CORPORATE PRESENTATIONCORPORATE PRESENTATION

(SEHK: 408)

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HighlightsHighlights

Largest acetate solvents producer in the world, and poised to become even larger with investment in Jiangsu

China Focused – with 17 production plants in China mainly supplying the mainland domestic market

Focused on the core businesses of solvents, coatings and lubricants

Awarded the “Best Corporate Governance” and “Best Investor Relations” in Hong Kong by FinanceAsia in 2009

Selected As the Constituent Stock of MSCI China Small Cap Index Series

A small-mid cap company (USD441 million as on 1 Dec 2009) with a track record for earnings and dividend growth

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MilestonesMilestones

� Founded in October 1971, then known as “Hang Cheung Hong”

1970s

� One of the first Hong Kong manufacturers to establish facilities in China bysetting up production facilities and providing a wide range of supporting services

1980s

� Continued to set up manufacturing bases and further expanded its sales networkto major cities all over the country to tap the domestic market in China

� Listed on the Stock Exchange of Hong Kong in August 1991 (Stock Code: 408)

1990s

� 17 production plants in China and over 40 sales office covering all major citiesin China

2009

China China –– Our ArenaOur Arena

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Business ModelBusiness Model

PRCMarket

OverseasMarket

Yip’s ChemicalGroup

ManufacturersRawMaterials

EndProducts

>90%

<10%

PRCSuppliers

OverseasSuppliers

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Core BusinessesCore Businesses

Market Share

Ind

ustr

y G

row

th

Low Hi

HiPaints

(Bauhinia)SolventsInks

Lubricants Industrial paints-GD

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Product Mix Product Mix

Construction, toys, furniture, electrical equipmentsproduction industries

BauhiniaDomestic architectural paints (50%), industrial paints (50%)

Direct sales, only a small portion goes to distributors for small factories

Shopping bags,F&B packaging industries.Major customers:Tingyi, Want Want

Bauhinia Variegata

Inks for plastic shopping bags,food and cigarette packaging

Direct salesPaper print industriesGolaxxoVarnishes – glossy coatings appliedon printed paper, cardboards

Direct salesPaints manufacturersDa ChangResins

Mainly direct salesPacoil General industriesSpecialty lubricants

Direct sales, distributors

General consumers,industrial plants

HerculesAutomotive, industrial lubricants

Toys, electronics, printing, furniture industriesMixed solvents – thinners

Direct sales to manufacturers

Coatings, medicine,adhesives industries

N/A

Raw solvents – ethyl acetate,butyl acetate, mixed butyl acetate,

Sales ChannelCustomersBrandsProducts

Solvents

Coatings

Lubricants

Ethanol

Over 4,500 distributors nationwide

* Minority interests in Solvents and Lubricants businesses

Products Turnover (HK$ ’000)Period ended 30 Sept

% BreakdownPeriod ended 30 Sept

2009 2008 % Change 2009 2008

Solvents* 1,425,717 1,902,163 -25% 53% 62%

Coatings 1,092,724 1,063,686 +3% 41% 34%

Lubricants* 138,024 154,214 -10% 5% 5%

Financial HighlightsFinancial Highlights

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The Solvents and Coatings The Solvents and Coatings

businesses: A Natural Internal Hedgebusinesses: A Natural Internal Hedge

Acetate solvents prices reflect international supply and demand and volatilities in raw materials supply prices are passed on immediately,giving rise to opportunities for stock gains when raw material prices surge

Coatings uses solvents as one of their raw materials. Selling pricestypically lag raw material price trends

During times of raw material prices increase, solvents business benefits while coatings business adversely affected

When raw material prices decline, coatings will be the beneficiarywhile solvents adversely affected

With a good balance between the solvents and coatings businesses,the impact of raw material price volatilities is minimized

Solvents Margin Trend Coatings Margin Trend Oil Price

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Internal Hedge in ActionInternal Hedge in Action

Time

04/2008

09/2008

03/2009

09/2009

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PERFORMANCE OF PERFORMANCE OF

CORE BUSINESSESCORE BUSINESSESFor Financial Year 200For Financial Year 20099/20/201010

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Brands Operated under the Group Brands Operated under the Group

I) Solvents

II) Coatings

III) Lubricants

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I. Solvents: Business HighlightsI. Solvents: Business Highlights

Sales volume grew by 14%; operating profits at HK$151,344,000, an increase of 6%

Raw Solvents

Raw solvents reached record volume at 197,000 metric tons. Solvents business has shaken off the effects of financial tsunami with significant competitive advantages of economy of scale.

Mixed Solvents

Mixed solvents benefited from formulations improvement and cost rationalization, profits margin enhanced; will continue to grow steadily along with growth of coatings business

120,000 tonnes acetate solvents production facility in Taixing plant will be completed by end 2009, total solvents capacity up to 430,000 tonnes, securing the Group’s position as the world’s largest acetate solvents producer

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II. CoatingsII. Coatings

Paints Paints

InksInks

VarnishesVarnishes

ResinsResins

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II. Coatings: Business HighlightsII. Coatings: Business Highlights

Coatings business achieved notable results through successful implementation of the laid-down development plans and strategies

Record turnover of HK$1,092,724,000, a growth of 3%; operating profits at HK$146,657,000, a drastic increase of 129%

Household Paints

Benefited from the strategy of heavier investment in brand building, improvement in distribution network

Household architectural paints and inks have had increases of 23% by volume

Continue investments in brand and distribution network in 2nd and 3rd tier cities. Complete the face lifting of Bauhinia’s distribution outlets by the middle of next year. Develop strategic partnership with major property developers in China

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II. Coatings: Business HighlightsII. Coatings: Business Highlights

Industrial Paints and Inks

Tungxiang Zhejiang plant, commissioned in May 2009, gave additional impetus to the growth of inks and industrial coatings business in Eastern China

Automated color-matching systems, nationally accredited (CNAS) QC laboratory, and strong quality commitment breeds customer confidence

“Mattel Approved Supplier” , “Sony Green Partner”, “Ferrero Certified Paint Supplier” and “RTQ & Creata Certified Paint Supplier” provide competitive advantages

Bauhinia Paints New Logo and Bauhinia Paints New Logo and

Marketing CampaignMarketing Campaign

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Bauhinia Paints TVC on CCTVBauhinia Paints TVC on CCTV

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Operating environment was relatively difficult; turnover declined 10% with small operating loss of HK$552,000

Industrial specialty business affected by decline in export markets

Sales of automotive engine oils rebounded due to domestic marketdemand, but results affected by cut-throat competition and high-priced inventory, gross margins declined

Prospects for lubricants division is expected to improve; specialty lubricants will benefit from the gradual picking up of export markets and growth in Eastern China

Automotive lubricants will continue to develop the distribution network in 2nd and 3rd tier cities, and market for anti-freeze in Northern China

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III. LubricantsIII. Lubricants: Business Highlights: Business Highlights

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GROWTH GROWTH

STRATEGIESSTRATEGIES

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Solvents Growth Strategies:Solvents Growth Strategies:

ExpansionsExpansions

Eastern China

Acquisition of Taixing Chemical provides platform for expansion into Yangtze Delta:

Taxing is an ethanol producer – upstream raw material for ethyl acetate

Relative prices of tapioca to corn started to swing in favour of tapioca, ethanol production returned to profitability

Investing HK$70M to build a 120,000 tonnes acetate solvents production line and is expected to commence operation in FY2009, building on the advantages of vertical integration

Total output capacity for acetate solvents will reach more than 430,000 tonnes a year, a capacity growth of 38%

Purchase of a parcel of land of 145 acres adjacent to its Taixing Jinjiangplant:

Accommodate the expansion of acetate solvent production facility

Reinforce the position of the Group as the world’s largest acetate solvents producer

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Coatings Growth Strategies:Coatings Growth Strategies:

Brand ManagementBrand Management

Bauhinia Paints already a China Top Brand with increased investment in brand

Professional marketing team set up to manage brands and further consolidate distribution in 2nd and 3rd tier networks

Poised to become the leading Chinese brand in China within the next three years

Bauhinia Variegata Inks already a Guangdong Famous Brand and recognized by Mattel as Brand A inks supplier

Sudden surge in demand for inks without ketones and aromatic solvents lead to increased demand for Group’s ink products

Main areas for development:

Water-based emulsion paints for homes

Environmentally friendly alcohol/water based inks

Inks for offset printing market

The Group remains confident of the prospects for coatings. To cater for the huge business opportunities:

(1) Capacity expansion:

Accelerating the expansion of architectural paint’s production in Shanghai and the inks production in Hebei

Acquired 90 acres and 30 acres of land in Tungxiang and Zhongshanrespectively for further expansion (full completion end 2012)

(2) Brand management and network distribution: increase investment in brand promotion, expand distribution coverage in 2nd and 3rd tier cities

(3) New product development: increase investment in R&D and new product development, with emphasis on safe, healthy and environmentally friendly new products

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Coatings Growth Strategies:Coatings Growth Strategies:

Plant ExpansionsPlant Expansions

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Financial Resource for GrowthFinancial Resource for Growth

Net cash position as at 30 September 2009: HK$155M

2010/11 2009/10

First Half 90,000 64,000

Second Half 70,000 90,000

160,000 154,000

Estimated Capital Investments (HK$’000)

Estimated Capital Investments Estimated Capital Investments ((CapexCapex))

152

134

89

168

85

154159

0

50

100

150

200

2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10

HK$ million

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Capacity of Capacity of TThree hree BBusinesses usinesses ((End ofEnd of 20020099))

Solvents

Raw solvents : 430,000 MT

Inclusive of 120,000 MT of raw solvents production facility in Taixing to be commissioned in end of 2009

Mixed solvents : 70,000MT

Coatings

Paints : 118,000 MT

Inks : 55,000 MT

Resins : 20,000 MT

Varnishes : 25,000 MT

Lubricants

Automotive and Industrial lubricants : 60,000 MT

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FINANCIAL FINANCIAL

HIGHLIGHTSHIGHLIGHTS

InterimFull YearHK$ million

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Track Record: Track Record: TurnoverTurnover

InterimFull Year

60.276.0

93.9

128.4

155.4

227.7

96.2

123.2

168.4

223.6 224.2

158.0

275.2

0

50

100

150

200

250

300

2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10

HK$ million

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Track Record:Track Record:Net Profit Attributable to Equity HoldersNet Profit Attributable to Equity Holders

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Track Record: P/E RatioTrack Record: P/E Ratio

168

275

224

123

224

0

50

100

150

200

250

300

0

1

2

3

4

5

6

7

8

Earnings

(HK$ million)

P/E 8.0x 6.8x

2005 2006 2007 2008 2009

8.5x 10.1x 5.7x

•P/E Ratio – Closing stock price as on 31 March each year / EPS from the past 12 months (trailing stock price)•Stock price – Closing stock price as on 30 Nov 2009

Stock price (HK$)

Earnings Stock Price

Dividend Per ShareDividend Per Share

InterimFull YearHK cents

* include special dividend of 2.0 cents

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4 4.5 5

810

8

1210

1214

20

2525

02468

1012141618202224262830

2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10

*

*

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Investment HighlightsInvestment Highlights

Focuses on the core businesses with good earnings quality

Dominant position in solvents

Natural hedge mechanism reduces volatilities and protects earnings

Maintains a high degree of transparency

Consistent dividend policy, without sacrificing growth

Prudent financial management

Alignment of major shareholders’ interest with that of minority shareholders

The new management structure implemented in 2008 is now functioning seamlessly, further improving corporate governance standards and setting a firm foundation for long term developments

Business OutlookBusiness Outlook

Remain optimistic because:

The Central Economic Work Conference set the policies of boosting

domestic demand and relaxing “hukou” from 2nd and 3rd tier towns to

main cities. These policies will doubtlessly increase domestic

consumption and labour force

China’s domestic economy should continue to grow strongly and the

Group will benefit from a favorable external operating environment

Currently volumes are at historically high levels with margins also high

Geographical diversification strategy should start to benefit

The global real economy will begin to recover and exports (esp. toys)

should show some recovery towards Q3

The Group maintained strong cash flow position

New management structure implemented in 2008 is now functioning

seamlessly

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Thank you!Thank you!

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