– 1 –
(incorporated in the Cayman Islands with limited liability)
(Stock code: 2341)
ANNUAL RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2006

The board of directors (the “Board”) of EcoGreen Fine Chemicals Group
Limited (the “Company”) is pleased to announce the consolidated results
of the Company and its subsidiaries (collectively “EcoGreen” or the
“Group”) for the year ended 31 December 2006 together with the
comparative figures for the previous year as follows:
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2006

(All amounts in RMB thousands unless otherwise stated)
Note 2006 2005
Turnover 2 532,975 384,417
Cost of goods sold (362,975) (250,994)
Gross profit 170,000 133,423
Other gains – net 3 4,952 1,967
Selling and marketing costs (22,123) (18,268)
Administrative expenses (41,767) (32,285)
Operating profit 111,062 84,837
Finance costs (6,645) (6,864)
Profit before income tax 104,417 77,973
Income tax expense 4 (8,982) (6,923)
Profit for the year 95,435 71,050

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Attributable to:
Equity holders of the Company 95,440 71,120
Minority interest (5) (70)
95,435 71,050

Earnings per share for profit attributable
to the equity holders of the Company
during the year
(expressed in RMB per share)
– basic 5 20.7 Cents 16.8 Cents
– diluted 5 20.6 Cents N/A
Dividends 6 14,226 9,605
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2006

(All amounts in RMB thousands unless otherwise stated)
Note 2006 2005
ASSETS

Non-current assets
Property, plant and equipment 216,012 184,144
Land use rights 8,851 4,955
Intangible assets 29,261 22,705
Available-for-sale financial assets 400 400
254,524 212,204
-------- --------

Current assets
Inventories 38,932 33,306
Trade receivables 7 114,904 101,771
Prepayments and other receivables 25,819 40,558
Available-for-sale financial assets 100 300
Pledged bank deposits 47,626 –
Bank deposits with original maturity
over three months – 3,122
Cash and cash equivalents 312,990 257,908
540,371 436,965
-------- --------

Total assets 794,895 649,169

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EQUITY

Capital and reserves attributable
to the Company’s equity holders
Share capital 48,778 48,778
Other reserves 209,970 209,747
Retained earnings
– Proposed final dividend 10,493 5,720
– Others 263,595 180,540
532,836 444,785

Minority interest 224 229
Total equity 533,060 445,014
-------- --------
LIABILITIES

Non-current liabilities
Borrowings 11,698 5,000
Deferred income on government grants – 20
11,698 5,020
-------- --------

Current liabilities
Borrowings 123,138 117,824
Trade payables and bills payable 8 91,808 48,061
Accruals and other payables 28,231 30,568
Deferred income on government
grants, current portion 19 114
Amount due to a director 141 159
Amount due to a related company 3,880 –
Current income tax liabilities 2,920 2,409
250,137 199,135
-------- --------

Total liabilities 261,835 204,155
-------- --------

Total liabilities and equity 794,895 649,169
Net current assets 290,234 237,830
Total assets less current liabilities 544,758 450,034

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Notes:
1. Basis of preparation
The consolidated financial statements of the Company have been prepared in
accordance with Hong Kong Financial Reporting Standards (“HKFRS”). They
have been prepared under the historical cost convention, as modified by the
revaluation of available-for-sale financial assets, which are carried at fair value.
New standards, amendments to existing standards and interpretations:
(a) In 2006, the Group adopted the following amendments to existing standards
and interpretation that are effective in 2006 and relevant to the Group’s
operations.
HKAS 19 (Amendment) Actuarial Gains and Losses, Group Plan
and Disclosures
HKAS 39 and HKFRS 4 Financial Guarantee Contracts
(Amendment)
The adoption of these amendments to existing standards and interpretation
had no material impact on the Group for the year ended 31 December
2006.

(b) The following new standard, amendments to existing standards and
interpretations are mandatory for accounting periods beginning on or after
1 January 2006 but are not relevant to the Group’s operations:
HKAS 21 (Amendment) Net Investment in a Foreign Operation
HKAS 39 (Amendment) Cash Flow Hedge Accounting of Forecast
Intragroup Transactions
HKAS 39 (Amendment) The Fair Value Option
HKFRS 6 Exploration for and Evaluation of Mineral
Resources
HKFRS 1 (Amendment) First-time Adoption of Hong Kong
and HKFRS 6 Financial Reporting Standards and
(Amendment) Exploration for and Evaluation of Mineral
Resources
HK (IFRIC)-Int 4 Determining whether an Arrangement
contains a Lease
HK (IFRIC)-Int 5 Rights to Interests arising from
Decommissioning, Restoration and
Environmental Rehabilitation Funds
HK (IFRIC)-Int 6 Liabilities arising from Participating in a
Specific Market-Waste Electrical and
Electronic Equipment
(c) The following new standards and interpretations to existing standards have
been published and are mandatory for the Group’s accounting periods
beginning on or after 1 January 2007 or later periods. The Group has
started considering their potential impact. Based on the preliminary
assessment, the Group believes that the adoption of these new standards
and interpretations to existing standards, if applicable, will not result in
substantial changes to the Group’s accounting policies. The Group has not
early adopted these new standards and interpretations to existing standards,
if applicable, in the accounts for the year ended 31 December 2006.

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HKFRS 7 Financial Instruments: Disclosures (effective for
annual periods beginning on or after 1 January
2007)
HKFRS 8 Operating Segments (effective for annual periods
beginning on or after 1 January 2009)
HK (IFRIC)-Int 7 Applying the Restatement Approach under HKAS
29, Financial Reporting in Hyperinflationary
Economies (effective for annual periods
beginning on or after 1 March 2006)
HK (IFRIC)-Int 8 Scope of HKFRS 2 (effective for annual periods
beginning on or after 1 May 2006)
HK (IFRIC)-Int 9 Reassessment of Embedded Derivatives (effective
for annual periods beginning on or after 1 June
2006)
HK (IFRIC)-Int 10 Interim Financial Reporting and Impairment
(effective for annual periods beginning on or
after 1 November 2006)
HK (IFRIC)-Int 11 HKFRS 2 – Group and Treasury Share
Transactions (effective for annual periods
beginning on or after 1 March 2007)
HK (IFRIC)-Int 12 Service Concession Arrangements (effective for
annual periods beginning on or after 1 January
2008)
The Group plans to adopt the above new standards and interpretations to existing
standards when they become effective.
2. Turnover and segment information
(a) Turnover
The Group is principally engaged in the manufacturing of fine chemicals
from natural resources for use in aroma chemicals and pharmaceutical
products and the trading of natural materials and fine chemicals. Turnover
for the Group represents revenue from sale of goods.
2006 2005

Sale of goods (net of value-added tax) 532,975 384,417
(b) Segment information
Primary reporting format – business segment
As at 31 December 2006, the Group is organised into two main business
segments:
(1) manufacturing and selling of fine chemicals; and
(2) trading of natural materials and fine chemicals.

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The segment results for the year ended 31 December 2006 are as follows:
Manufacturing Trading Total
Turnover 419,904 113,071 532,975
Operating profit 111,589 2,819 114,408
Unallocated corporate
expenses (3,346)
Finance costs (6,645)
Profit before income tax 104,417
Income tax expense (8,982)
Profit for the year 95,435
The segment results for the year ended 31 December 2005 are as follows:
Manufacturing Trading Total
Turnover 306,918 77,499 384,417
Operating profit 91,548 1,747 93,295
Unallocated corporate
expenses (8,458)
Finance costs (6,864)
Profit before income tax 77,973
Income tax expense (6,923)
Profit for the year 71,050
Other segment items included in the consolidated income statement are as
follows:
Manufacturing Trading
2006 2005 2006 2005

Depreciation 11,106 6,053 55 34
Amortisation 4,084 2,646 – –
Impairment of product
development costs/goodwill 4,450 755 – –
Provision for/(reversal of)
impairment of inventories 175 130 (31) 35
Reversal of provision for
impairment of trade
receivables 124 716 38 194

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The segment assets and liabilities as at 31 December 2006 and capital
expenditure for the year then ended are as follows:
Manufacturing Trading Unallocated Total
Assets 407,016 27,263 360,616 794,895
Liabilities 145,370 15,499 100,966 261,835
261,646 11,764 259,650 533,060

Capital expenditure 61,312 716 – 62,028
The segment assets and liabilities as at 31 December 2005 and capital
expenditure for the year then ended are as follows:
Manufacturing Trading Unallocated Total
Assets 374,554 13,257 261,358 649,169
Liabilities 104,424 8,339 91,392 204,155
270,130 4,918 169,966 445,014

Capital expenditure 79,141 65 – 79,206
Segment assets consist primarily of land use rights, property, plant and
equipment, intangible assets, inventories, receivables and operating cash.
Segment liabilities comprise operating liabilities. They exclude items such
as taxation and corporate borrowings. Capital expenditure comprises
additions to property, plant and equipment, land use rights, and intangible
assets, including additions resulting from acquisitions through business
combinations.
Secondary reporting format – geographical segment
The Group’s two business segments operate in three main geographical
areas.
2006 2005

Turnover
– Mainland China 345,380 246,387
– Europe 126,822 71,426
– Asia (excluding Mainland China) 43,554 44,207
– Others 17,219 22,397
532,975 384,417

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Sales are allocated based on the places/countries in which customers are
located.
2006 2005

Total assets
– Mainland China 739,824 613,917
– Hong Kong 54,656 34,879
– Unallocated 415 373
794,895 649,169

Total assets are allocated based on where the assets are located.
No geographical analysis of capital expenditure is presented as substantially
all of the Group’s capital expenditure was incurred in respect of assets
located in Mainland China.
3. Other gains – net
2006 2005

Interest income from bank deposits 3,136 1,480
Amortisation of deferred income
on government grants 115 114
Others 1,701 373
4,952 1,967

4. Income tax expense
2006 2005

Current taxation
– Mainland China enterprise income tax 8,982 6,923
No Hong Kong profits tax has been provided as the Group had no assessable
profit arising in or derived from Hong Kong.
The subsidiaries established in Xiamen, Fujian Province, Mainland China are
subject to Mainland China enterprise income tax at a rate of 15% (2005: 15%).
In February 2002, Xiamen Sinotek Enterprise Development Co., Ltd. transformed
from a domestic enterprise to a wholly foreign owned enterprise and is exempted
from payment of enterprise income tax for two years starting from the first year
of profitable operations after offsetting prior years’ tax losses, followed by a
50% reduction in enterprise income tax for the following three years. In August
2003, Xiamen Doingcom Chemical Co., Ltd. was accredited as a New High
Technology Enterprise and accordingly is exempted from payment of enterprise
income tax for two years starting from year 2003. In November 2006, Xiamen
Doingcom transformed from a domestic enterprise to a wholly foreign owned
enterprise. It has obtained approval from Mainland China Tax Bureau to be
exempted from enterprise income tax for two years starting from the first year
of profitable operations, followed by a 50% reduction in enterprise income tax
for the following three years, Xiamen Doingcom has not yet commenced to
enjoy its tax holiday in year 2006.

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The Company is incorporated in the Cayman Islands as an exempted company
with limited liability under the Companies Law of the Cayman Islands and,
accordingly, is exempted from Cayman Islands income tax. The Company’s
subsidiaries established in the British Virgin Islands are incorporated under the
International Business Companies Acts of the British Virgin Islands and,
accordingly, are exempted from British Virgin Islands income tax.
5. Earnings per share
Basic
Basic earnings per share is calculated by dividing profit attributable to equity
holders of the Company by the weighted average number of ordinary shares in
issue during the year.
2006 2005

Profit attributable to equity holders of the Company 95,440 71,120
Weighted average number of ordinary shares
in issue (thousands) 461,000 424,326
Basic earnings per share (RMB per share) 20.7 Cents 16.8 Cents
Diluted
Diluted earnings per share is calculated adjusting the weighted average number
of ordinary shares outstanding to assume conversion of all dilutive potential
ordinary shares. The dilutive potential ordinary shares of the Company mainly
comprise the share options. A calculation is made in order to determine the
number of shares that could have been acquired at fair value (determined as the
average monthly market share price of the Company’s shares) based on the
monetary value of the subscription rights attached to outstanding share options.
The number of shares calculated as above is compared with the number of
shares that would have been issued assuming the exercise of the share options.
2006

Profit attributable to equity holders of the Company 95,440
Weighted average number of ordinary shares in issue (thousands) 461,000
Adjustments assuming the exercise of share options (thousands) 2,818
Weighted average number of ordinary shares for
diluted earnings per share (thousands) 463,818
Diluted earnings per share (RMB per share) 20.6 Cents
Diluted earnings per share for the year ended 31 December 2005 is not presented
as the potential ordinary shares were anti-dilutive.

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6. Dividends
During the year ended 31 December 2006, a final dividend for the year ended
31 December 2005 of RMB5,720,000 (HK$0.012 per share) and an interim
dividend for the year ended 31 December 2006 of RMB3,733,000 (HK$0.008
per share), were paid by the Company, totalling RMB9,453,000 (2005:
RMB11,535,000).
A final dividend in respect of the year ended 31 December 2006 of HK$0.023
per share, totalling RMB10,493,000, is to be proposed at the annual general
meeting on 21 May 2007. These financial statements do not reflect this dividend
payable.
2006 2005

Interim dividend paid of HK$0.008 (2005: HK$0.008)
per ordinary share 3,733 3,885
Proposed final dividend of HK$0.023 (2005: HK$0.012)
per ordinary share 10,493 5,720
14,226 9,605

7. Trade receivables
The credit period granted by the Group to its customers is generally 60 to 90
days. The aging analysis of trade receivables is as follows:
2006 2005

0 to 30 days 46,985 43,382
31 to 60 days 40,072 32,086
61 to 90 days 28,122 19,742
91 to 180 days 512 3,180
181 to 365 days 137 4,409
Over 365 days 512 570
116,340 103,369

Less: Provision for impairment of trade receivables (1,436) (1,598)
114,904 101,771

There is no concentration of credit risk with respect to trade receivables, as the
Group has a large number of customers.

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8. Trade payables and bills payable
As at 31 December 2006, the aging analysis of trade payables and bills payable
was as follows:
2006 2005

0 to 30 days 20,660 10,310
31 to 60 days 21,017 19,126
61 to 90 days 18,230 7,996
91 to 180 days 30,647 9,480
181 to 365 days 84 483
Over 365 days 1,170 666
91,808 48,061
FINAL DIVIDEND

The Directors will propose at the annual general meeting to be held on 21
May 2007 payment of final dividend of HK2.3 cents per share on 1 June
2007 for the year ended 31 December 2006 to be payable in cash to
shareholders whose names are listed on the register of members of the
Company on 21 May 2007. Together with the interim dividend of HK0.8
cent (2005: HK0.8 cent) per share, this will bring the total dividend
distribution for the year to HK3.1 cents (2005: HK2 cents) per share.
CLOSURE OF REGISTERS OF MEMBERS

The transfer books and register of members of the Company will be
closed from Wednesday, 16 May 2007 to Monday, 21 May 2007, both
days inclusive, during which period no transfer of shares will be effected.
In order to qualify for the proposed final dividend, all transfers documents
accompanied by the relevant share certificates must be lodged with the
Company’s branch share registrar and transfer office in Hong Kong, Tengis
Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai,
Hong Kong not later than 4:00 p.m. on Tuesday, 15 May 2007.
BUSINESS REVIEW

In 2006, the global fine chemical industry witnessed exponential expansion
due to favourable economic environment. Downstream industries using
the Group’s products, such as the flavour and fragrance industry, food
and beverage industry, personal care industry, household care industry
and pharmaceutical industry, all maintained their growth momentum. This
coupled with other favourable factors such as the migration of the industry
to emerging countries and the increase in domestic consumption power
has fuelled the rapid development of the fine chemical industry in emerging
countries, in particular the PRC. As such, the Group’s three major business
segments all recorded actual growth.

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In 2006, the Group recorded a faster average growth rate compared with
the previous few years in terms of business performance. Turnover reached
RMB533,000,000, an increase of 39% from the previous year. Profit
attributable to shareholders rose RMB24,320,000 or 34% from the previous
year to RMB95,440,000. Earnings per share were approximately RMB20.7
cents.
Sales and Marketing
During the year under review, the Group manufactured over 40 fine
chemical products. The analysis of turnover and gross profit of the Group’s
various products for the years ended 31 December 2006 and 31 December
2005 are as follows:
Turnover Gross Profit
2006 2005 2006 2005

RMB’000 RMB’000 RMB’000 RMB’000
Aroma chemicals 261,309 182,718 83,118 58,840
Natural extracts 97,666 73,600 35,520 26,718
Intermediates 60,929 50,600 41,480 38,307
Trading and resource
management 113,071 77,499 9,882 9,558
Turnover/gross profit of
the Group 532,975 384,417 170,000 133,423
Aroma Chemicals
Aroma chemicals continued to be the Group’s core business during the
year under review, and generated significant and stable income for the
Group. During the year under review, since aroma chemicals are primarily
used as functional ingredient in many daily supplie, demand for such
downstream products in China and the international market continued to
rise, generating more sales for the Group. For the year ended 31 December
2006, sales of aroma chemicals significantly surged 43% to
RMB261,309,000, accounting for 49% of the Group’s turnover (2005:
48%) and a gross profit margin of 31.8% (2005: 32.2%). Dihydromyrcenol
was an important contributor which brought a revenue of RMB83,918,000
to the Group. Its sales increased 56% over the corresponding period last
year and accounted for 32% of the total revenue for this product category.
Natural Extracts (Also known as Natural Pharmaceutical Raw Materials)
The Natural Extracts division includes the Group’s existing natural
pharmaceutical raw materials , and food seasonings produced with natural
extraction and purification technology, in particular, seafood and meat
extracts.

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During the year under review, the Group’s natural extract business
maintained steady growth because demand for downstream products rose
steadily on the back of improving living standard and increasing health
consciousness, pushing up market demand for the Group’s products,
coupled with the recognized product quality of the Group. Turnover of
this business category increased 33% to RMB97,666,000, accounting for
18% (2005:19%) of the Group’s sales. Gross profit margin was 36.4%,
similar to 36.3% of last year. The performance of Natural Cinnamic
Aldehyde was relatively more outstanding under this business category.
This product contributed a revenue of RMB28,138,000 to the Group and
its sales increased 44% over the corresponding period last year and
accounted for 29% of the total revenue for this product category.
Intermediates (Also known as Chiral Pharmaceutical Raw Materials
and Pharmaceutical Intermediates)
Besides the existing Chiral Pharmaceutical Raw Materials and
Pharmaceutical Intermediates, intermediates also include agrochemical
intermediates used for regulating the growth of plants recently developed
with similar technologies.
During the year under review, orders for the Group’s intermediate products
maintained steady. Turnover increased 20% from the corresponding period
last year to RMB60,929,000, accounting for 12% (2005:13%) of the
Group’s sales. Gross profit margin dropped to 68.1% from 75.7% of the
corresponding period last year. However, the gross profit margin of this
product category of the Group was still higher than its peers in the industry.
3-Phenylpropanal Aldehyde is the major product of the intermediate
business segment. Sales for this product category accounted for 45% of
the overall sales of this business category and contributed a revenue of
RMB27,618,000 to the Group.
Trading and Resource Management (Also known as Trading Products)
Trading and resource management segment is only a supplement to the
Group’s core business. In the past, comprised mainly the operation of
certain integrated sales of the raw materials of aroma chemicals. During
the year, taking into account the persistent high market prices of upstream
raw materials and the increase in the demand for certain raw materials
not produced by the Group, the Group has accordingly repositioned such
business on the effective management of relevant strategic resources,
including mainly gum turpentine and other special botanic essential oils
and their byproducts. For the year ended 31 December 2006, sales of the
Group’s trading and resource management business amounted to
RMB113,071,000, accounting for 21% of the Group’s turnover, and

– 14 –
contribution to gross profit was approximately RMB9,882,000. As well
as being a necessary supplement to the Group’s core business, this business
segment also brought sales and profit contribution to the Group during
the year under review.
For the trading and resource management business, the major objective of
integrated sales is to improve the quality of the Group’s sales services so
as to satisfy the customer demands and to provide a more comprehensive
product portfolio and value-added services to its clients, which will in
turn enhance the status of the Group and “DOINGCOM” brand in the
industry.
Operations
Although China’s macro economic environment and the international
flavour and fragrance sector in 2006 were satisfactory, uncertainties arising
from high raw material prices, Renminbi appreciation and interest rate
hikes adversely affected a majority of different sectors. Such factors also
created more upward pressure on the operating cost of the businesses
engaged by the Group. However, leveraging on its solid foundation in the
industry, the Group proactively adopted various effective measures in its
operating strategy, and adjusted product prices on a timely basis to
minimise the impact of the fluctuation in the costs of raw materials. In
addition, through the application of innovative technology in Phase II
expansion of the Xiamen plant, the Group increased its processing capacity
by half, while effectively controlled the overall production costs, and
enhanced the Group’s competitiveness as well as mitigated operating
exposures under rising costs in the industry around the world.
Customers
Over the years, the Group has established a solid clientele distributed
around the globe, and a relatively diversified client portfolio, including
global top ten multinational flavour and fragrance manufacturers, major
household and personal care product manufacturers, natural pharmaceutical
plants, raw pharmaceutical plants and intermediate traders. Operating edges
such as premium product quality and reliable supply have enabled the
Group to maintain the long-term good collaborative relationship with
clients. To date, the number of the Group’s clients exceeded 150. Turnover
generated from the Group’s five largest clients increased from 25% to
31% in 2006.
In order to facilitate further development in the future and strengthen the
good relationship with existing clients, the Group also proposed reasonable
solutions according to clients’ needs on a timely basis, and actively sought
for strategic partnerships with major multinational flavour and fragrance
manufacturing enterprises.

– 15 –
The Group’s “DOINGCOM” brand has built up strong reputation amongst
international peers.
Production
During the year under review, the Group actively capitalized on the Phase
II expansion completed in 2005 and upgraded its production facilities and
developed new workflow technology, pushing overall production
efficiency, and reached a capacity utilisation rate of over 80%. The Phase
III expansion commenced in the year is expected to be put in operation in
the beginning of 2008, upon which the annual processing capacity of
botanic essential oils will increase from currently 16,000 metric tonnes
to 20,000 metric tonnes. The new Phase can produce various new products
for the Group and enrich its product mix so as to provide a better
foundation for the Group’s business growth during the year. Looking
ahead into future business and product development, aside from the
completion of Phase III construction according to schedule, the Group
will also further expand its production capacity according to the middle
to long term market demands on a cautious and timely basis, as well as
continue to aggressively develop new workflow technologies, so as to
further lift its integrated production capability and efficiency.
Research and Development
The Group has always been putting great efforts on the research and
development of new products. During the year under review, the Group
focused on strengthening its own research and development team by
adopting a number of professional technological research backbones and
recruiting a large number of professionals with master degree from oversea
universities and post-doctor qualification. The Group’s research and
development centre at Xiamen and its Shanghai research and development
team currently employ around 45 research and development staff with
expertise and extensive experience, accounting for about 18% of total
headcount.
On the other hand, the Group successfully initiates new research and
development projects through new strategic alliances with international
peers. Leveraging on the advanced facilities and underlying resources of
various academic and research institutes in China, the Group further
strengthened its research capability through joint research and development
and acquisition of proprietary technological know-how. Such institutes
include Nanjing University, Xiamen University, Shanghai University of
T.C.M., South China University of Technology, Jiangnan University,
Guangdong Ocean University, Chinese Academy of Sciences, Shanghai
Organic Chemistry Institute and Chinese Academy of Sciences,
Guangzhou Chemistry Institute.

– 16 –
For the year ended 31 December 2006, costs of the Group’s product
development, merger and acquisition of technology capitalised totalled to
approximately RMB14,980,000 (2005: RMB4,316,000), amortisation of
costs of product development amounted to RMB3,974,000 (2005:
RMB2,536,000) and impairment of product development cost of
RMB4,500,000 (2005: nil).
Outlook
The Group is optimistic to the operating environment and prospect of the
coming year.
Despite the performance of the global economy still looks somewhat
uncertain, mainly clouded by factors such as high oil price and rising
interest rate, we expect the economy of China, Hong Kong and other
emerging countries and in particular the fine chemical industry will still
maintain strong growth momentum. In the downstream industries of fast-
moving consumer goods and daily necessities, the Group’s products are
mainly applied as functional ingredients and key components such as
flavour and fragrance products, food and beverage products, personal and
household healthcare products and pharmaceutical products. These fast-
moving consumer goods and daily necessities are less sensitive to cyclical
economic fluctuations than other industries. Besides, demand for upstream
products remains strong in light of the continued global trend of industry
migration. Therefore, the Group’s business still has large room for
development.
The construction of Phase III project is expected to be completed in
stages. The objective of the first phase will be to have a brand new and
advanced multifunctional production workshop completed and put into
operation at the end of 2007. The new multifunctional workshop will be
equipped with multifunctional fine chemical installation technology that
are the most advanced in the world and environmental friendly. The
workshop will have multi-purpose reactor, precision separation &
extraction unit, Special purpose unit and Clean production zone. In line
with Phase III project, the Group will continue to step up its efforts in
market exploration, international cooperation, research and development
of technologies and its integration and development with SFC, so as to
expand its new high value-added product series such as aroma chemicals,
natural extracts and intermediates.

– 17 –
Exclusive innovative technology and industry experience remain to be the
key to protecting the Group’s core competitiveness and enable the Group
to strengthen its partnership with leading international flavour and
fragrance companies. The Group will continue to launch new product
mix that caters for the market of fast-moving consumer goods and the
needs of its major customers. New products are expected to bring new
contribution to the profit of the Group.
Although the upward pressure of raw material costs is a reality the entire
industry must face, the Group will continue to implement various proactive
measures to cope with it. The Group will mainly focus on the
implementation of strategies on resource management, which include
strengthening the operating capacity of the resources management centre,
carrying out forward integration in the supply chain management of raw
material procurement, substantially increase the control on logistics and
converting raw material procurement from a cost centre to a profit centre,
so as to effectively control raw material costs and capture additional
profit from resource management.
In respect of operating strategies, the global industry has coped with the
increase in the prices of raw materials by lifting the prices of their
products, and major clients from all over the world are beginning to
accept the reality of rising product prices this year. The Group’s major
clients from around the globe are gradually accepting the rises in product
prices. On the other hand, the Group will innovate and improve its existing
techniques and technology on an ongoing basis to control cost. Under the
premise of ensuring product quality, the Group will increase its production
yield and improve its production efficiency. The workflow at all levels,
including the frontline departments, the research and development
department and the supporting departments will be redesigned to reduce
the overall operating costs. The above measures will enable the Group to
maintain its leading cost advantage and further enhance its competitiveness
in the international market. In addition, the Group will also effectively
manage the pressure arising from the appreciation of Renminbi on profit
by strengthening its international trade management.
Through the strategic alliances with international flavour and fragrance
companies, the Group timely captured the opportunity of transfer of
international properties and successfully acquired a new base for
development in the industry, which will provide ample room for long-
term development of the Group.

– 18 –
FINANCIAL REVIEW

Turnover
Benefiting from the completion of the Group’s Phase II expansion of
Haicang Plant in October 2005 and the increasing demand of Group’s
products, the Group’s turnover for the year ended 31 December 2006
amounted to RMB533,000,000, representing a rapid growth of 39%.
Excluding the revenue from trading and resource management products,
turnover reached RMB419.9 million, still achieving a steady growth of
37% when compared to last year. As the trading and resource management
business have a lower profit margin, it has dragged down the overall
gross profit margin of the Group to 31.9% from 34.7% as recorded in last
year. Nevertheless, this non-core business has a certain profit contributions
to the Group. Excluding the contribution from trading and resource
management products, the gross profit of the Group’s self-manufactured
products was 38.1%, representing only a slight decrease of 2.2% from
40.3% as recorded in last year.
Analysing by the Group’s products category, turnover of aroma chemicals
reached RMB261.3 million, representing a year-on-year increase of 43%
as compared to RMB182.7 million in 2005; turnover of natural extracts
and intermediates reached RMB97.7 million and RMB60.9 million
respectively, representing a year-on-year increase of 33% and 20% as
compared to RMB73.6 million and RMB50.6 million respectively in 2005.
Geographically, local sales of the Group’s fine chemical products surged
by 40% as compared to that of 2005 whereas the overseas sales of the
Group’s fine chemical products increased by 36% as compared to that of
2005.

– 19 –
Gross Profit
During the year under review, the gross profit of the Group amounted to
RMB170.0 million, representing a growth of 27%. The gross profit margin
of the Group decreased from 34.7% in 2005 to 31.9% in 2006. The
deterioration of the Group’s gross profit margin was mainly attributable
to lower profit margin of the trading and resource management business
and the surging of raw materials prices. Nevertheless, the adverse effect
caused by the pressure of production cost had been diminished after
adopting effective measures in its operating strategy, as mentioned in the
above section “Business review – operation”.
Analysing by the Group’s products category, the gross profit margin of
aroma chemicals and natural pharmaceutical extracts remained steady at
approximately 32% and 36% respectively in both years. The decrease of
profit margin of intermediates from 76% in 2005 to 68% in 2006 was
mainly attributable to the change of product mix in this category, within
which the gross profit margin of individual products varied broadly from
55% to 95%. The gross profit margin of trading and resource management
was decreased from 12% in 2005 to 9% in 2006. Despite the lower gross
profit margin and relatively higher operating costs, the trading and resource
management business facilitated the diversification of the Group’s product
mix, without utilizing the Group’s existing production capacity and
reinforce the Group’s leading position in the natural fine chemicals
industry in the PRC.
Operating Income and Expense
Other revenues include the interest income from bank deposits and the
amortisation of deferred income on government grants. The increase of
RMB3.0 million in other revenue was mainly due to the increase of the
bank interest income during the year under review.

– 20 –
The increase of RMB3.9 million in selling and marketing expense was
mainly due to the increase of transportation cost and packaging expenses
for those increased export sales in the year under review. Selling and
marketing expenses as a percentage of sales decreased from 4.8% to
4.2%.
The increase of RMB9.5 million in administrative expenses was mainly
due to the increase of employment cost and discretionary management
bonus by RMB5.3 million and the increase of impairment of product
development cost by RMB4.5 million in the year under review.
Administrative expenses for 2006 represented 7.8% of turnover (2005:
8.4%).
The finance expenses recorded RMB219,000 decrease when compared to
last year, mainly due to the decrease of interest expense on convertible
bonds which was fully repaid in 2005.
Income tax expense
Income tax expense of the Group for the year ended 31 December 2006
was RMB9.0 million, representing an increase of 30% as compared with
RMB6.9 million in last year. The effective income tax rate was 8.6%
(2005: 8.9%).
Profit for the year
Profit for the year ended 31 December 2006 was RMB95.4 million
representing an increase of 34% as compared with RMB71.1 million last
year. The net profit ratio of the Group decreased from 18.5% in last year
to 17.9% in this year. If excluding the trading and resource management
segment, the net profit ratio of the Group was 22.1% (2005: 22.6%).

– 21 –
Liquidity, Financial Resources and Capital Structure
During the year under review, the Group’s primary source of funding
mainly involved the cash generated from operating activities. With the
financial resources obtained from the Group’s operations, the Group had
utilized RMB62.0 million (2005: RMB74.9 million) in the capital
expenditure and paid dividend of RMB9.5 million (2005: 11.5 million)
during the year. As at 31 December 2006, the Group had cash and bank
deposits of approximately RMB360.6 million (2005: RMB261.0 million).
The Group’s financial position remains very solid and healthy during the
year under review. As at 31 December 2006, the net current assets and
the current ratio of the Group were approximately RMB290.2 million
(2005: RMB237.8 million) and 2.2 (2005: 2.2), respectively.
As at 31 December 2006, the Group had bank borrowings of approximately
RMB101.0 million (2005: RMB86.7 million), government loans from State
Development and Reform Commission, Xiamen Development Planning
Commission and other Mainland China government bureaus to finance
the Group’s product development activities and expansion of production
facilities of approximately RMB33.9 million (2005: RMB34.2 million).
As at 31 December 2006, the Group’s gearing ratio which is represented
by the ratio of total borrowings to total shareholders’ equity, was
approximately 25% (2005: 28%) and the Group’s net cash balance, being
cash and cash equivalents plus pledged bank deposits less borrowings
amounted to RMB225.8 million (2005: 138.2 million).
With the positive cash inflow from the Group’s operations, its available
banking facilities and its existing cash resources, the Group has very
strong liquidity and sufficient financial resources to meet its commitments,
working capital requirements and future investments for expansion.

– 22 –
Charges on assets
As at 31 December 2006, bank deposit of RMB47.6 million (2005: nil),
certain property, plant and equipment of the Group with an aggregate net
book value of about RMB92.1 million (2005: RMB32.2 million) and land
use rights of RMB4.8 million (2005: RMB3 million) were pledged to
secure the Group’s bank borrowings.
Contingent Liabilities
As at 31 December 2006, neither the Group nor the Company had any
significant contingent liabilities.
Capital Commitment
As at 31 December 2006, the Group had capital commitments of
approximately RMB108.8 million (2005: RMB73.0 million) in respect of
purchases of property, plant and equipment, construction-in-progress,
product development projects and land use rights.
Treasury Policies and Exposure to Fluctuations in Exchange Rates
The Group’s assets, liabilities, revenues and transactions are mainly
denominated in Renminbi, United States dollars and Hong Kong dollars
with its operation mainly in the PRC. As at 31 December 2006, the
Group’s borrowings of approximately RMB119.8 million were
denominated in Renminbi. The Group’s cash and bank deposits (comprise
cash and cash equivalents and pledged bank deposits) denominated in
Renminbi amounted to RMB326.5 million of the total balance, with the
remaining balance denominated in Hong Kong dollars and United States
dollars.
The Group’s foremost exposure to the foreign exchange fluctuations was
caused by the revaluation of Renminbi during the year under review. The
Group’s export sales are, in majority, denominated in United States dollars.
Nevertheless, the Group has not experienced any material difficulties or
effects on its operations or liquidity as a result of fluctuations in currency

– 23 –
exchange rates during the year. The Group will conduct periodic review
of its exposure to foreign exchange risk and may use financial instrument
for hedging purpose when considered appropriate.
EMPLOYEES AND REMUNERATION POLICY

As at 31 December 2006, the Group has 254 full-time employees of
which 248 are based in the PRC. For the year under review, the total
employment costs incurred for 2006 including directors’ emolument
amounted to RMB22.4 million. The Group has established its human
resources policies and procedures with a view to deploy the incentives
and rewards of the remuneration system. The remuneration package offered
to the staff is appropriate for the duties and in line with the prevailing
market terms. Staff benefits, including medical coverage and provident
funds, are provided to employees. The Group has also established effective
performance evaluation system in which employees are rewarded on a
performance-related basis within the general framework of the Group’s
salary and bonus system.
The Group has also adopted a share option scheme for the purpose of
providing incentives and rewards to eligible participants who contribute
to the success of the Group’s operations. During the year under review,
21.4 million share options were granted to directors, employees and
consultants.
CORPORATE GOVERNANCE

The Company’s corporate governance practice are based on the principles
and the code provisions (the “Code Provisions”) as set out in the Code on
Corporate Governance Practices (the “CG Code”) contained in Appendix
14 of the Rules Governing the Listing of Securities on the Stock Exchange
(the “Listing Rules”). In the year under review, the Company has complied
with most of the Code Provisions save for the deviations from the Code
Provisions A.2.1, A.4.2 and E.2.1.

– 24 –
Segregation of Rules of Chairman and Chief Executive Officer
(“CEO”)
The Company has not yet adopted A.2.1. Under the code provision A.2.1
of the CG Code, the roles of Chairman and CEO should be separate and
would not be performed by the same individual. The division of
responsibilities between the Chairman and CEO should be clearly
established and set out in writing.
The Company does not presently have any officer with the title CEO. At
present, Mr. Yang Yirong, being the Chairman and the President of the
Company, is responsible for the strategic planning, formulation of overall
corporate development policy and running the business of the Group as
well as the duties of Chairman. The Board considered that, due to the
nature and extent of the Group’s operations, Mr. Yang is the most
appropriate chief executive because he possesses in-depth knowledge and
experience in fine chemicals business and is able to ensure the sustainable
development of the Group. Besides, he is the founder, the chairman and
the controlling shareholder of the Group since its establishment and till
now. Notwithstanding the above, the Board will review the current
structure from time to time. When at the appropriate time and if candidate
with suitable leadership, knowledge, skills and experience can be identified
within or outside the Group, the Company may make the necessary
amendments.
Appointment, rotation and re-election of Directors
In order to ensure full compliance with the code provision A.4.2 of the
CG Code, special resolutions had been proposed to amend Articles 108(A)
and 112 of the Articles of Association of the Company. The amendments
were approved by shareholders of the Company at the annual general
meeting held on 25 May 2006.

– 25 –
In accordance with the CG Code and the Company’s Articles of Association
(after its amendment on 25 May 2006), all Directors are subject to
retirement by rotation once every three years and being eligible, offer
themselves for re-election.
Communication with Shareholders and Investor Relations
In order to ensure full compliance with the code provision E.2.1 of the
CG Code, special resolution had been proposed to amend Article 72 of
the Company’s Articles of Association. The amendments were approved
by shareholders of the Company at the annual general meeting held on 25
May 2006.
In accordance with the CG Code and the Company’s Articles of Association
(after its amendments on 25 May 2006), the Chairman of a meeting and/
or Directors who, individually or collectively, hold proxies in respect of
shares representing 5% or more of the total voting rights at a particular
meeting shall demand a poll in certain circumstances where, on a show of
hands, a meeting votes in opposite manner to that instructed in those
proxies.
ANNUAL GENERAL MEETING

The 2007 annual general meeting (“the AGM”) of the Company will be
held at Sutie 3706, 37/F., Central Plaza, 18 Harbour Road, Wanchai,
Hong Kong on Monday, 21 May 2007 at 2:30 pm. The Notice of AGM
will be published in The Standard and Hong Kong Econmic Times and
despatched to shareholders of the Company on or about Friday, 27 April
2007.
REVIEW OF ACCOUNTS

The audit committee of the Company has reviewed the Group’s
consolidated financial statements for the year ended 31 December 2006,
including the accounting principles and practices adopted by the Group,
including the accounting policies and practices adopted by the Group, in
conjunction with the Group’s external auditors.

– 26 –
PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S
LISTED SHARES

During the year ended 31 December 2006, the Company had not redeemed
and neither the Company nor any of its subsidiaries had purchased or
sold any of the Company’s listed securities.
PUBLICATION OF THE FINAL RESULTS AND ANNUAL REPORT

This results announcement is published on the website of the Stock
Exchange (www.hkex.com.hk) as well as the website of the Company
(www.ecogreen.com). The 2006 annual report containing all the
information required by The Listing Rules will be despatched to
shareholders and will be published on the aforementioned websites in
due course.
BOARD OF DIRECTORS

As at the date of this announcement, the Board of Directors of the
Company comprises of five executive Directors, namely Mr. Yang Yirong
(Chairman), Mr. Gong Xionghui, Ms. Lu Jiahua, Mr. Lin Like and Mr.
Han Huan Guang, one non-executive Directors, namely Mr. Feng Tao and
three independent non-executive Directors, namely Dr. Zheng Lansun,
Mr. Yau Fook Chuen and Mr. Wong Yik Chung, John.
By order of the Board
EcoGreen Fine Chemicals Group Limited
Yang Yirong
Chairman & President
Hong Kong, 18 April 2007
“Please also refer to the published version of this announcement in The
Standard.”