Final Results

Prince Catering and Management (Overseas) Limited

(“Prince Catering” or the “Company)

Preliminary Statement of Final Results

for the year ended 31 December 2006

Chairman’s Statement

Following our admission to AIM, a market operated by the London Stock Exchange, in August 2006, Prince Catering & Management (Overseas) Limited (“Prince Catering”) has continued to pursue its strategy of expansion throughout mainland China and in Hong Kong. At the year end we were operating a total of 14 restaurants in 11 Chinese cities, two of them owned by the Group and 12 operated under management contracts. The Group also managed one hotel during the year, the Xi’an Prince International Hotel, as well as the Xi’an Prince Health Club, and we continue, during 2007, to work towards further restaurant openings.

It is disappointing to report that revenue for the year fell 12% to £6.4million despite the opening of a new restaurant during the year in Xi’an. We believe the decline in sales was due in part to the fact that we did not open as many restaurants in 2006 as we had in 2005. Our management contracts carry initial signing fees of up to RMB 1.5 million (£99,000 approx.) which during 2005, significantly enhanced our revenues. The same level of new openings was not matched in 2006. As anticipated in the restaurant business, we also faced pressure from competitors and additionally felt the expiration of tax concessions at our Xi’an restaurant with taxes imposed at a rate of 5% on turnover in addition to a 33% charge on operating profit. We also saw a decline in business spending as a result of a cutback in government expenditure. Alongside the fall in revenue, pre-tax profits also slipped to £185,000 (2005:£1,685,000), partly due to the exceptional costs of the AIM flotation (£546,000), but we remain confident that we are addressing the issues and look forward to further new openings during the course of this year.

As shareholders will be aware, we believe our key strengths continue to be underpinned by our strong team of experienced management and chefs, backed by a commitment to quality control across our brand as a whole, and our strong programme of recruitment and training. As part of our continued efforts to attract an increasing customer base we are continuing to work on the creation of new dishes, paying attention among other things to an increasing awareness of environmental concerns surrounding existing luxury favourites such as shark fin soup and abalone.

During the first half of 2007 we have opened one further restaurant under management contract, the Yulin Prince Hotpot Restaurant in Shaanxi Province. We are, of course, continuing to work on further openings. Longer term, as we advised to shareholders during our admission to AIM, we are also planning new Group-owned restaurants in Shanghai and Beijing, where we hope to position ourselves to take advantage of the positive economic impact expected from the Beijing 2008 Olympic Games and the Shanghai 2010 World Expo.

In summary, while 2006 has provided some challenges, particularly during our initial period as a quoted company, we believe we remain well positioned to put ourselves back on course during 2007.

Mr. Guangfan Mai

Chief Executive

29 June 2007

For further information please contact:

David Youngman, WH Ireland Limited +44 (0) 161 832 2174

Allan Piper, First City Financial +44 (0) 20 7242 2666

CONSOLIDATED Income Statement

For the year ended 31 December 2006

	Note	2006 £’000	2005 £’000
Revenue		6,410	7,296
Cost of sales		(2,398)	(2,502)
Gross profit		4,012	4,794
Other operating income		-	1
Selling and distribution expenses		(2,588)	(2,793)
Administrative expenses		(712)	(319)
Operating Profit	3	712	1,683
Exceptional costs of AIM listing	3	(546)	-
Investment income		19	2
Profit before income taxes		185	1,685
Income Taxes	9	(176)	(182)
Profit for the financial year		9	1,503
Attributable to Equity holders of the parent company Minority Interest		(112) 121	1,353 150
Earnings (loss) per share	23
-Basic (pence)		(0.1p)	1.7p
-Fully diluted (pence)		(0.1p)	1.7p

All income and expenses relate to continuing and existing operations

CONSOLIDATED BALANCE SHEET For the year ended 31 December 2006	Note	2006 £’000	2005 £’000
Non-current assets
Intangible fixed assets	11	16	44
Tangible assets	10	1,428	1,908
Deferred tax asset		65	14
Total non-current assets		1,509	1,966

Current assets
Inventories	13	214	289
Trade and other receivables	14	1,967	1,922
Cash and cash equivalents	15	841	592
Total current assets		3,022	2,803

Total assets		4,531	4,769

Current Liabilities:
Trade and other payables	16	(2,209)	(1,799)


Total assets less current liabilities		2,322	2,970

Net assets		2,322	2,970

Equity
Share capital	18	1,756	1,846
Foreign currency translation reserve	19	13	287
Statutory reserves	19	343	276
Pooling Reserve	19	176	48
Warrant reserve	19	29	-
Retained Earnings	19	(713)	(162)
Equity attributable to the equity holders of the parent company		1,604	2,295
Minority Interest		718	675
Total Equity		2,322	2,970

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2006

	Share Capital	Retained Earnings	Share Premium	Pooling Reserve	Minority interest	Statutory Reserves	Warrants Reserve	Foreign Currency Translation	Total Equity
								Reserve
								£’000
	£’000	£’000	£’000	£’000	£’000	£’000	£’000		£’000
At 1 January 2005	1,687	184	-	265	459	93	-	-106	2,582
Profit for year	-	1,353	-	-	150	-	-	-	1,503
Dividends paid	-	-1,516	-	-	-	-	-	-	-1,516
Exchange rate adjustments	159	-	-	-217	66	-	-	393	401
Statutory Transfer	-	-183	-	-	-	183	-	-	-

At 31 December 2005	1,846	-162	-	48	675	276	-	287	2,970

	Share Capital £’000	Retained Earnings £’000	Share Premium £’000	Pooling Reserve £’000	Minority interest £’000	Statutory Surplus Reserve £’000	Warrants Reserve £’000	Foreign Currency Translation Reserve £’000	Total Equity £’000
At 1 January 2006	1,846	(162)	-	48	675	276	-	287	2,970
Profit for year	-	(112)	-	-	121	-	-	-	9
Dividends paid pre IPO and to minorities	-	(469)	-	-	-	-	-	-	(469)
Exchange rate adjustments	(184)	115	-	128	(78)	(18)	-	(274)	(311)
Increase in share capital	94	-	-	-	-	-	-	-	94
Premium on shares issued	-	-	331	-	-	-	-	-	331
					-
Issue cost of shares issued	-	-	(331)	-	-	-	-	-	(331)
Statutory Transfer	-	(85)	-	-	-	85	-	-	-
Warrants issued in the year	-	-	-	-	-	-	29	-	29

At 31 December 2006	1,756	(713)	-	176	718	343	29	13	2,322

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2006

	2006 £’000	2005 £’000
Profit (loss) attributable to equity holders of the parent company	(112)	1,353
Adjustments for:
Depreciation of property, plant and equipment	336	323
Amortisation	24	24
Loss on disposal of fixed assets	-	5
Interest Income		(2)
Income Tax	85	182
Minority Interest	121	150
Operating cash flow before movements in working capital	454	2,035
Change in inventories	75	(68)
Change in receivables	(46)	(1,840)
Change in payables	454	273
Cash generated by operations	937	400
Income taxes paid	-	(149)
Change in deferred tax	(56)	-
Share based payment	29	-
Net cash generated from operating activities	910	251
Investing activities
Purchase of fixed assets	(20)	(187)
Net cash used in investing activities	(20)	(187)
Financing activities
Proceeds of issue of new shares	94	-
Dividends paid to minority shareholders	(593)	-
Interest received	-	2
Foreign exchange differences	(144)	122
Net cash (used in)/ from financing activities	(643)	124
Net increase in cash and cash equivalents	247	188
Cash and cash equivalents at 1 January	591	403
Cash and cash equivalents at 31 December	838	591
Cash and bank balances	838	591

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2006

1. General Information

Prince Catering and Management (Overseas) Limited was incorporated on 6 June 2005 in the British Virgin Islands. The address of the registered office is at OMC Chambers, PO Box 3152 Road Town, Tortola, British Virgin Islands.

The company is domiciled in the British Virgin Islands.

The Company is an investment holding company. The principal activity of its subsidiaries is the operation of luxury Cantonese restaurants in the People’s Republic of China.

These consolidated financial statements are the Group’s first financial statements. The consolidated financial statements are presented in sterling.

2. Accounting Policies

1. Basis of Preparation

The consolidated financial statements of Prince Catering and Management (Overseas) Limited and its subsidiary undertakings (the‘‘Group’’) have been prepared in accordance with those International Financial Reporting Standards and Interpretations in force (‘‘IFRS’’), as adopted by the European Union.

2. Basis of Consolidation

The Group financial statements consolidate the financial statements of Prince Catering and Management (Overseas) Limited and all its subsidiary undertakings drawn up to 31 December 2006. Subsidiary undertakings comprise Xi’an Prince Restaurant Co Ltd, Hong Kong Prince Restaurant Co Ltd and Shenzhen Prince Catering Management Co Ltd.

Subsidiary undertakings have been consolidated using the pooling of interests method. The assets and liabilities of the combining entities are reflected at their carrying amounts. No adjustments have been made to reflect fair values. This enables presentation of the results and comparatives to reflect the ongoing business.

The income statement reflects the results of the combining entities for the full year irrespective of when the combination took place.

All intra-group transactions, balances income and expenses are eliminated on consolidation.

Comparative figures are presented as if the entities had always been combined.

3. Foreign Exchange

The functional currency of the Group is the Renminbi (RMB). The presentational currency is pounds sterling (£) for the benefit of investors.

Transactions denominated in foreign currencies are translated into sterling and recorded at the rate of exchange ruling at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies at the Balance Sheet date are retranslated at the rates ruling at that date. These translation differences are dealt with in the Group Income Statement.

The financial statements of foreign subsidiaries are translated into sterling at the closing rate of exchange and the differences arising from the translation of the opening net investment in the subsidiary are taken to reserves .

For the year ended 31 December 2006 the foreign operations financial statements have been translated from RMB or HKD to Sterling at the following exchange rates:

	Year end rate	Average rate
RMB: GB £	15.316	14.706
RMB: HK$	1.00467	1.00591

4. Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods or services provided in the normal course of business, net of discounts and other sales related charges. Revenue from the restaurant business is recognised when goods or services are delivered.

Revenue from the restaurant management business is recognised when the service is fully provided.

5. Operating Leases

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Where the companies within the Group are lessees, rentals payable under the operating leases are charged to the income statement on the straight-line basis over the lease terms.

6. Income Tax

Income tax for the financial year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case such tax is recognised in equity.

Current tax is the expected tax payable on the taxable income for the financial year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous financial years.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences as at the balance sheet date between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding tax bases used in the computation of taxable profit. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date.

Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.

7. Dividends

Equity dividends are recognised when paid or when they become legal obligations of the company.

8. Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

Depreciation is calculated on the straight-line method so as to write off the cost of property, plant and equipment reduced by the estimated residual value of the assets over their estimated useful lives. The annual depreciation rates used for this purpose are as follows:

Item	Annual Depreciation Rates
Leasehold premises refurbishment	10-20%
Motor vehicles	20%
Office equipment	20%

9. Intangible assets

Intangible assets are stated at cost less any impairment losses. Intangible assets are amortised on the straight-line basis.

Software	20%
Franchise	20%

The carrying values of intangible assets are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. Amortisation charges are included within administrative expenses.

10. Impairment of Assets

The carrying amounts of non-current assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of the asset or cash generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statements. The recoverable amount is the higher of an asset’s net selling price and its value in use. The net selling price is the amount obtainable from the sale of an asset in an arm’s length transaction. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Recoverable amounts are estimated for individual assets or, if it is not possible, for the cash generating unit.

An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined net of depreciation, if no impairment loss had been recognised. Reversals of impairment losses are recognised in the income statement.

11. Share Based Payments

The cost of granting share options and other share-based remuneration to employees and Directors is recognized through the income statement on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest. These share-based payments are measured at fair value at the date of grant by use of the option pricing model known as the Black – Scholes formula using assumptions deemed to be consistent with the price which the incentive might have been worth if it were traded in the open market. For equity-settled transactions with non-employees, the costs are recognised through the income statement (or where they relate to issue costs, taken against the share premium account if appropriate) with measurement normally based on the fair value of goods or services received.

12. Inventories

Inventories are stated at the lower of cost and net realisable value.

13. Financial Instruments

(a) Trade and other Receivables

Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts.

Other receivables are initially recognised at fair value and thereafter stated at amortised cost less provision for impairment. When the effect of discounting would be immaterial, the receivables are stated at cost less provision for impairment.

(b) Cash and cash Equivalents

Cash equivalents are short-term, highly liquid investments which are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

Trade payables are not interest bearing and are stated at their nominal value.

Other payables which are normally settled on credit terms are stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Group.

(d) Borrowings

All loans and borrowings which are interest-bearing are initially recognised at cost, being the fair value of the consideration received net of issue costs associated with borrowing, and are subsequently measured at amortised cost using the effective interest rate method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement.

Gain and losses are recognised in net profit or loss when liabilities are derecognised or impaired, as well as through the amortisation process.

(e) Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

14. Critical Accounting Estimates and Judgements

In the process of applying the Group’s accounting policies, management makes various estimates and judgements based on past experience, expectations of the future and other information. The key sources of estimation uncertainty and the critical judgements that can significantly affect the amounts recognised in the financial information are:

(a) Depreciation of property, plant and equipment

Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives, after taking account of their estimated residual values. The determination of the useful lives and residual values involve management’s estimation.

(b) Provision for bad and doubtful debts

The Group continuously monitors collections and payments from its customers and maintains a provision for estimated credit losses based upon its historical experience and any specific customer collection issues that it has been identified.

There are certain transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current income tax and deferred income tax provisions in the year in which such determination is made.

3. Operating Profit

	2006 £’000	2005 £’000
This is stated after charging:
Cost of inventories recognised as expenses	2,398	2,502
Share based payments recognised as expenses	29	-
Remuneration of auditors (see note 4)	52	34
Amortisation of intangible assets	24	24
Depreciation of property, plant and equipment	336	323
Staff costs (see note 5)	1,165	1,228
Operating lease expense	582	596

During the year, the Company was admitted to trading on AIM, a market operated by the London Stock Exchange plc. Costs were incurred relating to this listing. To the extent that these costs could not be written off against the share premium account, they have been taken to the income statement as an expense.

4. Analysis of Auditor’s Remuneration

	2006 £’000	2005 £’000
Audit of these financial statements	18	-
Amounts receivable by associates of the principal auditors in respect of:
Audit of financial statements of subsidiaries pursuant to legislation	17	-
All other services – receivable by principal auditors	17	-
	52	-

5. Staff Costs (including directors)

	2006 £’000	2005 £’000
Wages and salaries	1,102	1,033
Social security costs	33	12
Defined contribution pension cost	13	27
Other staff benefits	17	156
Total	1,165	1,228

6. Directors’ and Key Management Remuneration

The remuneration of directors and key management personnel is analysed as follows:

	Salary £’000	Benefits £’000	Total £’000	2005 Total £’000
Guangfan Mai	64	-	64	61
Honkeung Shum	21	-	21	21
Xingeng Dong	-	-	-	-
Jinbi He	-	-	-	-
Yuktong Yip	-	-	-	-
Richard Tanner	5	-	5	-
Lauren Lau	5	-	5	-
Hon Yin Cheung	26	-	26	20
Can Hui He	20	-	20	20
Wade Huang	7	-	7	6
Wenlu Xu	10	-	10	10
Wang Chan	-	-	-	-

7. Average Number of Employees During the Year

	2006 Number	2005 Number
Restaurant	272	306
Restaurant Management	56	57
Total	328	363

8. Segment Information

The Group can be divided into two business segments: the restaurants segment and the restaurant management segment.

		2006 £’000	2005 £’000
Revenue	Restaurant Segment	5,820	6,247
	Restaurant Management Segment	590	1,049
	Total	6,410	7,296

Net profit	Restaurant Segment	365	818
	Restaurant Management Segment	(356)	685
	Total	9	1,503

Assets	Restaurant Segment	4,126	4,437
	Restaurant Management Segment	405	332
	Total	4,531	4,769

Liabilities	Restaurant Segment	1,738	1,612
	Restaurant Management Segment	471	187
	Total	2,209	1,799

Capital expenditure	Restaurant Segment	18	147
	Restaurant Management Segment	2	-
	Total	20	147

Depreciation and	Restaurant Segment	169	346
amortisation	Restaurant Management Segment	191	1
	Total	360	347

Financial ratio - Segmental analysis for the year ended 31 December:		2006 %	2005 %

Gross profit margin	Restaurant Segment	60%	58%
	Restaurant Management Segment	94%	95%

The Group’s operations are entirely within the People’s Republic of China.

9. Income Tax

Income tax expense is as follows:	2006 £’000	2005 £’000
Current income tax	235	166
Deferred income tax	(59)	16
Total	176	182

Deferred tax assets
At beginning of the financial period	14	28
Transfer to/from income statement	52	(16)
Exchange adjustments	(1)	2
At end of the financial period	65	14

Deferred tax liabilities
At beginning of the financial period	5	5
Transfer to/from income statement	(5)	-
Exchange adjustment	-	-
At end of the financial period	-	5

The Group’s deferred tax assets arise from the deferral of income and the deferred tax liabilities arise from temporary differences.

	2006 £’000	2005 £’000
Profit before tax	185	1,685
Tax charges at the average rate for the Group (2005 – 12%, 2006- 20%)	37	202
Expenses not deductible for tax purposes	4	9
Assets that can be fully deducted for tax purposes	4	(23)
Expenditure not allowable for tax	112	(6)
Tax on previous years’ profits	19	-
Taxation charge