:-

(1) Allgreat Pacific Limited is an investment holding company incorporated in the British Virgin Islands on 16 April 2004 which is100% held by Mr Guo Hong Xin.

(2) Armour Asia Limited is an investment holding company incorporated in the British Virgin Islands on 2 January 2004 which is100% held by Mr Li Lai Suo.

(3) Claremont Consultancy Limited is an investment holding company incorporated in the British Virgin Islands on 26 April 2004which is 100% held by Mr Ma Ming.

(4) Trestle Asia Limited is an investment holding company incorporated in the British Virgin Islands on 15 April 2004 which is100% held by Ms Jin Rong.

(5) Vertex Resources Limited is an investment holding company incorporated in the British Virgin Islands owned by 3individuals (Mr Goh Siok Piew, 30%; Mr Goh Kai Kui, 30%; and Mr Lee Tong Soon, 20%) and Equity-Link Asia Limited(20%).

(6) Equity-Link Asia Limited is an investment holding company incorporated in the British Virgin Islands beneficially owned by 2individuals, being Mr Henry Tan Song Kok (50%) and Ms Wang Yih Bing (50%).

(7) Chu Tee Seng is the father of Chu Hui Yi, an executive director of Stirling Coleman Investment Management Private Limited,a subsidiary of Stirling Coleman Limited. Tay Hui Peng is a daughter of Tay Ah Kee, a non-executive director of StirlingColeman. Tan Lweng Ngoh is the mother-in-law of Zacchaeus Boon Suan Zin.

Pursuant to the terms of the PRC Investor Convertible Loan Agreement and Foreign InvestorsConvertible Loan Agreement, (a) the Founding Shareholders have granted the Lenders options (the “PutOptions”) to require the Founding Shareholders to purchase the ordinary shares in our Company issuedto the Lenders pursuant to the conversion of the Convertible Loans (the “Option Shares”) at the cost oftheir investment, being the aggregate amount of US$2,500,000 (the “Option Shares Price”); and (b) theLenders have granted the Founding Shareholders options (the “Call Options”) to require the Lenders tosell the Option Shares to the Founding Shareholders at the Option Shares Price. The Put Options andthe Call Options shall lapse and cease to have any effect upon the successful listing and quotation of theShares on the SGX-SESDAQ.

The Shares held by our Directors and substantial shareholders do not carry different voting rights fromthe Invitation Shares. Save as disclosed above, our Directors are not aware of any arrangement, theoperation of which may, at a subsequent date, result in a change in control of our Company.

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The significant changes in the percentage ownership of our Company directly held by our Directors andour substantial shareholders subsequent to the date of incorporation are as follows:-

After the RestructuringAs at Exercise, Bonus Issue As at the

the date of and Share Split Latest Practicableincorporation and the Conversion Date

Number of Number of Number ofordinary shares ordinary shares ordinary shares

of US$1.00 of US$ 0.01 of US$0.01Name each % each % each %

Directors

Guo Hong Xin 12,000 – 73,440,661 26.23 73,440,661 26.23

Li Lai Suo – – 66,154,120 23.63 66,154,120 23.63

Ma Ming – – 53,977,927 19.28 53,977,927 19.28

Jiang Ning – – – – – –

Lau Ping Sum Pearce – – – – – –

Tham Hock Chee – – – – – –

Chin Sek Peng – – – – – –

Shareholders

Allgreat Pacific Limited – – 12,847,322 4.59 12,847,322 4.59

Armour Asia Limited – – 12,943,198 4.62 12,943,198 4.62

Claremont Consultancy Limited – – 13,134,949 4.69 13,134,949 4.69

Notes:-

(1) Save as described in these notes below, none of our Directors or substantial shareholders are related to each other.

(2) Allgreat Pacific Limited is an investment holding company incorporated in the British Virgin Islands on 16 April 2004 which is100% held by Mr Guo Hong Xin.

(3) Armour Asia Limited is an investment holding company incorporated in the British Virgin Islands on 2 January 2004 which is100% held by Mr Li Lai Suo.

(4) Claremont Consultancy Limited is an investment holding company incorporated in the British Virgin Islands on 26 April 2004which is 100% held by Mr Ma Ming.

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VENDORS

The name of the Vendors and the number of Shares which they will offer (in proportion to itsshareholding before the Invitation) pursuant to the Invitation are set out below:-

No. of VendorShares as a %

of Pre-Invitation No. of Shares Share Capital (%) No. of Shares

held before the No. of Vendor as at the Latest held after theName Invitation Shares Practicable Date Invitation

Allgreat Pacific Limited 12,847,322 10,000,000 3.57 2,847,322

Armour Asia Limited 12,943,198 10,000,000 3.57 2,943,198

Claremont Consultancy Limited 13,134,949 9,999,710 3.57 3,135,239

Wong Hiu Kin 6,833,386 6,833,386 2.44 –

Vertex Resources Limited 6,149,965 6,149,965 2.20 –

Chua Kian Peng 4,783,124 4,783,124 1.71 –

Chau-Chan Sui Yung 4,783,124 4,783,124 1.71 –

Equity-Link Asia Limited 2,050,261 2,050,261 0.73 –

Ng E-Ming Joyce 1,093,145 1,093,145 0.39 –

Ang Poon Tiak 695,712 695,712 0.25 –

Aw Cheok Huat 695,712 695,712 0.25 –

Phillip Roger Bennett 695,712 695,712 0.25 –

Chu Tee Seng 695,712 695,712 0.25 –

Goh Soo Siah 695,713 695,713 0.25 –

Robin Lim Kai Wun 695,712 695,712 0.25 –

Tan Tiong Cheng 695,712 695,712 0.25 –

Tan Eng Kian 695,713 695,713 0.25 –

Tay Hui Peng 695,712 695,712 0.25 –

Wong Keng Yin 695,712 695,712 0.25 –

Zacchaeus Boon Suan Zin 695,713 695,713 0.25 –

Chen Jiong 409,725 409,725 0.15 –

Tan Lweng Ngoh 409,725 409,725 0.15 –

Total 64,165,000

Save for Allgreat Pacific Limited, Armour Asia Limited and Claremont Consultancy Limited, which are theinvestment companies wholly owned by our Executive Directors, Mr Guo Hong Xin, Mr Li Lai Suo and MrMa Ming respectively, none of the other Vendors holds any office with our Group nor has any relationship(apart from its shareholding in our Company) with our Group.

MORATORIUM

To demonstrate their commitment to our Group, the Founders, Messrs Guo Hong Xin, Li Lai Suo, MaMing, Allgreat Pacific Limited, Armour Asia Limited and Claremont Consultancy Limited who in aggregateown 202,498,467 Shares representing approximately 61.5% of our Company’s issued and paid-up sharecapital after the Invitation, have each undertaken not to realise, dispose of or transfer any part of theirrespective shareholdings in our Company for a period of six (6) months commencing from the date ofadmission of our Company to the Official List of the SGX-SESDAQ and in the six months thereafter, notto realise, dispose of or transfer more than 50% of their respective shareholdings in our Companyimmediately after the invitation.

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To demonstrate its commitment to our Group, Trestle Asia Limited, who owns 13,336,533 Sharesrepresenting approximately 4.05% of our Company’s issued and paid-up share capital after the Invitation,has undertaken not to realise, dispose of or transfer any part of its shareholdings in our Company for aperiod of six months commencing from the date of admission of our Company to the Official List of theSGX-SESDAQ.

Allgreat Pacific Limited is an investment holding company and is wholly-owned by Guo Hong Xin. GuoHong Xin has undertaken not to dispose of or transfer any part of his interest in Allgreat Pacific Limitedfor a period of twelve months from the date of admission of our Company to the Official list of the SGX-SESDAQ.

Armour Asia Limited is an investment holding company and is wholly-owned by Li Lai Suo. Li Lai Suohas undertaken not to dispose of or transfer any part of his interest in Armour Asia Limited for a period oftwelve months from the date of admission of our Company to the Official list of the SGX-SESDAQ.

Claremont Consultancy Limited is an investment holding company and is wholly-owned by Ma Ming. MaMing has undertaken not to dispose of or transfer any part of his interest in Claremont ConsultancyLimited for a period of twelve months from the date of admission of our Company to the Official list of theSGX-SESDAQ.

Trestle Asia Limited is an investment holding company and is wholly-owned by Jin Rong. Jin Rong hasundertaken not to dispose of or transfer any part of her interest in Trestle Asia Limited for a period of sixmonths from the date of admission of our Company to the Official list of the SGX-SESDAQ.

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GROUP STRUCTURE

Restructuring Exercise

Our Company implemented a restructuring exercise (the “Restructuring Exercise”) in preparation for ourlisting on the SGX-SESDAQ, as described below:-

Incorporation and investments

On 28 April 2004, our Company was incorporated as an exempted company with limited liability.

Pursuant to the Founding Shareholders Convertible Loan Agreement, Guo Hong Xin, Li Lai Suo, MaMing, Allgreat Pacific Limited, Armour Asia Limited, Claremont Consultancy Limited and Trestle AsiaLimited loaned an aggregate amount of US$300,000 to our Company. On 25 August 2004, the loans ofUS$300,000 were converted into 300,000 ordinary shares of US$1.00 each, pursuant to which the12,000 nil paid ordinary shares of US$1.00 each held by Guo Hong Xin were credited as fully paid-up,and Guo Hong Xin, Li Lai Suo, Ma Ming, Allgreat Pacific Limited, Armour Asia Limited, ClaremontConsultancy Limited and Trestle Asia Limited were allotted and issued 77,622, 80,730, 65,871, 15,678,15,795, 16,029 and 16,275 ordinary shares of US$1.00 each in our Company respectively. Trestle AsiaLimited is an investment holding company wholly owned by Ms Jin Rong. As consideration for herassistance to our Group in preparing for the Invitation, we agreed to her subscription of 16,275 ordinaryshares of US$1.00 each in our Company at par value.

Pursuant to the PRC Investor Convertible Loan Agreement, Wong Hiu Kin loaned an amount ofUS$500,000 to our Company. On 4 February 2005, the loan of US$500,000 was converted into 8,339ordinary shares of US$1.00 each, pursuant to which Wong Hiu Kin was allotted and issued 8,339ordinary shares of US$1.00 each in our Company.

Pursuant to the Foreign Investors Convertible Loan Agreement, Innovus, Vertex Resources Limited,Chua Kian Peng, Chau-Chan Sui Yung, Equity-Link Asia Limited, Ng E-Ming Joyce, Chen Jiong and TanLweng Ngoh loaned an aggregate amount of US$2,000,000 to our Company. On 4 February 2005, theloans of US$2,000,000 were converted into an aggregate of 33,354 ordinary shares of US$1.00 each.

Innovus then directed our Company to allot and issue the new ordinary shares of US$1.00 each in ourCompany, pursuant to the conversion of its loan, to 11 individuals. As a result, the following investorswere allotted and issued an aggregate of 33,354 ordinary shares of US$1.00 each in our Company:-

Name of investor Number of ordinary shares of US$1.00 each

Vertex Resources Limited 7,505

Chua Kian Peng 5,837

Chau-Chan Sui Yung 5,837

Equity-Link Asia Limited 2,502

Ng E-Ming Joyce 1,334

Ang Poon Tiak* 849

Aw Cheok Huat* 849

Phillip Roger Bennett* 849

Chu Tee Seng* 849

Goh Soo Siah* 849

Robin Lim Kai Wun* 849

Tan Tiong Cheng* 849

Tan Eng Kian* 849

Tay Hui Peng* 849

Wong Keng Yin* 849

Zacchaeus Boon Suan Zin* 849

Chen Jiong 500

Tan Lweng Ngoh 500

Total 33,354

* These 11 individuals had loaned the amount of US$560,000 to our Company through Innovus and were allotted and issuedthe shares pursuant to the direction of Innovus to our Company. Please refer to page 26 of this Prospectus for further details.

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Pursuant to the terms of the PRC Investor Convertible Loan Agreement and Foreign InvestorsConvertible Loan Agreement, the Lenders agreed to convert their respective loans by subscribing for newshares in our Company at a 40% discount to the preliminary issue price (“Preliminary IPO Price”)determined by the Manager and our Company. In the event that the Issue Price differs from thePreliminary IPO Price, the parties have agreed to make post conversion adjustments by way of cashpayments, such that the loans will be converted at 40% discount to the Issue Price. Pursuant to suchadjustments, the Pre-IPO Investors will pay an aggregate amount of approximately $655,973 in cash tothe Founding Shareholders.

Pursuant to the terms of the PRC Investor Convertible Loan Agreement and Foreign InvestorsConvertible Loan Agreement, (a) the Founding Shareholders have granted the Lenders options (the “PutOptions”) to require the Founding Shareholders to purchase the ordinary shares in our Company issuedto the Lenders pursuant to the conversion of the Convertible Loans (the “Option Shares”) at the cost oftheir investment, being the aggregate amount of US$2,500,000 (the “Option Shares Price”); and (b) theLenders have granted the Founding Shareholders options (the “Call Options”) to require the Lenders tosell the Option Shares to the Founding Shareholders at the Option Shares Price. The Put Options andthe Call Options shall lapse and cease to have any effect upon the successful listing and quotation of theShares on the SGX-SESDAQ.

Acquisition of Certain Business, Assets and Undertakings of Sunpower Petrochemical

On 16 April 2004, Perimeter Pacific established a wholly-owned subsidiary, Sunpower Technology, as awholly foreign-owned enterprise under the laws of the PRC with an initial registered capital of US$5.08million.

On 28 April 2004, our Company acquired the entire issued and paid-up capital in Perimeter Pacific,which is a limited liability company incorporated in the British Virgin Islands for a nominal consideration.Perimeter Pacific was a shell company and did not have any previous operations.

Pursuant to a sale and purchase agreement dated 18 April 2004 between Sunpower Petrochemical andSunpower Technology and as amended by a supplemental agreement dated 27 July 2004 between thesame parties, Sunpower Technology acquired certain of Sunpower Petrochemical’s business, assets andundertakings relating to the Pressure Vessels, Waste Gas and Energy Recovery Systems and PipeSupports which were located in Nanjing (“Sunpower Undertakings”), for a total cash consideration ofRMB15,132,374.97, based on the audited net book value of the Sunpower Undertakings as at 31December 2003. All rights and liabilities relating to the Sunpower Undertakings were acquired with effectfrom 30 April 2004. The assets and liabilities not acquired by Sunpower Technology include assets andliabilities of Sunpower Petrochemical relating to its sealing business which is a distributor for Klinger ofAustralia and its other non-operating assets and liabilities. Under the sale and purchase agreement, theparties have agreed that Sunpower Petrochemical will be responsible for the profit or loss of theoperations of Sunpower Undertakings from 1 January 2004 to 30 April 2004.

Subsequently, further to a confirmation letter between Sunpower Petrochemical and SunpowerTechnology dated 11 September 2004, the parties confirmed that an aggregrate amount ofRMB8,291,369.91 (comprising the profit accrued between 1 January 2004 and 30 April 2004 andreimbursements for cetain expenditure incurred by Sunpower Petrochemical in the course of theoperations) was to be paid by Sunpower Technology to Sunpower Petrochemical.

Please refer to “Conflict of Interests” for details on the non-competition undertakings executed bySunpower Petrochemical for our benefit.

Acquisition of Certain Business, Assets and Undertakings of Jiangsu Shengnuo

On 28 April 2004, our Company acquired the entire issued and paid-up capital in Sun Superior which isa limited liability company incorporated in the British Virgin Islands for a nominal consideration. SunSuperior was a shell company and did not have any previous operations.

On 18 June 2004, Sun Superior established a 64.5% owned subsidiary, Nanjing Shengnuo as an equityjoint venture under the laws of the PRC with an initial registered capital of US$1.33 million. Theremaining 35.5% of Nanjing Shengnuo is held by Nanjing Chemical University Science and TechnologyGroup Co., Ltd (30%), Nanjing Rongchuan EnvironmentalProtection Engineering Co., Ltd (4%) and Nanjing Rehan Science andTechnology Co., Ltd (1.5%).

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73

Pursuant to a sale and purchase agreement dated 12 June 2004 between Jiangsu Shengnuo (as seller)and Sun Superior, Nanjing Chemical University Science and Technology Group Co., Ltd

, Nanjing Rongchuan Environmental Protection Engineering Co.,Ltd and Nanjing Rehan Science and Technology Co., Ltd

(collectively signing on behalf of Nanjing Shengnuo as purchaser, as it was notestablished when the sale and purchase agreement was signed) and as amended by a supplementalagreement dated 27 July 2004 between Nanjing Shengnuo and Jiangsu Shengnuo, Nanjing Shengnuoacquired certain of Jiangsu Shengnuo’s business, assets and undertakings related to the Heat Pipes andHeat Pipe Exchangers which were located in Nanjing (“Shengnuo Undertakings”) with effect from 30June 2004, for a total cash consideration of RMB9,961,741.08, based on the audited net book value ofthe Shengnuo Undertakings as at 30 June 2004. All rights and liabilities relating to the ShengnuoUndertakings were acquired with effect from 30 June 2004. The assets and liabilities not acquired byNanjing Shengnuo include assets and liabilities of Jiangsu Shengnuo relating to its Heat Pipes and HeatPipe Exchangers contracts secured before 2 March 2004 and other non-operating assets.

Following the acquisition of Shengnuo Undertakings, Jiangsu Shengnuo will remain liable to thosecontracts secured prior to 2 March 2004, which is expected to complete by June 2005. After thecompletion of those contracts, Jiangsu Shengnuo will not engage in the business of research,development, manufacturing and sales of heat pipes or related products. However, Jiangsu Shengnuowill be entitled to complete all contracts secured before 2 March 2004 but not novated to NanjingShengnuo during the Restructuring Exercise. Please also refer to “Conflict of Interests” for details on thenon-competition undertaking executed by Jiangsu Shengnuo for our benefit.

Our Group Structure after the Restructuring Exercise and before the Invitation is shown as follows:

100% 100%

Sunpower Group Ltd.

PerimeterPacific

SunpowerTechnology

Sun Superior

Nanjing Shengnuo

64.5% 100%

Pre-IPO Investors FoundingShareholders

12.2% 87.8%

We do not have any associated company and the following companies are the subsidiaries of our Group:

Principal Equity heldPlace of place(s) of by Company/

Name of subsidiaries incorporation Principal business business Group

Sunpower Technology(1) PRC Pipe Supports, Pressure Vessels and PRC 100% Waste Gas and Energy Recovery Systems

Nanjing Shengnuo(2) PRC Heat Pipes and Heat Pipe Exchangers PRC 64.5%

Sun Superior BVI Investment holding – 100%

Perimeter Pacific BVI Investment holding and trading – 100%

Notes:-

(1) Sunpower Technology is a wholly foreign owned enterprise established on 16 April 2004. Sunpower Technology has aregistered capital of US$5,080,000, of which US$1,300,000 has been paid up as at 10 September 2004. AnotherUS$525,376.96 is required to be contributed before 15 April 2005. The balance of the registered capital is required to be paidby 15 April 2006. Sunpower Technology is licensed to operate for a fixed period of time. The current business licenceprovided that the term of operation for Sunpower Technology is from 16 April 2004 to 15 April 2007. Upon the full injection ofregistered capitals by its shareholder and upon application, the term of operation of Sunpower Technology shall be extendedto 50 years. The extension of the term of operation is procedural in nature and there are no legal impediments for suchextensions. During the period of six months before the expiry of the 50 years operation period of Sunpower Technology, wemay apply for an extension of this operation period. If the operation period is not extended and after the expiry of theoperation period, Sunpower Technology may be liquidated and the remaining assets of the subsidiary can be returned to itsshareholders after payment of liquidation expenses and all debts.

(2) Nanjing Shengnuo is an equity joint venture established on 18 June 2004 in the PRC. The remaining 35.5% of Nanjing Shengnuo is held by Nanjing Chemical University Science and Technology Group Co., Ltd

(30%), which is a company established by Nanjing University of Technology, NanjingRongchuan Environmental Protection Engineering Co., Ltd (4%) and Nanjing Rehan Scienceand Technology Co., Ltd (1.5%). Nanjing Shengnuo has a registered capital of US$1,330,000, ofwhich US$1,330,000 has been paid up as at 12 October 2004. Nanjing Shengnuo is licensed to operate for a fixed period oftime. The current business licence provided that the term of operation for Nanjing Shengnuo is from 18 June 2004 to 17 June2034. During the period of six months before the expiry of the 30 years operation period of Nanjing Shengnuo, we may applyfor an extension of this operation period. If the operation period is not extended and after the expiry of the operation period,Nanjing Shengnuo may be liquidated and the remaining assets of the subsidiary can be returned to its shareholders afterpayment of liquidation expenses and all debts.

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HISTORY AND BUSINESS

OUR HISTORY

Our Company was incorporated under the laws of Bermuda on 28 April 2004 as an exempted companywith limited liability. Pursuant to the Restructuring Exercise as described on pages 71 to 73 of thisProspectus, Sunpower Technology acquired the business, assets and undertakings of SunpowerPetrochemical relating to its business of Pipe Supports, Waste Gas and Energy Recovery Systems andPressure Vessels and Nanjing Shengnuo acquired certain of Jiangsu Shengnuo’s business, assets andundertakings related to Heat Pipes and Heat Pipe Exchangers.

In 1995, our Executive Chairman - Mr Guo Hong Xin, who was the then Vice Dean of the Heat PipeResearch Institute of Nanjing University of Technology, and our Executive Director, Mr Li Lai Suo, whowas then the Director of Thermal Engineering Lab and the Director of Energy Test Centre of NanjingChemical Engineering Senior College, were approached by SINOPEC Yangtze Petrochemical Co., Ltd.(“SINOPEC Yangtze Petrochemical”) to conduct R&D of specialised pipe supports to meet itsrequirements. SINOPEC Yangtze Petrochemical undertook the construction of a pipeline to transportethylene liquid across long distances. The temperature of the ethylene liquid had to be maintained below-104°C under normal pressure. As such, Pipe Supports were used to support and insulate the pipelinefrom the environmental temperature and supporting structure. As imported Pipe Supports were relativelyexpensive, SINOPEC Yangtze Petrochemical wanted to use cheaper locally made alternatives. Mr Guoand Mr Li then organised a team of professionals to research and develop Pipe Supports to be used forthe ethylene pipeline.

By the end of 1996, the professional team led by Mr Guo had successfully developed Pipe Supportsrequired by SINOPEC Yangtze Petrochemical to substitute the imported Pipe Supports used in theconstruction of the low temperature ethylene project.

Our Group was founded with the establishment of Nanjing Shengnuo Chemical Equipment Co., Ltd inApril 1997 which was subsequently renamed as Jiangsu Sunpower Petrochemical Engineering Co., Ltdin 2001. Sunpower Petrochemical was initially engaged in the business of supplying Pipe Supports.

In 1998, we successfully developed our high efficiency heat exchangers (one of our Pressure Vessels) totap the demand for energy saving products. Common heat exchangers were made of bare steel pipes.We used specially designed pipes such as corrugated pipes and threaded pipes to replace the bare steelpipes to increase the heat exchange surface area which improves the heat exchange efficiency to savethe energy consumed. We sold our high efficiency heat exchangers to petrochemical enterprises.

In 1999, we began to produce Heat Pipes and Heat Pipe Exchangers and started R&D on a Heat Pipewhich uses a new working fluid such that Heat Pipes can work within a wider temperature range of250°C to 550°C. This new working fluid is a non-water working fluid. As a result, its internal pressure wassignificantly lower when compared to Heat Pipes using water as a working fluid. As its internal pressurewas lower, it was safer to use. We completed our R&D in 2001.

In 1999, Sunpower Petrochemical was admitted as a member of the SINOPEC Group Material andEquipment Supply Network and a first tier supplier of CNPC Group. Those two memberships enabledSunpower Petrochemical to tap into the huge market of SINOPEC and CNPC as SINOPEC and CNPC(including all of their subsidiaries and branches) are generally required to procure materials, equipmentsand facilities from suppliers with such memberships. Pursuant to the Restructuring Exercise and withconsent from both SINOPEC and CNPC, the memberships were transferred to Sunpower Technology inearly 2004.

In 2000, we successfully developed corrosion resistant heat exchangers which have a longer operatinglife of at least two years as compared with common heat exchangers. To the best knowledge of ourDirectors, common heat exchangers were made of carbon steel which had an operating life of between 3and 6 months when processing petroleum with a high sulphur content. Such high sulphur content iscommonly found in petroleum imported from the Middle East region. We supplied our corrosion resistantheat exchangers to petrochemical and chemical enterprises.

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In 2001, we successfully developed high pressure and ultra-high pressure shock absorbing PipeSupports. These Pipe Supports were used by SINOPEC Yanshan Petrochemical Co., Ltd in its pipeline totransport polypropylene liquid at an ultra-high pressure of 340 MPa. Our Pipe Supports provided aneffective cheaper alternative to imported Pipe Supports. As our Pipe Supports were generally consideredto be a technical breakthrough in China petrochemical industry, SINOPEC Group organised an appraisalmeeting to promote our high pressure and ultra-high pressure shock absorbing Pipe Supports to allpetrochemical companies in China.

In 2002, we started supplying our Pipe Supports for use in the “West-to-East Pipeline” project, aconstruction project to transport natural gas from western China to eastern China.

In August 2002, our BR series of Pipe Supports and BL series of Pipe Supports were awarded hi-techproducts of Jiangsu by Jiangsu Science and Technology Bureau. Our Executive Directors believe that theawards were a recognition of our technical leading position in our industry.

In 2002, we successfully developed our Waste Gas and Energy Recovery Systems. In 2003 and FP2004we successfully secured several projects for our Waste Gas and Energy Recovery Systems fromcustomers such as SINOPEC Shanghai Petrochemical Co., Ltd and SINOPEC Yangtze Petrochemical.

In February 2003, we successfully developed and produced our first batch of low temperature Heat Pipesused in the Qinghai-Tibet railway. More than 500 km of the Qinghai-Tibet railway runs through the HohXil area of Tibet which is characterised by its high altitude and cold weather. The soilfoundation of this area is unstable due to the presence of unstable permafrost below the surface. OurHeat Pipes are used to stabilise the ground by freezing the unstable permafrost into permafrost, asdescribed under “Our Business” on pages 78 and 79 of this Prospectus.

In May 2003, our management team was invited by the Engineering Headquarter of Qinghai-TibetRailway under PRC Ministry of Railway to be the lead company responsible for drafting the standards forthe Heat Pipes used in the Qinghai-Tibet railway. The standards regulate the design, manufacture, qualitycontrol, installation, packaging and delivery of Heat Pipes used in Qinghai-Tibet railway and has beenimplemented in the Qinghai-Tibet railway construction.

In March 2004, Sunpower Petrochemical acquired a 34.84% shareholding in Jiangsu Shengnuo by wayof subscription for new equity interests in Jiangsu Shengnuo and took over the management of JiangsuShengnuo. Pursuant to this acquisition and to streamline the operations, Sunpower Petrochemical heatpipes and heat pipe exchangers business from March 2004 were transferred to Jiangsu Shengnuo.Sunpower Petrochemical later increased its shareholding in Jiangsu Shengnuo to 44.08% on 15 May2004. In August 1994, Nanjing University of Technology was appointed by PRC Ministry of Science andTechnology as the Heat Pipe Technology Promotion Centre. Nanjing University of Technology appointedJiangsu Shengnuo as the company to conduct the R&D of Heat Pipe related technologies which makesJiangsu Shengnuo a well-known company for its R&D in Heat Pipes. The acquisition of JiangsuShengnuo and strategic alliance with Nanjing Chemical University Science and Technology Group Co.,Ltd strengthened our Heat Pipe R&D capabilities and removedcompetition from Jiangsu Shengnuo.

In the second half of 2004, we started exporting our Heat Pipes to Russia, and hence, marked the startof our venture abroad.

In October 2004, Sunpower Technology was awarded a hi-tech enterprise certificate by Nanjing Scienceand Technology Bureau as a recognition of our technical leading position in our industry.

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OUR BUSINESS

Overview

We specialise in the design, R&D as well as manufacture of customised energy saving andenvironmental protection products with heat transfer technologies. Our products are currently used invarious industries such as petrochemical, steel and transportation, and may be classified as follows:-

Heat Pipes and Heat Pipe ExchangersPipe SupportsWaste Gas and Energy Recovery SystemsPressure Vessels

We generally undertake projects which utilise our products. The following illustrates in brief the projectwork flow:-

Pre-contractual

Our projects are generally secured through a tendering process. We participate in tender exercisesconducted by potential customers, pursuant to which we will submit our proposed project design. Ifselected, we will enter into a contract to supply them with the products and implement the project.In certain cases, we secure contracts without undergoing any tendering exercise when customersspecifically require our proprietary products.

Project design

For Pressure Vessels and Waste Gas and Energy Recovery Systems, our design department willprepare the basic design and then pass such basic design to our subcontractors with necessarydesign certificates who will finalise the design.

For other products or systems, our design department finalises and completes the design of theproduct or system based on our customer’s requirements. If necessary, we will conduct furtherresearch and simulation experiments to ascertain that the project design meets the requirementsof our customer.

Pre-contractual

Project design

Manufacturing

Installation and commission

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Manufacturing

Following the finalisation of the project design, we then proceed to manufacture our products. Wegenerally manufacture products and components that relate to our proprietary technologiesourselves to ensure that our proprietary technologies are kept confidential and outsource the otherproducts and components to subcontractors so that we can focus more on the design and R&D ofour products. We generally pre-qualify these subcontractors based on their quality assurance,manufacturing capacities, financial position, past performance and price competitiveness. ForPressure Vessels, we only select subcontractors from those with the necessary pressure vesselmanufacturing licenses.

Installation and commission and after sales service

Some of our contracts require us to install and commission the product/system on site. Theinstallation is generally carried out by our designated subcontractors under the guidance andsupervision of our technical staff. After the installation, the product/system is tested to ensure thatit meets the specifications of our customers. Following the successful testing, we will commissionthe product/system and hand it over to our customers.

We provide our customers after sales service as our products require proprietary knowledge. Ourtechnical staff from the design and engineering department are responsible for the after salesservice. Our sales staff cover regular customer visits and collection of feedbacks. Upon receipt of areport of defects from any of our customers, our staff will usually arrive at the site within 24 hoursfor PRC customers and rectify the defects as soon as practicable.

OUR PRODUCTS


Our Heat Pipes and Heat Pipe Exchangers are mainly used in the recovery of residual heat inpetrochemical, steel and chemical projects. They are also used to protect the permafrost foundation inthe construction of roads and railways.

Heat Pipes

A Heat Pipe is a thermal transfer device that transfers heat quickly from one point to another. HeatPipes are often referred to as “superconductors” of heat as they have excellent heat transfercapacities and rates, and transfer heat with almost no heat loss. The heat transfer rate of our HeatPipes is more than 3,000 times faster than the heat transfer rate of a copper pipe.

A Heat Pipe generally has three components – the container, the working fluid and the wick orcapillary structure. The container is usually made of steel, aluminium, copper or other metals. Heatis absorbed at one end of the Heat Pipe which causes the liquid to vapourise. The vapour thencarries the heat from one end of the Heat Pipe to the other end. By varying the material, theworking fluid and capillary structure, different types of Heat Pipes with different heat transmissioncapabilities can be produced.

Heat Pipes are applied in various areas where heat is required to be effectively and quicklytransmitted. For example, our Heat Pipes are applied in the protection of the support foundationsfor the Qinghai-Tibet railway to prevent the melting of the permafrost at their bases. This type ofHeat Pipe transmits the heat one-way – from the permafrost to the ground surface. Hence,whenever the environmental temperature is lower than the underground temperature, theunderground permafrost loses heat to the environment through the Heat Pipes. When theenvironmental temperature is higher than the underground temperature, the coldness accumulatedin the permafrost can resist the heat of the environment such that the permafrost remains frozen.Hence, as the permafrost remains frozen at all the time, the ground remains stable and the railwaycan be built on it. The Heat Pipes also help with the environmental protection.

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The following diagram illustrates how a Heat Pipe works.

working principle of heat pipe1 – evaporation 2 – container 3 – condensate 4 – working fluid

We are also able to manufacture Heat Pipes which can transmit heat two ways. The two-way heattransmitting Heat Pipes are used under different working temperatures for heat exchange andtransmission in the air conditioning system, heat discharge in the CPU of notebook computers andman-made satellites. For example, Heat Pipes are used in the man-made satellites to equalize thesurface temperature of the satellite. In space, the side of the satellite facing the sun is hot andexpands, while the side facing the earth is cold and contracts. The difference in the temperaturewill cause damage to the satellite.

We currently do not manufacture such two-way Heat Pipes. As and when business opportunitiesarise and it is commercially viable, we will start to manufacture two-way Heat Pipes in the future.

Heat Pipe Exchangers

A Heat Pipe Exchanger comprise many Heat Pipes, which could number in the thousands,bundled together into a Heat Pipe bundle. Our Heat Pipe Exchangers can be easily maintained aseach Heat Pipe in the Heat Pipe bundle exchanges heat independently. As such, any damage to aHeat Pipe in the Heat Pipe Exchanger will not cause the entire Heat Pipe Exchanger tomalfunction but will only affect the efficiency of the heat exchange system. Furthermore, the HeatPipe Exchanger can continue to be used while the damaged Heat Pipes are replaced.

cold fluid

hot fluid

1

2 3

4

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The diagram below illustrates how a Heat Pipe Exchanger works within a residual energy recoverysystem.

A: cold air inlet B: pre-heated hot air C: fuel D: flue gas

1: blower 2: down pipe 3: chimney 4: heat pipe exchanger 5: connection section 6: heater

The flue gas generated by the furnace are discharged to the atmosphere. The temperature of suchflue gas is generally between 300°C and 500°C. The Heat Pipe Exchanger is not only used torecover the heat energy contained in such flue gas (by preheating the air needed for combustion),but also reduces the heat pollution caused to the environment.

Pipe Supports

We manufacture various Pipe Supports as required by different customers, among which we mainlymanufacture three types of proprietary Pipe Supports – the BL series of ultra low temperature coldinsulating Pipe Supports, the BR series of high efficiency heat insulating Pipe Supports and the JZ seriesof shock absorbing Pipe Supports.

The BL series

This product range comprises Pipe Supports that insulate the pipes from the environmenttemperature and supporting structure to lower the energy loss during the transportation. BL is theabbreviation of Chinese pinyin “Baoleng” which means cold insulating. Our BL series ofPipe Supports are used wherever the temperature of the fluid being transported at a temperaturelower than the environment temperature. For example, liquefied natural gas (“LNG”) has to betransported at temperature of -163°C under normal pressure.

Our BL series of Pipe Supports are also essential for the safety of the pipelines. If the pipelinesare not insulated from the environmental temperature and supporting structure, the lowtemperature fluid in the pipelines will lower the temperature of the supporting steel structuresupporting the pipelines. Under a low temperature such as -163°C, the steel structure will becomebrittle. Our BL series of Pipe Supports insulates the pipelines from environmental temperature andsupporting structure.

D

A

Bc

2

3

4

5

6

1

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The BR series

This product range similarly comprise Pipe Supports that insulate the pipes from the environmenttemperature and supporting structure to lower the energy loss during the transportation. BR is theabbreviation of Chinese pinyin “Baore” which means heat insulating. Our BR series of PipeSupports are used wherever the temperature of the fluid being transported at a temperature higherthan the environment temperature. For example, pipelines used to transport steam uses this typeof Pipe Support.

Our BR series of Pipe Supports are used to protect turbine blades. Turbines are used in variousfactories to provide power for manufacturing purpose. Such turbines are generally driven bypressurised steam. If the pipelines channelling the steam are not insulated from environmentaltemperature and supporting structure, water droplets may be generated as a result ofcondensation of steam. The impact of water droplets on the turbine blades at high speeds candamage the turbine blades.

The JZ Series

This series comprise shock-absorbing Pipe Supports used to protect high pressure pipeline (up to340 Mpa) network and the connected equipment from vibrations. JZ is the abbreviation of Chinesepinyin “Jianzhen” which means shock absorbing. For example, during the manufacturingprocess of high pressure polypropylene, raw materials are transported under high pressure to thereaction equipment via pipelines. Under high pressure, the transport of the raw materialsgenerates vibrations along the pipelines. Such vibrations are harmful to the pipeline network andthe equipment and facilities connected to the pipeline network. Our JZ series of pipe supportsprotect the pipelines by absorbing the vibrations.

The diagram illustrates our heat/cold insulating Pipe Support.

Heat/cold insulating Pipe Support

1: Pipe line 2: Hot or cold insulating material 3: Support plate 4: Fixing part 5: Reinforce plate 6: Teflon friction pair 7: Lower holding plate 8: Upper holding plate

1

23

4

5

67

8

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Pressure Vessels

A Pressure Vessel is a container that holds its fluid contents under pressure. We prepare the basicdesign that implements our proprietary know-how and then pass such basic design to our subcontractorswith necessary pressure vessel design and manufacturing certificates, to finalise the design andmanufacture the pressure vessels. Our Pressure Vessels are designed to address specific requirementsof our customers and we mainly focus on corrosion resistant heat exchangers and high efficiency heatexchangers.

Corrosion resistant heat exchangers

Our corrosion resistant heat exchangers are made of corrosion resistant alloys such as copper-nickel alloy, chromium-aluminium-monel alloy and monel-chromium-steel alloy. Common heatexchangers are made of carbon steel which, to the best knowledge of our Executive Directors,have an operating life of between 3 and 6 months when processing petroleum with a high sulphurcontent. Such high sulphur content is commonly found in petroleum imported from the Middle Eastregion. We supply our corrosion resistant heat exchangers to petrochemical and chemicalenterprises.

As compared to commonly used heat exchangers, our corrosion resistant heat exchangers areresistant to high temperature sulphur, hydrogen sulphide, chloride ion and dilute organic acid. Ourcorrosion resistant heat exchangers have a longer operational life of at least 2 years.

High efficiency heat exchangers

Heat exchangers are commonly made of bare steel pipes. Our high efficiency heat exchangers usespecially designed pipes such as corrugated pipes and threaded pipes to replace the bare steelpipes to increase the heat exchange area and hence increases the heat exchange efficiency by atleast 80%. Due to the increase in the heat exchange efficiency, the size of heat exchangers can bereduced which leads to cost savings as less space is required to be set aside for the heatexchanger.

The diagram below illustrates two of our specially designed pipes, being corrugated pipes andthreaded pipes.

threaded pipe corrugated pipe

d – outside diameter of pipe dof – diameter of wave crest dof – diameter of wave crest dr – diameter of wave troughdr – diameter of wave trough di – inside diameter of thread pipe tp – pitch of corrugate di – inside diameter of

corrugate pipetp – pitch of thread δ1 – thickness of thread pipe δ – thickness of corrugate

pipe

10tp

d di dr dof

δ1

di dr dof

δ

tp

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Our Waste Gas and Energy Recovery Systems are used to recycle the residual heat and recover usefulpetrochemical by-products contained in the torch gas. Torch gas is the waste gas commonly generated ina petrochemical refinery or production process. Torch gas contains flammable and poisonous waste gasand is characterised by its high temperature, flammability and instability. As a result, such torch gascannot be discharged directly to the atmosphere. The common way to treat such torch gas is to burnthem before discharge. However, this causes pollution and is a waste of useful energy generated by itscombustion. As such, our system is also environmentally friendly as it reduces the amount of pollutantsbeing discharged into the atmosphere. The system is also a cost saving facility as the pollution penaltiesor pollutants discharge fee for petrochemical companies which adopted our systems will be greatlyreduced as a result of the reduced discharge of torch gas.

According to the different components contained in the torch gas, our Waste Gas and Energy RecoverySystems are able to recycle the torch gas containing a mixture of hydrogen, hydrogen sulphide, carbondioxide, nitrogen or Liquefied Petroleum Gas. We are currently improving our Waste Gas and EnergyRecovery Systems. For details, please refer to section of “Research and Development” on pages 84 and85 of this Prospectus.

QUALITY CONTROL

We have put in place a quality control system to ensure that the quality of our products meet theexpectations of our customers. In February 2003, Sunpower Petrochemical obtained its ISO 9000 qualityassurance certificate. After the Restructuring Exercise, Sunpower Technology is in the process ofapplication of the ISO certificate. However, we conduct our quality control strictly according to ISO 9000quality assurance system. For the last three financial years and up to the Latest Practicable Date, ourcustomers have not rejected any delivery orders due to defective or unsatisfactory products delivered.

Incoming quality control

In order to ensure the consistency and quality of incoming materials for production, we only purchaseraw materials from our qualified suppliers. Our manufacturing department and procurement departmentconduct supplier qualification surveys to identify such qualified suppliers taking into account of thequality, price, delivery schedule and after sales service of various suppliers. The qualifications of all suchsuppliers are subject to our annual review.

The raw materials procured are inspected by us in accordance with our standards. Every batch of rawmaterials purchased is inspected on a sampling basis. For some of the major raw materials, we alsoconduct quality inspection in the warehouse of the suppliers before they are delivered to us. Any defectsfound in the raw materials will be analysed and the supplier will be informed accordingly. The rawmaterials rejected by us would be returned to the supplier for replacement without any exception.

This stage of our quality control process ensures that only raw materials which meet our standards andspecifications are utilised in our production process.

In-process quality control

We have a three-stage inspection process – first product inspection, daily inspection and stageinspection. Our manufacturing staff in charge will inspect the quality of first product of each batch ofproducts and then hand over to our quality checking staff for further quality checking. That batch ofproducts will be produced only after the satisfactory quality inspection by the quality checking staff. Ourquality checking staff also conducts daily inspection every day and keeps a daily inspection record. At theend of each manufacturing stage, our quality checking staff will check all semi-completed products beforesuch semi-completed products being handed over to next stage for further process.

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Final quality control

Our quality checking staff conducts the final quality check on all products before delivery to ourcustomers. We conduct different quality tests for different products. For Pressure Vessels, we alsoconduct quality tests in accordance with the applicable national standards. The quality tests of otherproducts are conducted according to our own enterprise standards. For example, our quality tests ofHeat Pipes mainly include the heat transfer speed test and isothermal test. The heat transfer speed testis designed to test the heat transfer speed from the evaporate section to the condenser section while thepurpose of the isothermal test is to determine the degree of vacuum by analysing the temperaturedifference in different sections of the Heat Pipes.

The purpose of the final quality control is to ensure that our products comply with our customers’requirements and the technical specifications provided in the design plan before delivery. Only thoseproducts which pass the final quality control will be delivered to our customers together with the relevantquality certification documents.

RESEARCH AND DEVELOPMENT

Our Directors believe that we must continue to adapt to our customers’ expectations and market andtechnical changes to be competitive in the rapidly changing environment. As such, we recognise thatR&D is a crucial part of our business. Our R&D team is continually developing new technologies to stayahead of the market.

The R&D team of Sunpower Technology is responsible for R&D related to Pipe Supports, Waste Gas andEnergy Recovery Systems and Pressure Vessels with a focus on the design and improvement of thoseproducts. As a reflection of our technical leading position, in October 2003, the R&D team of SunpowerPetrochemical was awarded the Enterprise Technology Centre by Nanjing government. This enabledSunpower Petrochemical to obtain financial supports in terms of grants from government for the R&Dactivities. Pursuant to the Restructuring Exercise, the R&D team of Sunpower Petrochemical has beentransferred to Sunpower Technology.

We have an equity joint venture with Nanjing Chemical University Science and Technology Group Co.,Ltd. (“Nanjing Chemical University Co”), which is a company established by Nanjing University ofTechnology. Nanjing Chemical University Co is well known for its research and development in HeatPipes, and benefits from its links to Nanjing University of Technology. Since August 1994, NanjingUniversity of Technology has been appointed by PRC Ministry of Science and Technology as the HeatPipe Technology Promotion Centre. We believe that our joint venture company, Nanjing Shengnuo willbenefit from the research and development capabilities of Nanjing Chemical University Co.

To tap into the expertise of external professionals and experts, we have entered into technologycooperation agreements with Jiangsu Polytechnic University in November 2003 and South EastUniversity of China in May 2004 to jointly conduct research on various environmental protection andenergy saving products. Under the agreement with Jiangsu Polytechnic University, we establishedSunpower Energy Saving and Environmental Protection Lab in Jiangsu Polytechnic University andcooperate extensively with Jiangsu Polytechnic University on the education, R&D on energy saving andenvironmental protection. Any technological developments made through the research efforts under theJiangsu Polytechnic University agreement would be owned jointly by us and Jiangsu PolytechnicUniversity and we are free to use such technologies developed.

Under the agreement with South East University of China, we cooperate with South East University onthe R&D of torch gas head and South East University is responsible for the calculation, analysis, test andcommissioning of the torch gas head. Any technological developments made through the research effortsunder the South East University agreement would be owned jointly by us and South East University.

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We are also currently carrying out the following research projects to improve the technology of ourproducts and systems:-

Research Project Core technology or Characteristics Status of research

Waste Gas and Energy Hydrogen sulphide is a poisonous gas component Pending Recovery Systems contained in torch gas. Our research aims to burn

the hydrogen sulphide completely so that there will be no hydrogen sulphide discharged into the atmosphere. We are also conducting research to extract hydrogen sulphide and produce concentrated sulphuric acid with it. Concentrated sulphuric acid is araw material which may be used to produce chemical products.

Pipe Supports Our high temperature and ultra-low temperature Pipe Pending Supports are used to cover and insulate the pipeline from the environment temperature and supporting structure. Our research aims to further reduce the heat/cold loss during the medium transmission.

Heat Pipes and Heat Our research aims to expand the application areas of Feasibility study completed Pipe Exchangers Heat Pipes and Heat Pipe Exchangers to chemical

reaction and desulphur process of environmental protection projects.

To secure high success rate of R&D efforts, our sales engineers based in our 6 sales offices work closelywith our customers. We identify new market demand based on feedbacks from our customers as well asthe results of market surveys and reports in professional industrial magazines. We also seek expertopinions from consultants engaged by us for our R&D projects. A feasibility study will then be conductedtaking into consideration the market potential, profitability, capacity of our Group and expert opinionsbefore we finalise the feasibility study of the R&D project.

As a technology based company, we conduct full procedure control on the R&D process. Our R&Dprocess will generally cover the basic theory research, industrialisation of technology, research onimprovement of the existing technologies and design of our products and systems.

As a reflection of our technical leading position, in May 2003, our management achieved the raredistinction of being invited by the Engineering Headquarter of Qinghai-Tibet Railway under PRC Ministryof Railway to be the lead corporation responsible for drafting the standards for the Heat Pipes used in theconsolidation of frozen soil in Qinghai-Tibet railway. The standards regulate the design, manufacture,quality control, installation, packaging and delivery of Heat Pipes used in Qinghai-Tibet railway and isnow implemented in the Qinghai-Tibet railway construction. We believe that this standard will also beuseful for reference in other projects.

Our R&D expenses for the last three financial years ended 31 December 2003 and the six months ended30 June 2004 are as follows:-

(RMB’000) FY2001 FY2002 FY2003 FP2004

R&D expenses 627 1,249 2,117 944Percentage to revenue (%) 1.4 1.9 2.2 0.9

We intend to gradually increase our R&D expenditure so as to accelerate the R&D process of ourproducts.

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SALES AND MARKETING

As part of their daily responsibilities, our sales team conducts regular visits to our customers to getfeedback from our customers. They also visit our potential customers to promote our products based onour market surveys. To build up the confidence of our customers in our products and technologies, wealso invite our potential customers to visit our manufacturing facilities in Nanjing and subject to theagreement of our existing customers, their project sites where our products are used. This is helpful inraising the awareness of our potential customers as to the quality and technologies of our products.

We carry out the following marketing activities to acquire new customers and to promote our products toexisting customers:-

Direct marketing

Our sales and marketing team conducts direct customer interface to market our products to potential andexisting customers. As our products are mainly used by petrochemical and steel enterprises for energysaving and environmental protection purpose, we keep close attention to newly built petrochemical andsteel enterprises as they form our potential customers. We also market our products to existingpetrochemical and steel enterprises which plan to expand their production scale as well as conductmajor overhauls of their production systems.

Marketing to design centres

All petrochemical projects, power plants, steel projects and chemical projects in the PRC are designed bydesign centres in the PRC, for instance SINOPEC Petrochemical Design Centre. As such, thecontractors or owners of the projects, whose design is prepared by such design centres, will normallyadopt the products recommended by the relevant design centres. As part of our marketing efforts, weconduct regular presentations to the design centres to demonstrate the technology and performance, andcost and energy saving of our products for their consideration to incorporate our solutions in their designplans. We believe that the adoption of our technical solutions in the design plans increases the chance ofcustomers’ adopting of our products.

Seminars

We take part in various seminars to create awareness for our products amongst participants in ourindustry. During the seminars, we conduct demonstrations of our technologies and products to highlightthe benefits of our products and to help the participants understand the quality and performance of ourproducts. Our participation in those seminars helps us in our expansion of our sales market andstrengthens our competition edge.

Advertisement

Our advertisements seek to promote our “Sunpower” and “Shengnuo” as brands for quality andinnovative energy saving and environmental protection products. As our customers are mainlypetrochemical and steel enterprises, we advertise selectively in industrial magazines such as“Petrochemical Equipment and Technology” , “Petrochemical Industry in China”

, “Oil Refinery and Chemistry” , “Energy Research and Utilisation”, “Oil Refinery Technology and Engineering” and the Yellow Page

titled “2004 Directory of First Tier Supply Network of CNPC Oil Refinery Equipment and Spare Parts”, “Iron Making” and “Sintering

and Pelletizing” .

As at the Latest Practicable Date, our sales and marketing team comprises 50 members. Furthermore,we have 6 sales offices in Beijing, Shanghai, Nanjing, Wuhan, Luoyang and Shandong where our majorcustomers are located. We also allocated professional sales staff to be responsible for sales in southChina, north east China, north west China and south west China. Each sales office and sales team isresponsible for overseeing the marketing activities of the relevant customers or regions.

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INTELLECTUAL PROPERTY

Our Group has the following intellectual property which is used in the course of our business:-

Trademarks

We have applied for the registration of “ “ as a trademark in PRC. As at the Latest Practicable Date,the application is still pending.

Pursuant to the Restructuring Exercise as described on pages 71 to 74 of this Prospectus, our Companyhas acquired and has become the registered proprietor of the following trademarks with effect from 14December 2004:-

Country of Trademark Registration Category Registration No.

PRC 35 1639737

PRC 40 1647860

PRC 11 1630048

PRC 17 1640060

PRC 40 1947460

Pursuant to the Restructuring Exercise as described on pages 71 to 73 of this Prospectus, NanjingShengnuo has acquired and has become the registered proprietor of the following trademark, with effectfrom 21 October 2004:-

Country of Trademark Registration Category Registration No.

PRC 11 738570

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Patents

Pursuant to the Restructuring Exercise as described on pages 71 to 74 of this Prospectus, SunpowerTechnology has acquired and has become the registered proprietor of the following patents:-

Country ofRegistration No. Patent registration Validity

ZL 98242855.3 High Temperature Heat-insulated PRC From 8 December 1998 toSupport 7 December 2008

ZL 00221272.2 Super Low-temperature Cold- PRC From 4 August 2000 to insulated Support 3 August 2010

ZL 02220956.5 Mid-high Temperature Separated PRC From 3 June 2002 to Heat Pipe Exchanger 2 June 2012

ZL 02221034.2 High Pressure, Super High-pressure PRC From 5 June 2002 to Damping Support 4 June 2012

ZL 02258563.X High Efficient Corrugate Pipe PRC From 19 November 2002 Condensator to 18 November 2012

ZL 02258564.8 High Efficient Thread Pipe Exchanger PRC From 19 November 2002 to 18 November 2012

ZL 02258565.6 High Efficient Corrugate Pipe Reboiler PRC From 19 November 2002 to 18 November 2012

ZL 02258566.4 High Efficient Heat Flux Exchanger PRC From 19 November 2002 to 18 November 2012

ZL 02258567.2 High Efficient T Type Thread Pipe PRC From 19 November 2002 Exchanger to 18 November 2012

ZL 03221816.8 Low-temperature Thermal Stick PRC From 15 May 2003 to with Center Testing Pipe 14 May 2013

Pursuant to a patent transfer agreement dated 25 August 2004 with Jiangsu Shengnuo (assupplemented by an agreement dated 13 October 2004), Nanjing Shengnuo has acquired and hasbecome the registered proprietor of the following patent:-


ZL 96 2 31421.8 Continuous Abundant Oxygen Gas PRC From 14 March 1996 toGenerating Skills Gas Cooler Heat 13 March 2006

Pipe Style Steam Generator

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In addition, Nanjing Shengnuo has entered into another irrevocable exclusive licence agreement withNanjing University of Technology (formerly known as Nanjing Chemical University) on 20 July 2004.Under this licence agreement, Nanjing Shengnuo is licensed to use the following patents on an exclusivebasis from the date of execution of the license agreement to the expiry of the validity of the patents for amonthly nominal consideration of RMB1:-


ZL 00 2 20211.5 Heat Pipe Waste Heat Boiler PRC From 9 May 2000 to 8 May 2010

ZL 00 2 20212.3 Heat Pipe Waste Heat Boiler PRC From 9 May 2000 to 8 May 2010

ZL 01 2 37492.X Safety-integral Heat Pipe Exchanger PRC From 24 April 2001 to of Reactable Gas 23 April 2011

Nanjing Chemical University Science and Technology Group Co., Ltd, the 30% shareholder of NanjingShengnuo, is a company established by Nanjing University of Technology.

MAJOR CUSTOMERS

We set out below a list of our major customers which accounted for 5% or more of our total sales for thelast three financial years ended 31 December 2003 and six months ended 30 June 2004:-

Percentage of revenue (%)Customers Products Sold FY 2001 FY 2002 FY 2003 FP 2004

CNPC Dalian Petrochemical Engineering Co., Ltd (a) and (d) 1.7% 17.1% 5.2% –

CNPC Dalian West Pacific Co., Ltd (a) and (d) 10.0% 1.9% 3.5% 5.4%

Total from CNPC Group 11.7% 19.0% 8.7% 5.4%

SINOPEC Yangtze Petrochemical Co., Ltd (a), (b), (c) and (d) 19.1% 18.9% 19.0% 18.5%

SINOPEC Shanghai Petrochemical Co., Ltd (a), (b), (c) and (d) 16.7% 16.0% 8.0% 0.7%

SINOPEC Jinling Petrochemical Co., Ltd (a), (b), (c) and (d) 5.3% 4.5% 1.6% 4.1%

SINOPEC Jiujiang Petrochemical Co., Ltd (a), (b) and (d) 5.8% 2.8% 0.5% –

SINOPEC Qilu Petrochemical Co., Ltd (a), (b) and (d) 0.2% 1.0% 5.2% –

SINOPEC Engineering Incorporation (b) – – – 8.7%

SINOPEC Yanshan Petrochemical Co., Ltd (b) and (d) 11.4% 0.4% – –

YPC-BASF Company Limited (1) (b) and (d) – – 6.2% 16.6%

Total from SINOPEC Group 58.5% 43.6% 40.5% 48.6%

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Notes:-

(a) : Heat Pipes and Heat Pipe Exchangers(b) : Pipe Supports(c) : Waste Gas and Energy Recovery Systems(d) : Pressure Vessels

1. YPC-BASF Company Limited is a joint venture company between SINOPEC Yangtze Petrochemical Co., Ltd and BASF.

Our customer base comprises mainly the SINOPEC group, CNPC group, Shanghai SECCOPetrochemical Co., Ltd (a joint venture between BP and Shanghai Petrochemical), YPC-BASF Co., Ltd (ajoint venture between Yangtze Petrochemical and BASF), Engineering Headquarter of Qinghai-TibetRailway, Baosteel Shanghai Meishan (Group) Ltd, Handan Iron & Steel Co. Ltd and Wuhan Iron & SteelCo. Ltd. Sunpower Petrochemical was admitted as a member of the SINOPEC Group Material andEquipment Supply Network and as a first tier supplier of the CNPC group. The two memberships hadenabled Sunpower Petrochemical to tap into the huge market of SINOPEC and CNPC as thesubsidiaries and branches under the SINOPEC group and CNPC group are able to procure materials,equipment and facilities from suppliers with such memberships without going through a lengthy pre-contractual approval process. Membership is granted at the absolute discretion of the SINOPEC groupand CNPC group. To the best of our Directors’ knowledge, SINOPEC group and CNPC group will onlyaccept applications for such memberships if the applications are supported by 3 subsidiaries and 5subsidiaries within the SINOPEC group and the CNPC group respectively. Although the criteria foradmission to the memberships is not publicly disclosed, we believe that both the SINOPEC group andand CNPC group will take into account various factors such as the quality of the products supplied by theapplicants, quality of service provided and track record of dealing with their respective subsidiaries. Thememberships are subject to annual review. We believe that the same factors are considered for renewal.

Pursuant to the Restructuring Exercise, the memberships were transferred to Sunpower Technology inearly 2004. Our memberships with the CNPC group and the SINOPEC group are valid till December2005 and February 2005 respectively. We are currently in the process of renewing our membership withthe SINOPEC group and expect to receive it in due course. Our major customers as stated above arethe SINOPEC group and the CNPC group. Although they are part of the SINOPEC group and the CNPCgroup, each entity operates autonomously and we have been contracting with the various entities directly.

Our sales to our major customers fluctuate year to year as our business is contract-based where wegenerally provide customised solutions to our customers. However, due to our marketing efforts, solutionfocused approach and quality products, we are able to secure repeat orders from the same customers fordifferent solutions and products. In FY2003, approximately 80.2% of our revenue was generated fromsuch repeat customers.

Save as disclosed above, none of our customers accounted for five per cent. or more of our revenue forthe last three financial years ended 31 December 2003 and the six months ended 30 June 2004.

None of our Directors or substantial shareholders has any interest, direct or indirect, in our majorcustomers.

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MAJOR SUPPLIERS

We set out below a list of our major suppliers which accounted for 5% or more of our total purchases forthe last three financial years ended 31 December 2003 and six months ended 30 June 2004:-

Percentage of total purchasesSuppliers Type of Products FY 2001 FY 2002 FY 2003 FP 2004

Zhangjiagang Jiangnan Boiler Pressure Pressure Vessels 32.7% 2.8% – – Vessel Co., Ltd (1)

Wuxi Tiansheng Petrochemical Equipment Pressure Vessels 13.0% 8.7% 1.2% 1.6% Co., Ltd (1)

Wuxi Junda Thermal Equipment Co., Ltd Finned pipes 7.9% 0.9% 0.9% 0.9%

Nanjing Fengye Stainless Steel Co., Ltd Stainless steel plates 6.0% 2.5% 0.1% –and steel pipes

Zhangjiagang Huadong Powerstation Boiler Finned pipes 5.5% 1.5% 0.4% 3.0% Parts Manufacture Co., Ltd

Nanhua Group Construction Co. Ltd (1) Pressure Vessels – 61.1% 54.3% 24.0%

Nanjing Heye Energy Saving and Finned pipes and – 2.1% 13.5% 11.5% Environmental Protection Equipment Factory polyurethane

SINOPEC International Business Yangtze Forges – – 5.4% – Co., Ltd

Jiangyin Xingcheng Steel Pipe Co., Ltd Steel pipes 13.6% 3.5% 3.6% 1.2%

Note:-

1. Suppliers of pressure vessels are also our subcontractors.

We do not enter into any long-term agreement with any of our suppliers which gave us the flexibility toevaluate and select our suppliers, where necessary, on a year to year basis. As our products are mainlycustomised, our purchases from suppliers also fluctuate from year to year. Our evaluation of supplierstake into consideration factors such as product quality, price, delivery time and the credit terms granted.

The proportion of our purchases from Zhangjiagang Jiangnan Boiler Pressure Vessel Co., Ltd decreasedsignificantly from 32.7% in FY2001 to 2.8% in FY2002 and nil in FY2003. This was because SunpowerPetrochemical sold off its minority interests in Zhangjiagang Jiangnan Boiler Pressure Vessel Co., Ltd in2001 and thereafter reduced its purchases accordingly.

We began to subcontract the manufacture of pressure vessels from Nanhua Group Construction Co. Ltd(“Nanhua Group”) in FY2002 to take advantage of its close proximity to one of our major customers ofPressure Vessels – SINOPEC Yangtze Petrochemical Co. Ltd and at the same time to increase ourchoice of suppliers. With this additional supplier, the proportion of purchases from Wuxi TianshengPetrochemical Equipment Co., Ltd (“Wuxi Tiansheng”) to our Group was reduced.

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We have entered into a one-year OEM contract with Nanhua Group commencing from 11 June 2004.This contract is automatically renewable unless terminated by either party by giving written notice twomonths prior to the expiry date of the contract. Under the contract, we send our technical staff to providetechnical assistance on the manufacturing process and to assess the quality of products and NanhuaGroup will pay us a monthly technical service fee of RMB20,000. Under the OEM contract, NanhuaGroup will only accept OEM business from our Company unless otherwise agreed by us. Nanhua Groupis also obliged to maintain the validity of all qualifications necessary for its business operation. Whererequired, we may choose to subcontract from Wuxi Tiansheng or other alternative subcontractors.

In FY2003, we imported forges from an overseas supplier in Japan through an import/export company,SINOPEC International Business Yangtze Co., Ltd. This was to specifically cater to the production oflarge-dimension heat exchanger of diameter 4,240 millimeters under our contract with YPC-BASFCompany Limited. There were no such contract requirements in FY2001 and FY2002.

Save as disclosed above, none of our suppliers accounted for five per cent. or more of our revenue forthe last three financial years ended 31 December 2003 and the six months ended 30 June 2004.

None of our Directors or substantial shareholders has any interest, direct or indirect, in any of the abovemajor suppliers.

GOVERNMENT REGULATIONS

As at the Latest Practicable Date, our business operations in the PRC are not subject to any speciallegislation or regulatory controls other than those generally applicable to companies and businessesoperating in PRC. We have obtained all the necessary licences and permits for our business operationsin the PRC and have complied with all relevant laws and regulations.

For details on applicable PRC laws and regulations, please refer to Appendix G on pages G-1 to G-6 ofthis Prospectus.

COMPETITION

The following are our competitors for our corresponding product/system:

Products/systems Competitors

Pipe Supports Jiangyin Petrochemical Equipment Factory

Yangzhou Equipment General Factory Pipe Support Division

Wujin City Wunan Pipeline Equipment Co., Ltd

Heat Pipes and Heat Pipe Dalian Shanglide Heat Conduction Technology Co., Ltd

Exchangers

Harbin Aerospace Fenghua Co., Ltd Heat Pipe Branch

Shanghai Marine Equipment Institute

Jiangdu City Zhongtian Energy Equipment Co., Ltd

Pressure Vessels Shandong Meiling Chemical Equipment Co., Ltd

Yingkou Petrochemical Machinery Factory

Maoming Petrochemical Machinery Factory

Baoji Taiye Co., Ltd

Waste Gas and Energy Shanghai 711 Institute

Recovery Systems

Shenyang Liming Gas Turbine Co., Ltd

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COMPETITIVE STRENGTHS

We believe that the following are our competitive strengths:-

Strong emphasis on R&D

To stay ahead of our competitors in the business of the manufacturing of our products, we need topossess the relevant specialised expertise and in-depth knowledge to keep abreast of the latestchanges in the industry. As such, our management places strong emphasis on our R&D activities.

We have a R&D team which conducts R&D on Pipe Supports, Heat Pipes and Heat PipeExchangers, Waste Gas and Energy Recovery Systems and Pressure Vessels, and focuses on thedesign and improvement of these products. Our Executive Chairman, Mr Guo Hong Xin hasaccumulated extensive knowledge in respect of heat transfer technology. Mr Guo was once theVice Dean of Heat Pipe Research Institute of Nanjing University of Technology and was awardedvarious awards for his achievements including his first class award for science and technologyadvancement as awarded by PRC Ministry of Education in April 1994 for his research in theapplication of Heat Pipes in the recycling of residual heat.

We have an established track record for producing innovative and commercially viable products.For example, our BR series and BL series of Pipe Supports were awarded hi-tech products ofJiangsu by Jiangsu Science and Technology Bureau in August 2002. As at the Latest PracticableDate, our R&D staff have developed about 10 patents as a result of our R&D efforts. Thesepatents have been commercialised and adopted in our products. As a reflection of our technicalleading position, in October 2003, the R&D team of Sunpower Petrochemical was awarded theEnterprise Technology Centre by Nanjing government. This enabled Sunpower Petrochemical toobtain financial supports from government for the R&D activities. Pursuant to the RestructuringExercise, the R&D team of Sunpower Petrochemical has been transferred to SunpowerTechnology.

We have an equity joint venture with Nanjing Chemical University Science and Technology GroupCo., Ltd, which is a company established by Nanjing University of Technology. Nanjing University ofTechnology is well known for its research and development in Heat Pipes. Since August 1994,Nanjing University of Technology has been appointed by PRC Ministry of Science and Technologyas the Heat Pipe Technology Promotion Centre. We believe that our joint venture company, NanjingShengnuo, will benefit from the research and development capabilities of Nanjing University ofTechnology.

To tap into the expertise of external professionals and experts, we have entered into technologycooperation agreements with Jiangsu Polytechnic University in November 2003 and South EastUniversity of China in May 2004 to jointly conduct research on various environmental protectionand energy saving products. Under these agreements, we cooperate extensively with thoseuniversities and are free to use the intellectual properties/technologies developed in our products.

We have built up strong brand names and have a strong customer base

Our Directors believe that we have established our “Sunpower” and “Shengnuo” as reputablebrands in the industry we operate. Our reputation as a reliable solution provider is supported byour proprietary products. Over the years, we have established our reputation by maintaining aneffective quality control system for our production process and for the testing of our products whichis evidenced by our strong customer base.

We have a strong customer base, which include SINOPEC, CNPC, Shanghai SECCOPetrochemical Co., Ltd (a joint venture between BP and Shanghai Petrochemical), YPC-BASF Co.,Ltd (a joint venture between Yangtze Petrochemical and BASF), PRAXAIR, EngineeringHeadquarter of Qinghai-Tibet Railway, Baosteel Group Shanghai Meishan (Group) Ltd, Benxi Iron& Steel Co., Ltd, Handan Iron & Steel Co., Ltd, Wuhan Iron & Steel Co., Ltd and Shoudu Iron &Steel Co., Ltd. These customers are characterised by their high threshold, special technicalrequirements, stable demand and huge market potential. Our strong customer base also providesassurance to new customers on the quality of our products.

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We are a member of both SINOPEC materials supply network and CNPC first tier network. Thesememberships pre-qualify us to supply our products to companies in the SINOPEC and CNPCgroups. Our Executive Directors believe that our memberships give us a significant advantage overother competitors which do not have such memberships.

We are a solutions provider

Our products are customer-focused and market oriented. In this respect, we focus on providing ourcustomers with innovative solutions which incorporate our products. For example, the application ofour Heat Pipes to stabilise permafrost was an innovative application of our Heat Pipes.

Petrochemical projects, power plants, steel projects and chemical projects in the PRC aregenerally designed by design centres in the PRC. As such, we focus our marketing efforts ondesign centres by highlighting the features of our products and how our products may beeffectively incorporated into their design plans to achieve the technical requirements of theircustomers. We believe that the adoption of our solutions in the design plans increases the chanceof customers adopting our products.

Familiarity with the PRC business environment and our industry in PRC

We have an experienced management team which is familiar with our business and understandsour customers’ needs and requirements. Our management team consists of mainly PRC nationals,namely Mr Guo Hong Xin, Mr Li Lai Suo and Mr Ma Ming, who have the relevant knowledge ofand experience in the PRC market. Over the years, our management team has gained in-depthknowledge related to the petrochemical and metallurgy industries in the PRC. We are thereforeable to grasp the market opportunities and provide customised products.

Familiarity with the business environment in the PRC is another strength of our Group. The PRC isreforming its economic and legal system, and as a result, the market structures and businesspractices are undergoing constant changes. To maintain our market position, we must be able toidentify market trends to be able to grasp business opportunities in the PRC.

While PRC’s entry into WTO may see the increase in overseas competitors within the industry, ourDirectors are confident that our competitive edge will not be eroded away as those foreigncompanies may not be able to acquire the knowledge of our industry within a short period of time.As a result, their products may not suit the PRC customers.

Based on the above competitive strengths, we believe that we are one of the main players in our industryin PRC.

PROSPECTS AND FUTURE PLANS

Our Prospects

The growth of the PRC economy has led to an increasing demand for energy and energy savingmeasures. As our products are mostly used in energy projects and have energy saving features, weexpect demand for our products to grow. We elaborate on some of the specific reasons relating to ourproducts below:-

Pipe Supports

We believe that demand for Pipe Supports will grow due to two reasons. First, more energy relatedpipeline infrastructure projects will be built to address the need for energy. An example of suchprojects is the “West-to-East” pipeline project which transmits natural gas in the western part ofChina to the more developed eastern coastal areas.

Second, to the best of our knowledge, many existing pipelines used in petrochemical, steel,electric power projects in China do not have Pipe Supports with heat/cold insulating features. Witha growing awareness and emphasis on the need to save energy in the PRC, we expect anincreasing market demand for our BR and BL series Pipe Supports for existing pipeline networks.

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Currently, the major customers of our Heat Pipes and Heat Pipe Exchangers include somepetrochemical companies and steel works. We expect more petrochemical and steel projects to beimplemented to address the energy needs in the PRC, which will create a bigger market for ourHeat Pipes and Heat Pipe Exchangers. Furthermore, we believe that increasing awareness andemphasis on energy saving measures will lead to an increased demand for our Heat Pipes, whichcan be used in such industries as electric power, CPU heat discharge, utilisation of solar energy,air conditioning system and chemical projects where our Heat Pipes can be applied to recoverresidual heat.

Our Heat Pipes and Heat Pipe Exchangers have a limited life span of between three and fiveyears. As such, there is also a replacement market that our products can address.

We expect a stable demand from the on-going construction of Qinghai-Tibet railway. The Qinghai-Tibet railway runs through the over 500-kilometre long Hoh Xil area of Tibet which ischaracterised by its high altitude, cold weather and non-residents. Our Heat Pipes are used tostabilise the foundation of the railway by freezing the unstable permafrost into permafrost. For eachkilometre of the railway, 500 to 750 Heat Pipes may be used. As we are the lead companyresponsible for drafting the standards for the Heat Pipes used in the Qinghai-Tibet railway, webelieve that we are in a stronger position to secure orders from the Engineering Headquarter ofQinghai-Tibet Railway.

Pressure Vessels

We expect a continued market growth of our Pressure Vessels.

Our corrosion resistant heat exchangers are primarily applied in oil refinery. With the PRC’sincreasing energy demands, we believe that oil refinery activities will grow and this will lead to anincreasing market demand for our corrosion resistant heat exchangers. Furthermore, we believethat increasing awareness and emphasis on energy saving measures will lead to an increaseddemand for our high efficiency heat exchanger, which increases heat transfer area in a limitedspace and heat transferring efficiency.

Our Pressure Vessels generally have a life span of between two and five years which depends onthe materials employed and the working conditions. As such, there is also a replacement marketthat our products can address.


In line with its national policy for environmental protection, the PRC government has taken steps tocontrol the pollution control and pollutants discharge. Our system is environmental friendly,reduces the amount of pollutants discharged and reduces costs by recovering and recycling wasteenergy. As such, we believe that demand for our Waste Gas and Energy Recovery Systems willgrow.

Order Books

Taking into account the factors discussed in “Review of Past Operating Performance and FinancialCondition” on pages 44 to 54 of this Prospectus and barring any unforeseen circumstances, we do notexpect any significant changes in the cost of raw materials and the selling prices of our products inFY2005.

As at the Latest Practicable Date, we have unfulfilled secured contracts amounting to approximatelyRMB74.0 million, all of which are expected to be fulfilled during FY2005. As discussed under “RiskFactors” on pages 30 and 31 of this Prospectus, the secured contracts may be cancelled or delayed as aresult of the unanticipated postponement or termination of any projects or customers’ decision not toproceed with an anticipated project. Therefore the order book at any particular date may not be indicativeof revenues for the succeeding period.

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Our Strategies and Future Plans

Based on the factors set out above, our Directors are optimistic of the prospects of our Group. To capturethe emerging business opportunities, we will continue to focus on the research, development,manufacturing and sales of environmental protection and energy saving products and will continue toprovide our customers with proprietary technical solutions. We intend to adopt the strategy and futureplans as set out below:-

Strengthen our R&D capabilities and increase our product range

Our R&D team is one of the main engines for our future growth. With increased competition, wewill continue to strengthen our R&D capabilities by investing in advanced technology, wherenecessary, to facilitate the development of new technologies and designs. This would enable us toincrease the range of our product offerings in response to the sophisticated demands of ourcustomers and improve the efficiency of our production process. We are currently conducting R&Don our Waste Gas and Energy Recovery Systems, Heat Pipes and Heat Pipe Exchangers andPipe Supports to improve their designs. For details, please refer to pages 84 and 85 of thisProspectus on “Research and Development”.

We also plan to increase the strength of our current R&D team by recruiting additionalprofessionals with relevant skills and expertise to augment the knowledge of our existing team. Wewill also increase our joint R&D efforts with PRC research institutions and universities.Furthermore, we will continue to train and update our staff with the latest developments, trendsand advances in our industry. Part of the net proceeds of the issue of New Shares, amounting toS$1.7 million, will be used to fund our R&D efforts. For details, please refer to page 28 of thisProspectus on “Use of Proceeds”.

Increase our production capacity

Our existing manufacturing facility in Nanjing, PRC, is operating at close to full capacity. To meetthe anticipated increase in market demand, we intend to increase the production capacity of ourproducts.

We have plans to build or rent new factories to increase our production capacity. We will also beacquiring new machinery and equipment for our new factories along with employing additionalskilled personnel. The additional production space and production equipment would allow us tomeet our production targets so as to serve our customers better.

Part of the net proceeds of the issue of New Shares amounting to approximately S$4.5 million willbe utilised for the acquisition of machinery, equipment and the building or lease of factories toincrease our production capacity and indirectly increase our market share. Currently, we do nothave a specific plan for the acquisition of machinery, equipment and the building of factories.However, we have been granted an option to lease factory buildings from Sunpower Petrochemicallocated at Jianshe Road, Jiangning Science Park, Nanjing. Please refer to page 114 of thisProspectus under “Interested Person Transactions” for further details.

Continue to develop the PRC market and expand to overseas markets

We will continue to increase our existing market share in the PRC through business developmentactivities in the PRC market. Currently, our major customers are engaged in some ofpetrochemical and steel projects. We will continue to expand our market share in morepetrochemical and steel projects. We also intend to intensify our marketing efforts in the PRC bypromoting our products to electric power, chemical companies, transportation industry, solarenergy utilisation, air conditioning system and IT technology industry. In addition, we also intend topromote our products more actively through further participation in relevant industry events andseminars. Our sales and marketing personnel will continue to cultivate new customers and developexisting customers through better service support.

Despite the potential offered in the PRC market, we believe that our advanced technology coupledwith the relatively low labour cost in the PRC where our manufacturing facilities are located, giveus a competitive edge in overseas markets. We view the penetration into overseas markets as animportant contributing factor towards our sustained progress and brand-building.

In April 2003, in furtherance of our policy to expand abroad, we successfully obtained our importand export certificate. This enables us to export our products abroad directly without the need toengage a PRC import/export agent. To date, we have exported our Heat Pipes to Russia with theefforts from our import and export department. We planned to allocate more human resources toour import and export department to better the exploration of international market.

Part of the net proceeds from the issue of New Shares, amounting to approximately S$1.0 millionwill be utilised for our business development and marketing efforts.

Acquisitions, joint ventures, strategic investments or alliances to accelerate our Group’sexpansion

After listing, we may take advantage of favourable financing resources and keep a lookout forsynergistic businesses to bolster our growth potential via acquisitions or through other avenues.For example, we may acquire manufacturing facilities of other PRC manufacturers in our industrywith quality assets but poor management. Our Directors believe that we may be able to extractsynergistic value from such asset acquisitions with our proven management capability. Currentlywe have not identified any potential acquisitions, joint ventures, strategic investments or alliances.

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DIRECTORS

Our Board of Directors is entrusted with the responsibility for the overall management of our Group. OurDirectors’ particulars are listed below:-

Name Age Residential Address Position

Guo Hong Xin 41 Room 3-202, Biguiyuan, No. 15, Fuzuo Road, Executive Chairman Nanjing, Jiangsu, China

Li Lai Suo 43 Room 01-303, Zixincheng, No. 9, Bancang Executive Director Street, Xuanwu District, Nanjing, Jiangsu, China

Ma Ming 39 Room 402, Unit 1, Block 6, Minghushanzhuang, Executive Director Muxuyuan Street, Nanjing, Jiangsu, China

Jiang Ning 47 Room 602, Block 3, No. 51, Gaoloumen, Independent Director Nanjing, Jiangsu, China

Lau Ping Sum Pearce 64 19 Nim Green, Singapore 807614 Independent Director

Tham Hock Chee 56 49 Puay Hee Avenue, Singapore 348155 Independent Director

Michael Chin Sek Peng 48 61 Irrawaddy Road, #05-03 Independent DirectorSingapore 329557

Information on the business and working experience of our Directors is set out below:-

Mr Guo Hong Xin was appointed as our Director in May 2004. He is our Executive Chairman and isresponsible for the overall management and strategy plan for the development of our Group. Mr Guograduated from Nanjing Chemical Engineering Senior College (major in thermal engineering) in July1983. From 1983 to 1985, Mr Guo worked as a Lab Director in Heat Pipe Research Centre of NanjingChemical Institute. From 1985 to 1993, Mr Guo worked in Nanjing Heat Pipe Technology DevelopmentCentre as the Manager of Business Department. From 1993 to 1997, Mr Guo worked in ShengnuoGroup as a Director and Deputy General Manager and was responsible for sales and marketing ofShengnuo Group. From 1995 to 1997, Mr Guo worked as a Vice Dean of Heat Pipe TechnologyDevelopment Institute of Nanjing University of Technology and a Deputy Director of Heat PipeTechnology Promotion Centre. In 1998, Mr Guo joined Sunpower Petrochemical. Currently, Mr Guo hasbeen a part time professor of Jiangsu Polytechnic University from 2003. He was also awarded anExcellent Entrepreneur award by Nanjing Government in 2003 and one of the Top 100 Excellent PrivatelyRun Entrepreneurs by Jiangsu Government in 2004.

Mr Li Lai Suo was appointed as our Director in May 2004. He is our Executive Director and isresponsible for the management of business operation of our Group. Mr Li graduated from NanjingChemical Engineering Senior College (major in thermal engineering) in 1981. From 1981 to 1997, Mr Liworked in Nanjing Chemical Engineering Senior College and held various positions such as lecturer, theDirector of Thermal Engineering Lab and the Director of Energy Test Centre. From 1983 to 1988, Mr Listudied in Mechanical Engineering Department of Tongji University and graduated with a Bachelor ofEngineering (major in thermal supply and ventilation) in 1988. In 1997, Mr Li joined SunpowerPetrochemical and acted as the General Manager between 1997 and March 2004. Mr Li acted as theGeneral Manager and Chairman of Jiangsu Shengnuo from March 2004. Mr Li is currently an ExecutiveMBA postgraduate student of China Europe International Business School since 2003.

Mr Ma Ming was appointed as our Director in May 2004. He is our Executive Director and is responsiblefor the management of the financial affairs and external investment of our Group. Mr Ma graduated fromNanjing Chemical Engineering Senior College (major in chemical engineering instruments) in July 1983.From 1983 to 1992, Mr Ma worked as an engineer in Nanjing Chemical Industrial Company. From 1992to 1996, Mr Ma worked in Hainan Lida Industrial Co., Ltd as a Manager and was responsible for thesales and marketing of products. In 1997, Mr Ma joined Sunpower Petrochemical and acted as DeputyGeneral Manager.

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Mr Jiang Ning was appointed as our Independent Director in February 2005. From September 1978 toSeptember 1982, Mr Jiang studied in Anhui Normal University and graduated with a Bachelor of Sciencein 1982. From September 1982 to September 1989, Mr Jiang acted as a lecturer in Anhui BengbuEducation Institute and Anhui Bengbu Foodstuff College. From September 1989 to September 1992, MrJiang studied in Nanjing University of China and graduated with a Master of Economics in 1992. SinceSeptember 1992, Mr Jiang worked in Nanjing University and held such positions as lecturer, associateprofessor, Vice Dean of Yangtze Delta Economic Social Development Research Centre of NanjingUniversity, Vice Dean of Investment and Finance Research Centre of Nanjing University and wasresponsible for research and administration. His teaching experience covers lecturing on investment andfinance research, corporate acquisitions and evaluation of financial statements and companies’ financialposition. Mr Jiang was an Independent Director of Nanjing Jinling Pharmacy Co., Ltd from 1998 to 2001and is currently Independent Director of both Guodian Nanjing Automation Co., Ltd and JiangsuWuzhong Industry Co., Ltd.

Mr Lau Ping Sum Pearce was appointed as our Independent Director in February 2005. Mr Laugraduated from the Australian National University with a Degree in Economics and also holds a Diplomain Business Administration from the National University of Singapore. From 1980 to 1996, Mr Lau was aMember of Parliament for Yio Chu Kang/Ang Mo Kio GRC. From 1986 to 1996, Mr Lau was the SeniorVice President of Information System Services (“ISS”) Department of Oversea-Chinese BankingCorporation Limited and was responsible for Management of ISS Dept, Operation of Data Centre,development and implementation of banking systems including computerisation of financial applicationsfor Singapore and Overseas branches. From 1997 to 2000, Mr Lau was the General Manager of NTUCLink Pte Ltd (a company providing Smart Card services and the NTUC Link loyalty programme to theNTUC group of co-operatives and unions) and his responsibilities included overseeing the company’sfinancial reporting function. Since January 2001, Mr Lau has been an executive director of People’sAction Party/PAP Community Foundation and has been responsible for the management of theiroperations including finance-related matters.

Mr Tham Hock Chee was appointed as our Independent Director in February 2005. In 1967, Mr Thamreceived a scholarship from German Government to study in Germany and graduated fromFachhochschule Hamburg in 1972 as a Production Engineer. From 1972 to 1973, Mr Tham worked inFraesmaeschinen Reckermann (a German tool company) as a Production Engineer. From 1973 to 1979,Mr Tham worked in Singapore Economic Development Board as an investment officer and wasresponsible for investment promotion and industrial training. From 1979 to 1983, Mr Tham worked inGuthrie Singapore as a Product Manager. From 1984 to 1985, Mr Tham worked as a General SalesManager of Polaroid Singapore Private Limited. From 1985 to 1999, Mr Tham worked in Singapore TradeDevelopment Board as the manager for Market Development (emerging market) and was promoted to bea Director in 1995. Between 1988 and 1995, Mr Tham was posted to London and Frankfurt as theEuropean Director. Between 1995 to 1999, as the Director of Singapore Trade Development Board, MrTham’s responsibilities included approving subsidies for local companies where part of the process wasto evaluate the applicant’s financial viability. From 1999 to 2002, Mr Tham worked in SingaporeConfederation of Industries as its Secretary General and was responsible for the entire operation andfinancial matters of the association, which included budgetary and financial control and cashflowmanagement. From 2002 to 2003, Mr Tham worked as a Senior Consultant in Droege & Co, a Germanmanagement consulting company. From 2003 to July 2004, Mr Tham worked as a freelance managementconsultant. Mr Tham joined Sitoca Marketing Service Pte Ltd in July 2004 as a Director of BusinessDevelopment.

Michael Chin Sek Peng was appointed as our Independent Director in February 2005. He is currentlythe co-founder Director of Corporate Advisory Partners Pte Ltd, a company engaged in the provision ofconsultancy and business advisory services and is also the founder Partner involved in running,managing and developing the assurance business of Cap Partnership, a certified public accounting firmin Singapore. Michael Chin started his accountancy and audit training in Casson Beckman, a mediumsized firm of chartered accountants in London. After qualifying as a chartered accountant, he joinedlegacy Price Waterhouse and worked in different countries in UK, Europe and Singapore from 1983 to1994. In 1994, he joined the Institute of Certified Public Accountants of Singapore as the first Practice

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Review Director in charge of heading, running and regulating the compliance of work standards of allaudit practices in Singapore. In 1999, Michael Chin joined legacy Arthur Andersen as a partner in itsAssurance and Business Advisory division and in 2002 he left the firm to set up his own audit, tax andconsultancy practices together with another partner. Michael Chin holds a Bachelor of Arts (Honours) inAccounting and Finance from Lancaster University in the United Kingdom and is a Fellow member of theInstitute of Chartered Accountants of England and Wales and a practising Certified Public Accountant ofSingapore. He is also a member of the Institute of Internal Auditors, Singapore.

The list of present and past directorships of each Director over the last five years excluding those held inour Company, is set out below:-

Name Present Directorships Past Directorships

Guo Hong Xin Group companies Group companies

Perimeter Pacific Nil Nanjing ShengnuoSun Superior Sunpower Technology

Other companies Other companies

Allgreat Pacific Limited NilJiangsu Shengnuo Nanjing Zhiyuan Electronic Science Co., Ltd

Nanjing Zhongshengyuan Machinery and Electrical Equipment Co., Ltd

Sunpower Petrochemical Wuhan Zhongsheng Energy Environmental Protection Project Co., Ltd

Li Lai Suo Group companies Group companies

Perimeter Pacific Nil Nanjing ShengnuoSun Superior Sunpower Technology


Armour Asia Limited NilJiangsu Shengnuo Nanjing Zhiyuan Electronic Science Co., Ltd



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Name Present Directorships Past Directorships

Ma Ming Group companies Group companies

Nanjing Shengnuo Nil Perimeter PacificSun Superior Sunpower Technology


Claremont Consultancy Limited NilJiangsu Shengnuo Nanjing Zhiyuan Electronic Science Co., Ltd



Jiang Ning Group companies Group companies

Nil Nil


Guodian Nanjing Automation Co., Ltd Nanjing Jinling Pharmacy Co., LtdJiangsu Wuzhong Industry Co., Ltd

Lau Ping Sum Pearce Group companies Group companies

Nil Nil


Action Information Management Pte Ltd FibreChem Technologies LimitedCortina Holdings Ltd i Foundry Mobile Pte Ltd (formerly known asHuan Hsin Holdings Ltd i Foundry Systems (S) Pte Ltd) Nera Telecommunications Ltd Intelligent Telecommunications Pte Ltd

KLW Holdings LtdNew Wave Technologies LtdPenton International Ltd

Tham Hock Chee Group companies Group companies

Nil Nil


Global NavSystems Pte Ltd Mount Prajna Ltd

Michael Chin Sek Peng Group companies Group companies

Nil Nil


C&L Business Advisers Pte Ltd Ezra Holdings LimitedCorporate Advisory Partners Pte. Ltd. NagaCorp LtdFragrance Group Limited I’M Technologies LimitedThomson Medical Centre Limited

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MANAGEMENT

The day-to-day operations are entrusted to an experienced and qualified team of Executive Officers whoare responsible for the different functions of our Group. The particulars of our Executive Officers are setout below:-

Name Age Residential Address Principal occupation

Ge Cui Ping 36 Room 402, No. 33, Village 2, Qinghexinyu, Financial Controller Nanjing, Jiangsu, China

He Chao Jun 45 Room 501, No. 58, Baiyunyuan, Assistant General Manager, Longjiangxiaoqu, Nanjing, Jiangsu, China Human Resource

Wei Xiao Ping 34 Room 502, No. 10, Yuhuamingju, Assistant General Manager, Gulou District, Nanjing, Jiangsu, China Sales and Marketing

Zhang He Sheng 58 Room 201, Block 11, No. 1 Nengrenli, Assistant General Manager, Nanjing, Jiangsu, China Production

Zhang Mei Sun 58 Room A-507, No. 18 Weigangxi, Nanjing, Chief Engineer, R&D Jiangsu, China

Zhou Jiang Hong 50 Room 701, No. 46, Daijia Lane, Nanjing, Assistant General Manager, Jiangsu, China Administration

Information on the business and working experience of our Executive Officers is set out below:-

Ms Ge Cui Ping is our Financial Controller and is responsible for the financial management of ourGroup. Ms Ge graduated from Nanjing Economic Institute (major in accounting) in 1998. Ms Ge becamea PRC Certified Public Accountant in December 1999 and PRC Certified Public Valuer in May 2002.From October 2000 to January 2004, Ms Ge acted as an audit manager in Jiangsu Tianheng CertifiedPublic Accountants and was involved in auditing of accounts for various PRC listed companies. Shejoined our Group in January 2004 as a Financial Controller.

Mr He Chao Jun is our Assistant General Manager for Human Resource and is responsible for ensuringthe consistency and effectiveness of the quality assurance system and human resource management. MrHe graduated from Xi’an Communication University in July 1982 (major in low temperature engineering).From 1982 to 1991, Mr He acted as an engineer of Nanjing 734 Factory. From 1991 to 1996, Mr Heworked in the Thermal Engineering Department of Nanjing Power Senior College as a lecturer. Mr Hejoined our Group in 1997 and has held such positions as Manager of the Engineering Department andManager of Human Resource Department. Mr He has been an MBA student of Nanjing University sinceApril 2003.

Mr Wei Xiao Ping is our Assistant General Manager for Sales and Marketing and is responsible forbusiness operations, sales and marketing of our Group. Mr Wei graduated from Nanjing Power SeniorCollege in July 1993 with a diploma in thermal supply, ventilation and air conditioning. Between 1993 and1997, Mr Wei acted as an assistant engineer of Nanjing Pukou Urban Development Co., Ltd. Mr Weijoined our Group in 1997 as Manager of Business Department and was promoted to be AssistantGeneral Manager in April 2000.

Ms Zhang He Sheng is our Assistant General Manager for Production and is responsible for themanagement of manufacturing, procurement and quality inspection. In 1965, Ms Zhang graduated fromShanghai Waiwang Industrial College with a diploma in machinery manufacturing. From 1965 to 1984,Ms Zhang worked in Nanjing Chemical Mechanical Factory of Nanjing Chemical Industrial Company as atechnical staff. From 1984 to 1999, Ms Zhang worked as a Director of Quality Assurance Department inNanjing Second Chemical Mechanical Factory. Ms Zhang gained extensive experience in themanufacturing and quality inspection of Pressure Vessels in those two companies. In 1999, Ms Zhangjoined our Group as an Assistant General Manager.

Ms Zhang Mei Sun is our Chief Engineer and is responsible for R&D of products, market promotion andengineering application of our Group. In 1967, Ms Zhang graduated from Nanjing Power Senior Collegewith a diploma in thermal equipment. Between 1967 and 2001, Ms Zhang worked in SINOPEC YangtzeDesign Institute for 34 years and was involved in the design of various petrochemical projects in China. In2001, Ms Zhang joined our Group as a Chief Engineer.

Ms Zhou Jiang Hong is one of our Assistant General Managers and is responsible for management ofgeneral administrative matters of our Group. Ms Zhou graduated from Nanjing Railway Medical College(major in medicine) in 1977. From 1977 to 1990, Ms Zhou worked in Medical College of South EastUniversity as a general staff. From 1990 to 1999, Ms Zhou worked as a Director of Students AffairsDepartment of South East University of China. In 1999, Ms Zhou joined our Group as the Manager ofAdministrative Office. In January 2004, Ms Zhou was promoted to be Assistant General Manager.

None of our Executive Officers has any present and past directorships over the past five years.

To support the management in discharging of their financial reporting responsibilities and obligations, ourCompany has appointed Nexia Tan & Sitoh and Nexia TS Pte Ltd (“Nexia”) from 1 January 2005 or listingof our Company, whichever is earlier, for a period of three years, to assist our Company in reviewing thequarterly group consolidated financial accounts in accordance with the Singapore Financial ReportingStandards (“FRS”) and the SGX-ST listing requirements. They are also engaged to review theannouncements to be made by our Group, corporate governance issue, internal control and accountingsystem. Nexia will report its findings on the internal control and accounting system review to our AuditCommittee and our Audit Committee will determine the scope and frequency of review. Our Company willalso be updated with the latest FRS issued and the implication to our Group and where necessarysuggest appropriate changes required to be made to the accounting policy and procedures of our Group.Our Audit Committee will review the appointment of Nexia at the expiry of the three-year period todetermine whether Nexia’s services should be continued.

There is no arrangement or understanding with a substantial shareholder, customer or supplier of ourCompany or other person, pursuant to which any of our Directors or Executive Officers was selected as adirector or executive officer of our Company. None of our Directors and Executive Officers is related byblood or marriage to one another nor are they so related to any substantial shareholders of ourCompany.

REMUNERATION

The compensation paid to our Directors and our Executive Officers for services rendered to us and oursubsidiaries on an individual basis and in remuneration bands during FY2003 and FY2004 and theestimated amount to be paid for FY2005 were and are as follows:-

Estimated amount forNames FY2003 FY2004 FY2005

Directors

Guo Hong Xin A A ALi Lai Suo A A AMa Ming A A AJiang Ning – – ALau Ping Sum Pearce – – ATham Hock Chee – – AChin Sek Peng – – A

Executive Officers

Ge Cui Ping – A AHe Chao Jun A A AWei Xiao Ping A A AZhang He Sheng A A AZhang Mei Sun A A AZhou Jiang Hong A A A

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Notes:-

(1) Band A means between S$0 and S$249,999.

(2) The remunerations in FY2004 are based on our unaudited financial statements.

(3) Save for the remunerations for Messrs Lau Ping Sum Pearce, Tham Hock Chee and Michael Chin Sek Peng, who will bepaid in S$, the remunerations of our Directors shall be paid in RMB.

(4) For the purposes of this estimation, no account is taken for the performance bonus that our Executive Directors are entitledto under their respective service agreements, further details of which are set out under the section “Service Agreements” onpages 106 and 107 of this Prospectus.

Other than social security contributions for our PRC employees, we have not set aside or accrued anyamount of money to provide for pension, retirement or similar benefits.

EMPLOYEES

As at the Latest Practicable Date, we had a workforce of approximately 367. We signed individualemployment contracts with all our employees. The relationship and cooperation between themanagement and staff have been good and are expected to continue in the future. There has not beenany incidence of work stoppages or labour disputes which affected our operations.

The functional distribution of our full-time employees as at 31 December 2001 to 2003 and as at 30 June2004 were as follows:-

As at 31 As at 31 As at 31 December 2001 December 2002 December 2003 As at 30 June 2004

Function

Production 104 216 255 142Sales and Marketing 26 29 40 45Finance and Accounting 6 5 6 10Administrative and Management 17 26 30 50R&D 24 33 30 53

Number of employees 177 309 361 300

Note:- The production employees decreased from 255 as at 31 December 2003 to 142 as at 30 June 2004. This is because weemployed 81 part time employees in 2003. We no longer employ such part time employees after the Restructuring Exerciseand we outsourced some of the manufacturing process to subcontractors.

SERVICE AGREEMENTS

On 2 February 2005, our Company entered into separate service agreements (the “ServiceAgreements”) with our Executive Directors, Messrs Guo Hong Xin, Li Lai Suo and Ma Ming, for a periodof three (3) years (unless otherwise terminated by either party giving not less than six months’ notice tothe other) with effect from 1 January 2005. We may also terminate their respective Service Agreements ifany of these Executive Directors are guilty of dishonesty or serious or persistent misconduct, becomesbankrupt or otherwise acts to the prejudice of our Company. None of these Executive Directors will beentitled to any benefits upon termination of their respective Service Agreements. The ServiceAgreements cover the terms of employment, specifically salaries and bonuses. Directors’ fees do notform part of the terms of the Service Agreements as these require the approval of shareholders in ourCompany’s annual general meeting.

Pursuant to the terms of their respective Service Agreements, Messrs Guo Hong Xin, Li Lai Suo and MaMing are entitled to an annual salary equivalent to RMB390,000, RMB364,000 and RMB364,000respectively.

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Messrs Guo Hong Xin, Li Lai Suo and Ma Ming are also entitled to a performance bonus based on aproportion of our Group’s consolidated profit before tax and payment of performance bonus in a financialyear (“Consolidated Profit Before Tax”). The performance bonus will be calculated based on the auditedconsolidated financial statements of our Group for the financial year preceding the date of payment of theperformance bonus.

The performance bonus is calculated on the Consolidated Profit Before Tax as follows:-

Percentage of Consolidated Profit Before Tax to beConsolidated Profit Before Tax (“PBT”) allocated as performance bonus

For PBT of RMB42 million to RMB45 million (inclusive) Mr Guo : 2 per cent.Mr Li : 2 per cent.Mr Ma : 2 per cent.

On surplus amount for PBT above RMB45 million Mr Guo : 3.33 per cent.Mr Li : 3.33 per cent.Mr Ma : 3.33 per cent.

All travelling and travel-related expenses, entertainment expenses and other out-of-pocket expensesreasonably incurred by our Executive Directors in the process of discharging their duties on behalf of ourGroup will be borne by our Group. Our Executive Directors are also entitled to medical, dental and travel,accident and life insurance coverage as well as car and club memberships.

Had the Service Agreements been in existence for FY2003, the aggregate remuneration paid to theExecutive Directors would have been approximately RMB1.1 million and our profit before income tax andprofit after tax attributable to our Pro Forma Group for FY2003 would have been RMB13.4 million andRMB11.3 million respectively instead of RMB14.3 million and RMB12.1 million.

Our Group has also previously entered into various letters of employment with all of the ExecutiveOfficers. Such letters typically provide for the salaries payable to our Executive Officers, their workinghours, annual leave, medical benefits, grounds of termination and certain restrictive covenants.

Save for the above, there are no existing or proposed service contracts entered or to be entered into byour Directors and Executive Officers.

CORPORATE GOVERNANCE

Our Bye-laws provide that our board of Directors will consist of not less than two Directors. None of ourDirectors are appointed for any fixed terms, but one-third of our Directors (save for the managing directoror a person holding an equivalent position) is required to retire at every annual general meeting of ourCompany. Hence, the maximum term for each Director is three years. Directors who retire are eligible tostand for re-election.

Our Directors recognise the importance of corporate governance and the offering of high standards ofaccountability to the shareholders of our Company.

Nominating Committee

Our Nominating Committee comprises Messrs Lau Ping Sum Pearce, Jiang Ning and Tham Hock Chee.The Chairman of the Nominating Committee is Mr Jiang Ning. Our Nominating Committee will beresponsible for (i) re-nomination of our Directors having regard to the Director’s contribution andperformance, (ii) determining annually whether or not a Director is independent and (iii) deciding whetheror not a Director is able to and has been adequately carrying out his duties as a director. The NominatingCommittee will decide how the board’s performance is to be evaluated and propose objectiveperformance criteria, subject to the approval of the board, which address how the board has enhancedlong-term shareholders’ value. The board will also implement a process to be carried out by theNominating Committee for assessing the effectiveness of the board as a whole and for assessing thecontribution by each individual Director to the effectiveness of the board. Each member of the NominatingCommittee shall abstain from voting on any resolutions in respect of the assessment of his performanceor re-nomination as director.

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Remuneration Committee

Our Remuneration Committee comprises Messrs Lau Ping Sum Pearce, Guo Hong Xin and Tham HockChee. The Chairman of the Remuneration Committee is Mr Tham Hock Chee. Our RemunerationCommittee will recommend to our Board a framework of remuneration for our Directors and keyexecutives officers, and determine specific remuneration packages for each executive Director. Therecommendations of our Remuneration Committee on remuneration of Directors should be submitted forendorsement by the entire board. All aspects of remuneration, including but not limited to directors’ fees,salaries, allowances, bonuses, options and benefits in kind shall be covered by our RemunerationCommittee. Each member of the Remuneration Committee shall abstain from voting on any resolutions inrespect of his remuneration package.

Audit Committee

Our Audit Committee comprises Messrs Michael Chin Sek Peng, Tham Hock Chee, Lau Ping SumPearce and Jiang Ning. The Chairman of the Audit Committee is Mr Michael Chin Sek Peng. OurDirectors recognise the importance of corporate governance and the offering of high standards ofaccountability to the shareholders of our Company. Our Audit Committee shall meet periodically toperform the following functions:-

(a) review the audit plans of our Company’s auditors;

(b) review the auditors’ reports;

(c) review the co-operation given by our Company’s officers to the auditors;

(d) review the financial statements of our Company and our Group before their submission to theBoard;

(e) nominate auditors for re-appointment; and

(f) review interested person transactions, if any.

Apart from the duties listed above, the Audit Committee shall commission and review the findings ofinternal investigations into matters where there is any suspected fraud or irregularity, or failure of internalcontrols or infringement of any Singapore law, rule or regulation which has or is likely to have a materialimpact on our Group’s operating results and/or financial position. Each member of the Audit Committeeshall abstain from voting on any resolutions in respect of matters in which he is interested.

THE SUNPOWER EMPLOYEE SHARE OPTION SCHEME

On 2 February 2005, our shareholders approved a share option scheme known as the SunpowerEmployee Share Option Scheme (the “ESOS”), the rules of which are set out in Appendix E of thisProspectus. The ESOS complies with the relevant rules as set out in Chapter 8 of the Listing Manual.The ESOS will provide eligible participants with an opportunity to participate in the equity of ourCompany and to motivate them towards better performance through increased dedication and loyalty.The ESOS, which forms an integral and important component of a compensation plan, is designed toprimarily reward and retain executive directors and employees whose services are vital to our well beingand success.

As at the Latest Practicable Date, no options have been granted under the ESOS.

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Objectives of the ESOS

The objectives of ESOS are as follows:-

(a) to motivate participants to optimise their performance standards and efficiency and to maintain ahigh level of contribution to our Group;

(b) to retain key employees and Directors whose contributions are essential to the long-term growthand profitability of our Group;

(c) to instil loyalty to, and a stronger identification by participants with the long-term prosperity of, ourGroup;

(d) to attract potential employees with relevant skills to contribute to our Group and to create value forthe shareholders of our Company; and

(e) to align the interest of participants with the interests of the shareholders of our Company.

Summary of ESOS

A summary of the rules of ESOS is set out as follows:-

(1) Participants

Under the rules of ESOS, Executive Directors and employees of our Group and our associatedcompanies (“Group Employees”), are eligible to participate in ESOS. For this purpose, a companyis our “associated company” if we and/or our subsidiaries hold at least 20 per cent. but not morethan 50 per cent. of the issued shares in that company and provided our Company has controlover the associated company.

Currently, we have no associated company. However, our Company may acquire such companiesin future and accordingly, we have provided for the ESOS to be extended to directors and keyemployees of our future associated companies (if any) so that we have the flexibility to grant theOptions to such person at the appropriate times.

Our Controlling Shareholders and their associates are not eligible to participate in the ESOS. As atthe date of this Prospectus, Mr Guo Hong Xin, Mr Li Lai Suo and Mr Ma Ming are our ControllingShareholders.

(2) Scheme administration

The ESOS shall be administered by the Remuneration Committee (Please refer to the section“Corporate Governance” on pages 107 and 108 of this Prospectus) with powers to determine, interalia, the following:-

(a) persons to be granted options;

(b) number of options to be granted; and

(c) recommendations for modifications to the ESOS.

As at the date of this Prospectus, our Remuneration Committee comprises Messrs Lau Ping SumPearce, Guo Hong Xin and Tham Hock Chee. The Remuneration Committee will consist ofDirectors (including Directors or persons who may be participants of ESOS). A member of theRemuneration Committee who is also a participant of ESOS must not be involved in itsdeliberation in respect of options granted or to be granted to him.

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(3) Size of the ESOS

The aggregate nominal amount of shares over which the Remuneration Committee may grantoptions on any date, when added to the nominal amount of Shares issued and issuable in respectof all options granted under the ESOS shall not exceed fifteen per cent (15%) of the issued sharecapital of our Company on the day immediately preceding the date of the relevant grant.

Our Company believe that this fifteen per cent (15%) limit gives our Company sufficient flexibility todecide the number of Option Shares to offer to its existing and new employees. Fifteen per cent(15%) of the post-Invitation share capital of our Company constitutes approximately 49,350,000Shares. As it is intended that the Scheme shall last for ten (10) years, assuming that there is nochange in the total issued share capital of our Company, the number of Options that may begranted in a year will average approximately 4,935,000. The number of eligible participants isexpected to grow over the years. Our Company, in line with its goals of ensuring sustainablegrowth, is constantly reviewing its position and considering the expansion of its talent pool whichmay involve employing new employees. The employee base, and thus the number of eligibleparticipants will increase as a result. If the number of Options available under the ESOS is limited,our Company may only be able to grant a small number of Options to each eligible participantwhich may not be a sufficiently attractive incentive. Our Company is of the opinion that it shouldhave sufficient number of Options to offer to new employees as well as to existing ones. Thenumber of Options offered must also be significant enough to serve as a meaningful reward forcontributions to our Group. However, it does not necessarily mean that the RemunerationCommittee will definitely issue Option Shares up to the prescribed limit. The RemunerationCommittee shall exercise its discretion in deciding the number of Option Shares to be granted toeach employee which will depend on the performance and value of the employee to our Group.

(4) Maximum entitlements

The aggregate number of Shares comprised in any options to be offered to a participant in ESOSshall be determined at the absolute discretion of the Remuneration Committee, who shall take intoaccount (where applicable) criteria such as rank, past performance, years of service, potential forfuture development of that participant.

(5) Options, exercise period and exercise price

The options that are granted under the ESOS may have exercise prices that are, at theRemuneration Committee’s discretion, set at a price (the “Market Price”) equal to the average ofthe last dealt prices for the Shares on the Official List of the SGX-SESDAQ for the five consecutivemarket days immediately preceding the relevant date of grant of the relevant option of a Share; orat a discount to the Market Price (subject to a maximum discount of 20%). Options which are fixedat the Market Price (“Market Price Option”) may be exercised after the 1st anniversary of the dateof grant of that option while options exercisable at a discount to the Market Price may be exercisedafter the 2nd anniversary from the date of grant of the option (“Incentive Option”). Options grantedunder the ESOS will have a life span of five (5) years for Options granted to Group Employees(other than employees of associated companies) and five (5) years for Options granted toemployees of associated companies. In no circumstances shall the exercise price be less than thenominal value of a Share.

(6) Grant of options

Under the rules of the ESOS, there are no fixed periods for the grant of options. As such, offers ofthe grant of options may be made at any time from time to time at the discretion of theRemuneration Committee. However, no option shall be granted during the period of 30 daysimmediately preceding the date of announcement of our Company’s interim or final results (as thecase may be).

In addition, in the event that an announcement on any matter of an exceptional nature involvingunpublished price sensitive information is imminent, offers may only be made after the secondmarket day from the date on which the aforesaid announcement is made.

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(7) Termination of options

Special provisions in the rules of the ESOS deal with the lapse or earlier exercise of options incircumstances which include the termination of the participant’s employment in our Group, thebankruptcy of the participant, the death of the participant, a take-over of our Company and thewinding-up of our Company.

(8) Acceptance of options

The grant of options shall be accepted within thirty (30) days from the date of the offer. Offers ofoptions made to grantees, if not accepted before the closing date, will lapse. Upon acceptance ofthe offer, the grantee must pay our Company a consideration of RMB1.00.

(9) Rights of shares arising

Shares arising from the exercise of options are subject to the provisions of the Memorandum ofAssociation and Bye-laws of our Company. The Shares so allotted will upon issue rank pari passuin all respects with the then existing issued Shares, save for any dividend, rights, allotments ordistributions, the record date (“Record Date”) for which is prior to the relevant exercise date of theoption. “Record Date” means the date as at the close of business on which the shareholders mustbe registered in order to participate in any dividends rights, allotments or other distributions (as thecase may be).

(10) Duration of the ESOS

The ESOS shall continue in operation for a maximum duration of ten (10) years and may becontinued for any further period thereafter with the approval of our shareholders by ordinaryresolution in general meeting and of any relevant authorities which may then be required.

(11) Abstention from voting

Shareholders who are eligible to participate in the ESOS are to abstain from voting on anyshareholders’ resolution relating to the ESOS.

Grant of options with a discounted exercise price

The ability to offer options to participants of the ESOS with exercise prices set at a discount to theprevailing market prices of the Shares will operate as a means to recognise the performance ofparticipants as well as to motivate them to continue to excel while encouraging them to focus more onimproving the profitability and return of our Group above a certain level which will benefit all shareholderswhen these are eventually reflected through share price appreciation. The ESOS will also serve to recruitnew group employees whose contributions are important to the long term growth and profitability of ourGroup. Discounted Options would be perceived in a more positive light by the participants, inspiring themto work hard and produce results in order to be offered Options at a discount as only employees whohave made outstanding contributions to the success and development of our Group would be grantedOptions at a discount.

The flexibility to grant options with discounted prices is also intended to cater to situations where thestock market performance has overrun the general market conditions. In such events, the RemunerationCommittee will have absolute discretion to:-

(i) grant options set at a discount to Market Price of a share (subject to a maximum limit of 20%); and

(ii) determine the participants to whom, and the options to which, such reduction in exercise priceswill apply.

In determining whether to give a discount and the quantum of the discount, the Remuneration Committeeshall be at liberty to take into consideration factors including the performance of our Company, ourGroup, the performance of the participant concerned, the contribution of the participant to the successand development of our Group and the prevailing market conditions.

At present, our Company foresees that options may be granted with a discount principally in the followingcircumstances:-

(a) Firstly, where it is considered more effective to reward and retain talented employees by way of adiscounted price option rather than a market price option. This is to reward the outstandingperformers who have contributed significantly to our Group’s performance and the discounted priceoption serves as additional incentives to such Group employees. Options granted by our Companyon the basis of market price may not be attractive and realistic in the event of an overly buoyantmarket and inflated share prices. Hence during such period the ability to offer such options at adiscount would allow our Company to grant options on a more realistic and economically feasiblebasis. Furthermore, options granted at a discount will give an opportunity to Group employees torealise some tangible benefits even if external events cause the share price to remain largelystatic.

(b) Secondly, where it is more meaningful and attractive to acknowledge a participant’s achievementsthrough a discounted price option rather than paying him a cash bonus. For example, optionsgranted at a discount may be used to compensate employees and to motivate them duringeconomic downturns when wages (including cash bonuses and annual wage supplements) arefrozen or cut, or they could be used to supplement cash rewards in lieu of larger cash bonuses orannual wage supplements. Accordingly, it is possible that merit-based cash bonuses or rewardsmay be combined with grants of market price options or discounted price options, as part ofeligible employees’ compensation packages. The ESOS will provide Group employees with anincentive to focus more on improving the profitability of our Group thereby enhancing shareholdervalue when these are eventually reflected through the price appreciation of the Shares after thevesting period.

(c) Thirdly, where due to speculative forces and having regard to the historical performance of theShare price, the market price of the Shares at the time of the grant of the options may not bereflective of financial performance indicators such as return on equity and/or earnings growth.

The Remuneration Committee will have the absolute discretion to grant options where the exercise priceis discounted, to determine the level of discount (subject to a maximum discount of twenty (20) per cent.of the Market Price) and the grantees to whom, and the options to which, such discount in the exerciseprice will apply provided that our Company’s shareholders in general meeting shall have authorised, in aseparate resolution, the making of offers and grants of options under the Scheme at a discount notexceeding the maximum discount as aforesaid.

In deciding whether to give a discount and the quantum of such discount (subject to the aforesaid limit),the Remuneration Committee will have regard to the financial and other performance of our Companyand our Group, the years of service and individual performance of the grantee, the contribution of thegrantee to the success and development of our Group and the prevailing market conditions.

Our Company may also grant options without any discount to the market price. Additionally, our Companymay, if it deems fit, impose conditions on the exercise of the options (whether such options are granted atthe market price or at a discount to the market price), such as restricting the number of shares for whichthe option may be exercised during the initial years following its vesting.

Rationale for participation of Executive Officers and employees of our Group and associatedcompanies in the ESOS

The extension of the ESOS to Executive Officers and employees of our Group and associatedcompanies allows our Group to have a fair and equitable system to reward Executive Officers andemployees who have made and who continue to make significant contributions to the long-term growth ofour Group.

We believe that the ESOS will also enable us to attract, retain and provide incentives to its participants toachieve higher standards of performance as well as encourage greater dedication and loyalty by enablingour Company to give recognition to past contributions and services as well as motivating participantsgenerally to contribute towards the long-term growth of our Group.

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Cost of Options granted under the ESOS to our Company

Currently, the Singapore Financial Reporting Standards (“SFRS”) do not require listed companies toaccount for the cost of the share-based compensation in their financial statements for accounting periodthat commences before 1 January 2005.

With effect from financial year beginning on or after 1 January 2005, SFRS 102 Share-based Paymentswill require listed companies to measure equity-settled share-based payments at fair value at the date ofgrant, which is then expensed off on a straight-line basis over the vesting period. SFRS 102 has limitedretrospective application, resulting in the need for prior periods to be adjusted to reflect the effect ofadopting the standard. SFRS 102 will apply retrospectively to share-based payment transactions whichare granted on or after 22 November 2002 and had not vested by 1 January 2005.

As at the Latest Practicable Date, our Group has not granted any share options to our employees. Detailsof the number of Options granted pursuant to the ESOS, the number of Options exercised and theexercise price (as well as any applicable discounts) will be disclosed in our annual report.

We have made an application to the SGX-ST for permission to deal in and for quotation of the Shareswhich may be issued upon the exercise of the options to be granted under the ESOS. The approval ofthe SGX-ST is not to be taken as an indication of the merits of our Company, our subsidiaries, ourShares (including the Vendor Shares), the New Shares or the Option Shares.

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INTERESTED PERSON TRANSACTIONS

In general, transactions between our Group and any of its interested persons (namely, the Directors, ourChief Executive Officer or Controlling Shareholders of our Company or the Associates of such Directors,Chief Executive Officer or Controlling Shareholders) are known as interested person transactions.

Save for the Restructuring Exercise which is described on pages 71 to 74 of this Prospectus, thefollowing discussion sets out the material interested person transactions for the last three financial yearsand up to the Latest Practicable Date, based on our Group (Post-Restructuring Exercise) with itsinterested persons construed accordingly.

Existing transaction between Sunpower Petrochemical and Sunpower Technology

Our Executive Chairman, Mr Guo Hong Xin, our Executive Directors, Mr Li Lai Suo and Mr Ma Ming eachhas a direct interest of 37%, 34% and 29% in Sunpower Petrochemical respectively.

Option to lease factory buildings by Sunpower Technology and Sunpower Petrochemical

Pursuant to an option agreement dated 15 July 2004, Sunpower Technology was granted an option tolease factory buildings from Sunpower Petrochemical located at Jianshe Road, Jiangning Science Park,Nanjing for a maximum period of 3 years. As at the Latest Practicable Date, the factory buildingsconcerned are still under construction and are expected to be completed by March 2005. Pursuant to theoption agreement, the rent payable by Sunpower Technology shall be determined by an independentvaluer appointed by our Group.

The transaction will be conducted at arm’s length and not prejudical to the interest of our Company asthe rent will be determined by an independent valuer appointed by our Company pursuant to the optionagreement. The exercise of the option will be subject to the relevant provisions in the Listing Manual, inparticular, Chapter 9, including review by our Audit Committee. Our Executive Directors, Mr Guo HongXin, Mr Li Lai Suo and Mr Ma Ming shall abstain from voting in respect of the exercise of the option.

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CONFLICT OF INTERESTS

Our Executive Chairman, Mr Guo Hong Xin and our Executive Directors, Mr Li Lai Suo and Mr Ma Minghas a 37%, 34% and 29% interest in Sunpower Petrochemical respectively. Mr Guo Hong Xin, Mr Li LaiSuo and Mr Ma Ming are also directors of both Jiangsu Shengnuo and Sunpower Petrochemical and MrGuo is the legal representative of Sunpower Petrochemical and Mr Li is the legal representative ofJiangsu Shengnuo. Sunpower Petrochemical is a PRC domestic company which owns a 44.08% interestin Jiangsu Shengnuo.

After the sale of Sunpower Undertakings to Sunpower Technology, Sunpower Petrochemical haschanged its business licence in August 2004 to exclude activities undertaken by our Group. Currently,Jiangsu Shengnuo still have some contracts secured before 2 March 2004 to be fulfilled and suchcontracts are expected to complete before June 2005.

To eliminate the conflict of interest, Mr Guo Hong Xin, Mr Li Lai Suo and Mr Ma Ming have entered intothree separate deeds of undertaking with our Company pursuant to which each of Mr Guo Hong Xin, MrLi Lai Suo and Mr Ma Ming has undertaken to our Company that, following the listing of our Company onthe SGX-SESDAQ, each of Mr Guo Hong Xin, Mr Li Lai Suo and Mr Ma Ming will not, as long as heremains (i) a director of our Company (or any of its subsidiaries and associated companies, as defined inthe Listing Manual of the SGX-ST) and/or a shareholder with an interest of 5% or more (whether direct orindirect) in the voting shares of our Company; and (ii) a director of Jiangsu Shengnuo or SunpowerPetrochemical and/or a shareholder with an interest of 5% or more (whether direct or indirect) in theequity interest of Jiangsu Shengnuo or Sunpower Petrochemical, directly or indirectly carry on (whetheralone or in partnership or joint venture with anyone else) any activity which competes with our Group inthe business, whether in the PRC or elsewhere.

Sunpower Petrochemical and Jiangsu Shengnuo have also entered into deeds of undertaking with ourCompany pursuant to which Jiangsu Shengnuo and Sunpower Petrochemical have undertaken to ourCompany that, following the listing of our Company on the SGX-SESDAQ, it will not directly or indirectlycarry on (whether alone or in partnership or joint venture with anyone else) any activity which competeswith our Group whether in the PRC or elsewhere. However, Jiangsu Shengnuo will be entitled tocomplete all contracts secured before 2 March 2004 but not novated to Nanjing Shengnuo during theRestructuring Exercise. These secured contracts are expected to be completed by June 2005.

Save as disclosed under the section on “Interested Person Transactions”, none of our Directors,controlling shareholders and Executive Officers or their associates has any material interest, direct orindirect, in:-

(i) any company carrying out the same business;

(ii) any enterprise or company that is our Group’s customer or supplier of goods or services; and

(iii) any transaction to which we are a party.

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REVIEW BY AUDIT COMMITTEE

Our Audit Committee which comprises four Independent Directors will review all existing and futureinterested person transactions on at least a quarterly basis to ensure that they are carried out on normalcommercial terms and are not prejudicial to the interests of our Shareholders. Please refer to the sectionon “Corporate Governance” on pages 107 and 108 of this Prospectus for more details of our AuditCommittee.

Our Audit Committee will also review all interested person transactions to ensure that the then prevailingrules and regulations of the SGX-ST (in particular Chapter 9 of the SGX-ST Listing Manual) are compliedwith. We will also endeavour to comply with the principles of and best practices set out in the SGX-STListing Manual.

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GENERAL AND STATUTORY INFORMATION

INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS

1. None of our Directors or Executive Officers is or was involved in any of the following events:-

(i) during the last ten years, a petition under any bankruptcy laws of any jurisdiction filedagainst him or against a partnership of which he was a partner;

(ii) during the last ten years, a petition under any law of any jurisdiction filed against acorporation of which he was a director or key executive for the winding up of that corporationon the ground of insolvency;

(iii) any unsatisfied judgements against him;

(iv) a conviction of any offence, in Singapore or elsewhere, involving fraud or dishonesty whichis punishable with imprisonment for three months or more, or any criminal proceedings(including any pending criminal proceedings which he is aware of) for such purpose;

(v) a conviction of any offence, in Singapore or elsewhere, involving a breach of any law orregulatory requirement that relates to the securities or futures industry in Singapore orelsewhere, or any criminal proceedings (including pending criminal proceedings which he isaware of) for such breach;

(vi) during the last ten years, judgement entered against him in any civil proceeding inSingapore or elsewhere involving a breach of any law or regulatory requirement that relatesto the securities or futures industry in Singapore or elsewhere, or a finding of fraud,misrepresentation or dishonesty on his part, or any civil proceedings (including any pendingcivil proceedings which he is aware of) involving an allegation of fraud, misrepresentation ordishonesty on his part;

(vii) a conviction in Singapore or elsewhere of any offence in connection with the formation ormanagement of any corporation;

(viii) disqualification from acting as a director of any corporation, or from taking part directly orindirectly in the management of any corporation;

(ix) the subject of any order, judgement or ruling of any court, tribunal or governmental bodypermanently or temporarily enjoining him from engaging in any type of business practice oractivity; and

(x) to his knowledge, been concerned with the management or conduct, in Singapore orelsewhere, of affairs of

(a) any corporation which has been investigated for a breach of any law or regulatoryrequirement governing corporations in Singapore or elsewhere; or

(b) any corporation or partnership which has been investigated for a breach of any law orregulatory requirement that relates to the securities or futures industry in Singapore orelsewhere,

in connection with any matter occurring or arising during the period when he was soconcerned with the corporation or partnership.

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SHARE CAPITAL

2. Save as set out under the section “Share Capital” on page 65 of this Prospectus and below, therewere no changes in the issued and paid-up capital of our Company and our subsidiaries within thethree years preceding the date of lodgement of this Prospectus.

Sunpower Technology

Issue price / Consideration Resultant registered Date Purpose of issue (US$) capital (US$)

16 April 2004 Registered capital 5,080,000 5,080,000upon establishment

Nanjing Shengnuo

Date Purpose of issue Issue price / Consideration Resultant registered(US$) capital (US$)

18 June 2004 Registered capital 1,330,000 1,330,000 upon establishment

Notes:-

(1) The registered capital of Sunpower Technology is only paid up to the amount of US$1,300,000. AnotherUS$525,376.96 is required to be contributed before 15 April 2005. The balance of the registered capital is required tobe injected by 15 April 2006.

(2) The registered capital of Nanjing Shengnuo has been fully paid up.

3. Save as disclosed under “Share Capital” on page 65 of this Prospectus, no Shares or debentureswere issued or were agreed to be issued by our Company for cash or for a consideration otherthan cash during the last two years.

LITIGATION

4. Our Group is not engaged in any legal or arbitration proceedings in the last 12 months before thedate of the lodgement, as plaintiff or defendant in respect of any claims or amounts which arematerial in the context of the Invitation and our Directors have no knowledge of any proceedingspending or threatened against our Group or any facts likely to give rise to any litigation, claims orproceedings which might materially affect the financial position or the business of our Group.

EXPENSES

5. The estimated amount of expenses of the Invitation and of the application for listing, includingmanagement fee, professional fees to independent auditors and solicitors to the Invitation and allother incidental expenses in relation to the Invitation is approximately S$2.9 million. Save for theunderwriting commission, placement commission and brokerage which will be borne by ourCompany and the Vendors in the proportion in which the number of Invitation Shares offered byeach of them pursuant to the Invitation bears to the total number of Invitation Shares, all otherexpenses will be borne by our Company. A breakdown of these estimated expenses is as follows:-

S$’000

Listing fees 10Professional fees 1,550Underwriting commission, placement commission and brokerage 996Miscellaneous expenses 354

Total estimated expenses of the Invitation 2,910

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MATERIAL CONTRACTS

6. The following contracts not being contracts entered into in the ordinary course of business havebeen entered into by our Company and our subsidiaries within the two years preceding the date oflodgement of this Prospectus and are or may be material:-

(a) Sale and Purchase Agreement dated 18 April 2004 between Sunpower Petrochemical andSunpower Technology for the sale and purchase of Sunpower Petrochemical’s business,assets and undertakings relating to the Pressure Vessels, Waste Gas and Energy RecoverySystems and Pipe Supports which were located in Nanjing (“Sunpower Undertakings”), for atotal consideration of RMB15,132,374.97, based on the audited net book value of theSunpower Undertakings as at 31 December 2003 pursuant to the Restructuring Exercise,details of which are set out on pages 71 to 74 of this Prospectus;

(b) Founding Shareholders Convertible Loan Agreement dated 1 June 2004 between Guo HongXin, Ma Ming, Li Lai Suo, Allgreat Pacific Limited, Armour Asia Limited, ClaremontConsultancy Limited and Trestle Asia Limited as lenders and our Company as borrower, theabove lenders loaned an aggregate amount of US$300,000 to our Company, details ofwhich are set out in the “Restructuring Exercise” section of this Prospectus;

(c) PRC Investor Convertible Loan Agreement dated 1 June 2004 between Wong Hiu Kin aslender and our Company as borrower, Wong Hiu Kin loaned an aggregate amount ofUS$500,000 to our Company, details of which are set out in the “Restructuring Exercise”section of this Prospectus;

(d) Foreign Investors Convertible Loan Agreement dated 1 June 2004 between Innovus, VertexResources Limited, Chua Kian Peng, Chau-chan Sui Yung, Equity-Link Asia Limited, Ng E-ming Joyce, Chen Jiong and Tan Lweng Ngoh as lenders and our Company as borrower,the above lenders loaned an aggregate amount of US$2,000,000 to our Company, details ofwhich are set out in the “Restructuring Exercise” section of this Prospectus;

(e) Sale and Purchase Agreement dated 12 June 2004 between Jiangsu Shengnuo as sellerand Sun Superior, Nanjing Chemical University Science and Technology Group Co., Ltd

(30%), Nanjing Rongchuan Environmental ProtectionEngineering Co., Ltd (4%) and Nanjing Rehan Science andTechnology Co., Ltd (1.5%) (collectively signing on behalf ofNanjing Shengnuo as purchaser, as it was not established when the sale and purchaseagreement was signed) for the sale and purchase of Jiangsu Shengnuo’s business, assetsand undertakings relating to the Heat Pipe and Heat Pipe Exchangers which were located inNanjing (“Shengnuo Undertakings”), for a total consideration of RMB9,961,741.08, based onthe audited net book value of the Shengnuo Undertakings as at 30 June 2004 pursuant tothe Restructuring Exercise, details of which are set out on pages 71 to 74 of thisProspectus;

(f) Supplemental Deed to Foreign Investors Convertible Loan Agreement dated 7 July 2004between Founding Shareholders, our Company (as borrower), Foreign Investors andInnovus Capital Private Limited pursuant to which all parties agreed to certain amendmentsto the Foreign Investors Convertible Loan Agreement;

(g) Supplemental Deed to PRC Investor Convertible Loan Agreement dated 7 July 2004between Founding Shareholders and our Company (as borrower) and PRC Investorpursuant to which all parties agreed to certain amendments to the PRC Investor ConvertibleLoan Agreement;

(h) Supplemental Agreement dated 27 July 2004 between Sunpower Petrochemical andSunpower Technology for amendments to the Sale and Purchase Agreement dated 18 April2004;

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(i) Supplemental Agreement dated 27 July 2004 between Nanjing Shengnuo and JiangsuShengnuo for amendments to the Sale and Purchase Agreement dated 12 June 2004;

(j) Deed of Undertaking issued by Mr Guo Hong Xin dated 2 February 2005 pursuant to whichMr Guo gives a non-competition undertaking in favour of our Group, details of which are setout in “Conflict of Interests” on page 115 of this Prospectus;

(k) Deed of Undertaking issued by Mr Li Lai Suo dated 2 February 2005 pursuant to which MrLi gives a non-competition undertaking in favour of our Group, details of which are set out in“Conflict of Interests” on page 115 of this Prospectus;

(l) Deed of Undertaking issued by Mr Ma Ming dated 2 February 2005 pursuant to which MrMa gives a non-competition undertaking in favour of our Group, details of which are set outin “Conflict of Interests” on page 115 of this Prospectus;

(m) Deed of Undertaking issued by Sunpower Petrochemical dated 2 February 2005 pursuant towhich Sunpower Petrochemical gives a non-competition undertaking in favour of our Group,details of which are set out in “Conflict of Interests” on page 115 of this Prospectus;

(n) Deed of Undertaking issued by Jiangsu Shengnuo dated 2 February 2005 pursuant to whichJiangsu Shengnuo gives a non-competition undertaking in favour of our Group, details ofwhich are set out in “Conflict of Interests” on page 115 of this Prospectus;

(o) Patent Transfer Agreement executed between Sunpower Petrochemical and SunpowerTechnology dated 30 April 2004 pursuant to which Sunpower Technology acquires 10patents owned by Sunpower Petrochemical, details of which is set out on page 88 of thisProspectus;

(p) Patent License Agreement executed between Sunpower Petrochemical and SunpowerTechnology dated 12 July 2004 pursuant to which Sunpower Technology is licensed to use10 patents owned by Sunpower Petrochemical;

(q) Patent License Agreement executed between Jiangsu Shengnuo and Nanjing Shengnuodated 12 July 2004 pursuant to which Nanjing Shengnuo is licensed to use 1 patent ownedby Jiangsu Shengnuo;

(r) Patent License Agreement executed between Nanjing University of Technology and NanjingShengnuo dated 20 July 2004 pursuant to which Nanjing Shengnuo is licensed to use 3patents owned by Nanjing University of Technology, details of which is set out on page 89 ofthis Prospectus;

(s) Patent Transfer Agreement executed between Jiangsu Shengnuo and Nanjing Shengnuodated 25 August 2004 pursuant to which Nanjing Shengnuo acquires 1 patent owned byJiangsu Shengnuo, details of which is set out on page 88 of this Prospectus;

(t) A letter of confirmation executed between Sunpower Petrochemical and SunpowerTechnology dated 11 September 2004 relating to the agreement as set out in paragraph (a);and

(u) Supplemental Agreement to Patent License Agreement and Patent Transfer Agreementexecuted between Jiangsu Shengnuo and Nanjing Shengnuo dated 13 October 2004pursuant to which Jiangsu Shengnuo and Nanjing Shengnuo agree to amend theagreements as set out in paragraphs (q) and (s).

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MISCELLANEOUS

7. No expert is employed on a contingent basis by our Company or any of our subsidiaries, has amaterial interest, whether direct or indirect, in the Shares or in the shares of our subsidiaries, orhas a material economic interest, whether direct or indirect, in our Company, including an interestin the success of the Invitation.

8. There was no public take-over offer, by a third party in respect of our Company’s Shares or by ourCompany in respect of the shares of another corporation, during FY2003 and up to the LatestPracticable Date.

9. Save as disclosed in the section “Subsequent Events” in the Compilation Report on pages A-37and A-38 of this Prospectus, our Directors are not aware of any event which has occurred since 30June 2004, which may have a material effect on the proforma consolidated financial informationset out on pages A-1 to A-46 of the Compilation Report.

CONSENTS

10. Deloitte & Touche has given and has not withdrawn its written consent to the issue of thisProspectus with the inclusion herein of the Compilation Report, the audited financial statements ofeach of Sunpower Petrochemical for the three years ended 31 December 2001, 2002 and 2003,the audited financial statements of Sunpower Petrochemical for the four-month period ended 30April 2004, the audited financial statements of Sunpower Technology from 16 April 2004 (date ofestablishment) to 30 June 2004 and the audited financial statements of Sunpower Group Ltd. from28 April 2004 (date of incorporation) to 30 June 2004.

11. Each of the Solicitors to the Invitation, the Legal Advisers to our Company as to PRC Law, theLegal Advisers to our Company as to Bermuda Law, the Registrar for the Invitation and SingaporeShare Transfer Agent, the Bermuda Share Registrar and the Receiving Banker do not make, orpurport to make, any statement in this Prospectus or any statement upon which a statement in thisProspectus is based and, to the maximum extent permitted by law, expressly disclaim and take noresponsibility for any liability to any person which is based on, or arises out of, the statements,information or opinions in this Prospectus.

DOCUMENTS AVAILABLE FOR INSPECTION

12. Copies of the following documents may be inspected at the office of 80 Raffles Place, #58-01 UOBPlaza 1, Singapore 048624 during normal business hours for a period of six months from the dateof registration of this Prospectus:-

(a) the Memorandum of Association and the Bye-laws of our Company;

(b) the Compilation Report comprising the proforma financial information of our Group for thethree years ended 31 December 2001, 31 December 2002 and 31 December 2003 and thesix-month period ended 30 June 2004 as set out on pages A-1 to A-46 of this Prospectus;

(c) the audited financial statements of each of Sunpower Petrochemical for the three yearsended 31 December 2001, 31 December 2002, 31 December 2003 and the four-monthperiod ended 30 April 2004;

(d) the audited financial statements of Sunpower Technology from 16 April 2004 (date ofestablishment) to 30 June 2004;

(e) the audited financial statements of Sunpower Group Ltd. from 28 April 2004 (date ofincorporation) to 30 June 2004;

(f) the audited financial statements of Perimeter Pacific, Sun Superior, Nanjing Shengnuo andJiangsu Shengnuo for the respective periods covered under the proforma financialinformation;

(g) the material contracts referred to on pages 119 and 120 of this Prospectus;

(h) the letter of consent referred to on page 121 of this Prospectus;

(i) the Bermuda Companies Act; and

(j) the Service Agreements referred to on pages 106 and 107 of this Prospectus.

STATEMENT BY OUR DIRECTORS AND THE VENDORS

13. This Prospectus has been seen and approved by our Directors and the Vendors, and theycollectively and individually accept the full responsibility for the accuracy of the information given inthis Prospectus and confirm, having made all reasonable enquires, that to the best of theirknowledge and belief, that the facts stated and the opinions expressed herein are fair and accuratein all material respects as of the date hereof and there are no other facts the omission of whichwould make any statements herein misleading, and that this Prospectus constitutes full and truedisclosure of all material facts about the Invitation and our Group.

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APPENDIX A

COMPILATION REPORT OF REPORTING AUDITORS ON PRO FORMA FINANCIAL INFORMATION

8 March 2005

The Board of DirectorsSunpower Group LtdCanon’s Court, 22 Victoria StreetHamilton HM 12, Bermuda

Dear Sirs

COMPILATION REPORT OF THE REPORTING AUDITORS ONPRO FORMA FINANCIAL INFORMATION

This Report has been prepared for inclusion in the Prospectus dated 8 March 2005 (the “Prospectus”) inconnection with the Invitation in respect of 113,165,000 ordinary shares of US$0.01 each comprising49,000,000 New Shares and 64,165,000 Vendor Shares payable in full on application as follows:

(a) 2,000,000 Offer Shares at S$0.22 each by way of public offer; and

(b) 111,165,000 Placement Shares at S$0.22 each Placement Share.

We report on the pro forma financial information set out in pages A-3 to A-46 which has been prepared,for illustrative purposes only and based on certain assumptions and after making certain adjustments toshow what:

(a) the financial results of the Company and its subsidiaries (collectively the “pro forma Group”) for thefinancial years ended 31 December 2001, 2002, 2003 (“FY 2001 to FY 2003”) and for the sixmonths financial period ended 30 June 2004 (“FP June 2004”) would have been if the groupstructure as of the date of lodgement of the Prospectus had been in place since the beginning ofthe periods being reported on; and

(b) the financial position of the pro forma Group as of the date of the balance sheet as at 31December 2003 and 30 June 2004, and equity changes and cash flows for the financialyear/period then ended, would have been if the Group structure as of the date of lodgement of theProspectus had been in place on that date.

The pro forma financial information, because of their nature, may not give a true picture of the Group’sactual financial position or results.

The pro forma financial information is the responsibility of the directors of the Company. Ourresponsibility is to express an opinion on the pro forma financial information based on our work.

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We carried out procedures in accordance with Singapore Statement of Auditing Practice: SAP 24:“Auditors and Public Offering Documents”. Our work, which involved no independent examination of theunderlying financial statements, consisted primarily of comparing pro forma financial information to thefinancial statements (or where information is not available, to accounting records) of the Company andthe companies in the Group where applicable, considering the evidence supporting the adjustments anddiscussing the pro forma financial information with the directors of the Company.

In our opinion,

(a) the pro forma financial information have been properly prepared:

(i) in a manner consistent with both the format of the financial statements and the accountingpolicies of the Company which are prepared in accordance with Singapore Statements ofAccounting Standards for FY 2001 and FY 2002 and with Singapore Financial ReportingStandards for FY 2003 and FP June 2004; and;

(ii) on the basis stated in Note 2 of Section E below; and;

(b) each material adjustment made to the information used in the preparation of the pro formafinancial information is appropriate for the purpose of preparing such financial information.

The audit qualification on the financial statements of Jiangsu Shengnuo Heat Pipe Co., Ltd for thefinancial period from 2 March 2004 to 30 June 2004 as described in Note 2(II)(e) of Section E is notexpected to have any material financial impact on the pro forma financial information of the pro formaGroup for FP June 2004.

Yours faithfully

DELOITTE & TOUCHECertified Public AccountantsSingapore

Aric Loh Siang KheePartner

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A. PRO FORMA GROUP BALANCE SHEETSAS AT 31 DECEMBER 2003, 30 JUNE 2004 AND 30 JUNE 2003

Pro forma Group

(Unaudited)31 December 30 June 30 June

Notes 2003 2004 2003RMB’000 RMB’000 RMB’000

ASSETS

Current assets:Cash and bank balances – 20,697 –Trade receivables 6 36,079 49,293 16,910Other receivables and prepayments 7 5,934 9,879 4,642Inventories 8 24,701 18,098 20,175

Total current assets 66,714 97,967 41,727

Non-current assets:Investment in subsidiaries 9 – – –Property, plant and equipment 10 10,348 13,169 8,634Intangible asset 11 – 2,924 –

Total non-current assets 10,348 16,093 8,634

Total assets 77,062 114,060 50,361

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:Trade payables 12 47,014 43,224 22,402Other payables 13 3,572 34,182 13,237Short term loans 14 7,850 6,850 3,000Current portion of long term bank loans 14 100 – 100Convertible loans 15 – 7,545 –

Total current liabilities 58,536 91,801 38,739

Non-current liability:Long term bank loans 14 130 – 180

Shareholders’ equity:Issued capital 16 10,000 – 10,000General reserve 17 1,490 3,342 511Accumulated profits 6,906 18,917 931

Total shareholders’ equity 18,396 22,259 11,442

Total liabilities and shareholders’ equity 77,062 114,060 50,361

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B. PRO FORMA GROUP PROFIT AND LOSS STATEMENTSFOR THE FINANCIAL YEARS/PERIODS ENDED 31 DECEMBER 2001, 2002 AND 2003 AND 30 JUNE 2003 AND 2004

Pro forma Group

(Unaudited)Six months Six months

ended endedYear ended 31 December 30 June 30 June

Notes 2001 2002 2003 2004 2003RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Revenue 18 44,423 64,382 96,776 100,492 44,747

Cost of sales (35,192) (53,146) (68,892) (67,689) (32,374)

Gross profit 9,231 11,236 27,884 32,803 12,373

Other operating income 19 10 20 1,022 480 12

Administrative expenses 20 (3,351) (4,293) (5,598) (5,165) (2,145)

Research expenses (627) (1,249) (2,117) (944) (621)

Selling and distribution expenses (5,714) (5,443) (6,541) (3,865) (2,855)


Profit (Loss) from operations 21 (777) 207 14,557 23,259 6,717

Finance cost 22 (62) (96) (253) (180) (106)

Profit (Loss) before income tax (839) 111 14,304 23,079 6,611

Income tax expense 23 (511) (467) (2,209) (311) (994)

Profit (Loss) after income tax (1,350) (356) 12,095 22,768 5,617

Minority interests – – – 19 –

Net profit (loss) attributableto the pro forma Group (1,350) (356) 12,095 22,787 5,617

Earnings (loss) per share (RMB cents)* (0.48) (0.13) 4.32 8.14 2.01

* Earnings per share for the periods under review has been computed based on Pre-Invitation share capital of280,000,000 ordinary shares of US$0.01 each.

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C. PRO FORMA GROUP MOVEMENTS IN SHAREHOLDERS’ EQUITYFOR THE FINANCIAL YEAR/PERIOD ENDED 31 DECEMBER 2003 AND 30 JUNE 2004

Issued General Accumulatedcapital reserve profits (losses) Total

RMB’000 RMB’000 RMB’000 RMB’000

Balance as at 1 January 2003 10,000 – (4,189) 5,811Profit for the year – – 12,095 12,095Transfer – 1,490 (1,490) –

10,000 1,490 6,416 17,906Pro forma adjustments:

- On income statement – – 59 59- Restructuring exercise

(net assets not transferred) – – 431 431

Balance as at 31 December 2003 10,000 1,490 6,906 18,396

Transfer – 3,476 (3,476) – Profit for the period – – 22,787 22,787

Pro forma adjustments:- Restructuring exercise (10,000) (1,624) (6,772) (18,396)- On income statement – – (528) (528)

Balance as at 30 June 2004 – 3,342 18,917 22,259

FP 30 June 2003 (unaudited)

Balance as at 1 January 2003 10,000 – (4,189) 5,811Profit for the period – – 5,617 5,617Transfer – 511 (511) –

10,000 511 917 11,428Pro forma adjustment:

- On income statement – – 14 14

Balance as at 30 June 2003 10,000 511 931 11,442

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D. PRO FORMA GROUP STATEMENTS OF CASH FLOWFOR THE FINANCIAL YEAR/PERIOD ENDED 31 DECEMBER 2003 AND 30 JUNE 2004

Pro forma Group


Year ended ended ended31 December 30 June 30 June

2003 2004 2003RMB’000 RMB’000 RMB’000

Cash flows from operating activities:Profit before income tax 14,304 23,079 6,611Adjustments for:

Depreciation expense 1,123 804 626Impairment of intangible asset – 167 –Amortisation of intangible asset – 129 –Gain on disposal of property, plant and equipment – (24) – Interest expense 253 180 106

Operating profit before working capital changes 15,680 24,335 7,343

Trade receivables (21,941) (20,626) (2,772)Other receivables and prepayments (725) 16,635 567Inventories 1,157 15,409 5,683Trade payables 6,984 (17,496) (17,627)Other payables (11,719) 9,501 (2,486)

Cash (used in) from operations (10,564) 27,758 (9,292)

Interest paid (253) (180) (106)Income tax not transferred under Restructuring exercise (2,209) (311) (994)

Net cash (used in) from operating activities (13,026) 27,267 (10,392)

Cash flows from investing activities:Purchase of property, plant and equipment (3,178) (2,459) (967)Proceeds from disposal of property, plant and equipment – 70 – Partial payment for acquisition of Sunpower

Undertakings (Note A) – (10,840) –

Net cash used in investing activities (3,178) (13,229) (967)

Cash flows from financing activities:Increase (decrease) in bank loans 6,600 (1,197) 1,800Increase in convertible loans – 7,545 – Pro forma adjustments (Note B) 59 311 14

Net cash from financing activities 6,659 6,659 1,814

Net increase (decrease) in cash (9,545) 20,697 (9,545)Cash and bank balances at beginning of year/period (Note C) 9,545 – 9,545

Cash and bank balances at end of year/period – 20,697 –

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Notes to the pro forma Group statements of cash flow:

Note A

The pro forma Group acquired the following assets and undertakings pursuant to RestructuringExercise as described in Note 5 to the financial statements:

ShengnuoSunpower Undertakings Undertakings

Acquiredbased onaudited

net assets Movement Transferred Acquiredas at 31 from as at as at Total

December January to 30 April 30 June acquired/2003 April 2004 2004 2004 transferred

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Current assets:Trade receivables 36,079 (10,174) 25,905 2,762 28,667Other receivables and prepayments 5,934 18,837 24,771 1,743 26,514Inventories 24,701 6,683 31,384 2,123 33,507

Total current assets 66,714 15,346 82,060 6,628 88,688

Non-current assets:Property, plant and equipment

– net book value 5,548 353 5,901 6,774 12,675Intangible asset – – – 2,924 2,924

Total non-current assets 5,548 353 5,901 9,698 15,599

Total assets 72,262 15,699 87,961 16,326 104,287

Current liabilities:Trade payables 45,478 9,455 54,933 5,787 60,720Other payables 3,572 (2,015) 1,557 577 2,134Short term loans 7,850 197 8,047 – 8,047Current portion of long term loans 100 (100) – – –

Total current liabilities 57,000 7,537 64,537 6,364 70,901

Non-current liability:Long term loans 130 (130) – – –

Total liabilities 57,129 7,407 64,537 6,364 70,901

Net assets acquired / transferred 15,132 8,292 23,424 9,962 33,386

Less: amount paid (10,840) – (10,840)

Amount outstanding as at 30 June 2004 (Note 13) 12,584 9,962 22,546

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Note B:

This comprises pro forma adjustments on the following:

Pro forma Group


Year ended ended ended31 December 30 June 30 June

2003 2004 2003RMB’000 RMB’000 RMB’000

Income statement 59 (528) 14Depreciation – 392 – Others – 447 –

59 311 14

Note C:

For the purpose of preparation of the statement of cash flow for 2003, the balance sheet ofJiangsu Sunpower Petrochemical Engineering Co., Ltd as at 31 December 2002, as adjusted bypro forma adjustments to exclude assets and liabilities which were not transferred, has been used.See “Pro forma Statements of Cash Flow” in Section F of Compilation Report for details.

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E. NOTES TO PRO FORMA GROUP FINANCIAL INFORMATION

1. General

The Company is incorporated in Bermuda, under the Companies Act 1981 of Bermuda (“BermudaAct”), with its registered office at Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda andprincipal place of business at Room 301, Suning Universal Mansion, No.188, Guangzhou Road,Nanjing, China 210024.

The principal activity of the Company is that of investment holding.

The principal activities of its subsidiaries are described in Note 2 III below.

2. Basis of Preparation of Pro forma Financial Information

The pro forma Group financial information for the financial years ended 31 December 2001, 2002and 2003 (“FY 2001 to FY 2003”) and for the six months financial period ended 30 June 2004 (“FPJune 2004”) have been prepared for inclusion in the Prospectus in connection with the Invitation asdescribed in the Report.

The financial information in this report is expressed in Renminbi which is the measurementcurrency of the Company.

I. Restructuring Exercise

On 28 April 2004, the Company, Sunpower Group Ltd, was incorporated under the BermudaAct as an exempt company with limited liability with an authorised share capital ofUS$12,000 and initial issued capital of US$12,000 comprising 12,000 ordinary shares ofUS$1 each nil paid. On 23 July 2004, the Company increased its authorised share capital toUS$1,000,000 comprising of 1,000,000 ordinary shares of US$1 each. On 27 July 2004, theCompany increased its authorised share capital to US$8,000,000 comprising of 8,000,000ordinary shares of US$1 each. The principal activity of the Company is that of investmentholding.

The Company implemented a restructuring exercise (the “Restructuring Exercise”) inpreparation for its listing on the SGX-SESDAQ, as described below:

a) Drawdown and Conversion of Convertible Loan

i) Pursuant to the Founding Shareholders Convertible Loan Agreement dated 1June 2004, Guo Hong Xin, Li Lai Suo, Ma Ming, Allgreat Pacific Limited,Armour Asia Limited, Claremont Consultancy Limited and Trestle Asia Limitedadvanced an aggregate amount of US$300,000 to the Company. On 25 August2004, the loans of US$300,000 were converted into 300,000 ordinary shares ofUS$1.00 each, pursuant to which the 12,000 nil paid ordinary shares ofUS$1.00 each held by Guo Hong Xin were credited as fully paid-up, and GuoHong Xin, Li Lai Suo, Ma Ming, Allgreat Pacific Limited, Armour Asia Limited,Claremont Consultancy Limited and Trestle Asia Limited were allotted andissued 77,622, 80,730, 65,871, 15,678, 15,795, 16,029 and 16,275 ordinaryshares of US$1.00 each in the Company respectively. Trestle Asia Limited is aninvestment holding company wholly owned by Ms Jin Rong. As considerationfor her assistance to the Group in preparing for the Invitation, the Companyagreed to her subscription of 16,275 ordinary shares of US$1.00 each in theCompany at par value.

ii) Pursuant to the PRC Investor Convertible Loan Agreement dated 1 June 2004,Wong Hiu Kin advanced an amount of US$500,000 to the Company. On 4February 2005, the loan of US$500,000 was converted into 8,339 ordinaryshares of US$1.00 each, pursuant to which Wong Hiu Kin was allotted andissued 8,339 ordinary shares of US$1.00 each in the Company.

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iii) Pursuant to the Foreign Investors Convertible Loan Agreement dated 1 June2004, Innovus Capital Private Limited, Vertex Resources Limited, Chua KianPeng, Chau-Chan Sui Yung, Equity-link Asia Limited, Ng E-Ming Joyce, ChenJiong and Tan Lweng Ngoh advanced an aggregate amount of US$2,000,000to the Company. On 4 February 2005, the loans of US$2,000,000 wereconverted into an aggregate of 33,354 ordinary shares of US$1.00 each.

iv) Pursuant to the terms of the PRC Investor Convertible Loan Agreement andForeign Investors Convertible Loan Agreement, the Lenders agreed to converttheir respective loans by subscribing for new shares in our Company at a 40%discount to the preliminary issue price (“Preliminary IPO Price”) determined bythe Manager and the Company. In the event that the Issue Price differs from thePreliminary IPO Price, the parties have agreed to make post conversionadjustments by way of cash payments, such that the loans will be converted at40% discount to the Issue Price.

v) Pursuant to the terms of the PRC Investor Convertible Loan Agreement andForeign Investors Convertible Loan Agreement, (a) the Founding Shareholdershave granted the Lenders options (the “Put Options”) to require the FoundingShareholders to purchase the ordinary shares in the Company issued to theLenders pursuant to the conversion of the Convertible Loans (the “OptionShares”) at the cost of their investment, being the aggregate amount ofUS$2,500,000 (the “Option Share Price”); and (b) the Lenders have granted theFounding Shareholders options (the “Call Options”) to require the Lenders tosell the Option Shares to the Founding Shareholders at the Option Share Price.The Put Options and the Call Options shall lapse and cease to have any effectupon the successful listing and quotation of the Shares on the SGX-SESDAQ.

b) Acquisition of Jiangsu Sunpower Petrochemical Engineering Co., Ltd’s Undertakings(“Sunpower Undertakings”)

i) On 28 April 2004, the Company acquired the entire issued and paid-up capitalin Perimeter Pacific Limited, which is a limited liability company incorporated inthe British Virgin Islands on 22 August 2003 for a nominal consideration.

ii) On 16 April 2004, Perimeter Pacific Limited established a wholly-ownedsubsidiary, Jiangsu Sunpower Technology Co., Ltd, as a wholly foreign-ownedenterprise under the laws of the PRC with an initial registered capital of US$5,080,000 (equivalent to RMB 42,011,000).

iii) Pursuant to a sale and purchase agreement dated 18 April 2004 betweenJiangsu Sunpower Petrochemical Engineering Co., Ltd and Jiangsu SunpowerTechnology Co., Ltd and as amended by a supplemental agreement dated 27July 2004, Jiangsu Sunpower Technology Co., Ltd acquired Jiangsu SunpowerPetrochemical Engineering Co., Ltd’s business, assets and undertakingsrelating to the pressure vessels, waste gas and energy recovery system andpipe supports which were located in Nanjing (“Sunpower Undertakings”), for atotal cash consideration of RMB 15,132,375, based on the audited net bookvalue of the Sunpower Undertakings as at 31 December 2003. All rights andliabilities relating to the Sunpower Undertakings were acquired with effect from30 April 2004. The assets and liabilities not acquired by Jiangsu SunpowerTechnology Co., Ltd include assets and liabilities of Jiangsu SunpowerPetrochemical Engineering Co., Ltd relating to its sealing business which is adistributor for Klinger of Australia and its other non-operating assets andliabilities. Under the sale and purchase agreement, the parties have agreed thatJiangsu Sunpower Petrochemical Engineering Co., Ltd will be responsible forthe profit or loss of the operations of Sunpower Undertakings from 1 January2004 to 30 April 2004.

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Subsequently, further to a confirmation letter between Jiangsu SunpowerPetrochemical Engineering Co., Ltd and Jiangsu Sunpower Technology Co., Ltddated 11 September 2004, the parties confirmed that an aggregate amount of RMB 8,291,370 (comprising the profit accrued between 1 January 2004 and 30April 2004 and reimbursements for certain expenditure incurred by JiangsuSunpower Petrochemical Engineering Co., Ltd in the course of the operations)was to be paid by Jiangsu Sunpower Technology Co., Ltd to Jiangsu SunpowerPetrochemical Engineering Co., Ltd.

c) Acquisition of Jiangsu Shengnuo Heat Pipe Co., Ltd’s Undertakings (“ShengnuoUndertakings”)

i) On 28 April 2004, the Company acquired the entire issued and paid-up capitalin Sun Superior Holdings Ltd which is a limited liability company incorporated inthe British Virgin Islands on 13 April 2004 for a nominal consideration.

ii) On 18 June 2004, Sun Superior Holdings Ltd established a 64.5% ownedsubsidiary, Nanjing Shengnuo Heat Pipe Co., Ltd, as an equity joint ventureunder the laws of the PRC with an initial registered capital of US$1,330,000(equivalent to RMB 10,972,500).

iii) Pursuant to a sale and purchase agreement dated 12 June 2004 betweenJiangsu Shengnuo Heat Pipe Co., Ltd and Sun Superior Holdings Ltd, NanjingChemical University Science and Technology Group Co., Ltd, NanjingRongchuan Environmental Protection Engineering Co., Ltd and Nanjing RehanScience and Technology Co., Ltd (collectively signing on behalf of NanjingShengnuo Heat Pipe Co., Ltd as it was not established when the sale andpurchase agreement was signed) and as amended by a supplementalagreement dated 27 July 2004, Nanjing Shengnuo Heat Pipe Co., Ltd acquiredJiangsu Shengnuo Heat Pipe Co., Ltd’s business, assets and undertakingsrelating to the heat pipes and heat pipe exchangers which were located inNanjing (“Shengnuo Undertakings”), for a total cash consideration of RMB 9,961,741, based on the audited net book value of the ShengnuoUndertakings as at 30 June 2004. All rights and liabilities relating to theShengnuo Undertakings were acquired with effect from 30 June 2004. Theassets and liabilities not acquired by Nanjing Shengnuo Heat Pipe Co., Ltdinclude assets and liabilities of Jiangsu Shengnuo Heat Pipe Co., Ltd relating toits heat pipes and heat pipe exchangers contracts secured before 2 March2004 and other non-operating assets.

II. Basis of Preparation

(a) The pro forma financial information for FY 2001 to FY 2003 and FP June 2004 areprepared for illustrative purposes only. These are prepared in accordance with theaccounting policies of the pro forma Group as set out in Note 3 to pro forma Groupfinancial information. These are prepared based on assumptions that the pro formaGroup structure was in place as at 1 January 2001 and the pro forma Group structurehas been in existence throughout the period or since the respective dates ofincorporation of the companies in the pro forma Group.

The objective of the pro forma financial information of the Group is to show what thehistorical information might have been had the Group existed at an earlier date andhad the above pro forma Group structure has been in existence throughout the periodor since the respective dates of incorporation of the companies in the pro formaGroup. However, the pro forma financial information of the Group is not necessarilyindicative of the results of the operations or the related effects on the financial positionthat would have been attained had the abovementioned Group actually existed earlier.

The pro forma Group is set out in Note 2 III of this report.

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(b) The pro forma consolidated financial information for FY 2001 to FY 2003 are basedon:

(i) The audited financial statements of Jiangsu Sunpower PetrochemicalEngineering Co., Ltd (company level only) for the financial years ended 31December 2001, 2002 and 2003, prepared in accordance with SingaporeStatements of Accounting Standard for FY 2001 and FY 2002 and withSingapore Financial Reporting Standards for FY 2003; and

(ii) The unaudited management accounts of Perimeter Pacific Limited for thefinancial period from 22 August 2003 (date of incorporation) to 31 December2003.

(c) The pro forma consolidated financial information for FP June 2004 are based on:

i) The audited financial statements of the Company for the period from 28 April2004 (date of incorporation) to 30 June 2004, prepared under the SingaporeFinancial Reporting Standards;

ii) The audited profit and loss statement of Jiangsu Sunpower PetrochemicalEngineering Co., Ltd from 1 January 2004 to 30 April 2004, prepared underSingapore Financial Reporting Standards;

iii) The audited financial statements of Jiangsu Sunpower Technology Co., Ltd forthe period from 16 April 2004 (date of establishment) to 30 June 2004,prepared under the Singapore Financial Reporting Standards;

iv) Audited profit and loss statement of Jiangsu Shengnuo Heat Pipe Co., Ltd from2 March 2004 to 30 June 2004, prepared under Singapore Financial ReportingStandards;

v) The audited financial statements of Nanjing Shengnuo Heat Pipe Co., Ltd forthe period from 18 June 2004 (date of establishment) to 30 June 2004,prepared under the Singapore Financial Reporting Standards;

vi) The audited financial statements of Perimeter Pacific Limited for FP June 2004,prepared under the Singapore Financial Reporting Standards; and

vii) The audited financial statements of Sun Superior Holdings Ltd for the periodfrom 13 April 2004 (date of incorporation) to 30 June 2004, prepared under theSingapore Financial Reporting Standards.

(d) The auditors of the pro forma Group are described below:

i) The financial statements of Jiangsu Sunpower Petrochemical Engineering Co.,Ltd for each of the financial years ended 31 December 2001, 2002 and 2003,which were prepared under applicable accounting regulations in the PRC, wereaudited by Nanjing Dongxing Tax-Agent Office Co., Ltd, a certified publicaccountants in the PRC, for PRC tax reporting purposes.

ii) For the purpose of this report, Deloitte & Touche Singapore has performed anindependent audit on the financial statements of Jiangsu SunpowerPetrochemical Engineering Co., Ltd for each of the financial years ended 31December 2001, 2002 and 2003 and for the period from 1 January 2004 to 30April 2004.

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iii) For the purpose of this report, Deloitte & Touche Singapore has performed anindependent audit on the financial statements of Jiangsu Shengnuo Heat PipeCo., Ltd from 2 March 2004 to 30 June 2004.

iv) For the purpose of this report, Deloitte & Touche Singapore has performed anindependent audit on the financial statements of Jiangsu Sunpower TechnologyCo., Ltd for the period from 16 April 2004 (date of establishment) to 30 June2004 and the financial statements of Nanjing Shengnuo Heat Pipe Co., Ltd forthe period from 18 June 2004 (date of establishment) to 30 June 2004;

v) Deloitte & Touche Singapore has acted as auditors of Perimeter Pacific Limitedand Sun Superior Holdings Ltd from the period from their respective date ofincorporation to 30 June 2004; and

vi) Deloitte & Touche Singapore has acted as auditors of the Company for theperiod from 28 April 2004 (date of incorporation) to 30 June 2004.

(e) The auditors’ reports on the financial statements of the companies within the proforma Group for the financial years/period covered in these pro forma financialstatements were not subject to any qualification, except that the auditors’ report onthe financial statements of Jiangsu Shengnuo Heat Pipe Co., Ltd for the financialperiod from 2 March 2004 to 30 June 2004 was qualified as follows:

“FRS 34 Interim Financial Reporting requires the balance sheet as at 31 December2003 as well as income statement, statement of changes in equity and cash flowstatement for the corresponding period ended 30 June 2003 to be disclosed as thecomparative figures in the accompanying financial statements. As described in Note1(d) of the financial statements, such comparative information is not available.

The company has disclosed the balance sheet as at 2 March 2004 based on itsunaudited management accounts as comparative figures. Had the 2 March 2004balance sheet items been audited, further adjustments to these balance sheet itemsmay have been necessary.

In our opinion, except for the effects of such adjustments, if any, as might have beendetermined to be necessary had the March 2, 2004 balance sheet been audited, theaccompanying financial statements are properly drawn up in accordance with theprovisions of the Singapore Financial Reporting Standards, to give a true and fairview of the state of affairs of the company as at 30 June 2004 and of the results,changes in equity and cash flows, of the company for the financial period ended onthat date.”

Note 1(d) to the financial statements of Jiangsu Shengnuo Heat Pipe Co., Ltd is asfollows: “As Jiangsu Sunpower Petrochemical Engineering Co., Ltd only took overeffective control of the company only with effect from 2 March 2004, JiangsuSunpower Petrochemical Engineering Co., Ltd and the existing company’s staff areunable to locate the company’s management accounts prior to 2 March 2004. Hencethe accompanying financial statements are prepared for the financial period from 2March 2004 to 30 June 2004 only.”

In the view of the directors and management of the Company and the auditors, theabove qualification is not expected to have any material financial impact on the proforma financial information of the pro forma Group for the six months period ended 30June 2004.

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III. Details of pro forma Group

Upon completion of the Restructuring Exercise referred to the above, the Company has thefollowing subsidiaries:

Effective Placeequity of incorporation/

Subsidiaries interest operation Principal activities%

Held by Company

Perimeter Pacific Limited 100.0 British Virgin Islands Investment holding andtrading

Sun Superior Holdings Ltd 100.0 British Virgin Islands Investment holding

Held by subsidiaries

Jiangsu Sunpower 100.0 Nanjing, Manufacture and saleTechnology Co., Ltd People’s Republic of pressure vessels, and(Capital held by of China designing, manufacturingPerimeter Pacific Limited) and sale of special pipe

racks and hanger,provision of installation and commissioning of relevant projects andprovision of technical services and consultation

Nanjing Shengnuo 64.5 Nanjing, Manufacture and sale Heat Pipe Co., Ltd People’s Republic of heat pipes and heat (Capital held by of China pipe exchangers, Sun Superior Holdings Ltd) provision of installation

and commissioning ofrelevant projects andprovision of technical services and consultation

3. Summary of Significant Accounting Policies

The accounting policies which have been consistently adopted in preparing the pro forma financialinformation set out above, are as follows:

a) BASIS OF ACCOUNTING – The financial statements for the financial years/period ended 31December 2001, 2002 and 2003 and 30 June 2004 are prepared in accordance with thehistorical cost convention, and are drawn up in accordance with the Singapore Statementsof Accounting Standard for FY 2001 and FY 2002 and the Singapore Financial ReportingStandards for FY 2003 and FP June 2004.

The financial statements set out in this report have been prepared in Renminbi (“RMB”),since this is the measurement currency in which the majority of the pro forma Group’stransactions are denominated.

b) BASIS OF CONSOLIDATION – The unaudited pro forma financial information are preparedfor illustrative purposes only. These are prepared on the basis detailed in Note 2 above.

The consolidated financial information includes the financial statements of the Company andenterprises controlled by the Company (its subsidiaries) made up to the end of the financialyear. Control is achieved when the Company has the power to govern the financial andoperating policies of an investee enterprise so as to obtain benefits from its activities. Onacquisition, the assets and liabilities of the relevant subsidiaries are measured at their fairvalues at the date of acquisition. The interest of minority shareholders is stated at the

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minority’s proportion of the fair values of the assets and liabilities recognised. The results ofsubsidiaries acquired or disposed of during the year are included in the consolidated profitand loss statement from the effective date of acquisition or up to the effective date ofdisposal, as appropriate. Where necessary, adjustments are made to the financialstatements of the subsidiaries to bring the accounting policies used in line with those usedby other members of the group.

All significant intercompany transactions and balances within the pro forma Group areeliminated on consolidation.

In the Company’s financial statements, investment in subsidiaries is carried at cost less anyimpairment in net recoverable value that has been recognised in the profit and lossstatement.

c) GOODWILL – Goodwill arising on consolidation represents the excess of the cost ofacquisition over the fair value of the group’s share of net assets of the acquired subsidiariesat the date of acquisition. Goodwill is recognised as an asset and amortised over a periodof up to 20 years on a straight-line basis.

Negative goodwill represents the excess of the fair value of the group’s share of net assetsacquired over the cost of acquisition. Negative goodwill is presented as the same balancesheet classification as goodwill. To the extent that the negative goodwill relates toexpectations of future losses and expenses that can be reliably measured, but do notrepresent identifiable liabilities, the portion of negative goodwill is recognised in the profitand loss statement when the future losses and expenses are incurred. Any remainingnegative goodwill, not exceeding the fair values of the non-monetary assets acquired, isrecognised in the profit and loss statement over the remaining weighted average useful lifeof those assets. Negative goodwill in excess of the fair value of those assets is recognised inthe profit and loss statement immediately.

d) FOREIGN CURRENCY TRANSACTIONS – The books of the Company and the pro formaGroup are maintained in its measurement currency, namely Renminbi. Transactions inforeign currencies are recorded in Renminbi at the rates ruling at the date of thetransactions. At each balance sheet date, recorded monetary balances are denominated inforeign currencies are recorded at the rates ruling at the balance sheet date. All realised andunrealised exchange adjustment gains and losses are dealt with in the profit and lossstatement.

e) PROPERTY, PLANT AND EQUIPMENT – Property, plant and equipment are carried atcost, less accumulated depreciation and any impairment loss where the recoverable amountof the asset is estimated to be lower than its carrying amount.

Depreciation is charged so as to write off the cost of the assets over their estimated usefullives, using the straight-line method, as follows:

Land use rights - 2% to 3.33%Leasehold land and buildings - 5%Plant and machinery - 10%Furniture, fixtures and equipment - 20%Motor vehicles - 20%

Land use rights pertain to the payment for rights of the usage of land over 30 to 50 years.

No depreciation is provided on construction-in-progress.

Fully depreciated assets are retained in the financial statements until they are no longer inuse.

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f) INVENTORIES – Inventories are measured at the lower of cost (weighted average method)and net realisable value. Cost includes all costs of purchase, cost of conversion and othercosts incurred in bringing the inventories to their present location and condition. Netrealisable value represents the estimated selling price less all estimated costs to completionand costs to be incurred in marketing, selling and distribution.

Work-in-progress is stated at the lower of cost and net realisable value. Cost includesmaterials, direct labour, and appropriate allocation of production overheads.

g) INTANGIBLE ASSET – Trademark is stated at cost less amortisation. This is amortisedusing the straight-line method over its estimated useful lives of 10 years as more fullydescribed in Note 11. Where an indication of impairment exists, the carrying amount of anyintangible asset is assessed and written down immediately to its recoverable amount.

h) FINANCIAL ASSETS – The principal financial assets are cash, trade receivables and otherreceivables. Trade receivables and other receivables are stated at their nominal value asreduced by appropriate allowances for estimated irrecoverable amounts.

i) FINANCIAL LIABILITIES AND EQUITY – Financial liabilities and equity instruments areclassified according to the substance of the contractual arrangements entered into.

Significant financial liabilities include interest-bearing loans, convertible loans, tradepayables and other payables.

Interest-bearing loans are recorded at the proceeds received, net of direct issue costs.Finance charges, including premiums payable on settlement or redemption, are accountedfor on an accrual basis and are added to the carrying amount of the instrument to the extentthat they are not settled in the period in which they arise.

Trade payables and other payables are stated at their nominal value.

Equity instruments are recorded at the fair value of the consideration received, net of directissue costs.

j) LEASES – Leases are classified as finance leases whenever the terms of the lease transfersubstantially all the risks and rewards of ownership to the lessee. All other leases areclassified as operating leases.

Assets held under finance leases are recognised as assets of the pro forma Group at theirfair value at the date of acquisition. The corresponding liability to the lessor is included inthe balance sheet as a finance lease obligation. Finance costs, which represent thedifference between the total leasing commitments and the fair value of the assets acquired,are charged to the income statement over the term of the relevant lease using the effectiveinterest rate method.

Rentals payable under operating leases are charged to income on a straight-line basis overthe term of the relevant lease.

k) IMPAIRMENT OF ASSETS – At each balance sheet date, the pro forma Group reviews thecarrying amounts of its tangible and intangible assets to determine whether there is anyindication that those assets have suffered an impairment loss. If any such indication exists,the recoverable amount of the asset is estimated in order to determine the extent of theimpairment loss (if any). If the recoverable amount of an asset is estimated to be less thanits carrying amount, the carrying amount of the asset is reduced to its recoverable amount.Impairment losses are recognised as an expense immediately.

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

l) REVENUE RECOGNITION – Revenue from sale of goods is recognised when significantrisks and rewards of ownership are transferred to the buyer and the amount of revenue andthe costs of the transactions (including future costs) can be measured reliably.

Revenue from the rendering of services that are of a short-term duration is recognised whenthe services are completed.

m) INCOME TAX – Tax expense is determined on the basis of tax effect accounting, using theliability method, and it is applied to all significant temporary differences arising between thecarrying amount of assets and liabilities in the financial statements and the correspondingtax bases used in the computation of taxable profit, except that a debit balance for deferredtax is not carried forward unless there is a reasonable expectation of realisation.

Deferred tax is charged or credited to the profit and loss statement, except when it relates toitems charged or credited directly to equity, in which case the deferred tax is also dealt within equity. Deferred tax assets and liabilities are offset when they relate to income taxeslevied by the same tax authority.

n) RETIREMENT BENEFIT COSTS – Payments to defined contribution retirement benefitplans (including state-managed retirement benefit schemes) are charged as an expensewhen incurred.

o) BORROWING COSTS – Borrowing costs directly attributable to the acquisitions,construction or production of qualifying assets, which are assets that necessarily take asubstantial period of time to get ready for their intended use or sale, are added to the cost ofthose assets, until such time as the assets are substantially ready for their intended use orsale. Investment income earned on the temporary investment of specific borrowings pendingtheir expenditure on qualifying assets is deducted from the costs of those assets.

p) RESERVES – In accordance with the PRC Company Law and its Articles of Association,Jiangsu Sunpower Petrochemical Engineering Co., Ltd and Jiangsu Shengnuo Heat PipeCo., Ltd, as PRC domestic enterprises, are required to appropriate 10% and 5% to 10% oftheir profit after taxation as reported in its PRC statutory financial statements to the statutoryreserve fund and statutory enterprise expansion fund respectively.

Pursuant to relevant laws and regulations in the PRC and the Articles of Association,Jiangsu Sunpower Technology Co., Ltd and Nanjing Shengnuo Heat Pipe Co., Ltd arerequired to transfer 10% of their profit after taxation as reported in the PRC statutoryfinancial statements to the reserve fund until the balance reached 50% of their registeredcapital. The reserve fund can be used to make up losses incurred or to increase capital. Inaddition, the subsidiary is required to make appropriation to enterprise expansion fund.Subject to approval by relevant government authority, the enterprise expansion fund mayalso be used to increase capital. The appropriation to the expansion fund shall be approvedby the board of directors. In addition, the subsidiaries appropriate an additional 5% of itsprofit after taxation to the statutory reserve fund and statutory enterprise expansion fund.

q) PROVISIONS – Provisions are recognised when the Company and the pro forma Group hasa present obligation as a result of a past event where it is probable that it will result in anoutflow of economic benefits that can be reasonably estimated.

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r) GOVERNMENT GRANTS – Government grants relating to the purchase of property, plantand equipment are included in the balance sheet as deferred income by deducting the grantin arriving at the carrying amount of the assets. Government grants relating to expenditures,which are not capitalised, are credited to profit and loss statement to match the relatedexpenditure when incurred.

s) RESEARCH AND DEVELOPMENT COSTS – Research expenditure is recognised as anexpense as incurred. Costs incurred on development projects are recognised as intangibleassets only if all the following conditions are met:

an asset is created that can be identified (such as software and new processes);

it is probable that the asset created will generate future economic benefits; and

the development cost of the asset can be measured reliably.

Development costs that have been capitalised as intangible assets are amortised from thecommencement of the commercial production on a straight-line basis over the period of itsexpected benefits, which normally does not exceed 20 years. Other developmentexpenditures are recognised as expense as incurred. Development costs previouslyrecognised as an expense are not recognised as an asset in the subsequent period.

4. Financial Risks and Management

a) Interest Rate Risk

The pro forma Group is exposed to interest rate risk through the impact of rate changes oninterest bearing liabilities and assets. These exposures are managed partly by using naturalhedges that arise from offsetting interest rate sensitive assets and liabilities.

b) Credit Risk

The pro forma Group’s credit risk is primarily attributable to its trade and other receivables.The amounts presented in the balance sheet are net of allowances for doubtful receivables,if any, as estimated by the pro forma Group’s management based on prior experience andthe current economic environment.

The credit risk on liquid funds is limited because the counterparties are banks with goodcredit ratings.

c) Significant Concentration of Credit Risk

Concentration of credit risk exist when changes in economic, industry or geographic factorssimilarly affect Groups of counterparties whose aggregate credit exposure is significant inrelation to the Group’s total credit exposure.

The pro forma Group’s credit exposure is concentrated mainly in the People’s Republic ofChina. There is no significant concentration of credit risk with any customer or group ofcustomers except that the top 5 balances accounted for RMB 17,715,000 or 35% of the totalgross trade receivables as at 30 June 2004.

d) Foreign Currency Risk

The pro forma Group’s exposure to foreign currency risk is minimal as substantially all itstransactions are in Renminbi.

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e) Liquidity Risk

The Group is exposed to minimal liquidity risk as a substantial portion of its financial assetsand financial liabilities are due within one year and can finance its operations from existingshareholders’ funds.

f) Fair Value of Financial Assets and Financial Liabilities

The management is of the view that the fair value of the financial assets and financialliabilities approximates their carrying values.

5. Related Party Transactions

a) Related parties are entities with common direct or indirect shareholders and/or directors.Parties are considered to be related if one party has the ability to control the other party orexercise significant influence over the other party in making financial and operating decision.

Some of the transactions and arrangements are with related parties and the effect of theseon the basis determined between the parties are reflected in these financial statements.The balance are unsecured, interest-free and without fixed repayment terms unless statedotherwise.

b) Significant related party transactions:



2001 2002 2003 2004 2003 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Transfer of net assets:Purchase of Sunpower Undertakings – – – 15,132 –

Additional transfer of Jiangsu Sunpower Petrochemical Engineering Co., Ltd’s net assets – – – 8,292 –

Purchase of Shengnuo Undertakings – – – 9,962 –

Sale of goods to Jiangsu Shengnuo Heat Pipe Co., Ltd – – (1,225) – –

Purchase of goods from Nanjing Zhi Yuan Electronic Science Co., Ltd – 154 – – –

Purchase of goods from NanjingUniversity of Technology – – – 659 –

Rental of premises from NanjingUniversity of Technology – – – 45 –

Reimbursement of operating expenses with subsidiaries of Jiangsu Sunpower Petrochemical Engineering Co., Ltd 300 832 219 – 110

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c) Related party balances:

Pro forma Group


2003 2004 2003 RMB’000 RMB’000 RMB’000

Trade receivables:

Jiangsu Shengnuo Heat Pipe Co., Ltd 235 788 – Jiangsu Sunpower Petrochemical Engineering Co., Ltd – 28 –

235 816 –

Other receivables:

Nanjing University of Technology – 226 – Wuhan Zhongshengyuan Energy Environmental Protection Project Co., Ltd – 100 –

– 326 –

Trade payables:

Jiangsu Shengnuo Heat Pipe Co., Ltd 5,086 – 40Nanjing Zhi Yuan Electronic Science Co., Ltd 154 – 154Nanjing University of Technology – 290 –

5,240 290 194

Other payables:

Jiangsu Sunpower Petrochemical Engineering Co., Ltd - Acquisition of net assets – 12,584 – - Others – 157 –

Jiangsu Shengnuo Heat Pipe Co., Ltd- Acquisition of net assets – 9,962 –

Nanjing Zhongshengyuan Machinery andElectrical Equipment Co., Ltd – – 1,450

– 22,703 1,450

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6. Trade Receivables

Pro forma Group


2003 2004 2003 RMB’000 RMB’000 RMB’000

Outside parties 36,855 49,458 17,783Less: Allowance for doubtful debts (1,011) (981) (873)

35,844 48,477 16,910Related parties (Note 5) 235 816 –

Net 36,079 49,293 16,910

Movement in the above allowances:

Balance at beginning of year/period 873 1,011 873Utilised – (30) – Charge to profit and loss 138 – –

Balance at end of year/period 1,011 981 873

7. Other Receivables and Prepayments

Pro forma Group


2003 2004 2003 RMB’000 RMB’000 RMB’000

Advance payment for purchases:Outside parties 3,793 6,348 2,288Related parties (Note 5) – 326 –

Recoverables 1,438 – 1,438Staff and other loans 1,168 1,049 1,131Initial public offering expenses – 2,230 –Prepayments 121 435 224Deposits 228 104 302Others 38 239 100

Total 6,786 10,731 5,483Less: Allowance for doubtful other receivables (852) (852) (841)

Net 5,934 9,879 4,642


Balance at beginning of year/period 841 852 841Charge to profit and loss 11 – –

Balance at end of year/period 852 852 841

The staff and other loans are non-trade in nature, unsecured, interest-free and without fixed termsof repayment.

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8. Inventories

Pro forma Group


2003 2004 2003 RMB’000 RMB’000 RMB’000

At cost:

Raw materials 2,209 1,862 1,347Work-in-progress 17,418 13,973 15,494Finished goods 5,074 2,263 3,334

24,701 18,098 20,175

9. Investment In Subsidiaries

Company


2003 2004 2003 RMB’000 RMB’000 RMB’000

Unquoted equity shares, at cost – – –

Details of the subsidiaries as at 30 June 2004 are as follows:

Effective PlaceCost of equity of incorporation/

Name of subsidiaries investment interest operation Principal activitiesRMB’000 %

Held by Company

Perimeter Pacific Limited (a) 100.0 British Virgin Islands Investment holding andtrading

Sun Superior Holdings Ltd (a) 100.0 British Virgin Islands Investment holding

Held by subsidiaries

Jiangsu Sunpower 4,966(b) 100.0 Nanjing, Manufacture and saleTechnology Co., Ltd People’s Republic of pressure valves, and(Capital held by of China designing, manufacturingPerimeter Pacific Limited) and sale of special pipe

racks and hanger, provision of installation and commissioning of relevant projects andprovision of technical services and consultation

Nanjing Shengnuo (c) 64.5 Nanjing, Manufacture and sale ofHeat Pipe Co., Ltd People’s Republic heat pipes and heat pipe(Capital held by of China exchangers, provision ofSun Superior Holdings Ltd) installation and

commissioning ofrelevant projects andprovision of technical services and consultation

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Note on cost:

(a) Cost of investment amounted to US$1.00 (equivalent to RMB 8.27).

(b) Cost of investment held by Perimeter Pacific Limited in Jiangsu Sunpower Technology Co.,Ltd represented capital application monies paid amounting to US$600,000 (equivalent to RMB 4,966,000). The registered capital of this subsidiary is US$5,080,000. The pro formaGroup is committed to pay the balance of US$4,480,000 (equivalent to RMB 37,068,000) ascapital injection in this subsidiary.

(c) The registered capital of Nanjing Shengnuo Heat Pipe Co., Ltd is US$1,330,000. As the proforma Group’s equity interest in this subsidiary is 64.5%, the pro forma Group is committedto pay US$857,850 (equivalent to RMB 7,097,850) as capital injection into this subsidiary.

Note on auditors for period ended 30 June 2004:

The above subsidiaries are audited by Deloitte & Touche, Singapore for consolidation purposes.

10. Property, Plant and Equipment

Leasehold Furniture,Land-use land and Plant and fixtures and Motor Construction-

rights buildings machinery equipment vehicles in-progress TotalRMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Cost:

At 1 January 2003 400 4,533 2,855 1,251 1,781 60 10,880

Additions – – 1,646 184 110 1,238 3,178Transfer – 1,298 – – – (1,298) –

At 31 December 2003 400 5,831 4,501 1,435 1,891 – 14,058

Additions – 938 833 228 170 290 2,459Transfer from

related party – – – 124 696 – 820Reclassification 1,940 (2,301) 104 282 (25) – – Disposals – – – – (281) – (281)

At 30 June 2004 2,340 4,468 5,438 2,069 2,451 290 17,056

Accumulated depreciation:

At 1 January 2003 40 615 683 527 722 – 2,587

Depreciation 40 155 335 282 311 – 1,123

At 31 December 2003 80 770 1,018 809 1,033 – 3,710

Depreciation 32 132 281 198 161 – 804Adjustments (93) (268) (39) (379) 387 – (392)Disposals – – – – (235) – (235)

At 30 June 2004 19 634 1,260 628 1,346 – 3,887

Net book value:

At 31 December 2003 320 5,061 3,483 626 858 – 10,348

At 30 June 2004 2,321 3,834 4,178 1,441 1,105 290 13,169

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rights buildings machinery equipment vehicles in-progress TotalRMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

FP June 2003(unaudited)

Cost:

At 1 January 2003 400 4,533 2,855 1,251 1,781 60 10,880

Additions – – 714 218 – 35 967

At 30 June 2003 400 4,533 3,569 1,469 1,781 95 11,847


At 1 January 2003 40 615 683 527 722 – 2,587

Depreciation 20 77 205 136 188 – 626

At 30 June 2003 60 692 888 663 910 – 3,213

Net book value:

At 30 June 2003 340 3,841 2,681 806 871 95 8,634

11. Intangible Asset

Pro forma Group


2003 2004 2003 RMB’000 RMB’000 RMB’000

Cost – 3,220 – Less: Impairment – (167) – Less: Accumulated amortisation – (129) –

Net book value – 2,924 –

Movement in the impairment:

Charge to profit and loss and balance at end of year/period – 167 –

Movement in the accumulated amortisation:

Charge to profit and loss and balance at end of year/period – 129 –

This relates to the trademark “SHENGNUO”, which was acquired by Jiangsu Shengnuo Heat PipeCo., Ltd for RMB 2,942,000. This trademark was subsequently transferred to Nanjing ShengnuoHeat Pipe Co., Ltd as part of the Shengnuo Undertakings acquired. The trademark has beenregistered with the relevant authority of the People’s Republic of China on 7 April 1995 and iseffective for a period of 10 years till 6 April 2005.

On 2 December 2004, the authority has approved the renewal of the trademark for another 10years to 6 April 2015.

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12. Trade Payables

Pro forma Group


2003 2004 2003 RMB’000 RMB’000 RMB’000

Outside parties 15,517 20,914 9,238Related parties (Note 5) 5,240 290 194Customer advances 26,257 22,020 12,970

47,014 43,224 22,402

13. Other Payables

Pro forma Group


2003 2004 2003 RMB’000 RMB’000 RMB’000

Related parties (Note 5):Acquisition of assets – 22,546 – Non-trade – 157 1,450

Accrual for late costs on contracts 2,029 6,269 8,878Accruals 924 4,102 1,989Due to directors – 360 – Accrual for interest and finders’ fees – 80 – Others 619 668 920

3,572 34,182 13,237

The amount due to directors is non-trade in nature, unsecured, interest-free and without fixedterms of repayment.

14. Term loans

Pro forma Group


2003 2004 2003 RMB’000 RMB’000 RMB’000

Short term loans

Financial institution – Note (a) 1,850 850 3,000Loan 1 – Note (b) 2,000 6,000 – Loan 2 – Note (b) 4,000 – –

7,850 6,850 3,000

Long term loans

Loan 3 – Note (c) 180 – 211Loan 4 – Note (c) 50 – 69

230 – 280Less: current portion (100) – (100)

Non-current portion 130 – 180

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For 31 December 2003:

(a) The short term bank loans payable to a financial institution bear interest ranging from 5.43%to 6.64% per annum. The loans are secured by buildings and land use rights with a carryingvalue of RMB 1,961,000 as at 31 December 2003.

(b) The short term loans 1 and 2 are payable to a bank, bear interest at 4.2% per annum andare guaranteed by a third party.

(c) The long term loans 3 and 4 are payable to a bank and are repayable in monthlyinstalments. The loans bear interest at 6.03% per annum and are secured by the motorvehicles with carrying value of RMB 492,000.

For 30 June 2004:

(a) The short-term bank loan payable to a financial institution bears interest at 6.64% perannum. The loan is secured by leasehold buildings with a carrying value of RMB 935,000.

(b) Short term loan payable to a bank bears an interest at 4.2% per annum and is supported bya guarantee issued by guarantor company for which the pro forma Group has paid aguarantee fee of RMB 110,000.

15. Convertible Loans

Pro forma Group


2003 2004 2003 RMB’000 RMB’000 RMB’000

Convertible loans payable to:Founding Shareholders - US$300,000 (Note a) – 2,482 – PRC investor - US$415,000 (Note b) – 3,408 – Foreign investors - US$200,000 (Note c) – 1,655 –

Total – 7,545 –

a) Convertible Loans Payable To Founding Shareholders

(i) On 1 June 2004, the Company entered into a Founding Shareholders ConvertibleLoan Agreement with Guo Hong Xin, Li Lai Suo, Ma Ming, Allgreat Pacific Limited,Armour Asia Limited, Claremont Consultancy Limited and Trestle Asia Limited(collectively the “Founding Shareholders”) whereby the Founding Shareholdersagreed to advance an aggregate of US$300,000 to the Company. The ConvertibleLoans payable to the Founding Shareholders are unsecured.

As at 30 June 2004, the Founding Shareholders have fully advanced the agreedamount of US$300,000 (equivalent to RMB 2,482,200) to the Company.

(ii) The Convertible Loans are convertible into new fully paid ordinary shares of US$1.00each (“Conversion Shares”) in the capital of the Company upon receipt by theCompany of all necessary consents from the Bermuda Monetary Authority in relationto the issue of the Conversion Shares to the Founding Shareholders.

(iii) The conversion ratio is based on the 1:1 ratio such that 288,000 new ordinary sharesof US$1.00 each will be issued, and the 12,000 nil paid ordinary shares of US$1.00each held by Guo Hong Xin will be credited as fully paid-up, upon the full conversionof the US$300,000 Convertible Loans Payable by the Founding Shareholders.

(iv) The Convertible Loans payable to the Founding Shareholders are interest-free.

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b) Convertible Loan Payable to PRC Investor

(i) On 1 June 2004, the Company entered into a Convertible Loan Agreement with WongHiu Kin (the “PRC Investor”) whereby the PRC Investor agreed to advanceUS$500,000 to the Company for the purpose of implementing the RestructuringExercise of the Group.

As at 30 June 2004, the PRC Investor has advanced US$415,000 (equivalent to RMB 3,408,000) out of the agreed US$500,000 to the Company. Subsequent to 30June 2004, the PRC Investor advanced the remaining US$85,000 to the Company.

(ii) Following the conversion of the Convertible Loans by the Founding Shareholders asdescribed in Note 15(a) above, each of the Founding Shareholders is required toexecute a security in favour of the PRC Investor for 20% of the new ordinary sharesallotted and issued by the Company to the each of the Founding Shareholders.

(iii) The Convertible Loans are convertible into new fully paid ordinary shares of US$1.00each (“Conversion Shares”) in the capital of the Company provided:

the Company has received the Eligibility-to-List letter from the SGX-ST for theListing and the Company has determined the public offer price of the Shares forits initial public offering; and

the Company has received the written approval from the Bermuda MonetaryAuthority for the subscription of the Conversion Shares by the PRC Investorupon an exercise of its conversion rights.

(iv) The number of Conversion Shares to be issued upon conversion is equivalent to theConvertible Loan Amount divided by the Conversion Price based on the US$:S$exchange rate on the date of the conversion. The Conversion Price is defined as 60%of the IPO share price upon its initial public offering, or the par value of the shares,whichever is higher.

(v) In the event that the listing of the Company occurs on or before 30 June 2005 (the“Maturity Date”), the Convertible Loans payable to the PRC Investor shall not bearany interest.

(vi) In the event that the listing of the Company does not occur by the Maturity Date, theConvertible Loans will bear interest at 5% per annum from the drawdown date to thedate of actual of repayment.

(vii) In the event that the listing of the Company does not occur by the Maturity Date, theConvertible Loans and the interest will be repayable in six equal monthly installmentsfrom 31 July 2005 to 31 December 2005.

(viii) As at 30 June 2004, the Company has accrued interest payable amounting toUS$1,730 (equivalent to RMB 14,314) on the Convertible Loans payable to the PRCInvestor.

c) Convertible Loans Payable to Foreign Investors

(i) On 1 June 2004, the Company entered into a Convertible Loan Agreement with 8foreign investors (collectively the “Foreign Investors”) whereby the Foreign Investorsagreed to advance an aggregate of US$2,000,000 over three tranches to theCompany for the purpose of implementing the Restructuring Exercise of the pro formaGroup. On 7 July 2004, the Company, the Foreign Investors and the FoundingShareholders entered into a supplemental deed to amend the Convertible LoanAgreement.

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(ii) The First Trance of US$200,000 will be made available to the Company on 7 businessdays from the date of the Agreement.

The Second Tranche of US$1,100,000 will be made available to the Company uponfulfillment of all the conditions known as the Second Tranche Drawdown Conditionsand on the date falling 7 business days from the date of the Company’s written notice(issued within 3 business days from the fulfillment of all the Second TrancheDrawdown Conditions) to draw down on the Second Tranche.

The Third Tranche of US$700,000 will be made available to the Company uponfulfillment of all the conditions known as the Third Tranche Drawdown Conditions andon the date falling 7 business days from the date of the Company’s written notice(issued within 3 business days from the fulfillment of all the Third Tranche DrawdownConditions) to draw down on the Third Tranche.

As at 30 June 2004, the Foreign Investors have advanced the First Tranche ofUS$200,000 (equivalent to RMB 1,655,000) to the Company.

On 13 July 2004 and 7 September 2004, the Foreign Investors advanced the SecondTranche of US$1,100,000 and the Third Tranche of US$700,000 respectively to theCompany.

(iii) Following the conversion of the Convertible Loans by the Founding Shareholders asdescribed in Note 15(a) above, each of the Founder is required to execute a securityin favour of the Foreign Investors for 80% of all the Shares held by, or on behalf of,each of the Founding Shareholders at any time, including the Shares to be allottedand issued to each Founder pursuant to their conversion of the FoundingShareholders’ Convertible Loan.

(iv) The Convertible Loans are not convertible into new fully paid ordinary shares ofUS$1.00 each (“Conversion Shares”) in the capital of the Company unless and until:

the Company has received the Eligibility-to-List letter from the SGX-ST for theListing;

the Company and its Listing Manager has determined an estimate of theSingapore public offer price of the Shares for its initial public offering(“Preliminary IPO Price”); and

the receipt of the written approval from the Bermuda Monetary Authority for thesubscription of the Conversion Shares by each of the Foreign Investors uponan exercise of its conversion rights.

(v) The number of Conversion Shares to be issued upon conversion is equivalent to theConvertible Loan Amount divided by the Conversion Price based on the US$:S$exchange rate on the date of the conversion. The Conversion Price is defined as 60%of the IPO share price upon its initial public offering, or the par value of the shares,whichever is higher.

(vi) In the event that the Conversion Notice is issued by the Foreign Investors on or before30 June 2005 (the “Maturity Date”), the Convertible Loans payable to the ForeignInvestors shall not bear any interest.

(vii) In the event that the Conversion Notice is not issued by the Foreign Investors by theMaturity Date, the Convertible Loans will bear interest in arrears on the outstandingloans from the Third Tranche Drawdown Date at 5% per annum.

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(viii) In the event that the Conversion Notice is not issued by the Foreign Investors by theMaturity Date, the Convertible Loans and the interest will be repayable in six equalmonthly installments from 31 July 2005 to 31 December 2005.

(ix) The Company shall pay a Finder Fee of US$80,000 or 4% of the Loans in 3 separatepayments to the arranger of the Foreign Investors Convertible Loan payable at 10%,55% and 35% (or US$8,000, US$44,000 and US$28,000) within 7 business daysfrom the First Tranche Drawdown, Second Tranche Drawdown and Third TrancheDrawdown respectively. In the event that the Listing shall not occurred by the MaturityDate, the arranger shall return the amounts of finder fee paid as referred to above infull to the Company within 3 business days after the Company has met its repaymentobligations described in Note 15[c][viii] above.

(x) The Founding Shareholders granted a Put Option to the Foreign Investors jointly theright to require the Founding Shareholders to purchase all of the Conversion Sharesfrom the Foreign Investors for a consideration of US$2,000,000, subject to certainconditions being met. The option period is from the period commencing from theMaturity Date and expiring 30 days thereafter.

(xi) The Foreign Investors granted a Call Option to the Founding Shareholders the right torequire the Foreign Investors to sell all of the Conversion Shares to the FoundingShareholders for a consideration of US$2,000,000, subject to certain conditions beingmet. The option period is from the period commencing from the Maturity Date andexpiring 30 days thereafter. The exercise of the Put Option shall preclude theexercise of the Call Option and vice versa.

16. Issued Capital

Pro forma Group


2003 2004 2003 RMB’000 RMB’000 RMB’000

Authorised issued and paid up:12,000 ordinary shares of US$1 each, nil paid N/A – N/A

Pro forma capital 10,000 – 10,000

Subsequent to 30 June 2004, the Company increased its issued and paid up capital toUS$2,800,000 as follows:

a) The issue of 288,000 ordinary shares of US$1.00 each and the crediting as fully paid-up ofthe 12,000 ordinary shares of US$1.00 each which had been issued as Nil paid held by GuoHong Xin, pursuant to the conversion of the loans under the Founding ShareholdersConvertible Loan Agreement;

b) The issue of 8,339 and 33,354 ordinary shares of US$1.00 each pursuant to the conversionunder the PRC Investor Convertible Loan Agreement and the Foreign Investors ConvertibleLoan Agreement respectively.; and

c) The bonus issue of 245,830,700 ordinary shares of US$0.01 each by capitalisingUS$2,458,307 out of the share premium account.

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17. General Reserve

Pro forma Group


2003 2004 2003 RMB’000 RMB’000 RMB’000

Reserve fund 993 2,228 341Enterprise expansion fund 497 1,114 170

1,490 3,342 511

18. Revenue

Pro forma Group



2001 2002 2003 2004 2003RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Sales of goods:Heat pipes and heat pipe exchangers 11,488 13,061 37,351 36,886 10,404Pipe supports 14,665 17,666 18,226 22,629 11,456Pressure vessels 17,896 29,691 37,473 36,057 20,030

44,049 60,418 93,050 95,572 41,890Waste gas and energy recovery systems 374 3,964 3,726 4,920 2,857

Total 44,423 64,382 96,776 100,492 44,747

19. Other Operating Income

Pro forma Group




Interest income 10 20 15 12 7Government grant – – 1,000 430 – Gain on disposal of property, plant and equipment – – – 24 –

Others – – 7 14 5

Total 10 20 1,022 480 12

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20. Administrative Expenses

Pro forma Group




Amortisation of intangible asset – – – 129 – Bad debts allowance 773 575 149 – – Courses 52 85 112 78 51Defined contribution plans - 25 62 36 23Depreciation 463 613 643 413 323Entertainment 211 243 219 241 79Impairment of intangible asset – – – 167 – Insurance 113 201 184 169 60Low cost consumables 44 24 181 197 59Office expenses 418 398 662 1,097 345Rental – – – 180 – Repair and maintenance 76 110 116 104 41Salaries and wages 570 1,118 1,739 1,172 717Staff benefits 90 184 248 182 99Stamp duty and other taxes 74 31 33 39 20Telecommunication – – 83 59 5Travelling and transportation 410 588 851 870 292Utilities 20 29 79 32 24Others 37 69 237 – 7

Total 3,351 4,293 5,598 5,165 2,145

21. Profit (Loss) From Operations

This item includes the following charges:

Pro forma Group




Staff costs 2,539 3,402 4,448 2,723 2,162Depreciation 636 930 1,123 804 626Directors’ remuneration 77 223 209 148 122Cost of defined contribution plans – 25 62 36 23

The number of employees at the end of FY2001, FY2002, FY2003, FP June 2004 and FP June2003 are 177, 309, 361, 300 and 350 respectively.

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22. Finance Cost

Pro forma Group




Interest expense on:Term loans 62 96 253 166 106Convertible loans – – – 14 –

Total 62 96 253 180 106

23. Income Tax Expense

Pro forma Group




Current 511 467 2,209 185 994Under provision in prior year – – – 126 –

511 467 2,209 311 994

a) The charge for the year can be reconciled to the profit per pro forma Group results asfollows:

Income tax expense (benefits) at applicable rate @ 33% (277) 37 4,720 7,616 2,182

Effect of tax concession – – (2,585) (7,569) (1,228)Benefits not recognised:tax losses 200 113 – 18 – other timing differences 255 190 49 – –

Non-allowable items 333 127 25 120 40Under provision in prior year – – – 126 –

511 467 2,209 311 994

Effective tax rate NA NA 15.4% 1.3% 15.0%

b) Jiangsu Sunpower Petrochemical Engineering Co., Ltd

In 2003, pursuant to the relevant laws and regulations in PRC, Jiangsu SunpowerPetrochemical Engineering Co., Ltd being an advanced hi-tech industry, applied andobtained a tax concession of 15%. In 2001 and 2002, Jiangsu Sunpower PetrochemicalEngineering Co., Ltd did not enjoy any tax incentives and was taxed at the statutory tax rateof 33%.

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c) Jiangsu Sunpower Technology Co., Ltd

Jiangsu Sunpower Technology Co., Ltd is a production enterprise located in Nanjing. Inaccordance with the tax legislations applicable to foreign investment enterprises, JiangsuSunpower Technology Co., Ltd is entitled to exemptions from PRC income tax for the twoyears commencing from the first profit-making year of operations, after offsetting allunexpired tax losses carried forward from the previous years, and thereafter, entitled to a50% relief from PRC income tax for the next three years. 2004 is the first year of the taxexemption period.

d) Jiangsu Shengnuo Heat Pipe Co., Ltd

Jiangsu Shengnuo Heat Pipe Co., Ltd is taxed at the statutory tax rate of 33%.

e) Nanjing Shengnuo Heat Pipe Co., Ltd

Nanjing Shengnuo Heat Pipe Co., Ltd is a production enterprise located in Nanjing. Inaccordance with the tax legislations applicable to foreign investment enterprises, NanjingShengnuo Heat Pipe Co., Ltd is entitled to exemptions from PRC income tax for the twoyears commencing from their first profit-making year of operations, after offsetting allunexpired tax losses carried forward from the previous years, and thereafter, entitled to a50% relief from PRC income tax for the next three years. 2004 is the first tax exemptionperiod.

24. Operating Lease Commitments

Pro forma Group


2003 2004 2003 RMB’000 RMB’000 RMB’000

Minimum lease payments under operating leases forrental of land and buildings and plant and machinery 16 225 9

At the balance sheet date, the commitments in respect of operating leases for rental of land andbuildings and plant and machinery with a term of more than one year were as follows:

Pro forma Group


2003 2004 2003 RMB’000 RMB’000 RMB’000

Within one year 10 754 10In the second to fifth years inclusive 20 91 27After five years – – –

25. Capital Expenditure Commitments

Pro forma Group


2003 2004 2003 RMB’000 RMB’000 RMB’000

Contracted but not provided for acquisition of property, plant and equipment 8,013 5,554 2,211

Capital injection into subsidiaries – 44,166 –

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26. Segment Information

a) Primary reporting format – Business segments

The pro forma Group’s operations are organised into the following operating divisionsnamely:

(1) Heat pipes and heat pipe exchangers;(2) Pipe supports;(3) Pressure vessels; and (4) Waste gas and energy recovery systems.

These divisions are the basis on which the pro forma Group reports its primary businesssegment information.

Pro forma Statement of Group Results

Heat pipes Waste gasand and energy

heat pipe Pipe Pressure recoveryexchangers supports vessels systems Total


31 December 2001

REVENUE 11,488 14,665 17,896 374 44,423

RESULTSegment result 123 (38) (904) 32 (787)

Interest income 10

Loss from operations (777)Finance cost (62)

Loss before income tax (839)Income tax expense (511)

Loss after income tax (1,350)

OTHER INFORMATIONCapital expenditure 1,984 646 345 1 2,976Depreciation expense 181 300 155 – 636

31 December 2002

REVENUE 13,061 17,666 29,691 3,964 64,382

RESULTSegment result (1,656) 3,527 (1,472) (212) 187

Interest income 20

Profit from operations 207Finance cost (96)

Profit before income tax 111Income tax expense (467)

Loss after income tax (356)

OTHER INFORMATIONCapital expenditure 1,158 395 1,222 23 2,798Depreciation expense 223 343 351 13 930

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31 December 2003

REVENUE 37,351 18,226 37,473 3,726 96,776

RESULTSegment result 5,554 4,728 3,946 314 14,542

Interest income 15

Profit from operations 14,557Finance cost (253)

Profit before income tax 14,304Income tax expense (2,209)

Profit after income tax 12,095

OTHER INFORMATIONCapital expenditure 2,104 62 1,008 4 3,178Depreciation expense 426 298 379 20 1,123

30 June 2004

REVENUE 36,886 22,629 36,057 4,920 100,492

RESULTSegment result 4,078 9,557 7,297 2,315 23,247

Interest income 12


Profit before income tax 23,079Income tax expense (311)

Profit after income tax 22,768Minority interest 19

Net profit 22,787

OTHER INFORMATIONCapital expenditure 1,295 912 205 47 2,459Depreciation expense 211 465 104 24 804

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30 June 2003 (unaudited)

REVENUE 10,404 11,456 20,030 2,857 44,747

RESULTSegment result (204) 4,940 1,326 648 6,710

Interest income 7


Profit before income tax 6,611Income tax expense (994)


OTHER INFORMATIONCapital expenditure 734 83 147 3 967Depreciation expense 180 215 223 8 626

Pro forma Statement of Net Assets

31 December 2003

Assets:Segment assets 37,228 10,527 26,003 3,304 77,062

Liabilities:Segment liabilities 25,176 8,334 24,695 461 58,666

30 June 2004

Assets:Segment assets 56,684 27,948 20,811 6,218 111,661Unallocated assets 2,399

Total assets 114,060

Liabilities:Segment liabilities 48,831 14,372 16,530 2,279 82,012Unallocated liabilities 9,789

Total liabilities 91,801

30 June 2003 (unaudited)

Assets:Segment assets 21,997 9,473 17,954 937 50,361

Liabilities:Segment liabilities 13,930 7,703 16,177 1,109 38,919

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b) Secondary reporting format – Geographical segment

Analysis of the pro forma Group’s revenue and results and the pro forma Group’s carryingamount of segment assets and additions to property, plant and equipment by geographicalarea in which the assets are located has not been presented as the pro forma Group’soperations are situated in the PRC in which its assets and customers are located andrevenue was derived principally therefrom. Accordingly, no geographical segments werepresented.

27. Dividends

No dividend has been paid, or declared or recommended by any company in the pro forma Groupfor the financial years ended 31 December 2001, 2002 and 2003, and the six months periodended 30 June 2004.

28. Audited Financial Statements

No audited financial statements of the Company and its subsidiaries have been prepared for anyperiod subsequent to 30 June 2004.

The pro forma financial information of the Group for the financial period ended 30 June 2003 wasprepared based on the unaudited management accounts and was presented for the purpose ofcomparison only.

29. Subsequent Events

a) Pursuant to a written resolution dated 23 July 2004, the shareholders of the Companyapproved an increase in the authorised share capital of the Company from US$12,000divided into 12,000 ordinary shares of US$1.00 each to US$1,000,000 divided into1,000,000 ordinary shares of US$1.00 each; and

b) Pursuant to written resolutions dated 27 July 2004, the shareholders of the Companyapproved, inter alia, the following:

(i) an increase in the authorised share capital of the Company from US$1,000,000divided into 1,000,000 ordinary shares of US$1.00 each to US$8,000,000 divided into8,000,000 ordinary shares of US$1.00 each; and

(ii) the allotment and issue of 288,000 ordinary shares of US$1.00 each and the creditingas fully paid-up of the 12,000 ordinary shares of US$1.00 each which had beenissued as nil paid held by Guo Hong Xin, pursuant to the conversion of the loansunder the Founding Shareholders Convertible Loan Agreement (the “FoundingShareholders’ Conversion”).

(iii) the allotment and issue of 41,693 ordinary shares of US$1.00 each pursuant to theconversion of the loans under the PRC Investor Convertible Loan Agreement and theForeign Investors Convertible Loan Agreement (the “Investors’ Conversion”).

c) Pursuant to written resolutions dated 2 February 2005, the shareholders of the Companyapproved inter alia, the following:

(i) the sub-division of every one ordinary share of US$1.00 each in the authorised andissued share capital of the Company into 100 ordinary shares of US$0.01 each(“Share Split”);

(ii) the capitalisation of US$2,458,307 out of our share premium account by way of abonus issue of 245,830,700 ordinary shares of US$0.01 each fully paid to theshareholders of our Company (the “Bonus Issue”);

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(iii) the adoption of a new set of Bye-laws for the Company;

(iv) the issue and allotment of New Shares. The New Shares, when issued and fully paid-up, will rank pari passu in all respects with the existing issued and fully paid-upShares;

(v) the adoption of the Employee Share Option Scheme (“ESOS”), and that authority begiven to the Directors to allot and issue Shares upon the exercise of options grantedunder the ESOS;

(vi) that authority be given to the Directors to (i) allot and issue shares in the Company;and (ii) issue convertible securities and any shares in the Company pursuant to theconvertible securities, (whether by way of rights, bonus or otherwise) at any time andupon such terms and conditions and for such purposes and to such persons as theDirectors shall in their absolute discretion deem fit, provided that the aggregatenumber of shares and convertible securities to be issued pursuant to such authorityshall not exceed 50 per cent. of the post-Invitation issued share capital of theCompany and that the aggregate number of shares and convertible securities to beissued other than on a pro-rata basis to the then existing shareholders of theCompany shall not exceed 20 per cent. of the post-Invitation issued share capital ofthe Company. Unless revoked or varied by the Company in general meeting, suchauthority shall continue in full force until the conclusion of the next Annual GeneralMeeting of the Company or the date by which the next Annual General Meeting isrequired by law or by our Articles to be held, whichever is earlier, except that theDirectors shall be authorised to allot and issue new shares pursuant to the convertiblesecurities notwithstanding that such authority has ceased.

For the purposes of this resolution and pursuant to Rules 806(3) and 806(4) of theListing Manual of the SGX-ST, “post-Invitation issued share capital” shall mean theenlarged issued and paid-up share capital of the Company after the Invitation, afteradjusting for any subsequent consolidation or sub-division of shares.

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F. STATEMENT OF ADJUSTMENTS

Profit and Loss Statements

The following adjustments have been made in arriving at the pro forma Group’s Profit and LossStatements for the financial years ended 31 December 2001, 2002 and 2003 and the six monthsperiod ended 30 June 2004.

Pro forma Adjustments

Per JiangsuSunpower Sealing

Petrochemical materials PerEngineering Bank loans business pro forma

FY2001 Co., Ltd not transferred not transferred Group RMB’000 RMB’000 RMB’000 RMB’000

{Note 1} {Note 1(b)} {Note 1(c)}

Revenue 45,149 – (726) 44,423

Cost of sales (35,572) – 380 (35,192)

Gross profit 9,577 – (346) 9,231

Other operating income 10 – – 10

Administrative expenses (3,428) – 77 (3,351)

Research expenses (627) – – (627)

Selling and distribution expenses (5,751) – 37 (5,714)

Other operating expenses (326) – – (326)

Loss from operations (545) – (232) (777)

Finance costs (62) – – (62)

Loss before income tax (607) – (232) (839)

Income tax expense (511) – – (511)

Loss after income tax (1,118) – (232) (1,350)

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Per JiangsuSunpower Sealing

Petrochemical materials PerEngineering Bank loans business pro forma

FY2002 Co., Ltd not transferred not transferred Group RMB’000 RMB’000 RMB’000 RMB’000

{Note 1} {Note 1(b)} {Note 1(c)}

Revenue 65,298 – (916) 64,382

Cost of sales (54,073) – 927 (53,146)

Gross profit 11,225 – 11 11,236

Other operating income 20 – – 20


Research expenses (1,249) – – (1,249)



Profit from operations (247) – 454 207

Finance costs (96) – – (96)

Loss before income tax (343) – 454 111

Income tax expense (467) – – (467)

Loss after income tax (810) – 454 (356)

FY2003

Revenue 97,704 – (928) 96,776

Cost of sales (69,618) – 726 (68,892)

Gross profit 28,086 – (202) 27,884

Other operating income 1,022 – – 1,022


Research expenses (2,117) – – (2,117)



Profit from operations 14,629 – (72) 14,557

Finance costs (266) 13 – (253)

Profit before income tax 14,363 13 (72) 14,304

Income tax expense (2,209) – – (2,209)

Profit after income tax 12,154 13 (72) 12,095

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Fourmonths

from Period from 1 January 2004March to or date of incorporation

Four months ended 30 April 2004 June 2004 to 30 June 2004

Per adjustedPer Jiangsu Pro forma JiangsuSunpower adjustment Sunpower Jiangsu Jiangsu Nanjing Company

Petrochemical on bank Petrochemical Shengnuo Sunpower Shengnuo and other Other PerEngineering loans not Engineering Heat Pipe Technology Heat Pipe non-PRC consolidation pro forma

FP June 2004 Co., Ltd transferred Co., Ltd Co., Ltd Co., Ltd Co., Ltd subsidiaries adjustments GroupRMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

{Note 2} {Note 1(c)} {Note 3} {Note 4} {Note 5} {Note 6} {Note 7}

Profit (Loss) from operations 1,389 – 1,389 (19) 22,364 – (8) (467) 23,259

Finance costs (188) 141 (47) (36) (83) – (14) – (180)

Profit (Loss) before income tax 1,201 141 1,342 (55) 22,281 – (22) (467) 23,079

Income tax expense (311) – (311) – – – – – (311)

Profit (Loss) after tax 890 141 1,031 (55) 22,281 – (22) (467) 22,768

Minority interest – – – – – – – 19 19

Profit attributable to group 890 141 1,031 (55) 22,281 – (22) (448) 22,787

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Pro forma Statements of Cash Flow

The pro forma Group Balance Sheet as at 31 December 2002 represents the audited balancesheet of Jiangsu Sunpower Petrochemical Engineering Co., Ltd.

For the purpose of preparation of the pro forma Group statement of cash flow for the financial yearended 31 December 2003, the following adjustments have been made in arriving at the pro formaGroup Consolidated Balance Sheet as at 31 December 2002 to exclude the assets and liabilitieswhich were not transferred by Jiangsu Sunpower Petrochemical Engineering Co., Ltd as at 31December 2003 to the pro forma Group under the Restructuring Exercise:


Per pro formabalance sheet

2002 of Jiangsu Balance sheet Property, plant, Other Sunpower

of Jiangsu equipment and non-operating PetrochemicalSunpower construction- assets and Engineering

Petrochemical in-progress liabilities Co., Ltd forEngineering not not cash flow

Co., Ltd transferred transferred purposeRMB’000 RMB’000 RMB’000 RMB’000

{Note 8} {Note 1a}

As at 31 December 2002

ASSETS

Current assets:Cash and bank balances 3,393 – 6,152 9,545*Trade receivables 14,234 – (96) 14,138Other receivables and prepayments 9,837 – (4,628) 5,209Inventories 26,148 – (290) 25,858

Total current assets 53,612 – 1,138 54,750

Non-current assets:Property, plant and equipment 8,552 (259) – 8,293Investment in subsidiaries 1,600 – (1,600) – Advance payment for investment in subsidiary 275 – (275) –

Total non-current assets 10,427 (259) (1,875) 8,293

Total assets 64,039 (259) (737) 63,043

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Per pro formabalance sheet

2002 of Jiangsu Balance sheet Property, plant, Other Sunpower

of Jiangsu equipment and non-operating PetrochemicalSunpower construction- assets and Engineering

Petrochemical in-progress liabilities Co., Ltd forEngineering not not cash flow

Co., Ltd transferred transferred purposeRMB’000 RMB’000 RMB’000 RMB’000

{Note 8} {Note 1a}

LIABILITIES ANDSHAREHOLDERS’ EQUITY

Current liabilities:Trade payables 40,039 – (9) 40,030Other payables 16,430 – (1,139) 15,291Short term loans 1,150 – – 1,150Current portion of long term bank loans 100 – – 100Due from related party – Restructuring – – 431 431Income tax payable 279 – (279) –

Total current liabilities 57,998 – (996) 57,002

Non-current liability:Long-term bank loans 230 – – 230

Shareholders’ equity:Issued capital 10,000 – – 10,000Accumulated losses (4,189) – – (4,189)

Total shareholders’ equity 5,811 – – 5,811

Total liabilities and shareholders’ equity 64,039 – (996) 63,043

* As at 31 December 2002, the net liabilities not transferred is assumed to be RMB 431,000 equivalent to the netliabilities not transferred as at 31 December 2003. The cash and bank balances as at 31 December 2002 aretherefore the residual balance.

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NOTES TO STATEMENT OF ADJUSTMENTS

1. Profit and Loss Statements of Jiangsu Sunpower Petrochemical Engineering Co., Ltd

This represents the audited profit and loss statements of Jiangsu Sunpower PetrochemicalEngineering Co., Ltd (company level only) for the years ended 31 December 2001, 2002 and 2003(“FY 2001, FY 2002 and FY 2003”).

The following pro forma adjustments are made to the profit and loss statement of JiangsuSunpower Petrochemical Engineering Co., Ltd to reflect the profit and loss effect of certain non-operating assets and liabilities not transferred on 31 December 2003.

(a) Properties not transferred

As disclosed in Note 9 below, certain land use rights and buildings will be transferred outfrom Jiangsu Sunpower Petrochemical Engineering Co., Ltd to Nanjing Shengnuo Heat PipeCo., Ltd via Jiangsu Shengnuo Heat Pipe Co., Ltd. Therefore, these assets would stillremain within the pro forma Group. As such, no pro forma adjustments are made to theprofit and loss statements relating to the land use rights and buildings.

Certain equipment with a net book value of RMB 372,000 as at 31 December 2003 were nottransferred as Jiangsu Sunpower Technology Co., Ltd intends to acquire similar newequipment. No pro forma adjustment are made to the profit and loss statement relating todepreciation as Jiangsu Sunpower Technology Co., Ltd will continue to depreciate such newequipment after acquisition.

The construction-in-progress were not transferred over and will remain with JiangsuSunpower Petrochemical Engineering Co., Ltd. No pro forma adjustment is required as therewas no related depreciation expense on these construction-in-progress.

(b) Bank loans not transferred

FY 2001 FY 2002 FY 2003 FP JUNE 2004RMB’000 RMB’000 RMB’000 RMB’000

Interest expense 62 96 266 307Less: Interest on bank loans transferred (62) (96) (253) (166)

Increase in pro forma profit before income tax – – 13 141

Increase in pro forma income tax expense – – – –

Increase in pro forma profit after income tax – – 13 141

Certain short term bank loans of Jiangsu Sunpower Petrochemical Engineering Co., Ltdwere not transferred over. In the pro forma Group profit and loss statements, pro formaadjustments have been made to reverse the interest expense on bank loans. These loanswere mainly utilised to finance the construction-in-progress that were not transferred over.The FY 2003 adjustment is based on 5.4% on RMB 1,150,000 loan and 4.2% on RMB3,000,000 loan not transferred for the period from 6 November 2003 to 31 December 2003.The FP 2004 adjustment is based on interest on loans of RMB 1,150,000, RMB 3,000,000,RMB 4,000,000 and RMB 3,500,000 not transferred with interest ranging from 4.2% to6.64%.

(c) Sealing materials business not transferred

This relates to the sealing materials business which are not transferred over.

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2. Jiangsu Sunpower Petrochemical Engineering Co., Ltd – Four months ended April 2004

This represents the audited profit and loss statement relating to Jiangsu Sunpower PetrochemicalEngineering Co., Ltd for the four month period from 1 January 2004 to 30 April 2004 (prior to theincorporation of Jiangsu Sunpower Technology Co., Ltd).

3. Jiangsu Shengnuo Heat Pipe Co., Ltd – Months of March to June 2004

This represents the audited profit and loss statement relating to Jiangsu Shengnuo Heat Pipe Co.,Ltd from 2 March 2004 (effective date of acquisition by Jiangsu Sunpower PetrochemicalEngineering Co., Ltd through cash and injection of plant and equipment).

4. Jiangsu Sunpower Technology Co., Ltd

This represents the audited profit and loss statement of Jiangsu Sunpower Technology Co., Ltdfrom 16 April 2004 (date of establishment) to 30 June 2004.

5. Nanjing Shengnuo Heat Pipe Co., Ltd

This represents the audited profit and loss statement of Nanjing Shengnuo Heat Pipe Co., Ltd from18 June 2004 (date of establishment) to 30 June 2004.

6. Company and Other Non-PRC Companies

This represents the audited profit and loss statements of the Company, Perimeter Pacific Limitedand Sun Superior Holdings Ltd from their dates of incorporation of 28 April 2004, 22 August 2003and 13 April 2004 respectively to 30 June 2004.

7. Other consolidation adjustments – FP June 2004

This comprises the following:

FP June 2004RMB’000

a) Elimination of the gain on disposal of property, plant and equipment as recordedby Jiangsu Sunpower Petrochemical Engineering Co., Ltd on transfer of such assets to Jiangsu Shengnuo Heat Pipe Co., Ltd in April 2004 (510)

b) Loss on sealing material business which is not transferred 43

c) Adjustment for 35.5% minority interest share of loss of Jiangsu Shengnuo Heat 19Pipe Co., Ltd

Total (448)

8. Balance Sheet of Jiangsu Sunpower Petrochemical Engineering Co., Ltd

This represents the audited balance sheet of Jiangsu Sunpower Petrochemical Engineering Co.,Ltd (company level only) as at 31 December 2002 and 2003.

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9. Assets/Liabilities Not Transferred

Pursuant to a sale and purchase agreement dated 18 April 2004 between Jiangsu SunpowerPetrochemical Engineering Co., Ltd and Jiangsu Sunpower Technology Co., Ltd and as amendedby a supplemental agreement dated 27 July 2004, Jiangsu Sunpower Technology Co., Ltdacquired Jiangsu Sunpower Petrochemical Engineering Co., Ltd’s business, assets andundertakings relating to the pressure vessels, waste gas and energy recovery systems and pipesupports which were located in Nanjing (“Sunpower Undertakings”), for a total consideration ofRMB 15,132,375 based on the audited net book value of the Sunpower Undertakings as at 31December 2003.

The assets and liabilities as at 31 December 2003 transferred as part of the Sale and PurchaseAgreement are as follows:

Jiangsu Sunpower Petrochemical Engineering Co., Ltd (company level only)

As at 31 December 2003

Audited Assets andbalance sheet liabilities Assets

of Jiangsu taken over taken overSunpower by Jiangsu by Nanjing

Petrochemical Assets and Sunpower ShengnuoEngineering liabilities not Technology Heat Pipe

Co., Ltd taken over Co., Ltd Co., Ltd RMB’000 RMB’000 RMB’000 RMB’000

ASSETS

Current assets:Cash and bank balances 3,908 3,908 – – Trade receivables 37,082 1,003 36,079 – Other receivables and prepayments 9,354 3,420 5,934 – Inventories 22,937 (1,764) 24,701 –

Total current assets 73,281 6,567 66,714 –

Non-current assets:Property, plant and equipment 16,484 6,136 5,548 4,800Investment in subsidiaries 2,275 2,275 – – Advance payment for investment

in subsidiary 4,536 4,536 – – Long term investment 30 30 – –

Total non-current assets 23,325 12,977 5,548 4,800

Total assets 96,606 19,544 72,262 4,800

LIABILITIES

Current liabilities:Trade payables 47,124 110 45,478 1,536Other payables 17,247 13,675 3,572 – Short term loans 12,000 4,150 7,850 – Current portion of long term bank loans 100 – 100 – Income tax payable 2,040 2,040 – –

Total current liabilities 78,511 19,975 57,000 1,536

Non-current liability:Long-term bank loans 130 – 130 –

Total liabilities 78,641 19,975 57,130 1,536

Net assets (liabilities) 17,965 (431) 15,132 3,264

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APPENDIX B

TAXATION

The following is a discussion of certain tax matters arising under the current tax laws in Singapore andBermuda and is not intended to be and does not constitute legal or tax advice. While this discussion isconsidered to be a correct interpretation of existing laws in force as at the Latest Practicable Date, noassurance can be given that courts or fiscal authorities responsible for the administration of such lawswill agree with this interpretation or that changes in such laws will not occur.

The discussion is limited to a general description of certain tax consequences in Singapore andBermuda with respect to ownership of the Shares by Singapore investors, and does not purport to be acomprehensive nor exhaustive description of all of the tax considerations that may be relevant to adecision to purchase the Shares. Prospective investors should consult their tax advisers regardingSingapore and Bermuda tax and other tax consequences of owning and disposing the Shares. It isemphasised that neither our Company, our Directors nor any other persons involved in the Invitationaccepts responsibility for any tax effects or liabilities resulting from the subscription for, purchase, holdingor disposal of the Shares. Dividends payable by our Company on the Shares will be declared and paid toshareholders in Singapore dollars.

BERMUDA TAXATION

The Company is incorporated in Bermuda. Dividends remitted to shareholders resident outside Bermudawill not be subject to Bermuda withholding tax. There are no tax treaties between Bermuda andSingapore. Further details are set out under “Appendix D – Summary of Bermuda Company Law” of thisProspectus.

SINGAPORE TAXATION

Income Tax

General

Singapore corporate taxpayers are subject to Singapore income tax on income accruing in or derivedfrom Singapore and on foreign income received or deemed received in Singapore.

However, foreign income in the form of branch profits, dividends and service income received or deemedreceived in Singapore by a resident corporate taxpayer are exempt from tax in Singapore provided thefollowing conditions are met:

(i) such income is subject to tax of a similar character to income tax under the law of the jurisdictionfrom which such income is received;

(ii) at the time the income is received in Singapore, the highest rate of tax of a similar character toincome tax in the jurisdiction from which the income is received is at least 15%; and

(iii) the Singapore Comptroller of Income Tax is satisfied that the tax exemption would be beneficial tothe recipient of the foreign income.

In addition to the above, foreign dividends received in Singapore on or after 30 July 2004 will also beexempt from Singapore tax even if no tax was paid in the foreign country due to the availability of taxincentives given in that foreign country provided that this foreign company paying such dividends hassubstantive business activities in that foreign country.

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A company is regarded as a tax resident in Singapore if the control and management of its business isexercised in Singapore. An individual is regarded as a tax resident in Singapore in a year of assessmentif, in the preceding calendar year, he was physically present in Singapore or exercised an employment inSingapore (other than as a director of a company) for 183 days or more, or if he ordinarily resides inSingapore.

The corporate tax rate in Singapore is 20% from the Year of Assessment 2005. In addition, 75% of up tothe first S$10,000 of a company’s normal chargeable income, and 50% of up to the next S$90,000 isexempt from corporate tax. The remaining chargeable income (after the partial tax exemption) will betaxed at 20%.

With effect from Year of Assessment 2005, all foreign-sourced personal income received or deemedreceived in Singapore by a Singapore tax resident individual taxpayers (except where such income isreceived through a partnership) will be exempt from tax in Singapore. Certain investment income derivedfrom Singapore sources by individuals on or after 1 January 2004 will also be exempt from tax.

Singapore tax-resident individuals are subject to tax based on progressive rates, currently ranging from0% to 22% (from Year of Assessment 2003 onwards). The Minister for Finance has, in the 2005 BudgetStatement, announced that the top individual marginal tax rate will be 21% and 20% for years ofassessment 2006 and 2007 respectively.

Non-Singapore resident individuals are generally subject to tax at a rate equivalent to the prevailingcorporate tax rate.

Dividend Distributions

As the Company was incorporated in Bermuda and will be a non-tax resident in Singapore, dividendspaid by the Company would be considered as sourced outside Singapore.

As dividends on the Shares will be paid through the CDP, foreign-sourced dividends received or deemedreceived in Singapore by an individual investor is exempt from Singapore income tax.

Dividends on the Shares received or deemed received by corporate investors in Singapore will be liableto Singapore tax as they are received through the CDP and the conditions for the exemption of foreignincome (as stated above) are unlikely to be met.

Dividends on the Shares received or deemed received in Singapore through the CDP by corporateinvestors who are not tax resident in Singapore and without business presence in Singapore willgenerally not be subject to tax in Singapore. However, where foreign companies have activities inSingapore, dividends received in Singapore through the CDP by such investors may be subject to tax inSingapore if the dividends are in respect of investments made through their Singapore-based activities orthe dividends are otherwise connected with their Singapore-based activities.

Gains on Disposal of the Shares

Singapore currently does not impose tax on capital gains. However, there are no specific laws orregulations which deal with the characterisation of gains. In general, gains may be construed to be of anincome nature and subject to Singapore income tax if they arise from activities which the SingaporeComptroller of Income Tax regards as the carrying on of a trade or business in Singapore.

Thus, any profits from the disposal of the Shares if regarded as capital profits are not taxable inSingapore unless the seller is regarded by Singapore Comptroller of Income Tax as having derived theseprofits from the carrying on of a trade or business in Singapore, in which case, the disposal profits wouldbe taxable as trading profits.

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Stamp Duty

There is no stamp duty payable in Singapore on the subscription of the Shares.

Stamp duty is payable in Singapore on an instrument of transfer of the Shares at the rate of S$0.20 forevery S$100 or any part thereof of the consideration for the Shares.

The purchaser is liable for stamp duty, unless there is an agreement to the contrary. No stamp duty ispayable if no instrument of transfer is executed or the instrument of transfer is executed outsideSingapore. However, stamp duty may be payable if the instrument of transfer which is executed outsideSingapore is received in Singapore.

The above stamp duty is not applicable to electronic transfers of the Shares through the CDP since suchtransfer does not require an instrument of transfer to be executed.

Estate Duty

Singapore estate duty is imposed on the value of immovable property situated in Singapore and onmovable property, wherever it may be, owned by individuals who are domiciled in Singapore, subject tospecific exemption limits.

Singapore estate duty is imposed on the value of certain immovable property situated in Singaporeowned by individuals who at the time of his death was not domiciled in Singapore, i.e. all Singaporemovable assets of such persons will be exempt from Singapore estate duty.

As the Company maintains a share register in Singapore as well as in Bermuda, the Shares areconsidered movable property situated in Singapore. Accordingly, any Shares held by an individual who isdomiciled in Singapore would be subject to Singapore estate duty upon the individual’s death.

Singapore estate duty is payable to the extent that the value of the Shares aggregated with any otherdutiable assets exceeds S$600,000. Unless other exemptions apply to the other assets, for example, theseparate exemption limit for residential properties, any excess beyond S$600,000 will be taxed asfollows:-

First S$12,000,000 5%Excess over S$12,000,000 10%

Individuals, whether or not domiciled in Singapore should consult their own tax advisors regarding theSingapore estate duty consequences of their ownership of the Shares.

Goods and Services Tax (“GST”)

The sale of the Shares by a GST-registered investor belonging in Singapore through an SGX-ST memberor to another person belonging in Singapore is an exempt supply not subject to GST.

Where the Shares are sold by an GST-registered investor in the course of or furtherance of a businesscarried on by him to a person belonging outside Singapore, the sale of the Shares is generally a taxablesupply subject to GST at zero-rate. Any GST incurred by a GST-registered investor in the making of thissupply in the course or furtherance of a business carried on by him may be recovered from theSingapore Comptroller of GST.

Charges on brokerage, handling and clearing services rendered by a GST-registered person to aninvestor belonging in Singapore in connection with the investor’s purchase, sale or holding of the Shareswill be subject to GST at the current rate of 5%. Similar services rendered to an investor belongingoutside Singapore are subject to GST at zero-rate.

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APPENDIX C

SUMMARY OF THE CONSTITUTION OF THE COMPANY

This appendix provides information about certain provisions of our Memorandum of Association and Bye-Laws and Bermuda company law. The description below is only a summary and is qualified in its entirelyby reference to our Memorandum of Association and Bye-Laws and the Bermuda Act.

The instruments that constitute and define the Company are the Memorandum of Association and theBye-Laws of the Company.

1. MEMORANDUM OF ASSOCIATION AND REGISTRATION NUMBER

The registration number with which the Company was incorporated is 35230. Our Memorandum ofAssociation states that the liability of shareholders of our Company is limited to the amount, if any,for the time being unpaid on the shares respectively held by them and that our Company is anexempted company as defined in the Bermuda Act. Our Memorandum of Association also sets outthe objects for which our Company was formed, including acting as a holding and investmentcompany, and the powers of our Company, including the powers set out in the First Schedule tothe Bermuda Act. As an exempted company, our Company will be carrying on business outsideBermuda from a place of business within Bermuda.

2. DIRECTORS

(a) Ability of interested directors to vote

Subject to the Bermuda Act and any further disclosure required thereby, if a general noticeto our Board of Directors is given by a Director or officer declaring that he is a director orofficer or has an interest in a person and is to be regarded as interested in any transactionor arrangement made with that person, it shall be a sufficient declaration of interest inrelation to any transaction or arrangement so made. Our Directors shall not vote in respectof any contract, proposed contract or arrangement in which he has a personal materialinterest, although he may be counted in the quorum present at the meeting.

(b) Remuneration

Fees payable to no-executive Directors shall be a fixed sum (not being a commission on or apercentage of profits or turnover of the Company) as shall from time to time be determinedby the Company in general meeting. Fees payable to Directors shall not be increased exceptat a general meeting convened by a notice specifying the intention to propose suchincrease.

The Board may grant special remuneration to any Director who, being called upon, shallperform any special or extra services to or at the request of the Company. Such specialremuneration may be made payable to such Director in addition to or in substitution for hisordinary remuneration as a Director, as the Board may determine.

The remuneration of a Managing Director, Joint Managing Director, Deputy ManagingDirector or an Executive Director of our Company or a Director appointed to any other officein the management of our Company may from time to time be fixed by our Board ofDirectors and with such other benefits (including pension and/or gratuity and/or otherbenefits on retirement) and allowances as our Board of Directors may from time to timedecide. Such remuneration shall be in addition to his ordinary remuneration as a Director ofour Company.

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We are required to obtain shareholders’ approval for any payments to our Directors of anysum by way of compensation for loss of office or as consideration for or in connection withhis retirement from office (not being a payment to which our Directors are contractuallyentitled).

(c) Borrowing

Our Board of Directors may, at its discretion, exercise all the powers of our Company toraise or borrow or to secure the payment of any sum or sums of money for the purposes ofour Company and to mortgage or charge our undertaking, property and uncalled capital orany part thereof.

(d) Retirement Age Limit

There is no retirement age limit for Directors.

(e) Shareholding Qualification

There is no shareholding qualification for Directors in the Bye-Laws of the Company.

3. SHARE RIGHTS AND RESTRICTIONS

Our Company currently has one class of shares, namely, ordinary shares. Under the Bermuda Act,only persons who are registered on our register of members are recognised as our shareholders.Shareholders who are named as depositors in the depository register maintained by CDP will notbe recognised as shareholders under Bermuda law and will hold their shares and exercise theirrights through CDP.

(a) Dividends and distribution

We may, by ordinary resolution, declare dividends at a general meeting, but we may not paydividends in excess of the amount recommended by our Board of Directors. All dividends wedeclare must be paid out of our profits, which would generally comprise retained earnings,or pursuant to Section 40(2)(a) of the Bermuda Act, which permits the application of theshare premium attributable to our issued shares to the payment of dividends in the form ofshares. Our Board of Directors may also declare an interim dividend without the approval ofour shareholders. All dividends are paid pro rata among the shareholders in proportion tothe amount paid up on each shareholder’s ordinary shares, unless the rights attaching to anissue of any share provide otherwise. All dividends or bonuses unclaimed for one year afterhaving been declared may be invested or otherwise made use of by our Board of Directorsfor the benefit of our Company until claimed and our Company shall not be constituted atrustee in respect thereof. All dividends or bonuses unclaimed for six years after havingbeen declared may be forfeited by our Board of Directors and shall revert to our Company.

Our Board of Directors may retain any dividends or other moneys payable on or in respectof a share upon which our Company has a lien, and may apply the same in or towardssatisfaction of the debts, liabilities or engagements in respect of which the lien exists. OurBoard of Directors may also deduct from any dividend or bonus payable to any shareholderall sums of money (if any) presently payable by him to our Company on account of calls,instalments or otherwise.

(b) Voting rights

A shareholder is entitled to attend, speak and vote at any general meeting in person and ashareholder who is the holder of two or more shares may appoint not more than two proxiesto attend on the same occasion. Notwithstanding the foregoing provision, CDP may appointmore than two proxies or a corporate representative to attend and vote at the same generalmeeting. A proxy need not be a shareholder.

The Bye-Laws do not provide for cumulative voting for entire shareholders and directors.

4. CHANGE IN CAPITAL

Under the Bermuda Act, changes in the capital structure of our Company (for example, anincrease, a consolidation or a sub-division of our share capital) require shareholder approval atgeneral meetings which requires a minimum period of 14 days with resolutions being passed by asimple majority. However, we are required to obtain our shareholders’ consent by way of a specialresolution for any reduction of our share capital, redemption reserve, fund or any share premiumaccount or other undistributable reserve, subject to the conditions prescribed by law.

The Bye-Laws provide a distinction between an “ordinary resolution” and a “special resolution”, adistinction which is not made in the Bermuda Act. A resolution shall be an “ordinary resolution”when it has been passed by a simple majority of the votes cast by our shareholders at a generalmeeting held in accordance with these presents and of which not less than 14 days’ notice hasbeen duly given. A resolution shall be a “special resolution” when it has been passed by a majorityof 3/4 of the votes cast by our shareholders at a general meeting of which not less than 21 days’notice, specifying (without prejudice to the power contained in these presents to amend the same)the intention to propose the resolution as a Special Resolution, has been duly given.

5. VARIATION OF RIGHTS OF EXISTING SHARES OR CLASSES OF SHARES

Subject to the Bermuda Act, if at any time our share capital is divided into different classes ofshares, all or any of the special rights attached to any class (unless otherwise provided for by theterms of issue of the shares of that class) may, subject to the provisions of the Bermuda Act, bevaried or abrogated either with the consent in writing of the holders of not less than three-fourthsin nominal value of the issued shares of that class or with the sanction of a special resolutionpassed at a separate general meeting of the holders of the shares of that class. To every suchseparate general meeting the provisions of these Bye-Laws relating to general meetings shallmutatis mutandis apply, but so that the necessary quorum shall be not less than two personsholding or representing by proxy or by corporate representative one-third in nominal value of theissued shares of that class, and that any holder of shares of the class present in person or byproxy or by duly authorised corporate representative may demand a poll. This provisions will alsoapply to the variation or abrogation of the special rights attached to the shares of any class as ifeach group of shares of the class differently treated formed a separate class the rights whereofare to be varied or abrogated.

The relevant Bye-Law does not impose more significant conditions than the Bermuda Act in thisregard.

6. LIMITATIONS ON SHAREHOLDERS REGARDED AS NON-RESIDENTS OF BERMUDA

There are no limitations on the rights of our shareholders who are regarded as non-residents ofBermuda to hold or vote their shares. As the Company has been designated by the BermudaMonetary Authority as non-resident of Bermuda for exchange control purposes, the Company isfree to acquire, hold and sell foreign currency and securities without restriction.

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APPENDIX D

SUMMARY OF BERMUDA COMPANY LAW

The Company is incorporated in Bermuda and therefore, operates subject to Bermuda law. Set out belowis a summary of certain provisions of Bermuda company law, which does not purport to contain allapplicable qualifications and exemptions and does not purport to be a complete review of all matters ofBermuda company law or a comparison of provisions that may differ from the laws of other jurisdictions,with which interested parties may be more familiar.

(i) Share capital

The Bermuda Act provides for the giving of financial assistance by a company for the acquisition ofits own or its holding company’s shares in specific circumstances.

The Bermuda Act provides that where a company issues shares at a premium whether for cash orotherwise, a sum equal to the aggregate amount or value of the premium on those shares shall betransferred to an account, to be called “the share premium account” and the provisions of theBermuda Act relating to a reduction of share capital shall, except as provided in section 40 of theBermuda Act, apply as if the share premium account were paid up share capital of the company.An exception is made to this rule in the case of an exchange of shares where the excess value ofthe shares acquired over the nominal value of the shares being issued may be credited to acontributed surplus account of the issuing company. Contributed surplus is a North Americanconcept recognised under the generally accepted accounting principles of the Canadian Institute ofChartered Accountants which accounting principles are applied in Bermuda.

The Bermuda Act permits a company to issue preference shares and under certain circumstancesto convert those preference shares into redeemable shares.

(ii) Alteration of share capital

A company may if authorised by a general meeting of the shareholders of the company and by itsbye-laws, alter the conditions of its memorandum of association to increase its share capital, divideits shares into several classes and attach thereto respectively any preferential, deferred, qualifiedor special rights, privileges or conditions, consolidate and divide all or any of its share capital intoshares of a larger amount than is fixed by the memorandum of association, make provision for theissue and allotment of shares which do not carry any voting rights, cancel shares which have notbeen taken or agreed to be taken by any person, diminish the amount of its share capital by theamount of the shares so cancelled and change the currency denomination of its share capital. Withthe exception of an increase in capital, cancellation of shares and redenomination of currency ofcapital, there are no filing requirements for any of the above-mentioned alterations.

Furthermore, a company may, if authorised by a general meeting of the shareholders, reduce itsshare capital. There are certain requirements, including a requirement prior to the reduction topublish a notice in an appointed newspaper stating the amount of the share capital as lastdetermined by the company, the amount to which the share capital is to be reduced and the dateon which the reduction is to have effect.

The Bermuda Act provides that a company shall not reduce the amount of its share capital if onthe date the reduction is to be effected there are reasonable grounds for believing that thecompany is, and after the reduction would be, unable to pay its liabilities as they become due.

The Bermuda Act includes certain protections for holders of special classes of shares, requiringtheir consent to be obtained before their rights may be varied.

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The Bermuda Act requires that as soon as practicable after the allotment of any of its shares acompany must complete and have ready for delivery share certificates in relation to those sharesallotted unless the conditions of issue of the shares otherwise provide. A certificate under thecommon seal of the company shall be prima facie evidence of the title of the shareholder to theshares. The Bermuda Act prohibits bearer shares.

(iii) Financial assistance to purchase shares of a company or its holding company

A company is prohibited from providing financial assistance for the purpose of an acquisition of itsown or its holding company’s shares. However, in certain circumstances, the prohibition from givingfinancial assistance may be excluded such as where the company’s principal purpose in givingthat assistance is not to give it for the purpose of any such acquisition, or the giving of theassistance for that purpose is but an incidental part of some larger purpose of the company, andthe assistance is given in good faith in the interests of the company. In addition, a company is onlyprohibited from granting financial assistance if on the date from which the financial assistance is tobe given, there are reasonable grounds for believing that the company is, or after the giving ofsuch financial assistance would be, unable to pay its liabilities as they become due.

(iv) Purchase by the company of its own shares and warrants

The Bermuda Act permits the company, if authorised to do so by its memorandum of associationor by its bye-laws, to purchase its own shares. It should be noted that the company is authorisedby its bye-laws, subject to certain approvals, to purchase its own shares. Such purchases may onlybe effected out of the capital paid up on the purchased shares, profits otherwise available fordividend or distribution (see “Dividends and distributions” below) or out of the proceeds of a newissue of shares made for the purpose. Any premium payable on a repurchase over the par value ofthe shares to be repurchased must be provided for out of the profits otherwise available fordividends, out of the company’s share premium account, or out of contributed surplus. A purchaseby the company of its own shares may be authorised by its board of directors or otherwise by or inaccordance with the provisions of its bye-laws. The Bermuda Act provides that no purchase by thecompany of its own shares may be effected if, on the date on which the purchase is to be effected,there are reasonable grounds for believing that the company is, or after the purchase would be,unable to pay its liabilities as they become due. The shares purchased pursuant to the BermudaAct shall be treated as cancelled and the amount of the company’s issued capital shall bediminished by the nominal amount of those shares accordingly. It shall not be taken as reducingthe amount of the company’s authorised share capital.

The company is not prevented from purchasing and may purchase its own warrants. There is norequirement of Bermuda Law that the company’s memorandum of association or its bye-lawscontain a specific enabling provision authorising any such purchase and the directors may relyupon the general power contained in its memorandum of association to buy and sell and deal inpersonal property of all kinds.

A company has power to hold and purchase shares of its holding company. A distinction must bedrawn between the purchase of shares in the holding company by the holding company itself andthe purchase by a subsidiary. A holding company can only purchase its own shares in accordancewith the provisions referred to above. When a subsidiary acquires shares in its holding company,the shares, once purchased, may be voted by the subsidiary for its own benefit.

(v) Transfer of securities

Title to securities of companies whose securities are traded or listed on an appointed stockexchange may, where permitted by regulations made by the Minister or where such transfer iseffected through the mechanism required or permitted by an appointed stock exchange, beevidenced and transferred without a written instrument.

(vi) Dividends and distributions

The Bermuda Act provides that a company shall not declare or pay a dividend or make adistribution out of contributed surplus, if there are reasonable grounds for believing that (a) thecompany is, or would after the payment be, unable to pay its liabilities as they become due; or (b)the realisable value of the company’s assets would thereby be less than the aggregate of itsliabilities and its issued share capital and share premium accounts.

Contributed surplus for these purposes is defined as including proceeds arising from donatedshares, credits resulting from the redemption or conversion of shares at less than the amount setup as nominal capital, the excess value of shares acquired over those issued in a share exchangeshould the Board elect to treat it as such and donations of cash and other assets to the company.

(vii) Charges on the assets of the company

The Bermuda Act established a register of charges at the office of the Registrar of Companiespermitting any charges on the assets of a company to be registered. Registration is not mandatorybut does govern priority in Bermuda, giving a registered charge priority over any subsequentlyregistered charge and over all unregistered charges save those in effect prior to the coming intoeffect of the Bermuda Act in July 1983. The register of charges is available for inspection bymembers of the public. The Bermuda Act also makes provision for the registration of a series ofdebentures.

(viii) Management and administration

The management and administration of a Bermuda company is essentially governed by Part VI ofthe Bermuda Act and provides that the management and administration of a Bermuda companyshall be vested in the hands of not less than two (2) directors duly elected by the shareholders.The Bermuda Act requires that a Bermuda company maintain either (a) a Bermuda residentsecretary and a Bermuda resident representative; or (b) a Bermuda resident secretary and aBermuda resident director; or (c) two (2) Bermuda resident directors, all of whom must beindividuals. Exempted companies, the shares of which are listed on an appointed stock exchange,may appoint a resident representative in Bermuda in place of the other Bermuda resident officers,who or which may be either an individual or a corporate entity, whose statutory right, duties andobligations are established by the Bermuda Act.

The Bermuda Act contains no specific restrictions on the power of the directors to resolve todispose of assets of a company although it specifically requires that every officer (which includes adirector and managing director and secretary) of a company, in exercising his powers anddischarging his duties, shall act honestly and in good faith with a view to the best interests of thecompany and exercise the care, diligence and skill that a reasonably prudent person wouldexercise in comparable circumstances. Furthermore, it requires that every officer should complywith the Bermuda Act, regulations passed pursuant to the Bermuda Act and the bye-laws of thecompany.

(ix) Accounting requirements under the Bermuda Act

The Bermuda Act requires that a company shall cause to be kept proper records of account withrespect to:-

(a) all sums of money received and expended by the company and the matters in respect ofwhich the receipt and expenditure take place;

(b) all sales and purchases of goods by the company; and

(c) the assets and liabilities of the company.

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It further requires that the records of account shall be kept at the registered office of the companyor at such other place as the Board thinks fit and shall at all times be open to inspection by thedirectors. The Bermuda Act also requires that, these records of account also be maintained at theoffice of the resident representative where the company is listed on an appointed stock exchangeand the company has appointed a resident representative. There is a proviso in the Bermuda Actto the effect that if the records of account are kept at some place outside Bermuda, there shall bekept at an office of the company in Bermuda such records as will enable the Board to ascertainwith reasonable accuracy the financial position of the company at the end of each three (3) monthperiod. Power is vested in the courts of Bermuda to order the company to make available therecords of account to any of the directors of the company should the company for some reasonrefuse to do so. Furthermore, the Bermuda Act imposes a fine in the event of failure to comply withthe aforementioned requirements which fine is limited to the sum of BD$500.00 (approximatelyequivalent in value to US$500.00), for the time being.

(x) Auditing requirements

The Bermuda Act requires that the board of every company shall, at least once in every year, laybefore the company in general meeting:-

(a) financial statements for the period, which shall include:-

(a1) a statement of the results of operations for such period;(a2) a statement of retained earnings or deficits;(a3) a balance sheet at the end of such period;(a4) a statement of changes in the financial position for the period;(a5) notes to the financial statements;(a6) such further information as required by the Bermuda Act and the company’s

memorandum of association and its bye-laws;

(b) the report of the auditor in respect of the financial statements described above based uponthe results of the audit made in accordance with generally accepted accounting principles;and

(c) the notes referred to in paragraph (a5) above shall include a description of the generallyaccepted accounting principles used in the preparation of the financial statements andwhere the accounting principles used are those of a country or jurisdiction other thanBermuda the notes shall disclose this fact and shall name the country or jurisdiction.

Financial statements to be laid before the shareholders in general meeting shall be signed on thebalance sheet by two (2) of the directors of the company.

If for some reason it becomes impossible, for reasons beyond the reasonable control of thedirectors, to lay the financial statements before the shareholders, it shall be lawful for the meetingto adjourn the meeting for a period of up to ninety (90) days or such longer period as theshareholders may agree.

All shareholders of a company are entitled to receive a copy of the financial statements preparedin accordance with the aforementioned requirements, at least seven (7) days before the generalmeeting of the company at which the financial statements would be tabled. The Bermuda Act alsoprovides that companies listed on an appointed stock exchange (including the SingaporeExchange) may send summarized financial statements instead of the unabridged financialstatements mentioned above. Each shareholder can elect to receive unabridged financialstatements for that period and/or any subsequent period. The summarized financial statementstogether with auditors report and notice to elect to receive the unabridged financial statementsmust be sent to shareholders twenty-one (21) days before the general meeting. A company shallsend the full financial statements to a member within seven (7) days of receipt of the member’selection to receive the full financial statements.

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The summarized financial statements must be derived from the company’s financial statementsand shall include:

(a) a summarized report of the unabridged financial statements;(b) such further information extracted from the financial statements as the board of directors

considers appropriate; and(c) a statement that it is only a summarized version of the company’s financial statements and

does not contain sufficient information to allow as full an understanding of the financialposition, results of operations or changes in financial position or cash flows of the companyas would be provided by unabridged financial statements.

There are certain exceptions in the case of shareholders not entitled to receive notices of generalmeetings, joint holders of shares or where the address for a person is not known to the company.

The Bermuda Act also makes provision vesting power in the shareholders in general meeting towaive the laying of the financial statements and auditors’ report and to waive the appointment ofan auditor. In order to do so, it is required that all shareholders and directors of the company agreeeither in writing or at a general meeting, that in respect of a particular interval no financialstatement or auditors’ report thereon need be laid before a general meeting.

The Bermuda Act contains specific requirements in section 89 in relation to the appointment anddisqualification of an auditor.

By way of general reference, the provisions of sections 83, 84, 87, 88, 89 and 90 govern thepreparation and maintenance of accounting records and audited financial statements.

(xi) Exchange control

Although incorporated in Bermuda, the company has been classified as non-resident in Bermudafor exchange control purposes by the Bermuda Monetary Authority. Accordingly, the company mayconvert currency (other than Bermudian currency) held for its account to any other currencywithout restriction.

Persons, firms or companies regarded as residents of Bermuda for exchange control purposesrequire specific consent under the Exchange Control Act 1972 of Bermuda, and regulations thereunder, to purchase or sell shares or warrants of the company which are regarded as foreigncurrency securities by the Bermuda Monetary Authority. Under the terms of the consent given tothe company by the Bermuda Monetary Authority, the issue of shares pursuant to this documentand any transactions in issued shares between persons, firms or companies regarded asnonresident in Bermuda for exchange control purposes may be effected without further permissionfrom that Authority. Before the company can issue any further shares beyond the consent givenfrom the Bermuda Monetary Authority, the company must first obtain the prior written consent ofthat Authority.

In granting such permission, the Bermuda Monetary Authority accepts no responsibility for thefinancial soundness of any proposals or for the correctness of any statements made or opinionsexpressed in this document with regard to them.

(xii) Taxation

In Bermuda, there are no taxes on profits, income or dividends, nor is there any capital gains tax,estate duty or death duty. Profits can be accumulated and it is not obligatory for a company to paydividends. The company is required to pay an annual government fee (the “Government Fee”),which is determined on a sliding scale by reference to a company’s authorised share capital andshare premium account, with the minimum fee being BD$1,780 and the maximum BD$27,825 (theBD$ is treated at par with the US$). The Government Fee is payable at the end of January in everyyear and is based on the authorised share capital and share premium account as they stood at 31August in the preceding year.

The Bermuda Government has enacted legislation under which the Minister of Finance isauthorised to give an assurance to an exempted company or a partnership that, in the event ofthere being enacted in Bermuda any legislation imposing tax computed on profits or income orcomputed on any capital asset, gain or appreciation, then the imposition of any such tax shall notbe applicable to such entities or any of their operations. In addition, there may be included anassurance that any such tax or any tax in the nature of estate duty or inheritance tax, shall not beapplicable to the shares, debentures or other obligations of such entities. This assurance has beenobtained by the company for a period ending 28 March 2016.

(xiii) Stamp duty

The law relating to stamp duties has been fundamentally changed as a result of the enactment ofcertain legislation that came into force on 1 April 1990. Stamp duty is no longer chargeable inrespect of the incorporation, registration or licensing of an exempted company, nor, subject tocertain minor exceptions, on their transactions. Accordingly, no stamp duty will be payable on theincrease in or the issue or transfer of the share capital of the company.

(xiv) Loans to directors

The Bermuda Act prohibits the making of loans by the company to any of its directors or to theirfamilies or companies in which they hold a 20 per cent. interest, without the consent ofshareholders of the company holding in the aggregate not less than nine-tenths (9/10) of the totalvoting rights of all shareholders having the right to vote at any meeting of the shareholders of thecompany. These prohibitions do not apply to anything done to provide a director with funds to meetexpenditure incurred or to be incurred by him for the purposes of the company, provided that thecompany gives its prior approval at a general meeting or, if not, the loan is made on condition thatit shall be repaid within six (6) months of the next annual general meeting if the loan is notapproved at such meeting. If the approval of the company is not given for a loan, the directors whoauthorised it will be jointly and severally liable for any loss arising.

(xv) The investigation of the affairs of a company and the protection of minorities

The Bermuda Act makes specific provision with regard to the foregoing and provides that theMinister of Finance may, at any time of his own volition, appoint one or more inspectors toinvestigate the affairs of an exempted company and to report thereon in such manner as he maydirect. The Bermuda Act requires that such an investigation be conducted in private unless thecompany requests that it be held in public. Furthermore, any shareholder of a company whocomplains that the affairs of the company are being conducted or have been conducted in amanner oppressive or prejudicial to the interests of some part of the shareholders, includinghimself, or where a report has been made to the Minister of Finance under the foregoing, theRegistrar on behalf of the Minister, may make an application to the court by petition for an orderthat the company’s affairs are being conducted or have been conducted in a manner oppressive orprejudicial to the interests of some part of the shareholders and that to wind up the companywould unfairly prejudice that part of the shareholders but otherwise the facts would justify themaking of a winding up order on the ground that it would be just and equitable that the companyshould be wound up. If the court is of this opinion, then it may, with a view to bringing to an endthe matters complained of, make such order as it thinks fit whether for regulating the conduct ofthe company’s affairs in future or for the purchase of shares of any shareholders of the companyby other shareholders of the company or by the company and in the case of a purchase by thecompany, for the reduction accordingly of the company’s capital, or otherwise.

Class actions and derivative actions are generally not available to shareholders under the laws ofBermuda; however, the Bermuda courts ordinarily would expect to follow English case lawprecedent which would permit a shareholder to commence an action in the name of the companyto remedy a wrong done to the company where the act complained of is alleged to be beyond thecorporate power of the company or is illegal or would result in the violation of a company’smemorandum of association and bye-laws. Furthermore, consideration would be given by the courtto acts that are alleged to constitute a fraud against the minority shareholders or, for instance,where an act requires the approval of a greater percentage of the company’s shareholders thanthat which actually approved it.

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In addition to the above, the shareholders may be able to bring claims against a company; suchclaims must, however, be based on the general laws of contract or tort applicable in Bermuda.

A statutory right of action is conferred on subscribers to shares of a company against persons(including directors and officers) responsible for the issue of a prospectus in respect of damagesuffered by reason of an untrue statement therein (see above) but this confers no right of actionagainst the company itself. In addition, the company itself (as opposed to its shareholders) maytake action against the officers (including directors) for breach of their statutory and fiduciary dutyto act honestly and in good faith with a view to the best interests of the company (as mentionedabove).

(xvi) Inspection of corporate records

Members of the general public have the right to inspect the public documents of the companyavailable at the office of the Registrar of Companies in Bermuda which will include the company’scertificate of incorporation, its memorandum of association (including its objects and powers) andany alteration to the company’s memorandum of association and documents relating to anincrease or reduction of authorised capital. The shareholders have the additional right to inspectthe bye-laws of the company, minutes of general (i.e. shareholders) meetings and audited financialstatements of the company, which must be presented to the annual general meeting ofshareholders. The register of shareholders of the company is also open to inspection byshareholders without charge, and to members of the general public for a fee. The company isrequired to maintain its share register in Bermuda but may establish a branch register outsideBermuda. The company is required to keep at its registered office a register of its directors andofficers which is open for inspection by members of the public without charge.

(xvii) Winding up and liquidation provisions of Bermuda legislation

(a) Introduction

The winding up of Bermuda companies is governed by the provisions of the Bermuda Actand by the Companies (Winding Up) Rules 1982 (the “Rules”) and may be divided into thefollowing two types:-

(a1) Voluntary winding up which commences with the shareholders’ resolution or upon thehappening of a specified event (fixed or limited life company) and which itself can besub-divided into a shareholders’ voluntary winding up and a creditors’ voluntarywinding up; and

(a2) Compulsory winding up, by petition presented to the courts of Bermuda followed bywinding up order.

(b) Voluntary winding up

(b1) Shareholders’ voluntary winding up

A shareholders’ voluntary winding up is only possible if a company is solvent. AStatutory Declaration of Solvency to the effect that a company is able to meet itsdebts within twelve (12) months from the date of the commencement of its winding upis sworn by a majority of the company’s directors and filed with the Registrar ofCompanies.

A general meeting of shareholders is then convened which resolves that the companybe wound up voluntarily and that a liquidator (responsible for collecting in the assetsof the company, determining its liabilities and distributing its assets amongst itscreditors and the surplus to the shareholders) be appointed.

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Once the affairs of the company are fully wound up, the liquidator prepares a fullaccount of the liquidation which he then presents to the company’s shareholders at ageneral meeting called for that purpose. This special general meeting must beadvertised in an appointed newspaper in Bermuda at least one (1) month before it isheld and within one (1) week after it is held, the liquidator notifies the Registrar ofCompanies that the company has been dissolved.

(b2) Creditors’ voluntary winding up

A creditors’ voluntary winding up may occur where a company is insolvent and aDeclaration of Solvency cannot be sworn.

A board meeting is convened which resolves to recommend to the shareholders ofthe company that the company be placed into a creditors’ voluntary winding up. Thisrecommendation is then considered and, if thought fit, approved at a special generalmeeting of the company’s shareholders and, subsequently, at a meeting of thecompany’s creditors.

Notice of the creditors’ meeting must appear in an appointed newspaper on at leasttwo (2) occasions and the directors must provide this meeting with a list of thecompany’s creditors and a full report of the position of the company’s affairs.

At their respective meetings, the creditors and shareholders are entitled to nominate aperson or persons to serve as liquidator(s) and whose responsibilities includecollecting in the assets of the company, ascertaining its liabilities and distributing itsassets rateably amongst its creditors in accordance with their proofs of debt. Inaddition to the liquidator, the creditors are entitled to appoint a Committee ofInspection which, under Bermuda Law, is a representative body of creditors whoassist the liquidator during the liquidation.

As soon as the affairs of the company are fully wound up, the liquidator prepares hisfinal account explaining the liquidation of the company and the distribution of itsassets which he then presents to the company’s shareholders in a special generalmeeting and to the company’s creditors in a meeting. Within one (1) week after thelast of these meetings, the liquidator sends a copy of the account to the Registrar ofCompanies in Bermuda who proceeds to register it in the appropriate public recordsand the company is deemed dissolved three (3) months after the registration of thisaccount.

(c) Compulsory winding up

The courts of Bermuda may wind up a Bermuda company on a petition presented bypersons specified in the Bermuda Act and which include the company, itself and any creditoror creditors of the company (including contingent or prospective creditors) and anyshareholder or shareholders of the company.

Any such petition must state the grounds upon which the Bermuda court has been asked towind up the company and may include either one of the following:-

(c1) that the company has by resolution resolved that it be wound up by the Bermudacourt;

(c2) that the company is unable to pay its debts;(c3) that the Bermuda court is of the opinion that it is just and equitable that the company

be wound up.

The winding up petition seeks a winding up order and may include a request for theappointment of a provisional liquidator.

Prior to the Winding Up Order being granted and the appointment of the provisionalliquidator, (who under Bermuda Law, may or may not be the Official Receiver – aGovernment appointed officer) an interim provisional liquidator may be appointed toadminister the affairs of the company with a view to its winding up until he is relieved ofthese duties by the appointment of the provisional liquidator. (Often, the interim provisionalliquidator is appointed the provisional liquidator).

As soon as the Winding Up Order has been made, the provisional liquidator summonsseparate meetings of the company’s creditors and shareholders in order to determinewhether or not he should serve as the permanent liquidator or be replaced by some otherperson who will serve as the permanent liquidator and also to determine whether or not aCommittee of Inspection should be appointed and, if appointed, the shareholders of thatCommittee. The provisional liquidator notifies the Court of the decisions made at thesemeetings and the Court makes the appropriate orders.

A permanent liquidator’s powers are prescribed by the Act and include the power to bring ordefend actions or other legal proceedings in the name and on behalf of the company andthe power to carry on the business so far as may be necessary for the beneficial winding upof the company. His primary role and duties are the same as a liquidator in a creditors’voluntary winding up i.e. to distribute the company’s assets rateably amongst its creditorswhose debts have been admitted.

As soon as the affairs have been completely wound up, the liquidator applies to the courtsof Bermuda for an order that the company be dissolved and the company is deemeddissolved from the date of this order being made.

Any person wishing to have a detailed summary of Bermuda company law or advice on thedifferences between it and the laws of any jurisdiction with which he is more familiar isrecommended to seek independent legal advice.

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APPENDIX E

RULES OF THE SUNPOWER EMPLOYEE SHARE OPTION SCHEME

1. NAME OF THE SCHEME

The Scheme shall be called the “Sunpower Employee Share Option Scheme”.

2. DEFINITIONS

2.1 In the Scheme, unless the context otherwise requires, the following words and expressions shallhave the following meanings:-

“Act” The Companies Act, Chapter 50 of Singapore as amended, modified or supplemented from time to time.

“Associated Company” A company in which at least 20% but not more than 50% ofits shares are held by the Company or the Group and overwhich the Company has control.

“Associated Company Employees” Any confirmed employee (including directors) of anAssociated Company selected by the Committee toparticipate in the Scheme.

“Auditors” The auditors of the Company for the time being.

“Bermuda Companies Act” The Bermuda Companies Act, as amended, modified orsupplemented from time to time.

“Board” The board of directors of the Company.

“Bye-Laws” The Bye-Laws of the Company, as amended from time totime.

“CDP” The Central Depository (Pte) Limited.

“CPF” Central Provident Fund.

“Committee” A committee of Directors who are duly authorised andappointed by the Board to administer the Scheme for thetime being and where the Company has established aRemuneration Committee pursuant to the Code ofCorporate Governance, the Remuneration Committee shalladminister the Scheme.

“Company” Sunpower Group Ltd.

“control” The capacity to dominate decision making, directly orindirectly, in relation to the financial and operating policies ofthe Company.

“Controlling Shareholder” A shareholder exercising control over the Company andunless rebutted, a person who controls directly or indirectlya shareholding of fifteen (15) per cent. or more of theCompany’s issued share capital shall be presumed to be aControlling Shareholder of the Company.

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“Date of Grant” In relation to an Option, the date on which the Option isgranted to a Participant pursuant to Rule 7.

“Director” A person holding office as a director for the time being ofthe Company, its subsidiary or Associated Company, as thecase may be.

“Group Employee” Any confirmed employee of the Group (including anyExecutive Director) and its Associated Companies selectedby the Committee to participate in the Scheme inaccordance with Rule 4.

“Executive Director” A director of the Company, its subsidiaries and/or itsAssociated Companies, as the case may be, who performsan executive function within the Company, the relevantsubsidiary or Associated Company, as the case may be.

“Exercise Price” The price at which a Participant shall subscribe for eachShare upon the exercise of an Option which shall be theprice as determined in accordance with Rule 9, as adjustedin accordance with Rule 10.

“Financial Year” Each period of twelve (12) months or more or less thantwelve (12) months, at the end of which the balance ofaccounts of the Company are prepared and audited, for thepurpose of laying the same before an annual generalmeeting of the Company.

“Grantee” A person to whom an offer of an Option is made.

“Group” The Company, its Subsidiaries and its AssociatedCompanies.

“Market Day” A day on which the SGX-ST is open for trading in securities.

“Market Price” A price equal to the average of the last dealt prices for theShares on the SGX-SESDAQ over the five consecutiveTrading Days immediately preceding the Date of Grant ofthat Option, as determined by the Committee by referenceto the daily official list or any other publication published bythe SGX-ST, rounded to the nearest whole cent in the eventof fractional prices.

“Market Price Option” An Option granted with the Exercise Price set at the MarketPrice.

“Offer Date” The date on which an offer to grant an Option is madepursuant to the Scheme.

“Offeree” The person to whom an offer of an Option is made.

“Option” The right to subscribe for Shares granted or to be granted toa Group Employee pursuant to the Scheme and for the timebeing subsisting.

“Option Share” The new Shares to be issued by the Company upon theexercise of the Options

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“Participant” The holder of an Option.

“Record Date” The date as at the close of business on which theShareholders must be registered in order to participate inany dividends, rights, allotments or other distributions.

“Rules” Rules of the Sunpower Employee Share Option Scheme.

“Scheme” The Sunpower Employee Share Option Scheme, as thesame may be modified or altered from time to time.

“Securities Account” The securities account maintained by a Depositor with CDP.

“Shareholders” The registered holders for the time being of the Shares(other than the CDP) or in the case of Depositors,Depositors who have Shares entered against their names inthe Depository Register.

“Shares” Ordinary shares of par value US$0.01 each in the capital ofthe Company.

“Subsidiary” A company which is for the time being a subsidiary of theCompany as defined by Section 5 of the Act.

“SGX-ST” Singapore Exchange Securities Trading Limited.

“Trading Day” A day on which the Shares are traded on the SGX-SESDAQ.

“S$” Singapore dollar.

2.2 The term “Depositor”, “Depository Register” and “Depository Agent” shall have the meaningsascribed to it by Section 130A of the Act and the term “associate” shall have the meaning ascribedto it by the SGX-ST Listing Manual or any other publication prescribing rules or regulations forcorporations admitted to the Official List of the SGX-SESDAQ (as modified, supplemented oramended from time to time).

2.3 Words importing the singular number shall, where applicable, include the plural number and viceversa. Words importing the masculine gender shall, where applicable, include the feminine andneuter gender.

2.4 Any reference to a time of a day in the Scheme is a reference to Singapore time.

2.5 Any reference in the Scheme to any enactment is a reference to that enactment as for the timebeing amended or re-enacted. Any word defined under the Bermuda Companies Act or anystatutory modification thereof and used in the Scheme shall have the meaning assigned to it underthe Bermuda Companies Act.

3. OBJECTIVES OF THE SCHEME

The Scheme will provide an opportunity for Group Employees who have contributed significantly tothe growth and performance of the Group and who satisfy the eligibility criteria as set out in Rule 4of the Scheme, to participate in the equity of the Company.

The Scheme is primarily a share incentive scheme. It recognises the fact that the services of suchGroup Employees are important to the success and continued well-being of the Group.Implementation of the Scheme will enable the Company to give recognition to the contributionsmade by such Group Employees. At the same time, it will give such Group Employees anopportunity to have a direct interest in the Company at no direct cost to its profitability and will alsohelp to achieve the following positive objectives:-

(a) the motivation of each Participant to optimise his performance standards and efficiency andto maintain a high level of contribution to the Group;

(b) the retention of key employees and Executive Directors of the Group whose contributionsare essential to the long-term growth and profitability of the Group;

(c) to instil loyalty to, and a stronger identification by the Participants with the long-termprosperity of, our Company;

(d) to attract potential employees with relevant skills to contribute to the Group and to createvalue for the Shareholders of the Company; and

(e) to align the interests of the Participants with the interests of the Shareholders of theCompany.

4. ELIGIBILITY

4.1 Confirmed Group Employees who have attained the age of twenty-one (21) years on or prior to therelevant Offer Date and are not undischarged bankrupts and have not entered into a compositionwith their respective creditors, shall be eligible to participate in the Scheme at the absolutediscretion of the Committee.

4.2 Persons who are Controlling Shareholders and their associates shall not be eligible to participatein the Scheme.

4.3 There will be no restriction on the eligibility of any Participant to participate in any other shareoption or share incentive schemes implemented by any other companies within the Group.

4.4 Subject to the Act, Bermuda Companies Act and any requirement of the SGX-ST, the terms ofeligibility for participation in the Scheme may be amended from time to time at the absolutediscretion of the Committee, which would be exercised judiciously.

5. MAXIMUM ENTITLEMENT

Subject to Rule 4 and Rule 10, the aggregate number of Shares in respect of which Options maybe offered to a Grantee for subscription in accordance with the Scheme shall be determined at thediscretion of the Committee who shall take into account criteria such as rank, past performance,years of service and potential development of the participant.

6. LIMITATION ON SIZE OF THE SCHEME

The aggregate nominal amount of Shares over which the Committee may grant Options on anydate, when added to the nominal amount of Shares issued and issuable in respect of all Optionsgranted under the Scheme shall not exceed fifteen (15) per cent. of the issued share capital of theCompany on the day immediately preceding the Offer Date of the Option.

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7. OFFER DATE

7.1 The Committee may, save as provided in Rule 4, Rule 5 and Rule 6, offer to grant Options to suchGrantees as it may select in its absolute discretion at any time during the period when the Schemeis in force, except that no Option shall be granted during the period of thirty (30) days immediatelypreceding the date of announcement of the Company’s interim and/or final results (whichever thecase may be). In addition, in the event that an announcement on any matter of an exceptionalnature involving unpublished price sensitive information is made, offers to grant Options may onlybe made on or after the second Market Day on which such announcement is released.

7.2 An offer to grant the Option to a Grantee shall be made by way of a letter (the “Letter of Offer”) inthe form or substantially in the form set out in Schedule A, subject to such amendments as theCommittee may determine from time to time.

8. ACCEPTANCE OF OFFER

8.1 An Option offered to a Grantee pursuant to Rule 7 may only be accepted by the Grantee withinthirty (30) days after the relevant Offer Date and not later than 5.00 p.m. on the thirtieth (30th) dayfrom such Offer Date (a) by completing, signing and returning to the Company the AcceptanceForm in or substantially in the form set out in Schedule B, subject to such modification as theCommittee may from time to time determine, accompanied by payment of RMB1.00 asconsideration and (b) if, at the date on which the Company receives from the Grantee theAcceptance Form in respect of the Option as aforesaid, he remains eligible to participate in theScheme in accordance with these Rules.

8.2 If a grant of an Option is not accepted strictly in the manner as provided in this Rule 8, such offershall, upon the expiry of the thirty (30) day period, automatically lapse and shall forthwith bedeemed to be null and void and be of no effect.

8.3 The Company shall be entitled to reject any purported acceptance of a grant of an Option madepursuant to this Rule 8 or Exercise Notice given pursuant to Rule 12 which does not strictly complywith the terms of the Scheme.

8.4 Options are personal to the Grantees to whom they are granted and shall not be sold, mortgaged,transferred, charged, assigned, pledged or otherwise disposed of or encumbered in whole or inpart or in any way whatsoever without the Committee’s prior written approval, but may beexercised by the Grantee’s duly appointed personal representative as provided in Rule 11.6 in theevent of the death of such Grantee.

8.5 The Grantee may accept or refuse the whole or part of the offer. If only part of the offer isaccepted, the Grantee shall accept the offer in multiples of 1,000 Shares.

8.6 In the event that a grant of an Option results in a contravention of any applicable law or regulation,such grant shall be null and void and be of no effect and the relevant Participant shall have noclaim whatsoever against the Company.

8.7 Unless the Committee determines otherwise, an Option shall automatically lapse and become null,void and of no effect and shall not be capable of acceptance if:-

(a) it is not accepted in the manner as provided in Rule 8.1 within the thirty (30) day period; or

(b) the Participant dies prior to his acceptance of the Option; or

(c) the Participant is adjudicated a bankrupt or enters into composition with his creditors prior tohis acceptance of the Option; or

(d) the Grantee being a Group Employee ceases to be in the employment of the Group or(being a Director) ceases to be a Director of the Company, in each case, for any reasonwhatsoever prior to his acceptance of the Option; or

(e) the Company is liquidated or wound-up prior to the Grantee’s acceptance of the Option.

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9. EXERCISE PRICE

9.1 Subject to any adjustment pursuant to Rule 10, the Exercise Price for each Share in respect ofwhich an Option is exercisable shall be determined by the Committee, in its absolute discretion, onthe Date of Grant, at:-

(a) a price equal to the Market Price; or

(b) a price which is set at a discount to the Market Price, provided that:-

(i) the maximum discount shall not exceed twenty (20) per cent. of the Market Price (orsuch other percentage or amount as may be determined by the Committee andpermitted by the SGX-ST); and

(ii) the Company’s shareholders in general meeting shall have authorised, in a separateresolution, the making of offers and grants of Options under the Scheme at a discountnot exceeding the maximum discount as aforesaid.

9.2 In making any determination under Rule 9.1(b) on whether to give a discount and the quantum ofsuch discount, the Committee shall be at liberty to take into consideration such criteria as theCommittee may, at its absolute discretion, deem appropriate, including but not limited to:-

(a) the performance of the Company, its Subsidiaries and Associated Companies, as the casemay be;

(b) the years of service and individual performance of the eligible Group Employee;

(c) the contribution of the eligible Group Employee to the success and development of theCompany and/or the Group; and

(d) the prevailing market conditions.

9.3 The Exercise Price shall in no event be less than the nominal value of a Share. Where theExercise Price as determined above is less than the nominal value of the Share, the ExercisePrice shall be the nominal value.

10. ALTERATION OF CAPITAL

10.1 If a variation in the issued share capital of the Company (whether by way of a capitalisation ofprofits or reserves or rights issue or reduction (including any reduction arising by reason of theCompany purchasing or acquiring its issued Shares), subdivision, consolidation or distribution, orotherwise howsoever) should take place, then:-

(a) the Exercise Price in respect of the Shares and nominal value, class and/or number ofShares comprised in the Options to the extent unexercised and the rights attached thereto;and/or

(b) the nominal value, class and/or number of Shares in respect of which additional Optionsmay be granted to Participants,

may, be adjusted in such manner as the Committee may determine to be appropriate includingretrospective adjustments where such variation occurs after the date of exercise of an Option butthe Record Date relating to such variation precedes such date of exercise and, except in relationto a capitalisation issue, upon the written confirmation of the Auditors (acting only as experts andnot as arbitrators), that in their opinion, such adjustment is fair and reasonable.

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10.2 Notwithstanding the provisions of Rule 10.1 above, no such adjustment shall be made (a) whichwould result in the Shares to be issued upon the exercise of an Option being issued at a discountto the nominal value and if such an adjustment would but for this sub-Clause have so resulted, theExercise Price payable shall be the nominal value of a Share, (b) if as a result, the Participantreceives a benefit that a Shareholder does not receive; and (c) unless the Committee afterconsidering all relevant circumstances considers it equitable to do so.

10.3 The issue of securities as consideration for an acquisition of any assets by the Company will notbe regarded as a circumstance requiring adjustment under the provisions of this Rule 10.

10.4 The restriction on the number of Shares to be offered to any Grantee under Rule 5 above, shallnot apply to the number of additional Shares or Options over additional Shares issued by virtue ofany adjustment to the number of Shares and/or Options pursuant to this Rule 10.

10.5 Upon any adjustment required to be made, the Company shall notify each Participant (or his dulyappointed personal representative(s)) in writing and deliver to him (or, where applicable, his dulyappointed personal representative(s)) a statement setting forth the new Exercise Price thereafter ineffect and the nominal value, class and/or number of Shares thereafter comprised in the Option sofar as unexercised. Any adjustment shall take effect upon such written notification being given.

11. OPTION PERIOD

11.1 Options granted with the Exercise Price set at Market Price shall only be exercisable, in whole orin part (provided that an Option may be exercised in part only in respect of 1,000 Shares or anymultiple thereof), at any time, by a Participant after the first anniversary of the Offer Date of thatOption, Provided always that the Options (other than Options granted to Associated CompanyEmployees) shall be exercised before the fifth anniversary of the relevant Offer Date and Optionsgranted to Associated Company Employees shall be exercised before the fifth anniversary of therelevant Offer Date, or such earlier date as may be determined by the Committee, failing which allunexercised Options shall immediately lapse and become null and void and a Participant shallhave no claim against the Company.

11.2 Options granted with the Exercise Price set at a discount to Market Price shall only be exercisable,in whole or in part (provided that an Option may be exercised in part only in respect of 1,000Shares or any multiple thereof), at any time, by a Participant after the second anniversary from theOffer Date of that Option, Provided always that the Options (other than Options granted toAssociated Company Employees) shall be exercised before the fifth anniversary of the relevantOffer Date and Options granted to Associated Company Employees shall be exercised before thefifth anniversary of the relevant Offer Date, or such earlier date as may be determined by theCommittee, failing which all unexercised Options shall immediately lapse and become null and voidand a Participant shall have no claim against the Company.

11.3 An Option shall, to the extent unexercised, immediately lapse and become null and void and aParticipant shall have no claim against the Company:-

(a) subject to Rules 11.4, 11.5, 11.6 and 11.7, upon the Participant ceasing to be in theemployment of the Company or any of the companies within the Group for any reasonwhatsoever; or

(b) upon the bankruptcy of the Participant or the happening of any other event which result inhis being deprived of the legal or beneficial ownership of such Option; or

(c) in the event of misconduct on the part of the Participant, as determined by the Committee inits absolute discretion.

For the purpose of Rule 11.3(a), a Participant shall be deemed to have ceased to be so employedas of the date the notice of termination of employment is tendered by or is given to him, unlesssuch notice shall be withdrawn prior to its effective date.

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11.4 If a Participant ceases to be employed by the Group by reason of his:-

(a) ill health, injury or disability, in each case, as certified by a medical practitioner approved bythe Committee;

(b) redundancy;

(c) retirement at or after a normal retirement age; or

(d) retirement before that age with the consent of the Committee,

or for any other reason approved in writing by the Committee, he may, at the absolute discretion ofthe Committee exercise any unexercised Option within the relevant Option Period and upon theexpiry of such period, the Option shall immediately lapse and become null and void.

11.5 If a Participant ceases to be employed for any reason approved by the Committee in writing, hemay exercise any unexercised Options within the relevant Option Period and upon the expiry ofsuch period, the Option shall immediately lapse and become null and void.

11.6 If a Participant dies and at the date of his death holds any unexercised Option, such Option may,at the absolute discretion of the Committee, be exercised by the duly appointed legal personalrepresentatives of the Participant within the relevant Option Period and upon the expiry of suchperiod, the Option shall immediately lapse and become null and void.

11.7 If a Participant, who is also an Executive Director, ceases to be a Director for any reasonwhatsoever, he may, at the absolute discretion of the Committee, exercise any unexercised Optionwithin the relevant Option Period and upon the expiry of such period, the Option shall immediatelylapse and become null and void.

12. EXERCISE OF OPTIONS, ALLOTMENT AND LISTING OF SHARES

12.1 An Option may be exercised, in whole or in part (provided that an Option may be exercised in partonly in respect of 1,000 Shares or any multiple thereof), by a Participant giving notice in writing tothe Company in or substantially in the form set out in Schedule C (the “Exercise Notice”), subjectto such amendments as the Committee may from time to time determine. Every Exercise Noticemust be accompanied by a remittance for the full amount of the aggregate Exercise Price inrespect of the Shares which have been exercised under the Option, the relevant CDP charges (ifany) and any other documentation the Committee may require. All payments shall be made bycheque, cashier’s order, bank draft or postal order made out in favour of the Company. An Optionshall be deemed to be exercised upon the receipt by the Company of the said notice dulycompleted and the receipt by the Company of the full amount of the aggregate Exercise Price inrespect of the Shares which have been exercised under the Option.

12.2 Subject to:-

(a) such consents or other actions required by any competent authority under any regulations orenactments for the time being in force as may be necessary (including any approvalsrequired from the SGX-ST); and

(b) compliance with the Rules of the Scheme, the Memorandum of Association and Bye-laws ofthe Company,

the Company shall, as soon as practicable after the exercise of an Option by a Participant but inany event within ten (10) Market Days after the date of the exercise of the Option in accordancewith Rule 12.1, allot and issue the Shares in respect of which such Option has been exercised bythe Participant and deliver the relevant share certificates to CDP for the credit of the securitiesaccount of that Participant by ordinary post or such other mode of delivery as the Committee maydeem fit.

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12.3 The Company shall, if necessary, as soon as practicable after the exercise of an Option, apply tothe SGX-ST or any other stock exchange on which the Shares are quoted or listed for permissionto deal in and for quotation of the Shares which may be issued upon exercise of the Option andthe Shares (if any) which may be issued to the Participant pursuant to any adjustments made inaccordance with Rule 10.

12.4 Shares which are all allotted on the exercise of an Option by a Participant shall be issued, as theParticipant may elect, in the name of CDP to the credit of the securities account of the Participantmaintained with CDP or the Participant’s securities subaccount with a CDP Depository Agent.

12.5 Shares allotted and issued upon the exercise of an Option shall be subject to all provisions of theMemorandum of Association and Bye-laws of the Company and shall rank pari passu in allrespects with the then existing issued Shares in the capital of the Company except for anydividends, rights, allotments or other distributions, the Record Date for which is prior to the datesuch Option is exercised.

12.6 Except as set out in Rule 12.2 and subject to Rule 10, an Option does not confer on a Participantany right to participate in any new issue of Shares.

12.7 The Company shall keep available sufficient unissued Shares to satisfy the full exercise of allOptions for the time being remaining capable of being exercised.

13. MODIFICATIONS TO THE SCHEME

13.1 Any or all the provisions of the Scheme may be modified and/or altered at any time and from timeto time by resolution of the Committee, except that:-

(a) any modification or alteration which shall alter adversely the rights attaching to any Optiongranted prior to such modification or alteration and which in the opinion of the Committee,materially alters the rights attaching to any Option granted prior to such modification oralteration may only be made with the consent in writing of such number of Participants who,if they exercised their Options in full, would thereby become entitled to not less than three-quarters (3/4) in nominal amount of all the Shares which would fall to be allotted uponexercise in full of all outstanding Options;

(b) any modification or alteration which would be to the advantage of Participants under theScheme shall be subject to the prior approval of the Company’s Shareholders in generalmeeting; and

(c) no modification or alteration shall be made without the prior approval of the SGX-ST or (ifrequired) any other stock exchange on which the Shares are quoted and listed, and suchother regulatory authorities as may be necessary.

For the purposes of Rule 13.1(a), the opinion of the Committee as to whether any modification oralteration would alter adversely the rights attaching to any Option shall be final and conclusive.

13.2 Notwithstanding anything to the contrary contained in Rule 13.1, the Committee may at any timeby resolution (and without other formality, save for the prior approval of the SGX-ST) amend oralter the Scheme in any way to the extent necessary to cause the Scheme to comply with anystatutory provision or the provision or the regulations of any regulatory or other relevant authorityor body (including the SGX-ST).

13.3 Written notice of any modification or alteration made in accordance with this Rule 13 shall be givento all Participants.

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14. DURATION OF THE SCHEME

14.1 The Scheme shall continue to be in force at the discretion of the Committee, subject to amaximum period of ten (10) years, commencing on the date on which the Scheme is adopted byShareholders. Subject to compliance with any applicable laws and regulations in Singapore, theScheme may be continued beyond the above stipulated period with the approval of theShareholders by ordinary resolution at a general meeting and of any relevant authorities whichmay then be required.

14.2 The Scheme may be terminated at any time by the Committee or by resolution of the Shareholdersat a general meeting subject to all other relevant approvals which may be required and if theScheme is so terminated, no further Options shall be offered by the Company hereunder.

14.3 The termination, discontinuance or expiry of the Scheme shall be without prejudice to the rightsaccrued to Options which have been granted and accepted as provided in Rule 8, whether suchOptions have been exercised (whether fully or partially) or not.

15. TAKE-OVER AND WINDING UP OF THE COMPANY

15.1 In the event of a take-over offer being made for the Company, Participants (including Participantsholding Options which are then not exercisable pursuant to the provisions of Rule 11.1 and 11.2)holding Options as yet unexercised shall, notwithstanding Rule 11 and Rule 12 but subject to Rule15.5, be entitled to exercise such Options in full or in part in the period commencing on the dateon which such offer is made or, if such offer is conditional, the date on which the offer becomes oris declared unconditional, as the case may be, and ending on the earlier of:-

(a) the expiry of six (6) months thereafter, unless prior to the expiry of such six (6) monthperiod, at the recommendation of the offeror and with the approvals of the Committee andthe SGX-ST, such expiry date is extended to a later date (being a date falling not later thanthe date of expiry of the Option Period relating thereto); or

(b) the date of the expiry of the Option Period relating thereto,

whereupon any Option then remaining unexercised shall immediately lapse and become null andvoid.

Provided always that if during such period the offeror becomes entitled or bound to exercise therights of compulsory acquisition of the Shares under the provisions of the Act or the BermudaCompanies Act and, being entitled to do so, gives notice to the Participants that it intends toexercise such rights on a specified date, the Option shall remain exercisable by the Participantsuntil such specified date or the expiry of the Option Period relating thereto, whichever is earlier.Any Option not so exercised by the said specified date shall lapse and become null and voidProvided that the rights of acquisition or obligation to acquire stated in the notice shall have beenexercised or performed, as the case may be. If such rights of acquisition or obligations have notbeen exercised or performed, all Options shall, subject to Rule 11.3, remain exercisable until theexpiry of the Option Period.

15.2 If, under any applicable laws, the court sanctions a compromise or arrangement proposed for thepurposes of, or in connection with, a scheme for the reconstruction of the Company or itsamalgamation with another company or companies, Participants (including Participants holdingOptions which are then not exercisable pursuant to the provisions of Rule 11.1 and 11.2) shallnotwithstanding Rule 11 and Rule 12 but subject to Rule 15.5, be entitled to exercise any Optionthen held by them during the period commencing on the date upon which the compromise orarrangement is sanctioned by the court and ending either on the expiry of sixty (60) daysthereafter or the date upon which the compromise or arrangement becomes effective, whichever islater (but not after the expiry of the Option Period relating thereto), whereupon any unexercisedOption shall lapse and become null and void, Provided always that the date of exercise of anyOption shall be before the fifth anniversary of the Offer Date.

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15.3 If an order or an effective resolution is passed for the winding up of the Company on the basis ofits insolvency, all Options, to the extent unexercised, shall lapse and become null and void.

15.4 In the event a notice is given by the Company to its members to convene a general meeting for thepurposes of considering, and if thought fit, approving a resolution to voluntarily wind-up theCompany, the Company shall on the same date or soon after it despatches such notice to eachmember of the Company give notice thereof to all Participants (together with a notice of theexistence of the provisions of this Rule 15.4) and thereupon, each Participant (or his or her legalpersonal representative(s)) shall be entitled to exercise all or any of his Options at any time notlater than two (2) business days prior to the proposed general meeting of the Company by givingnotice in writing to the Company, accompanied by a remittance for the full amount of the aggregateExercise Price for the Shares in respect of which the notice is given whereupon the Company shallas soon as possible and, in any event, no later than the business day immediately prior to the dateof the proposed general meeting referred to above, allot and issue the relevant Shares to theParticipant credited as fully paid.

15.5 If in connection with the making of a general offer referred to in Rule 15.1 above or the schemereferred to in Rule 15.2 above or the winding up referred to in Rule 15.4 above, arrangements aremade (which are confirmed in writing by the Auditors, acting only as experts and not as arbitrators,to be fair and reasonable) for the compensation of Participants, whether by the continuation oftheir Options or the payment of cash or the grant of other options or otherwise, a Participantholding an Option, which is not then exercisable, may not, at the discretion of the Committee, bepermitted to exercise that Option as provided for in this Rule 15.

15.6 To the extent that an Option is not exercised within the periods referred to in this Rule 15, it shalllapse and become null and void.

16. ADMINISTRATION OF THE SCHEME

16.1 The Scheme shall be administered by the Committee in its absolute discretion with such powersand duties as are conferred on it by the Board.

16.2 The Committee shall have the power, from time to time, to make or vary such regulations (notbeing inconsistent with the Scheme) for the implementation and administration of the Scheme as itthinks fit.

16.3 Any decision of the Committee, made pursuant to any provision of the Scheme (other than amatter to be certified by the Auditors), shall be final and binding (including any decisions pertainingto disputes as to the interpretation of the Scheme or any rule, regulation, or procedure thereunderor as to any rights under the Scheme).

16.4 A Director who is a member of the Committee shall not be involved in its deliberation in respect ofOptions to be granted to him.

17. NOTICES

17.1 Any notice given by a Participant to the Company shall be sent by post or delivered to theregistered office of the Company or such other address as may be notified by the Company to theParticipant in writing.

17.2 Any notice or documents given by the Company to a Participant shall be sent to the Participant byhand or sent to him at his home address stated in the records of the Company or the last knownaddress of the Participant, and if sent by post shall be deemed to have been given on the dayimmediately following the date of posting.

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18. TERMS OF EMPLOYMENT UNAFFECTED

18.1 The Scheme or any Option shall not form part of any contract of employment between theCompany, any Subsidiary or Associated Company (as the case may be) and any Participant andthe rights and obligations of any individual under the terms of the office or employment with suchcompany within the Group shall not be affected by his participation in the Scheme or any rightwhich he may have to participate in it or any Option which he may hold and the Scheme or anyOption shall afford such an individual no additional rights to compensation or damages inconsequence of the termination of such office or employment for any reason whatsoever.

18.2 The Scheme shall not confer on any person any legal or equitable rights (other than thoseconstituting the Options themselves) against the Company, any Subsidiary and/or AssociatedCompany directly or indirectly or give rise to any cause of action at law or in equity against theCompany, any Subsidiary or Associated Company.

19. TAXES

All taxes (including income tax) arising from the exercise of any Option granted to any Participantunder the Scheme shall be borne by that Participant.

20. COSTS AND EXPENSES OF THE SCHEME

20.1 Each Participant shall be responsible for all fees of CDP relating to or in connection with the issueand allotment of any Shares pursuant to the exercise of any Option in CDP’s name, the deposit ofshare certificate(s) with CDP, the Participant’s securities account with CDP, or the Participant’ssecurities sub-account with a Depository Agent or CPF investment account with a CPF agent bankand all taxes referred to in Rule 19 which shall be payable by the relevant Participant.

20.2 Save for such costs and expenses expressly provided in the Scheme to be payable by theParticipants, all fees, costs and expenses incurred by the Company in relation to the Schemeincluding but not limited to the fees, costs and expenses relating to the allotment and issue ofShares pursuant to the exercise of any Option shall be borne by the Company.

21. CONDITION OF OPTION

Every Option shall be subject to the condition that no Shares shall be issued pursuant to theexercise of an Option if such issue would be contrary to any law or enactment, or any rules orregulations of any legislative or non-legislative governing body for the time being in force inSingapore, Bermuda or any other relevant country.

22. DISCLAIMER OF LIABILITY

Notwithstanding any provisions herein contained and subject to the Act, the Bermuda CompaniesAct, the Board, the Committee and the Company shall not under any circumstances be held liablefor any costs, losses, expenses and damages whatsoever and howsoever arising in respect of anymatter under or in connection with the Scheme, including but not limited to the Company’s delay inallotting and issuing the Shares or in applying for or procuring the listing of the Shares on theSGX-SESDAQ.

23. DISCLOSURE IN ANNUAL REPORT

The Company shall make the following disclosure in its annual report:-

(a) The names of the members of the Committee;

(b) The information required in the table below for the following Participants (which for theavoidance of doubt, shall include Participants who have exercised all their Options in anyparticular Financial Year):-

(i) Participants who are Directors of the Company; and

(ii) Participants who are Controlling Shareholders of the Company and their Associates;and

(iii) Participants, other than those in (i) and (ii) above who receive five (5) per. cents. ormore of the total number of Options available under the Scheme.

Name of Options granted Aggregate Aggregate AggregateParticipant during financial Options granted Options Options

year under commencement of exercised since outstandingreview (including the Scheme to end commencement as at end of

terms) of financial year of the Scheme to financial yearunder review end of financial under review

year under review

(c) The number and proportion of Options granted at the following discounts to average marketvalue of the Shares in the financial year under review:-

(i) options granted at up to ten per cent. discount; and

(ii) options granted at between ten per cent. but not more than 20 per cent. discount.

24. ABSTENTION FROM VOTING

Grantees who are Shareholders are to abstain from voting on any Shareholders’ resolution relatingto the Scheme.

25. DISPUTES

Any disputes or differences of any nature arising hereunder shall be referred to the Committee andits decision shall be final and binding in all respects.

26. GOVERNING LAW

The Scheme shall be governed by, and construed in accordance with, the laws of the Republic ofSingapore. The Participants, by accepting Options in accordance with the Scheme, and theCompany submit to the exclusive jurisdiction of the courts of the Republic of Singapore.

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SCHEDULE A

SUNPOWER EMPLOYEE SHARE OPTION SCHEME

LETTER OF OFFER

Serial No:

Date:To: [Name]

[Designation][Address]

Private and Confidential

Dear Sir/Madam,

1. We have the pleasure of informing you that, pursuant to the Sunpower Employee Share OptionScheme (“ESOS”), you have been nominated to participate in the ESOS by the Committee (the“Committee”) appointed by the Board of Directors of Sunpower Group Ltd. (the “Company”) toadminister the ESOS. Terms as defined in the ESOS shall have the same meaning when used inthis letter.

2. Accordingly, in consideration of the payment of a sum of RMB1.00, an offer is hereby made togrant you an option (the “Option”), to subscribe for and be allotted Shares at theprice of S$ for each Share.

3. The Option is personal to you and shall not be transferred, charged, pledged, assigned orotherwise disposed of by you, in whole or in part, except with the prior approval of the Committee.

4. The Option shall be subject to the terms of the Scheme, a copy of which is available for inspectionat the business address of the Company.

5. If you wish to accept the offer of the Option on the terms of this letter, please sign and return theenclosed Acceptance Form with a sum of RMB1.00 not later than 5.00 p.m. on ,failing which this offer will lapse.

Yours faithfully,For and on behalf ofSunpower Group Ltd.

Name:Designation:

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SCHEDULE B


ACCEPTANCE FORM

Serial No:

Date:

To: The Committee,Sunpower Employee Share Option Scheme,No. 88, Zhushan Road, Nanjing, Jiangsu, People’s Republic of China

Closing Date for Acceptance of Offer:

Number of Shares Offered :

Exercise Price for each Share :S$

Total Amount Payable :S$

I have read your Letter of Offer dated and agree to be bound by the terms of theLetter of Offer and ESOS referred to therein. Terms defined in your Letter of Offer shall have the samemeanings when used in this Acceptance Form.

I hereby accept the Option to subscribe for Shares at S$ foreach Share. I enclose cash for RMB1.00 in payment for the purchase of the Option/I authorise myemployer to deduct the sum of RMB1.00 from my salary in payment for the purchase of the Option.

I understand that I am not obliged to exercise the Option.

I confirm that my acceptance of the Option will not result in the contravention of any applicable law orregulation in relation to the ownership of shares in the Company or options to subscribe for such shares.

I agree to keep all information pertaining to the grant of the Option to me confidential.

I further acknowledge that you have not made any representation to induce me to accept the offer andthat the terms of the Letter of Offer and this Acceptance Form constitute the entire agreement betweenus relating to the offer.

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Please print in block letters

Name in full :

Designation :

Address :

Nationality :

*NRIC/Passport No :

Signature :

Date :

Note:-

* Delete accordingly

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SCHEDULE C


FORM OF EXERCISE OF OPTION

Total number of ordinary shares of US$0.01 each (the “Shares”) offered at S$ for each Share (the “Exercise Price”) under the Scheme on (Date of Grant) :

Number of Shares previously allotted thereunder :

Outstanding balance of Shares to be allotted thereunder :

Number of Shares now to be subscribed :

To: The Committee,Sunpower Employee Share Option Scheme,No. 88, Zhushan Road, Nanjing, Jiangsu, People’s Republic of China

1. Pursuant to your Letter of Offer dated and my acceptance thereof, I herebyexercise the Option to subscribe for Shares in Sunpower Group Ltd. (the“Company”) at S$ for each Share.

2. I enclose a *cheque/cashier’s order/banker’s draft/postal order no. forS$ by way of subscription for the total number of the said Shares.

3. I agree to subscribe for the said Shares subject to the terms of the Letter of Offer, the SunpowerEmployee Share Option Scheme and the Memorandum of Association and the Bye-Laws of theCompany.

4. I declare that I am subscribing for the said Shares for myself and not as a nominee for any otherperson.

5. I request the Company to allot and issue the Shares in the name of The Central Depository (Pte)Limited (“CDP”) for credit of my *Securities Account with CDP/Sub-Account with the DepositoryAgent/CPF investment account with my Agent Bank specified below and I hereby agree to bearsuch fees or other charges as may be imposed by CDP in respect thereof.

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Please print in block letters

Name in full :

Designation :

Address :

Nationality :

*NRIC/Passport No. :

*Direct Securities Account No. :

OR

*Sub-Account No. :

Name of Depository Agent :

OR

*CPF Investment Account No. :

Name of Agent Bank :

Signature :

Date :

Note:-

* Delete accordingly

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F-1

APPENDIX F

TERMS AND CONDITIONS AND PROCEDURES FOR APPLICATION

You are invited to apply and subscribe for and/or purchase the 113,165,000 Invitation Shares at the IssuePrice for each Invitation Share subject to the following terms and conditions:-

1. YOUR APPLICATION MUST BE MADE IN LOTS OF 1,000 INVITATION SHARES AND HIGHERINTEGRAL MULTIPLES THEREOF. YOUR APPLICATION FOR ANY OTHER NUMBER OFINVITATION SHARES WILL BE REJECTED.

2. Your application for Offer Shares may be made by way of printed Offer Shares Application Formsor by way of Electronic Applications through ATMs of the Participating Banks (“ATM ElectronicApplications”) or through the Internet Banking (“IB”) websites of the relevant Participating Banks(“Internet Electronic Applications” which, together with ATM Electronic Applications, shall bereferred as “Electronic Applications”).

Your application for the Placement Shares may only be made by way of Placement SharesApplication Forms.

YOU MAY NOT USE CPF FUNDS TO APPLY FOR THE INVITATION SHARES.

3. You (being other than an approved nominee company) are allowed to submit ONLY oneapplication in your own name for:-

(a) the Offer Shares by any one of the following:

(i) Offer Shares Application Form;

(ii) ATM Electronic Application;

(iii) Internet Electronic Application,

(b) the Placement Shares by Placement Shares Application Form.

If more than one application is submitted for either the Offer Shares or the PlacementShares, such separate applications shall be deemed to be multiple applications and shall berejected.

If you have made an application for Placement Shares, you should not make any applicationfor Offer Shares and vice versa. Such separate applications shall be deemed to be multipleapplications and shall be rejected.

Joint or multiple applications shall be rejected. If you submit or procure submissions ofmultiple share applications for Offer Shares, Placement Shares or both Offer Shares andPlacement Shares, you may be deemed to have committed an offence under the PenalCode, Chapter 224 of Singapore and the Securities and Futures Act, Chapter 289 ofSingapore, and your applications may be referred to the relevant authorities forinvestigation. Multiple applications or those appearing to be or suspected of being multipleapplications will be liable to be rejected at the discretion of our Company and the Vendors.

4. We will not accept applications from any person under the age of 21 years, undischargedbankrupts, sole-proprietorships, partnerships, chops or non-corporate bodies, joint SecuritiesAccount holders of CDP and from applicants whose addresses (furnished in their ApplicationForms or, in the case of Electronic Applications, contained in the records of the relevantParticipating Banks, as the case may be) bear post office box numbers.

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5. We will not recognise the existence of a trust. Any application by a trustee or trustees must bemade in his/their own name(s) and without qualification or, where the application is made by wayof an Application Form, in the name(s) of an approved nominee company or approved nomineecompanies after complying with paragraph 6 below.

6. WE WILL ONLY ACCEPT APPLICATIONS FROM APPROVED NOMINEE COMPANIES.Approved nominee companies are defined as banks, merchant banks, finance companies,insurance companies, licensed securities dealers in Singapore and nominee companies controlledby them. Applications made by persons acting as nominees other than approved nomineecompanies shall be rejected.

7. IF YOU ARE NOT AN APPROVED NOMINEE COMPANY, YOU MUST MAINTAIN A SECURITIESACCOUNT WITH CDP IN YOUR OWN NAME AT THE TIME OF YOUR APPLICATION. If you donot have an existing Securities Account with CDP in your own name at the time of yourapplication, your application will be rejected (if you apply by way of an Application form), or you willnot be able to complete your Electronic Application (if you apply by way of an ElectronicApplication). If you have an existing Securities Account but fail to provide your Securities Accountnumber or provide an incorrect Securities Account number in Section B of the Application Form orin your Electronic Application, as the case may be, your application is liable to be rejected.Subject to paragraph 8 below, your application shall be rejected if your particulars, such as name,NRIC/passport number, nationality and permanent residence status provided in your ApplicationForm or in the records of the relevant Participating Bank at the time of your Electronic Application,as the case may be, differ from those particulars in your Securities Account as maintained withCDP. If you possess more than one individual direct Securities Account with CDP, your applicationshall be rejected.

8. If your address as stated in the Application Form or, in the case of an ElectronicApplication, contained in the records of the relevant Participating Bank, as the case may be,is different from the address registered with CDP, you must inform CDP of your updatedaddress promptly, failing which the notification letter on successful allotment will be sent toyour address last registered with CDP.

9. Our Company and the Vendors reserve the right to reject any application which does notconform strictly to the instructions set out in the Application Form or the instruction forElectronic Applications and in this Prospectus or with the terms and conditions of thisProspectus, which is illegible, incomplete, incorrectly completed or which is accompaniedby an improperly drawn up or improper form of remittance. Our Company and the Vendorsfurther reserve the right to treat as valid any applications not completed or submitted oreffected in all respects in accordance with the instructions set out in the Application Formsor the instructions for Electronic Applications or the terms and conditions of thisProspectus, and also to present for payment or other processes all remittances at any timeafter receipt and to have full access to all information relating to, or deriving from, suchremittances or the processing thereof.

10. Our Company and the Vendors reserve the right to reject or to accept, in whole or in part, or toscale down or to ballot any application, without assigning any reason therefor, and our Companyand the Vendors will not entertain any enquiry and/or correspondence on our decision. This rightapplies to applications made by way of Application Forms and by way of Electronic Applications.In deciding the basis of allotment, our Company and the Vendors will give due consideration to thedesirability of allotting the Invitation Shares to a reasonable number of applicants with a view toestablishing an adequate market for the Shares.

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11. Share certificates will be registered in the name of CDP and will be forwarded only to CDP. It isexpected that CDP will send to you, at your own risk, within 15 Market Days after the close of theApplication List, a statement of account stating that your Securities Account has been credited withthe number of Invitation Shares allotted and/or allocated to you. This will be the onlyacknowledgement of application moneys received and is not an acknowledgement by ourCompany and the Vendors. You irrevocably authorise CDP to complete and sign on your behalf astransferee or renouncee any instrument of transfer and/or other documents required for the issueor transfer of the Invitation Shares allotted and/or allocated to you. This authorisation applies toapplications made by way of Application Forms and by way of Electronic Applications.

12. In the event of an under-subscription for the Offer Shares as at the close of the Application List, wewill make available that number of Offer Shares under-subscribed to satisfy applications forPlacement Shares to the extent that there is an over-subscription for Placement Shares as at theclose of the Application List.

In the event of an under-subscription for the Placement Shares as at the close of the ApplicationList, we will make available that number of Placement Shares under-subscribed to satisfyapplications for Offer Shares to the extent that there is an over-subscription for Offer Shares as atthe close of the Application List.

In the event of an over-subscription for Offer Shares as at the close of the Application List and thePlacement Shares are fully subscribed or over-subscribed as at the close of the Application List,the successful applications for Offer Shares will be determined by ballot or otherwise asdetermined by our Directors and the Vendors and approved by the SGX-ST.

13. You irrevocably authorise CDP to disclose the outcome of your application, including the number ofInvitation Shares allotted and/or allocated to you pursuant to your application, to our Company, theManager, the Underwriter, Placement Agent and any other parties so authorised by CDP, theCompany, the Manager, the Underwriter and/or the Placement Agent.

14. Any reference to the “you” in this section shall include an individual, a corporation, an approvednominee and trustee applying for the Offer Shares by way of an Application Form or by way of anElectronic Application and a person applying for the Placement Shares through the PlacementAgent by way of a Placement Shares Application Form.

15. By completing and delivering an Application Form or by making and completing an ElectronicApplication by (in the case of an ATM Electronic Application) pressing the “Enter” or “OK” or“Confirm” or “Yes” key on the ATM (as the case may be) or by (in the case of an Internet ElectronicApplication) clicking “Submit” or “Continue” or “Yes” or “Confirm” on the IB website screen (as thecase may be) in accordance with the provisions of this Prospectus, you:-

(a) irrevocably offer to subscribe for and/or purchase the number of Invitation Shares specifiedin your application (or such smaller number for which the application is accepted) at theIssue Price and agree that you will accept such Invitation Shares as may be allotted and/orallocated to you, in each case on the terms of this Prospectus and on the terms of, andsubject to the conditions set out in, this Prospectus and the Memorandum and Bye-laws ofour Company;

(b) agree that in the event of any inconsistency between the terms and conditions forapplication set out in this Prospectus and those set out in the IB websites or ATMs of therelevant Participating Banks, the terms and conditions set out in this Prospectus shallprevail;

(c) agree that the aggregate Issue Price for the Invitation Shares applied for is due and payableto our Company and the Vendors upon application;

F-4

(d) warrant the truth and accuracy of the information contained, and representations anddeclarations made, in your application, and acknowledge and agree that such information,representations and declarations will be relied on by our Company and the Vendors indetermining whether to accept your application and/or whether to allot and/or allocate anyInvitation Shares to you; and

(e) agree and warrant that if the laws of any jurisdictions outside Singapore are applicable toyour application, you have complied with all such laws and none of our Company, theVendors, the Manager, the Underwriter and/or the Placement Agent will infringe any suchlaws as a result of the acceptance of your application.

16. Our acceptance of applications will be conditional upon, inter alia, our Company and the Vendorsbeing satisfied that:-

(a) permission has been granted by the SGX-ST to deal in, and for quotation of, all our existingShares (including the Vendor Shares) and the New Shares, on the Official List of the SGX-SESDAQ;

(b) the Management and Underwriting Agreement and the Placement Agreement referred to onpages 26 and 27 of this Prospectus have become unconditional and have not beenterminated or cancelled prior to such date as our Company and the Vendors may determine;and

(c) the Authority has not served a stop order which directs that no further shares to which thisProspectus relates be allotted and/or allocated.

17. Our Company will not hold any applications in reserve.

18. Our Company will not allot or allocate Shares on the basis of this Prospectus later than six monthsafter the date of registration of this Prospectus.

19. Additional terms and conditions for applications using printed Application Forms are set out onpages F-4 to F-7 of Appendix F of this Prospectus.

20. Additional terms and conditions for Electronic Applications are set out on pages F-7 to F-14 ofAppendix F of this Prospectus.

ADDITIONAL TERMS AND CONDITIONS FOR APPLICATIONS USING PRINTED APPLICATIONFORMS

You shall make an application by way of Application Forms made on and subject to the terms andconditions of this Prospectus including but not limited to the terms and conditions appearing below aswell as those set out under the section on “TERMS AND CONDITIONS AND PROCEDURES FORAPPLICATION” on pages F-1 to F-14 of Appendix F of this Prospectus, as well as the Memorandum andBye-laws of our Company.

1. Your application for the Offer Shares must be made using the WHITE Offer Shares ApplicationForms and WHITE official envelopes “A” and “B’ accompanying and forming part of thisProspectus.

Your application for the Placement Shares must be made using the BLUE Placement SharesApplication Forms accompanying and forming part of this Prospectus.

We draw your attention to the detailed instructions contained in the respective Application Formsand this Prospectus for the completion of the Application Forms which must be carefully followed.Our Company and the Vendors reserve the right to reject applications which do notconform strictly to the instructions set out in the Application Forms and this Prospectus orto the terms and conditions of this Prospectus or which are illegible, incomplete,incorrectly completed or which are accompanied by improperly drawn remittances orimproper form of remittances.

F-5

2. Your Application Forms must be completed in English. Please type or write clearly in ink usingBLOCK LETTERS.

3. All spaces in the Application Forms except those under the heading “FOR OFFICIAL USE ONLY”must be completed and the words “NOT APPLICABLE” or “N.A.” should be written in any spacethat is not applicable.

4. Individuals, corporations, approved nominee companies and trustees must give their names in full.You must make your application, in the case of individuals, in your full names appearing in youridentity cards (if applicants have such identification documents) or in your passports and, in thecase of corporations, in your full names as registered with a competent authority. If you are a non-individual completing the Application Form under the hand of an official, you must state the nameand capacity in which that official signs. If you are a corporation completing the Application Form,you are required to affix your Common Seal (if any) in accordance with your Memorandum andArticles of Association or equivalent constitutive documents. If you are a corporate applicant andyour application is successful, a copy of your Memorandum and Articles of Association orequivalent constitutive documents must be lodged with our Company’s Share Registrar and ShareTransfer office. Our Company and the Vendors reserve the right to require you to producedocumentary proof of identification for verification purposes.

5. (a) You must complete Sections A and B and sign page 1 of the Application Form.

(b) You are required to delete either paragraph 7(a) or 7(b) on page 1 of the Application Form.Where paragraph 7(a) is deleted, you must also complete Section C of the Application Formwith particulars of the beneficial owner(s).

(c) If you fail to make the required declaration in paragraph 7(a) or 7(b), as the case may be, onpage 1 of the Application Form, your application is liable to be rejected.

6. You (whether you are an individual and corporate applicant, whether incorporated orunincorporated and wherever incorporated or constituted), will be required to declare whether youare a citizen or permanent resident of Singapore or a corporation in which citizens or permanentresidents of Singapore or any body corporate constituted under any statute of Singapore have aninterest in the aggregate of more than 50 per cent. of the issued share capital of or interests insuch corporations. If you are an approved nominee company, you are required to declare whetherthe beneficial owner of the Invitation Shares is a citizen or permanent resident of Singapore or acorporation, whether incorporated or unincorporated and wherever incorporated or constituted, inwhich citizens or permanent residents of Singapore or any body corporate whether incorporated orunincorporated and wherever incorporated or constituted under any statute of Singapore have aninterest in the aggregate of more than 50 per cent. of the issued share capital of or interests insuch corporation.

7. Your application must be accompanied by a cash remittance in Singapore currency for the fullamount payable, in respect of the number of Invitation Shares applied for, in the form of aBANKER’S DRAFT or CASHIER’S ORDER drawn on a bank in Singapore, made out in favour of“Sunpower Share Issue Account” crossed “A/C PAYEE ONLY’”, with your name and addresswritten clearly on the reverse side.

We will not accept applications accompanied by ANY OTHER FORM OF PAYMENT. We will rejectremittances bearing “NOT TRANSFERABLE” or “NON TRANSFERABLE” crossings. Noacknowledgement or receipt will be issued by our Company, the Vendors or the Manager forapplications and application moneys received.

8. Unsuccessful applications are expected to be returned (without interest or any share of revenue orother benefit arising therefrom) to you by ordinary post within 24 hours of the balloting at your ownrisk. Where your application is rejected or accepted in part only, the full amount or the balance ofthe application moneys, as the case may be, will be refunded (without interest or any share ofrevenue or other benefit arising therefrom) to you by ordinary post at your own risk within 14Market Days after the clost of the Application List.

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9. Capitalised terms used in the Application Forms and defined in this Prospectus shall bear themeanings assigned to them in this Prospectus.

10. By completing and delivering the Application Form in accordance with the provisions of thisProspectus, you agree that:-

(a) in consideration of our Company having distributed the Application Form to you andagreeing to close the Application List at 12.00 noon on 14 March 2005 or such other timeor date as our Company and the Vendors may, in consultation with the Manager,decide and by completing and delivering the Application Form, you agree that:-

(i) your application is irrevocable; and

(ii) your remittance will be honoured on first presentation and that any moneys returnablemay be held pending clearance of your payment without interest or any share ofrevenue or other benefit arising therefrom;

(b) all applications, acceptances and contracts resulting therefrom under the Invitation shall begoverned by and construed in accordance with the laws of Singapore and that youirrevocably submit to the non-exclusive jurisdiction of the Singapore courts;

(c) in respect of the Invitation Shares for which your application has been received and notrejected, acceptance of your application shall be constituted by written notification and nototherwise, notwithstanding any remittance being presented for payment by or on behalf ofour Company and the Vendors;

(d) you will not be entitled to exercise any remedy of rescission for misrepresentation at anytime after acceptance of your application; and

(e) in making your application, reliance is placed solely on the information contained in thisProspectus and none of our Company, the Vendors, the Manager, the Underwriter, thePlacement Agent or any other person involved in the Invitation shall have any liability for anyinformation not so contained.

Applications for Offer Shares

1. Your applications for Offer Shares MUST be made using the WHITE Offer Shares ApplicationForms and WHITE official envelopes “A” and “B”. ONLY ONE APPLICATION should be enclosedin each envelope.

2. You must:-

(a) enclose the WHITE Offer Shares Application Form, duly completed and signed, togetherwith your remittance in the WHITE envelope “A” provided;

(b) in the appropriate spaces on WHITE envelope “A”:-

(i) write your name and address;

(ii) state the number of Offer Shares applied for;

(iii) tick the relevant box to indicate the form of payment; and

(iv) affix adequate Singapore postage;

(c) SEAL THE WHITE OFFICIAL ENVELOPE “A”;

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(d) write, in the appropriate box provided on the larger WHITE official envelope “B” addressedto LIM ASSOCIATES, 10 COLLYER QUAY, #19-08 OCEAN BUILDING, SINGAPORE049315, the number of Offer Shares you have applied for; and

(e) insert WHITE official envelope “A” into WHITE official envelope “B”, seal WHITE envelope“B”, affix adequate Singapore postage on WHITE official envelope “B” (if despatching byordinary post) and thereafter DESPATCH BY ORDINARY POST OR DELIVER BY HANDthe documents at your own risk to LIM ASSOCIATES, 10 COLLYER QUAY, #19-08 OCEANBUILDING, SINGAPORE 049315, so as to arrive by 12.00 noon on 14 March 2005 orsuch other time or date as our Company and the Vendors may, in consultation withthe Manager, decide. Local Urgent Mail or Registered Post must NOT be used. Noacknowledgement of receipt will be issued for any application or remittance received.

3. Applications that are illegible, incomplete or incorrectly completed or accompanied by improperlydrawn remittances or which are not honoured upon their first presentation are liable to be rejected.

Applications for Placement Shares

1. Your application for Placement Shares MUST be made using the BLUE Placement SharesApplication Forms. ONLY ONE APPLICATION should be enclosed in each envelope.

2. The completed and signed BLUE Placement Shares Application Form and your remittance, inaccordance with the terms and conditions of this Prospectus, for the full amount payable in respectof the number of Placement Shares applied for, with your name and address written clearly on thereverse side, must be enclosed and sealed in an envelope to be provided by you. You must affixadequate Singapore postage on the envelope (if despatching by ordinary post) and thereafter thesealed envelope must be DESPATCHED BY ORDINARY POST OR DELIVERED BY HAND thedocuments at your own risk to UOB KAY HIAN PRIVATE LIMITED, 80 RAFFLES PLACE, #30-01UOB PLAZA 1, SINGAPORE 048624, to arrive by 12.00 noon on 14 March 2005 or such othertime or date as our Company and and the Vendors may, in consultation with the Manager,decide. Local Urgent Mail or Registered Post must NOT be used. No acknowledgement ofreceipt will be issued for any application or remittance received.

3. Applications which are illegible, incomplete or incorrectly completed or accompanied by improperlydrawn remittances or which are not honoured upon their first presentation are liable to be rejected.

ADDITIONAL TERMS AND CONDITIONS FOR ELECTRONIC APPLICATIONS

The procedures for Electronic Applications at ATMs are set out on the ATM screens (in the case of ATMApplications) and the IB website screens (in the case of Internet Electronic Applications) of the relevantParticipating Banks.

Currently, DBS and the UOB are the only Participating Banks through which an Internet ElectronicApplication can be made on the respective IB websites of DBS and UOB.

For illustration purposes, the procedures for Electronic Applications through ATMs and the IB website ofDBS are set out respectively in the “Steps for an ATM Electronic Application for Offer Shares through theATMs of DBS” and “Steps for an Internet Electronic Application through the IB website of DBS Bank”appearing on pages F-12 to F-14 of this Prospectus.

The Steps set out the actions that you must take at an ATM or the IB website of DBS to complete anElectronic Application. Please read carefully the terms of this Prospectus, the Steps and the terms andconditions for Electronic Applications set out below before making an Electronic Application.

Any reference to “you” in the additional terms and conditions for Electronic Applications and the Stepsshall refer to you making an application for Offer Shares through an ATM or the IB website of a relevantParticipating Bank.

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To make an ATM Application:

(a) You must have an existing bank account with and be an ATM cardholder of one of the ParticipatingBanks before you can make an Electronic Application at the ATMs. An ATM card issued by oneParticipating Bank cannot be used to apply for Offer Shares at an ATM belonging to otherParticipating Banks. Upon the completion of your ATM Electronic Application transaction, you willreceive an ATM transaction slip (“Transaction Record”), confirming the details of your ATMElectronic Application. The Transaction Record is for your retention and should not be submittedwith any Application Form.

(b) You must ensure that you enter your own Securities Account number when using the ATM cardissued to you in your own name. If you operate a joint bank account with any of the ParticipatingBanks, you must ensure that you enter your own Securities Account number when using the ATMcard issued to you in your own name. Using your own Securities Account number with an ATMcard which is not issued to you in your own name will render your Electronic Application liable tobe rejected.

To make an Internet Electronic Application, you must have an existing bank account with and an IB UserIdentification (“User ID”) and a Personal Identification Number/Password given by the relevantParticipating Bank. Upon completion of your Internet Electronic Application, there will be an on-screenconfirmation (“Confirmation Screen”) of the application which you can print out for your record. Thisprinted record of the Confirmation Screen is for your retention and should not be submitted with anyApplication Form.

Further, you must ensure, when making an Internet Electronic Application that :

(a) you are currently in Singapore at the time of making of such application;

(b) your mailing address for IB with the relevant Participating Bank is in Singapore;

(c) you are not a US person(1) (as such term is defined in Regulation S under the United StatesSecurities Act of 1933, as amended from time to time),

and you will be asked to declare the above accordingly. Otherwise, your application is liable to berejected.

Note:-

(1) For details, please refer to definition of “US person” on the IB websites.

Your Electronic Application shall be made on the terms and subject to the conditions of this Prospectusincluding but not limited to the terms and conditions appearing below and those set out under the sectionon “TERMS AND CONDITIONS AND PROCEDURES FOR APPLICATION” on pages F-1 to F-14 of thisProspectus as well as the Memorandum and Bye-laws of our Company.

1. In connection with your Electronic Application for Invitation Shares, you are required to confirmstatements to the following effect in the course of activating the Electronic Application: -

(a) that you have received a copy of this Prospectus and has read, understood andagreed to all the terms and conditions of application for Invitation Shares and thisProspectus prior to effecting the Electronic Application and agreed to be bound bythe same;

(b) that you consent to the disclosure of your name, NRIC/passport number, address,nationality, permanent resident status, CDP Securities Account number, and shareapplication amount (the “Relevant Particulars”) from your account with thatParticipating Bank to the Share Registrar, CDP, SCCS, our Company and the Manager(the “Relevant Parties”); and

(c) that this is your only application and it is made in your own name and at your ownrisk.

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Your application will not be successfully completed and cannot be recorded as a completedtransaction in the ATM unless you press the “Enter” or “OK” or “Confirm” or “Yes” key. By doing so,you shall be treated as signifying your confirmation of each of the above three statements. Inrespect of statement 1(b) above, your confirmation, by pressing the “Enter” or “OK” or “Confirm” or“Yes” key, shall signify and shall be treated as your written permission, given in accordance withthe relevant laws of Singapore including Section 47(2) of the Banking Act (Chapter 19) ofSingapore to the disclosure by that Participating Bank of your Relevant Particulars to the RelevantParties.

2. BY MAKING AN ELECTRONIC APPLICATION, YOU CONFIRM THAT YOU ARE NOT APPLYINGFOR INVITATION SHARES AS NOMINEE OF ANY OTHER PERSON AND THAT ANYELECTRONIC APPLICATION THAT YOU MAKE IS THE ONLY APPLICATION MADE BY YOUAS BENEFICIAL OWNER.

3. For an ATM Application or Internet Electronic Application, you must have sufficient funds in yourbank account with your Participating Bank at the time you make your ATM Application or InternetElectronic Application, failing which your ATM Application or Internet Electronic Application will notbe completed. Any ATM Application or Internet Electronic Application which does notconform strictly to the instructions set out on the screens of the ATM or IB website throughwhich your ATM Application or Internet Electronic Application is being made shall berejected.

4. You irrevocably agree and undertake to subscribe for and/or purchase and to accept the number ofInvitation Shares applied for as stated on the Transaction Record or Confirmation Screen. You alsoirrevocably agree and undertake to subscribe for and/or purchase and to accept any lesser numberof Invitation Shares that may be allotted and/or allocated to you in respect of your ElectronicApplication. In the event that our Company and the Vendors decide to allot and/or allocate anylesser number of such Invitation Shares or not to allot and/or allocate any Invitation Shares to you,you agree to accept such decision as final.

If your Electronic Application is successful, your confirmation (by your action of pressing the“Enter” or “OK” or “Confirm” or “Yes” key on the ATM, clicking “Confirm” or “OK” on the IB websitescreen) of the number of Invitation Shares applied for shall signify and shall be treated as youracceptance of the number of Invitation Shares that may be allotted and/or allocated to you andyour agreement to be bound by the Memorandum and Bye-law of our Company.

5. Our Company will not keep any applications in reserve. Where your Electronic Application isunsuccessful, the full amount of the application moneys will be refunded (without interest or anyshare of revenue or other benefit arising therefrom) to you by being automatically credited to youraccount with your Participating Bank within 24 hours after the close of the Application List. Tradingon a “WHEN ISSUED” basis, if applicable, is expected to commence after such refund hasbeen made.

Where your Electronic Application is rejected or accepted in part only, the full amount or thebalance of the application moneys, as the case may be, will be refunded (without interest or anyshare of revenue or other benefit arising therefrom) to you by being automatically credited to youraccount with your Participating Bank, at your own risk, within 14 Market Days after the close of theApplication List provided that the remittance in respect of such application which has beenpresented for payment or other processes has been honoured and the application moneysreceived in the designated share issue account.

Responsibility for timely refund of application moneys arising from unsuccessful or partiallysuccessful Electronic Applications lies solely with the respective Participating Banks. Therefore,you are strongly advised to consult your Participating Bank as to the status of your ElectronicApplication and/or the refund of any moneys to you from unsuccessful or partially successfulElectronic Application, to determine the exact number of Invitation Shares allotted and/or allocatedto you before trading the Invitation Shares on the SGX-SESDAQ. Neither the SGX-ST, the CDP,the SCCS, the Participating Banks, our Company, the Vendors, the Manager, the Underwriter andthe Placement Agent assume any responsibility for any loss that may be incurred as a result ofyou having to cover any net sell positions or from buy-in procedures activated by the SGX-ST.

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6. If your Electronic Application is made through the ATM of one of the Participating Banks and isunsuccessful, no notification will be sent by the relevant Participating Bank.

If your Internet Electronic Application made through the IB website of DBS or UOB isunsuccessful, no notification will be sent by such Participating Bank.

If you make ATM Electronic Applications through the ATMs of the following banks, you may checkthe result of your ATM Electronic Applications as follows: -

Bank Telephone Available at Operating Hours Service expected from

DBS 1800 339 6666 Internet Banking 24 hours a day Evening of the(for POSB account http://www.dbs.com(1) balloting dayholders)

1800 111 1111(for DBS account holders)

OCBC 1800 363 3333 ATM ATM / Phone Evening of theBanking balloting day24 hours a day

UOB Group 1800 222 2121 ATM (Other ATM/ Phone Banking Evening of theTransactions – 24 hours a day balloting day“IPO Enquiry”)(2)

http://www.uobgroup. Internet Bankingcom(1)(2) 24 hours a day

Notes:-

(1) If you have made your Internet Electronic Applications through the IB website of DBS or UOB, you may check theresult of your application through the same channels listed in the table above in relation to ATM ElectronicApplications made at ATMs of DBS or UOB Group.

(2) If you have made your Electronic Application through the ATMs or IB website of the UOB Group, you may check theresult of your application through UOB Personal Internet Banking, UOB Group ATMs or UOB PhoneBankingServices.

7. Electronic Applications shall close at 12.00 noon on 14 March 2005 or such other time or dateas our Company and the Vendors may, in consultation with the Manager, decide. Subject toparagraph 9 below, your Internet Electronic Application is deemed to be received when it entersthe designated information system of the relevant Participating Bank.

8. You are deemed to have irrevocably requested and authorised us to:-

(a) register the Offer Shares or Placement Shares, as the case may be, allotted and/orallocated to you in the name of CDP for deposit into your Securities Account;

(b) send the relevant Share certificate(s) to CDP;

(c) return or refund (without interest or any share of revenue earned or other benefit arisingtherefrom) the application moneys, should your ATM Electronic Applications or InternetElectronic Applications be unsuccessful, by automatically crediting your bank account withyour Participating Bank with the relevant amount within 24 hours of the balloting; and

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(d) return or refund (without interest or any share of revenue or other benefit arising therefrom)the balance of the application moneys, should your ATM Electronic Applications or InternetElectronic Applications be accepted in part only, by automatically crediting your bankaccount with your Participating Bank with the relevant amount within 14 Market Days afterthe close of the Application List.

9. You irrevocably agree and acknowledge that your Electronic Application is subject to risks ofelectrical, electronic, technical and computer-related faults and breakdowns, fires, acts of God andother events beyond the control of the Participating Banks and if, in any such event, our Company,the Vendors, the Manager and/or the relevant Participating Bank do not receive your ElectronicApplication, or data relating to your Electronic Application is lost, corrupted or not otherwiseaccessible, whether wholly or partially for whatever reason, you shall be deemed not to have madean Electronic Application and you shall have no claim whatsoever against our Company, and theVendors, the Manager and/or the relevant Participating Bank for Invitation Shares applied for or forany compensation, loss or damage.

10. Our Company does not recognise the existence of a trust. Any Electronic Application by a trusteemust be made in your own name and without qualification. Our Company and the Vendors willreject any application by any person acting as nominee.

11. All your particulars in the records of your Participating Bank at the time you make your ElectronicApplication shall be deemed to be true and correct and your Participating Bank and the RelevantParties shall be entitled to rely on the accuracy thereof. If there has been any change in yourparticulars after making your Electronic Application, you shall promptly notify your ParticipatingBank.

12. You should ensure that your personal particulars as recorded by both CDP, the relevantParticipating Bank are correct and identical, otherwise, your Electronic Application is liableto be rejected. You should promptly inform CDP of any change in address, failing which thenotification letter on successful allotment will be sent to your address last registered with CDP.

13. By making and completing an Electronic Application, you are deemed to have agreed that:-

(a) in consideration of our Company and the Vendors making available the ElectronicApplication facility, through the Participating Banks acting as agents of our Company and theVendors, at the ATMs and the IB websites:-

(i) your Electronic Application is irrevocable; and

(ii) your Electronic Application, the acceptance of our Company, the Vendors and thecontract resulting therefrom under the Invitation shall be governed by and construedin accordance with the laws of Singapore and you irrevocably submit to the non-exclusive jurisdiction of the Singapore courts;

(b) none of our Company, the Vendors, the Manager or the Participating Banks shall be liablefor any delays, failures or inaccuracies in the recording, storage or in the transmission ordelivery of data relating to your Electronic Application to us or CDP due to breakdowns orfailure of transmission, delivery or communication facilities or any risks referred to inparagraph 9 above or to any cause beyond their respective controls;

(c) in respect of Offer Shares for which your Electronic Application has been successfullycompleted and not rejected, acceptance of your Electronic Application shall be constitutedby written notification by or on behalf of our Company and the Vendors and not otherwise,notwithstanding any payment received by or on behalf of our Company and the Vendors;

(d) you will not be entitled to exercise any remedy of rescission for misrepresentation at anytime after acceptance of your application; and

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(e) reliance is placed solely on information contained in this Prospectus and that none of ourCompany, the Vendors, the Manager, the Placement Agent and Underwriter nor any otherperson involved in the Invitation shall have any liability for any information not so contained.

STEPS FOR AN ATM ELECTRONIC APPLICATION FOR OFFER SHARES THROUGH THE ATMS OFDBS

Instructions for ATM Electronic Applications will appear on the ATM screens of the Participating Bank. Forillustration purposes, the steps for making an ATM Electronic Application through a DBS ATM are shownbelow. Certain words appearing on the screen are in abbreviated form (“A/c”, “amt”, “appln”, “&”, “I/C”,“SGX”, “No.” and “Max” refer to “Account”, “amount”, “application”, “and”, “NRIC”, “SGX-ST”, “Number”and “Maximum”, respectively). Instructions for ATM Electronic Applications on the ATM screens ofParticipating Banks (other than DBS) may differ slightly from those represented below.

Step 1 : Insert your personal DBS Bank or POSB ATM Card.

2 : Enter your Personal Identification Number.

3 : Select “CASHCARD & MORE SERVICES”.

4 : Select “ESA-IPO SHARE/INVESTMENTS”.

5 : Select “ELECTRONIC SECURITY APPLN (IPOS/BONDS/ST-NOTES)” to “Sunpower”.

6 : Read and understand the following statements which will appear on the screen:

THE OFFER OF SECURITIES (OR UNITS OF SECURITIES) WILL BE MADE IN, ORACCOMPANIED BY, A COPY OF THE PROSPECTUS/DOCUMENT OR PROFILESTATEMENT (AND IF APPLICABLE, A COPY OF THE REPLACEMENT ORSUPPLEMENTARY PROSPECTUS/DOCUMENT OR PROFILE STATEMENT)WHICH CAN BE OBTAINED FROM ANY DBS/POSB BRANCH IN SINGAPOREAND, WHERE APPLICABLE, THE VARIOUS PARTICIPATING BANKS DURINGBANKING HOURS, SUBJECT TO AVAILABILITY.

ANYONE WISHING TO ACQUIRE THESE SECURITIES (OR UNITS OFSECURITIES) SHOULD READ THE PROSPECTUS/DOCUMENT OR PROFILESTATEMENT (AS SUPPLEMENTED OR REPLACED, IF APPLICABLE) BEFORESUBMITTING HIS APPLICATION WHICH WILL NEED TO BE MADE IN THEMANNER SET OUT IN THE PROSPECTUS/DOCUMENT OR PROFILE STATEMENT(AS SUPPLEMENTED OR REPLACED, IF APPLICABLE). A COPY OF THEPROSPECTUS/DOCUMENT OR PROFILE STATEMENT, AND IF APPLICABLE. ACOPY OF THE REPLACEMENT OR SUPPLEMENTARYPROSPECTUS/DOCUMENT OR PROFILE STATEMENT HAS BEEN LODGED WITHAND REGISTERED BY THE MONETARY AUTHORITY OF SINGAPORE WHOASSUMES NO RESPONSIBILITY FOR ITS OR THEIR CONTENTS.

Press the “Enter” key to confirm that you have read and understood.

7 : Press the “ENTER” key to acknowledge:-

YOU HAVE READ, UNDERSTOOD AND AGREED TO ALL TERMS OF THEAPPLICATION AND PROSPECTUS/DOCUMENT OR PROFILE STATEMENT, ANDIF APPLICABLE, THE REPLACEMENT OR SUPPLEMENTARYPROSPECTUS/DOCUMENT OR PROFILE STATEMENT.

YOU CONSENT TO DISCLOSE YOUR NAME, NRIC/PASSPORT NO., ADDRESS,NATIONALITY, CDP SECURITIES A/C NO., CPF INVESTMENT A/C NO. ANDSECURITY APPLICATION AMOUNT FROM YOUR BANK A/C(S) TO SHAREREGISTRARS, SGX, SCCS, CDP, CPF AND THE COMPANY/VENDORS.

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FOR FIXED AND MAX PRICE SECURITY APPLICATION, THIS IS YOUR ONLYAPPLICATION AND IT IS MADE IN YOUR OWN NAME AND AT YOUR OWN RISK.

THE MAXIMUM PRICE FOR EACH SHARE IS PAYABLE IN FULL ON APPLICATIONAND SUBJECT TO REFUND IF THE FINAL PRICE IS LOWER.

FOR TENDER SECURITY APPLICATIONS, THIS IS YOUR ONLY APPLICATION ATTHE SELECTED TENDER PRICE AND IS MADE IN YOUR OWN NAME AND ATYOUR OWN RISK.

YOU ARE NOT A US PERSON AS REFERRED TO IN THEPROSPECTUS/DOCUMENT OR PROFILE STATEMENT AND IF APPLICABLE, THEREPLACEMENT OR SUPPLEMENTARY PROSPECTUS/DOCUMENT OR PROFILESTATEMENT.

8 : Select your nationality.

9 : Select the DBS account (Autosave/Current/Savings/Savings Plus) or the POSB account(current/savings) from which to debit your application moneys.

10 : Enter the number of securities you wish to apply for using cash.

11 : Enter your own 12-digit CDP Securities Account number. (Note: This step will be omittedautomatically if your CDP Securities Account number has already been stored in the Bank’srecords).

12 : Check the details of your securities application, your I/C/Passport number and CDPSecurities Account number and number of securities on the screen and press the “ENTER”key to confirm your application.

13 : Remove the Transaction Record for your reference and retention only.

STEPS FOR AN INTERNET ELECTRONIC APPLICATION THROUGH THE IB WEBSITE OF DBS

For illustrative purposes, the steps for making an Internet Electronic Application through the DBS IBwebsite are shown below. Certain words appearing on the screen are in abbreviated form (“A/C”, “amt”,“&”, “I/C”, “SGX” and “No.” refer to “Account”, “Amount”, “and”, “NRIC”, “SGX-ST”, and “Number”respectively).

Step 1 : Click on to DBS Bank website (www.dbs.com).

2 : Login to Internet Banking.

3 : Enter your User ID and PIN.

4 : Select “Electronic Security Application (ESA)”.

5 : Click “Yes” to proceed and to warrant that you have observed and complied with allapplicable laws and regulations.

6 : Select your country of residence.

7 : Click on “Sunpower” and click the “Submit” button.

8 : Click “Confirm” to confirm:-

(a) You have read, understood and agreed to all terms of this application and theProspectus/Document or Profile Statement and if applicable, the Supplementaryor Replacement Prospectus/Document or Profile Statement.

(b) You consent to disclose your name, I/C or Passport number, address,nationality, CDP Securities Account number, CPF Investment Account number(if applicable) and securities application amount from your DBS/POSBankAccount(s) to registrars of securities, SGX, SCCS, CDP, CPF Board andCompany/Vendors.

(c) You are not a US Person (as such term is defined in Regulation S under theUnited States Securities Act of 1993, as amended).

(d) This application is made in your own name and at your own risk.

(e) For FIXED/MAX price securities application, this is your only application. ForTENDER price securities application, this is your only application at theselected tender price.

9 : Fill in details for share application and click “Submit”.

10 : Check the details of your share application, your NRIC or passport number and click “OK” toconfirm your application.

11 : Print Confirmation Screen (optional) for your reference & retention only.

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APPENDIX G

SUMMARY OF RELEVANT PRC LAWS AND REGULATIONS

1. PRC legal system

The PRC legal system is based on the PRC Constitution and is made up of written laws,regulations and directives. Decided court cases do not constitute binding precedents.

The National People’s Congress of the PRC (“NPC”) and the Standing Committee of the NPC areempowered by the PRC Constitution to exercise the legislative power of the state. The NPC hasthe power to amend the PRC Constitution and to enact and amend primary laws governing thestate organs, civil and criminal matters. The Standing Committee of the NPC is empowered tointerpret, enact and amend laws other than those required to be enacted by the NPC.

The State Council of the PRC is the highest organ of state administration and has the power toenact administrative rules and regulations. Ministries and commissions under the State Council ofthe PRC are also vested with the power to issue orders, directives and regulations within thejurisdiction of their respective departments. Administrative rules, regulations, directives and orderspromulgated by the State Council and its ministries and commissions must not be in conflict withthe PRC Constitution or the national laws and, in the event that any conflict arises, the StandingCommittee of the NPC has the power to annul such administrative rules, regulations, directivesand orders.

At the regional level, the people’s congresses of provinces and municipalities and their standingcommittees may enact local rules and regulations and the people’s government may promulgateadministrative rules and directives applicable to their own administrative area. These local laws andregulations may not be in conflict with the PRC Constitution, any national laws or anyadministrative rules and regulations promulgated by the State Council.

Rules, regulations or directives may be enacted or issued at the provincial or municipal level or bythe State Council of the PRC or its ministries and commissions in the first instance forexperimental purposes. After sufficient experience has been gained, the State Council may submitlegislative proposals to be considered by the NPC or the Standing Committee of the NPC forenactment at the national level.

The power to interpret laws is vested by the PRC Constitution in the Standing Committee of theNPC. According to the Decision of the Standing Committee of the NPC Regarding theStrengthening of Interpretation of Laws passed on 10 June 1981, the Supreme People’s Court hasthe power to give general interpretation on application of laws in judicial proceedings apart from itspower to issue specific interpretation in specific cases. The State Council and its ministries andcommissions are also vested with the power to give interpretation of the rules and regulationswhich they promulgated. At the regional level, the power to give interpretation of regional laws isvested in the regional legislative and administration organs which promulgate such laws. All suchinterpretations carry legal effect.

2. Judicial system

The People’s Courts are the judicial organs of the PRC. Under the PRC Constitution and the Lawof Organisation of the People’s Courts of the People’s Republic of China, the People’s Courtscomprise the Supreme People’s Court, the local people’s courts, military courts and other specialpeople’s courts. The local people’s courts are divided into three levels, namely, the basic people’scourts, intermediate people’s courts and higher people’s courts. The basic people’s courts aredivided into civil, criminal, administrative and economic divisions. The intermediate people’s courtshave divisions similar to those of the basic people’s courts and, where the circumstances sowarrant, may have other special divisions (such as intellectual property divisions). The judicial

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functions of people’s courts at lower levels are subject to supervision of people’s courts at higherlevels. The people’s procuratorates also have the right to exercise legal supervision over theproceedings of people’s courts of the same and lower levels. The Supreme People’s Court is thehighest judicial organ of the PRC. It supervises the administration of justice by the people’s courtsof all levels.

The people’s courts adopt a two-tier final appeal system. A party may before the taking effect of ajudgment or order appeal against the judgment or order of the first instance of a local people’scourt to the people’s court at the next higher level. Judgments or orders of the second instance ofthe same level and at the next higher level are final and binding. Judgments or orders of the firstinstance of the Supreme People’s Court are also final and binding. If, however, the SupremePeople’s Court or a people’s court at a higher level finds an error in a final and binding judgmentwhich has taken effect in any people’s court at a lower level, or the presiding judge of a people’scourt finds an error in a final and binding judgment which has taken effect in the court over whichhe presides, a retrial of the case may be conducted according to the judicial supervisionprocedures.

The PRC civil procedures are governed by the Civil Procedure Law of the People’s Republic ofChina (the “Civil Procedure Law”) adopted on 9 April 1991. The Civil Procedure Law containsregulations on the institution of a civil action, the jurisdiction of the people’s courts, the proceduresin conducting a civil action, trial procedures and procedures for the enforcement of a civil judgmentor order. All parties to a civil action conducted within the territory of the PRC must comply with theCivil Procedure Law. A civil case is generally heard by a court located in the defendant’s place ofdomicile. The jurisdiction may also be selected by express agreement by the parties to a contractprovided that the jurisdiction of the people’s court selected has some actual connection with thedispute, that is to say, the plaintiff or the defendant is located or domiciled, or the contract wasexecuted or implemented in the jurisdiction selected, or the subject-matter of the proceedings islocated in the jurisdiction selected. A foreign national or foreign enterprise is accorded the samelitigation rights and obligations as a citizen or legal person of the PRC. If any party to a civil actionrefuses to comply with a judgment or order made by a people’s court or an award made by anarbitration body in the PRC, the aggrieved party may apply to the people’s court to enforce thejudgment, order or award. There are time limits on the right to apply for such enforcement. Whereat least one of the parties to the dispute is an individual, the time limit is one year. If both partiesto the dispute are legal persons or other entities, the time limit is six months.

A party seeking to enforce a judgment or order of a people’s court against a party who or whoseproperty is not within the PRC may apply to a foreign court with jurisdiction over the case forrecognition and enforcement of such judgment or order. A foreign judgment or ruling may also berecognised and enforced according to PRC enforcement procedures by the people’s courts inaccordance with the principle of reciprocity or if there exists an international or bilateral treaty withor acceded to by the foreign country that provides for such recognition and enforcement, unlessthe people’s court considers that the recognition or enforcement of the judgment or ruling willviolate fundamental legal principles of the PRC or its sovereignty, security or social or publicinterest.

3. Arbitration and enforcement of arbitral awards

The Arbitration Law of the PRC (the “Arbitration Law”) was promulgated by the StandingCommittee of the NPC on 31 August 1994 and came into effect on 1 September 1995. It isapplicable to, among other matters, trade disputes involving foreign parties where the parties haveentered into a written agreement to refer the matter to arbitration before an arbitration committeeconstituted in accordance with the Arbitration Law. Under the Arbitration Law, an arbitrationcommittee may, before the promulgation by the PRC Arbitration Association of arbitrationregulations, formulate interim arbitration rules in accordance with the Arbitration Law and the PRCCivil Procedure Law. Where the parties have by an agreement provided arbitration as a methodfor dispute resolution, the parties are not permitted to institute legal proceedings in a people’scourt.

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Under the Arbitration Law, an arbitral award is final and binding on the parties and if a party fails tocomply with an award, the other party to the award may apply to the people’s court forenforcement. A people’s court may refuse to enforce an arbitral award made by an arbitrationcommittee if there were mistakes, an absence of material evidence or irregularities over thearbitration proceedings, or the jurisdiction or constitution of the arbitration committee.

A party seeking to enforce an arbitral award of a foreign affairs arbitration body of the PRC againsta party who or whose property is not within the PRC may apply to a foreign court with jurisdictionover the case for enforcement. Similarly, an arbitral award made by a foreign arbitration body maybe recognised and enforced by the PRC courts in accordance with the principles of reciprocity orany international treaty concluded or acceded to by the PRC.

In respect of contractual and non-contractual commercial-law-related disputes which arerecognised as such for the purposes of PRC law, the PRC has acceded to the Convention on theRecognition and Enforcement of Foreign Arbitral Award (“New York Convention”) adopted on 10June 1958 pursuant to a resolution of the Standing Committee of the NPC passed on 2 December1986. The New York Convention provides that all arbitral awards made by a state which is a partyto the New York Convention shall be recognised and enforced by other parties to the New YorkConvention subject to their right to refuse enforcement under certain circumstances includingwhere the enforcement of the arbitral award is against the public policy of the state to which theapplication for enforcement is made. It was declared by the Standing Committee of the NPC at thetime of the accession of the PRC that (1) the PRC would only recognise and enforce foreignarbitral awards on the principle of reciprocity and (2) the PRC would only apply the New YorkConvention in disputes considered under PRC laws to be arising from contractual and non-contractual mercantile legal relations.

4. Taxation

The applicable income tax laws, regulations, notices and decisions (collectively referred to as“Applicable Foreign Enterprises Tax Law”) related to foreign investment enterprises and theirinvestors include the follows:

(1) Income Tax Law of the PRC on Foreign Investment Enterprises and Foreign Enterprisesadopted by the NPC on 9 April 1991

(2) Implementing Rules of the Income Tax Law of the PRC on Foreign Investment Enterprisesand Foreign Enterprises promulgated by the State Council, which came into effect on 1 July1991

(3) Notice Relating to taxes Applicable to Foreign Investment Enterprises / Foreign Enterprisesand Foreign Nationals in Relation to Dividends and Gains obtained from Holding andTransferring of Shares promulgated by State Tax Bureau on 21 July 1993

(4) Amendments to the Income Tax Law Applicable to Individuals of the PRC promulgated byStanding Committee of NPC on 30 August 1999

(5) Notice on Relevant Policies Concerning Individual Income Tax issued by Ministry of Financeand the State Tax Bureau on 13 May 1994

(6) Notice on Relevant Policies Concerning the Reduction of Income Tax on Interest and OtherIncome of Foreign Enterprises Derived from Sources in China issued by the State Council,which came into effect on 1 January 2000

(a) Income tax on foreign investment enterprises

According to the Applicable Foreign Enterprises Tax Law, foreign investment enterprises(including sino-foreign equity joint ventures, sino-foreign co-operative joint ventures andwholly foreign owned enterprises established in the territory of the PRC) is required to pay anational income tax at a rate of 30% of their taxable income and a local income tax at a rateof three per cent. of their taxable income.

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A foreign investment enterprise engaged in production having a period of operation of notless than ten years shall be exempted from income tax for the first two profit-making yearsand a 50% reduction in the income tax payable for the next three years. The income taxconcession for foreign investment enterprises engaged in the exploitation of resources suchas petroleum, natural gas, rare metals and precious metals are regulated separately by theState Council.

Foreign investment enterprises established in special economic zones, foreign enterpriseshaving an establishment in special economic zones engaged in production or businessoperations and foreign investment enterprises engaged in production in economic andtechnological zones may pay income tax at a reduced rate of 15%. Foreign investmententerprises engaged in production established in coastal economic open zones or in the oldurban districts of cities where the special economic zones or the economic andtechnological development zones are located may pay income taxes at a reduced rate of24%. A reduced income tax rate of 15 per cent. may apply to an enterprise located in suchregions which is engaged in energy, communication, harbour, wharf or other projectsencouraged by the State.

Losses incurred in a tax year may be carried forward for not more than five years.

The people’s governments of provinces, autonomous regions and municipalities directlyunder the central government may grant exemptions from or reduced local income tax for aforeign investment enterprise engaged in an industry or a project encouraged by the State.

(b) Value added tax

The Provisional Regulations of the People’s Republic of China Concerning Value Added Taxpromulgated by the State Council came into effect on 1 January, 1994. Under theseregulations and the Implementing Rules of the Provisional Regulations of the People’sRepublic of China Concerning Value Added Tax, value added tax is imposed on goods soldin or imported into the PRC and on processing, repair and replacement services providedwithin the PRC.

Value added tax payable in the PRC is charged on an aggregated basis at a rate of 13 or17% (depending on the type of goods involved) on the full price collected for the goods soldor, in the case of taxable services provided, at a rate of 17% on the charges for the taxableservices provided but excluding, in respect of both goods and services, any amount paid inrespect of value added tax included in the price or charges, and less any deductible valueadded tax already paid by the taxpayer on purchases of goods and services in the samefinancial year.

(c) Business tax

With effect from 1 January 1994, business that provide services including entertainmentbusiness, assign intangible assets or sell immovable property became liable to business taxat a rate ranging from three to 20 per cent. of the charges of the services provided,intangible assets assigned or immovable property sold, as the case may be.

(d) Tax on dividends from PRC enterprise with foreign investment

According to the Applicable Foreign Enterprises Tax Law, income such as dividends andprofits distribution from the PRC derived from a foreign enterprise which has noestablishment in the PRC is subject to a 10% withholding tax, subject to reduction asprovided by any applicable double taxation treaty, unless the relevant income is specificallyexempted from tax under the Applicable Foreign Enterprises Tax Law. The profit derived bya foreign investor from a PRC enterprise with foreign investment is exempted from PRC taxaccording to the Applicable Foreign Enterprises Tax Law.

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5. Sino-foreign equity joint venture

Sino-foreign equities joint venture are governed by the Law of the People’s Republic of ChinaConcerning Sino-foreign Equities Joint Venture, which was promulgated on 8 July 1979, and itsImplementation Regulations promulgated on 20 September 1983 (as amended)(together the “Sino-foreign Equity Law”).

(a) Procedures for establishment of a Sino-foreign equity joint venture

The establishment of a Sino-foreign equity joint venture will have to be approved byMOFTEC (or its delegated authorities). A Sino-foreign equity joint venture must also obtain abusiness licence from SAIC before it can commence business.

(b) Nature

A Sino-foreign equity joint venture is a limited liability company under the Sino-foreign EquityLaw. It is a legal person which may independently assume civil obligations, enjoy civil rightsand has the right to own, use and dispose of property. It is required to have a registeredcapital contributed by the Chinese and foreign investors. The liability of the Chinese andforeign investors are limited to the amount of registered capital contributed. Chinese andforeign investors may make their contributions by instalments and the registered capital mustbe contributed within the period as stated in the Sino-foreign Equity Joint Venture Contract.

(c) Profit distribution

The Sino-foreign Equity Law provides that after payment of taxes, a Sino-foreign equity jointventure must make contributions to a reserve fund, an employee bonus and welfare fund,and a development fund (“Three Funds”). The allocation ratio for the Three Funds may bedetermined by the enterprise. The enterprise is prohibited from distributing dividends unlessthe losses (if any) of previous years have been made up.

6. Wholly foreign-owned enterprise

Wholly foreign-owned enterprises are governed by the Law of the People’s Republic of China

Concerning Enterprises with Sole Foreign Investments , which was

promulgated on 12 April 1986 and amended on 31 October 2000, and its ImplementationRegulations promulgated on 12 December 1990 which was amended on 12 April 2001 (togetherthe “Foreign Enterprises Law”).

Sunpower Technology is a wholly foreign-owned enterprise and is therefore governed by theForeign Enterprise Law.

(a) Procedures for establishment of a wholly foreign-owned enterprise

The establishment of a wholly foreign-owned enterprise will have to be approved by theMinistry of Commerce (“MOFCOM”) (or its delegated authorities). If two or more foreigninvestors jointly apply for the establishment of a wholly foreign-owned enterprise, a copy ofthe contract between the parties must also be submitted to MOFCOM (or its delegatedauthorities) for its record. A wholly foreign-owned enterprise must also obtain a businesslicence from SAIC (or its delegated authorities) before it can commence business.

(b) Nature

A wholly foreign-owned enterprise is a limited liability company under the Foreign EnterpriseLaw. It is a legal person which may independently assume civil obligations, enjoy civil rightsand has the right to own, use and dispose of property. It is required to have a registeredcapital contributed by the foreign investor(s). The liability of the foreign investor(s) is limitedto the amount of registered capital contributed. A foreign investor may make itscontributions by instalments and the registered capital must be contributed within the periodas approved by MOFCOM (or its delegated authorities) in accordance with relevantregulations.

(c) Profit distribution

The Foreign Enterprise Law provides that after payment of taxes, a wholly foreign-ownedenterprise must make contributions to a reserve fund and an employee bonus and welfarefund. The allocation ratio for the employee bonus and welfare fund may be determined bythe enterprise. However, at least 10 per cent. of the after tax profits must be allocated to thereserve fund. If the cumulative total of allocated reserve funds reaches 50% of anenterprise’s registered capital, the enterprise will not be required to make any additionalcontribution. The enterprise is prohibited from distributing dividends unless the losses (ifany) of previous years have been made up.

Subject to compliance with relevant exchange rules and regulations, we may remit out ofPRC, profits that are lawfully earned in PRC by Sunpower Technology, our subsidiary inPRC, which is a wholly foreign-owned enterprise.

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APPENDIX H

THE AUDITED FINANCIAL STATEMENTS OFSUNPOWER PETROCHEMICAL FOR THE THREE YEARS ENDED

31 DECEMBER 2001, 2002 AND 2003

JIANGSU SUNPOWER PETROCHEMICAL ENGINEERING CO., LTD

STATEMENT OF DIRECTORS

In the opinion of the directors, the accompanying financial statements of the company and theconsolidated financial statements of the group set out on pages H-3 to H-27 are drawn up so as to give atrue and fair view of the state of affairs of the company and of the group as at December 31, 2001, 2002and 2003 and of the results and equity changes of the company and the group and cash flows of thegroup for the financial years then ended and at the date of this statement there are reasonable groundsto believe that the company will be able to pay its debts as and when they fall due.

ON BEHALF OF THE DIRECTORS

.....................................………..Guo Hong Xin

.....................................………..Ma Ming

April 10, 2004

H-1

AUDITORS’ REPORT TO THE MEMBERS OF


We have audited the accompanying financial statements of Jiangsu Sunpower PetrochemicalEngineering Co., Ltd set out on pages H-3 to H-27 for the financial years ended December 31, 2001,2002 and 2003, expressed in Renminbi. These financial statements are the responsibility of thecompany’s directors. Our responsibility is to express an opinion on these financial statements based onour audit. The financial statements for the year ended December 31, 2000 were audited by anotherfirm of certified public accountants for tax reporting purposes in the People’s Republic of China.

We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by the directors, as well as evaluating theoverall financial statements presentation. We believe that our audit provides a reasonable basis for ouropinion.

In our opinion, the accompanying financial statements of the company and the consolidated financialstatements of the group are properly drawn up in accordance with the provisions of the SingaporeStatement of Accounting Standards for 2001 and 2002 and the Singapore Financial Reporting Standardsfor 2003 so as to give a true and fair view of the state of affairs of the company and of the group as atDecember 31, 2001, 2002 and 2003 and of the results and equity changes of the company and thegroup and cash flows of the group for the financial years ended on that date.

This report and the accompanying financial statements of the company and the consolidated financialstatement of the group are prepared for the purpose of the restructuring exercise and the initial publicoffering in Singapore of the holding company to be formed pursuant to the restructuring exercise andshould not be used for any other purposes.

Deloitte & ToucheCertified Public Accountants


SingaporeApril 10, 2004

H-2


CONSOLIDATED BALANCE SHEETSDecember 31, 2001, 2002, 2003

(Expressed in Renminbi)

GROUPNote 2001 2002 2003

RMB’000 RMB’000 RMB’000ASSETS

Current assets:Cash 4,290 4,036 6,336Trade receivables 5 9,766 14,422 39,278Other receivables and prepayments 6 5,157 8,849 12,615Inventories 7 13,168 26,377 23,423


Non-current assets:Property, plant and equipment 8 7,270 9,620 18,127Investment in subsidiaries 9 – – – Advance payment for

investment in subsidiary 9 – 275 4,536Long term investment 10 2,438 – 30


Total assets 42,089 63,579 104,345

LIABILITIES AND EQUITY

Current liabilities:Trade payables 11 24,002 39,895 52,855Other payables 12 10,002 16,697 17,293Short term loans 13 1,000 1,150 12,000Current portion of long term bank loans 13 62 100 239Income tax payable 497 279 2,324


Non-current liability:Long term bank loans 13 241 230 325

Minority interest 332 442 1,382

Capital and reserves:Paid-up capital 14 10,000 10,000 10,000General reserve 15 – – 1,490Accumulated (losses) profits (4,047) (5,214) 6,437

Total equity 5,953 4,786 17,927

Total liabilities and equity 42,089 63,579 104,345

See accompanying notes to financial statements.

H-3


BALANCE SHEETS December 31, 2001, 2002, 2003


COMPANYNote 2001 2002 2003

RMB’000 RMB’000 RMB’000ASSETS

Current assets:Cash 4,286 3,393 3,908Trade receivables 5 9,745 14,234 37,082Other receivables and prepayments 6 5,137 9,837 9,354Inventories 7 12,967 26,148 22,937


Non-current assets:Property, plant and equipment 8 6,684 8,552 16,484Investment in subsidiaries 9 1,000 1,600 2,275Advance payment for

investment in subsidiary 9 – 275 4,536Long term investment 10 2,438 – 30


Total assets 42,257 64,039 96,606


Current liabilities:Trade payables 11 24,002 40,039 47,123Other payables 12 9,834 16,430 17,248Short term loans 13 1,000 1,150 12,000Current portion of long term bank loans 13 62 100 100Income tax payable 497 279 2,040


Non-current liability:Long term bank loans 13 241 230 130

Capital and reserves:Paid-up capital 14 10,000 10,000 10,000General reserve 15 – – 1,490Accumulated (losses) profits (3,379) (4,189) 6,475

Total equity 6,621 5,811 17,965

Total liabilities and equity 42,257 64,039 96,606


H-4


CONSOLIDATED PROFIT AND LOSS STATEMENTSFor the years ended December 31, 2001, 2002 and 2003


GROUPNote 2001 2002 2003

RMB’000 RMB’000 RMB’000

Revenue 16 45,149 65,463 110,629

Cost of sales (35,572) (54,232) (78,358)

Gross profit 9,577 11,231 32,271

Other operating income 17 11 22 1,034

Selling and distribution expenses (5,942) (5,706) (6,614)

Research expenses (627) (1,249) (2,117)

Administrative expenses 18 (4,074) (5,118) (7,963)

Other operating expenses (326) (64) (93)

(Loss) Profit from operations 19 (1,381) (884) 16,518

Finance costs 20 (62) (107) (268)

(Loss) Profit before income tax (1,443) (991) 16,250

Income tax expense 21 (511) (467) (2,493)

(Loss) Profit after income tax (1,954) (1,458) 13,757

Minority interest 168 291 (616)

(Loss) Profit for the year (1,786) (1,167) 13,141


H-5


PROFIT AND LOSS STATEMENTS For the years ended December 31, 2001, 2002 and 2003


COMPANYNote 2001 2002 2003

RMB’000 RMB’000 RMB’000

Revenue 16 45,149 65,298 97,704

Cost of sales (35,572) (54,073) (69,618)

Gross profit 9,577 11,225 28,086

Other operating income 17 10 20 1,022

Selling and distribution expenses (5,942) (5,706) (6,614)

Research expenses (627) (1,249) (2,117)

Administrative expenses 18 (3,237) (4,473) (5,655)

Other operating expenses (326) (64) (93)

(Loss) Profit from operations 19 (545) (247) 14,629

Finance costs 20 (62) (96) (266)

(Loss) Profit before income tax (607) (343) 14,363

Income tax expense 21 (511) (467) (2,209)

(Loss) Profit after income tax (1,118) (810) 12,154


H-6


STATEMENTS OF CHANGES IN EQUITYFor the years ended December 31, 2001, 2002 and 2003


Paid up General Accumulatedcapital reserves profits (losses) Total

RMB’000 RMB’000 RMB’000 RMB’000GROUP

Balance as at January 1, 2001 10,000 – (2,261) 7,739

Loss for the year – – (1,786) (1,786)

Balance as at December 31, 2001 10,000 – (4,047) 5,953

Loss for the year – – (1,167) (1,167)


Profit for the year – – 13,141 13,141

Transfer – 1,490 (1,490) –

Balance as at December 31, 2003 10,000 1,490 6,437 17,927

COMPANY


Loss for the year – – (1,118) (1,118)


Loss for the year – – (810) (810)


Profit for the year – – 12,154 12,154

Transfer – 1,490 (1,490) –



H-7


CONSOLIDATED CASH FLOW STATEMENTFor the years ended December 31, 2001, 2002 and 2003


GROUP2001 2002 2003

RMB’000 RMB’000 RMB’000

Cash flows from operating activities:(Loss) Profit before income tax (1,443) (991) 16,250Adjustments for:

Depreciation expense 660 1,095 1,379Allowance for doubtful receivables:

Trade receivables 302 529 138Other receivables 473 46 11

Allowance for stock obsolescence – – 183Interest income (11) (22) (27)Interest expense 62 107 268

Operating profit before working capital changes 43 764 18,202

Trade receivables (699) (5,185) (24,994)Other receivables and prepayments 841 (3,738) (3,777)Inventories (9,948) (13,209) 2,771Trade payables 9,710 15,893 12,960Other payables 5,706 6,695 596

Cash generated from operations 5,653 1,220 5,758

Interest paid (62) (107) (268)Interest received 11 22 27Income tax paid (14) (685) (448)

Net cash from operating activities 5,588 450 5,069

Cash flows used in investing activities:Purchase of plant and equipment (3,586) (3,445) (9,886)Advance payment for investment in subsidiary – (275) (4,261)Long term investment 1,438 2,438 (30)Net contribution by minority shareholders 177 401 324

Net cash flows used in investing activities (1,971) (881) (13,853)

Cash flows from financing activities:(Decrease) Increase in short term loan (100) 150 10,850Increase in long term loan 303 27 234

Net cash from financing activities 203 177 11,084

Net increase (decrease) in cash 3,820 (254) 2,300Cash at beginning of year 470 4,290 4,036

Cash at end of year 4,290 4,036 6,336


H-8


NOTES TO FINANCIAL STATEMENTSFor the year ended December 31, 2001, 2002 and 2003


1 GENERAL

Jiangsu Sunpower Petrochemical Engineering Co., Ltd (“the company”) is incorporated in thePeople’s Republic of China with its registered address at Nanjing Jiangning Science Park, No. 88,Zhushan Road, Nanjing China 211100 and principal place of business at Room 301, SuningUniversal Mansion, No. 188, Guangzhou Road, Nanjing China 210024. The financial statementsare expressed in Renminbi (“RMB”).

The company is principally engaged in the manufacture and sale of pressure vessels, and heatpipes and heat pipes exchanger, designing, manufacturing and sale of special pipe racks andhanger, provision of installation and commissioning of relevant projects and provision of technicalservices and consultation for a term of 10 years commencing April 9, 1997.

The principal activities of the subsidiaries are detailed in Note 9 to the financial statements.

The financial statements of the company for financial years ended December 31, 2001, 2002, and2003 were authorised for issue by the management/directors on April 10, 2004.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) BASIS OF ACCOUNTING – The financial statements for the financial years endedDecember 31, 2001, 2002 and 2003 are prepared in accordance with the historical costconvention, and are drawn up in accordance with the Singapore Statement of AccountingStandards for 2001 and 2002, and the Singapore Financial Reporting Standards for 2003.

b) BASIS OF CONSOLIDATION – The consolidated financial statements incorporate thefinancial statements of the company and enterprises controlled by the company (itssubsidiaries) made up to the end of the financial year. Control is achieved when thecompany has the power to govern the financial and operating policies of an investeeenterprise so as to obtain benefits from its activities. On acquisition, the assets andliabilities of the relevant subsidiaries are measured at their fair values at the date ofacquisition. The interest of minority shareholders is stated at the minority’s proportion of thefair values of the assets and liabilities recognised. The results of subsidiaries acquired ordisposed of during the year are included in the consolidated profit and loss statement fromthe effective date of acquisition or up to the effective date of disposal, as appropriate.Where necessary, adjustments are made to the financial statements of the subsidiaries tobring the accounting policies used in line with those used by other members of the group.All significant intercompany transactions and balances between group enterprises areeliminated on consolidation.

In the company’s financial statements, investment in subsidiaries is carried at cost less anyimpairment in net recoverable value that has been recognised in the profit and lossstatement.

H-9

c) GOODWILL – Goodwill arising on consolidation represents the excess of the cost ofacquisition over the fair value of the group’s share of net assets of the acquired subsidiariesat the date of acquisition. Goodwill is recognised as an asset and amortised over itsestimated useful life of 20 years on a straight-line basis.

Negative goodwill represents the excess of the fair value of the group’s share of net assetsacquired over the cost of acquisition. Negative goodwill is presented as the same balancesheet classification as goodwill. To the extent that the negative goodwill relates toexpectations of future losses and expenses that can be reliably measured, but do notrepresent identifiable liabilities, the portion of negative goodwill is recognised in the profitand loss statement when the future losses and expenses are incurred. Any remainingnegative goodwill, not exceeding the fair values of the non-monetary assets acquired, isrecognised in the profit and loss statement over the remaining weighted average useful lifeof those assets. Negative goodwill in excess of the fair value of those assets is recognisedin the profit and loss statement immediately.

d) FOREIGN CURRENCY TRANSACTIONS – The books of the company are maintained in itsmeasurement currency, namely Renminbi. Transactions in foreign currencies are recordedin Renminbi at the rates ruling at the date of the transactions. At each balance sheet date,recorded monetary balances are denominated in foreign currencies are recorded at therates ruling at the balance sheet date. All realised and unrealised exchange adjustmentgains and losses are dealt with in the profit and loss statement.

The financial statements of the subsidiaries are expressed in Renminbi.



Building – 5%Land use rights – 2%Plant and machinery – 10%Furniture, fixtures and equipment – 20%Motor vehicles – 20%

Land use rights pertain to the payment for rights of the usage of land over 50 years.





g) FINANCIAL ASSETS – The principal financial assets are cash, trade receivables and otherreceivables. Trade receivables and other receivables are stated at their nominal value asreduced by appropriate allowances for estimated irrecoverable amounts. The accountingpolicy for other investments is described below.

H-10

h) FINANCIAL LIABILITIES AND EQUITY – Financial liabilities and equity instruments areclassified according to the substance of the contractual arrangements entered into.

Significant financial liabilities include interest-bearing loans, trade payables and otherpayables.

Interest-bearing loans are recorded at the proceeds received, net of direct issue costs.Finance charges, are accounted for on an accrual basis and are added to the carryingamount of the instrument to the extent that they are not settled in the period in which theyarise.



i) LEASES – Leases are classified as finance leases whenever the terms of the lease transfersubstantially all the risks and rewards of ownership to the lessee. All other leases areclassified as operating leases.

Assets held under finance leases are recognised as assets of the Group at their fair value atthe date of acquisition. The corresponding liability to the lessor is included in the balancesheet as a finance lease obligation. Finance costs, which represent the difference betweenthe total leasing commitments and the fair value of the assets acquired, are charged to theincome statement over the term of the relevant lease using the effective interest ratemethod.


j) IMPAIRMENT OF ASSETS – At each balance sheet date, the company reviews the carryingamounts of its tangible and intangible assets to determine whether there is any indicationthat those assets have suffered an impairment loss. If any such indication exists, therecoverable amount of the asset is estimated in order to determine the extent of theimpairment loss (if any). If the recoverable amount of an asset is estimated to be less thanits carrying amount, the carrying amount of the asset is reduced to its recoverable amount.Impairment losses are recognised as an expense immediately.


k) REVENUE RECOGNITION – Revenue from sale of goods is recognised when significantrisks and rewards of ownership are transferred to the buyer and the amount of revenue andthe costs of the transactions (including future costs) can be measured reliably.

Revenue and profits from contracts (which are less than one year) are recognised on thecompleted contract method of accounting, that is, profits are recorded when the contractsare completed. However, any estimated losses on uncompleted contracts are recognised inadvance to completion to the extent determinable.


H-11

l) INCOME TAX – Tax expense is determined on the basis of tax effect accounting, using theliability method, and it is applied to all significant temporary differences arising between thecarrying amount of assets and liabilities in the financial statements and the correspondingtax bases used in the computation of taxable profit, except that a debit balance for deferredtax is not carried forward unless there is a reasonable expectation of realisation.


m) RETIREMENT BENEFIT COSTS – Payments to defined contribution retirement benefitplans (including state-managed retirement benefit schemes) are charged as an expensewhen incurred.

n) BORROWING COSTS – Borrowing costs directly attributable to the acquisitions,construction or production of qualifying assets, which are assets that necessarily take asubstantial period of time to get ready for their intended use or sale, are added to the cost ofthose assets, until such time as the assets are substantially ready for their intended use orsale. Investment income earned on the temporary investment of specific borrowings pendingtheir expenditure on qualifying assets is deducted from the costs of those assets.

o) RESERVES – In accordance with the PRC Company Law and the Company’s Articles ofAssociation, the company as a PRC domestic enterprise, is required to appropriate 10%and 5% to 10% of its profit after taxation as reported in its PRC statutory financialstatements to the statutory reserve fund and statutory public welfare fund respectively.

p) PROVISIONS – Provisions are recognised when the company and the group has a presentobligation as a result of a past event where it is probable that it will result in an outflow ofeconomic benefits that can be reasonably estimated.

q) OTHER INVESTMENTS – Investments held for long-term are stated at cost less anyimpairment in net recoverable value and investments held for short-term are stated at thelower of cost or market value determined on a portfolio basis.

r) MINORITY INTEREST – Minority interest is stated at the appropriate proportion of the post-acquisition fair value of the net identifiable assets of the subsidiary.

s) GOVERNMENT GRANTS – Government grants relating to the purchase of property, plantand equipment are included in the balance sheet as deferred income by deducting the grantin arriving at the carrying amount of the assets. Government grants relating to expenditures,which are not capitalised, are credited to profit and loss statement to match the relatedexpenditure when incurred.

3 FINANCIAL RISKS AND MANAGEMENT


The Group is exposed to interest rate risk through the impact of rate changes on interestbearing liabilities and assets. These exposures are managed partly by using natural hedgesthat arise from offsetting interest rate sensitive assets and liabilities.

H-12

b) Credit Risk

The Group’s credit risk is primarily attributable to its trade and other receivables. Theamounts presented in the balance sheet are net of allowances for doubtful receivables, ifany, as estimated by the Group’s management based on prior experience and the currenteconomic environment.



Concentration of credit risk exist when changes in economic, industry or geographic factorssimilarly affect Groups of counterparties whose aggregate credit exposure is significant inrelation to the Group’s total credit exposure.

Although the Group’s credit exposure is concentrated mainly in the People’s Republic ofChina, there is no significant concentration of credit risk with any customer or Group ofcustomers.


The Group’s exposure to foreign currency risk is minimal as substantially mainly all itstransactions are in Renminbi.

e) Liquidity Risk

The Group is exposed to minimal liquidity risk as a substantial portion of its financial assetsand financial liabilities are due within one year and can finance its operations from existingshareholders’ funds.



4 RELATED PARTY TRANSACTIONS

Related parties are entities with common direct or indirect shareholders and/or directors. Partiesare considered to be related if one party has the ability to control the other party or exercisesignificant influence over the other party in making financial and operating decisions.

Some of the company’s transaction and arrangements are with related parties and the effect ofthese on the basis determined between the parties are reflected in these financial statements. Thebalances are unsecured, without fixed repayment terms and interest free unless stated otherwise.

Significant related parties transactions:

2001 2002 2003RMB’000 RMB’000 RMB’000

GROUP

Reimbursement of operating expenses 114 74 78

H-13

5 TRADE RECEIVABLES

2001 2002 2003RMB’000 RMB’000 RMB’000

GROUP

Outside parties 10,115 15,300 40,059Less: Allowance for doubtful debts (349) (878) (1,016)

9,766 14,422 39,043Related party (Note 4) – – 235

Net 9,766 14,422 39,278


Balance at beginning of year 47 349 878Charge to profit and loss 302 529 138

Balance at end of year 349 878 1,016

COMPANY

Outside parties 10,094 15,112 37,863Less: Allowance for doubtful debts (349) (878) (1,016)

9,745 14,234 36,847Related party (Note 4) – – 235

Net 9,745 14,234 37,082



Balance at end of year 349 878 1,016

6 OTHER RECEIVABLES AND PREPAYMENTS

2001 2002 2003RMB’000 RMB’000 RMB’000

GROUP

Advance payments for purchases 646 2,368 6,471Recoverables 1,438 1,438 1,438Staff and other loans 1,026 2,015 3,227Prepayments 112 243 157Deposits 4 135 1,141Others 631 108 199

Total 3,857 6,307 12,633Due from directors 1,569 2,945 – Related parties (Note 4) 528 440 836

5,954 9,692 13,469Less: Allowance for doubtful other receivables (797) (843) (854)

5,157 8,849 12,615

H-14

2001 2002 2003RMB’000 RMB’000 RMB’000



Balance at end of year 797 843 854

COMPANY

Advance payment for purchases 337 2,292 4,162Recoverable 1,438 1,438 1,438Staff and other loans 1,012 1,997 2,921Prepayments 112 230 121Deposits 4 132 228Others 632 107 38

Total 3,535 6,196 8,908Due from directors 1,569 2,945 – Related parties (Note 4) 528 440 – Subsidiaries (Note 9) 300 1,097 1,298

5,932 10,678 10,206Less: Allowance for doubtful other receivables (795) (841) (852)

Net 5,137 9,837 9,354



Balance at end of year 795 841 852

The amount due from directors, staff and other loans, and amount due from related parties arenon-trade in nature, unsecured, interest-free and without fixed terms of repayment.

H-15

7 INVENTORIES

2001 2002 2003RMB’000 RMB’000 RMB’000

GROUP

At cost:Raw materials 1,719 1,060 2,256Work-in-progress 5,329 9,852 16,045Finished goods 6,120 15,465 5,305

13,168 26,377 23,606Less: Allowance for obsolescence – – (183)

13,168 26,377 23,423

Movement in above allowance:

Charge for the year and balance at December 31 – – 183

2001 2002 2003RMB’000 RMB’000 RMB’000

COMPANY

At cost:Raw materials 1,657 995 2,165Work-in-progress 5,190 9,771 15,698Finished goods 6,120 15,382 5,074

12,967 26,148 22,937

H-16

8 PROPERTY, PLANT AND EQUIPMENT


GROUP rights buildings machinery equipment vehicles in-progress TotalRMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Cost:

At January 1, 2001 – 2,085 1,494 563 1,223 – 5,365Additions – 1,643 703 459 558 223 3,586

At December 31, 2001 – 3,728 2,197 1,022 1,781 223 8,951

Additions 400 335 1,793 416 177 324 3,445Transfer – 470 17 – – (487) –

At December 31, 2002 400 4,533 4,007 1,438 1,958 60 12,396


At December 31, 2003 400 5,831 5,654 1,884 2,749 5,764 22,282


At January 1, 2001 – 345 269 155 252 – 1,021

Depreciation – 127 228 148 157 – 660

At December 31, 2001 – 472 497 303 409 – 1,681

Depreciation 40 143 359 230 323 – 1,095

At December 31, 2002 40 615 856 533 732 – 2,776

Depreciation 40 155 521 299 364 – 1,379

At December 31, 2003 80 770 1,377 832 1,096 – 4,155

Net book value:

At December 31, 2001 – 3,256 1,700 719 1,372 223 7,270

At December 31, 2002 360 3,918 3,151 905 1,226 60 9,620

At December 31, 2003 320 5,061 4,277 1,052 1,653 5,764 18,127

H-17


COMPANY rights buildings machinery equipment vehicles in-progress TotalRMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Cost:

At January 1, 2001 – 2,085 1,494 563 1,223 – 5,365

Additions – 1,643 115 437 558 223 2,976

At December 31, 2001 – 3,728 1,609 1,000 1,781 223 8,341

Additions 400 335 1,333 406 – 324 2,798Transfer – 470 17 – – (487) –

At December 31, 2002 400 4,533 2,959 1,406 1,781 60 11,139


At December 31, 2003 400 5,831 4,605 1,703 1,891 5,764 20,194


At January 1, 2001 – 345 269 155 252 – 1,021

Depreciation – 127 206 146 157 – 636

At December 31, 2001 – 472 475 301 409 – 1,657

Depreciation 40 143 208 226 313 – 930

At December 31, 2002 40 615 683 527 722 – 2,587

Depreciation 40 155 335 282 311 – 1,123

At December 31, 2003 80 770 1,018 809 1,033 – 3,710

Net book value:At December 31, 2001 – 3,256 1,134 699 1,372 223 6,684

At December 31, 2002 360 3,918 2,276 879 1,059 60 8,552

At December 31, 2003 320 5,061 3,587 894 858 5,764 16,484

H-18

9 INVESTMENT IN SUBSIDIARIES

2001 2002 2003RMB’000 RMB’000 RMB’000

GROUPAdvance payment for investment in subsidiary – 275 4,536

COMPANYUnquoted capital, at cost 1,000 1,600 2,275Advance payment for investment in subsidiary – 275 4,536

1,000 1,875 6,811

Name of subsidiaries/ Cost of investment Effective percentage ofDate of incorporation Principal activities (RMB’000) equity held by the Group

2001 2002 2003 2001 2002 2003% % %

Nanjing Zhongshengyuan Design and – 600 600 – 60 60Machinery and Electrical construction ofEquipment Co., Ltd machines and 28 June 2002 (1) industrial tools

and other kindsof technical support

Nanjing Sunpower Provider of – – 400 – – 80Energy Environmental services andEngineering and Designs solutions to the Co., Ltd environmental7 August 2003 (1) industry

Nanjing Zhi Yuan Manufacturing 1,000 1,000 1,000 50 50 50Electronic Science and trading ofCo., Ltd electronic 20 December 2000 (1) devices

Wuhan Zhongshengyuan Provider of – – 275 – – 55Energy Environmental services andProtection Project Co., Ltd solutions to the25 December 2002 (1) environmental industry

Total 1,000 1,600 2,275

Name of subsidiaries/ Advance payment Effective percentage ofDate of incorporation Principal activities for investment (RMB’000) equity held by the Group

2001 2002 2003 2001 2002 2003% % %

Wuhan Zhongshengyuan Provider of – 275 – – 55 –Energy Environmental services andProtection Project Co., Ltd solutions to the25 December 2002 environmental

industry

Jiangsu Shengnuo Manufacturing – – 4,536 – – *Heat Pipes Group and trading ofCo., Ltd heat pipes20 August 1993

Total – 275 4,536

* According to management, the effective control of this 35% owned subsidiary, Jiangsu Shengnuo HeatPipes Group Co., Ltd, took effect from March 2, 2004. The company has entered into an agreement toacquire an additional 16% equity interest in this subsidiary.

H-19

Note on auditors:

(1) Audited by Shanghai East Asia Certified Public Accountants Co., Ltd, located at 6F, 239Jiang Ning Road, China 200041, for 2001, 2002 and 2003 for consolidation purposes.

The place of incorporation and operations of the subsidiaries are the People’s Republic of China.

10 LONG TERM INVESTMENT

2001 2002 2003RMB’000 RMB’000 RMB’000

GROUP AND COMPANY

Unquoted capital, at cost:Zhangjiagang Sunpower Jiangnan Chemical

Industrial Machinery Co., Ltd 2,438 – – Others – – 30

2,438 – 30

In 2001, this represented a 32% investment in Zhangjiagang Sunpower Jiangnan ChemicalIndustrial Machinery Co., Ltd, incorporated in the People’s Republic of China. This investmentwas not accounted for using the equity method as the company then intended to hold thisinvestment temporarily, with view to its subsequent disposal in the near future. The companydisposed off this investment in 2002 to a third party at a cost of $2,438,000.

11 TRADE PAYABLES

2001 2002 2003RMB’000 RMB’000 RMB’000

GROUP

Customer advances 15,576 30,887 35,219Outside parties 8,426 9,008 17,636

24,002 39,895 52,855

COMPANY

Customer advances 15,576 30,887 26,328Outside parties 8,426 8,998 15,555Related party – – 5,086Subsidiary (Note 9) – 154 154

24,002 40,039 47,123

H-20

12 OTHER PAYABLES

2001 2002 2003RMB’000 RMB’000 RMB’000

GROUP

Accruals for late costs on contracts 5,375 12,544 2,029Accrual for property, plant and equipment 1,148 1,148 1,148Value added taxes 776 329 1,876Accruals 385 479 2,152Others 370 1,287 924

8,054 15,787 8,129Due to directors 1,457 910 9,039Related parties (Note 4) 491 – 125

10,002 16,697 17,293

COMPANY

Accrual for late costs contracts 5,375 12,544 2,029Accrual for property, plant and equipment 1,148 1,148 1,148Value added taxes 776 329 1,740Accruals 359 442 924Others 342 1,245 841

8,000 15,708 6,682Due to directors 1,343 722 8,898Related parties (Note 4) 491 – – Subsidiary (Note 9) – – 1,668

9,834 16,430 17,248

The amount due to directors and amount due to related parties are non-trade in nature,unsecured, interest-free and without fixed terms of repayment.

13 BANK LOANS

2001 2002 2003RMB’000 RMB’000 RMB’000

GROUP

Short term loans

Financial institution – Note (a) 1,000 1,150 3,000Bank loan 1 – Note (b) – – 3,000Bank loan 2 – Note (c) – – 2,000Bank loan 3 – Note (c) – – 4,000

1,000 1,150 12,000

Long term loans – Note (d)

Bank loan 4 303 242 180Bank loan 5 – 88 50

Bank loan 6 – – 184Bank loan 7 – – 150

303 330 564Less: Current portion (62) (100) (239)

Non current portion 241 230 325

H-21

2001 2002 2003RMB’000 RMB’000 RMB’000

COMPANY

Short term loans

Financial institution – Note (a) 1,000 1,150 3,000Bank loan 1 – Note (b) – – 3,000Bank loan 2 – Note (c) – – 2,000Bank loan 3 – Note (c) – – 4,000

1,000 1,150 12,000

Long term loans – Note (d)

Bank loan 4 – Note 303 242 180Bank loan 5 – Note – 88 50

303 330 230Less: Current portion (62) (100) (100)

Non current portion 241 230 130

(a) The short-term bank loans payable to a financial institution bear interest ranging from 5.43%to 6.64% per annum (2002 : 5.43% and 2001 : 5.7%). The loans are secured by buildingsand land use rights with a carrying value of RMB 1,961,000 (2002 and 2001 : RMB2,103,000 and RMB 1,771,000).

(b) Short term loan 1 is payable to a bank, bears an interest at 4.2% per annum. The loan issecured against a pledge on the land use rights with a carrying value of RMB 5,764,000.

(c) The short term loans 2 and 3 are payable to a bank, bear interest at 4.2% per annum andare guaranteed by a third party.

(d) The long term loans 4 to 7 payable to banks are repayable in monthly instalments. Theloans bear interest at 6.03% per annum and are secured by the motor vehicles with carryingvalue of RMB 1,137,000 (2002 and 2001 : RMB 615,000 and RMB 554,000) for the groupand with carrying value of RMB 492,000 (2002 and 2001 : RMB 615,000 and RMB 554,000)for the company.

14 PAID-UP CAPITAL

2001 2002 2003RMB’000 RMB’000 RMB’000

GROUP AND COMPANY

Registered and paid-up capital 10,000 10,000 10,000

15 GENERAL RESERVE

2001 2002 2003RMB’000 RMB’000 RMB’000

GROUP AND COMPANY

Reserve fund – – 993Enterprise expansion fund – – 497

– – 1,490

H-22

16 REVENUE2001 2002 2003

RMB’000 RMB’000 RMB’000GROUP

Sales of goods:Pressure vessels 17,896 29,691 37,473Heat pipes and heat pipes exchanger 11,488 12,980 36,083Pipe supports 14,665 17,633 18,226

44,049 60,304 91,782Waste gas and energy recovery system 374 1,733 3,726Others 726 3,426 15,121

Total 45,149 65,463 110,629

COMPANY

Sales of goods:Pressure vessels 17,896 29,691 37,473Heat pipes and heat pipe exchangers 11,488 12,980 36,083Pipe supports 14,665 17,633 18,226

44,049 60,304 91,782Waste gas and energy recovery system 374 1,733 3,726Others 726 3,261 2,196

Total 45,149 65,298 97,704

17 OTHER OPERATING INCOME

2001 2002 2003RMB’000 RMB’000 RMB’000

GROUP

Interest income 11 22 27Government grants – – 1,000Others – – 7

Total 11 22 1,034

COMPANY

Interest income 10 20 15Government grants – – 1,000Others – – 7

Total 10 20 1,022

H-23

18 ADMINISTRATIVE EXPENSES2001 2002 2003

RMB’000 RMB’000 RMB’000GROUP

Bad debts allowance 775 575 149Salaries and wages 633 1,353 2,310Bad debts written off 500 – 7Office expenses 485 581 731Depreciation 463 626 714Travelling and transportation 420 681 1,239Entertainment 211 275 453Insurance 113 215 199Staff benefits 90 184 248Repair and maintenance 76 110 116Stamp duty and other taxes 75 33 33Rental 66 47 97Courses 54 90 128Low cost consumables 44 24 208Utilities 20 33 88Defined contribution plans 9 51 161Telecommunication – – 83Consultancy – – 301Stock obsolescence – – 183Others 40 240 515

Total 4,074 5,118 7,963

COMPANY

Bad debts allowance 773 575 149Salaries and wages 570 1,118 1,739Office expenses 495 578 719Depreciation 463 613 643Travelling and transportation 219 588 851Entertainment 211 243 219Insurance 113 201 184Staff benefits 90 184 248Repair and maintenance 76 110 116Stamp duty and other taxes 74 31 33Courses 52 85 112Low cost consumables 44 24 181Utilities 20 29 79Defined contribution plans – 25 62Telecommunication – – 83Others 37 69 237

Total 3,237 4,473 5,655

H-24

19 (LOSS) PROFIT BEFORE INCOME TAX

In addition to the charges and credits disclosed elsewhere in the notes to the profit and lossaccount, this item includes the following charges:

2001 2002 2003RMB’000 RMB’000 RMB’000

GROUP

Salaries and wages 2,602 3,637 5,019Defined contribution plans 9 51 161Directors’ remuneration 77 223 209

COMPANY

Salaries and wages 2,539 3,402 4,448Defined contribution plans – 25 62Directors’ remuneration 77 223 209

2001 2002 2003GROUP

Number of employees at the end of the financial year 194 344 418

COMPANY

Number of employees at the end of the financial year 177 309 361

20 FINANCE COSTS

This relates to interest expenses on the term loans.

21 INCOME TAX EXPENSE

2001 2002 2003RMB’000 RMB’000 RMB’000

GROUP

Current 511 467 2,493

COMPANY

Current 511 467 2,209

In 2003, pursuant to the relevant laws and regulations in PRC, the company being an advanced hi-tech industry, applied and obtained a tax concession of 15%. In 2001 and 2002, the company didnot enjoy any tax incentives and was taxed at the statutory tax rate of 33%.

H-25

The income tax expense varied from the amount of income tax expense determined by applyingthe tax rate of 33% to profit before income tax as a result of the following differences:

2001 2002 2003RMB’000 RMB’000 RMB’000

GROUP

Income tax (benefits) expense at applicable rate (476) (327) 5,363Effect of tax concession – – (2,585)Benefits not recognised:

Tax losses 476 327 – Other timing difference 256 190 110

Non-allowable (taxable) items 255 277 (395)

511 467 2,493

Effective tax rate NA NA 15.3%

COMPANY

Income tax (benefits) expense at applicable rate (200) (113) 4,740Effect of tax concession – – (2,585)Benefits not recognised:

Tax losses 200 113 – Other timing difference 255 190 49

Non-allowable items 256 277 5

511 467 2,209

Effective tax rate NA NA 15.4%

22 OPERATING LEASE COMMITMENTS

2001 2002 2003RMB’000 RMB’000 RMB’000

GROUP

Minimum lease payments paid under operating leases 86 53 113

At the balance sheet date, commitments in respect of operating leases with a term of more thanone year were as follows:

2001 2002 2003RMB’000 RMB’000 RMB’000

Within 1 year 24 13 17Within 2 to 5 years 40 20 20After 5 years – – –

2001 2002 2003RMB’000 RMB’000 RMB’000

COMPANY

Minimum lease payments paid under operating leases 20 10 16

H-26


2001 2002 2003RMB’000 RMB’000 RMB’000

Within 1 year 24 10 10Within 2 to 5 years 40 30 20After 5 years - – –

23 CAPITAL COMMITMENTS

Capital expenditure not provided for in the accounts:

2001 2002 2003RMB’000 RMB’000 RMB’000

GROUP

Contracted but not provided for acquisitionof property, plant and equipment 3,445 9,886 2,090

COMPANY

Contracted but not provided for acquisitionof property, plant and equipment 2,798 9,055 2,090

24 COMPARATIVE FIGURES

The financial statements for the year ended 31 December 2000 were audited by another firm ofcertified public accountants for tax reporting purposes in the People’s Republic of China.

H-27

APPENDIX I

THE AUDITED FINANCIAL STATEMENTS OFSUNPOWER PETROCHEMICAL FOR THE FOUR-MONTH

PERIOD ENDED 30 APRIL 2004



In the opinion of the directors, the accompanying financial statements of the company and theconsolidated financial statements of the group set out on pages I-2 to I-26 are drawn up so as to give atrue and fair view of the state of affairs of the company and of the group as at April 30, 2004 and of theresults and equity changes of the company and the group and cash flows of the group for the fourmonths financial period then ended and at the date of this statement there are reasonable grounds tobelieve that the company will be able to pay its debts as and when they fall due.


.....................................………..Guo Hong Xin

.....................................………..Ma Ming

July 31, 2004

I-1

AUDITORS’ REPORT TO THE MEMBERS OF


We have audited the accompanying financial statements of Jiangsu Sunpower PetrochemicalEngineering Co., Ltd set out on pages I-3 to I-26 for the financial period ended April 30, 2004 expressedin Renminbi. These financial statements are the responsibility of the company’s directors/managements.Our responsibility is to express an opinion on these financial statements based on our audit.


In our opinion, the accompanying financial statements of the company and the consolidated financialstatements of the group are properly drawn up in accordance with the provisions of the SingaporeFinancial Reporting Standards so as to give a true and fair view of the state of affairs of the companyand of the group as at April 30, 2004 and of the results and equity changes of the company and thegroup and cash flows of the group for the four months financial period ended on that date.

This report and the accompanying financial statements of the company and the consolidated financialstatements of the group are prepared for the purpose of a restructuring exercise for an initial publicoffering in Singapore and should not be used for any other purposes.

Deloitte & ToucheCertified Public Accountants


SingaporeJuly 31, 2004

I-2

I-3


BALANCE SHEETSApril 30, 2004


GROUP COMPANYApril 30, December 31, April 30, December 31,

Note 2004 2003 2004 2003 RMB’000 RMB’000 RMB’000 RMB’000

ASSETS

Current assets:Cash and bank balances 10,989 6,336 6,721 3,908Trade receivables 5 11,167 39,278 286 37,082Other receivables and prepayments 6 45,770 12,615 25,919 9,354Inventories 7 10,594 23,423 14 22,937

Total current assets 78,520 81,652 32,940 73,281

Non-current assets:Property, plant and equipment 8 15,077 18,127 6,766 16,484Investment in subsidiaries 9 – – 7,885 2,275Advance payment for

investment in subsidiary 9 – 4,536 – 4,536Intangible asset 10 3,156 – – – Long term investment 30 30 30 30

Total non-current assets 18,263 22,693 14,681 23,325

Total assets 96,783 104,345 47,621 96,606


Current liabilities:Trade payables 11 34,762 52,855 289 47,123Other payables 12 19,095 17,293 16,666 17,248Short term loans 13 12,650 12,000 11,650 12,000Current portion of long term loans 13 79 239 – 100Income tax payable 181 2,324 161 2,040

Total current liabilities 66,767 84,711 28,766 78,511

Non-current liability:Long term loans 13 79 325 – 130

Minority interest 11,833 1,382 – –

Capital and reserves:Paid-up capital 14 10,000 10,000 10,000 10,000General reserve 15 1,624 1,490 1,624 1,490Accumulated profits 6,480 6,437 7,231 6,475

Total equity 18,104 17,927 18,855 17,965

Total liabilities and equity 96,783 104,345 47,621 96,606



PROFIT AND LOSS STATEMENTSFor the four months period ended April 30, 2004


GROUP COMPANY(Unaudited) (Unaudited)

January 1, January 1, January 1, January 1,2004 to 2003 to 2004 to 2003 toApril 30, April 30, April 30, April 30,

2004 2003 2004 2003Note (4 months) (4 months) (4 months) (4 months)

RMB’000 RMB’000 RMB’000 RMB’000

Revenue 16 26,746 37,120 21,856 36,911

Cost of sales (20,399) (29,514) (17,298) (29,314)

Gross profit 6,347 7,606 4,558 7,597

Other operating income 17 482 9 973 7

Selling and distribution expenses (1,702) (2,358) (1,452) (2,156)

Research expenses (157) (278) (94) (278)

Administrative expenses 18 (4,274) (1,804) (2,584) (1,409)

Other operating expenses (38) (31) (12) (31)

Profit from operations 19 658 3,144 1,389 3,730

Finance costs 20 (208) (69) (188) (69)

Profit before income tax 450 3,075 1,201 3,661

Income tax expense 21 (311) (570) (311) (570)

Profit after income tax 139 2,505 890 3,091

Minority interest 38 246 – –

Profit for the year 177 2,751 890 3,091


I-4


STATEMENTS OF CHANGES IN EQUITYFor the four months period ended April 30, 2004


Paid up General Accumulatedcapital reserve profits (losses) Total

RMB’000 RMB’000 RMB’000 RMB’000GROUP


Profit for four months from January to April 2003 – – 2,751 2,751

Balance as at April 30, 2003 10,000 – (2,463) 7,537

Profit for the eight months from May to December 2003 – – 10,390 10,390

Transfer – 1,490 (1,490) –


Profit for four months from January to April 2004 – – 177 177

Transfer – 134 (134) –

Balance as at April 30, 2004 10,000 1,624 6,480 18,104

COMPANY


Profit for four months from January to April 2003 – – 3,091 3,091

Balance as at April 30, 2003 10,000 – (1,098) 8,902

Profit for the eight months from May to December 2003 – – 9,063 9,063

Transfer – 1,490 (1,490) –


Profit for four months from January to April 2004 – – 890 890

Transfer – 134 (134) –

Balance as at April 30, 2004 10,000 1,624 7,231 18,855


I-5


CONSOLDIATED CASH FLOW STATEMENTFor the four months period ended April 30, 2004


GROUP(Unaudited)

January 1, January 1,2004 to 2003 toApril 30, April 30,

Note 2004 2003RMB’000 RMB’000

Cash flows from operating activities:Profit before income tax 450 3,075Adjustments for:

Gain on disposal of plant and equipment (24) – Depreciation expense 573 460Amortisation of intangible asset 64 – Interest income (23) (6)Interest expense 208 69

Operating profit before working capital changes 1,248 3,598

Trade receivables 11,940 (6,188)Other receivables and prepayments (17,649) (4,615)Inventories (13,457) 5,333Trade payables 18,111 1,459Other payables 664 (127)

Cash generated from (used in) operations 857 (540)

Interest received 23 6Interest paid (208) (69)Income tax paid (2,454) (6)

Net cash used in operating activities (1,782) (609)

Cash flows used in investing activities:Purchase of plant and equipment (2,908) (965)Proceeds from disposal of plant and equipment 70 – Contribution from minority interest – 225Cash acquired from a subsidiary A 1,982 –

Net cash used in investing activities (856) (740)

Cash flows from financing activities:Increase in short term loan 7,537 1,877Decrease in long term loan (246) (60)

Net cash from financing activities 7,291 1,817

Net increase in cash 4,653 468Cash and bank balances at beginning of period 6,336 4,036

Cash and bank balances at end of period 10,989 4,504

I-6

NOTES TO CONSOLIDATED CASH FLOW STATEMENT

A. The group acquired the following assets, based on unaudited management financial statements ofa subsidiary, Jiangsu Shengnuo Heat Pipe Co., Ltd, on March 2, 2004:

(Unaudited)March 2,

2004 RMB’000

ASSETS

Current assets:Cash and bank balances 1,982Trade receivables 9,734Other receivables and prepayments 16,854Inventories 5,098

Total current assets 33,668

Non-current assets:Property, plant and equipment 1,636Intangible asset 3,220

Total non-current assets 4,856

Total assets 38,524

LIABILITIES

Current liabilities:Trade payables 18,729Other payables 2,695Short term loans 1,000

Total current liabilities 22,424

Minority interest acquired 8,508

Net assets acquired 7,592Less: Consideration:

- Advance payment for investment paid in 2003 (Note 9) (4,536)- Plant and equipment used as capital injection (1,074)

Cash acquired 1,982

I-7

B. The group disposed the following assets and undertakings to a related party, Jiangsu SunpowerTechnology Co., Ltd, pursuant to Restructuring Exercise described in Note 4(b) to the financialstatements:

MovementDisposal as at from JanuaryDecember 31, to April 20042003 based attributable to Transferredon audited Jiangsu Sunpower out as atnet assets Technology Co., Ltd April 30, 2004RMB’000 RMB’000 RMB’000

Current assets:Trade receivables 36,079 (10,174) 25,905Other receivables and prepayments 5,934 18,837 24,771Inventories 24,701 6,683 31,384


Non-current asset:Property, plant and equipment – net book value 5,548 353 5,901

Total assets 72,262 15,699 87,961

Current liabilities:Trade payables 45,478 9,455 54,933Other payables 3,572 (2,015) 1,557Short term loans 7,850 197 8,047Current portion of long term loans 100 (100) –


Non-current liability:Long-term loans 130 (130) –

Total liabilities 57,130 7,407 64,537

Net assets disposed/transferred out and amountreceivable as at April 30, 2004 (Note 6) 15,132 8,292 23,424

I-8


NOTES TO FINANCIAL STATEMENTSFor the four months period ended April 30, 2004


1 GENERAL

Jiangsu Sunpower Petrochemical Engineering Co., Ltd (“the company”) is incorporated in thePeople’s Republic of China with its registered address at Nanjing Jiangning Science Park, No. 88,Zhushan Road, Nanjing China 211100 and principal place of business at Room 301, SuningUniversal Mansion, No. 188, Guangzhou Road, Nanjing China 210024. The financial statementsare expressed in Renminbi (“RMB”).

The company is principally engaged in the manufacture and sale of pressure vessels, and heatpipes and heat pipe exchangers, designing, manufacturing and sale of special pipe racks andhanger, provision of installation and commissioning of relevant projects and provision of technicalservices and consultation for a term of 10 years commencing April 9, 1997.

The principal activities of the subsidiaries are detailed in Note 9 to the financial statements.

The financial statements of the company for four months financial period ended April 30, 2004were authorised for issue by the management/directors on July 31, 2004.


a) BASIS OF ACCOUNTING – The financial statements for the financial period ended April 30,2004 are prepared in accordance with the historical cost convention, and are drawn up inaccordance with the Singapore Financial Reporting Standards.

b) BASIS OF CONSOLIDATION – The consolidated financial statements incorporate thefinancial statements of the company and enterprises controlled by the company (itssubsidiaries) made up to the end of the financial year. Control is achieved when thecompany has the power to govern the financial and operating policies of an investeeenterprise so as to obtain benefits from its activities. On acquisition, the assets and liabilitiesof the relevant subsidiaries are measured at their fair values at the date of acquisition. Theinterest of minority shareholders is stated at the minority’s proportion of the fair values of theassets and liabilities recognised. The results of subsidiaries acquired or disposed of duringthe year are included in the consolidated profit and loss statement from the effective date ofacquisition or up to the effective date of disposal, as appropriate. Where necessary,adjustments are made to the financial statements of the subsidiaries to bring the accountingpolicies used in line with those used by other members of the group. All significantintercompany transactions and balances between group enterprises are eliminated onconsolidation.


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d) FOREIGN CURRENCY TRANSACTIONS – The books of the company are maintained in itsmeasurement currency, namely Renminbi. Transactions in foreign currencies are recorded inRenminbi at the rates ruling at the date of the transactions. At each balance sheet date,recorded monetary balances are denominated in foreign currencies are recorded at therates ruling at the balance sheet date. All realised and unrealised exchange adjustmentgains and losses are dealt with in the profit and loss statement.




Land use rights – 2%Leasehold land and buildings – 5%Plant and machinery – 10%Furniture, fixtures and equipment – 20%Motor vehicles – 20%

Land use rights pertain to the payment for rights of the usage of land over 50 years.





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g) FINANCIAL ASSETS – The principal financial assets are cash, trade receivables and otherreceivables. Trade receivables and other receivables are stated at their nominal value asreduced by appropriate allowances for estimated irrecoverable amounts. The accountingpolicy for other investments is described below.

h) FINANCIAL LIABILITIES AND EQUITY – Financial liabilities and equity instruments areclassified according to the substance of the contractual arrangements entered into.





i) LEASES – Leases are classified as finance leases whenever the terms of the lease transfersubstantially all the risks and rewards of ownership to the lessee. All other leases areclassified as operating leases.

Assets held under finance leases are recognised as assets of the group at their fair value atthe date of acquisition. The corresponding liability to the lessor is included in the balancesheet as a finance lease obligation. Finance costs, which represent the difference betweenthe total leasing commitments and the fair value of the assets acquired, are charged to theincome statement over the term of the relevant lease using the effective interest ratemethod.


j) IMPAIRMENT OF ASSETS – At each balance sheet date, the company reviews the carryingamounts of its tangible and intangible assets to determine whether there is any indicationthat those assets have suffered an impairment loss. If any such indication exists, therecoverable amount of the asset is estimated in order to determine the extent of theimpairment loss (if any). If the recoverable amount of an asset is estimated to be less thanits carrying amount, the carrying amount of the asset is reduced to its recoverable amount.Impairment losses are recognised as an expense immediately.


k) REVENUE RECOGNITION – Revenue from sale of goods is recognised when significantrisks and rewards of ownership are transferred to the buyer and the amount of revenue andthe costs of the transactions (including future costs) can be measured reliably.


l) INCOME TAX – Tax expense is determined on the basis of tax effect accounting, using theliability method, and it is applied to all significant temporary differences arising between thecarrying amount of assets and liabilities in the financial statements and the correspondingtax bases used in the computation of taxable profit, except that a debit balance for deferredtax is not carried forward unless there is a reasonable expectation of realisation.


m) RETIREMENT BENEFIT COSTS – Payments to defined contribution retirement benefitplans (including state-managed retirement benefit schemes) are charged as an expensewhen incurred.

n) BORROWING COSTS – Borrowing costs directly attributable to the acquisitions,construction or production of qualifying assets, which are assets that necessarily take asubstantial period of time to get ready for their intended use or sale, are added to the cost ofthose assets, until such time as the assets are substantially ready for their intended use orsale. Investment income earned on the temporary investment of specific borrowings pendingtheir expenditure on qualifying assets is deducted from the costs of those assets.

o) RESERVES – In accordance with the PRC Company Law and the Company’s Articles ofAssociation, the company as a PRC domestic enterprise, is required to appropriate 10%and 5% to 10% of its profit after taxation as reported in its PRC statutory financialstatements to the statutory reserve fund and statutory public welfare fund respectively.

p) PROVISIONS – Provisions are recognised when the company and the group has a presentobligation as a result of a past event where it is probable that it will result in an outflow ofeconomic benefits that can be reasonably estimated.

q) OTHER INVESTMENTS – Investments held for long-term are stated at cost less anyimpairment in net recoverable value and investments held for short-term are stated at thelower of cost or market value determined on a portfolio basis.






Development costs that have been capitalised as intangible assets are amortised from thecommencement of the commercial production on a straight-line basis over the period of itsexpected benefits, which normally does not exceed 20 years. Other developmentexpenditures are recognised as expense as incurred. Development costs previouslyrecognised as an expense are not recognised as an asset in the subsequent period

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The group is exposed to interest rate risk through the impact of rate changes on interestbearing liabilities and assets. These exposures are managed partly by using natural hedgesthat arise from offsetting interest rate sensitive assets and liabilities.

b) Credit Risk

The group’s credit risk is primarily attributable to its trade and other receivables. Theamounts presented in the balance sheet are net of allowances for doubtful receivables, ifany, as estimated by the group’s management based on prior experience and the currenteconomic environment.



Concentration of credit risk exist when changes in economic, industry or geographic factorssimilarly affect groups of counterparties whose aggregate credit exposure is significant inrelation to the group’s total credit exposure.

Although the group’s credit exposure is concentrated mainly in the People’s Republic ofChina, there is no significant concentration of credit risk with any customer or group ofcustomers.


The group’s exposure to foreign currency risk is minimal as substantially mainly all itstransactions are in Renminbi.

e) Liquidity Risk

The group is exposed to minimal liquidity risk as a substantial portion of its financial assetsand financial liabilities are due within one year and can finance its operations from existingshareholders’ funds.




(a) Related parties are entities with common direct or indirect shareholders and/or directors.Parties are considered to be related if one party has the ability to control the other party orexercise significant influence over the other party in making financial and operatingdecisions.

Some of the company’s transaction and arrangements are with related parties and the effectof these on the basis determined between the parties are reflected in these financialstatements. The balances are unsecured, without fixed repayment terms and interest freeunless stated otherwise.

(b) Pursuant to a sale and purchase agreement dated April 18, 2004 between the company andJiangsu Sunpower Technology Co., Ltd and as amended by a supplemental agreementdated July 27, 2004, Jiangsu Sunpower Technology Co., Ltd acquired the company’sbusiness, assets and undertakings relating to the pressure vessels, waste gas and energyrecovery systems and pipe supports which were located in Nanjing (“SunpowerUndertakings”), for a total cash consideration of RMB 15,132,375, based on the audited netbook value of the Sunpower Undertakings as at December 31, 2003. All rights and liabilitiesrelating to the Sunpower Undertakings were acquired with effect from April 30, 2004.

Significant related parties transactions:



2004 2003 2004 2003(4 months) (4 months) (4 months) (4 months)RMB’000 RMB’000 RMB’000 RMB’000

Net assets disposed relating toSunpower Undertakings 23,424 – 23,424 –

Reimbursement of operating expenses – 39 – –

5 TRADE RECEIVABLES


2004 2003 2004 2003 RMB’000 RMB’000 RMB’000 RMB’000

Outside parties 11,212 40,059 291 37,863Less: Allowance for doubtful debts (45) (1,016) (5) (1,016)

11,167 39,043 286 36,847Related party (Note 4) – 235 – 235

Net 11,167 39,278 286 37,082


Balance at beginning of year 1,016 878 1,016 878Subsidiary acquired 40 – – – Charge to profit and loss – 138 – 138Transfer to a related party (Note 4) (1,011) – (1,011) –

Balance at end of year 45 1,016 5 1,016

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2004 2003 2004 2003 RMB’000 RMB’000 RMB’000 RMB’000

Advance payments for purchases 12,305 6,471 903 4,162Recoverables – 1,438 – 1,438Staff and other loans 2,105 3,227 – 2,921Prepayments 806 157 – 121Deposits 1,262 1,141 – 228Others 297 199 1 38

Total 16,775 12,633 904 8,908Due from a related party for the

Sunpower Undertakings (Note 4) 23,424 – 23,424 – Due from directors 116 – – – Related parties (Note 4) 5,457 836 157 – Subsidiaries (Note 9) – – 1,434 1,298

45,772 13,469 25,919 10,206Less: Allowance for doubtful

other receivables (2) (854) – (852)

45,770 12,615 25,919 9,354


Balance at beginning of year 854 843 852 841Charge to profit and loss – 11 – 11Transfer to a related party (Note 4) (852) – (852) –

Balance at end of year 2 854 – 852

The staff and other loans, amount due from directors and amount due from related parties arenon-trade in nature, unsecured, interest-free and without fixed terms of repayment.

7 INVENTORIES


2004 2003 2004 2003 RMB’000 RMB’000 RMB’000 RMB’000

At cost:Raw materials 2,370 2,256 – 2,165Work-in-progress 6,744 16,045 14 15,698Finished goods 1,663 5,305 – 5,074

10,777 23,606 14 22,937Less : Allowance for obsolescence (183) (183) – –

10,594 23,423 14 22,937

Movement in above allowance:

Balance at beginning of year 183 – – – Charge to profit and loss – 183 – –

Balance at end of year 183 183 – –


Furniture,Land-use Leasehold land Plant and fixtures and Motor Construction-

GROUP rights and buildings machinery equipment vehicles in-progress TotalRMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Cost:At January 1, 2003 400 4,533 4,007 1,438 1,958 60 12,396


At December 31, 2003 400 5,831 5,654 1,884 2,749 5,764 22,282

Subsidiary acquired – – – 390 739 – 1,129Additions – 401 809 903 172 623 2,908Reclassification – – – (24) 24 – – Disposed to

- a related party – (2,221) (3,645) (1,264) (1,586) (15) (8,731)- outside parties – – – – (281) – (281)

At April 30, 2004 400 4,011 2,818 1,889 1,817 6,372 17,307

Accumulated depreciation:At January 1, 2003 40 615 856 533 732 – 2,776

Depreciation 40 155 521 299 364 – 1,379

At December 31, 2003 80 770 1,377 832 1,096 – 4,155

Subsidiary acquired – – – 161 406 – 567Depreciation 13 57 223 136 144 – 573Disposed to

- a related party – (559) (843) (530) (898) – (2,830)- outside parties – – – – (235) – (235)

At April 30, 2004 93 268 757 599 513 – 2,230

Net book value:At December 31, 2003 320 5,061 4,277 1,052 1,653 5,764 18,127

At April 30, 2004 307 3,743 2,061 1,290 1,304 6,372 15,077

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Furniture,Land-use Leasehold land Plant and fixtures and Motor Construction-

COMPANY rights and buildings machinery equipment vehicles in-progress TotalRMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Cost:At January 1, 2003 400 4,533 2,959 1,406 1,781 60 11,139


At December 31, 2003 400 5,831 4,605 1,703 1,891 5,764 20,194

Additions – – 545 220 – 623 1,388Reclassification – – – 24 (24) – – Transfer to subsidiary

as capital injection – – (1,384) – – – (1,384)Disposed to

- a subsidiary (400) (3,610) – – – – (4,010)- a related party – (2,221) (3,645) (1,264) (1,586) (15) (8,731)- outside parties – – – – (281) – (281)

At April 30, 2004 – – 121 683 – 6,372 7,176

Accumulated depreciation:At January 1, 2003 40 615 683 527 722 – 2,587

Depreciation 40 155 335 282 311 – 1,123

At December 31, 2003 80 770 1,018 809 1,033 – 3,710

Depreciation 13 57 166 100 100 – 436Transfer to subsidiary

as capital injection – – (310) – – – (310)Disposed to

- a subsidiary (93) (268) – – – – (361)- a related party – (559) (843) (530) (898) – (2,830)- outside parties – – – – (235) – (235)

At April 30, 2004 – – 31 379 – – 410

Net book value:At December 31, 2003 320 5,061 3,587 894 858 5,764 16,484

At April 30, 2004 – – 90 304 – 6,372 6,766



2004 2003 2004 2003 RMB’000 RMB’000 RMB’000 RMB’000

Unquoted capital, at cost – – 7,885 2,275Advance payment for

investment in subsidiary – 4,536 – 4,536

– 4,536 7,885 6,811

Details of the subsidiaries are as follows:

Effective percentage of Name of subsidiaries/ Cost of investment equity held by the groupDate of incorporation Principal activities April 30, December 31, April 30, December 31,

2004 2003 2004 2003 RMB’000 RMB’000 % %

Jiangsu Shengnuo Heat Manufacturing and 5,610 – 35* – Pipe Co., Ltd trading of heat pipes20 August 1993(formerly known as Jiangsu Shengnuo HeatPipes Group Co., Ltd)

Nanjing Zhongshengyuan Design and construction 600 600 60 60Machinery and Electrical of machines and industrial Equipment Co., Ltd tools and other kinds28 June 2002 (1) of technical support

Nanjing Sunpower Energy In the process of 400 400 80 80Environmental Engineering liquidationand Designs Co., Ltd7 August 2003 (1)

Nanjing Zhi Yuan Electronic Manufacturing and 1,000 1,000 50 50Science Co., Ltd trading of electronic 20 December 2000 (1) devices

Wuhan Zhongshengyuan Provider of services and 275 275 55 55Energy Environmental solutions to the Protection Project Co., Ltd environmental industry25 December 2002 (1)

Total 7,885 2,275

Advance payment Effective percentage of Name of subsidiaries/ for investment equity held by the groupDate of incorporation Principal activities April 30, December 31, April 30, December 31,

2004 2003 2004 2003 RMB’000 RMB’000 % %

Jiangsu Shengnuo Heat Manufacturing and – 4,536 – 35*Pipe Co., Ltd trading of heat pipes20 August 1993

* According to management, the effective control of this 35% owned subsidiary, Jiangsu Shengnuo Heating Pipe Co.,Ltd, took effect from March 2, 2004. The company has entered into an agreement to acquire an additional 16% equityinterest in this subsidiary.

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Note on auditors:

(1) The 2003 financial statements of these subsidiaries are audited by Shanghai East Asia Certified Public AccountantsCo., Ltd, located at 6F, 239 Jiang Ning Road, China 200041, for consolidation purposes.

For the purpose of the preparation of the consolidated financial statements for the four monthsfinancial period ended April 30, 2004, unaudited management financial statements of thesesubsidiaries for April 30, 2004 were used.

The place of incorporation and operations of the subsidiaries are at the People’s Republic ofChina.

10 INTANGIBLE ASSET


2004 2003 2004 2003 RMB’000 RMB’000 RMB’000 RMB’000

Cost 3,220 – – – Less: amortisation (64) – – –

Net book value 3,156 – – –

This relates to the trademark “SHENGNUO”, which was acquired by Jiangsu Shengnuo HeatingPipe Co., Ltd. This trademark was subsequently transferred to Nanjing Shengnuo Heat Pipe Co.,Ltd on June 30, 2004 at the prevailing carrying book value as part of the Shengnuo Undertakingsacquired. The trademark has been registered with the relevant authority of the People’s Republic ofChina on April 7, 1995 and is effective for a period of 10 years till April 6, 2005. The companyintends to apply for the renewal of a further 10 years upon the expiration on April 6, 2005 and thedirectors/management of the company are confident of obtaining the extension at a minimal cost.

11 TRADE PAYABLES


2004 2003 2004 2003 RMB’000 RMB’000 RMB’000 RMB’000

Outside parties 13,913 17,636 38 15,555Related party – – – 5,086Subsidiary (Note 9) – – – 154Customer advances 20,849 35,219 251 26,328

34,762 52,855 289 47,123

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12 OTHER PAYABLES


2004 2003 2004 2003 RMB’000 RMB’000 RMB’000 RMB’000

Accrual for late costs on contracts 14 2,029 14 2,029Accrual for property, plant and equipment 1,018 1,148 1,018 1,148Value added taxes 4,717 1,876 5,166 1,740Accruals 1,691 2,152 – 924Grant received 600 – 600 – Others 550 924 103 841

8,590 8,129 6,901 6,682Due to directors 8,378 9,039 8,237 8,898Related parties (Note 4) 2,127 125 260 – Subsidiary (Note 9) – – 1,268 1,668

19,095 17,293 16,666 17,248

The amount due to directors and amount due to related parties are non-trade in nature,unsecured, interest-free and without fixed terms of repayment.

13 BANK LOANS


2004 2003 2004 2003 RMB’000 RMB’000 RMB’000 RMB’000

Short term loans

Financial institution – Note (a) – 3,000 – 3,000Financial institution – Note (b) 4,650 – 4,650 – Financial institution – Note (c) 1,000 – – – Bank loan 1 – Note (d) 7,000 3,000 7,000 3,000Bank loan 2 – Note (e) – 2,000 – 2,000Bank loan 3 – Note (e) – 4,000 – 4,000

12,650 12,000 11,650 12,000

Long term loans - Note (f)

Bank loan 4 – 180 – 180Bank loan 5 – 50 – 50Bank loan 6 158 184 – – Bank loan 7 – 150 – –

158 564 – 230Less: current portion (79) (239) – (100)

Non current portion 79 325 – 130

(a) In 2003, the short-term bank loan payable to a financial institution bore interest at 5.43% to6.64% per annum. The loan was secured by buildings and land use rights with a carryingvalue of RMB 1,961,000.

(b) The short-term bank loan payable to a financial institution bears interest at 6.64% per annumand is unsecured.

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(c) The short-term bank loan payable to a financial institution bears interest at 5.84% perannum. It is secured by a guarantee from a corporate shareholder of the subsidiary.

(d) Short term loan 1 is made up of 2 loans (2003 : one loan) payable to a bank which bearinterest ranging from 4.2% to 4.4 % (2003 : 4.2%) per annum. The loan is secured against apledge on the land use rights with a carrying value of RMB 6,386,000 (2003 : RMB5,764,000).

(e) In 2003, the short-term loans 2 and 3 were payable to a bank, bore interest at 4.2% perannum and were guaranteed by a third party. The loans were fully repaid during the financialyear.

(f) Loan 6 is payable to a bank, bears interest at 6.03% per annum and is secured by a motorvehicle with carrying value of RMB 506,000. In 2003, the long-term loans 4 to 7 wererepayable to banks in monthly instalments. The loans bore interest at 6.03 % per annum andwere secured by the motor vehicles with carrying value of RMB 1,137,000 for the group andwith carrying value of RMB 492,000 for the company.

14 PAID-UP CAPITAL


2004 2003 2004 2003 RMB’000 RMB’000 RMB’000 RMB’000

Registered and paid-up capital 10,000 10,000 10,000 10,000

15 GENERAL RESERVE


2004 2003 2004 2003 RMB’000 RMB’000 RMB’000 RMB’000

Reserve fund 1,082 993 1,082 993Enterprise expansion fund 542 497 542 497

1,624 1,490 1,624 1,490

16 REVENUE




Sales of goods:Pressure vessels 5,677 21,106 5,677 21,106Heat pipes and heat pipe exchangers 11,834 4,390 9,174 4,390Pipe supports 6,987 10,964 6,987 10,964

24,498 36,460 21,838 36,460Others 2,248 660 18 451

Total 26,746 37,120 21,856 36,911

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Gain on disposal of property,plant and equipment- Related party (Note 4) – – 510 – - Outside parties 24 – 24 –

Government grants 430 – 430 – Interest income 23 6 4 4Others 5 3 5 3

Total 482 9 973 7

18 ADMINISTRATIVE EXPENSES




Salaries and wages 1,083 517 619 458Office expenses 792 279 672 241Depreciation 326 219 227 211Amortisation of intangible asset 64 – – – Travelling and transportation 968 193 455 188Entertainment 213 78 79 55Insurance 110 27 96 26Staff benefits 162 73 93 64Repair and maintenance 37 34 27 31Stamp duty and other taxes 39 14 39 14Rental 110 – 87 – Courses 47 33 42 33Low cost consumables 130 37 85 37Utilities 59 19 16 18Defined contribution plans 45 14 22 14Consultancy 49 239 17 – Others 40 28 8 19

Total 4,274 1,804 2,584 1,409

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19 PROFIT BEFORE INCOME TAX

In addition to the charges and credits disclosed elsewhere in the notes to the profit and lossaccount, this item includes the following charges:




Salaries and wages 1,904 1,673 1,531 1,482Defined contribution plans 62 54 22 14

Directors’ remuneration 90 70 64 70


2004 2003 2004 2003

Number of employees 480 418 325 339

20 FINANCE COSTS






Current 185 570 185 570Underprovision in prior year 126 – 126 –

311 570 311 570

In 2003, pursuant to the relevant laws and regulations in PRC, the company being an advanced hi-tech industry, applied and obtained a tax concession of 15%.

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The income tax expense varied from the amount of income tax expense determined by applyingthe tax rate of 33% to profit before income tax as a result of the following differences:




Income tax expense at applicable rate 149 1,014 396 1,208Effect of tax concession (216) (659) (216) (659)Benefits on tax losses not recognised 238 194 – – Non-allowable items 14 21 5 21Underprovision in prior year 126 – 126 –

311 570 311 570

Effective tax rate 69.1% 18.5% 25.9% 15.6%

22 DISCONTINUING OPERATION

Pursuant to a sale and purchase agreement dated April 18, 2004 between the company andJiangsu Sunpower Technology Co., Ltd and as amended by a supplemental agreement dated July27, 2004, Jiangsu Sunpower Technology Co., Ltd acquired the company’s business, assets andundertakings relating to the pressure vessels, waste gas and energy recovery system and pipesupports which were located in Nanjing (“Sunpower Undertakings”), for a total cash considerationof RMB15,132,375, based on the audited net book value of the Sunpower Undertakings as atDecember 31, 2003. All rights and liabilities relating to the Sunpower Undertakings were acquiredwith effect from April 30, 2004.

The revenue, results, cash flows and net assets of the discontinuing business segment up to thedate of disposal were as follows:

Profit and loss statement:

GROUP ANDCOMPANY

January 1, January 1, 2004 to 2003 toApril 30, December 31,

2004 2003(4 months) (12 months)RMB’000 RMB’000

Revenue 21,506 96,776

Profit before tax 1,244 14,304

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Balance sheet:

GROUP ANDCOMPANY

April 30, December 31,2004 2003

RMB’000 RMB’000

Current assets 82,060 66,713Non-current assets 5,901 5,548Current liabilities (64,537) (56,999)Non-current liabilities – (130)

Net assets 23,424 15,132

Cash flow statement:

Cash flow from operating activities (25,570) (17,664)Cash flow from financing activities 8,047 8,080Cash flow from investing activities (5,901) (5,548)

Total cash flow (23,424) (15,132)

Gain on disposal was determined as follows:

Net assets disposed 23,424 – Proceeds from disposal (23,424) –

Net gain on disposal – –





Minimum lease payments paid under operating leases 110 36 87 4



2004 2003 2004 2003 RMB’000 RMB’000 RMB’000 RMB’000

Within 1 year 5 17 – 10Within 2 to 5 years – 20 – 20After 5 years – – – –


Capital expenditure not provided for in the accounts:


2004 2003 2004 2003 RMB’000 RMB’000 RMB’000 RMB’000

Contracted but not provided for acquisition of property, plant and equipment 19,428 2,090 19,428 2,090

25 SUBSEQUENT EVENT

The group has purchased a further shareholding of 9.28% in Jiangsu Shengnuo Heat Pipe Co.,Ltd by paying RMB 975,000 to minority shareholders. The effective interest of the subsidiary is now44.08%.


The financial information of the group and the company for the financial period ended April 30,2003 was prepared based on the unaudited management accounts and was presented for thepurpose of comparison only.

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APPENDIX J

THE AUDITED FINANCIAL STATEMENTS OF SUNPOWER TECHNOLOGY FROM 16 APRIL 2004 (DATE OF ESTABLISHMENT) TO 30 JUNE 2004

JIANGSU SUNPOWER TECHNOLOGY CO., LTD

STATEMENT OF DIRECTOR

In the opinion of the director, the accompanying financial statements are drawn up so as to give a trueand fair view of the state of affairs of the company as at June 30, 2004 and of the results, changes inequity and cash flows, of the company for the financial period then ended and at the date of thisstatement there are reasonable grounds to believe that the company will be able to pay its debts as andwhen they fall due.


.....................................………..Guo Hong Xin

.....................................………..Ma Ming

July 31, 2004

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AUDITORS’ REPORT TO THE MEMBER OF


We have audited the accompanying financial statements of Jiangsu Sunpower Technology Co., Ltd forthe financial period from April 16, 2004 (date of establishment) to June 30, 2004. These financialstatements are the responsibility of the company’s directors. Our responsibility is to express an opinionon these financial statements based on our audit.


In our opinion, the accompanying financial statements are properly drawn up in accordance with theprovisions of the Singapore Financial Reporting Standards, to give a true and fair view of the state ofaffairs of the company as at June 30, 2004 and of the results, changes in equity and cash flows, of thecompany for the financial period ended on that date.

The accompanying financial statements was prepared for the purpose of enabling the ultimate holdingcompany to prepare consolidated financial statements and the initial public offering in Singapore andshould not be used for any other purposes.

Certified Public Accountants



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BALANCE SHEETJune 30, 2004


June 30,Note 2004

RMB’000

ASSETS

Current assets:Cash and bank balances 18,390Trade receivables 6 47,251Other receivables and prepayments 7 7,325Inventories 8 15,975

Total current assets 88,941

Non-current asset:Property, plant and equipment 9 6,395

Total assets 95,336


Current liabilities:Trade payables 10 39,908Other payables 11 21,331Short term loans 12 6,850

Total current liabilities 68,089

Capital and reserves:Paid-up capital 13 –Capital application monies 13 4,966General reserve 14 3,342Accumulated profits 18,939

Total equity 27,247

Total liabilities and equity 95,336


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PROFIT AND LOSS STATEMENTPeriod from April 16, 2004 (date of establishment) to June 30, 2004


April 16, 2004 to June 30,

Note 2004RMB’000

Revenue 15 68,169

Cost of sales (42,861)

Gross profit 25,308

Other operating income 16 10

Selling and distribution expenses (1,181)

Research expenses (800)

Administrative expenses 17 (969)

Other operating expenses (4)

Profit from operations 18 22,364

Finance costs 19 (83)

Profit before income tax 22,281

Income tax expense 20 –



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STATEMENT OF CHANGES IN EQUITYPeriod from April 16, 2004 (date of establishment) to June 30, 2004

CapitalPaid-up application General Accumulatedcapital monies reserve profits Total


Balance at April 16, 2004(date of establishment) – – – – –

Capital application monies – 4,966 – – 4,966

Profit for the period – – – 22,281 22,281

Transfer – – 3,342 (3,342) –

Balance at June 30, 2004 – 4,966 3,342 18,939 27,247


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CASH FLOW STATEMENTPeriod from April 16, 2004 (date of establishment) to June 30, 2004



2004RMB’000

Cash flows from operating activities:Profit before income tax 22,281Adjustments for:

Depreciation expense 157Interest income (1)Interest expense 83

Operating profit before working capital changes 22,520

Trade receivables (21,346)Other receivables and prepayments 17,446Inventories 15,409Trade payables (15,025)Other payables 7,190

Cash from operations 26,194

Interest paid (83)Interest received 1

Net cash from operating activities 26,112

Cash flows used in investing activities:Acquisition of assets and undertakings pursuant to Sunpower Undertakings (Note A) (10,840)Purchase of plant and equipment (651)

Net cash used in investing activities (11,491)

Cash flows from financing activities:Decrease in short term loan (1,197)Capital application monies received 4,966

Net cash from financing activities 3,769

Net increase in cash 18,390Cash and bank balances at beginning of period –

Cash and bank balances at end of period 18,390


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NOTE TO CASH FLOW STATEMENT

A. The company acquired the following assets and undertakings pursuant to Restructuring Exercisedescribed in Note 5(b) to the financial statements:

Movement fromAcquired as at January to April 2004December 31, attributable to Jiangsu Transferred to2003 based on Sunpower Petrochemical the company as at

audited net assets Engineering Co., Ltd April 30, 2004RMB’000 RMB’000 RMB’000

Current assets:Trade receivables 36,079 (10,174) 25,905Other receivables and prepayments 5,934 18,837 24,771Inventories 24,701 6,683 31,384


Non-current asset:Property, plant and equipment – net book value 5,548 353 5,901

Total assets 72,262 15,699 87,961

Current liabilities:Trade payables 45,478 9,455 54,933Other payables 3,572 (2,015) 1,557Short term loans 7,850 197 8,047Current portion of long term loans 100 (100) –


Non-current liability:Long-term loans 130 (130) –

Total liabilities 57,130 7,407 64,537

Net assets acquired/transferred 15,132 8,292 23,424

Less: Amount paid (10,840)

Amount payable outstanding as at June 30, 2004 (Note 11) 12,584

J-7


NOTES TO FINANCIAL STATEMENTSJune 30, 2004

1 GENERAL

Jiangsu Sunpower Technology Co., Ltd (“the company”) was established in the People’s Republicof China on April 16, 2004 with its registered address and principal place of business at NanjingJiangning Science Park, No. 88, Zhushan Road, Nanjing China 211100 and Room 301, SuningUniversal Mansion, No. 188, Guangzhou Road, Nanjing China 210024 respectively. The financialstatements are expressed in Renminbi (“RMB”).

The company is principally engaged in the manufacture and sale of pressure vessels, heat pipesand heat pipe exchangers, designing, manufacturing and sale of special pipe racks and hanger,provision of installation and commissioning of relevant projects and provision of technical servicesand consultation for a term of 50 years commencing April 16, 2004.

The accompanying financial statements was prepared for the purpose of enabling the ultimateholding company to prepare consolidated financial statements and the initial public offering inSingapore and should not be used for any other purposes.

The financial statements of the company for financial period ended June 30, 2004 were authorisedfor issue by the management/directors on July 31, 2004.


a) BASIS OF ACCOUNTING – The financial statements for the financial period ended June30, 2004 are prepared in accordance with the historical cost convention, and are drawn upin accordance with the Singapore Financial Reporting Standards.

b) FOREIGN CURRENCY TRANSACTIONS – The books of the company are maintained in itsmeasurement currency, namely Renminbi. Transactions in foreign currencies are recorded inRenminbi at the rates ruling at the date of the transactions. At each balance sheet date,recorded monetary balances are denominated in foreign currencies are recorded at therates ruling at the balance sheet date. All realised and unrealised exchange adjustmentgains and losses are dealt with in the profit and loss statement.

c) PROPERTY, PLANT AND EQUIPMENT – Property, plant and equipment are carried atcost, less accumulated depreciation and any impairment loss where the recoverable amountof the asset is estimated to be lower than its carrying amount.


Leasehold land and buildings - 5%Plant and machinery - 10%Furniture, fixtures and equipment - 20%Motor vehicles - 20%



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d) INVENTORIES – Inventories are measured at the lower of cost (weighted average method)and net realisable value. Cost includes all costs of purchase, cost of conversion and othercosts incurred in bringing the inventories to their present location and condition. Netrealisable value represents the estimated selling price less all estimated costs to completionand costs to be incurred in marketing, selling and distribution.


e) FINANCIAL ASSETS – The principal financial assets are cash, trade receivables and otherreceivables. Trade receivables and other receivables are stated at their nominal value asreduced by appropriate allowances for estimated irrecoverable amounts.

f) FINANCIAL LIABILITIES AND EQUITY – Financial liabilities and equity instruments areclassified according to the substance of the contractual arrangements entered into.





g) LEASES – Leases are classified as finance leases whenever the terms of the lease transfersubstantially all the risks and rewards of ownership to the lessee. All other leases areclassified as operating leases.

Assets held under finance leases are recognised as assets of the company at their fairvalue at the date of acquisition. The corresponding liability to the lessor is included in thebalance sheet as a finance lease obligation. Finance costs, which represent the differencebetween the total leasing commitments and the fair value of the assets acquired, arecharged to the income statement over the term of the relevant lease using the effectiveinterest rate method.


h) IMPAIRMENT OF ASSETS – At each balance sheet date, the company reviews the carryingamounts of its tangible and intangible assets to determine whether there is any indicationthat those assets have suffered an impairment loss. If any such indication exists, therecoverable amount of the asset is estimated in order to determine the extent of theimpairment loss (if any). If the recoverable amount of an asset is estimated to be less thanits carrying amount, the carrying amount of the asset is reduced to its recoverable amount.Impairment losses are recognised as an expense immediately.


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i) REVENUE RECOGNITION – Revenue from sale of goods is recognised when significantrisks and rewards of ownership are transferred to the buyer and the amount of revenue andthe costs of the transactions (including future costs) can be measured reliably.


j) INCOME TAX – Tax expense is determined on the basis of tax effect accounting, using theliability method, and it is applied to all significant temporary differences arising between thecarrying amount of assets and liabilities in the financial statements and the correspondingtax bases used in the computation of taxable profit, except that a debit balance for deferredtax is not carried forward unless there is a reasonable expectation of realisation.


k) RETIREMENT BENEFIT COSTS – Payments to defined contribution retirement benefitplans (including state-managed retirement benefit schemes) are charged as an expensewhen incurred.

l) BORROWING COSTS – Borrowing costs directly attributable to the acquisitions,construction or production of qualifying assets, which are assets that necessarily take asubstantial period of time to get ready for their intended use or sale, are added to the cost ofthose assets, until such time as the assets are substantially ready for their intended use orsale. Investment income earned on the temporary investment of specific borrowings pendingtheir expenditure on qualifying assets is deducted from the costs of those assets.

m) RESERVES – Pursuant to relevant laws and regulations in the PRC and the Articles ofAssociation, as wholly owned foreign entity, the company is required to transfer 10% of itsprofit after taxation as reported in the PRC statutory financial statements to the reserve funduntil the balance reached 50% of its registered capital. The reserve fund can be used tomake up losses incurred or to increase capital. Subject to approval by relevant governmentauthority, the enterprise expansion fund may also be used to increase capital. Theappropriation to the expansion fund shall be approved by the board of directors. In addition,the company appropriates an additional 5% of its profit after taxation to the enterpriseexpansion fund.

n) PROVISIONS – Provisions are recognised when the company has a present obligation as aresult of a past event where it is probable that it will result in an outflow of economic benefitsthat can be reasonably estimated.

o) GOVERNMENT GRANTS – Government grants relating to the purchase of property, plantand equipment are included in the balance sheet as deferred income by deducting the grantin arriving at the carrying amount of the assets. Government grants relating to expenditures,which are not capitalised, are credited to profit and loss statement to match the relatedexpenditure when incurred.

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p) RESEARCH AND DEVELOPMENT COSTS – Research expenditure is recognised as anexpense as incurred. Costs incurred on development projects are recognised as intangibleassets only if all the following conditions are met:







The company is exposed to interest rate risk through the impact of rate changes on interestbearing liabilities and assets. These exposures are managed partly by using natural hedgesthat arise from offsetting interest rate sensitive assets and liabilities.

b) Credit Risk

The company’s credit risk is primarily attributable to its trade and other receivables. Theamounts presented in the balance sheet are net of allowances for doubtful receivables, ifany, as estimated by the company’s management based on prior experience and the currenteconomic environment.



Concentration of credit risk exist when changes in economic, industry or geographic factorssimilarly affect company of counterparties whose aggregate credit exposure is significant inrelation to the company’s total credit exposure.

The company’s credit exposure is concentrated mainly in the People’s Republic of China.There is no significant concentration of credit risk with any customer or group of customersexcept that the top 5 balances accounted for RMB17,715,000 or 37%of the total gross tradereceivables at June 30, 2004.


The company’s exposure to foreign currency risk is minimal as substantially mainly all itstransactions are in Renminbi.

e) Liquidity Risk

The company is exposed to minimal liquidity risk as a substantial portion of its financialassets and financial liabilities are due within one year and can finance its operations fromexisting shareholders’ funds.



J-11

4 HOLDING COMPANY AND RELATED COMPANY TRANSACTIONS

The company’s immediate and ultimate holding companies are Perimeter Pacific Limited, acompany incorporated in British Virgin Islands and Sunpower Group Ltd, a company incorporatedin Bermuda respectively. Related companies in these financial statements refer to members of theultimate holding company’s group of companies.

Some of the company’s transactions and arrangements and terms thereof are arranged by orbetween members of the group and the effect of these on the basis determined between theparties are reflected in these financial statements. The intercompany balances are without fixedrepayment terms and interest unless stated otherwise.


(a) Related parties are entities with common direct or indirect shareholders and/or directors.Parties are considered to be related if one party has the ability to control the other party orexercise significant influence over the other party in making financial and operatingdecisions.


(b) Pursuant to a sale and purchase agreement dated April 18, 2004 between JiangsuSunpower Petrochemical Engineering Co., Ltd and the company and as amended by asupplemental agreement dated July 27, 2004, the company acquired Jiangsu SunpowerPetrochemical Engineering Co., Ltd’s business, assets and undertakings relating to thepressure vessels, waste gas and energy recovery systems and pipe supports which werelocated in Nanjing (“Sunpower Undertakings”), for a total cash consideration of RMB15,132,375, based on the audited net book value of the Sunpower Undertakings as atDecember 31, 2003. All rights and liabilities relating to the Sunpower Undertakings wereacquired with effect from April 30, 2004.

(c) Significant related parties transactions:


2004RMB’000

Transfer of net assets:Purchase of Sunpower Undertakings 15,132Additional transfer 8,292

Purchases of goods 1,702

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(d) Related parties balances:

June 30,2004

RMB’000

Trade receivables

Jiangsu Shengnuo Heat Pipe Co., Ltd 788Jiangsu Sunpower Petrochemical Engineering Co., Ltd 28

816

Other receivables and prepayments

Wuhan Zhongshengyuan Energy Environmental Protection Project Co., Ltd 100

Other payable

Jiangsu Sunpower Petrochemical Engineering Co., Ltd 12,584

6 TRADE RECEIVABLES

June 30,2004

RMB’000

Outside parties 47,416Less: Allowance for doubtful debts (981)

46,435Related parties (Note 5) 816

Net 47,251


Transfer from a related party (Note 5) 1,016Utilised (35)

Balance at end of period 981


June 30,2004

RMB’000

Advance payments for purchases - outside parties 4,831- related party (Note 5) 100- related company (Note 4) 1,750

Staff and other loans 1,049Prepayments 104Deposits 104Others 239

Total 8,177Less: Allowance for doubtful other receivables (852)

Net 7,325


Transfer from a related party and balance at end of period (Note 5) 852

The staff and other loans are non-trade in nature, unsecured, interest-free and without fixed termsof repayment.

J-13

8 INVENTORIES

June 30,2004

RMB’000

At cost:Raw materials 1,821Work-in-progress 11,891Finished goods 2,263

15,975


Leasehold Furniture,land and Plant and fixtures and Motor Construction-buildings machinery equipment vehicles in-progress TotalRMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Cost:Transferred from a related party (Note 5) 2,221 3,645 1,264 1,586 15 8,731

Additions – 178 28 170 275 651

At June 30, 2004 2,221 3,823 1,292 1,756 290 9,382

Accumulated depreciation:Transferred from a related party (Note 5) 559 843 530 898 – 2,830

Charge for the period 19 58 34 46 – 157

At June 30, 2004 578 901 564 944 – 2,987

Net book value:At June 30, 2004 1,643 2,922 728 812 290 6,395

As at June 30, 2004, the property, plant and equipment with a gross book value of RMB 8,731,000transferred from a related party are still registered in the name of the related party pending theapproval of the transfer by the relevant authorities.

10 TRADE PAYABLES

June 30,2004

RMB’000

Outside parties 17,852Related company (Note 4) 1,620Customer advances 20,436

39,908

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11 OTHER PAYABLES

June 30,2004

RMB’000

Related parties (Note 5) 12,584Accrual for late costs on contracts 5,782Value added taxes 1,837Accruals 460Others 668

21,331

12 SHORT TERM LOANS

June 30,2004

RMB’000

Financial institution – Note (a) 850Bank loan – Note (b) 6,000

6,850

(a) The short-term bank loan payable to a financial institution bears interest at 6.64% perannum. The loan is secured by leasehold buildings with a carrying value of RMB 935,000.

(b) Short term loan payable to a bank bears an interest at 4.2% per annum and is supported bya guarantee issued by a guarantor company for which a guarantee fee of RMB 110,000 hasbeen paid.

13 PAID-UP CAPITAL

June 30,2004

RMB’000

Authorised capital (US$10,000,000) 82,700

Registered capital (US$ 5,080,000) 42,012

a) As at June 30, 2004, the registered capital is not paid up. The company is required to have15% of the registered capital up within 3 months of registration and the remaining of theregistered capital to be paid up within 2 years of registration.

b) The company has received US$ 600,000 (equivalent to RMB 4,966,000) from its immediateholding company at the end of the financial year. This amount is to be used for capitalverification of the company and is classified as “Capital Application Monies”.

14 GENERAL RESERVE

June 30,2004

RMB’000

Reserve fund 2,228Enterprise expansion fund 1,114

3,342

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15 REVENUE


2004RMB’000

Sales of goods:Pressure vessels 29,592Heat pipes and heat pipe exchangers 17,581Pipe supports 15,642

62,815Waste gas and energy recovery systems 5,354

Total 68,169



2004 RMB’000

Interest income 1Others 9

Total 10



2004 RMB’000

Salaries and wages 216Travelling and transportation 189Office expenses 120Rental 93Depreciation 89Entertainment 75Low cost consumables 56Staff benefits 38Insurance 33Telecommunication 22Courses 16Defined contribution plans 14Utilities 6Repair and maintenance 2

Total 969

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18 PROFIT FROM OPERATIONS

In addition to the charges and credits disclosed elsewhere in the notes to the profit and lossstatement, this item includes the following charges:


2004RMB’000

Salaries and wages 731Defined contribution plans 14Directors’ remuneration 32

June 30,2004

Number of employees at the end of the financial period 198

19 FINANCE COSTS



Pursuant to the relevant laws and regulations in People’s Republic of China (“PRC”), the companyis entitled to an exemption from PRC enterprise income for two years starting from its first profit-making year, followed by a 50% reduction for the next three years. As this is the first profit-makingyear of the company, under the PRC regulations, the company is exempted from taxation.



2004RMB’000

Minimum lease payments paid under operating leases 93


June 30,2004

RMB’000

Within 1 year 399Within 2 to 5 years –


The financial statements cover the financial period since establishment on April 16, 2004 to June 30, 2004. This being the first set of financial statements, there are no comparative figures.

J-17

APPENDIX K

THE AUDITED FINANCIAL STATEMENTS OF SUNPOWER GROUP LTD. FROM 28 APRIL 2004 (DATE OF INCORPORATION) TO 30 JUNE 2004

SUNPOWER GROUP LTD

REPORT OF THE DIRECTORS

The directors present their report together with the audited consolidated financial statements of the groupand the audited financial statements of the company for the financial period ended June 30, 2004. Thefinancial period covers the period since incorporation on April 28, 2004 to June 30, 2004.

1 DIRECTORS

The directors of the company in office at the date of this report are:

Guo Hong Xin (Appointed on May 12, 2004)Li Lai Suo (Appointed on May 12, 2004)Ma Ming (Appointed on May 12, 2004)

2 ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE SHARES OR DEBENTURES

Neither at the end of the financial period nor at any time during the financial period did theresubsist any arrangement whose object is to enable the directors of the company to acquirebenefits by means of the acquisition of shares or debentures in the company or any other bodycorporate.

3 DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES

The directors holding office at the end of the financial period had no interests in the share capitaland debentures of the company and related corporations except as follows:

Interests HeldAt At

date of appointment June 30, 2004

The companyShares at par value of US$1.00 per share, nil paid

Guo Hong Xin 12,000 12,000

4 DIRECTORS’ RECEIPT AND ENTITLEMENT TO CONTRACTUAL BENEFITS

Since the beginning of the financial period, no director has received or become entitled to receivea benefit by reason of a contract made by the company or a related corporation with the director orwith a firm of which he/she is a member, or with a company in which he/she has a substantialfinancial interest, except for remuneration as disclosed in the financial statements.

K-1

5 OPTIONS TO TAKE UP UNISSUED SHARES

During the financial period, no option to take up unissued shares of the company or its subsidiarywas granted.

6 OPTIONS EXERCISED

During the financial period, there were no shares of the company or its subsidiary issued by virtueof the exercise of an option to take up unissued shares.

7 UNISSUED SHARES UNDER OPTION

At the end of the financial period, there were no unissued shares of the company or its subsidiaryunder option.

8 AUDITORS

The auditors, Deloitte & Touche, have expressed their willingness to accept re-appointment.

ON BEHALF OF THE BOARD

..........................................Guo Hong Xin

..........................................Ma Ming

July 31, 2004

K-2

AUDITORS’ REPORT TO THE MEMBER OF

SUNPOWER GROUP LTD

We have audited the consolidated financial statements of the group and the financial statements of thecompany for the financial period from April 28, 2004 (date of incorporation) to June 30, 2004. Thesefinancial statements are the responsibility of the company’s directors. Our responsibility is to express anopinion on these financial statements based on our audit.


In our opinion, the accompanying consolidated financial statements of the group and the financialstatements of the company are properly drawn up in accordance with the provisions of the SingaporeFinancial Reporting Standards, to give a true and fair view of the state of affairs of the group and thecompany as at June 30, 2004 and of the results and changes in equity of the group and the companyand the cash flows of the group for the financial period ended on that date.

The accompanying consolidated financial statements of the group and the financial statements of thecompany were prepared for the purpose of enabling the company to prepare for an initial public offeringin Singapore and should not be used for any other purposes.

Certified Public Accountants



K-3

SUNPOWER GROUP LTD

BALANCE SHEETSJune 30, 2004


GROUP COMPANYJune 30, June 30,

Notes 2004 2004RMB’000 RMB’000

ASSETS

Current assets:Cash and bank balances 20,697 2,225Trade receivables 6 49,293 – Other receivables and prepayments 7 9,879 7,542Inventories 8 18,098 –


Non-current assets:Investment in subsidiaries 9 – – Property, plant and equipment 10 13,169 –Intangible asset 11 2,924 –

Total non-current assets 16,093 –



Current liabilities:Trade payables 12 43,224 –Other payables 13 34,182 2,239Short term loans 14 6,850 –Convertible loans 15 7,545 7,545


Capital and reserves:Paid-up capital 16 – –General reserve 17 3,342 –Accumulated profits 18,917 (17)

Total equity 22,259 (17)

Total liabilities and equity 114,060 9,767


K-4

SUNPOWER GROUP LTD

PROFIT AND LOSS STATEMENTSPeriod from April 28, 2004 (date of incorporation) to June 30, 2004


GROUP COMPANYApril 28, April 28, 2004 to 2004 to June 30, June 30,

Notes 2004 2004 RMB’000 RMB’000

Revenue 18 68,169 –

Cost of sales (42,861) –

Gross profit 25,308 –

Other operating income 19 10 –

Selling and distribution expenses (1,181) –

Research expenses (800) –

Administrative expenses 20 (977) (3)

Other operating expenses (4) –

Profit (Loss) from operations 21 22,356 (3)

Finance costs 22 (97) (14)

Profit (Loss) before income tax 22,259 (17)

Income tax expense 23 – –

Profit (Loss) after income tax 22,259 (17)


K-5

SUNPOWER GROUP LTD

STATEMENTS OF CHANGES IN EQUITYPeriod from April 28, 2004 (date of incorporation) to June 30, 2004

Paid-up General Accumulatedcapital reserve profits (losses) Total

RMB’000 RMB’000 RMB’000 RMB’000

GROUP

Balance at April 28, 2004 (date of incorporation) – – – –

Profit for the period – – 22,259 22,259

Transfer – 3,342 (3,342) –

Balance at June 30, 2004 – 3,342 18,917 22,259

COMPANY

Balance at April 28, 2004 (date of incorporation) – – – –

Loss for the period – – (17) (17)

Balance at June 30, 2004 – – (17) (17)


K-6

SUNPOWER GROUP LTD

CONSOLIDATED CASH FLOW STATEMENTPeriod from April 28, 2004 (date of incorporation) to June 30, 2004


GROUPApril 28,2004 toJune 30,

2004RMB’000

Cash flows from operating activities:Profit before income tax 22,259Adjustments for:

Depreciation expense 157Interest expense 97

Operating profit before working capital changes 22,513

Trade receivables (20,626)Other receivables and prepayments 16,635Inventories 15,409Trade payables (17,496)Other payables 9,422

Cash generated from operations 25,857

Interest paid (17)

Net cash from operating activities 25,840

Cash flows used in investing activities:Acquisition of assets and undertakings pursuant to Sunpower Undertakings (Note A) (10,840)Purchase of plant and equipment (651)

Net cash used in investing activities (11,491)

Cash flows from financing activities:Decrease in short term loan (1,197)Increase in convertible loan 7,545

Net cash from financing activities 6,348

Net increase in cash 20,697Cash and bank balances at beginning of period –

Cash and bank balances at end of period 20,697


K-7

SUNPOWER GROUP LTD

NOTE TO CASH FLOW STATEMENT

A. The group acquired the following assets and undertakings pursuant to Restructuring Exercisedescribed in Note 2 to the financial statements:

ShengnuoSunpower Undertakings Undertakings

Acquired basedon audited net Movementassets as at from Transferred Acquired Total

December 31, January to as at April as at June acquired/2003 April 2004 30, 2004 30, 2004 transferred


Current assets:Trade receivables 36,079 (10,174) 25,905 2,762 28,667Other receivables and prepayments 5,934 18,837 24,771 1,743 26,514Inventories 24,701 6,683 31,384 2,123 33,507

Total current assets 66,714 15,346 82,060 6,628 88,688

Non-current assets:Property, plant and equipment – net book value 5,548 353 5,901 6,774 12,675

Intangible asset – – – 2,924 2,924

Total non-current assets 5,548 353 5,901 9,698 15,599

Total assets 72,262 15,699 87,961 16,326 104,287

Current liabilities:Trade payables 45,478 9,455 54,933 5,787 60,720Other payables 3,572 (2,015) 1,557 577 2,134Short term loans 7,850 197 8,047 – 8,047Current portion of long term loans 100 (100) – – –

Total current liabilities 57,000 7,537 64,537 6,364 70,901

Non-current liability:Long term loans 130 (130) – – –

Total liabilities 57,130 7,407 64,537 6,364 70,901

Net assets acquired / transferred 15,132 8,292 23,424 9,962 33,386

Less: amount paid (10,840) – (10,840)

Amount outstanding as at June 30, 2004 (Note 13) 12,584 9,962 22,546

K-8

SUNPOWER GROUP LTD

NOTES TO FINANCIAL STATEMENTSJune 30, 2004

1 GENERAL

The company is incorporated in Bermuda, under the Companies Act 1981 of Bermuda, with itsregistered office at Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda and principalplace of business at Room 301, Suning Universal Mansion, No.188, Guangzhou Road, Nanjing,China 210024. The financial statements are expressed in Renminbi (“RMB”).

The principal activity of the company is that of investment holdings. The principal activities of thesubsidiaries are detailed in Note 9 to the financial statements.

The accompanying financial statements was prepared for the purpose of enabling the ultimateholding company to prepare consolidated financial statements and the initial public offering inSingapore and should not be used for any other purposes.

The financial statements of the group and of the company for financial period ended June 30, 2004were authorised for issue by the management/directors on July 31, 2004.

2 RESTRUCTURING EXERCISE

The company implemented a restructuring exercise (the “Restructuring Exercise”) in preparationfor its listing on the SGX-SESDAQ, as described below:

a) Drawdown of Convertible Loan

i) Pursuant to the Founding Shareholders Convertible Loan Agreement dated June 1,2004, Guo Hong Xin, Li Lai Suo, Ma Ming, Allgreat Pacific Limited, Armour AsiaLimited, Claremont Consultancy Limited and Trestle Asia Limited advanced anaggregate amount of US$300,000 to the company.

ii) Pursuant to the PRC Investor Convertible Loan Agreement dated June 1, 2004, WongHiu Kin advanced an amount of US$500,000 to the company.

iii) Pursuant to the Foreign Investors Convertible Loan Agreement dated June 1, 2004,Innovus Capital Private Limited, Vertex Resources Limited, Chua Kian Peng, Chau-chan Sui Yung, Equity-link Asia Limited, Ng E-ming Joyce, Chen Jiong and Tan LwengNgoh advanced an aggregate amount of US$2,000,000 to the company.

b) Acquisition of Jiangsu Sunpower Petrochemical Engineering Co., Ltd’s Undertakings(“Sunpower Undertakings”)

i) On April 28, 2004, the company acquired the entire issued and paid-up capital inPerimeter Pacific Limited, which is a limited liability company incorporated in theBritish Virgin Islands on August 22, 2003 for a nominal consideration.

ii) On April 16, 2004, Perimeter Pacific Limited established a wholly-owned subsidiary,Jiangsu Sunpower Technology Co., Ltd, as a wholly foreign-owned enterprise underthe laws of the PRC with an initial registered capital of US$ 5,080,000 (equivalent toRMB 42,011,000).

K-9

iii) Pursuant to a sale and purchase agreement dated April 18, 2004 between JiangsuSunpower Petrochemical Engineering Co., Ltd and Jiangsu Sunpower TechnologyCo., Ltd and as amended by a supplemental agreement dated July 27, 2004, JiangsuSunpower Technology Co., Ltd acquired Jiangsu Sunpower PetrochemicalEngineering Co., Ltd’s business, assets and undertakings relating to the pressurevessels, waste gas and energy recovery systems and pipe supports which werelocated in Nanjing (“Sunpower Undertakings”), for a total cash consideration of RMB 15,132,375, based on the audited net book value of the Sunpower Undertakingsas at December 31, 2003. All rights and liabilities relating to the SunpowerUndertakings were acquired with effect from April 30, 2004. The assets and liabilitiesnot acquired by Jiangsu Sunpower Technology Co., Ltd include assets and liabilitiesof Jiangsu Sunpower Petrochemical Engineering Co., Ltd relating to its sealingbusiness which is a distributor for Klinger of Australia and its other non-operatingassets and liabilities. Under the sale and purchase agreement, the parties haveagreed that Jiangsu Sunpower Petrochemical Engineering Co., Ltd will be responsiblefor the profit or loss of the operations of Sunpower Undertakings from January 1,2004 to April 30, 2004.

c) Acquisition of Jiangsu Shengnuo Heat Pipe Co., Ltd’s Undertakings (“ShengnuoUndertakings”)

i) On April 28, 2004, the company acquired the entire issued and paid-up capital in SunSuperior Holdings Ltd which is a limited liability company incorporated in the BritishVirgin Islands on April 13, 2004 for a nominal consideration.

ii) On June 18, 2004, Sun Superior Holdings Ltd established a 64.5% owned subsidiary,Nanjing Shengnuo Heat Pipe Co., Ltd, as an equity joint venture under the laws of thePRC with an initial registered capital of US$1,330,000 (equivalent to RMB 10,972,500).

iii) Pursuant to a sale and purchase agreement dated June 12, 2004 between JiangsuShengnuo Heat Pipe Co., Ltd and Sun Superior Holdings Ltd, Nanjing ChemicalUniversity Science and Technology Group Co., Ltd, Nanjing RongchuanEnvironmental Protection Engineering Co., Ltd and Nanjing Rehan Science andTechnology Co., Ltd (collectively signing on behalf of Nanjing Shengnuo Heat PipeCo., Ltd as it was not established when the sale and purchase agreement wassigned) and as amended by a supplemental agreement dated July 27, 2004, NanjingShengnuo Heat Pipe Co., Ltd acquired Jiangsu Shengnuo Heat Pipe Co., Ltd’sbusiness, assets and undertakings relating to the heat pipes and heat pipeexchangers which were located in Nanjing (“Shengnuo Undertakings”), for a totalcash consideration of RMB 9,961,741, based on the audited net book value of theShengnuo Undertakings as at June 30, 2004. All rights and liabilities relating to theShengnuo Undertakings were acquired with effect from June 30, 2004. The assetsand liabilities not acquired by Nanjing Shengnuo Heat Pipe Co., Ltd include assetsand liabilities of Jiangsu Shengnuo Heat Pipe Co., Ltd relating to its heat pipe andheat pipe exchangers contracts secured before 2 March 2004 and other non-operating assets.

K-10


a) BASIS OF ACCOUNTING – The financial statements for the financial period ended June30, 2004 are prepared in accordance with the historical cost convention, and are drawn upin accordance with the Singapore Financial Reporting Standards.

The group’s principal operations are conducted in the People’s Republic of China.Accordingly, the financial statements have been prepared in RMB, being the functionalcurrency of the principal companies in the group.

b) BASIS OF CONSOLIDATION – The consolidated financial statements incorporate thefinancial statements of the company and enterprises controlled by the company (itssubsidiaries) made up to the end of the financial period. Control is achieved when thecompany has the power to govern the financial and operating policies of an investeeenterprise so as to obtain benefits from its activities. On acquisition, the assets and liabilitiesof the relevant subsidiaries are measured at their fair values at the date of acquisition. Theinterest of minority shareholders is stated at the minority’s proportion of the fair values of theassets and liabilities recognised. The results of subsidiaries acquired or disposed of duringthe period are included in the consolidated profit and loss statement from the effective dateof acquisition or up to the effective date of disposal, as appropriate. Where necessary,adjustments are made to the financial statements of the subsidiaries to bring the accountingpolicies used in line with those used by other members of the group. All significantintercompany transactions and balances between group enterprises are eliminated onconsolidation.




d) FOREIGN CURRENCY TRANSACTIONS – The books of the company are maintained in itsmeasurement currency, namely Renminbi. Transactions in foreign currencies are recorded inRenminbi at the rates ruling at the date of the transactions. At each balance sheet date,recorded monetary balances are denominated in foreign currencies are recorded at therates ruling at the balance sheet date. All realised and unrealised exchange adjustmentgains and losses are dealt with in the profit and loss statement.


K-11

e) INVENTORIES – Inventories are measured at the lower of cost (weighted average method)and net realisable value. Cost includes all costs of purchase, cost of conversion and othercosts incurred in bringing the inventories to their present location and condition. Netrealisable value represents the estimated selling price less all estimated costs to completionand costs to be incurred in marketing, selling and distribution.


f) PROPERTY, PLANT AND EQUIPMENT – Property, plant and equipment are carried atcost, less accumulated depreciation and any impairment loss where the recoverable amountof the asset is estimated to be lower than its carrying amount.


Land use rights - 2 to 3.33%Leasehold land and buildings - 5%Plant and machinery - 10%Furniture, fixtures and equipment - 20%Motor vehicles - 20%

Land use rights pertain to the payment for rights of the usage of land over 30 to 50 years.



g) INTANGIBLE ASSET – Trademark is stated at cost less amortisation. This is amortisedusing the straight-line method over its estimated useful lives of 10 years as more fullydisclosed in Note 11. Where an indication of impairment exists, the carrying amount of anyintangible asset is assessed and written down immediately to its recoverable amount.

h) FINANCIAL ASSETS – The principal financial assets are cash, trade receivables and otherreceivables. Trade receivables and other receivables are stated at their nominal value asreduced by appropriate allowances for estimated irrecoverable amounts. The accountingpolicy for other investments is described below.

i) FINANCIAL LIABILITIES AND EQUITY – Financial liabilities and equity instruments areclassified according to the substance of the contractual arrangements entered into.

Significant financial liabilities include interest-bearing loans, convertible loans, tradepayables and other payables.

Interest-bearing loans are recorded at the proceeds received, net of direct issue costs.Finance charges, including premiums payable on settlement or redemption, are accountedfor on an accrual basis and are added to the carrying amount of the instrument to the extentthat they are not settled in the period in which they arise.



K-12

j) LEASES – Leases are classified as finance leases whenever the terms of the lease transfersubstantially all the risks and rewards of ownership to the lessee. All other leases areclassified as operating leases.

Assets held under finance leases are recognised as assets of the Group at their fair value atthe date of acquisition. The corresponding liability to the lessor is included in the balancesheet as a finance lease obligation. Finance costs, which represent the difference betweenthe total leasing commitments and the fair value of the assets acquired, are charged to theincome statement over the term of the relevant lease using the effective interest ratemethod.


k) IMPAIRMENT OF ASSETS – At each balance sheet date, the group reviews the carryingamounts of its tangible and intangible assets to determine whether there is any indicationthat those assets have suffered an impairment loss. If any such indication exists, therecoverable amount of the asset is estimated in order to determine the extent of theimpairment loss (if any). If the recoverable amount of an asset is estimated to be less thanits carrying amount, the carrying amount of the asset is reduced to its recoverable amount.Impairment losses are recognised as an expense immediately.


l) REVENUE RECOGNITION – Revenue from sale of goods is recognised when significantrisks and rewards of ownership are transferred to the buyer and the amount of revenue andthe costs of the transactions (including future costs) can be measured reliably.


m) INCOME TAX – Tax expense is determined on the basis of tax effect accounting, using theliability method, and it is applied to all significant temporary differences arising between thecarrying amount of assets and liabilities in the financial statements and the correspondingtax bases used in the computation of taxable profit, except that a debit balance for deferredtax is not carried forward unless there is a reasonable expectation of realisation.


n) RETIREMENT BENEFIT COSTS – Payments to defined contribution retirement benefitplans (including state-managed retirement benefit schemes) are charged as an expensewhen incurred.

o) BORROWING COSTS – Borrowing costs directly attributable to the acquisitions,construction or production of qualifying assets, which are assets that necessarily take asubstantial period of time to get ready for their intended use or sale, are added to the cost ofthose assets, until such time as the assets are substantially ready for their intended use orsale. Investment income earned on the temporary investment of specific borrowings pendingtheir expenditure on qualifying assets is deducted from the costs of those assets.

K-13

p) RESERVES – Pursuant to relevant laws and regulations in the PRC and the Articles ofAssociation, as wholly owned foreign entities, the subsidiaries are required to transfer 10%of its profit after taxation as reported in the PRC statutory financial statements to thereserve fund until the balance reached 50% of its registered capital. The reserve fund canbe used to make up losses incurred or to increase capital. In addition, the subsidiary isrequired to make appropriation to enterprise expansion fund. Subject to approval by relevantgovernment authority, the enterprise expansion fund may also be used to increase capital.The appropriation to the expansion fund shall be approved by the board of directors. Inaddition, the subsidiaries appropriate an additional 5% of its profit after taxation to thestatutory reserve fund and statutory enterprise expansion fund.

q) PROVISIONS – Provisions are recognised when the company and the group has a presentobligation as a result of a past event where it is probable that it will result in an outflow ofeconomic benefits that can be reasonably estimated.









The group is exposed to interest rate risk through the impact of rate changes on interestbearing liabilities and assets. These exposures are managed partly by using natural hedgesthat arise from offsetting interest rate sensitive assets and liabilities.

b) Credit Risk

The group’s credit risk is primarily attributable to its trade and other receivables. Theamounts presented in the balance sheet are net of allowances for doubtful receivables, ifany, as estimated by the Group’s management based on prior experience and the currenteconomic environment.


K-14


Concentration of credit risk exist when changes in economic, industry or geographic factorssimilarly affect groups of counterparties whose aggregate credit exposure is significant inrelation to the group’s total credit exposure.

The group’s credit exposure is concentrated mainly in the People’s Republic of China. Thereis no significant concentration of credit risk with any customer or group of customers, exceptthat the top 5 balances accounted for RMB17,715,000 or 35%of the total gross tradereceivables at June 30, 2004.


The group’s exposure to foreign currency risk is minimal as substantially mainly all itstransactions are in Renminbi.

e) Liquidity Risk

The group is exposed to minimal liquidity risk as a substantial portion of its financial assetsand financial liabilities are due within one year and can finance its operations from existingshareholders’ funds.




a) Related parties are entities with common direct or indirect shareholders and/or directors.Parties are considered to be related if one party has the ability to control the other party orexercise significant influence over the other party in making financial and operatingdecisions.


b) Significant related parties transactions:


2004 2004 RMB’000 RMB’000

Transfer of net assets:Purchase of Sunpower Undertakings 15,132 –Additional transfer of Jiangsu Sunpower Petrochemical Engineering Co., Ltd 8,292 –

Purchase of Shengnuo Undertakings 9,962 –Purchases of goods 1,702 –

K-15

c) Related parties balances:

GROUPJune 30,

2004RMB’000

Trade receivables

Jiangsu Shengnuo Heat Pipe Co., Ltd 788Jiangsu Sunpower Petrochemical Engineering Co., Ltd 28

816

Other receivables and prepayments

Nanjing University of Technology 226Wuhan Zhongshengyuan Energy Environmental Protection Project Co., Ltd 100

326

Trade payables

Nanjing University of Technology 290

Other payables

Jiangsu Sunpower Petrochemical Engineering Co., Ltd 12,741Jiangsu Shengnuo Heat Pipe Co., Ltd 9,962

22,703

6 TRADE RECEIVABLES


2004 2004 RMB’000 RMB’000

Outside parties 49,458 –Less: Allowance for doubtful debts (981) –

48,477 –Related parties (Note 5) 816 –

Net 49,293 –


Transfer from a related party (Note 5) 1,016 –Utilised (35) –

Balance at end of period 981 –

K-16



2004 2004 RMB’000 RMB’000

Advance payments for purchases:Outside parties 6,348 –Related parties (Note 5) 326 –

Initial public offering expenses 2,230 2,164Staff and other loans 1,049 –Prepayments 435 331Deposits 104 –Subsidiary (Note 9) – 5,047Others 239 –

Total 10,731 7,542Less: Allowance for doubtful other receivables (852) –

Net 9,879 7,542


Transfer from a related party (Note 5) and balance at end of period 852 –

The amount due from staff and other loans are non-trade in nature, unsecured, interest-free andwithout fixed terms of repayment.

8 INVENTORIES


2004 2004 RMB’000 RMB’000

At cost:Raw materials 1,862 –Work-in-progress 13,973 –Finished goods 2,263 –

Total 18,098 –


COMPANYJune 30,

2004 RMB’000

Unquoted equity shares, at cost –

The balances with subsidiaries are unsecured, without fixed repayment terms and interest freeunless stated otherwise.

K-17

Details of the subsidiaries are as follows:

Place ofCost of Effective equity incorporation/

Subsidiaries investment interest held operation Principal activities RMB’000 %

Held by company:

Perimeter Pacific Limited (a) 100.0 British Virgin Investment holdingIslands

Sun Superior Holdings Ltd (a) 100.0 British Virgin Investment holdingIslands

Held by subsidiaries:

Jiangsu Sunpower 4,966(b) 100.0 Nanjing, Manufacture and sale of Technology Co., Ltd People’s pressure vessels, heat pipes (Capital held by Republic and heat pipe exchangers, Perimeter Pacific Limited) of China designing, manufacturing

and sale of special pipe racks and hanger, provision of installation and commissioning of relevantprojects and provision oftechnical servicesand consultation

Nanjing Shengnuo Heat (c) 64.5 Nanjing, Manufacturing and trading Pipe Co., Ltd People’s of heat pipes and heat (Capital held by Republic pipe exchangers, provision Sun Superior Holdings Ltd) of China of installation and

commissioning of relevant projects and provision of technical services andconsultation

Note on cost:

(a) Cost of investment amounted to US$1.00 (equivalent to RMB 8.27).

(b) Cost of investment held by Perimeter Pacific Limited in Jiangsu Sunpower Technology Co.,Ltd represented capital application monies paid amounting to US$600,000 (equivalent toRMB 4,966,000). The registered capital of this subsidiary is US$5,080,000. The group iscommitted to pay the balance of US$4,480,000 (equivalent to RMB 37,068,000) as capitalinjection in this subsidiary.

(c) The registered capital of Nanjing Shengnuo Heat Pipe Co., Ltd is US$1,330,000. As thegroup’s equity interest in this subsidiary is 64.5%, the group is committed to payUS$857,850 (equivalent to RMB 7,097,850) as capital injection into this subsidiary.

Note on auditors for period ended June 30, 2004:

The above subsidiaries are audited by Deloitte & Touche, Singapore for consolidation purposes.

K-18



GROUP rights buildings machinery equipment vehicles in-progress TotalRMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Cost:

Transfer from related parties 2,340 4,468 5,260 2,041 2,281 15 16,405

Additions – – 178 28 170 275 651

At June 30, 2004 2,340 4,468 5,438 2,069 2,451 290 17,056

Accumulateddepreciation:

Transfer from related parties 19 615 1,202 594 1,300 – 3,730

Depreciation – 19 58 34 46 – 157

At June 30, 2004 19 634 1,260 628 1,346 – 3,887

Net book value:

At June 30, 2004 2,321 3,834 4,178 1,441 1,105 290 13,169

As at June 30, 2004, the property, plant and equipment with a gross book value of RMB16,405,000 transferred from related parties are still registered in the name of the respective relatedparties pending the approval of the transfer by the relevant authorities.

11 INTANGIBLE ASSET


2004 2004 RMB’000 RMB’000

Trademark transferred from a related party (Note 5):Cost 3,053 – Less: Accumulated amortisation (129) –

Net book value 2,924 –

a) This relates to the trademark “SHENGNUO” which was acquired by Jiangsu Shengnuo HeatPipe Co., Ltd for RMB 2,924,000. This trademark was subsequently transferred to NanjingShengnuo Heat Pipe Co., Ltd as part of the Shengnuo Undertakings acquired. Thetrademark has been registered with the relevant authority of the People’s Republic of Chinaon April 7, 1995 and is effective for a period of 10 years till April 6, 2005. The subsidiaryintends to apply for the renewal of a further 10 years upon the expiration on April 6, 2005and the directors/management of the company are confident of obtaining the extension at aminimal cost.

b) On July 30, 2004, Nanjing Shengnuo Heat Pipe Co., Ltd entered into a supplementalagreement with Jiangsu Shengnuo Heat Pipe Co., Ltd, whereby in the event that therenewal application of the trademark for another 10 years is rejected by the authorities, thelatter will compensate Nanjing Shengnuo Heat Pipe Co., Ltd and amount up to original costof RMB 2,924,000. Accordingly, the company amortises the trademark over a period of 10years.

K-19

12 TRADE PAYABLES


2004 2004 RMB’000 RMB’000

Outside parties 20,914 – Related parties (Note 5) 290 – Customer advances 22,020 –

Total 43,224 –

13 OTHER PAYABLES


2004 2004 RMB’000 RMB’000

Related parties (Note 5):- Acquisition of assets pursuant to Sunpower and Shengnuo

Undertakings 22,546 –- Non-trade 157 157

Accrual for late costs on contracts 6,269 –Accruals 4,102 1,685Due to directors 360 335Accrual for interest and finders’ fees 80 14Subsidiaries (Note 9) – 48Others 668 –

34,182 2,239

The amount due to related parties and directors are non-trade in nature, unsecured, interest-freeand without fixed terms of repayment.

14 SHORT TERM LOANS


2004 2004 RMB’000 RMB’000

Financial institution – Note (a) 850 –Bank loan – Note (b) 6,000 –

6,850 –

(a) Short-term bank loan payable to a financial institution bears interest at 6.64% per annum.The loan is secured by leasehold buildings with a carrying value of RMB 935,000.

(b) Short term loan payable to a bank bears an interest at 4.2% per annum and is supported bya guarantee issued by guarantor company for which the subsidiary has paid a guarantee feeof RMB 110,000.

K-20

15 CONVERTIBLE LOANS

GROUP AND COMPANYJune 30, 2004

US$’000 RMB’000(equivalent)

Convertible loans payable to:Founding Shareholders 300 2,482PRC investor 415 3,408Foreign investors 200 1,655

Total 915 7,545

a) Convertible Loans Payable To Founding Shareholders

(i) On June 1, 2004, the company entered into a Founding Shareholders ConvertibleLoan Agreement with Guo Hong Xin, Li Lai Suo, Ma Ming, Allgreat Pacific Limited,Armour Asia Limited, Claremont Consultancy Limited and Trestle Asia Limited(collectively the “Founding Shareholders”) whereby the Founding Shareholdersagreed to advance an aggregate of US$300,000 to the company. The ConvertibleLoans payable to the Founding Shareholders are unsecured.

As at June 30, 2004, the Founding Shareholders have fully advanced the agreedamount of US$300,000 (equivalent to RMB 2,482,200) to the company.

(ii) The Convertible Loans are convertible into new fully paid ordinary shares of US$1.00each (“Conversion Shares”) in the capital of the company upon receipt by thecompany of all necessary consents from the Bermuda Monetary Authority in relationto the issue of the Conversion Shares to the Founding Shareholders.

(iii) The conversion ratio is based on the 1:1 ratio such that 288,000 new ordinary sharesof US$1.00 each will be issued, and the 12,000 nil paid ordinary shares of US$1.00each held by Guo Hong Xin will be credited as fully paid-up, upon the full conversionof the US$300,000 Convertible Loans Payable by the Founding Shareholders.

(iv) The Convertible Loans payable to the Founding Shareholders are interest-free.

b) Convertible Loan Payable to PRC Investor

(i) On June 1, 2004, the company entered into a Convertible Loan Agreement with WongHiu Kin (the “PRC Investor) whereby the PRC Investor agreed to advanceUS$500,000 to the company for the purpose of implementing the RestructuringExercise of the Group.

As at June 30, 2004, the PRC Investor has advanced US$415,000 (equivalent to RMB 3,408,000) out of the agreed US$500,000 to the company. Subsequent to 30June 2004, the PRC Investor advanced the remaining US$85,000 to the Company.

(ii) Following the conversion of the Convertible Loans by the Founding Shareholders asdescribed in Note 15(a) above, each of the Founding Shareholders is required toexecute a security in favour of the PRC Investor for 20% of the new ordinary sharesallotted and issued by the Company to the each of the Founding Shareholders.

K-21

(iii) The Convertible Loans are convertible into new fully paid ordinary shares of US$1.00each (“Conversion Shares”) in the capital of the company provided:

the company has received the Eligibility-to-List letter from the SGX-ST for theListing and the company has determined the public offer price of the Shares forits initial public offering; and

the company has received the written approval from the Bermuda MonetaryAuthority for the subscription of the Conversion Shares by the PRC Investorupon an exercise of its conversion rights.

(iv) The number of Conversion Shares to be issued upon conversion is equivalent to theConvertible Loan Amount divided by the Conversion Price based on the US$:S$exchange rate on the date of the conversion. The Conversion Price is defined as 60%of the IPO share price upon its initial public offering, or the par value of the shares,whichever is higher.

(v) In the event that the listing of the company occurs on or before June 30, 2005 (the“Maturity Date”), the Convertible Loans payable to the PRC Investor shall not bearany interest.

(vi) In the event that the listing of the company does not occur by the Maturity Date, theConvertible Loans will bear interest at 5% per annum from the drawdown date to thedate of actual of repayment.

(vii) In the event that the listing of the company does not occur by the Maturity Date, theConvertible Loans and the interest will be repayable in six equal monthly installmentsfrom July 31, 2005 to December 31, 2005.

(viii) As at June 30, 2004, the company has accrued interest payable amounting toUS$1,730 (equivalent to RMB 14,314) on the Convertible Loans payable to the PRCInvestor.

c) Convertible Loans Payable to Foreign Investors

(i) On June 1, 2004, the company entered into a Convertible Loan Agreement with 8foreign investors (collectively the “Foreign Investors”) whereby the Foreign Investorsagreed to advance an aggregate of US$2,000,000 over three tranches to thecompany for the purpose of for the purpose of implementing the RestructuringExercise of the Group. On July 7, 2004, the company, the Foreign Investors and theFounding Shareholders entered into a supplemental deed to amend the ConvertibleLoan Agreement.

(ii) The First Trance of US$200,000 will be made available to the company on 7 businessdays from the date of the Agreement.

The Second Tranche of US$1,100,000 will be made available to the company uponfulfillment of all the conditions known as the Second Tranche Drawdown Conditionsand on the date falling 7 business days from the date of the company’s written notice(issued within 3 business days from the fulfillment of all the Second TrancheDrawdown Conditions) to draw down on the Second Tranche.

The Third Tranche of US$700,000 will be made available to the company uponfulfillment of all the conditions known as the Third Tranche Drawdown Conditions andon the date falling 7 business days from the date of the company’s written notice(issued within 3 business days from the fulfillment of all the Third Tranche DrawdownConditions) to draw down on the Third Tranche.

K-22

As at June 30, 2004, the Foreign Investors have advanced the First Tranche ofUS$200,000 (equivalent to RMB 1,655,000) to the company.

On July 13, 2004, the Foreign Investors have advanced the Second Tranche ofUS$1,100,000 (equivalent to RMB 9,102,500) to the company.

(iii) Following the conversion of the Convertible Loans by the Founding Shareholders asdescribed in Note 15(a) above, each of the Founding Shareholders is required toexecute a security in favour of the Foreign Investors for 80% of all the Shares held by,or on behalf of, each of the Founding Shareholders at any time, including the Sharesto be allotted and issued to each Founder pursuant to their conversion of theFounding Shareholders’ Convertible Loan.

(iv) The Convertible Loans are not convertible into new fully paid ordinary shares ofUS$1.00 each (“Conversion Shares”) in the capital of the Company unless and until:

the company has received the Eligibility-to-List letter from the SGX-ST for theListing;

the company and its Listing Manager has determined an estimate of theSingapore public offer price of the Shares for its initial public offering(“Preliminary IPO Price”); and

the receipt of the written approval from the Bermuda Monetary Authority for thesubscription of the Conversion Shares by each of the Foreign Investors uponan exercise of its conversion rights.

(v) The number of Conversion Shares to be issued upon conversion is equivalent to theConvertible Loan Amount divided by the Conversion Price based on the US$:S$exchange rate on the date of the conversion. The Conversion Price is defined as 60%of the IPO share price upon its initial public offering, or the par value of the shares,whichever is higher.

(vi) In the event that the Conversion Notice is issued by the Foreign Investors on or beforeJune 30, 2005 (the “Maturity Date”), the Convertible Loans payable to the ForeignInvestors shall not bear any interest.

(vii) In the event that the Conversion Notice is not issued by the Foreign Investors by theMaturity Date, the Convertible Loans will bear interest in arrears on the outstandingloans from the Third Tranche Drawdown Date at 5% per annum.

(viii) In the event that the Conversion Notice is not issued by the Foreign Investors by theMaturity Date, the Convertible Loans and the interest will be repayable in six equalmonthly installments from July 31, 2005 to December 31, 2005.

(ix) The company shall pay a Finder Fee of US$80,000 or 4% of the Loans in 3 separatepayments to the arranger of the Foreign Investors Convertible Loan Payable at 10%,55% and 35% (or US$8,000, US$44,000 and US$28,000) within 7 business daysfrom the First Tranche Drawdown, Second Tranche Drawdown and Third TrancheDrawdown respectively. In the event that the Listing shall not occurred by the MaturityDate, the arranger shall return the amounts of finder fee paid as referred to above infull to the company within 3 business days after the company has met its repaymentobligations described in Note 15(c)(viii) above.

(x) The Founding Shareholders granted a Put Option to the Foreign Investors jointly theright to require the Founding Shareholders to purchase all of the Conversion Sharesfrom the Foreign Investors for a consideration of US$2,000,000, subject to certainconditions being met. The option period is from the period commencing from theMaturity Date and expiring 30 days thereafter.

K-23

(xi) The Foreign Investors granted a Call Option to the Founding Shareholders the right torequire the Foreign Investors to sell all of the Conversion Shares to the FoundingShareholders for a consideration of US$2,000,000, subject to certain conditions beingmet. The option period is from the period commencing from the Maturity Date andexpiring 30 days thereafter. The exercise of the Put Option shall preclude theexercise of the Call Option and vice versa.

16 ISSUED CAPITAL


2004 2004 RMB’000 RMB’000

Authorised, issued and paid up:

12,000 shares of par value US$ 1.00 each, nil paid – –

Subsequent to the financial period ended June 30, 2004:

(a) On July 23, 2004, the company increased its authorised share capital to US$1,000,000comprising of 1,000,000 ordinary shares of US$1 each; and

(b) On July 27, 2004, the company increased its authorised share capital to US$8,000,000comprising of 8,000,000 ordinary shares of US$1 each.

17 GENERAL RESERVE


2004 2004 RMB’000 RMB’000

Reserve fund 2,228 –Enterprise expansion fund 1,114 –

3,342 –

18 REVENUE


2004 2004 RMB’000 RMB’000

Sales of goods:Pressure vessels 30,396 –Heat pipes and heat pipe exchangers 17,546 –Pipe supports 15,642 –

63,584 –Waste gas and energy recovery systems 4,585 –

Total 68,169 –

K-24



2004 2004 RMB’000 RMB’000

Interest income 1 – Others 9 –

Total 10 –



2004 2004 RMB’000 RMB’000

Salaries and wages 216 –Travelling and transportation 189 –Office expenses 120 3Depreciation 89 –Rental 93 –Entertainment 75 –Low cost consumables 56 –Staff benefits 38 –Insurance 33 –Telecommunication 22 –Courses 16 –Defined contribution plans 14 –Utilities 6 –Repair and maintenance 10 –

Total 977 3

21 PROFIT (LOSS) FROM OPERATIONS

This item includes the following charges:


2004 2004 RMB’000 RMB’000

Salaries and wages 731 –Defined contribution plans 14 –Directors’ remuneration 32 –


2004 2004

Number of employees at the end of the financial period 300 –

K-25

22 FINANCE COSTS


2004 2004 RMB’000 RMB’000

Interest expense on:Term loans 83 –Convertible loans 14 14

Total 97 14


a) Jiangsu Sunpower Technology Co., Ltd

Jiangsu Sunpower Technology Co., Ltd is a production enterprise located in Nanjing. Inaccordance with the tax legislations applicable to foreign investment enterprises, JiangsuSunpower Technology Co., Ltd is entitled to exemptions from PRC income tax for the twoyears commencing from the first profit-making year of operations, after offsetting allunexpired tax losses carried forward from the previous years, and thereafter, entitled to a50% relief from PRC income tax for the next three years. 2004 is the first year of the taxexemption period.

b) Nanjing Shengnuo Heat Pipe Co., Ltd

Nanjing Shengnuo Heat Pipe Co., Ltd is a production enterprise located in Nanjing. Inaccordance with the tax legislations applicable to foreign investment enterprises, NanjingShengnuo Heat Pipe Co., Ltd is entitled to exemptions from PRC income tax for the twoyears commencing from their first profit-making year of operations, after offsetting allunexpired tax losses carried forward from the previous years, and thereafter, entitled to a50% relief from PRC income tax for the next three years. 2004 is the first tax exemptionperiod.

c) Certain subsidiaries are incorporated in countries where profits are not subject to incometax.



2004 2004 RMB’000 RMB’000

Minimum lease payments paid under operating leases 93 –



2004 2004 RMB’000 RMB’000

Within 1 year 754 –Within 2 to 5 years 91 –

K-26


GROUPJune 30,

2004RMB’000

Capital injection into subsidiaries 44,166

26 SEGMENT INFORMATION

a) Primary reporting format – Business segments

The pro forma Group’s operations are organised into the following operating divisionsnamely:

(1) Heat pipes and heat pipe exchangers;(2) Pipe supports;(3) Pressure vessels; and(4) Waste gas and energy recovery systems.

These divisions are the basis on which the Group reports its primary business segmentsinformation.




30 June 2004

REVENUE 17,581 15,642 29,592 5,354 68,169

RESULTSegment result 3,942 7,572 7,841 3,000 22,355

Interest income 1


Profit before income tax 22,259Income tax expense –


OTHER INFORMATIONCapital expenditure – 608 35 8 651Depreciation expense – 123 28 6 157

Statement of Net Assets

30 June 2004

Assets:Segment assets 56,684 27,948 20,811 6,218 111,661Unallocated assets 2,399

Total assets 114,060

Liabilities:Segment liabilities 48,831 14,372 16,530 2,279 82,012Unallocated liabilities 9,789

Total assets 91,801

K-27


The financial statements cover the financial period since incorporation on April 28, 2004 to June 30, 2004. This being the first set of financial statements, there are no comparative figures.

K-28

SUNPOWER GROUP LTD


In the opinion of the directors, the consolidated financial statements of the group and the financialstatements of the company set out on pages K-4 to K-28 are drawn up so as to give a true and fair viewof the state of affairs of the group and of the company as at June 30, 2004 and of the results andchanges in equity of the group and of the company and cash flows of the group for the financial periodthen ended and at the date of this statement, there are reasonable grounds to believe that the companywill be able to pay its debts as and when they fall due.


......................................…........Guo Hong Xin

......................................…........Ma Ming


K-29