Aceso Life Science Group Limited - Proxy Solicitation & Information Statement 2014

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your licensed securities dealer, registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Hao Tian Development Group Limited (the “ Company ”), you should at once hand this circular and accompanying form of proxy to the purchaser or the transferee or to the bank, licensed securities dealer, registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

This circular is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of the Company.

Hong Kong Exchanges and Clearing Limited, Hong Kong Securities Clearing Company Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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(Incorporated in the Cayman Islands with limited liability)

(Stock code: 00474)

(1) PROPOSED OPEN OFFER ON THE BASIS OF TWO OFFER SHARES FOR EVERY ONE ADJUSTED SHARE HELD ON THE RECORD DATE AT HK$0.25 PER OFFER SHARE WITH BONUS ISSUE ON THE BASIS OF ONE BONUS SHARE FOR EVERY ONE OFFER SHARE TAKEN UP UNDER THE OPEN OFFER; (2) UNDERWRITING ARRANGEMENT; (3) PROPOSED AMENDMENTS TO ARTICLES OF ASSOCIATION; (4) APPLICATION FOR WHITEWASH WAIVER;

(5) PROPOSED GRANT OF SPECIFIC MANDATE;

AND

( 6) NOTICE OF EXTRAORDINARY GENERAL MEETING

Underwriters

Asia Link Capital Investment Holdings Limited Financial Adviser

Independent Financial Adviser to the Independent Board Committee of the Company and the Independent Shareholders

Capitalized terms used in this cover page shall have the same meanings as those defined in this circular.

A letter from the Board is set out on pages 12 to 47 of this circular. A letter from the Independent Board Committee containing its recommendation to the Independent Shareholders is set out on pages 48 to 49 of this circular. A letter from Pan Asia, the Independent Financial Adviser, containing its advice in respect of the Open Offer, the Underwriting Agreement and the Whitewash Waiver to the Independent Board Committee and the Independent Shareholders is set out on pages 50 to 79 of this circular.

A notice convening the Open Offer EGM to be held at Room 2702, 27/F, 200 Gloucester Road, Wanchai, Hong Kong on Wednesday, 30 July 2014 at 10:30 a.m. is set out on pages EGM-1 to EGM-5 of this circular. A proxy form for use at the Open Offer EGM is enclosed. Whether or not you are able to attend the Open Offer EGM, you are requested to complete the enclosed proxy form in accordance with the instructions printed thereon and return the same to the Registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong, as soon as practicable but in any event not later than 48 hours before the time appointed for holding the Open Offer EGM or any adjournment thereof. Completion and return of the proxy form will not preclude you from attending and voting in person at the Open Offer EGM or any adjournment thereof (as the case may be) should you so wish and in such event, the proxy shall be deemed to be revoked.

The Open Offer (with the Bonus Issue) is subject to the satisfaction of certain conditions as described in the paragraph headed “Conditions of the Underwriting Agreement”. In particular, it is subject to, among other things, the Capital Reorganisation becoming effective, the approval of the Proposed Amendments to Articles by the Shareholders, the approval of the Open Offer (with the Bonus Issue) and the Whitewash Waiver by the Independent Shareholders at the Open Offer EGM by way of poll, the Whitewash Waiver having been granted by the Executive, and the Underwriting Agreement having become unconditional and not having been terminated (see the paragraph headed “Termination of the Underwriting Agreement” below). Accordingly, the Open Offer (with the Bonus Issue) may or may not proceed. Shareholders and potential investors should exercise caution when dealing in the Shares, and if they are in doubt about their position, they should consult their professional advisers. Shareholders and potential investors should note that the Shares are expected to be dealt in on an ex-entitlement basis commencing from Friday, 1 August 2014 and that dealings in Shares will take place while the conditions to which the Open Offer is subject remain unfulfilled. Any Shareholder or other person dealing in Shares up to the date on which all conditions to which the Open Offer (with the Bonus Issue) is subject are fulfilled (which is expected to be on 4:00 p.m. on Friday, 29 August 2014), will accordingly bear the risk that the Open Offer cannot become unconditional and may not proceed. Any Shareholder or other person contemplating selling or purchasing Shares, who is in any doubt about his/her/ its position, is recommended to consult his/her/its own professional adviser.

2 July 2014

	Page
EXPECTED TIMETABLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
TERMINATION OF THE UNDERWRITING AGREEMENT. . . . . . . . . . . . . . . . . . . .	9
RESPONSIBILITY STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
LETTER FROM THE INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . . . . . .	48
LETTER FROM PAN ASIA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	50
APPENDIX I – FINANCIAL INFORMATION OF THE GROUP. . . . . . . . . . . . .	I-1
APPENDIX II – UNAUDITED PRO FORMA FINANCIAL INFORMATION
OF THE GROUP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	II-1
APPENDIX III – GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
NOTICE OF EXTRAORDINARY GENERAL MEETING. . . . . . . . . . . . . . . . . . . . . .	EGM-1

– i –

EXPECTED TIMETABLE

Expected timetable for, among other things, the proposed (a) Open Offer and Bonus Issue and (b) change in board lot size is set out below, which is subject to the proposed Capital Reorgani sation as announced by the Company on 26 March 2014 becoming effective:

Note: Italic fonts below denote the timetable relating to the Capital Reorganisation.

Event 2014 (Hong Kong time)
Latest time for lodging transfers of Existing Shares to be qualified
for attendance and voting at the Open Offer EGM . . . . . . . . . . . . . . . . . . . . . . . . . . .4:30 p.m. on
Friday, 25 July
Register of members closes (both days inclusive) . . . . . . . . . . . . . . . . . . . . . . . Monday, 28 July to
to Wednesday, 30 July
Latest time for returning and lodging of proxy
form for the Open Offer EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10:30 a.m. on
Monday, 28 July
Record date for the Open Offer EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 30 July
Expected date and time of the Open Offer EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10:30 a.m. on
Wednesday, 30 July
Announcement of results of the Open Offer EGM . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 30 July
The following events are conditional on the fulfilment of the conditions for the
implementation of the Capital Reorganisation
Effective date of the Capital Reorganisation . . . . . . . . . . . . . . . . . . . . . . . . . . . after 10:00 p.m. on
Wednesday, 30 July
Register of members of the Company re-opens . . . . . . . . . . . . . . . . . . . . . . . . . . .Thursday, 31 July
Dealings in Adjusted Shares commence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9:00 a.m. on
Thursday, 31 July
Original counter for trading in the Existing Shares in
board lots of 4,000 Existing Shares (in the form of existing
share certificates) temporarily closes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9:00 a.m. on
Thursday, 31 July

– ii –

EXPECTED TIMETABLE

Event 2014 (Hong Kong time)
Temporary counter for trading in the Adjusted Shares in
board lots of 400 Adjusted Shares (in the form of
existing share certificates) opens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9:00 a.m. on
Thursday, 31 July
First day for free exchange of existing share
certificates for new share certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Thursday, 31 July
Last day of dealings in Shares on a cum-entitlement basis . . . . . . . . . . . . . . . . . . .Thursday, 31 July
First day of dealings in Shares on an ex-entitlement basis . . . . . . . . . . . . . . . . . . . Friday, 1 August
Latest time for lodging transfer of Shares in order to be
qualified for the Open Offer and the Bonus Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . .4:30 p.m. on
Monday, 4 August
Register of members of the Company closes
(both days inclusive) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 5 August to
Friday, 8 August
Record Date for the Open Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 8 August
Register of members of the Company re-opens . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 11 August
Despatch of the Prospectus Documents (in case of
the Excluded Shareholders, the Prospectus only) . . . . . . . . . . . . . . . . . . . . . . Tuesday, 12 August
Designated broker starts to stand in the market to
provide matching service for the sale and
purchase of odd lots of Adjusted Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9:00 a.m. on
Thursday, 14 August
Original counter for trading in the Adjusted
Shares in board lots of 6,000 Adjusted Shares
(in the form of new share certificates) re-opens . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9:00 a.m. on
Thursday, 14 August

– iii –

EXPECTED TIMETABLE

Event 2014 (Hong Kong time)
Parallel trading in the Adjusted Shares commences . . . . . . . . . . . . . . . . . . . . . . . . . . . .9:00 a.m. on
Thursday, 14 August
Latest time for acceptance of and
payment for the Offer Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4:00 p.m. on
Tuesday, 26 August
Latest time for the Open Offer (with the Bonus Issue) to
become unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4:00 p.m. on
Friday, 29 August
Announcement of results of acceptance of
the Offer Shares and the Bonus Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 2 September
Designated broker ceases to stand in the
market to provide matching service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4:00 p.m. on
Wednesday, 3 September
Temporary counter for trading in the Adjusted
Shares in board lots of 400 Adjusted Shares
(in the form of existing share certificates) closes . . . . . . . . . . . . . . . . . . . . . . . . . . . .4:00 p.m. on
Wednesday, 3 September
Parallel trading in the Adjusted Shares ends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4:00 p.m. on
Wednesday, 3 September
Despatch of share certificates for
Offer Shares and Bonus Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 3 September
Dealings in Offer Shares and
Bonus Shares commence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9:00 a.m. on
Thursday, 4 September
Last day of free exchange of existing
certificates for new share certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Friday, 5 September

– iv –

EXPECTED TIMETABLE

EFFECT OF BAD WEATHER ON THE LATEST TIME FOR ACCEPTANCE OF AND PAYMENT FOR THE OFFER SHARES

The latest time for acceptance of and payment for the Offer Shares will not take place if there is:

a tropical cyclone warning signal number 8 or above; or
a “black” rainstorm warning
(i) in force in Hong Kong at any local time before 12:00 noon and no longer in force after 12:00 noon on the date of Latest Time for Acceptance. Instead the latest time for acceptance of and payment for the Offer Shares will be extended to 5:00 p.m. on the same business day; or
(ii) in force in Hong Kong at any local time between 12:00 noon and 4:00 p.m. on the date of Latest Time for Acceptance. Instead the latest time for acceptance of and payment for the Offer Shares will be rescheduled to 4:00 p.m. on the following business day which does not have either of those warnings in force in Hong Kong at any time between 9:00 a.m. and 4:00 p.m..

If the latest time for acceptance of and payment for the Offer Shares does not take place on the date of Latest Time for Acceptance, the dates mentioned in this section may be affected. An announcement will be made by the Company in such event as soon as possible.

– v –

DEFINITIONS

In this circular, unless the context otherwise requires, the following words and expressions shall have the meaning ascribed to them below:

“acting in concert” has the meaning ascribed thereto under the Takeovers Code “Adjusted Share(s)” ordinary share(s) of HK$0.01 each in the share capital of the Company after the Capital Reorganisation becoming effective “Announcement” the announcement of the Company dated 25 April 2014 in relation to, among other things, the Open Offer (with the Bonus Issue), the Underwriting Agreement, the Whitewash Waiver, the change in board lot size and the Proposed Amendments to Articles “Application Form(s)” the form(s) of application to be used by the Qualifying Shareholders to apply for the Offer Shares in the form agreed by the Company and the Underwriters “Articles” articles of association of the Company “Asia Link” Asia Link Capital Investment Holdings Limited, a company incorporated in the British Virgin Islands with limited liability, which is wholly and beneficially owned by Ms. Li “associates” has the meaning described thereto in the Listing Rules “Board” the board of Directors “Bonus Issue” the proposed issue of Bonus Shares on the basis of one (1) Bonus Share for every one (1) Offer Share taken up under the Open Offer “Bonus Shares” new Adjusted Shares to be allotted and issued pursuant to the Bonus Issue “Business Day” any day (other than a Saturday, Sunday or public holiday) on which licensed banks in Hong Kong are generally open for business throughout their normal business hours

– 1 –

DEFINITIONS

“Capital Reduction” the proposed reduction of the issued share capital of the Company by the cancellation of the paid-up capital of the Company to the extent of HK$0.49 on each of the issued Consolidated Shares such that the nominal value of each issued Consolidated Share will be reduced from HK$0.50 to HK$0.01
“Capital Reorganisation” the proposed reorganisation of the share capital of the Company by way of (i) the Share Consolidation; (ii) the Capital Reduction; and (iii) the Share Subdivision
“Capital Reorganisation EGM” the extraordinary general meeting of the Company held on 12 May 2014 for the Shareholders to consider and approve (among other things) the Capital Reorganisation
“CCASS” the Central Clearing and Settlement System established and operated by HKSCC
“China Capital” China Capital Group Limited, a company beneficially owned as to 50% by Ms. Li, as to 40% by Mr. Ma Lishan and as to 10% by Mr. Liu Zhibin
“Companies Ordinance” the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Chapter 32 of the Laws of Hong Kong (as amended from time to time)
“Company” Hao Tian Development Group Limited, a company incorporated in the Cayman Islands with limited liability, the Shares of which are listed on the Main Board of the Stock Exchange
“Concert Group” Asia Link, its beneficial owner(s), and the parties acting in concert with any of them (including Ms. Li, Mr. Ma Lishan, Ms. Ma Lirong, Mr. Ma Bao Shan, Mr. Liu Zhibin, TRXY Development, TRXY International, Real Power, China Capital and Kingston Securities)
“Consolidated Share(s)” ordinary share(s) of nominal value of HK$0.50 each in the capital of the Company immediately following the Share Consolidation and prior to the Capital Reduction and Share Subdivision

– 2 –

DEFINITIONS

“Directors”
“Excluded Shareholders”
“Executive”
“Existing Share(s)”
“Group”
“HKSCC”
“Hong Kong”
“Independent Board Committee”
“Independent Shareholder(s)”
directors of the Company

those Overseas Shareholders who, in the opinion of the Directors based on enquiry made in compliance with Rule 13.36(2)(a) of the Listing Rules, are to be excluded from the Open Offer (with the Bonus Issue) including Shareholders residing in Canada, the United States, the United Kingdom and the Philippines

the Executive Director of the Corporate Finance Division of the SFC or any delegate(s) of the Executive Director

ordinary share(s) of HK$0.05 each in the share capital of the Company prior to the Capital Reorganisation becoming effective

the Company and its subsidiaries

Hong Kong Securities Clearing Company Limited

the Hong Kong Special Administrative Region of PRC

a committee of the Board (comprising Mr. Chan Ming Sun Jonathan, Mr. Ma Lin, and Mr. Lam Kwan Sing, being all of the independent non-executive Directors) established to advise the Independent Shareholders on the Open Offer (with the Bonus Issue), the Underwriting Agreement and the Whitewash Waiver

in relation to the Whitewash Waiver, Shareholders other than the Concert Group and those who are involved in or interested in the Open Offer (with the Bonus Issue) (save for any assured entitlement to the Open Offer as a Qualifying Shareholder), the Underwriting Agreement and/ or the Whitewash Waiver

in relation to the Open Offer (with the Bonus Issue), Shareholder(s) other than the Directors (excluding independent non-executive Directors) and the chief executive of the Company and their respective associates

– 3 –

DEFINITIONS

“Independent Third Party(ies)”
“Irrevocable Undertakings”
“Kingston Securities”
“Last Trading Day”
“Latest Practicable Date”
“Latest Time for Acceptance”
“Latest Time for Termination”
“Listing Rules”

third parties independent of and not connected with the Directors, chief executive and substantial shareholders of the Company or any of its subsidiaries, or any of their respective associates

the irrevocable undertakings dated 17 April 2014 to the Company and the Underwriters given by each of Ms. Li, Mr. Ma Lishan, Mr. Ma Bao Shan and Ms. Ma Lirong that they will not exercise the conversion rights attaching to the Share Options respectively owned by them and will remain as the beneficial holders of those Share Options at any time from the date of the irrevocable undertakings and up to and including the date of completion of the Open Offer
Kingston Securities Limited, a licensed corporation to carry out business in type 1 (dealing in securities) regulated activity under the SFO
17 April 2014, being the last trading day for the Shares immediately prior to the date of the Announcement
27 June 2014, being the latest practicable date prior to the printing of this circular for the purpose of as ascertaining certain information for inclusion herein
4:00 p.m. on Tuesday, 26 August 2014 or such later time or date as may be agreed between the Underwriters and the Company, being the latest time for acceptance of, and payment for, the Offer Shares as described in the Prospectus
4:00 p.m. on the third Business Day after the Latest Time for Acceptance that is 29 August 2014 or such later time or date as may be agreed between the Underwriters and the Company, being the latest time to terminate the Underwriting Agreement

the Rules Governing the Listing of Securities on the Stock Exchange

– 4 –

DEFINITIONS

“Ms. Li”
“Offer Share(s)”
“Open Offer”
“Open Offer EGM”
“Overseas Letter”
“Overseas Shareholders”
“Pan Asia” or “Independent Financial Adviser”

Ms. Li Shao Yu, a substantial shareholder, the chief executive officer of the Company and the sole beneficial owner of Asia Link

new Adjusted Shares to be issued and allotted under the Open Offer, being not less than 794,407,160 Adjusted Shares (assuming no new Shares being issued or repurchased by the Company on or before the Record Date) and not more than 951,787,160 Adjusted Shares (assuming no new Shares being issued other than those falling to be issued upon full exercise of the Share Options (save for those Share Options under the Irrevocable Undertakings) and the Warrants and no Share being repurchased by the Company on or before the Record Date)

the proposed issue of the Offer Shares by way of Open Offer to the Qualifying Shareholders for subscription at the Subscription Price on the terms and subject to the conditions set out in the Underwriting Agreement and the Prospectus Documents

the extraordinary general meeting of the Company to be convened and held on 30 July 2014 for the Shareholders or the Independent Shareholders (as the case may be) to consider and approve (among other things), if thought fit, the Proposed Amendments to Articles, the Open Offer (with the Bonus Issue), the Underwriting Agreement , the Whitewash Waiver and the Specific Mandate

a letter from the Company to the Excluded Shareholders explaining the circumstances in which the Excluded Shareholders are not permitted to participate in the Open Offer (with the Bonus Issue)

Shareholders with registered addresses (as shown in the register of members of the Company on the Record Date) which are outside Hong Kong

Pan Asia Corporate Finance Limited, a licensed corporation licensed to carry on Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO

– 5 –

DEFINITIONS

“PRC”

the People’s Republic of China

“Proposed Amendments to Articles”
the proposed amendments to the Articles as set out in the notice of the Open Offer EGM
“Prospectus”
the prospectus in connection with the Open Offer (with the Bonus Issue) (in such form as the Company and the Underwriters may agree) to be despatched to the Shareholders on the Prospectus Posting Date
“Prospectus Documents” the Prospectus and Application Form(s)
“Prospectus Posting Date”
Tuesday, 12 August 2014 or such later date as may be agreed between the Underwriters and the Company for the despatch of the Prospectus Documents
“Qualifying Shareholders” the Shareholders, other than the Excluded Shareholders, whose names appear on the register of members of the Company as at the close of business on the Record Date
“Real Power”
Real Power Holdings Limited, a company owned as to 99.90% by Ms. Li and as to 0.10% by China Capital
“Record Date”
Friday, 8 August 2014 or such other date as may be agreed between the Company and the Underwriters for the determination of the entitlements under the Open Offer (with the Bonus Issue)
“Relevant Period”
the period commencing six months immediately preceding 25 April 2014, being the date of the Announcement, and ending on the Latest Practicable Date
“Registrar”
the Company’s branch share registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited of 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong
“SFC”
the Securities and Futures Commission of Hong Kong
“SFO”

The Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

– 6 –

DEFINITIONS

“Shareholder(s)”

holder(s) of the Share(s)

“Share(s)”

Existing Share(s) or Adjusted Share(s) (as the case may be)

“Share Options”

the share options granted under the share option scheme adopted by the Company on 16 May 2006

“Share Consolidation”
the proposed consolidation of every ten (10) Existing Shares of nominal value of HK$0.05 each in the issued and unissued share capital of the Company into one (1) Consolidated Share of nominal value of HK$0.50
“Share Subdivision” the proposed sub-division of every one authorised but unissued Consolidated Share of nominal value of HK$0.50 into fifty (50) Adjusted Shares of nominal value of HK$0.01 each
“Specific Mandate” the specific mandate to be sought from the Shareholders at the Open Offer EGM to grant the authority to the Directors for the allotment and issue of new Adjusted Shares upon the exercise of the subscription rights attaching to the outstanding Warrants taking into account of the adjustments to the Warrants following completion of the Open Offer (with Bonus Issue) and further applicable adjustments (if any) in accordance with the terms of the Warrants from time to time
“Specified Event” an event occurring or matter arising on or after the date of the Underwriting Agreement and prior to the Latest Time for Termination which if it had occurred or arisen before the date of the Underwriting Agreement would have rendered any of the warranties contained in the Underwriting Agreement untrue or incorrect in any material respect
“Stock Exchange”

The Stock Exchange of Hong Kong Limited

“Subscription Price”
the issue price of HK$0.25 per Offer Share
“substantial shareholder(s)” has the meaning ascribed thereto under the Listing Rules
“Takeovers Code” the Hong Kong Code on Takeovers and Mergers

– 7 –

DEFINITIONS

“TRXY Development”
TRXY Development (HK) Limited, a company beneficially and wholly owned by Ms. Li
“TRXY International”
Tai Rong Xin Ye International Power Generation Inc., a company beneficially and wholly owned by Ms. Li
“Underwriters”
Asia Link and Kingston Securities
“Underwriting Agreement”
the underwriting agreement dated 17 April 2014 entered into between the Company and the Underwriters in relation to the underwriting arrangement in respect of the Open Offer (with the Bonus Issue)
“Underwritten Shares” all the Offer Shares which are fully underwritten by the Underwriters on the terms and subject to the conditions set out in the Underwriting Agreement
“Untaken Shares”
the Underwritten Shares which have not been taken up by the Qualifying Shareholders
“Warrants”
785,500,000 unlisted warrants issued by the Company on 21 January 2013 which entitle the holders thereof to subscribe for Existing Shares at the price of HK$0.1625 each at any time during a period commencing from the date of issue of the Warrants to the date of expiry
“Whitewash Waiver”

a waiver by the Executive to Asia Link pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code in respect of any obligation of Asia Link to make a mandatory general offer for all the securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company not already owned and/or agreed to be acquired by the Concert Group as a result of the subscription of the Offer Shares by Asia Link pursuant to the underwriting obligations of Asia Link under the Underwriting Agreement

“HK$”

Hong Kong dollars, the lawful currency of Hong Kong

“%”

per cent.

– 8 –

TERMINATION OF THE UNDERWRITING AGREEMENT

If, prior to the Latest Time For Termination:

(i) in the absolute opinion of the Underwriters, the success of the Open Offer (with Bonus Issue) would be materially and adversely affected by:
(a) the introduction of any new law or regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may in the absolute opinion of any of the Underwriters materially and adversely affect the business or the financial or trading position of the Group as a whole or is materially adverse in the context of the Open Offer (with the Bonus Issue); or
(b) the occurrence of any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date of the Underwriting Agreement) of a political, military, financial, economic or other nature (whether or not ejusdem generis with any of the foregoing), or in the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities markets which may, in the absolute opinion of any of the Underwriters materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or materially and adversely prejudice the success of the Open Offer (with the Bonus Issue) or otherwise makes it inexpedient or inadvisable to proceed with the Open Offer(with the Bonus Issue); or
(ii) any adverse change in market conditions (including without limitation, any change in fiscal or monetary policy, or foreign exchange or currency markets, suspension or material restriction or trading in securities) occurs which in the absolute opinion of any of the Underwriters are likely to materially or adversely affect the success of the Open Offer (with the Bonus Issue) or otherwise makes it inexpedient or inadvisable to proceed with the Open Offer (with the Bonus Issue); or
(iii) there is any change in the circumstances of the Company or any member of the Group which in the absolute opinion of the Underwriters will adversely affect the prospects of the Company, including without limiting the generality of the foregoing the presentation of a petition or the passing of a resolution for the liquidation or winding up or similar event occurring in respect of any member of the Group or the destruction of any material asset of the Group; or
(iv) any event of force majeure including, without limiting the generality thereof, any act of God, war, riot, public disorder, civil commotion, fire, flood, explosion, epidemic, terrorism, strike or lockout; or

– 9 –

TERMINATION OF THE UNDERWRITING AGREEMENT

(v) any other material adverse change in relation to the business or the financial or trading position or prospects of the Group as a whole whether or not ejusdem generis with any of the foregoing; or
(vi) any matter which, had it arisen or been discovered immediately before the date of the Prospectus and not having been disclosed in the Prospectus, would have constituted, in the absolute opinion of any of the Underwriters, a material omission in the context of the Open Offer (with the Bonus Issue); or
(vii) any suspension in the trading of securities generally or the Company’s securities on the Stock Exchange for a period of more than ten consecutive Business Days, excluding any suspension in connection with the clearance of the Announcement or this circular or the Prospectus Documents or other announcements or circulars in connection with the Open Offer (with the Bonus Issue),

any of the Underwriters shall be entitled by notice in writing to the Company, served prior to the Latest Time For Termination, to terminate the Underwriting Agreement.

Any of the Underwriters shall be entitled by notice in writing to rescind the Underwriting Agreement if prior to the Latest Time For Termination:

(i) any material breach of any of the representations, warranties or undertakings contained in the Underwriting Agreement comes to the knowledge of the Underwriters; or
(ii) any Specified Event comes to the knowledge of the Underwriters.

Any such notice shall be served by any of the Underwriters prior to the Latest Time For Termination.

If prior to the Latest Time For Termination, any such notice as referred to above is given by any of the Underwriters, the obligations of all parties under the Underwriting Agreement shall terminate forthwith and no party shall have any claim against any other party for costs, damages, compensation or otherwise save for any antecedent breaches.

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RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules and the Takeovers Code for the purpose of giving information with regard to the Group.

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinion expressed in this circular have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any statement in this circular misleading.

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LETTER FROM THE BOARD

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(Incorporated in the Cayman Islands with limited liability)

(Stock code: 00474)

Executive Directors: Registered office: Mr. Xu Hai Ying Cricket Square Dr. Zhiliang Ou, JP (Australia) Hutchins Drive Mr. Fok Chi Tak P.O. Box 2681 Grand Cayman KY1-1111 Independent Non-executive Directors: Cayman Islands Mr. Chan Ming Sun Jonathan Mr. Ma Lin Head office and principal place Mr. Lam Kwan Sing of business: Rooms 4917-4932, 49th Floor Sun Hung Kai Centre 30 Harbour Road, Wanchai Hong Kong 2 July 2014

To all shareholders

Dear Sir or Madam,

(1) PROPOSED OPEN OFFER ON THE BASIS OF
TWO OFFER SHARES FOR EVERY ONE ADJUSTED SHARE HELD ON THE RECORD DATE AT HK$0.25 PER
OFFER SHARE WITH BONUS ISSUE ON THE BASIS OF ONE BONUS SHARE FOR EVERY ONE OFFER SHARE TAKEN UP UNDER THE OPEN OFFER;
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 - **(2) UNDERWRITING ARRANGEMENT;**
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(3) PROPOSED AMENDMENTS TO ARTICLES OF ASSOCIATION; (4) APPLICATION FOR WHITEWASH WAIVER;
- (5) PROPOSED GRANT OF SPECIFIC MANDATE;

AND ( 6) NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

Reference is made to the announcement of the Company dated 26 March 2014 in relation to the Capital Reorganisation ; the Announcement in relation to, among other things, the Open Offer, the Underwriting Agreement, the Whitewash Waiver, the change in board lot size and the Proposed Amendments to Articles; and the announcements of the Company dated 16 May 2014 , 12 June 2014 and 24 June 2014 respectively in relation to the revised timetable in connection with, among other things, the Open Offer (with Bonus Issue).

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LETTER FROM THE BOARD

On 25 April 2014, the Company announced that the Board proposed to change the board lot size for trading in Shares from 4,000 Existing Shares to 6,000 Adjusted Shares subject to and after the Capital Reorganisation becoming effective. For the details of the change in board lot size, please refer to the Announcement.

The Company proposes to raise not less than approximately HK$198.60 million and not more than approximately HK$237.95 million, before expenses, by issuing not less than 794,407,160 Offer Shares and not more than 951,787,160 Offer Shares to the Qualifying Shareholders by way of the Open Offer at the Subscription Price of HK$0.25 per Offer Share on the basis of two (2) Offer Shares for every one (1) Adjusted Share held on the Record Date and payable in full on acceptance with Bonus Issue on the basis of one (1) Bonus Share for every one (1) Offer Share taken up under the Open Offer. The Open Offer (with the Bonus Issue) will not be extended to the Excluded Shareholders.

The Open Offer will be fully underwritten by the Underwriters. The Underwriting Agreement contains provisions granting the Underwriters the right, which may be exercised at any time prior to 4:00 p.m. on Friday, 29 August 2014, being Latest Time for Termination, to terminate the Underwriting Agreement on the occurrence of certain events. If the Underwriters terminate the Underwriting Agreement, the Open Offer (with the Bonus Issue) will not proceed.

In order to facilitate the Bonus Issue (which will not be made to Shareholders on pro rata basis as Bonus Shares will only be issued to Shareholders who have taken up Offer Shares under the Open Offer) as proposed, the Company also proposes to put forward a special resolution to the Shareholders for approval at the Open Offer EGM to amend the Articles to allow for any declaration, making or payment of a distribution or dividend to the Shareholders can be declared, made or paid otherwise than pro rata to their respective shareholdings upon the capitalisation of any part of the Company’s reserves or undivided profits.

The additional new Adjusted Shares falling to be issued under the outstanding Warrants in light of the adjustments to the Warrants as result of the Capital Reorganisation and the Open Offer (with Bonus Issue) will exceed the authorization under general mandate granted by the Shareholders to the Directors in 2012. The Board, therefore, proposed to seek the Shareholders’ approval at the Open Offer EGM in respect of the granting of the Specific Mandate to allot and issue new Adjusted Shares falling to be issued upon full exercise of the conversion rights of the outstanding Warrants, taking into account the adjustments to the subscription price and number of the Adjusted Shares as a result of the Capital Reorganisation and the Open Offer (with Bonus Issue) and further applicable adjustments (if any) in accordance with the terms of the Warrants from time to time.

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LETTER FROM THE BOARD

The purpose of this circular is to provide you with, among other things, (i) further details about the Open Offer (with the Bonus Issue), the Underwriting Agreement, the Whitewash Waiver, the change in board lot size , the Proposed Amendments to Articles and the Specific Mandate; (ii) a letter of recommendation from the Independent Board Committee to the Independent Shareholders in respect of the Open Offer (with the Bonus Issue), the Underwriting Agreement and the Whitewash Waiver; (iii) a letter of advice from Pan Asia to the Independent Board Committee and the Independent Shareholders in respect of the Open Offer (with the Bonus Issue), the Underwriting Agreement and the Whitewash Waiver; (iv) the financial information and other general information of the Group; and (iv) the notice convening the Open Offer EGM.

The Independent Board Committee has been formed to advise the Independent Shareholders in respect of the Open Offer (with the Bonus Issue), the Underwriting Agreement and the Whitewash Waiver, and Pan Asia has been appointed as the Independent Financial Adviser with the Independent Board Committee’s approval to advise the Independent Board Committee and the Independent Shareholders in this regard.

PROPOSED OPEN OFFER (WITH THE BONUS ISSUE)

Issue statistics

Basis of the Open Offer : two (2) Offer Shares for every one (1) Adjusted Share held on the Record Date Basis of the Bonus Issue : one (1) Bonus Share for every one (1) Offer Share taken up Subscription Price : HK$0.25 per Offer Share Number of Existing Shares : 3,972,035,804 Existing Shares in issue as at the Latest Practicable Date Number of whole Adjusted : 397,203,580 Adjusted Shares Shares in issue upon the Capital Reorganisation having become effective

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LETTER FROM THE BOARD

Number of Offer Shares : not less than 794,407,160 Offer Shares (assuming no new Share being issued and no Share being repurchased by the Company on or before the Record Date) and not more than 951,787,160 Offer Shares (assuming no new Share being issued other than those falling to be issued upon full exercise of the Share Options (save for those Share Options under the Irrevocable Undertakings) and the Warrants and no Share being repurchased by the Company on or before the Record Date)

Number of Bonus Shares : not less than 794,407,160 Bonus Shares (assuming no new Share being issued and no Share being repurchased by the Company on or before the Record Date) and not more than 951,787,160 Bonus Shares (assuming no new Share being issued other than those falling to be issued upon full exercise of the Share Options (save for those Share Options under the Irrevocable Undertakings) and the Warrants and no Share being repurchased by the Company on or before the Record Date)

Total number of whole : 1,986,017,900 Adjusted Shares (assuming no new Adjusted Shares in Shares being issued and no Shares being repurchased issue immediately upon by the Company on or before the Record Date) and not completion of the Open more than 2,379,467,900 Adjusted Shares (assuming Offer (with the Bonus no new Shares being issued other than those falling Issue) to be issued upon full exercise of the Share Options (save for those Share Options under the Irrevocable Undertakings) and the Warrants and no Shares being repurchased by the Company on or before the Record Date)

Underwriters and number of : Asia Link and Kingston Securities; all of the Offer Underwritten Shares Shares

– 15 –

LETTER FROM THE BOARD

As at the Latest Practicable Date, there are (i) Share Options outstanding entitling the holders thereof to subscribe for an aggregate of 89,900,000 Existing Shares; and (ii) Warrants outstanding entitling the holders thereof to subscribe for an aggregate of 741,000,000 Existing Shares. Save as and except for the Share Options and the Warrants, as at the Latest Practicable Date, the Company has no other outstanding convertible securities, options or warrants in issue which confer any right to subscribe for, convert or exchange into Shares.

Qualifying Shareholders

The Open Offer (with the Bonus Issue) is only available to the Qualifying Shareholders. The Company will send (i) the Prospectus Documents to the Qualifying Shareholders; and (ii) the Prospectus to the Excluded Shareholders for information purposes only.

To qualify for the Open Offer (with the Bonus Issue), a Shareholder must:

(i) be registered as a member of the Company at the close of business on the Record Date; and
(ii) not be an Excluded Shareholder.

In order to be registered as members of the Company at the close of business on the Record Date, holders of the Shares must lodge any transfers of the Shares (together with the relevant share certificates) with the Registrar, being Computershare Hong Kong Investor Services Limited at shops 1712-1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration no later than 4:30 p.m. on Monday, 4 August 2014.

Closure of register of members

The register of members of the Company will be closed from Tuesday, 5 August 2014 to Friday, 8 August 2014, both dates inclusive and the Record Date will be on Friday, 8 August 2014. No transfer of Shares will be registered during this period.

Rights of the Overseas Shareholders

The Prospectus Documents are not intended to be registered under the applicable securities legislation of any jurisdiction other than Hong Kong.

– 16 –

LETTER FROM THE BOARD

Based on the register of members of the Company as at the Latest Practicable Date, the Company had 20 Overseas Shareholders (holding in aggregate approximately 49,964 Existing Shares) whose addresses are outside Hong Kong, including the United Kingdom, the United States, Canada, the Philippines, Malaysia, Singapore and Macau.

In compliance with the necessary requirements of the Listing Rules, the Company have made enquiries regarding the feasibility of extending the Open Offer (with the Bonus Issue) to the Overseas Shareholders . Based on advice from legal advisers in Malaysia, Singapore and Macau, no legal or regulatory compliance is required to be made in these jurisdictions. Accordingly, the Open Offer (with Bonus Issue) will be extended to the Overseas Shareholders with addresses in these jurisdictions.

The Company has obtained advice from legal advisers in Canada, the Philippines, the United Kingdom and the United States. The Directors, having made reasonable enquiries under the laws of the these jurisdictions, are of the view that the extension of the Open Offer (with Bonus Issue) to the Overseas Shareholders with addresses in these jurisdictions would or might, in the absence of compliance with relevant registration or other special formalities in these jurisdictions, be unlawful or impracticable, and compliance with the registration and other special formalities in these jurisdictions could be both costly and time-consuming, and therefore inexpedient to do so.

Accordingly, in view of the likely costs and time involved if overseas compliance was to be observed, and the insignificant shareholdings of the Excluded Shareholders, the costs of overseas compliance would outweight the benefits which the Company and its Shareholders as a whole would receive by including the Excluded Shareholders in the Open Offer (with Bonus Issue). Accordingly, the Open Offer (with Bonus Issue) will not be extended to any Excluded Shareholder. The Company will send copies of the Prospectus to the Excluded Shareholders for their information only, but will not send any Application Form to them on the Prospectus Posting Date. For the avoidance of doubt, the Excluded Shareholders will be entitled to attend and vote at the Open Offer EGM.

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LETTER FROM THE BOARD

Offer Shares and Bonus Shares to the issued share capital of the Company

Assuming no new Shares being issued and no Share being repurchased by the Company on or before the Record Date and the Capital Reorganisation having become effective, a total number of 1,588,814,320 new Shares will be issued upon completion of the Open Offer (with the Bonus Issue), comprising 794,407,160 Offer Shares and 794,407,160 Bonus Shares, represent:

(i) 400.00% of the Company’s existing issued share capital as at the Latest Practicable Date (having adjusted for the Capital Reorganisation); and
(ii) 80.00% of the Company’s issued share capital (having adjusted for the Capital Reorganisation) as enlarged by the issue of the Offer Shares and the Bonus Shares.

Assuming no new Shares being issued other than those falling to be issued upon full exercise of the Share Options (save for those Share Options under the Irrevocable Undertakings) and the Warrants and no Share being repurchased by the Company on or before the Record Date, and the Capital Reorganisation having become effective, a total number of 1,903,574,320 new Shares will be issued upon completion of the Open Offer (with the Bonus Issue), comprising 951,787,160 Offer Shares and 951,787,160 Bonus Shares, represent:

(i) approximately 479.24% of the Company’s issued share capital as at the Latest Practicable Date (having adjusted for the Capital Reorganisation); and
(ii) 80.00% of the Company’s issued share capital (having adjusted for the Capital Reorganisation) as enlarged by the issue of the Offer Shares and the Bonus Shares.

Qualifying Shareholders who elect to subscribe for in full their assured entitlements under the Open Offer (with the Bonus Issue) will retain their current shareholdings in the Company. Shareholding of those Qualifying Shareholders who do not elect to subscribe for in full their assured entitlements under the Open Offer (with the Bonus Issue) will be diluted after completion of the Open Offer and the Bonus Issue by a maximum of approximately 80.00%.

However, such scenario of maximum dilution is unlikely to occur since it assumes that (i) the Independent Shareholders have voted in favour of the Open Offer (with the Bonus Issue) at the Open Offer EGM; but (ii) no Qualifying Shareholders would take up their provisional entitlements under the Open Offer (with the Bonus Issue), which is a complete misalignment between the voting behaviour of the Independent Shareholders and their subscription for assured entitlements under the Open Offer (with the Bonus Issue).

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LETTER FROM THE BOARD

Despite the dilution effect by the Open Offer (with the Bonus Issue) of a maximum of approximately 80.00%, having taken into account: (i) the Open Offer (with the Bonus Issue) would provide funding for the Group to develop and expand its money lending business; (ii) the Open Offer (with the Bonus Issue) would strengthen the capital base of the Group; (iii) the Open Offer (with the Bonus Issue) is on the basis that all Qualifying Shareholders have been offered the same opportunity to maintain their proportional interests in the Company and that it allows the Qualifying Shareholders to participate in the growth of the Company; (iv) the inherent dilutive nature of Open Offer (with the Bonus Issue) in general if existing Shareholders did not take up their entitlements under the Open Offer (with the Bonus Issue); and (v) the discount of the Subscription Price (including the subscription ratio and the Bonus Issue) was necessary to encourage the Qualifying Shareholders to participate in the Open Offer (with the Bonus Issue), the Directors (excluding the independent non-executive Directors whose opinion has been set out in this circular, after having been advised by Pan Asia) consider the possible dilution effect on the Independent Shareholders to be acceptable.

Subscription Price

The Subscription Price of HK$0.25 per Offer Share is payable in full on application. The Subscription Price represents:

(i) a discount of approximately 83.66% to the closing price of HK$1.530 per Adjusted Share as quoted on the Stock Exchange on the Last Trading Day of HK$0.153 per Share and adjusted for the effect of the Capital Reorganisation;
(ii) a discount of approximately 84.20% to the average closing price of approximately HK$1.582 per Adjusted Share as quoted on the Stock Exchange for the five consecutive trading days up to and including the Last Trading Day of approximately HK$0.1582 per Share and adjusted for the effect of the Capital Reorganisation;
(iii) a discount of approximately 38.42% to the theoretical ex-entitlement price of HK$0.406 per Adjusted Share after the Open Offer (with the Bonus Issue), based on the closing price of HK$1.530 per Adjusted Share as quoted on the Stock Exchange on the Last Trading Day of HK$0.153 per Share and adjusted for the effect of the Capital Reorganisation ; and
(iv) a discount of approximately 82.14% to the closing price of HK$1.400 per Adjusted Share as quoted on Stock Exchange on the Latest Practicable Date of HK$0.140 per Share and adjusted for the effect of the Capital Reorganisation.

– 19 –

LETTER FROM THE BOARD

Since every one (1) Bonus Share will be issued upon the subscription of every one (1) Offer Share, for illustrative purpose, the average price for each Share to be allotted and issued under the Open Offer (with the Bonus Issue) will be HK$0.125, which represents:

(i) a discount of approximately 91.83% to the closing price of HK$1.530 per Adjusted Share as quoted on the Stock Exchange on the Last Trading Day of HK$0.153 per Share and adjusted for the effect of the Capital Reorganisation;
(ii) a discount of approximately 92.10% to the average closing price of approximately HK$1.582 per Adjusted Share as quoted on the Stock Exchange for the five consecutive trading days up to and including the Last Trading Day and adjusted for the effect of the Capital Reorganisation;
(iii) a discount of approximately 69.21% to the theoretical ex-entitlement price of HK$0.406 per Adjusted Share after the Open Offer (with the Bonus Issue) (after taking into consideration of the Bonus Issue), based on the closing price of HK$0.153 per Share as quoted on the Stock Exchange on the Last Trading Day and adjusted for the effect of the Capital Reorganisation;
(iv) a discount of approximately 91.07 % to the closing price of HK$ 1.400 per Adjusted Share as quoted on Stock Exchange on the Latest Practicable Date of HK$ 0.140 per Share and adjusted for the effect of the Capital Reorganisation; and
(v) a discount of approximately 67. 11% to the theoretical ex-entitlement price of HK$ 0.380 per Adjusted Share after the Open Offer (with the Bonus Issue), based on the closing price of HK$ 1.400 per Adjusted Share as quoted on the Stock Exchange on the Latest Practicable Date of HK$ 0.140 per Share and adjusted for the effect of the Capital Reorganisation.

Basis of determining the Subscription Price

The Subscription Price was arrived at after arm’s length negotiation between the Company and the Underwriters with reference to, among other things, the prevailing market price of the Shares, the financial positions of the Group, the absence of excess application arrangement to Shareholders and having considered the future development in respect of the money lending business of the Group. Each Qualifying Shareholder is entitled to subscribe for the Offer Shares at the Subscription Price in proportion to his/her/its existing shareholding in the Company.

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LETTER FROM THE BOARD

The relatively deep discount to the adjusted closing price represented by the Subscription Price (together with the Bonus Issue which will effectively reduce the average price per Offer Share taken up) is made with a view to encouraging the Qualifying Shareholders to participate in the Open Offer and maintain their shareholdings in the Company accordingly and participate in the future growth of the Company.

On this basis, having considered the prevailing market price of the Shares, the financial positions of the Group, the absence of excess application arrangement to Shareholders with an objective to lower the further investment cost of Shareholders to encourage them to take up their entitlements and to participate in the potential growth of the Company and having considered the future development in respect of the money lending business of the Group, the Directors ( including the independent non-executive Directors who have taken into consideration of the advices of Pan Asia) consider that the Subscription Price, which has been set at a relatively deep discount, the subscription ratio and the terms of the Open Offer (with Bonus Issue) to be fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Status of the Offer Shares and the Bonus Shares

The Offer Shares and the Bonus Shares (when allotted, fully paid or credited as fully paid, and issued) will rank pari passu in all respects with the Shares in issue on the date of allotment and issue of the Offer Shares and the Bonus Shares. Holders of the Offer Shares and the Bonus Shares will be entitled to receive all future dividends and distributions, which are declared, made or paid on or after the date of allotment and issue of the Offer Shares and Bonus Shares.

Certificates of the Offer Shares and the Bonus Shares

Subject to the Open Offer (with the Bonus Issue) becoming unconditional, share certificates in respect of the Offer Shares and the Bonus Shares are expected to be posted to those entitled thereto by ordinary post at their own risk on or before Wednesday, 3 September 2014 or such later date as the Board may determine.

No application for excess Offer Shares

Considering that the Open Offer (with the Bonus Issue) will give the Qualifying Shareholders an equal and fair opportunity to maintain their respective pro rata shareholding interests in the Company, if application for excess Offer Shares is arranged, the Company will be required to put in additional effort and costs to administer the excess application procedures. After arm’s length negotiation with the Underwriters, the Board has decided that the Qualifying Shareholders will not be entitled to subscribe for any Offer Share in excess of their respective assured entitlements.

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LETTER FROM THE BOARD

Pursuant to the Underwriting Agreement, the Underwriters have conditionally agreed to subscribe for or procure subscription for the Offer Shares which have not been taken up by the Qualifying Shareholders. In compliance with Rule 7.26A(2) of the Listing Rules, the absence of excess application arrangement and the alternative arrangement for the disposal of the Offer Shares not being subscribed for must be specifically approved by the Independent Shareholders at the Open Offer EGM.

Fractional entitlements to the Offer Shares (if any)

Fractions of Offer Shares will not be allotted to Qualifying Shareholders and fractional entitlements will be rounded down to the nearest whole number. Any Offer Shares created from the aggregation of fractions of Offer Shares will be aggregated and taken up by the Underwriters.

Application for listing and dealings of the Offer Shares

The Company will apply to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Offer Shares and the Bonus Shares.

No part of the securities of the Company is listed or dealt in or on which listing or permission to deal is being or is proposed to be sought on any other stock exchange.

Subject to the granting of the listing of, and permission to deal in, the Offer Shares and the Bonus Shares on the Stock Exchange, the Offer Shares and the Bonus Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the commencement date of dealings in the Offer Shares and the Bonus Shares on the Stock Exchange or such other dates as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

All necessary arrangements will be made to enable the Offer Shares and the Bonus Shares to be admitted into CCASS.

Dealings in the Offer Shares and the Bonus Shares which are registered in the branch register of members of the Company in Hong Kong will be subject to the payment of stamp duty, Stock Exchange trading fee, transaction levy, investor compensation levy or any other applicable fees and charges in Hong Kong.

The board lot size of trading of the Offer Shares and the Bonus Shares will be 6,000 Adjusted Shares.

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LETTER FROM THE BOARD

UNDERWRITING ARRANGEMENT

Irrevocable Undertakings

As at the Latest Practicable Date, each of Ms. Li, Mr. Ma Lishan, Mr. Ma Bao Shan and Ms. Ma Lirong is respectively interested in 19,000,000 Share Options, 20,000,000 Share Options, 2,000,000 Share Options and 3,000,000 Share Options and they do not hold any Shares of the Company directly. Pursuant to the Irrevocable Undertakings, each of Ms. Li, Mr. Ma Lishan, Mr. Ma Bao Shan and Ms. Ma Lirong has given an irrevocable undertaking to each of the Company and the Underwriters that they will not exercise any of the rights attaching to the Share Options respectively owned by them at any time on or prior to the completion of the Open Offer and will remain as the beneficial holders of the those Share Options at any time from the date of the Irrevocable Undertakings to the date of completion of the Open Offer.

Save for the above, as at the Latest Practicable Date, the Board has not received any information or irrevocable undertakings from any Shareholders of their intention to take up or not to take up the securities of the Company to be offered to them under the Open Offer (with the Bonus Issue).

Mr. Ma Lishan is a director of the TRXY Development, which is a company beneficially wholly-owned by Ms. Li, Mr. Ma Lishan is therefore an associate (as defined under the Takeovers Code) of Ms. Li. Furthermore, Mr. Ma Bao Shan is the brother of Mr. Ma Lishan and Ms. Ma Lirong is a director of Asia Link, Mr. Ma Bao Shan and Ms. Ma Lirong are also associates of Ms. Li pursuant to the Takeovers Code.

– 23 –

LETTER FROM THE BOARD

Underwriting Agreement

Date : 17 April 2014 (after trading hours) Underwriters : (i) Asia Link; and (ii) Kingston Securities Total number of : not less than 794,407,160 Offer Shares (assuming no new Offer Shares Shares being issued or repurchased by the Company on or before the Record Date) and not more than 951,787,160 Offer Shares (assuming no new Shares being issued other than those falling to be issued upon full exercise of the Share Options (save for those Share Options under the Irrevocable Undertakings) and the Warrants and no Shares being repurchased by the Company on or before the Record Date)

Total number of : not less than 794,407,160 Bonus Shares (assuming no new Bonus Shares Shares being issued or repurchased by the Company on or before the Record Date) and not more than 951,787,160 Bonus Shares (assuming no new Shares being issued other than those falling to be issued upon full exercise of the Share Options (save for those Share Options under the Irrevocable Undertakings) and the Warrants and no Shares being repurchased by the Company on or before the Record Date)

– 24 –

LETTER FROM THE BOARD

Total number of : All of the Offer Shares will be underwritten severally by the Underwritten Shares Underwriters in the following manner:
(i) Asia Link: In priority the first of not less than 683,190,000 Offer Shares (assuming no new Shares being issued or repurchased by the Company on or before the Record Date) and not more than 818,536,000 Offer Shares (assuming no new Shares being issued other than those falling to be issued upon full exercise of the Share Options (save for those Share Options under the Irrevocable Undertakings) and the Warrants and no Share being repurchased by the Company on or before the Record Date), representing approximately 86% of the total number of Underwritten Shares.
(ii) Kingston The remaining of not less than Securities: 111,217,160 Offer Shares (assuming no new Shares being issued or repurchased by the Company on or before the Record Date) and not more than 133,251,160 Offer Shares (assuming no new Shares being issued other than those falling to be issued upon full exercise of the Share Options (save for those Share Options under the Irrevocable Undertakings) and the Warrants and no Shares being repurchased by the Company on or before the Record Date), representing approximately 14% of the total number of Underwritten Shares.

– 25 –

LETTER FROM THE BOARD

Underwriting commission :

Payable by the Company to Asia Link at 2.50% and to Kingston Securities at 2.50%, each of the aggregate Subscription Price of the respective portion of the maximum Underwritten Shares mentioned above. The commission rates were determined after arms’ length negotiations between the Company and the Underwriters with reference to, among other things, the scale of the Open Offer (with the Bonus Issue) and the market rate, and the Board considers that the underwriting commission rate is fair and reasonable so far as the Company and the Shareholders are concerned.

In the event of the Underwriters being called upon to subscribe for or procure subscription for the Untaken Shares:

(i) Kingston Securities shall not subscribe, for its own account, for such number of Untaken Shares which will result in the shareholding of it and its associates (as defined under the Listing Rules) to exceed 10.0% of the voting rights of the Company upon the completion of the Open Offer (with the Bonus Issue); and
(ii) Kingston Securities shall use its best endeavours to ensure that each of the subscribers of the Untaken Shares procured by it (i) shall be an Independent Third Party and not acting in concert with the Directors or chief executive of the Company or substantial shareholders of the Company or their respective associates; and (ii), none of such subscribers, together with any party acting in concert (within the meaning of the Takeovers Code) with it, will hold 10.0% or more of the voting rights of the Company upon completion of the Open Offer (with the Bonus Issue), such that the Company will be able to comply with the minimum public float requirement sets out under Rule 8.08(1) of the Listing Rules.

As at the Latest Practicable Date, Asia Link confirmed that it had no intention to procure any Independent Third Parties to subscribe for the Untaken Shares (if any).

As at the Latest Practicable Date, Kingston Securities is not interested in any Existing Share or other outstanding derivatives, warrants, options and conversion rights which are convertible or exchangeable into Shares.

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LETTER FROM THE BOARD

Information of Asia Link

Asia Link is a company incorporated in the British Virgin Islands with limited liability and is wholly-owned by Ms. Li. The principal business of Asia Link is investment holdings and has not conducted any business since incorporation on 8 April 2010. Asia Link intends to satisfy its financial obligation under the Underwriting Agreement by the HK$205 million loan facility (“ Facility ”) provided by Kingston Securities and/or internal resources.

Conditions of the Underwriting Agreement

The Underwriting Agreement is conditional upon:

(1) the passing of the necessary resolution(s) by the Board and the Shareholders at the Capital Reorganisation EGM by way of poll approving, confirming and ratifying (as appropriate) the Capital Reorganisation;
(2) the Capital Reorganisation becoming effective;
(3) the passing of all the necessary resolution(s) by the Board and the Shareholders or Independent Shareholders (as the case may be) at the Open Offer EGM by way of poll approving, confirming and ratifying (as appropriate):–
(a) the Proposed Amendments to Articles;
(b) the Open Offer (with the Bonus Issue) (including the absence of the excess application arrangement pursuant to Rule 7.26A of the Listing Rules) and the transactions contemplated thereunder and authorizing the Directors to allot and issue the Offer Shares and the Bonus Shares;
(c) the Underwriting Agreement and the performance of the transactions contemplated thereunder by the Company; and
(d) the Whitewash Waiver,

each in accordance with the Articles, the Listing Rules and the Takeovers Code on or before the Record Date.

(4) the Executive granting to Asia Link the Whitewash Waiver and the satisfaction of such conditions (if any) attached thereto and such other necessary waiver or consent as may be required to be obtained from the Executive for the transactions contemplated under the Underwriting Agreement;

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LETTER FROM THE BOARD

(5) the delivery to the Stock Exchange for authorization and the registration with the Registrar of Companies in Hong Kong respectively not later than the Prospectus Posting Date one copy of each of the Prospectus Documents duly signed by two Directors (or by their agents duly authorised in writing) in accordance with section 342C of the Companies Ordinance as having been approved by resolutions of the Directors (and all other documents required to be attached thereto) and otherwise in compliance with the Listing Rules and the Companies Ordinance;
(6) the posting of the Prospectus Documents to the Qualifying Shareholders and the posting of the Prospectus and a letter in the agreed form to the Excluded Shareholders, if any, for information purpose only explaining the circumstances in which they are not permitted to participate in the Open Offer (with the Bonus Issue), on or before the Prospectus Posting Date;
(7) the Listing Committee of the Stock Exchange granting or agreeing to grant (subject to allotment) and not having withdrawn or revoked, listing of and permission to deal in, the Adjusted Shares, the Offer Shares and the Bonus Shares respectively by no later than the first day of their dealings on the Stock Exchange;
(8) the Underwriting Agreement not being terminated by any of the Underwriters pursuant to the terms hereof at or before the Latest Time for Termination;
(9) compliance with and performance of all the undertakings of Ms. Li, Mr. Ma Lishan, Mr. Ma Bao Shan and Ms. Ma Lirong under the Irrevocable Undertakings;
(10) the compliance with and performance of all the undertakings and obligations of the Company under the Underwriting Agreement and the representations and warranties given by the Company under the Underwriting Agreement remaining true, correct and not misleading in all material respects; and
(11) there being no Specified Event occurring prior to the Latest Time for Termination.

The above conditions precedent are incapable of being waived (other than condition (10) which can be waived by the Underwriters). If the conditions precedent are not satisfied (or waived where applicable) by the Latest Time for Termination or such other date as the Company and the Underwriters may agree in writing, the Underwriting Agreement may be terminated by the Underwriters by written notice to the Company, in which case the Underwriting Agreement should be terminated and the Open Offer (with the Bonus Issue) will not be proceeded and no party shall have any claim against any other party for costs, damages, compensation or otherwise save for any antecedent breaches.

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LETTER FROM THE BOARD

Termination of the Underwriting Agreement

If, prior to the Latest Time For Termination:

(i) in the absolute opinion of the Underwriters, the success of the Open Offer (with Bonus Issue) would be materially and adversely affected by:
(a) the introduction of any new law or regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may in the absolute opinion of any of the Underwriters materially and adversely affect the business or the financial or trading position of the Group as a whole or is materially adverse in the context of the Open Offer (with the Bonus Issue); or
(b) the occurrence of any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date of the Underwriting Agreement) of a political, military, financial, economic or other nature (whether or not ejusdem generis with any of the foregoing), or in the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities markets which may, in the absolute opinion of any of the Underwriters materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or materially and adversely prejudice the success of the Open Offer (with the Bonus Issue) or otherwise makes it inexpedient or inadvisable to proceed with the Open Offer (with the Bonus Issue); or
(ii) any adverse change in market conditions (including without limitation, any change in fiscal or monetary policy, or foreign exchange or currency markets, suspension or material restriction or trading in securities) occurs which in the absolute opinion of any of the Underwriters are likely to materially or adversely affect the success of the Open Offer (with the Bonus Issue) or otherwise makes it inexpedient or inadvisable to proceed with the Open Offer (with the Bonus Issue); or
(iii) there is any change in the circumstances of the Company or any member of the Group which in the absolute opinion of the Underwriters will adversely affect the prospects of the Company, including without limiting the generality of the foregoing the presentation of a petition or the passing of a resolution for the liquidation or winding up or similar event occurring in respect of any member of the Group or the destruction of any material asset of the Group; or

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LETTER FROM THE BOARD

(iv) any event of force majeure including, without limiting the generality thereof, any act of God, war, riot, public disorder, civil commotion, fire, flood, explosion, epidemic, terrorism, strike or lockout; or
(v) any other material adverse change in relation to the business or the financial or trading position or prospects of the Group as a whole whether or not ejusdem generis with any of the foregoing; or
(vi) any matter which, had it arisen or been discovered immediately before the date of the Prospectus and not having been disclosed in the Prospectus, would have constituted, in the absolute opinion of any of the Underwriters, a material omission in the context of the Open Offer (with the Bonus Issue); or
(vii) any suspension in the trading of securities generally or the Company’s securities on the Stock Exchange for a period of more than ten consecutive Business Days, excluding any suspension in connection with the clearance of the Announcement or this circular or the Prospectus Documents or other announcements or circulars in connection with the Open Offer (with the Bonus Issue),

any of the Underwriters shall be entitled by notice in writing to the Company, served prior to the Latest Time For Termination, to terminate the Underwriting Agreement.

Any of the Underwriters shall be entitled by notice in writing to rescind the Underwriting Agreement if prior to the Latest Time For Termination:

(i) any material breach of any of the representations, warranties or undertakings contained in the Underwriting Agreement comes to the knowledge of the Underwriters; or
(ii) any Specified Event comes to the knowledge of the Underwriters.

Any such notice shall be served by any of the Underwriters prior to the Latest Time For Termination.

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LETTER FROM THE BOARD

REASONS FOR THE OPEN OFFER (WITH THE BONUS ISSUE) AND USE OF PROCEEDS

The Company is an investment holding company. It is the corporate strategy of the Group to focus on the development of natural gas business and to expand its business gradually to various sectors of clean resources along with expansion of business coverage to other industries. The Group is also engaged in provision of loan financing services, trading of commodities and securities investments.

The Group has commenced its money lending business during the financial year ended 31 March 2013 and recorded an interest income of approximately HK$2 million for this segment during the period. For the year ended 31 March 2014, the Group’s interest income has increased to approximately HK$39.1 million, representing an increase of over 18 times. For the year ended 31 March 2014, of the total revenue of approximately HK$40.3 million from the continuing operations of the Group, approximately HK$39.1 million of which was attributable by the interest income from the money lending business and approximately HK$1. 2 million was attributable by the service income from the trading of commodities business. Interest income from the money lending business had accounted for approximately 97% of the total income from the continuing operations of the Group during the period. In view of the substantial increase in revenue from the money lending business, the Company intends to continue to expand its money lending business, in particular, the mortgage loan business.

On 26 September 2013, the Group entered into a facility agreement with a bank, pursuant to which the bank made available to the Group a revolving loan facility of up to an aggregate of HK$450 million for an initial term of 12 months. As at the Latest Practicable Date, the Group had utilized approximately HK$200 million of the aforesaid bank facility to fund its money lending business, which created interest payment obligation on the Group. The Company has been advised by the bank that the proceeds from the HK$450 million loan facility is prohibited from the borrowers applying towards the purchase of residential properties situate in Hong Kong ( and therefore the on-lending of the Loan to customers who intend to purchase residential properties situate in Hong Kong is also prohibited). As the Group intends to expand into the mortgage loans area within its money lending business, the Board therefore needs to look for additional source of funding to finance the Group’s expansion into this particular segment. Hence, in order to further expand the money lending business by increasing the amount of loans and advances to customers to generate more loan interests, alternative financial resources is necessary for the Company .

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LETTER FROM THE BOARD

The Board considers that the Open Offer represents an opportunity for the Company to develop its money lending business and enhance its working capital. Moreover, the Board is of the view that it is in the interests of the Company and its Shareholders as a whole to raise the capital through the Open Offer since it would allow the Qualifying Shareholders to maintain their respective pro rata shareholdings in the Company and participate in the future growth and development of the Company. However, those Qualifying Shareholders who do not take up the Offer Shares to which they are entitled should note that their shareholdings in the Company will be diluted.

The Board has also considered other fund raising alternatives before resolving to the Open Offer, including but not limited to bank borrowings, share placement and rights issue. In the view that borrowings would result in additional interest burden and higher gearing ratio of the Group, share placement may necessarily dilute the shareholding in the Company of the existing Shareholders, rights issue will involve extra administrative work and cost for the trading arrangements in relation to the nil-paid rights, the Board considers raising funds by way of the Open Offer is more cost effective and efficient.

The estimated net proceeds from the Open Offer (with the Bonus Issue) will be not less than approximately HK$ 192.20 million and not more than HK$230. 60 million. It is expected that the 70% of the net proceeds from the Open Offer (with the Bonus Issue), which is expected to be ranging in between approximately HK$134. 54 million and HK$161. 42 million, will be used for the development and expansion of the money lending business of the Group and the remaining 30% of the net proceeds, which is expected to be ranging in between approximately HK$57. 66 million to approximately HK$69. 18 million, will be used for general working capital of the Group.

BUSINESS REVIEW OF THE GROUP

Money Lending Business

During the year ended 31 March 2014 (“ FY2014 ”), the money lending business of the Group recorded a revenue of approximately HK$ 39.1 million and a net profit of approximately HK$ 39.1 million respectively. This is a new business segment of the Group with main business areas in provision of personal loans and mortgage loans. Income from the money lending business has become one of the major revenue streams of the Group. The Group has operated its money lending business through Hao Tian Finance Company Limited (“ Hao Tian Finance ”), a whollyowned subsidiary of the Company and a holder of money lender licence. Initially Hao Tian Finance commenced its lending business by granting loans to high net worth clients. To be in line with the strategic development plan of the Group, Hao Tian Finance has recently expanded into the mortgage loans area, thereby expanding its loan portfolio and moving to optimize the operational scale in the future. The funding for the money lending business is financed through bank loans as well as the Group’s internal resources and the Board will continue to assess its financing needs and options for further expansion of this segment.

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LETTER FROM THE BOARD

Natural Gas Business

During the FY2014, the Group obtained approvals from the local governments in the Xinjiang Uygur Autonomous Region, subject to the land planning, safety and environmental protection requirements, to construct eight LNG fueling stations in the region, and entered into a 20 years gas supply agreement with a representative company of the Kuche County People’s Government.

Having consider ed the social instability in Xinjiang, the Group has been adopting stringent and prudent approach in the development plan and its implementation schedule for its natural gas projects in Xinjiang and will adjust the development plan and pace as and when appropriate.

As the Group’s natural gas business was still at the preliminary stage during the FY2014, hence no revenue was recorded.

Trading of Commodities Business

Given the demand for commodities has been driven by the global economic recovery, the Group has begun to engage in the commodities trading business, which mainly covers raw materials. During the FY2014, the commodities trading business, another new business segment of the Group, recorded a revenue of approximately HK$ 105.2 million and a net profit of approximately HK$ 1.2 million respectively.

Coal Mining Business

During the FY2014, the Group disposed of its entire interests in a coal mine in Baicheng County operated by Baicheng Wenzhou Mining Development Co., Ltd（拜城溫州礦業開發有限公司）at a total consideration of HK$1,580.0 million. The Group recorded a net gain of approximately HK$ 87.2 million from this transaction.

Packaging Box Business

During the FY2014, the Group disposed of its entire equity interest in Winbox (BVI) Limited, which through its subsidiaries engaged in the manufacturing and sale of luxury packaging boxes, at a total consideration of HK$80.0 million . The Group recorded a net gain of approximately HK$ 1.2 million from this disposal.

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LETTER FROM THE BOARD

FINANCIAL AND TRADING PROSPECTS OF THE GROUP

The long term development strategy of the Group is to actively lay down the foundation and strength of its existing businesses and further diversify its businesses, and the Board believes that diversity and flexibility will allow the Group to effectively manage opportunities and risks in response to market conditions and create value and improve the performance of the Group.

The Group is still optimistic about the prospect of the licenced money lending sector in Hong Kong. As driven by the favourable economic conditions, the Group plans to increase its efforts in expanding the mortgage loan business. It is expected that good consumer sentiment with the favourable policies for real estate market in Hong Kong will gradually rejuvenate the property transaction market, and thus provide a continuous support for the money lending business. Looking forward, the Group will capitalise on the development trend to expand continuously its loan portfolio and customer base.

With the society’s increasing awareness in environmental protection and the proportionate adjustment of energy consumption in China, clean energy will enter an important development stage. It is the strategy of the Group to actively grasp the investment opportunities in clean energy sector through making full use of various channels like self-development, merger and acquisition, cooperation development, with a view to creating value for the shareholders.

In line with the long term development plan of the Group in Xinjiang, the Group has been working closely with the counter-party to complete the acquisition of a land located in Urumqi with a site of approximately 151,334 sq.m. designated for logistics and warehousing development purpose, subject to fulfillment of certain conditions. This underlines the Group’s confidence in becoming a service provider of logistics and warehousing services to enterprises in Xinjiang in the foreseeable future.

The Group will continue to explore other business opportunities and has taken initiatives to optimise its financial structure, including proposed open offer of new shares, issue of nonconvertible corporate bonds and will continue its prudent financing strategies to obtain diversified funding from banks and capital markets at competitive rates, so as to continue to grow and capture the opportunities lie ahead.

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LETTER FROM THE BOARD

EFFECTS ON SHAREHOLDING STRUCTURE

Set out below is the shareholding structure of the Company (as extracted from the Disclosure of Interests forms posted on the website of the Stock Exchange) immediately before and after completion of the Capital Reorganisation and Open Offer (with the Bonus Issue):

(i) Assuming there is no new Share being issued and no Share being repurchased by the Company on or before the Record Date:

Concert Group: Asia Link (Note 3) Real Power (Note 4) TRXY Development (Note 5) TRXY International (Note 6) Kingston Securities (Note 7) Sub-total: Public: Sub-underwriters procured by Kingston Securities (Note 8) Other public Shareholders Total	As at the L Practicable Number of Shares – 522,400,561 359,655,351 259,748,941 – 1,141,804,853 – 2,830,230,951 3,972,035,804	atest Date % – 13.15 9.05 6.55 0.00 28.75 0.00 71.25 100.00	Immediately after the Capital Reorganisation become effective Number of Adjusted Shares % – – 52,240,056 13.15 35,965,535 9.05 25,974,894 6.55 – 0.00 114,180,485 28.75 – 0.00 283,023,095 71.25 397,203,580 100.00	Immediately after completion of the Open Offer (with the Bonus Issue) All Offer Shares are subscribed by the Qualifying Shareholders None of the Offer Shares are subscribed by the Qualifying Shareholders (except for the Underwriters) (Notes 1 & 2 & 8) Number of Adjusted Shares % Number of Adjusted Shares % – – 1,366,380,000 68.80 261,200,280 13.15 52,240,056 2.63 179,827,675 9.05 35,965,535 1.81 129,874,470 6.55 25,974,894 1.31 – 0.00 – 0.00 570,902,425 28.75 1,480,560,485 74.55 – 0.00 222,434,320 11.20 1,415,115,475 71.25 283,023,095 14.25 1,986,017,900 100.00 1,986,017,900 100.00	Immediately after completion of the Open Offer (with the Bonus Issue) All Offer Shares are subscribed by the Qualifying Shareholders None of the Offer Shares are subscribed by the Qualifying Shareholders (except for the Underwriters) (Notes 1 & 2 & 8) Number of Adjusted Shares % Number of Adjusted Shares % – – 1,366,380,000 68.80 261,200,280 13.15 52,240,056 2.63 179,827,675 9.05 35,965,535 1.81 129,874,470 6.55 25,974,894 1.31 – 0.00 – 0.00 570,902,425 28.75 1,480,560,485 74.55 – 0.00 222,434,320 11.20 1,415,115,475 71.25 283,023,095 14.25 1,986,017,900 100.00 1,986,017,900 100.00
					74.55 11.20 14.25
					100.00

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LETTER FROM THE BOARD

(ii) Assuming no new Shares being issued other than those falling to be issued upon full exercise of the Share Options (save for those Share Options under the Irrevocable Undertakings) and Warrants and no Shares being repurchased by the Company before the Record Date:

Concert Group: Asia Link (Note 3) Real Power (Note 4) TRXY Development (Note 5) TRXY International (Note 6) Kingston Securities (Note 7) Sub-total: Public: Sub-underwriters procured by Kingston Securities (Note 8) Other public Shareholders Total	As at the L Practicable Number of Shares – 522,400,561 359,655,351 259,748,941 – 1,141,804,853 – 3,617,130,951 4,758,935,804	atest Date % – 10.98 7.56 5.45 0.00 23.99 0.00 76.01 100.00	Immediately after the Capital Reorganisation become effective Number of Adjusted Shares % – – 52,240,056 10.98 35,965,535 7.56 25,974,894 5.45 – 0.00 114,180,485 23.99 – 0.00 361,713,095 76.01 475,893,580 100.00	Immediately after completion of the Open Offer (with the Bonus Issue) All Offer Shares are subscribed by the Qualifying Shareholders None of the Offer Shares are subscribed by the Qualifying Shareholders (except for the Underwriters) (Notes 1 & 2 & 8) Number of Adjusted Shares % Number of Adjusted Shares % – – 1,637,072,000 68.80 261,200,280 10.98 52,240,056 2.20 179,827,675 7.56 35,965,535 1.51 129,874,470 5.45 25,974,894 1.09 – 0.00 6,502,320 0.27 570,902,425 23.99 1,757,754,805 73.87 – 0.00 260,000,000 10.93 1,808,565,475 76.01 361,713,095 15.20 2,379,467,900 100.00 2,379,467,900 100.00	Immediately after completion of the Open Offer (with the Bonus Issue) All Offer Shares are subscribed by the Qualifying Shareholders None of the Offer Shares are subscribed by the Qualifying Shareholders (except for the Underwriters) (Notes 1 & 2 & 8) Number of Adjusted Shares % Number of Adjusted Shares % – – 1,637,072,000 68.80 261,200,280 10.98 52,240,056 2.20 179,827,675 7.56 35,965,535 1.51 129,874,470 5.45 25,974,894 1.09 – 0.00 6,502,320 0.27 570,902,425 23.99 1,757,754,805 73.87 – 0.00 260,000,000 10.93 1,808,565,475 76.01 361,713,095 15.20 2,379,467,900 100.00 2,379,467,900 100.00
					73.87 10.93 15.20
					100.00

Notes:

The above scenario is for illustrative purpose only and will unlikely occur.
The Company will ensure the compliance with the public float requirements under Rule 8.08 of the Listing Rules upon completion of the Open Offer (with the Bonus Issue).
Asia Link is beneficially wholly-owned by Ms. Li.
Real Power is beneficially owned as to 99.90% and 0.10% by TRXY Development and China Capital respectively. TRXY Development is beneficially wholly-owned by Ms. Li.
TRXY Development is beneficially wholly-owned by Ms. Li.
TRXY International is beneficially wholly-owned by Ms. Li.

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LETTER FROM THE BOARD

In the event of the Underwriters being called upon to subscribe for or procure subscription for the Untaken Shares:
(i) Kingston Securities shall not subscribe, for its own account, for such number of Untaken Shares which will result in the shareholding of it and its associates (as defined under the Listing Rules) to exceed 10.0% of the voting rights of the Company upon the completion of the Open Offer (with the Bonus Issue); and
(ii) Kingston Securities shall use its best endeavours to ensure that each of the subscribers of the Untaken Shares procured by it (i) shall be an Independent Third Party and not acting in concert with the Directors or chief executive of the Company or substantial shareholders of the Company or their respective associates; and (ii), none of such subscribers, together with any party acting in concert (within the meaning of the Takeovers Code) with it, will hold 10.0% or more of the voting rights of the Company upon completion of the Open Offer (with the Bonus Issue), such that the Company will be able to comply with the minimum public float requirement sets out under Rule 8.08(1) of the Listing Rules.
As at the Latest Practicable Date, Kingston Securities has procured sub-underwriters, who are Independent Third Parties, for 130,000,000 Underwritten Shares, which entitle for a total of 130,000,000 Bonus Shares. On this basis, the Company confirmed that it will be able to comply with the minimum public float requirement under Rule 8.08(1) of the Listing Rules upon completion of the Open Offer (with Bonus Issue).
The percentages are subject to rounding difference, if any.

Save as disclosed above, as at the Latest Practicable Date:

a. each of the members of the Concert Group does not own, control or have direction over any voting rights or rights over the Shares or convertible securities, options, warrants of the Company;
b. none of the members of the Concert Group has received any irrevocable commitment to vote for or against the Open Offer (with the Bonus Issue), the Underwriting Agreement and/or the Whitewash Wavier or to take up the Shares to be provisionally allotted under the Open Offer (with the Bonus Issue);
c. save for the Underwriting Agreement and the Shares and/or securities that are/will be pledged to Kingston Securities under the Facility (as defined and elaborated under the section headed “Implication under the Takeovers Code and application for Whitewash Waiver” below), there is no arrangement (whether by way of option, indemnity or otherwise) in relation to the Shares which might be material to the Open Offer (with the Bonus Issue), the Underwriting Agreement and/or the Whitewash Wavier;

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LETTER FROM THE BOARD

d. the Open Offer (with the Bonus Issue), the Underwriting Agreement and the Whitewash Waiver are subject to the satisfaction or waiver of (where applicable) the relevant conditions set out under the paragraph headed “Conditions of the Underwriting Agreement” above, save for the aforesaid, there is no agreement or arrangement to which Asia Link is a party which relates to the circumstances in which it may or may not invoke or seek to invoke a pre-condition or a condition to the Open Offer (with the Bonus Issue), the Underwriting Agreement and/or the Whitewash Waiver;
e. none of the members of the Concert Group has borrowed or lent any relevant securities (as defined in note 4 to Rule 22 of the Takeovers Code) in the Company; and
f. none of the members of the Concert Group has entered into any outstanding derivative in respect of any relevant securities (as defined in note 4 to Rule 22 of the Takeovers Code) of the Company.

ADJUSTMENTS TO THE OUTSTANDING SHARE OPTIONS AND WARRANTS AND PROPOSED GRANT OF SPECIFIC MANDATE TO ISSUE NEW ADJUSTED SHARES UPON EXERCISE OF WARRANTS

As mentioned above, as at the Latest Practicable Date, there are (i) Share Options outstanding entitling the holders thereof to subscribe for an aggregate of 89,900,000 Existing Shares; and (ii) Warrants outstanding entitling the holders thereof to subscribe for an aggregate of 741,000,000 Existing Shares.

Under the relevant terms and conditions, the Capital Reorganisation and the Open Offer (with the Bonus Issue) may lead to adjustments to the exercise price and/or the number of Adjusted Shares falling to be issued upon the exercise of the Share Options and the conversion rights of the Warrants respectively. Adjustments to the Share Options shall be made pursuant to the share option scheme adopted by the Company on 16 May 2006 and the supplementary guidance issued by the Stock Exchange on 5 September 2005 (“ Supplementary Guidance ”) regarding the adjustment of share options in compliance with Rule 17.03(13) of the Listing Rules; whereas the adjustments to the Warrants (“ Warrant Adjustments ”) shall be made pursuant to the instrument constituting the Warrants (“ Warrant Instrument ”) and the Supplementary Guidance.

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LETTER FROM THE BOARD

The 785,500,000 new Existing Shares falling to be issued upon full exercise of the Warrants would be issued under the general mandate as refreshed and granted to the Directors at extraordinary general meeting of the Company held on 25 September 2012 (“ 2012 General Mandate ”), under which, the Directors were authorised to issue up to 785,507,160 Existing Shares. As at the Latest Practicable Date, there are 741,000,000 Warrants outstanding, entitling the holders thereof to subscribe for an aggregate of 741,000,000 Existing Shares. Based on the preliminary assessment by the Company , assuming the Capital Reorganisation and the Warrant Adjustments having become effective, the Board expected that the number of new Adjusted Shares falling to be issued upon the full exercise of the outstanding Warrants will exceed the number of Adjusted Shares authorised under the 2012 General Mandate, after adjusting to the effects of the Open Offer (with the Bonus Issue).

To allow the Directors to allot and issue new Adjusted Shares to the holders of the Warrants upon exercise of any outstanding Warrants after the Warrant Adjustments, the Board has made reference to the historical closing prices of Existing Shares with an attempt to access a reasonable and possible cap for the number of Adjusted Shares required to be issued upon full exercise of the Warrants. Pursuant to the Warrant Instrument, the relevant adjustment factors to the Open Offer (with the Bonus Issue) included the closing price of the Adjusted Shares as quoted on the Stock Exchange on the last day of dealing in Shares on a cum-entitlement basis (“ Cum Price ”), which is expected to be on 31 July 2014 based on the current timetable of the Open Offer (with Bonus Issue). Hence, as at the Latest Practicable Date, the Company is unable to ascertain the exact number of additional Adjusted Shares falling to be issued upon full exercise of the Warrants. Nevertheless, in accordance with the principle of the relevant adjustments, it is expected that the higher the Cum Price, the more the number of Adjusted Shares to be issued pursuant to the Warrant Instrument. Based on the aforesaid, the Directors has made reference to the highest closing price of the Shares quoted on the Stock Exchange over the year prior to and including the Last Trading Day (“ Highest Price ”), which has covered the period from 18 April 2013 to 17 April 2014 (“ Reference Period ”). The Highest Price during the Reference Period is HK$0.485 on 7 May 2013.

On this basis, it is estimated that approximately 530,472,897 additional new Adjusted Shares will be issued upon full exercise of the outstanding Warrants, and the exercise price of the Warrants would be adjusted from HK$0.1625 per Warrant to HK$0.199 per Warrant after the Capital Reorganisation, Open Offer and Bonus Issue. The Board therefore will seek the Shareholders’ approval at the Open Offer EGM for the granting of the Specific Mandate to allot and issue not more than 530,480,000 new Adjusted Shares to be issued under the Warrants . The Directors believe that the Specific Mandate is fair and reasonable and is in the interests of the Company and Shareholders as a whole.

The Company will inform the holders of the Share Options and the Warrants of the actual adjustments upon the Capital Reorganisation and Open Offer (with the Bonus Issue) becoming effective and unconditional, which is expected to be on 2 September 2014 based on the current timetable of the Open Offer (with the Bonus Issue) by way of announcement as and when appropriate.

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LETTER FROM THE BOARD

Shareholders and public investors should note that in the event the Specific Mandate is not approved by the Shareholders at the Open Offer EGM, the Listing Committee of the Stock Exchange may or may not grant the listing of, and permission to deal in the Offer Shares and Bonus Shares; and accordingly, the Open Offer (with the Bonus Issue) will lapse and will not proceed. Shareholders are advised to be cautious and to consult their professional advisers, if needed, when dealing in Shares.

PROPOSED AMENDMENTS TO ARTICLES

The existing Articles provides that the capitalization of the Company’s reserves or funds by way of distribution of bonus shares to the Shareholders should be in the same proportion to their shareholdings. In order to give effect to the Bonus Issue (which will not be made to Shareholders on pro rata basis as Bonus Shares will only be issued to Shareholders who have taken up the Offer Shares) as proposed, the Company proposes to amend the Articles to allow for any declaration, making or payment of a distribution or dividend to the Shareholders can be declared, made or paid otherwise than pro rata to their respective shareholdings upon the capitalisation of any part of the Company’s reserves or undivided profits.

The Directors consider that such amendments would facilitate the issue of the Bonus Shares and to provide the Company with flexibility in raising capital from its Shareholders.

The Proposed Amendments to Articles are subject to and conditional upon the passing of a special resolution by the Shareholders approving the Proposed Amendments to Articles at the Open Offer EGM.

IMPLICATION UNDER THE TAKEOVERS CODE AND APPLICATION FOR WHITEWASH WAIVER

Asia Link is wholly-owned by Ms. Li, who is the chief executive officer and a substantial shareholder of the Company. Thus, Asia Link is a party acting in concert with Ms. Li. Kingston Securities, as one of the Underwriters, will provide the Facility for Asia Link to facilitate its underwriting obligation under the Underwriting Agreement, Kingston Securities was presumed to be acting in concert with Asia Link under the Takeovers Code. The Facility shall be solely for the purpose of financing the subscription for the Offer Shares by Asia Link under the Open Offer (with the Bonus Issue) and pursuant to the Underwriting Agreement. Pursuant to the terms of the Facility, all of the Offer Shares to be acquired by Asia Link under the Open Offer (with the Bonus Issue) and the Underwriting Agreement will be charged to Kingston Securities as security for the payment obligation under the Facility. In addition, Mr. Ma Lishan is a director of the TRXY Development which is a company beneficially wholly-owned by Ms. Li, Mr. Ma Bao Shan is the brother of Mr. Ma Lishan and Ms. Ma Lirong is a director of Asia Link. Therefore, Mr. Ma Lishan, Mr. Ma Bao Shan and Ms. Ma Lirong are also associates (as defined under the Takeovers Code) of Ms. Li.

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LETTER FROM THE BOARD

As at the Latest Practicable Date (assuming the Capital Reorganisation became effective), the Concert Group together are interested in 114,180,485 Adjusted Shares, representing approximately 28.75% of the issued share capital of the Company. In the event that the Underwriters are called upon to subscribe for or procure subscription for the Untaken Shares pursuant to its obligations under the Underwriting Agreement, the shareholding of the Concert Group in aggregate would increase (i) from approximately 28.75% of the issued share capital of the Company to a maximum of approximately 85.75% of the issued share capital of the Company as enlarged by the Offer Shares and the Bonus Shares immediately upon completion of the Open Offer (with the Bonus Issue) (assuming none of the Qualifying Shareholders accept their respective assured allotment of the Offer Shares and no new Shares being issued or repurchased by the Company on or before the Record Date) and (ii) from approximately 23.99% of the issued share capital of the Company to a maximum of approximately 84.80% of the issued share capital of the Company as enlarged by the Offer Shares and the Bonus Share immediately upon completion of the Open Offer (with the Bonus Issue) (assuming none of the Qualifying Shareholders accept their respective assured allotment of the Offer Shares and no new Shares being issued other than those falling to be issued upon full exercise of the Share Options (save for those Share Options under the Irrevocable Undertakings) and Warrants and no Shares being repurchased by the Company on or before the Record Date).

In the event that certain Qualifying Shareholders do not subscribe for their entitlements under the Open Offer and the Underwriters are called upon to subscribe for or procure subscription for the Untaken Shares pursuant to their obligations under the Underwriting Agreement which would increase the shareholding of Asia Link and parties acting in concert with it to or above 30.0% of the issued share capital of the Company, under Rule 26 of the Takeovers Code, the acquisition of voting rights by Asia Link under such circumstances will result in Asia Link being obliged to make a mandatory general offer for all the securities of the Company not already owned or agreed to be acquired by Asia Link and other members of the Concert Group, unless, amongst others, the Whitewash Waiver is obtained from the Executive and approved by the Independent Shareholders at the Open Offer EGM by way of poll. An application was made by Asia Link to the Executive for the Whitewash Waiver pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code. The Executive has indicated that it will subject to the approval of the Independent Shareholders on a vote taken by way of poll at the Open Offer EGM and such other condition(s) as may be imposed by the Executive, grant the Whitewash Waiver. If the Whitewash Waiver is not granted by the Executive or if it is granted, the conditions (if any) imposed by the Executive are not fulfilled by the completion of the subscription or not approved by the Independent Shareholders, the Open Offer (with the Bonus Issue) will not become unconditional and will not proceed.

In the event that the voting rights held by the Concert Group exceed 50% of the voting rights of the Company upon completion of the Open Offer (with the Bonus Issue) as aforementioned, Asia Link may increase its holdings of voting rights of the Company without incurring any further obligation under Rule 26 of the Takeovers Code to make a general offer.

– 41 –

LETTER FROM THE BOARD

Only the Independent Shareholders will be eligible to vote on the resolution relating to the Whitewash Waiver. Accordingly, M s. Li, Asia Link and other members of the Concert Group and Shareholders who are involved in or interested in the Open Offer (with the Bonus Issue), the Underwriting Agreement and/or the Whitewash Waiver will abstain from voting on such resolution at the Open Offer EGM.

Save for the entering into of the Underwriting Agreement, none of the Underwriters, Ms. Li and parties acting in concert with any of them has acquired or disposed of any voting rights of the Company in the six month period prior to the date of the Announcement and thereafter up to and including the Latest Practicable Date.

As at the Latest Practicable Date, the interest of the Underwriters, Ms. Li and the parties acting in concert with any of them in the Shares, convertible securities, warrants or options of the Company are set out as follows:

(i) Ms. Li, who is the chief executive officer and a substantial shareholder of the Company, is interested in 19,000,000 Share Options;
(ii) Mr. Ma Lishan, who is a director of TRXY Development which is beneficially whollyowned by Ms. Li, is interested in 20,000,000 Share Options;
(iii) Mr. Ma Bao Shan, who the brother of Mr. Ma Lishan, is interested in 2,000,000 Share Options;
(iv) Ms. Ma Lirong, who is a director of Asia Link which is beneficially wholly-owned by Ms. Li, is interested in 3,000,000 Share Options;
(v) Real Power, which is beneficially owned as to 99.90% and 0.10% by TRXY Development and China Capital respectively, owned 522,400,561 Existing Shares, representing approximately 13.15% of the issued share capital of the Company as at the Latest Practicable Date;
(vi) TRXY Development, which is beneficially wholly-owned by Ms. Li, owned 359,655,351 Existing Shares, representing approximately 9.05% of the issued share capital of the Company as at the Latest Practicable Date;
(vii) TRXY International, which is beneficially wholly-owned by Ms. Li, owned 259,748,941 Existing Shares, representing approximately 6.55% of the issued share capital of the Company as at the Latest Practicable Date;

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LETTER FROM THE BOARD

(viii) Asia Link, which is one of the Underwriters and is wholly and beneficially owned by Ms. Li, did not hold any Existing Shares but was deemed to be interested in not less than 683,190,000 Offer Shares and 683,190,000 Bonus Shares (assuming no new Share being issued and no Share being repurchased by the Company on or before the Record Date) and not more than 818,536,000 Offer Shares and 818,536,000 Bonus Shares (assuming no new Share being issued other than those falling to be issued upon full exercise of the Share Options (save for those Share Options under the Irrevocable Undertakings) and the Warrants and no Share being repurchased by the Company on or before the Record Date) through its underwriting obligation under the Underwriting Agreement; and
(ix) Kingston Securities, which is one of the Underwriters , did not hold any Existing Shares but was deemed to be interested in not less than 111,217,160 Offer Shares and 111,217,160 Bonus Shares (assuming no new Share being issued and no Share being repurchased by the Company on or before the Record Date) and not more than 133,251,160 Offer Shares and 133,251,160 Bonus Shares (assuming no new Share being issued other than those falling to be issued upon full exercise of the Share Options (save for those Share Options under the Irrevocable Undertakings) and the Warrants and no Share being repurchased by the Company on or before the Record Date) through its underwriting obligation under the Underwriting Agreement .

Save as disclosed above, as at the Latest Practicable Date:

(i) the Underwriters, Ms. Li and parties acting in concert with any of them did not own, control or have direction over any voting rights or rights over the Shares or convertible securities, options, warrants or derivatives of the Company;
(ii) save for the Underwriting Agreement and the Irrevocable Undertakings, there was no arrangement (whether by way of option, indemnity or otherwise) in relation to the shares of the Underwriters or the Company which might be material to the Open Offer (with the Bonus Issue), the Underwriting Agreement and/or the Whitewash Waiver;
(iii) other than those set out in the paragraph headed “Conditions of the Underwriting Agreement” under the section entitled “UNDERWRITING ARRANGEMENT” herein, there was no agreement or arrangement to which the Underwriter is a party which relates to the circumstances in which it may or may not invoke or seek to invoke a precondition or a condition to the Open Offer;

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LETTER FROM THE BOARD

(iv) the Underwriters, Ms. Li and parties acting in concert with any of them had not received any irrevocable commitment to vote for or against the Open Offer (with the Bonus Issue), the Underwriting Agreement and/or the Whitewash Waiver or to take up the securities of the Company to be provisionally allotted under the Open Offer; and
(v) the Underwriters, Ms. Li and parties acting in concert with any of them had not borrowed or lent any relevant securities (as defined in note 4 to Rule 22 of the Takeovers Code) in the Company.

INTENTION OF ASIA LINK

If Asia Link becomes the controlling Shareholder as a result of the performance of the underwriting obligations under the Underwriting Agreement, Asia Link intends to continue the existing businesses of the Group following the completion of the Open Offer (with the Bonus Issue).

Asia Link consider s that the Open Offer (with the Bonus Issue) is favourable to the Group as the Group will be able to obtain additional capital resources for further development and expansion of the Group’s money lending business when suitable opportunity arises. If Asia Link becomes the controlling Shareholder as a result of the performance of the underwriting obligations under the Underwriting Agreement, it has no intention to introduce any major change to the businesses of the Group, the continued employment of the Group’s employees and has no intention to re-deploy the fixed assets of the Group other than in its ordinary course of business.

WARNING OF THE RISK OF DEALING IN THE SHARES

The Open Offer (with the Bonus Issue) is subject to the satisfaction of certain conditions as described in the paragraph headed “Conditions of the Underwriting Agreement”. In particular, it is subject to the approval of the Capital Reorganisation, the Proposed Amendments to Articles by the Shareholders, the approval of the Open Offer (with the Bonus Issue) and the Whitewash Waiver by the Independent Shareholders at the Capital Reorganisation EGM and the Open Offer EGM by way of poll, the Whitewash Waiver having been granted by the Executive, and the Underwriting Agreement having become unconditional and not having been terminated (see the paragraph headed “Termination of the Underwriting Agreement” below). Accordingly, the Open Offer (with the Bonus Issue) may or may not proceed.

Shareholders and potential investors should exercise caution when dealing in the Shares, and if they are in doubt about their position, they should consult their professional advisers.

– 44 –

LETTER FROM THE BOARD

Shareholders and potential investors should note that the Shares are expected to be dealt in on an ex-entitlement basis commencing from Friday, 1 August 2014 and that dealings in Shares will take place while the conditions to which the Open Offer (with the Bonus Issue) is subject remain unfulfilled. Any Shareholder or other person dealing in Shares up to the date on which all conditions to which the Open Offer (with the Bonus Issue) is subject are fulfilled (which is expected to be on 4:00 p.m. on Friday, 29 August 2014, will accordingly bear the risk that the Open Offer (with the Bonus Issue) cannot become unconditional and may not proceed. Any Shareholder or other person contemplating selling or purchasing Shares, who is in any doubt about his/her/its position, is recommended to consult his/her/its own professional adviser.

FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS

The Company had not conducted any equity fund raising exercises in the past twelve months from the Latest Practicable Date.

IMPLICATION UNDER THE LISTING RULES

Pursuant to Rule 7.24(5)(a) of the Listing Rules, any controlling Shareholders and their associates or, where there are no controlling Shareholders, the Directors (excluding the independent non-executive Directors), the chief executive of the Company and their respective associates shall abstain from voting in favour of the resolutions relating to the Open Offer (with the Bonus Issue). As at the Latest Practicable Date, the Company had no controlling Shareholder, accordingly, assuming the Capital Reorganisation having become effective, Ms. Li, the chief executive officer and a substantial shareholder of the Company, together with her associates are interested in 114,180,485 Adjusted Shares, representing approximately 28.75% of the issued share capital of the Company, shall abstain from voting in favour of the resolutions relating to the Open Offer (with the Bonus Issue) at the Open Offer EGM. Save from disclosed above, none of the Directors or chief executive of the Company holds any Shares as at the Latest Practicable Date.

As the Company has not made arrangements for the Qualifying Shareholders to apply for Offer Shares in excess of their entitlements under the Open Offer in accordance with Rule 7.26A(1) of the Listing Rules and the Open Offer is partially underwritten by an associate of Ms. Li, who is the chief executive officer and a substantial shareholder of the Company, pursuant to Rule 7.26A(2) of the Listing Rules, specific approval shall be obtained from the Independent Shareholders in respect of the absence of such excess application arrangement.

– 45 –

LETTER FROM THE BOARD

Given that Asia Link is an associate of Ms. Li and is one of the Underwriters, Asia Link is deemed to be a connected person of the Company. The entering into of the Underwriting Agreement between Asia Link, Kingston Securities and the Company therefore constitutes a connected transaction for the Company under the Listing Rules. As the underwriting commission to be received by Asia Link is on normal commercial terms and all applicable percentage ratios (as defined in the Listing Rules) are less than 5%, the payment of underwriting commission by the Company to Asia Link is therefore subject to reporting and announcement requirements but is exempt from the independent shareholders’ approval requirement under Rule 14A.32 of the Listing Rules.

OPEN OFFER EGM

The voting of the Independent Shareholders at the Open Offer EGM of all necessary resolutions to approve the Open Offer (with the Bonus Issue), the Underwriting Agreement, the Whitewash Waiver and the Proposed Amendments to Articles will be taken by the way of poll.

A notice convening the Open Offer EGM to be held at Room 2702, 27/F, 200 Gloucester Road, Wanchai, Hong Kong on Wednesday, 30 July 2014 at 10:30 a.m. is set out on pages EGM-1 to EGM-5 of this circular for the purpose of considering and, if thought fit for, approving, among other things, the Open Offer (with the Bonus Issue), the Underwriting Agreement, the Whitewash Waiver , the Proposed Amendments to Articles and the Specific Mandate. The form of proxy for use at the Open Offer EGM is enclosed with this circular. Whether or not you are able to attend the meeting in person, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for holding the Open Offer EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the Open Offer EGM or any adjournment thereof (as the case may be) should you so wish and in such event, the proxy shall be deemed to be revoked.

Subject to, among other things, the Open Offer (with the Bonus Issue), the Underwriting Agreement, the Whitewash Waiver , the Proposed Amendments to Articles being and the Specific Mandate approved at the Open Offer EGM, the Prospectus or Prospectus Documents, where appropriate, containing further information on the Open Offer (with the Bonus Issue) will be dispatched to the Shareholders as soon as practicable.

– 46 –

LETTER FROM THE BOARD

RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee set out on pages 48 to 49 of this circular which contains its recommendation to the Independent Shareholders, and the letter from Pan Asia set out on pages 50 to 79 of this circular which contains its advice and recommendation to the Independent Board Committee and the Independent Shareholders in relation to the Open Offer (with the Bonus Issue), the Underwriting Agreement and the Whitewash Waiver.

Having taken into account the advice and recommendation of the Independent Financial Adviser, the independent non-executive Directors consider that the terms of the Open Offer (with the Bonus Issue), the Underwriting Agreement and Whitewash Waiver are on normal commercial terms and fair and reasonable so far as the Independent Shareholders are concerned. Further, the independent non-executive Directors consider that the Open Offer (with the Bonus Issue), the Underwriting Agreement and the Whitewash Waiver are in the interest of the Company and the Shareholders as a whole. Accordingly the independent non-executive Directors recommend the Independent Shareholders to vote in favour of the proposed resolutions approving the Open Offer (with the Bonus Issue), the Underwriting Agreement and the Whitewash Waiver.

The Directors (other than the independent non-executive Directors) consider that the terms of the Open Offer (with the Bonus Issue), the Underwriting Agreement and the Whitewash Waiver are on normal commercial terms and fair and reasonable and are in the interest of the Company and the Shareholders as a whole, therefore, the Directors (other than the independent non-executive Directors) recommend the Independent Shareholders to vote in favour of the proposed resolutions approving the Open Offer (with the Bonus Issue), the Underwriting Agreement and the Whitewash Waiver at the Open Offer EGM.

ADDITIONAL INFORMATION

Your attention is also drawn to the additional information on the Group set out in the appendices to this circular.

By order of the Board

Hao Tian Development Group Limited Fok Chi Tak Executive Director

– 47 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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(Incorporated in the Cayman Islands with limited liability)

(Stock code: 00474)

2 July 2014

To the Independent Shareholders

Dear Sir or Madam,

(1) PROPOSED OPEN OFFER ON THE BASIS OF TWO OFFER SHARES FOR EVERY ONE SHARE HELD ON THE RECORD DATE WITH BONUS ISSUE ON THE BASIS OF ONE BONUS SHARE FOR EVERY ONE OFFER SHARE TAKEN UP UNDER THE OPEN OFFER; AND

(2) APPLICATION FOR WHITEWASH WAIVER

We refer to the circular of the Company dated 2 July 2014 (the “ Circular ”) of which this letter forms part. Terms defined in the Circular shall have the same meanings when used herein unless the context requires otherwise.

We have been appointed by the Board as members of the Independent Board Committee to advise the Independent Shareholders in respect of the fairness and reasonableness of the Open Offer (with the Bonus Issue), the Underwriting Agreement and the Whitewash Waiver and to recommend whether or not the Independent Shareholders should vote on the resolutions to be proposed at the Open Offer EGM to approve the Open Offer (with the Bonus Issue), the Underwriting Agreement and the Whitewash Waiver. Pan Asia Corporate Finance Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

– 48 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Your attention is drawn to the letter from Pan Asia Corporate Finance Limited as set out on pages 50 to 79 of this Circular which contains, inter alia, its advice and recommendation to the Independent Board Committee and the Independent Shareholders in respect of the terms and conditions of the Open Offer (with the Bonus Issue), the Underwriting Agreement and the Whitewash Waiver with the principle factors and reasons for its advice and recommendation.

Having taken into account the advice and recommendation of Pan Asia Corporate Finance Limited, we consider that the terms of the Open Offer (with the Bonus Issue), the Underwriting Agreement and the Whitewash Waiver are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned. Furthermore, the Open Offer (with the Bonus Issue), the Underwriting Agreement and the Whitewash Waiver are in the interest of the Company and the Shareholders as a whole.

Accordingly, we recommend the Independent Shareholders to vote in favour of the relevant resolution s to approve the Open Offer (with the Bonus Issue), the Underwriting Agreement and the Whitewash Waiver.

Yours faithfully, For and on behalf of

the Independent Board Committee of

Hao Tian Development Group Limited

Chan Ming Sun Jonathan Ma Lin Lam Kwan Sing Independent Independent Independent non-executive Director non-executive Director non-executive Director

– 49 –

LETTER FROM PAN ASIA

The following is the text of a letter of advice from Pan Asia Corporate Finance Limited to the Independent Board Committee and the Independent Shareholders in respect of the Open Offer (with the Bonus Issue), the Underwriting Agreement and the Whitewash Waiver which has been prepared for the purpose of incorporation into this circular.

Unit 1504, 15th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong

2 July 2014

To: The Independent Board Committee and the Independent Shareholders of Hao Tian Development Group Limited

Dear Sir or Madam,

(2) UNDERWRITING AGREEMENT; AND

(3) APPLICATION FOR WHITEWASH WAIVER

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Open Offer (with the Bonus Issue), the Underwriting Agreement and the Whitewash Waiver, details of which were set out in the section headed “Letter from the Board” (the “ Letter from the Board ”) in a circular dated 2 July 2014 issued by the Company (the ‘‘ Circular ”), of which this letter forms part. Unless the context otherwise requires, capitalised terms used in this letter shall have the same meanings given to them in the Circular.

– 50 –

LETTER FROM PAN ASIA

On 25 April 2014, the Board announced in a Company Announcement (the “ Announcement ”) that, subject to the Capital Reorganisation becoming effective, the Company proposes to raise not less than approximately HK$198.60 million and not more than approximately HK$237.95 million, before expenses, by issuing not less than 794,407,160 Offer Shares and not more than 951,787,160 Offer Shares at a price of HK$0.25 per Offer Share to the Qualifying Shareholders by way of Open Offer on the basis of two (2) Offer Shares for every one (1) Adjusted Share held on Record Date and payable in full on acceptance (the “ Open Offer ”), with Bonus Issue on the basis of one (1) Bonus Share for every one (1) Offer Share taken up under the Open Offer (the “ Bonus Issue ”). The term “ Open Offer (with the Bonus Issue) ” was used in the Announcement and the Letter from the Board to describe the completion and the result of the Open Offer together with the Bonus Issue , and this term is adopted in this letter as well.

According to the Letter from the Board, the net proceeds from the Open Offer (with the Bonus Issue) are estimated to be between HK$191.63 million and HK$230.00 million approximately. It is expected that 70% of the net proceeds will be used for developing and expanding the Group’s money lending business whereas the remaining 30% will be used for the general working capital of the Group.

The Offer Shares will be fully underwritten by the Underwriters, namely, Asia Link and Kingston Securities, subject to the terms and conditions of the Underwriting Agreement, a summary of which is set out on pages 24-26 of the Circular.

Asia Link is a company wholly and beneficially owned by Ms Li, who is the chief executive officer and a substantial shareholder of the Company. Thus, Asia Link is a party acting in concert with Ms Li for the purposes of the Takeovers Code.

Kingston Securities, for its part, has agreed to provide a loan facility to Asia Link to help it discharge its obligations under the Underwriting Agreement. It is therefore presumed by the Takeovers Code to be acting in concert with Asia Link.

Assuming that the Capital Reorganisation has become effective, the Concert Group was interested in an aggregate of 114,180,485 Adjusted Shares, which represented approximately 28.75% of the issued share capital of the Company, as at the Latest Practicable Date.

If none of the Qualifying Shareholders accept their respective assured allotment of the Offer Shares and no new Shares are issued or repurchased by the Company on or before the Record Date, and the Underwriters are called upon to subscribe for, or procure subscription for, the Untaken Shares pursuant to their obligations under the Underwriting Agreement, the shareholding of the Concert Group in aggregate will increase from approximately 28.75% of the issued share capital of the Company to a maximum of approximately 85.75% of the issued share capital of the Company as enlarged by the Offer Shares and the Bonus Shares immediately upon completion of the Open Offer (with the Bonus Issue).

– 51 –

LETTER FROM PAN ASIA

In the event that certain Qualifying Shareholders do not subscribe for their entitlements under the Open Offer, and the Underwriters are called upon to subscribe for, or procure subscription for, the Untaken Shares pursuant to their obligations under the Underwriting Agreement, this would increase the shareholding of Asia Link and parties acting in concert with it to or above 30 % of the issued share capital of the Company . The acquisition of voting rights by Asia Link under such circumstances will result in Asia Link being obliged to make a mandatory general offer for all the securities of the Company not already owned or agreed to be acquired by Asia Link and other members of the Concert Group under Rule 26 of the Takeovers Code, unless, amongst others, a Whitewash Waiver is obtained from the Executive and approved by the Independent Shareholders at the Open Offer EGM by way of poll.

Asia Link has made an application to the Executive for the Whitewash Waiver pursuant to note 1 on dispensations from Rule 26 of the Takeovers Code to waive the mandatory general offer obligation.

The Open Offer (with the Bonus Issue) is conditional, among other things, the grant of the Whitewash Waiver by the Executive and the approval of the Independent Shareholders at the Open Offer EGM. If the Whitewash Waiver is not granted by the Executive or disapproved by the Independent Shareholders at the Open Offer EGM, the Open Offer (with the Bonus Issue) will not become unconditional and will not proceed.

Since the proposed Open Offer (with the Bonus Issue) will increase the Company’s issued share capital by more than 50%, it must be approved by Shareholders at the Open Offer EGM under Rule 7.24(5)(a) of the Listing Rules. Controlling Shareholders and their associates or, absent a controlling Shareholder, the Directors (excluding the independent non-executive Directors), the chief executive of the Company and their respective associates shall abstain from voting on the resolution relating to the Open Offer.

As the Company had no controlling Shareholder at the Latest Practicable Date, Ms Li, who as mentioned earlier is the chief executive officer of the Company, and her associates are required by Rule 7.24(5)(a) to abstain from voting on the resolution in relation to the Open Offer (with the Bonus Issue) at the Open Offer EGM.

In addition, as the Company has not made arrangements for the Qualifying Shareholders to apply for Offer Shares in excess of their assured entitlements under the Open Offer in accordance with Rule 7.26A(1) of the Listing Rules, and the Open Offer is partly underwritten by Asia Link, which is a Ms Li’s associate, specific approval must be obtained from the Independent Shareholders under Rule 7.26A(2) of the Listing Rules in respect of the lack of such excess application arrangement.

– 52 –

LETTER FROM PAN ASIA

Being Ms Li’s associate and one of the Underwriters, Asia Link is deemed to be a connected person of the Company. The entering into the Underwriting Agreement by Asia Link, Kingston Securities and the Company therefore constitutes a connected transaction for the Company under the Listing Rules. As the underwriting commission (the “ Commission ”) to be received by Asia Link is on normal commercial terms and all applicable percentage ratios (as defined in the Listing Rules) are less than 5%, the payment of Commission by the Company to Asia Link is therefore subject to reporting and announcement requirements but exempt from the Independent Shareholders’ approval requirement under Rule 14A.32 of the Listing Rules.

The allotment and issue of the Offer Shares and the Bonus Shares to Asia Link in accordance with the Underwriting Agreement is exempt from the reporting, announcement and independent shareholders’ approval requirements pursuant to Rule 14A.31(3)(c) of the Listing Rules. The Open Offer (with the Bonus Issue) will be conducted in compliance with Rule 7.26A of the Listing Rules.

An Independent Board Committee, which comprises all of the Company’s independent nonexecutive Directors, namely, Mr Chan Ming Sun Jonathan, Mr Ma Lin and Mr Lam Kwan Sing, has been established to make recommendations to the Independent Shareholders with respect to the Open Offer (with the Bonus Issue), the Underwriting Agreement and the Whitewash Waiver.

In our capacity as the independent financial adviser to the Independent Board Committee and the Independent Shareholders, we are required to provide them with an independent opinion on (i) whether or not the terms and conditions of the Open Offer (the Bonus Issue), the Underwriting Agreement and the Whitewash Waiver are fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole; and (ii) how the Independent Shareholders should vote in respect of the relevant resolutions relating to the Open Offer (with the Bonus Issue) (including the absence of excess application arrangement), the Underwriting Agreement and the Whitewash Waiver at the Open Offer EGM.

BASIS OF OUR OPINION AND RECOMMENDATION

In formulating our opinion and recommendation to the Independent Board Committee and the Independent Shareholders, we have relied on the accuracy of the statements, information, opinions and representations contained or referred to in the Circular as well as the information and representations provided to us by the Company, the Directors and the management of the Company.

We have no reason to believe that any information and representations relied on by us in forming our opinion is untrue, inaccurate or misleading, nor are we aware of any material facts the omission of which would render the information provided and the representations made to us untrue, inaccurate or misleading.

– 53 –

LETTER FROM PAN ASIA

We have assumed that all information, representations and opinions contained or referred to in the Circular, which have been provided to us by the Company, the Directors and the management of the Company and for which they are solely and wholly responsible, were true and accurate at the time when they were made and continue to be true up to the Latest Practicable Date. Should there be any material changes after the despatch of the Circular, Shareholders would be notified as soon as possible.

The Directors have jointly and severally accepted full responsibility for the accuracy of the information contained in the Circular and have confirmed in the Circular, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in the Circular have been arrived at after due and careful consideration and that there are no other facts the omission of which would make any statement in the Circular misleading.

We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted any independent in-depth investigation into the business and affairs of the Group.

We have not considered the tax consequences on the Qualifying Shareholders arising from the subscription for, holding of or dealing in, the Offer Shares or the Bonus Shares, since these are particular to their own circumstances. We will not accept responsibility for any tax effect on, or liabilities of, any person resulting from the subscription for, holding of or dealing in the Offer Shares or the exercise of any rights attaching thereto or otherwise. In particular, Qualifying Shareholders subject to overseas taxes or Hong Kong taxation on securities dealings should consider their own tax positions with regard to the Open Offer (with the Bonus Issue) and, if in any doubt, should consult their own professional advisers.

This letter is issued to the Independent Board Committee and the Independent Shareholders solely in connection with their consideration of the Open Offer (with the Bonus Issue), the Underwriting Agreement and the Whitewash Waiver and, except for its inclusion in the Circular, is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purposes, without our prior written consent.

OUR QUALIFICATIONS AND INDEPENDENCE

Pan Asia has been licensed by the SFC since 1992 and is a licensed corporation engaging in Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under SFO.

– 54 –

LETTER FROM PAN ASIA

Mr Cheung, who is the Chairman of Pan Asia and signs off on this letter together with Mr Harding, is licensed by the SFC as a Responsible Officer and a Principal licence holder of Pan Asia, and has over 20 years’ experience in the financial services industry in Hong Kong. Mr Cheung holds a bachelor degree of Social Sciences, a bachelor and a master degree in laws, and is a fellow member of both the Financial Services Institute of Australasia and the Hong Kong Institute of Certified Public Accountants.

Mr Harding, who is the Managing Director of Pan Asia and co-signs this letter with Mr Cheung, worked for the SFC for four years and held positions in the Investment Products Division, the Chairman’s Office and the Corporate Finance Division.

Mr Harding worked in Nomura International (Hong Kong) Limited from 1993 to 1997 where he was responsible for overseeing transaction management in the Asia-Pacific region. Mr Harding subsequently worked in BOCI Asia Limited for 3 years, where he was involved in overseeing the execution of listings in Hong Kong including “H” share and red chip listing candidates to be listed on the Main Board and the GEM Board. Following this, Mr. Harding worked in a number of corporate finance-related roles in Crosby Limited and SBI Crosby Limited before joining Pan Asia. Mr Harding holds a master degree in contemporary classical studies.

On 16 December 2013, Pan Asia was engaged to act as the independent financial adviser to the independent board committee and independent shareholders of the Company in a discloseable and connected transaction in relation to the proposed acquisition of the entire issued share capital of an investment company in Urumqi, the PRC. We understand from the Company that the transaction is still onging.

On 28 December 2013, Pan Asia was engaged to act as the independent financial adviser to the independent board committee and independent shareholders of the Company in a very substantial disposal and connected transaction in relation to the sale of the entire issued share capital of Winbox (BVI) Limited, which was a wholly-owned subsidiary of the Company, to Goodwill International Holdings Limited (the “ Winbox transaction ”).

We were required by Rule 14A.22 of the Listing Rules to advise the independent board committee and independent shareholders in the Winbox transaction, among others, whether or not the terms of the sale were on normal commercial terms, were in the interests of the Company and the shareholders as a whole and were fair and reasonable as far as the Company and the independent shareholders were concerned. Details of the work leading to our recommendations were set out in the independent financial adviser letter dated 24 February 2014 contained in the relevant circular of the Company.

The Winbox Transaction was approved by the Independent Shareholders of the Company in an Extraordinary General Meeting on 14 March 2014.

– 55 –

LETTER FROM PAN ASIA

Notwithstanding that we took on the above two engagements within two years of acting as the independent financial adviser in the current transaction, we are not associated with the Company’s directors, substantial shareholders and their associates, and we are of the view that we meet the independence guidelines as set out in Rule 13.84 of the Listing Rules and Rule 2.6 of the Takeovers Code.

FACTORS AND REASONS CONSIDERED

In formulating our opinion on the terms of the Open Offer (with the Bonus Issue), the Underwriting Agreement and the Whitewash Waiver, we have considered a total of seven factors and reasons, which are conveniently divided into the following sub-sections.

1. Background information and financial highlights

(a) The Group’s business activities

The Company is an investment holding company currently focused on the development of natural gas business and the clean resources sector. The Group is also engaged in the provision of loan financing services, trading of commodities and securities investments.

Before March 2014, the Group also carried on the business of manufacturing and selling quality plastic and paper boxes for luxury consumer goods through a directly whollyowned subsidiary of the Company named Winbox (BVI) Limited (“ Winbox ”). However, following the sale of the entire issued share capital of Winbox to Goodwill International Holdings Limited, which transaction was completed following the approval by the Company’s independent shareholders at an extraordinary general meeting held on 14 March 2014, the Group ceased to be engaged in the packaging box business.

(b) Financial performance

Set out below are some highlights of the financial performance of the Group in recent periods.

(i) For the year ended 31 March 2014

Based on the financial results announcements of the Company dated 27 June 2014 (the “ Results Announcement ”), the Group’s financial performance for the year ended 31 March 2014 can be briefly summarised as follows.

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LETTER FROM PAN ASIA

In terms of continuing operations, the Group had (i) a revenue of approximately HK$40.32 million which included interest income generated from lending of money to outside borrowers and service income from trading of commodities; (ii) other income of HK$5.52 million representing interest income earned on bank deposits and loan receivables; and (iii) other gains and losses of HK$59.7 million from, for example, fair value gains and losses on financial instruments and loss on disposal of property, plant and equipment. After accounting for administrative expenses and finance costs, the Group recorded a loss from continuing operations at approximately HK$106.9 million. As regards the discontinued operations, which included the disposal of coal mine operations in Xinjiang as well as equity interest in Winbox which manufactured and sold luxury packaging boxes, a profit of approximately HK$94.4 million was recorded.

The total net loss from continuing operations and discontinued operations attributable to the shareholders was approximately HK$12.41 million. The basic and diluted loss per share from continuing and discontinued operations was approximately HK0.31 cents.

It is worth noting from the Results Announcement that the Group is currently divided into two operating divisions, namely, money lending and trading of commodities, and money lending was regarded as a reportable segment for the year ended 31 March 2014. The segment results of money lending and commodities trading during the year was a revenue of approximately HK$39.14 and HK$1.18 million respectively. Since the Group’s revenue from continuing operations for the year ended 31 March 2014 amounted to approximately HK$40.32 million, the revenue from the money lending business therefore accounted for approximately 97% of the total revenue during this period.

( ii) For the six months ended 30 September 2013

As reported in the Group’s interim report for the six months ended 30 September 2013 (the “ IR2013 ”), the Group recorded an unaudited revenue of approximately HK$85.33 million, representing an increase of approximately 38.46% from that for the six months ended 30 September 2012 of an unaudited revenue of approximately HK$61.63 million.

According to the IR2013, the increase in the Group’s revenue was mainly attributable to (i) a slight increase in the demand for plastic boxes and paper boxes of luxury consumer goods caused by a slow recovery of European economy; and (ii) the increase in income from its money lending segment.

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LETTER FROM PAN ASIA

However, for the six months ended 30 September 2013, the Group recorded a loss from continuing operations which included its natural gas, packaging box, money lending and commodities trading businesses of approximately HK$77.2 million (2012: HK$73.8 million) while a profit from discontinued operations of the Company’s previous coal mining business in the same period amounted to approximately HK$84.9 million (2012: a loss of HK$11.8 million). As a result, the total net profit from continuing operations and discontinued operations attributable to the shareholders for the six months ended 30 September 2013 was approximately HK$7.7 million (2012: a loss of HK$85.6 million). The basic and diluted profit per share from continuing operations and discontinuing operations were approximately HK0.19 cents (2012: a loss of HK2.18 cents). Nevertheless, the Company had recorded segment revenue and profit of its money lending business of approximately HK$15.2 million and HK$15.1 million respectively for the six months ended 30 September 2013.

(iii) For the year ended 31 March 2013

As set out in the Company’s annual report for the year ended 31 March 2013 (the “ AR2013 ”), the Group recorded revenue of approximately HK$112.51 million, representing a decrease of approximately 19.75% from that for the year ended 31 March 2012 of revenue of approximately HK$140.22 million. According to the AR2013, the decrease in revenue was mainly attributable to the sluggish demand for plastic boxes and paper boxes of luxury consumer goods caused by the downturn in the European market.

As a result of this drop in revenue, the Group recorded a loss from continuing operations of approximately HK$135.5 million (2012: HK$349 million), with a net loss from operations of coal mining, which were finally discontinued in June 2013, of approximately HK$83.8 million (2012: HK$29.4 million). Consequently, the total net loss from continuing operations and discontinued operations attributable to the shareholders for the year ended 31 March 2013 was approximately HK$219.3 million (2012: HK$378.5 million). The basic and diluted loss per share from continuing and discontinued operations was approximately HK5.58 cents (2012: HK12.98 cents). However, the Group also recorded other income of approximately HK$4.4 million from its money lending business.

As can be seen from the above discussion, the Group’s increase in its revenue and profit was mainly due to the income generated from its money lending business. Moreover, it was noted that the loss from the Group’s continuing operations was only partly covered by the profits generated from its discontinued operations.

Given that the profits generated from the Group’s discontinued operations will subside in the near future and that the Group has already sold Winbox, there is a need for the Group to generate income from other sources .

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LETTER FROM PAN ASIA

2. Reasons for the Open Offer (with the Bonus Issue)

(a) Rationale for the fund raising and use of proceeds

In view of the substantial increase in revenue derived from the Group’s money lending business, the Company intends to further expand the money lending business, especially in respect of the second-mortgage lending business.

As advised by the Company, the current term of the revolving loan facility will expire shortly and there is a possibility that the facility will not be renewed on the ground that the bank’s request for additional security for the loan cannot be met. If the facility is not renewed, the Company has to look for alternative long term sources of finance to fund the expansion of the money lending business. Moreover, the Company has been advised by the bank that the proceeds from the HK$450 million loan facility is prohibited from being applied towards funding the purchase of residential properties situated in Hong Kong, which is a target market that the Group intends to expand into within its money lending business, the Board therefore needs to look for additional source of funding to repay the utili sed amount of the facility as well as obtain funding to finance the Group’s expansion into this particular segment.

As mentioned earlier, the net proceeds from the Open Offer (with the Bonus Issue) are estimated to be not less than approximately HK$191.63 million and not more than HK$230 million approximately, 70% of which, i.e., between HK$134.14 million and HK$161 million approximately, will be used by the Company to develop and expand the Group’s money lending business. The remaining 30% of the net proceeds, i.e., between HK$57.49 million and HK$69 million approximately, on the other hand, will be used for general working capital of the Group.

We understand that one of the major business areas covered by licensed money lenders in Hong Kong is mortgage loans . As money lenders fall outside of the jurisdiction of the Hong Kong Monetary Authority (the “ HKMA ”), they tend to be more flexible in granting mortgage loans than their banking counterparts .

– 59 –

LETTER FROM PAN ASIA

With a low interest rate environment and quantitative easing measures adopted by major central banks in the last few years , for example, the US Federal Reserve’s purchase of billion dollars worth of mortgage-backed securities since November 2008 and the Bank of England’s purchase of gilts from financial institutions, along with a smaller amount of relatively high-quality debt issued by private companies since 2009, Hong Kong’s residential property prices have increased by over 60% since 2009. To curb speculative activities in the local property market, the Hong Kong government introduced various measures including (i) the HKMA’s tightening of the provision of mortgage loans by banks; (ii) the Special Stamp Duty (the “ SSD ”) which imposes an additional stamp duty of between 10% and 20% of the transaction value on properties bought and resold within 3 years; and (iii) the Buyer’s Stamp Duty (the “ BSD ”) on residential property purchase by any person other than a Hong Kong permanent resident.

With these credit-tightening measures, borrowers will find it increasingly difficult to obtain finance from banks if they fail to meet their additional requirements or find buyers for their properties because of the imposition of the SSD and BSD. They therefore need to find alternative sources of financing and money lenders, which are not subject to the HKMA’s supervision, may be able to fill this gap with their relatively more flexible requirements in relation to granting mortgage loans. Seen in this light, a case may arguably be made for the Company to expand its money lending business.

Notwithstanding the proposed expansion of the Group’s money lending business by the Company’s investing part of the net proceeds from the Open Offer in the amount of between HK$134.14 million and HK$161 million approximately, there is no urgent need, in our view, to step up the related operational scale, in particular the recruitment of additional staff, for the money lending business since the money lending business is not human intensive but capital intensive in nature. The cost efficiency of the Group’s money lending business is expected to be improved upon expanding its loan portfolio without incurring additional staff cost and increasing the operational scale in the future.

In view of (i) the possible growth in Hong Kong’s money lending industry; (ii) the relatively significant contribution of the income being derived from the money lending business to the Company’s financial position since 2013; (iii) the relatively more flexible regulatory environment of the money lending industry in Hong Kong; and (iv) given that the operational expenses for the Group’s money lending business can be kept down owing to the capital intensive nature of the business, we therefore, on balance, concur with the Directors’ view that by expanding the Group’s money lending business through utilising part of the net proceeds from the Open Offer, the Group may improve cost efficiency as well as the return of its money lending business segment in the future.

– 60 –

LETTER FROM PAN ASIA

Although there seems to be little doubt that the Group’s money lending business should be expanded for the future development of the Group, debate remains as to whether or not the Open Offer is the best option, amongst a variety of fund raising methods, to raise funds for such expansion as far as the Company and the Independent Shareholders are concerned.

( b) Other financing methods

We have inquired with the Directors and are advised that they have considered other fund raising methods such as bank borrowing, placement of new Shares and rights issue before settling on the Open Offer .

Having taken into account the following:

(i) bank borrowings or debt financing will result in additional interest burden on the Group and may not be achievable on favourable terms or on a timely basis, due to the possibility of the Company being subject to lengthy due diligence and negotiation processes with banks. Moreover, banks are likely to impose restrictive conditions on the loans which may adversely affect the borrower’s flexibility in business operations. Such conditions may include, without limitation, stipulation of adequate security to be provided by the borrower, provision of personal guarantees on the part of the borrower’s substantial shareholders, limited purposes for using the loans and other restrictive covenants;
(ii) a placement of new Shares to independent third parties (a) would not offer the existing Shareholders the first opportunity to share the results of the Company and maintain their respective pro-rata shareholding in the Company; and (b) would immediately dilute the shareholding of the existing Shareholders;
(iii) in raising funds by way of rights issue as opposed to Open Offer, the Company would incur higher administrative costs including, such as the preparation, printing, posting of excess application forms and making arrangements with its share registrar for trading the nil-paid rights;
(iv) the uncertainty of the existence of a market to trade the nil-paid entitlements and the trading cost which may be incurred by Qualifying Shareholders; and

– 61 –

LETTER FROM PAN ASIA

(v) the Open Offer enables the Shareholders to maintain their proportionate interests in the Company should they so wish, hence ensuring stability in the Company’s shareholders base, and to participate in the Company’s future growth and development. It also offers the Offer Shares to all Qualifying Shareholders on an equal and fair basis. The lack of trading of nil-paid rights does not affect the achievement of these objectives,

we are of the view that fund raising by way of the Open Offer is an acceptable and equitable means for the Company to raise new capital while avoiding high transaction and interest costs, and is in the interests of the Company and the Independent Shareholders as a whole.

3. Principal terms of the Open Offer (with the Bonus Issue)

(a) The basis

As mentioned before, the Open Offer (with the Bonus Issue) is structured in the following manner: two (2) Offer Shares for every one (1) Adjusted Share held on Record Date and payable in full on acceptance, with Bonus Issue of one (1) Bonus Share for every one (1) Offer Share taken up under the Open Offer.

The Offer Shares and the Bonus Shares, when allotted, issued and fully paid, will rank pari passu with the Shares in all respects. Holders of the Offer Shares and the Bonus Shares will be entitled to receive all future dividends and distributions, which are declared, made or paid on or after the date of allotment and issue of the Offer Shares and Bonus Shares.

(b) The Subscription Price

The Subscription Price of HK$0.25 per Offer Share, which is payable in full on application, represents :

(i) a discount of approximately 83.66% to the closing price of HK$1.53 per Adjusted Share as quoted on the Stock Exchange on the Last Trading Day;
(ii) a discount of approximately 84.2 % to the average closing price of approximately HK$1.582 per Adjusted Share as quoted on the Stock Exchange for the five consecutive trading days up to and including the Last Trading Day;
(iii) a discount of approximately 38.42% over the theoretical ex-entitlement price of HK$0.406 per Adjusted Share after the Open Offer (with the Bonus Issue), based on the closing price of HK$1.53 per Adjusted Share as quoted on the Stock Exchange on the Last Trading Day ; and
(iv) a discount of approximately 82.14% to the closing price of HK$1.40 per Adjusted Share as quoted on Stock Exchange on the Latest Practicable Date.

– 62 –

LETTER FROM PAN ASIA

The Bonus Issue, it should be noted, will reduce the average price per Offer Share taken up and is therefore in effect affecting the Subscription Price per Offer Share in relation to the prevailing market price of the Share.

Since one (1) Bonus Share will be issued upon the subscription of one (1) Offer Share, the average price for each Share to be allotted and issued under the Open Offer (with the Bonus Issue) will be approximately HK$0.125 (the ‘‘ Effective Subscription Price ”), which represents :

(i) a discount of approximately 91.83% to the closing price of HK$1.530 per Adjusted Share as quoted on the Stock Exchange on the Last Trading Day;
(ii) a discount of approximately 92.1 % to the average closing price of approximately HK$1.582 per Adjusted Share as quoted on the Stock Exchange for the five consecutive trading days up to and including the Last Trading Day;
(iii) a discount of approximately 69.21% to the theoretical ex-entitlement price of approximately HK$0.406 per Adjusted Share after the Open Offer (with the Bonus Issue), based on the closing price of HK$0.153 per Share as quoted on the Stock Exchange on the Last Trading Day ;
(iv) a discount of approximately 91.07% to the closing price of HK$ 1.40 per Adjusted Share as quoted on Stock Exchange on the Latest Practicable Date; and
(v) a discount of approximately 67.11% to the theoretical ex-entitlement price of HK$ 0.38 per Adjusted Share after the Open Offer (with the Bonus Issue), based on the closing price of HK$ 1.40 per Adjusted Share as quoted on the Stock Exchange on the Latest Practicable Date.

As stated in the Letter from the Board, the Subscription Price was arrived at after arm’s length negotiation between the Company and the Underwriters having regard to, among other things, the prevailing market price of the Shares, the financial position of the Group, the absence of an excess application arrangement for Shareholders, and the prospects of the Group particularly in the money lending business .

– 63 –

LETTER FROM PAN ASIA

The relatively deep discount to the adjusted closing price represented by the Subscription Price (together with the Bonus Issue which will effectively reduce the average price per Offer Share taken up) is made with a view to encouraging the Qualifying Shareholders to participate in the Open Offer , maintain their respective pro rata shareholdings in the Company and participate in the future growth of the Company. Moreover, dilution to existing shareholders’ interests will only occur if they decide not to take up the Offer Shares.

For the reason s set out below, we share the Directors’ view that the Subscription Price, which has been set at a relatively deep discount, the subscription ratio and the terms of the Open Offer (with Bonus Issue) are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Historical closing prices of the Shares:-

We have reviewed the closing prices of the Shares (adjusted on the assumption that the Capital Reorganisation has become effective) by comparing them with the Effective Subscription Price for a 12-month period from 18 April 2013 up to and including the Last Trading Day, i.e. 17 April 2014.

We consider that a 12-month review period to be a reasonable period of time within which the historical trend of the closing price of the Shares can be shown in relation to the Open Offer. We also believe that the Effective Subscription Price instead of the Subscription Price should be used to compare with the Shares’ closing prices because only the Effective Subscription Price fairly takes into account the effect of the Bonus Shares which participating Shareholders effectively receive for free.

Chart 1: Closing price per Share on the Stock Exchange

==> picture [282 x 186] intentionally omitted <==

----- Start of picture text -----

6
5
4
3
2
1
Effective Subscription Price (HK$0.125)
0
2013/4/182013/5/12013/6/32013/7/22013/8/12013/9/22013/10/22013/11/12013/12/22014/1/22014/2/32014/3/32014/4/12014/4/17
----- End of picture text -----

Source: website of the Stock Exchange (www.hkex.com.hk)

– 64 –

LETTER FROM PAN ASIA

During the 12-month review period, the closing prices of the Shares ranged from the lowest of HK$1.52 on 15 April 2014 to the highest of HK$4.85 on 7 May 2013. The average closing price of the Shares during this period was approximately HK$3.40.

As can be seen from the above Chart 1, the Effective Subscription Price of HK$0.125 was set at a level which is significantly below the closing prices of the Shares, representing a discount of approximately (i) 97.42% to the highest closing price of the Shares; (ii) 96.3% to the average closing price of the Shares; and (iii) 91.78% over the lowest closing price of the Shares during the review period.

We note that it is a common market practice that, in order to enhance the attractiveness of an open offer exercise and to encourage the existing shareholders to participate in an open offer, the subscription price of an open offer normally represents a discount to the prevailing market prices of the relevant shares.

Added to this market practice is the fact that (i) the Open Offer is available to all of the Qualifying Shareholders with an equal opportunity of participating in it; and that (ii) the closing prices of the Shares had been traded in a continuously decreasing trend, we therefore concur with the Directors that the Effective Subscription Price being set lower than the prevailing market prices of the Shares is in line with general practice and the current market trend, which we consider such arrangement to be reasonable and acceptable.

Comparison with other open offers:-

To further assess the fairness and reasonableness of the Effective Subscription Price, we have reviewed all of the 31 other open offers conducted by other listed companies on the Stock Exchange (the “ Comparables ”), which is exhaustive, in a 10-month period ending on the Last Trading Day, i.e. 17 April 2014 (the “ Comparable Period ”) in an effort to provide a general reference in respect of the common market practice on open offers conducted by listed companies in Hong Kong.

It is noted that the business activities of the Comparables vary from compan y to compan y with their different financial positions, business performances and future prospects. However, we consider that (i) the Comparables were determined under similar market conditions and sentiments as the Open Offer (with the Bonus Issue), and they might be able to reflect the recent trend of open market transactions in the Hong Kong stock market; and (ii) there were over 30 Comparables in the 10-month review period, representing a reasonable number of Comparables for the purpose of comparison. Accordingly, we are of the view that the 10-month review period forms an appropriate basis for our analysis and that the Comparables represent fair and representative samples.

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LETTER FROM PAN ASIA

Table 1: Comparison of Open Offers for the period from 18 June 2013 to 17 April 2014

					Closing price
					as quoted	Premium/		Premium/
					on the Stock	(discount) of		(discount) of
					Exchange	subscription		subscription
					on the last	price over/(to)	Theoretical	price over/(to)
					trading day of	the closing	ex-rights/	the theoretical
					the open	price on	entitlement	ex-rights/	Maximum
Announcement	Stock			Subscription	offer	the last	price	entitlement	Dilution	Underwriting	Excess
date	code	Name of Company	Basis	price	conducted	trading day	(Note 1)	price	(Note 2)	Commission	application
				(HK$)	(HK$)	(%)	(HK$)	(%)	(%)	(%)	(Y/N)
11/04/2014	188	Sunwah Kingway Capital	1 for 4	0.148	0.156	(5.13)	0.1540	(3.90)	20.00	2.00	N
		Holdings Limited
11/04/2014	8198	MelcoLot Limited	3 for 10	0.900	1.190	(24.40)	1.1231	(19.90)	23.08	3.00	N
02/04/2014	8063	Well Way Group Limited	1 for 2	0.700	0.900	(22.22)	0.8333	(16.00)	33.33	3.50	N
31/03/2014	144	China Merchants Holdings	1 for 5	30.260	26.650	13.55	27.2517	11.04	16.67	0.00	Y
		(International) Company
		Limited
28/03/2014	989	Ground Properties	1 for 2	0.200	0.280	(28.57)	0.2533	(21.05)	33.33	0.00	Y
		Company Limited
27/02/2014	723	Sustainable Forest	1 for 10	0.053	0.150	(64.40)	0.1140	(53.20)	37.50	2.50	Y
		Holdings Limited	(bonus issue of	(Note 3)		(Note 3)		(Note 3)
			5 bonus share
			for 1 offer share)
26/02/2014	860	Ming Fung Jewellery	1 for 2	0.080	0.190	(57.90)	0.1530	(47.70)	33.33	1.00	N
		Group Limited
27/01/2014	2324	Capital VC Limited	4 for 1	0.250	0.610	(59.02)	0.3220	(22.36)	80.00	2.50	N
24/01/2014	1124	Costal Greenland Limited	1 for 2	0.250	0.310	(19.40)	0.2900	(13.80)	33.33	1.50	Y
21/01/2014	1166	Solartech International	5 for 1	0.120	0.360	(66.67)	0.1600	(25.00)	83.33	2.50	N
		Holdings Limited
17/01/2014	115	Grand Field Group Holdings	1 for 2	0.040	0.118	(66.10)	0.0920	(56.52)	33.33	3.50	N
		Limited
03/01/2014	8351	Larry Jewelry International	7 for 10	0.120	0.138	(13.04)	0.1306	(8.12)	41.18	2.50	N
		Company Limited
22/12/2013	8270	China Leason CBM & Shale	1 for 2	0.040	0.111	(63.96)	0.0873	(54.18)	33.33	3.50	N
		Gas Group Company Limited
28/11/2013	8178	China Information Technology	2 for 1	0.110	0.172	(36.05)	0.1307	(16.03)	66.67	1.25	N
		Development Limited
28/11/2013	1333	China Zhongwang	3 for 10	2.610	2.610	0.00	2.6100	0.00	23.08	0.00	Y
		Holdings Limited
22/11/2013	8079	Unlimited Creativity	4 for 1	0.100	0.290	(65.52)	0.1380	(27.54)	80.00	2.00	N
		Holdings Limited								(Note 4)
19/11/2013	801	Golden Meditech	1 for 2	0.500	0.980	(48.98)	0.8200	(39.02)	33.33	1.50	Y
		Holdings Limited
14 /11/ 2013	1822	Perception Digital	6 for 5	0.050	0.190	(73.70)	0.1136	(56.00)	54.55	2.50	N
		Holdings Limited
13/11/2013	430	Oriental explorer	1 for 2	0.100	0.155	(35.50)	0.1367	(26.80)	33.33	2.00	Y
		Holdings Limited
11/11/2013	8192	Global Energy Resources	1 for 2	0.070	0.138	(49.28)	0.1153	(39.29)	33.33	2.50	N
		International Group Limited
5/11/ 2013	326	China Star Entertainment Limited	2 for 5	0.125	0.130	(3.85)	0.1290	(3.10)	28.57	1.00	N

– 66 –

LETTER FROM PAN ASIA

						Closing price
						as quoted	Premium/		Premium/
						on the Stock	(discount) of		(discount) of
						Exchange	subscription		subscription
						on the last	price over/(to)	Theoretical	price over/(to)
						trading day of	the closing	ex-rights/	the theoretical
						the open	price on	entitlement	ex-rights/	Maximum
Announcement	Stock				Subscription	offer	the last	price	entitlement	Dilution	Underwriting	Excess
date	code	Name of Company	Basis		price	conducted	trading day	(Note 1)	price	(Note 2)	Commission	application
					(HK$)	(HK$)	(%)	(HK$)	(%)	(%)	(%)	(Y/N)
28 /10/2013	8029	Sun International	1	for 2	0.100	0.320	(68.75)	0.2467	(59.51)	33.33	0.00	N
		Resources Limited
17/09/2013	8108	Fava International	4	for 1	0.100	0.295	(66.10)	0.1390	(28.06)	80.00	3.50	Y
		Holdings Limited
16/09/2013	996	Carnival Group International	1	for 2	0.200	0.300	(33.33)	0.2667	(25.01)	33.33	1.50	N
		Holdings Limited
28/08/2013	2358	Mitsumara East Kit	6	for 1	0.100	0.940	(89.36)	0.2200	(54.55)	85.71	2.50	N
		(Holdings) Limited
23/08/2013	8022	TLT Lottotainment	2	for 3	0.200	0.570	(64.91)	0.3390	(41.00)	62.50	2.50	N
		Group Limited	(bonus issue of		(Note 3)		(Note 3)		(Note 3)
				3 bonus share
				for 2 offer shares)
15/08/2013	1130	China Environmental	33 for 10		0.270	0.540	(50.00)	0.3330	(18.92)	76.74	2.50	N
		Resources Group Limited
11/07/2013	8019	Hao Wan Holdings Limited	8	for 1	0.100	0.260	(61.54)	0.1180	(15.24)	88.89	3.00	Y
10/07/2013	690	Uni-Bio Science Group Limited	1	for 1	0.080	0.158	(49.37)	0.1060	(24.53)	66.67	2.50	Y
			(bonus issue of		(Note 3)		(Note 3)		(Note 3)
				1 bonus share
				for 1 offer share)
09/07/2013	627	U-Right International	5	for 1	0.150	1.400	(89.29)	0.3583	(58.14)	83.33	2.50	N
		Holdings Limited
		Maximum	–		–	–	(89.29)	–	(82.34)	88.89	3.50
		Minimum	–		–	–	13.55	–	11.04	16.67	0.00
		Average	–		–	–	(46.88)	–	(30.51)	48.88	2.06
		Median	–		–	–	(50.00)	–	(25.01)	33.33	2.50
25/04/2014	474	The Company	2	for 1	0.125	1.53	(91.83)	0.4060	(69.21)	75.00	2.50
			(bonus issue of		(Note 3)		(Note 3)		(Note 3)
				1 bonus share
				for 1 offer share)

Note 1: The theoretical ex-rights/entitlement price is calculated by adding the market value of all the issued shares (based on the closing price of the shares on the last trading day) with the gross amount of subscription proceeds expected to be received from the open offer (before expenses), and then divided by the total number of issued shares as enlarged by the rights issue/open offer; e.g. in the case of every 1 rights share for every 2 existing shares, (2 x closing price on the last trading day) + 1 x (the subscription price)/(2+1).

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LETTER FROM PAN ASIA

Note 2: Maximum dilution effect of each rights issue/open offer is calculated as: (number of rights/ offer shares and (if any) bonus shares to be issued under the basis of entitlement)/(number of existing shares held for the entitlement for the rights/offer shares under the basis of entitlement + number of rights/offer shares and (if any) bonus shares to be issued under the basis of entitlement) x 100%, e.g. (i) for a rights issue with basis of 1 rights share for every 1 existing share held with bonus issue on the basis of 1 bonus share for every 1 rights share taken up, the maximum dilution effect is calculated as ((1+1/(1+1+1))*100) = 66.7%; and (ii) for a rights issue with basis of 1 rights share for every 2 existing shares held, the maximum dilution effect is calculated as 1/(1+2) = 33.3%.

Note 3: For illustrative purposes, the subscription price is the effective subscription price after taking into account of the bonus issue. The discounts of subscription price to the closing price on the last trading day and to the theoretical ex-rights/entitlement price are calculated based on the effective subscription price.
Note 4: There were two underwriters for the open offer conducted by this Comparable. The underwriting commissions to the two underwriters are 1.5% and 2.5%. The average of 2.0% of these two underwriting commissions has been used for the analysis of the maximum, minimum and mean of the underwriting commission of the Comparables.

As shown in above Table 1, the variance of the subscription prices to the closing prices of the Comparables on the last trading days prior to the release of the respective announcements ranged from a discount of approximately 89.29% to a premium of approximately 13.55% (the “ LTD Market Range ”), with the average being a discount of approximately 46.88%.

The discount of approximately 91.83% as represented by the Effective Subscription Price to the closing price of the Shares on the Last Trading Day falls slightly outside the LTD Market Range and is significantly deeper than its average .

The variance of the subscription prices to the theoretical ex-entitlement prices of the shares of the Comparables, on the other hand, ranged from a discount of approximately 82.34% to a premium of approximately 11.04% (the “ TEP Market Range ”), with the average being a discount of approximately 30.51%.

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LETTER FROM PAN ASIA

The discount of approximately 69.21% as represented by the Effective Subscription Price to the theoretical ex-entitlement price of the Shares falls within the TEP Market Range and is significantly deeper than its average.

Taking into account (i) the use of the proceeds from the Open Offer as disclosed in the sub-section headed ‘‘2. Reasons for the Open Offer” above; and (ii) the decreasing trend of the closing prices of the Shares as shown in Chart 1 above, the Company is expected to set the Effective Subscription Price at a deeper discount so as to increase the attractiveness of the Open Offer.

Having considered the abovementioned factors and bearing in mind that (i) the Subscription Price, hence the Effective Subscription Price, was determined after arm’s length negotiations between the Company and the Underwriters; (ii) all Qualifying Shareholders are offered an equal opportunity to subscribe for the Offer Shares; (iii) the discount represented by the Effective Subscription Price to the closing price of the Shares on the Last Trading Day falls slightly outside the LTD Market Range and is significantly deeper than the average of the LTD Market Range; and (iv) the discount represented by the Effective Subscription Price to the theoretical ex-entitlement price of the Shares falls within the TEP Market Range, we consider, on balance, the Effective Subscription Price to be fair and reasonable so far as the Independent Shareholders are concerned.

(c) Bonus Issue

Subject to fulfilment of the conditions of the Open Offer, Bonus Shares will be issued to the first registered holders of the Offer Shares on the basis of one (1) Bonus Share for every one (1) Offer Share taken up.

As noted in the Letter from the Board, the Open Offer will not be offered to the Excluded Shareholders and the average price for each Share to be allotted and issued under the Open Offer (with the Bonus Issue) will be HK$0.125 and represents a significant discount to the price of the Adjusted Share measured on a number of parameters.

As further noted in the Letter from the Board, in order to facilitate the Bonus Issue (which will not be made to Shareholders on a pro rata basis as Bonus Shares will only be issued to Shareholders who have taken up Offer Shares under the Open Offer) as proposed, the Company also proposes to put forward a special resolution to the Shareholders for approval at the Open Offer EGM to amend the Articles to allow for any declaration, making or payment, of a distribution or dividend to the Shareholders to be declared, made or paid otherwise than pro rata to their respective shareholdings upon the capitalisation of any part of the Company’s reserves or undivided profits.

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LETTER FROM PAN ASIA

Assuming that no new Shares have been issued and that no Shares repurchased by the Company on or before the Record Date and that the Capital Reorganisation has become effective, a total number of 1,588,814,320 new Shares will be issued upon completion of the Open Offer (with the Bonus Issue), comprising 794,407,160 Offer Shares and 794,407,160 Bonus Shares, representing:

(i) 400 % of the Company’s existing issued share capital as at the Latest Practicable Date (having adjusted for the Capital Reorganisation); and
(ii) 80 % of the Company’s issued share capital (having adjusted for the Capital Reorganisation) as enlarged by the issue of the Offer Shares and the Bonus Shares.

As mentioned in the Letter from the Board, Qualifying Shareholders who elect to subscribe for in full their assured entitlements under the Open Offer (with the Bonus Issue) will retain their respective pro rata shareholdings in the Company. Those Qualifying Shareholders who do not elect to subscribe for in full their assured entitlements under the Open Offer (with the Bonus Issue) will be diluted after completion of the Open Offer and the Bonus Issue by a maximum of approximately 80 %.

Given that (i) the Effective Subscription Price has been considered to be fair and reasonable in the sub-section 3(b); (ii) the Bonus Issue provides an opportunity for the Qualifying Shareholders to receive one extra Share for every Offer Share taken up under the Open Offer (with the Bonus Issue); (iii) the Bonus Issue serves as an incentive for the Qualifying Shareholders to subscribe for the Offer Shares at a deep discount to the prevailing market price in order to participate in the potential growth of the Group; and (iv) the Open Offer (with the Bonus Issue) may enable the Company to raise additional capital of not less than approximately HK$198.60 million and not more than approximately HK$237.95 million to strengthen the capital base of the Company without increasing the Group’s debt burden, we consider the Bonus Issue, as part of the Open Offer, to be in the interests of the Company and the Shareholders as a whole, and fair and reasonable so far as the Independent Shareholders are concerned.

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LETTER FROM PAN ASIA

( d) Lack of excess application arrangement

After arm’s length negotiation with the Underwriters, and taking into account (i) the lower administration and investment costs absent excess applications; and (ii) the encouragement to Qualifying Shareholders to take up their entitlements for the purpose of participating in the growth of the Company particularly in the money lending business, the Directors consider that it is fair and reasonable and in the interests of the Company and the Shareholders as a whole not to offer any excess application to the Shareholders, and to have the Underwriters subscribe for the Untaken Shares.

To those Qualifying Shareholders who wish to take up additional Offer Shares in excess of their assured entitlements, the lack of an excess application arrangement by the Company is assuredly unsatisfactory. However, their dissatisfaction should be tempered with the following observations:

(i) the terms of the Open Offer are structured in such a way as to encourage the Qualifying Shareholders to take up their respective assured entitlement of the Offer Shares as the Subscription Price is set at a deep discount to the prevailing market price of the Shares to enhance the attractiveness. It provides a reasonable incentive for the Qualifying Shareholders to participate in the Open Offer;
(ii) the Open Offer is offered equitably to all Qualifying Shareholders with an equal opportunity to maintain their respective pro rata shareholding in the Company. The Qualifying Shareholders who choose to fully accept their respective entitlements under the Open Offer can maintain their respective pro rata shareholdings in the Company after the Open Offer; and
( iii) the lack of an excess application arrangement will lower the administrative cost of the Open Offer to the Company, which benefits the Company and all the Shareholders as a whole .

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LETTER FROM PAN ASIA

All things considered, we believe that the lack of an excess application arrangement under the Open Offer is a common practice and it does not give rise to a material adverse situation to the Independent Shareholders than the Underwriters. As a result, the lack of an excess application arrangement may therefore be regarded as of little impact to the Qualifying Shareholders under the circumstances, and we consider it, on balance, to be acceptable.

4. Underwriting arrangement

(a) The Underwriters

The Offer shares are fully underwritten by the Underwriters, namely, Asia Link and Kingston Securities. Asia Link is a company which was incorporated in the British Virgin Islands with limited liability on 8 April 2010 and is wholly owned by Ms Li. The principal business of Asia Link is investment holdings and it has not engaged in any business transactions since incorporation. Asia Link intends to meet the financial obligations that it incurs under the Underwriting Agreement by means of the HK$205 million facility provided by Kingston Securities and/or internal resources.

Kingston Securities, on the other hand, is a participant of the Stock Exchange and a licensed corporation under the SFO to engage in Type 1 (dealing in securities) regulated activity. It is principally engaged in, among others, securities dealing and brokerage business, margin and IPO financing services.

The Underwriters are collectively of the view that the Open Offer (with the Bonus Issue) is favourable to the Group as the latter will be able to obtain additional funds for further development and expansion of its money lending business when suitable opportunity arises.

If the Underwriters, Ms. Li and parties acting in concert with any of them become the controlling Shareholder as a result of discharging the underwriting obligations under the Underwriting Agreement, the Underwriters have no intention to (i) introduce any material change to the Group’s existing business activities; (ii) disrupt the continued employment of the Group’s employees; and (iii) re-deploy the Group’s fixed assets other than in the ordinary course of its business.

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LETTER FROM PAN ASIA

(b) The Underwriting Agreement

(i) Number of Offer Shares underwritten

In brief, Asia Link and Kingston Securities have conditionally agreed to underwrite not less than 794,407,160 Offer Shares and not more than 951,787,160 Offer Shares in a proportion of 86% and 14% respectively.

As mentioned before, Kingston Securities will advance a loan facility of HK$205 million to Asia Link for it to wholly or partly discharge its financial obligations incurred under the Underwriting Agreement. All of the Offer Shares and Bouns Shares to be acquired by Asia Link under the Open Offer (with the Bonus Issue) and the Underwriting Agreement will be charged to Kingston Securities as security for repayment of the loan facility.

(ii) Underwriting commission

The Company will pay each of Asia Link and Kingston Securities a Commission of 2.5 % of the Subscription Price of the respective portion of the maximum number of Underwritten Shares mentioned above.

According to the Board, the Commission rate was determined after arm’s length negotiations between the Company and the Underwriters having regard to, among other things, the scale of the Open Offer and the market rate, and, in its view, is fair and reasonable insofar as the Company and the Shareholders are concerned.

To assess the fairness and reasonableness of the Commission, we refer to above Table 1. It shows, among other things, that the Commission falls within the range of commissions of open offer transactions in the past 10 months (i.e., between 3.5 % and 0 %), and is 0.01% below the mean.

In view that (i) the Commission rate falls within the range of the underwriting commissions rates of the Comparables; and (ii) the Commission was determined after arm’s length negotiation between the Company and the Underwriters, we consider that the Commission to be in line with market practice, and is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

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LETTER FROM PAN ASIA

(iii) Other terms

In addition, we have also reviewed other terms in the Underwriting Agreement and are not aware of any terms being unusual. Consequently, we are of the opinion that the terms of the Underwriting Agreement are fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

5. Possible financial effects of the Open Offer (with the Bonus Issue)

Net tangible assets:–

According to the unaudited pro forma financial information of the Group set out in Appendix II to the Circular (“ Appendix II ”), the consolidated net tangible assets of the Group attributable to owners of the Company was approximately HK$2, 549 million (approximately HK$6. 42 per share based on a total of approximately 397.2 million Adjusted Shares) as at 31 March 2014.

Given that the Company proposes to, among other things, issue not less than 794,407,160 Offer Shares and not more than 951,787,160 Offer Shares, it follows that, immediately upon completion of the Open Offer (with the Bonus Issue), the unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to owners of the Company will be approximately HK$2, 741 million (approximately HK$1.3 8 per share) if 794,407,160 Offer Shares and the same number of Bonus Shares are issued. However, if 951,787,160 Offer Shares and the same amount of Bonus Shares are issued, the approximate figure of HK$2, 741 million will increase to approximately HK$ 2,779.5 million (approximately HK$1. 21 per share).

In addition, the unaudited consolidated net tangible assets of the Group per share attributable to owners of the Company before the Open Offer (with the Bonus Issue) will decrease, immediately upon the completion of the Open Offer (with the Bonus Issue), from HK$ 6.42 to HK$ 1.38, which is based on the minimum number of shares to be issued from the Open Offer (with the Bonus Issue) or HK$ 1.21, which is based on the maximum number of shares to be issued from the Open Offer (with the Bonus Issue).

Working capital:–

The Open Offer (with the Bonus Issue) is expected to have a positive effect on the Group’s working capital upon completion as the estimated net proceeds from it will bring in, based on Note 2 in Appendix II , approximately between HK$ 192.2 million and HK$ 230.6 million to the Group.

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LETTER FROM PAN ASIA

Liquidity:–

According to the Results Announcement, the audited consolidated total current assets and total current liabilities of the Group as at 31 March 2014 were approximately HK$ 987.5 million and HK$ 262.3 million respectively, so, the current ratio (current assets/current liabilities) as at 31 March 2014 was approximately 3.76 times.

Since the net proceeds from the Open Offer is expected to increase the Group’s current assets by, as mentioned earlier, approximately between HK$ 192.2 million and HK$230 .6 million , the Open Offer is therefore expected to improve the Group’s liquidity position immediately after its completion.

Gearing:–

According to the Results Announcement, the Group’s gearing ratio, which is expressed as a percentage of total debts of HK$ 276.3 million over total assets of HK$ 2,830 million, was approximately 9.76% as at 31 March 2014. Upon completion of the Open Offer (with the Bonus Issue), the estimated net proceeds of between HK$192.2 million and HK$ 230.6 million approximately will enhance the cash position and enlarge the capital base and total equity of the Group. Therefore, the Group’s gearing ratio is expected to improve as a result of the enlarged total equity of the Group.

For the above reasons, we believe that the Open Offer (with the Bonus Issue) will have an overall positive effect on the financial positions of the Group in terms of its net tangible assets, liquidity and gearing position. On such basis, we are of the view that the Open Offer (with the Bonus Issue) is in the interests of the Company and the Shareholders as a whole.

6. Whitewash Waiver

As at the date of the Announcement (assuming the Capital Reorganisation became effective), Asia Link and its concert parties were interested in 114,180,485 Adjusted Shares, representing approximately 28.75% of the existing issued share capital of the Company.

As mentioned earlier, in the event that certain Qualifying Shareholders do not subscribe for their entitlements, under the Open Offer and the Underwriters are called upon to subscribe for, or procure subscription for, the Untaken Shares pursuant to their obligations under the Underwriting Agreement, this would increase the shareholding of Asia Link and parties acting in concert with it to or above 30 % of the issued share capital of the Company. The acquisition of voting rights by Asia Link under such circumstances will result in Asia Link being obliged to make a mandatory general offer for all the securities of the Company not already owned or agreed to be acquired by Asia Link and other members of the Concert Group under Rule 26 of the Takeovers Code, unless, amongst others, the Whitewash Waiver is obtained from the Executive and approved by the Independent Shareholders at the Open Offer EGM by way of poll.

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LETTER FROM PAN ASIA

An application has been made by Asia Link to the Executive for the grant of the Whitewash Waiver pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code. The Executive has indicated that the Whitewash Waiver will be granted and will be conditional upon, among other things, the approval of it by the Independent Shareholders at the Open Offer EGM by way of poll.

If the Whitewash Waiver is not granted by the Executive or the Whitewash Waiver is not approved by Independent Shareholders at the Open Offer EGM, the Open Offer will not become unconditional and will not proceed .

Having considered that (i) the approval of the Whitewash Waiver at the Open Offer EGM is one of the conditions precedents to implement the Open Offer (with the Bonus Issue); (ii) the terms of the Open Offer (with the Bonus Issue) are fair and reasonable to the Company and the Independent Shareholders as a whole; and (iii) success of the Open Offer (with the Bonus Issue) will improve the overall financial position of the Group, we are of the view that it is fair and reasonable for the Independent Shareholders to vote in favour of the Whitewash Waiver at the Open Offer EGM.

7. Risks associated with the Open Offer (with the Bonus Issue)

The Independent Shareholders face two types of risk which are associated with the Open Offer. The first type refers to the risk of possible dilution to the existing shareholding in the Company of those Qualifying Shareholders who choose not to subscribe for the Offer Shares.

The second type, which consists of two aspects, is the risk that the Open Offer may not proceed even if all the Qualifying Shareholders choose to subscribe for their entitlements under it. Details of these two types of risks are set out in the following paragraphs.

(a) Potential dilution effect on the shareholding interests of Independent Shareholders

Since the Open Offer is extended to all Qualifying Shareholders, they will be able to maintain their proportional interests in the Company if they elect to subscribe in full for their assured entitlements under the Open Offer. However, to those Qualifying Shareholders who choose not to take up their assured entitlements in full, their shareholding interests in the Company will be diluted, as can be seen in above Table 1, up to a maximum of approximately 75%, which nevertheless lies within the dilution range of the Comparables.

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LETTER FROM PAN ASIA

Having taken into account: (i) the Open Offer (with the Bonus Issue) will provide funding for the Group to develop and expand its money lending business; (ii) the Open Offer (with the Bonus Issue) will strengthen the capital base of the Group; (iii) the Open Offer (with the Bonus Issue) is on the basis that all Qualifying Shareholders have been offered the same opportunity to maintain their proportional interests in the Company and participate in the growth of the Company; (iv) the dilution caused by the Open Offer (with the Bonus Issue) is within the dilution range of the Comparables, as stated in the previous paragraph range; and (v) the discount of the Subscription Price (including the subscription ratio and the Bonus Issue) is to encourage the Qualifying Shareholders to participate in the Open Offer (with the Bonus Issue), we are of the view that the possible dilution effect on the Independent Shareholders is acceptable.

(b) The Open Offer may not proceed

(i) Non-fulfillment of the conditions precedent

Shareholders and potential investors should note that the Open Offer is conditional, inter alia, upon the fulfilment of the conditions set out in the section headed “Conditions of the Underwriting Agreement” in the Letter from the Board. In particular, the Open Offer is conditional upon, among others, the Capital Reorganisation becoming effective, the amendment of the Articles, the approval of the Open Offer and the Whitewash Waiver by the Independent Shareholders at the Open Offer EGM by way of poll, the Whitewash Waiver having been granted by the Executive and the Underwriting Agreement having become unconditional and not having been terminated. Accordingly, the Open Offer may or may not proceed.

Any dealing in the Shares up to the date on which all the conditions of the Open Offer are fulfilled will accordingly bear the risk that the Open Offer may not become unconditional or may not proceed. The Shareholders and potential investors of the Company should therefore exercise caution when dealing in the Shares. If in doubt about their position, they should consult their professional advisers.

(ii) Termination of the Underwriting Agreement

The Open Offer (with the Bonus Issue) will likewise not proceed if the Underwriters terminate the Underwriting Agreement in accordance with the terms set out in the section headed “Termination of the Underwriting Agreement” in the Letter from the Board. Such terms include, e.g., (i) changes in market conditions which may adversely affect the success of the Open Offer (with the Bonus Issue); (ii) changes in the Company’s prospects; and (iii) events of force majeure.

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LETTER FROM PAN ASIA

As it is common for underwriting agreements to be subject to conditions precedent clauses and termination clauses, we regard the provisions in the two sections in the Letter from the Board referred to above as normal commercial terms and, after reviewing the circulars of the Comparables, we are of the view that the provisions in those two sections are in line with common market practice.

RECOMMENDATION

Taking into account that:

the Group’s money lending business has generated relatively significant revenue for the Group since 2013;
due to the possible non-renewal of a revolving loan facility with a bank, the Group is in need of alternative long term finance to fund the expansion of its money lending business;
the net proceeds from the Open Offer (with the Bonus Issue) will improve the capital base, and reduce the interest payments, of the Group, and enhance the financial position of the Company for future strategic investments as and when such opportunities arise;
the Open Offer (with the Bonus Issue) would be a preferred method of equity financing as it will allow all the Qualifying Shareholders to maintain their proportionate interests in the Company and to participate in the future growth and development of the Company;
the Effective Subscription Price represents a deep discount to the average of the discounts with respect to the Comparables with a view to encouraging the Qualifying Shareholders to participate in the Open Offer (with the Bonus Issue).
the major terms of the Underwriting Agreement are in line with market practice;
the dilution effect is not prejudicial to the existing Shareholders’ interests in the Company if they choose to subscribe for their full entitlement of the Offer Shares under the Open Offer (with the Bonus Issue); and
the Open Offer (with the Bonus Issue) will enhance the net tangible assets value of the Group and improve the liquidity position of the Group,

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LETTER FROM PAN ASIA

and balancing in the scales the advantages of the Open Offer against its risks, we are of the view that, on balance, the terms of the Open Offer (with the Bonus Issue) (including the absence of an excess application arrangement) and the Underwriting Agreement, although not in the Company’s ordinary and usual course of business, are nevertheless on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned, and in the interest of the Company and the Independent Shareholders as a whole.

Accordingly, we advise the Independent Board Committee to recommend to the Independent Shareholders, as well as the Independent Shareholders, to vote in favour of the resolution(s) to approve the Open Offer (with the Bonus Issue) (including the absence of an excess application arrangement) and the Underwriting Agreement to be proposed at the Open Offer EGM.

In addition, based on our advice above, we consider the Whitewash Waiver to be fair and reasonable so far as the Independent Shareholders are concerned, and are in the interests of the Company and the Shareholders as a whole. As a result, we further advise the Independent Board Committee to recommend to the Independent Shareholders, as well as the Independent Shareholders, to vote in favour of the resolution to approve the Whitewash Waiver to be proposed at the Open Offer EGM.

Yours faithfully

For and on behalf of Pan Asia Corporate Finance Limited Billy C. W. Cheung Simon Harding Chairman Managing Director

– 79 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. THREE YEARS FINANCIAL SUMMARY

Set out below is a summary of the financial results and assets and liabilities of the Group for the three financial years ended 31 March 201 4 .

The financial results and assets and liabilities of the Group for the three financial years ended 31 March 201 4 were extracted from the annual results announcement of the Company for the year ended 31 March 2014 and the annual report of the Company for the year ended 31 March 2013 respectively.

The financial statements for the three financial years ended 31 March 201 4 were audited by Deloitte Touche Tohmatsu, the independent auditors of the Company. No qualification was made by the auditors of the Company in the issued statutory accounts of the Group for the three financial years ended 31 March 201 2, 201 3 and 201 4.

I – 1

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Results

For the three years ended 31 March 201 2, 201 3 and 201 4:

Revenue Other income Other gain and loss Loss before taxation Taxation Loss for the year from continuing operations Profit (loss) for the year from discontinued operations Loss for the year (Loss) profit for the year attributable to owners of the Company – from continuing operations – from discontinued operations Loss for the year attributable to owners of the Company Loss for the year attributable to non-controlling interests Loss per share From continuing and discontinued operations – Basic and diluted (HK cents) From continuing operations – Basic and diluted (HK cents)	Audited For the year ended 31 March 2014 2013 2012 HK$’000 HK$’000 HK$’000 40,323 – 140,218 5,523 2,7 60 2,634 (59,733) (71, 914) (248,474) (106,609) (130,841) (345,021) (256) – (4,012) (106,865) (130,841) (349,033) 94,406 (88,485) (29,425) (12,459) (219,326) (378,458) (106,821) (130,839) (349,033) 94,406 (88,485) (29,425) (12,415) (219,324) (378,458) (44) (2) – (12 ,459) (219,326) (378,458) (0.31) (5.58) (12.98) (2.69) (3.33) (11.97)	Audited For the year ended 31 March 2014 2013 2012 HK$’000 HK$’000 HK$’000 40,323 – 140,218 5,523 2,7 60 2,634 (59,733) (71, 914) (248,474) (106,609) (130,841) (345,021) (256) – (4,012) (106,865) (130,841) (349,033) 94,406 (88,485) (29,425) (12,459) (219,326) (378,458) (106,821) (130,839) (349,033) 94,406 (88,485) (29,425) (12,415) (219,324) (378,458) (44) (2) – (12 ,459) (219,326) (378,458) (0.31) (5.58) (12.98) (2.69) (3.33) (11.97)
		(378,458) (12.98) (11.97)

I – 2

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Assets and Liabilities

Total assets Total liabilities Non-controlling interests Equity attributable to owners of the Company	31 March 201 4 HK$’000 (Audited) 2,83 0,127 (2 76,270) (4,954) 2,548,903	31 March 2013 HK$’000 (Audited) 2,689,216 (241,913) (4,998) 2,442,305	31 March 2012 HK$’000 (Audited) 4,314,591 (1,580,030) –
			2,734,561

There were no dividends declared or paid for the years ended 31 March 201 2, 201 3 and 201 4 . There were no items that are exceptional because of size, nature or incidence during each of the years ended 31 March 201 2, 201 3 and 201 4 .

I – 3

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2014

Set out below are the audited financial statements of the Group for the year ended 31 March 2014 together with the accompanying notes as extracted from the annual results announcement of the Company for the year ended 31 March 2014.

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 MARCH 2014

NOTES Continuing operations Revenue 4 Other income 6 Other gain and loss 7 Administrative expenses Other expenses Finance costs 8 Loss before taxation Taxation 9 Loss for the year from continuing operations 10 Discontinued operations Profit (loss) for the year from discontinued operations 11 Loss for the year	2014 HK$’000 40, 323 5,523 (59,733) (78,486) – ( 14,236) (106,609) (256) (106,865) 94,406 (12,459)	2013 HK$’000 (Restated) – 2, 760 (71, 914) (55,798) (4,596) (1,293) (130,841) – (130,841) (88,485) (219,326)

I – 4

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Other comprehensive income: Items that will not be reclassified subsequently to profit or loss: Reclassification adjustments relating to foreign operations disposed of during the year Items that may be reclassified subsequently to profit or loss: Available-for-sale investments: – fair value changes – impairment loss recognised – reclassified to profit or loss upon disposal – reclassification adjustments relating to foreign operations dispos ed Exchange difference arising on translation of foreign operations Other comprehensive income (expense) for the year, net of tax Total comprehensive income (expense) for the year (Loss) profit for the year attributable to owners of the Company – from continuing operations – from discontinued operations Loss for the year attributable to owners of the Company Loss for the year from continuing operations attributable to non- controlling interests Total comprehensive income (expense) for the year attributable to: Owners of the Company Non-controlling interests Loss per share 12 From continuing and discontinued operations – Basic and diluted (HK cents) From continuing operations – Basic and diluted (HK cents) NOTE	(87,686) 193,626 24,613 (29,061) (2,126) 12,591 111,957 99,498 (106,821) 94,406 (12,415) (44) (12,459) 99,542 (44) 99,498 (0.31) (2.69) 2014 HK$’000	(120,505) (4, 011) 15,555 3,327 – 15, 458 (90, 176) (309, 502) (130,839) (88,485) (219,324) (2) (219,326) (309, 500) (2) (309, 502) (5.58) (3.33) 2013 HK$’000 (Restated)

I – 5

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 31 MARCH 2014

NOTES Non-current assets Property, plant and equipment Investment property Interests in associates Amounts due from associates Available-for-sale investments Financial assets designated at fair value through profit or loss Derivative financial instruments Loan receivables 14 Deposits Deferred tax assets Current assets Inventories Trade and bills receivables 13 Other receivables, deposits and prepayments Loan receivables 14 Consideration receivables 15 Investments held for trading Tax recoverable Pledged bank deposits Bank balances and cash Assets classified as held for sale 16 Current liabilities Trade and bills payables 17 Other payables, deposits received and accruals Secured notes 18 Borrowings 19 Tax payables Liabilities associated with assets classified as held for sale 16 Net current assets Total assets less current liabilities	2014 HK$’000 73,410 – – – 1,056,319 4,745 550,573 6,572 151,011 – 1,8 42,630 2,776 80,473 9,332 267,035 166,946 – – 44,613 416,322 9 87,497 – 9 87,497 24,748 8,866 – 21 0,000 18,656 26 2,270 – 26 2,270 725,227 2,567,857	2013 HK$’000 86,352 961 19 3,669 173,479 21,556 – 30,572 150,991 205
		467,804
		19,277 13,395 7,424 110,000 149,875 142 6,075 – 283,231
		589,419 1,631,993
		2,221,412
		7,832 21,112 122,582 – 23,804
		175,330 65,462
		240,792
		1,980,620
		2,448,424

I – 6

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Non-current liabilities Retirement benefits obligations Borrowings 19 Net assets Capital and reserves Share capital 20 Reserves Amount recognised in other comprehensive income and accumulated in equity relating to non-current assets classified as held for sale Equity attributable to owners of the Company Non-controlling interests Total equity NOTES	– 14,000 14,000 2,553,857 198,602 2,350,301 – 2,548,903 4,954 2,553,857 2014 HK$’000	1,121 – 2013 HK$’000
		1,121
		2,447,303

		196,527 2,180,597 65,181
		2,442,305 4,998
		2,447,303

I – 7

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2014

1. General

The Company was incorporated in the Cayman Islands on 30 September 2005 as an exempted company with limited liability under the Companies Law, Cap. 22 (Laws 3 of 1961, as consolidated and revised) of the Cayman Islands. The Company is a public limited company and its shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). The addresses of the registered office and principal place of business of the Company are disclosed in the Corporation Information section of the annual report.

Pursuant to the special resolution of the Company dated 27 September 2013, the name of the Company has been changed from Hao Tian Resources Group Limited to Hao Tian Development Group Limited with effect from 2 October 2013.

The principal activities of the Company are investment holding and provision of management service to its subsidiaries.

The Group’s consolidated financial statements are presented in Hong Kong dollars (“HK$”), which is also the functional currency of the Company.

I – 8

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. Application of new and revised Hong Kong Financial Reporting Standards (“HKFRSs”)

Application of new and revised HKFRSs

The Group has applied the following new and revised HKFRSs issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) for the first time in the current year:

Amendments to HKFRSs Annual improvements to HKFRSs 2009 – 2011 cycle Amendments to HKFRS 7 Disclosures – Offsetting financial assets and financial liabilities Amendments to HKFRS 10, Consolidated financial statements, joint HKFRS 11 and HKFRS 12 arrangements and disclosure of interests in other entities: Transition guidance HKFRS 10 Consolidated financial statements HKFRS 11 Joint arrangements HKFRS 12 Disclosure of interests in other entities HKFRS 13 Fair value measurement HKAS 19 (as revised in 2011) Employee benefits HKAS 27 (as revised in 2011) Separate financial statements HKAS 28 (as revised in 2011) Investments in associates and joint ventures Amendments to HKAS 1 Presentation of items of other comprehensive income HK(IFRIC) – INT 20 Stripping costs in the production phase of a surface mine

Except as described below, the application of the new and revised HKFRSs in the current year has had no material impact on the Group’s financial performance and positions for the current and prior years and/or on the disclosures set out in these consolidated financial statements.

I – 9

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

New and revised HKFRSs in issue but not yet effective

The Group has not early applied the following new and revised HKFRSs that have been issued but are not yet effective .

Amendments to HKFRS 10, Investment entities[1] HKFRS 12 and HKAS 27 Amendments to HKFR S 11 Accounting for acquisitions of interests in joint operations[6] Amendments to HKAS 16 and Clarification of acceptable methods of HKAS 38 depreciation and amortisation[6] Amendments to HKAS 19 Defined benefit plans: Employee contributions[2] Amendments to HKFRS 9 and Mandatory effective date of HKFRS 9 and HKFRS 7 transition disclosures[3] Amendments to HKAS 32 Offsetting financial assets and financial liabilities[1] Amendments to HKAS 36 Recoverable amount disclosures for nonfinancial assets[1] Amendments to HKAS 39 Novation of derivatives and continuation of hedge accounting[1] Amendments to HKFRSs Annual improvements to HKFRSs 2010 – 2012 cycle[4] Amendments to HKFRSs Annual improvements to HKFRSs 2011 – 2013 cycle[2] HKFRS 9 Financial instruments[3] HKFRS 14 Regulatory deferral accounts[5] HK(IFRIC) – INT 21 Levies[1]

1 Effective for annual periods beginning on or after 1 January 2014
2 Effective for annual periods beginning on or after 1 July 2014
3 Available for application – the mandatory effective date will be determined when the outstanding phases of HKFRS 9 are finalised
4 Effective for annual periods beginning on or after 1 July 2014, with limited exceptions
5 Effective for first annual HKFRS financial statements beginning on or after 1 January 2016 6 Effective for annual periods beginning on or after 1 January 2016

I – 10

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

HKFRS 9 “Financial instruments”

HKFRS 9 issued in 2009 introduces new requirements for the classification and measurement of financial assets. HKFRS 9 was subsequently amended in 2010 to include the requirements for the classification and measurement of financial liabilities and for derecognition, and further amended in 2013 to include the new requirements for hedge accounting.

Key requirements of HKFRS 9 are described as follows:

All recognised financial assets that are within the scope of HKAS 39 “Financial instruments: Recognition and measurement” are subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent reporting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.

The directors of the Company anticipate that the adoption of HKFRS 9 in the future may have a significant impact on the amounts reported in respect of the Group’s financial assets, for example, certain of the Group’s availablefor-sale investments currently measured at cost less impairment may have to be measured at fair value at the end of subsequent reporting periods, with changes in the fair value being recognised in profit or loss. However, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed.

HKFRS 12 “Disclosure of interests in other entities”

HKFRS 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the application of HKFRS 12 has resulted in more extensive disclosures in the consolidated financial statements.

I – 11

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

HKFRS 13 “Fair value measurement”

The Group has applied HKFRS 13 for the first time in the current year. HKFRS 13 establishes a single source of guidance for, and disclosures about, fair value measurements. The scope of HKFRS 13 is broad: the fair value measurement requirements of HKFRS 13 apply to both financial instrument items and non-financial instrument items for which other HKFRSs require or permit fair value measurements and disclosures about fair value measurements, subject to a few exceptions.

HKFRS 13 defines the fair value of an asset as the price that would be received to sell an asset (or paid to transfer a liability, in the case of determining the fair value of a liability) in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions. Fair value under HKFRS 13 is an exit price regardless of whether that price is directly observable or estimated using another valuation technique. Also, HKFRS 13 includes extensive disclosure requirements.

HKFRS 13 requires prospective application. In accordance with the transitional provisions of HKFRS 13, the Group has not made any new disclosures required by HKFRS 13 for the 201 3 comparative period . Other than the additional disclosures, the application of HKFRS 13 has not had any material impact on the amounts recognised in the consolidated financial statements.

Amendments to HKAS 1 “Presentation of items of other comprehensive income”

The Group has applied the amendments to HKAS 1 “Presentation of items of other comprehensive income”. Upon the adoption of the amendments to HKAS 1, the Group’s ‘statement of comprehensive income’ is renamed as the ‘statement of profit or loss and other comprehensive income’. Furthermore, the amendments to HKAS 1 require additional disclosures to be made in the other comprehensive income section such that items of other comprehensive income are grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss and (b) items that may be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis – the amendments do not change the option to present items of other comprehensive income either before tax or net of tax. The amendments have been applied retrospectively, and hence the presentation of items of other comprehensive income has been modified to reflect the changes. Other than the above mentioned presentation changes, the application of the amendments to HKAS 1 does not result in any impact on profit or loss, other comprehensive income and total comprehensive income.

I – 12

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The directors of the Company anticipate that the application of the other new and revised HKFRSs will have no material impact on the Group’s financial performance and positions for the current and prior years and/or on the disclosures set out in these consolidated financial statements.

3. Significant accounting policies

The consolidated financial statements have been prepared under the historical cost basis, except for certain financial instruments, which are measured at fair values .

The consolidated financial statements have been prepared in accordance with HKFRSs issued by the HKICPA. In addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange (“Listing Rules”) and by the Hong Kong Companies Ordinance.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods sold and services provided in the normal course of business, net of discounts and sales related taxes.

4. Revenue

Revenue represents interest income generated from lending of money to outside borrowers and income from rendering of services generated when the services are provided. An analysis of the Group’s revenue for the year from continuing operations is as follows:

Interest income generated from lending of money Service income generated from trading of commodities	2014 HK$’000 39,144 1,179 40,323	2013 HK$’000 – –
		–

I – 13

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5. Segment information

The Group is currently organised into below operating divisions:

(a) Money lending – Hao Tian Finance Company Limited
(b) Trading of commodities – Hao Tian Management (Hong Kong) Limited, Hao Tian Oil & Gas Development Group Limited and Hao Tian Hua Chen International Group Limited

The operating divisions are the basis of internal reports about components of the Group that are regularly reviewed by the executive directors of the Company, being the chief operating decision maker, in order to allocate resources to segments and to assess their performance.

Money lending has been regarded as a reportable segment of the Group during the current year. The Group obtained a HK$ 450,000,000 banking facility from a bank to develop money lending business. Of the total banking facility, an initial commitment of HK$ 200,000,000 has been approved by the bank and the remaining HK$ 250,000,000 is subject to the bank’s further approval after submission of request by the Group. The banking facility is secured by certain of the Group’s assets, including the Group’s available-forsale investments of HK$205,800,000, the entire issued share capital of Hao Tian Finance Company Limited and its immediate holding company, Guo Guang Limited, certain bank accounts of Hao Tian Finance Company Limited and a yacht of the Group. As at 31 March 2014, the Group has drawn HK$19 3,000,000 in respect of this banking facility.

Trading of commodities is another new business segment of the Group. In order to further diversify the Group’s business coverage of different industries, the Group has started indent trading of commodities. The Group obtained HK$ 70,000,000 banking facilities from banks to develop trading of commodities business. As at 31 March 2014, the banking facilities are secured by deposits of HK$40,000,000 and the Group has drawn HK$17,000,000 in respect of these banking facilities.

The Group’s operations in respect of sale of plastic and paper boxes for luxury consumer goods (“Package Box Operation”) and developing of underground coking coal mine, coal production and sale of coal (the Group’s “Inner-Mongolia Coal Mining Operation” and “Xinjiang Coal Mining Operation”) were discontinued during the current year. The segment information reported below does not include any amounts for the Group’s Package Box Operation, Inner-Mongolia Coal Mining Operation and Xinjiang Coal Mining Operation.

I – 14

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

No segment assets and liabilities are presented as the chief operating decision maker does not regularly review segment assets and liabilities.

Segment revenue and results

The following is an analysis of the Group’s revenue and results for continuing operations by operating and reportable segment.

For the year ended 31 March 2014

Segment revenue Less: Cost of commodities transactions Revenue as presented in the consolidated statement of profit or loss and other comprehensive income Segment results from continuing operations Other income Other gain and loss Central administration costs Finance costs Loss before taxation from continuing operations	Money lending HK$’000 39,144 – 39,144 39,144	Trading of commodities HK$’000 105,181 (104,002) 1,179 1,179	Consolidated HK$’000 144,325 (104,002) 40,323 40,323 5,523 (59,733) (78,4 8 6) ( 14,236) (106,60 9)

I – 15

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the year ended 31 March 2013 (Restated)

Segment revenue Segment results from continuing operations Other income Other gain and loss Central administration costs Other expenses Finance costs Loss before taxation from continuing operations 6. Other income Continuing operations Interest earned on bank deposits Interest earned on loan receivables ( other than money lending business) Sundry income Dividend income from available-for-sale investments	Money Trading of lending commodities HK$’000 HK$’000 – – – – 2014 HK$’000 1,085 1,113 3,028 297 5,523	Money Trading of lending commodities HK$’000 HK$’000 – – – – 2014 HK$’000 1,085 1,113 3,028 297 5,523	Consolidated HK$’000 – – 2,7 60 (71, 914) (55,798) (4,596) (1,293) (130,841) 2013 HK$’000 (Restated) 366 1,995 399 – 2,7 60

I – 16

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

7. Other gain and loss

Continuing operations Fair value (loss) gain on derivative financial instruments Fair value gain (loss) on secured notes Fair value gain (loss) on financial assets at FVTPL Loss on disposal of property, plant and equipment Gain (loss) on disposal of available-for-sale investments Net foreign exchange gain (loss) Impairment loss on available-for-sale investments 8. Finance costs Continuing operations Imputed interest expense on convertible notes Interest expense on borrowings – wholly repayable within five years – not wholly repayable within five years	2014 HK$’000 (49,534) 4,010 10,189 (57) 28,563 1,709 (54,613) (59,733) 2014 HK$’000 – 14,046 190 14,236	2013 HK$’000 (Restated) 43 (20,812) (30,872) (185) (3,327) (1,206) (15,555) (71, 914) 2013 HK$’000 (Restated) 1,293 – – 1,293

Note: During the year ended 31 March 2014, interest expense of HK$7,947,000 (2013: nil) was incurred for borrowings obtained solely for the Group’s lending of money business and trading of commodities which were wholly repayable within five years.

I – 17

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

9. Taxation

	2014	2013
	HK$’000	HK$’000
		(Restated)
Continuing operations
Underprovision in prior years:
Hong Kong	256	–

Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profit for both years. No provision for Hong Kong profits tax has been made for both years since there was no assessable profit for both years.

Taxation arising in other jurisdictions are calculated at the rates prevailing in the relevant jurisdictions.

10. Loss for the year from continuing operations

Continuing operations Loss for the year from continuing operations ha s been arrived at after charging: Auditor’s remuneration Depreciation of property, plant and equipment Operating lease rentals in respect of rented premises Staff costs: Directors’ emoluments Chief executive’s emoluments Other staff costs – salaries, bonus and other allowances – retirement benefit scheme contributions – share-based payments	2014 HK$’000 1,112 5,526 10, 199 2,885 2,818 21,159 901 1,767 29,530	2013 HK$’000 (Restated) 1,480 1,927 8,479
	2,885 2,818 21,159 901 1,767	4,606 3,755 11,401 336 6,471
	29,530	26,569

I – 18

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

11. Discontinued operations

The combined results of the discontinued operations (i.e. the Inner-Mongolia Coal Mining Operation, Xinjiang Coal Mining Operation and Package Box Operation) included in the loss for the year are set out below. The comparative loss and cash flows from discontinued operations have been re-presented to include the Package Box Operation, which was classified as discontinued operation in the current year.

Profit (loss) for the year from discontinued operations is analysed as follows: Revenue Cost of sales Other income, gain and loss Share of result of associates Distribution and selling costs Administrative expenses Written off of deposits for purchase of property, plant and equipment Other expenses Finance costs – interest on borrowings wholly repayable within five years Tax charge Gain on disposal of operations Attributable income tax expenses Profit (loss) for the year from discontinued operations	2014 HK$’000 161,445 (106,268) 6,274 8 (7,404) (39,283) – – (1,060) (7,722) 5,990 88,416 – 94,406	2013 HK$’000 (Restated) 145,510 (117,215) 4,237 18 (2,713) (44,293) (86,693) (266) (2,365) (2,203) (105,983) 141,619 (124,121) (88,485)

I – 19

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

12. Loss per share

From continuing and discontinued operations

The calculation of basic and diluted loss per share attributable to the owners of the Company is based on the following data:

Loss attributable to owners of the Company for the purposes of basic and diluted loss per share Number of shares: Weighted average number of ordinary shares for the purposes of basic and diluted loss per share	2014 HK$’000 (12,415) 2014 ’000 3,965,303	2013 HK$’000 (Restated) (219,324) 2013 ’000 3,927,700

From continuing operations

The calculation of basic and diluted loss per share from continuing operations attributable to the owners of the Company is based on the following data:

Loss for the year attributable to owners of the Company Add: (Profit) loss for the year from discontinued operations Loss for the purposes of calculating basic and diluted loss per share from continuing operations	2014 HK$’000 (12,415) (94,406) (106,821)	2013 HK$’000 (Restated) (219,324) 88,485 (130,839)

The denominators used are the same as those detailed above for basic and diluted loss per share from continuing and discontinued operations.

I – 20

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

From discontinued operations

Basic and diluted earnings per share from discontinued operations is HK2.38 cents (2013: loss of HK2.25 cents), based on the profit for the year from discontinued operations of HK$94,406,000 (2013: loss of HK$88,485,000) and the denominators detailed above for both basic and diluted loss per share from continuing operations.

For the year ended 31 March 2014 and 2013, the computation of diluted loss/earnings per share for both continuing and discontinued operations did not assume the exercise of the Company’s outstanding share options and warrants, since the assumed exercise would reduce loss per share from continuing operations.

13. OTHER CURRENT FINANCIAL ASSETS

Trade and bills receivables

Trade receivables Bills receivable Interest receivables in relation to money lending business Bills receivable arising from trading of commodities	2014 HK$’000 9,774 – 13,072 57,627 80,473	2013 HK$’000 13,178 217 – –
		13,395

The Group allows an average credit period of 30 to 60 days to its customers of sale of plastic and paper boxes for luxury consumer goods business, 90 days to its customers of trading of commodities business , 120 to 180 days to its customers of sale of coal. The aged analysis of trade and bills receivables presented based on the invoice date at the end of the reporting period, which approximated the respective revenue recognition dates, is stated as follows:

0 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days	2014 HK$’000 17,357 2,106 19,306 28,632 67,401	2013 HK$’000 9,351 2,533 1,006 505
		13,395

I – 21

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

14. Loan receivables

Non-current: Promissory note Interest Bearing ICube Bond Secured loan receivable from a third party, bearing interest at 20% per annum and repayable in year 2024 Current: Promissory note Secured, bearing interest at 36% per annum and repayable in year 2014 Secured, bearing interest at 22% per annum and repayable in year 2014 Secured, bearing interest at 15% per annum and repayable in year 2014 Secured, bearing interest at 25% per annum and repayable in year 2014 Secured, bearing interest at 30% per annum and repayable in year 2014 Secured, bearing interest at 24% per annum and repayable in year 2013 Unsecured, bearing interest at 30% per annum and repayable in year 2014 Unsecured, bearing interest at 20% per annum and repayable in year 2013	2014 HK$’000 – 5,572 1,000 6,572 25,000 57,000 100,000 6,000 20,000 10,535 – 48,500 – 267,035 273,607	2013 HK$’000 25,000 5,572 –
		30,572
		– – – – – – 50,000 – 60,000
		110,000
		140,572

I – 22

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

15. Consideration receivables

Consideration receivables from Menggang Group Disposal (Note i) Winbox Group Disposal (Note ii) Disposal of available-for-sale investments (Note iii)	2014 HK$’000 151,244 5,702 10,000 166,946	2013 HK$’000 149,875 – –
		149,875

Notes:

(i) Consideration receivable from disposal of the Menggang Group

On 7 September 2011, the Group entered into a sale and purchase agreement with an independent third party not connected with the Group, Inner-Mongolia Shuangxin Resources Group Co., Ltd. (the “Purchaser”). Pursuant to this sale and purchase agreement, the Group agreed to dispose of Wuhai City Menggang Industrial Development Co., Ltd. and its subsidiaries (collectively referred to as the “Menggang Group”) (the “Menggang Group Disposal”), which operated the Group’s coal mines in the Inner-Mongolia Autonomous Region in the PRC (the “Inner-Mongolia Coal Mining Operation”), for a cash consideration of RMB1,503,000,000 (“Total Consideration”). The Menggang Group Disposal was completed on 30 May 2012 . The Total Consideration shall be satisfied by four instalments: RMB781,560,000 by completion; RMB420,840,000 by 90 days subsequent to the completion; RMB225,450,000 by 180 days subsequent to the completion and the remaining RMB75,150,000 by fifteen months subsequent to the completion. On 19 November 2012, the Group and the Purchaser entered into a supplemental agreement in relation to the Menggang Group Disposal (“Supplemental Agreement”), pursuant to which the Group and the Purchaser agreed to reduce the Total Consideration by RMB75,000,000. Such reduction shall be settled by deducting the third installment by RMB40,000,000 and deducting the final installment by RMB35,000,000.

I – 23

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

On 6 December 2012, the Purchaser received a notice (the “Notice”) from the tax bureau of Wuhai City Hainan District in the Inner Mongolia Autonomous Region (the “Tax Bureau”), pursuant to which, the Tax Bureau requested the Purchaser to withhold additional business tax of RMB80 million. The directors of the Company are of the view that such additional business tax is not applicable to this transaction . Hence, the Group negotiated with the Tax Bureau and finally the Tax Bureau revoked the Notice on 3 April 2013. However, the Purchaser continues to withhold this RMB80 million .

On 16 May 2013, an arbitration was filed by the Group to China International Economic and Trade Arbitration Commission (the “Commission”) to claim this unsettled amount. On 8 August 2013, the Purchaser has provided its written defence to the arbitration court and argued that the Notice issued by the Tax Bureau did not clearly state that additional business tax is not applicable to this transaction and the Tax Bureau’s revocation the Notice could not remove the obligation for the Purchaser to withhold and pay the additional business tax.

During the year ended 31 March 2014, the final installment of the Total Consideration, RMB40,150,000 has been due. On 8 October 2013, the Purchaser filed a counter arbitration request to the Commission and claimed that the Group had failed to fulfil certain terms and obligations in accordance with the sale and purchase agreement. Due to this non-compliance, the Purchaser has to incur additional costs before the Menggang Group’s coal mines could be put into operations. Therefore, the Purchaser withheld the final installment of the Total Consideration and claimed an aggregate compensation amount of approximately RMB65 million (approximately HK$82 million).

In view of the Notice was revoked by Tax Bureau and the directors considered that the Group had fully complied with the terms of the sale and purchase agreement after taking legal advice, in the opinion of the directors, the Group has a meritorious ground on the arbitrations, so the risk of not recovering of the amount is minimal, and no impairment loss is required as at 31 March 2014.

As at 31 March 2014 and 2013, the remaining unsettled consideration of RMB120,150,000 (or equivalent to HK$151, 244,000; 31 March 2013: HK$149,875,000) was included in the consolidated statement of financial position as consideration receivable.

I – 24

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(ii) Consideration receivable from disposal of the Winbox Group

On 16 December 2013, the Group entered into a sale and purchase agreement with Goodwill International (Holdings) Limited ( “Goodwill International”) to dispose of the entire 100% equity interest of Winbox (BVI) Limited and its subsidiaries (the “Winbox Group”), which operated the Group’s Package Box Operation for a total consideration of HK$80,000,000 (the “Winbox Group Disposal”). The consideration will be satisfied by (i) HK$6,500,000 by way of cash payment at the date of the completion of the Winbox Group Disposal; (ii) cash consideration of HK$6,500,000 which will be settled at the first anniversary date of the date of the completion of the Winbox Group Disposal; and (iii) issue of 39,000,000 new shares ( the “Consideration Shares”) of HK$0.5 each at HK$1.7179 per share of Goodwill International, which represents approximately 7.54% of the enlarged equity interests of Goodwill International.

The Winbox Group Disposal was completed on 14 March 2014. As part of the cash consideration will be settled on 14 March 2015, fair value of this consideration receivable is estimated by using discounted cash flow method with imputed interest rate of 14% per annum at initial recognition and subsequently measured at amortised cost.

As at 31 March 2014, the carrying amount of the cash consideration was HK$5,702,000.

(iii) Consideration receivable from disposal of available-for-sale investments

During the year ended 31 March 2014, the Group disposed of its investment in an unlisted company at a consideration of HK$20,000,000. The consideration will be settled by four instalments: HK$5,000,000 by completion; HK$5,000,000 by 8 February 2014; HK$5,000,000 by 8 May 2014; and HK$5,000,000 by 8 August 2014. As at 31 March 2014, HK$10,000,000 was unsettled.

I – 25

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

16. Assets classified as held for sale

On 12 October 2012, the Group and Up Energy Mining Limited, an independent third party, entered into a sale and purchase agreement (“S&P Agreement”). Pursuant to the S&P Agreement, the Group conditionally agreed to dispose of its entire interest in Champ Universe Limited and its subsidiaries (collectively referred as the “Champ Universe Group”), which operates the Group’s coal mines in the Xinjiang Uygur Autonomous Region in the PRC (the “Xinjiang Coal Mining Operation”) and to assign HK$1.6 billion shareholder’s loan at a consideration of HK$1,580,000,000 subject to adjustments pursuant to the terms of the S&P Agreement (the “Champ Universe Disposal”).

The consideration shall be satisfied by: (i) issue of 367,500,000 shares of Up Energy Development Group Limited (“Up Energy”), ultimate holding company of Up Energy Mining Limited with its shares listed on the Stock Exchange, at an issue price of HK$2 per share (“Up Energy Share(s)”). However, if as at the third anniversary of the completion date of this disposal (“Third Anniversary Date”), the average closing price of the Up Energy Share for the five trading days immediately preceding and including the Third Anniversary Date is less than HK$2 per share, Up Energy shall allot and issue additional new Up Energy Share to the Company (the “Top-up Options”); (ii) HK$845,000,000 by way of cash payment; (iii) put option granted to the Company, pursuant to which, as at the Third Anniversary Date, the Company has the right to request Up Energy to arrange for the sale of the Up Energy Shares (the “Put Options”), up to a maximum of 140,000,000 shares by way of placing through an independent qualified placing agent nominated by Up Energy at a price to be agreed between Up Energy and such placing agent (“Placing Price”). If the Placing Price is less than HK$2.2 per share, Up Energy shall pay the shortfall as cash compensation to the Company.

On 28 June 2013 , the Champ Universe Disposal was completed.

I – 26

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

As at 31 March 2013, the assets and liabilities attributable to the Champ Universe Group to be sold within twelve months had been classified as assets and liabilities held for sale and were separately presented in the consolidated statement of financial position. The Xinjiang Coal Mining Operation for the current and prior years were presented as discontinued operation.

Assets of the Champ Universe Group: Property, plant and equipment Prepaid lease payments Mining rights Deposits Inventories Trade receivables Other receivables and prepayments Bank balances and cash Total assets classified as held for sale Liabilities of the Champ Universe Group: Trade payables Other payables Provision for restoration and environment costs Borrowings Deposit received from Up Energy Total liabilities associated with assets classified as held for sale	2013 HK$’000 33,328 1,898 1,568,091 7,973 13,917 1,980 775 4,031
	1,631,993

	2,039 13,252 6,802 33,369
	55,462 10,000
	65,462

I – 27

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

17. Other current financial liabilities

Trade and bills payables

Trade payables Bills payables arising from trading of commodities	2014 HK$’000 – 24,748 24,748	2013 HK$’000 7,832 –
		7,832

Trade and bills payables principally comprise amounts outstanding for trade purchases. The average credit period taken for trade purchases for sale of plastic and paper boxes for luxury consumer goods business is 30 to 60 days and for trading of commodities is 0 to 90 days. The aged analysis of trade and bills payables based on the invoice date at the end of the reporting period is stated as follows:

0 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days	2014 HK$’000 23,264 1,484 – – 24,748	2013 HK$’000 6,345 1,220 184 83
		7,832

I – 28

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

18. Secured notes

On 6 September 2012, the Company entered into an investment agreement (the “Investment Agreement”) with Cheer Hope Holdings Limited, an independent third party subscriber (the “Investor”), pursuant to which, the Company agreed to issue and the Investor agreed to subscribe for a note (the “Notes”) in the aggregate principal amount of up to US$40,000,000. Pursuant to the Investment Agreement, the Company also agreed to issue warrants to the Investor (the “Warrants”) to subscribe the Company’s ordinary shares with an aggregate exercise price of up to US$10,000,000 for a period of one year commencing from the date of issue of the Warrants. The subscription price of the Warrants had not been agreed by the Company and the Investor. On 4 October 201 2, the Company and the Investor entered into an agreement, pursuant to which, the date to agree on the subscription price of the Warrants was extended to 31 December 2012. On 24 December 201 2, the Company and the Investor further entered into an agreement (the “Supplementary Investment Agreement”), pursuant to which, the Company and the Investor agreed that the Warrants would not be issued and the Company’s obligation to issue the Warrants was released.

The maturity date of the Notes was one year after the issue date. The Notes bore fixed interest rate at 17% per annum. The Notes might be early redeemed in whole or in part by the Company at 100% of the principal amount of the Notes to be redeemed and together with all accrued interest.

The Notes were secured by equity charges of certain subsidiaries of the Company.

On 12 September 2012, the Company issued the Notes with principal amount of US$16,000,000 (equivalent to HK$123,880,000) for cash proceeds of HK$113,358,000. The Group designated the Notes as financial liabilities at FVTPL at initial recognition.

On 3 April 2013, the Company issued the remaining portion of the Notes with principal amount of US$24,000,000 (equivalent to HK$185,820,000) for cash proceeds of HK$170,210,000. On 8 May 2013, the Company fully redeemed the entire Notes (including the principal amount of US$16,000,000 issued at 31 March 2013) by cash of HK$293,715,000 with fair value gain of HK$4,010,000 recognised in profit or loss.

I – 29

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

19. Borrowings Bank overdrafts – secured Bank loans – secured Other borrowings – unsecured 20. Share capital Ordinary shares of HK$0.05 each Authorised: At 1 April 2012, 31 March 2013 and 2014 Issued and fully paid: At 1 April 2012 Shares issued upon exercise of warrants At 31 March 2013 Share issued upon exercise of warrants At 31 March 2014	2014 HK$’000 17,000 19 3,000 14,000 22 4,000 Number of shares 10,000,000,000 3,927,535,804 3,000,000 3,930,535,804 41,500,000 3,972,035,804	2013 HK$’000 – – –
		–

		Share capital HK$’000 500,000

		196,377 150
		196,527 2,075
		198,602

I – 30

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

Set out below are the audited financial statements of the Group for the year ended 31 March 2013 together with the accompanying notes as extracted from the annual report of the Company for the year ended 31 March 2013.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 March 2013

NOTES Continuing operations Revenue 7 Cost of sales Gross profit Other income 9 Other gain and loss 10 Share of results of associates Distribution and selling costs Administrative expenses Other expenses Finance costs 11 Loss before taxation Taxation 12 Loss for the year from continuing operations 13 Discontinued operations Loss for the year from discontinued operations 32 Loss for the year Other comprehensive income Exchange difference arising on translation of foreign operations Reclassification adjustments relating to foreign operation disposed of during the year Available-for-sale investments: – fair value changes – impairment loss recognised – reclassified to profit or loss upon disposal Other comprehensive (expense) income for the year, net of tax Total comprehensive expense for the year	2013 HK$’000 112,513 (90,405) 22,108 4,353 (71,890) 18 (2,319) (79,673) (4,596) (1,293) (133,292) (2,203) (135,495) (83,831) (219,326) 15,458 (120,505) (4,011) 15,555 3,327 (90,176) (309,502)	2012 HK$’000 (Restated) 140,218 (104,907) 35,311 2,634 (248,474) – (3,419) (73,254) (8,817) (49,002) (345,021) (4,012) (349,033) (29,425) (378,458) 96,256 – (289) 715 – 96,682 (281,776)

I – 31

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Loss for the year attributable to owners of the Company: – from continuing operations – from discontinued operations Loss for the year attributable to owners of the Company Loss for the year from continuing operations attributable to non-controlling interests Total comprehensive expense for the year attributable to: Owners of the Company Non-controlling interests Loss per share 17 From continuing and discontinued operations – Basic and diluted (HK cents) From continuing operations – Basic and diluted (HK cents) NOTES	(135,493) (83,831) (219,324) (2) (219,326) (309,500) (2) (309,502) (5.58) (3.45) 2013 HK$’000	(349,033) (29,425) (378,458) – (378,458) (281,776) – (281,776) (12.98) (11.97) 2012 HK$’000 (Restated)

I – 32

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF FINANCIAL POSITION At 31 March 2013

NOTES Non-current assets Property, plant and equipment 18 Prepaid lease payments 19 Investment property 20 Mining rights 21 Interests in associates 22 Amounts due from associates 22 Available-for-sale investments 23 Financial assets designated at fair value through profit or loss 24 Loan receivables 29 Deposits 25 Deferred tax assets 26 Current assets Inventories 27 Trade receivables 28 Bills receivable 28 Other receivables, deposits and prepayments 28 Loan receivables 29 Consideration receivable 40 Investments held for trading 30 Prepaid lease payments 19 Tax recoverable Bank balances and cash 28 Assets classified as held for sale 31 Current liabilities Trade payables 33 Other payables, deposits received and accruals 33 Secured notes 34 Convertible notes 35 Embedded derivatives 35 Tax payables Liabilities associated with assets classified as held for sale 31	2013 HK$’000 86,352 – 961 – 19 3,669 173,479 21,556 30,572 150,991 205 467,804 19,277 13,178 217 7,424 110,000 149,875 142 – 6,075 283,231 589,419 1,631,993 2,221,412 7,832 21,112 122,582 – – 23,804 175,330 65,462	2012 HK$’000 48,808 1,886 993 1,551,983 – – 11,212 – – 95,757 205
		1,710,844
		26,126 23,034 – 12,752 – – 118 104 4,903 44,040
		111,077 2,492,670
		2,603,747
		11,157 29,002 – 638,056 43 4,285
		682,543 888,812

I – 33

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Net current assets Total assets less current liabilities Non-current liabilities Retirement benefits obligations 36 Provision for restoration and environment costs 37 Net assets Capital and reserves Share capital 38 Reserves 39 Amount recognised in other comprehensive income and accumulated in equity relating to non- current assets classified as held for sale Equity attributable to owners of the Company Non-controlling interests Total equity NOTES	240,792 1,980,620 2,448,424 1,121 – 1,121 2,447,303 196,527 2,180,597 65,181 2,442,305 4,998 2,447,303 2013 HK$’000	1,571,355 2012 HK$’000
		1,032,392
		2,743,236

		1,386 7,289
		8,675
		2,734,561

		196,377 2,425,618 112,566
		2,734,561 –
		2,734,561

I – 34

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

			Total	equity	HK$’000		1,799,835	(378,458)	96,682	(281,776)		706,169	–		304,884	6,547	186,717		(5,866)	(216)	–	–	18,267	2,734,561	(219,326)	(90,176)	(319,502)	–	7,855	(256)	458	5,000	–	–	–	9,187	2,447,303
		Non-	controlling	interests	HK$’000		–	–	–	–		–	–		–	–	–		–	–	–	–	–	–	(2)	–	(2)	–	–	–	–	5,000	–	–	–	–	4,998
Total equity	attributable	to owners	of the	Company	HK$’000		1,799,835	(378,458)	96,682	(281,776)		706,169	–		304,884	6,547	186,717		(5,866)	(216)	–	–	18,267	2,734,561	(219,324)	(90,176)	(309,500)	–	7,855	(256)	458	–	–	–	–	9,187	2,442,305
			Accumulated	losses	HK$’000		(430,295)	(378,458)	–	(378,458)		–	–		–	–	–		–	–	133	168,084	–	(640,536)	(219,324)	–	(219,324)	6,331	–	–	–	–	6	(1,749)	136,800	–	(718,472)
			Translation	reserve	HK$’000		85,700	–	96,256	96,256		–	–		–	–	–		–	–	–	–	–	181,956	–	(105,047)	(105,047)	–	–	–	–	–	–	–	–	–	76,909
			Special	reserve	HK$’000	(Note b)	(5,754)	–	–	–		–	–		–	–	–		–	–	–	–	–	(5,754)	–	–	–	–	–	–	–	–	–	–	–	–	(5,754)
		Asset	revaluation	reserve	HK$’000		1,400	–	426	426		–	–		–	–	–		–	–	–	–	–	1,826	–	14,871	14,871	–	–	–	–	–	–	–	–	–	16,697
		Share	option	reserve	HK$’000		16,585	–	–	–		–	–		–	–	–		–	–	(133)	–	18,267	34,719	–	–	–	–	–	–	–	–	(6)	–	–	9,187	43,900
		Convertible	note equity	reserve	HK$’000		–	–	–	–		–	–		304,884	–	–		–	–	–	(168,084)	–	136,800	–	–	–	–	–	–	–	–	–	–	(136,800)	–	–
		Safety and	maintenance	reserve	HK$’000	(Note c)	–	–	–	–		–	–		–	–	–		–	–	–	–	–	–	–	–	–	–	–	–	–	–	–	1,749	–	–	1,749
		Statutory	surplus	reserve	HK$’000	(Note a)	3,539	–	–	–		–	–		–	–	–		–	–	–	–	–	3,539	–	–	–	–	–	–	–	–	–	–	–	–	3,539
			Warrant	reserve	HK$’000		–	–	–	–		–	–		–	6,547	–		–	(216)	–	–	–	6,331	–	–	–	(6,331)	7,855	(256)	(29)	–	–	–	–	–	7,570
			Share	premium	HK$’000		2,008,087	–	–	–		–	659,091		–	–	157,991		(5,866)	–	–	–	–	2,819,303	–	–	–	–	–	–	337	–	–	–	–	–	2,819,640
			Convertible	shares	HK$’000		–	–	–	–		706,169	(706,169)		–	–	–		–	–	–	–	–	–	–	–	–	–	–	–	–	–	–	–	–	–	–
			Share	capital	HK$’000		120,573	–	–	–		–	47,078		–	–	28,726		–	–	–	–	–	196,377	–	–	–	–	–	–	150	–	–	–	–	–	196,527
							At 1 April 2011	Loss for the year	Other comprehensive income	Total comprehensive expense for the year	Issue of convertible shares for acquisition assets	through acquisition subsidiaries	Issue of new shares upon conversion of convertible shares	Issue of convertible note for acquisition of	assets through purchase of subsidiaries	Issue of warrants	Issue of new shares upon placing	Transaction costs attributable to issue of	new shares upon placing	Transaction cost attributable to issuance of warrants	Transfer upon forfeiture of share options	Transfer upon redemption	Recognition of equity-settled share-based payments	At 31 March 2012	Loss for the year	Other comprehensive income (expense)	Total comprehensive income (expense) for the year	Warrants matured	Issue of warrants	Transaction cost attributable to issuance of warrants	Issue of new shares upon exercise of warrants	Incorporation of a non-wholly owned subsidiary	Transfer upon forfeiture of share options	Appropriation of safety and maintenance reserve	Transfer upon repayment of convertible notes	Recognition of equity-settled share-based payments	At 31 March 2013

I – 35

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes:

(a) As stipulated by the relevant laws and regulations of the People’s Republic of China (“PRC”), before distribution of the net profit each year, the Group’s subsidiaries established in the PRC shall set aside 10% of its net profit after taxation to the statutory surplus reserve. The reserve fund can only be used, upon approval by the board of directors of these PRC established subsidiaries and by the relevant authority, to offset accumulated losses or increase capital. During the year ended 31 March 2013 and 2012, there was no transfer from retained profits to the statutory reserve since the Group’s PRC subsidiaries incurred net loss.
(b) Special reserve of HK$5,754,000 represents the difference between the nominal amount of share capital issued by Winbox (BVI) Limited and the Company and the nominal amount of the share capital of the acquired subsidiaries and Winbox (BVI) Limited respectively arisen from a group reorganisation occurred in prior years.
(c) Pursuant to the relevant PRC regulations for coal mining business, provision for production maintenance, production safety and other related expenditures are accrued by a subsidiary engaged in mining operation at fixed rates based on coal production volume (the “maintenance and productions fund”). According to the relevant rules, such funds will be specifically utilised for the transformation costs of the coal mine industry, for the land restoration and environmental cost, and for improvements of safety at the mines, and is not available for distribution to shareholders. Upon incurring qualifying expenditures, an equivalent amount is transferred from maintenance and productions fund to accumulated losses.

I – 36

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 March 2013

	2013	2012
	HK$’000	HK$’000
OPERATING ACTIVITIES
Loss for the year	(219,326)	(378,458)
Adjustments for:
Income tax	2,203	3,735
Interest income	(3,039)	(1,550)
Finance costs	3,658	49,002
Amortisation of mining rights	992	556
Depreciation of property, plant and
equipment and investment property	6,083	8,098
Release of prepaid lease payments	706	734
Impairment loss on available-for-sale
investments	15,555	715
Allowance for of inventories	11,574	–
Share of results of associates	(18)	–
Written off of deposits paid for
property, plant and equipment	86,693	–
Share-based payments	9,187	18,267
Estimation adjustment on restoration
and environmental costs	(1,118)	–
Unwinding of discounting effect on
restoration and environmental costs	584	1,020
Loss (gain) on disposal of property,
plant and equipment	525	(1,560)
Loss on disposal of available-for-sale
investments	3,327	999
Loss on redemption of convertible
note/re-measurement of debt
components of convertible notes	–	426,139
Fair value gain on derivative
financial instruments	(43)	(180,839)
Fair value loss on secured notes	20,812	–
Fair value loss on financial
assets designated at fair value
through profit or loss	30,872	–
Gain on disposal of subsidiaries	(141,619)	–
Withholding tax charged
on disposal of subsidiaries	124,121	–

I – 37

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Operating cash flows before movements in working capital Increase in inventories Decrease (increase) in trade receivables (Increase) decrease in bills receivable Increase in other receivables, deposits and prepayments (Increase) decrease in investments held for trading Decrease in trade payables Decrease in other payables, deposits received and accruals Cash used in operations Income tax paid NET CASH USED IN OPERATING ACTIVITIES INVESTING ACTIVITIES Purchases of property, plant and equipment Deposits paid for purchase of property, plant and equipment Deposit paid for purchase of a land use right 25 Deposit received for the Proposed Disposal (as defined in note 31b) Proceeds from disposal of property, plant and equipment Placement in pledged bank deposit Purchase of financial assets designated at fair value through profit or loss Proceeds from disposal of a financial asset designated at fair value through profit or loss Purchases of available-for-sale investments Incorporation of associates Advance to associates Addition of loan receivables Net cash from a disposal of subsidiaries 40 Proceeds from disposal of available-for- sale investments Interest received Net cash used in acquisition of assets through purchase of subsidiaries 41 NET CASH FROM (USED IN) INVESTING ACTIVITIES NOTES	(48,271) (18,562) 7,889 (217) (3,363) (24) (1,298) (2,535) (66,381) (2,388) (68,769) (91,915) – (150,000) 10,000 300 (890) (78,000) 20,000 (176,350) (1) (3,669) (135,000) 1,374,370 10,072 1,044 – 779,961 2013 HK$’000	(53,142) (1,307) (2,826) 347 (14,866) 66 (4,426) (12,248) (88,402) (4,611) (93,013) (114,481) (13,941) – – 8,449 (924) – – – – – – – 561 1,550 273 (118,513) 2012 HK$’000

I – 38

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

FINANCING ACTIVITIES Interest paid Repayment/redemption of convertible bonds Net proceeds from issue of warrants The Settlement Fund received (as defined in note 31a) Bank deposits in special purpose bank account included in assets classified as held for sale Cash withdrawal from bank deposits in a special purpose bank account Proceeds from issue of secured notes Interest paid for secured notes Raised of borrowing Capital injected from a non-controlling shareholder of a subsidiary Net proceeds from placement of new shares Net proceeds from issue of new shares upon exercise of warrants NET CASH (USED IN) FROM FINANCING ACTIVITIES NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR EFFECT OF FOREIGN EXCHANGE RATE CHANGES CASH AND CASH EQUIVALENTS AT END OF THE YEAR CASH AND EQUIVALENTS REPRESENTED BY Bank balances and cash Bank balances and cash included in a disposal group classified as held for sale	(2,365) (639,349) 7,599 – – 21,832 113,358 (10,548) 33,053 5,000 – 487 (470,933) 240,259 46,971 32 287,262 283,231 4,031 287,262 2013 HK$’000	(1,253) (317,000) 6,331 365,190 (27,554) – – – – – 180,851 – 206,565 (4,961) 48,676 3,256 46,971 44,040 2,931 46,971 2012 HK$’000

I – 39

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 March 2013

1. General

The principal activities of the Company are investment holding and provision of management service to its subsidiaries. The principal activities of its subsidiaries are set out in note 48.

The Group’s consolidated financial statements are presented in Hong Kong dollars (“HK$”), which is also the functional currency of the Company.

2. Application of new and revised Hong Kong Financial Reporting Standards (“HKFRSs”)

In the current year, the Group has applied the following amendments to HKFRSs issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

Amendments to HKAS 12 Deferred tax: Recovery of underlying assets Amendments to HKFRS 7 Financial instruments: Disclosures – Transfers of financial assets

The application of the amendments to HKFRSs in the current year has had no material impact on the Group’s financial performance and positions for the current and prior years and/or on the disclosures set out in these consolidated financial statements.

I – 40

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

New and revised Standards and Interpretations issued but not yet effective

The Group has not early applied the following new and revised HKFRSs that have been issued but are not yet effective:

Amendments to HKFRSs

Annual improvements to HKFRSs 2009 – 2011 cycle[1] Disclosures – Offsetting financial assets and financial liabilities[1] Mandatory effective date of HKFRS 9 and transition disclosures[3] Consolidated financial statements, joint arrangements and disclosure of interests in other entities: Transition guidance[1] Investment entities[[2]]

Amendments to HKFRS 7

Amendments to HKFRS 9 and HKFRS 7 Amendments to HKFRS 10, HKFRS 11 and HKFRS 12

Amendments to HKFRS 10, Investment entities[[2]] HKFRS 12 and HKAS 27 HKFRS 9 Financial instruments[3] HKFRS 10 Consolidated financial statements[1] HKFRS 11 Joint arrangements[1] HKFRS 12 Disclosure of interests in other entities[1] HKFRS 13 Fair value measurement[1] HKAS 19 (as revised in 2011) Employee benefits[1] HKAS 27 (as revised in 2011) Separate financial statements[1] HKAS 28 (as revised in 2011) Investments in associates and joint ventures[2] Amendments to HKAS 1 Presentation of items of other comprehensive income[4] Amendments to HKAS 32 Offsetting financial assets and financial liabilities[2] HK(IFRIC) – INT 20 Stripping costs in the production phase of a surface mine[1]

1 Effective for annual periods beginning on or after 1 January 2013.

2 Effective for annual periods beginning on or after 1 January 2014.

3 Effective for annual periods beginning on or after 1 January 2015.

4 Effective for annual periods beginning on or after 1 July 2012.

I – 41

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

HKFRS 9 Financial instruments

HKFRS 9 issued in 2009 introduces new requirements for the classification and measurement of financial assets. HKFRS 9 amended in 2010 includes the requirements for classification and measurement of financial liabilities and for derecognition.

Under HKFRS 9, all recognised financial assets that are within the scope of HKAS 39 “Financial instruments: Recognition and measurement” are subsequently measured at either amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent accounting periods.

In relation to financial liabilities, the significant change relates to financial liabilities that are designated as at fair value through profit or loss (“FVTPL”). Specifically, under HKFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Under HKAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was presented in profit or loss.

The directors anticipate that HKFRS 9 will be adopted in the Group’s consolidated financial statements for financial year ending 31 March 2016 and that the application of this new Standard may mainly affect the classification and measurement of the Groups’ available-for-sale investments.

I – 42

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

New and revised standards on consolidation, joint arrangements, associates and disclosures

In June 2011, a package of five standards on consolidation, joint arrangements, associates and disclosures was issued, including HKFRS 10, HKFRS 11, HKFRS 12, HKAS 27 (as revised in 2011) and HKAS 28 (as revised in 2011).

Key requirements of HKFRS 10 and HKFRS 12 are described below.

HKFRS 10 replaces the parts of HKAS 27 “Consolidated and separate financial statements” that deal with consolidated financial statements. HK (SIC) – INT 12 “Consolidation – special purpose entities” will be withdrawn upon the effective date of HKFRS 10. HKFRS 10 includes a new definition of control that contains three elements: (a) power over an investee, (b) exposure, or rights, to variable returns from its involvement with the investee, and (c) the ability to use its power over the investee to affect the amount of the investor’s returns. Extensive guidance has been added in HKFRS 10 to deal with complex scenarios.

HKFRS 12 is a disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the disclosure requirements in HKFRS 12 are more extensive than those in the current standards.

In July 2012, the amendments to HKFRS 10, HKFRS 11 and HKFRS 12 were issued to clarify certain transitional guidance on the application of these five HKFRSs for the first time.

These five standards, together with the amendments relating to the transitional guidance, are effective for the Group for annual period beginning on 1 April 2013. The directors anticipate that the application of these five standards would not have significant impact on the amounts reported in the consolidated financial statements.

I – 43

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. Significant accounting policies

The consolidated financial statements have been prepared under the historical cost basis, except for certain financial instruments, which are measured at fair values, as explained in the accounting policies set out below.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

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

Non-controlling interests in subsidiaries are presented separately from the Group’s equity therein.

Allocation of total comprehensive income to non-controlling interests

Total comprehensive income and expense of a subsidiary is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

I – 44

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Changes in the Group’s ownership interests in existing subsidiaries

When the Group loses control of a subsidiary, it (i) derecognises the assets and liabilities of the subsidiary at their carrying amounts at the date when control is lost, (ii) derecognises the carrying amount of any non-controlling interests in the former subsidiary at the date when control is lost (including any components of other comprehensive income attributable to them), and (iii) recognises the aggregate of the fair value of the consideration received and the fair value of any retained interest, with any resulting difference being recognise as a gain or loss in profit or loss attributable to the Group. When assets of the subsidiary are carried at revalued amounts or fair values and the related cumulative gain or loss has been recognised in other comprehensive income and accumulated in equity, the amounts previously recognised in other comprehensive income and accumulated in equity are accounted for as if the Group had directly disposed of the related assets (i.e. reclassified to profit or loss or transferred directly to retained earnings as specified by applicable HKFRSs).

Investments in associates

An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting. The financial statements of associates used for equity accounting policies are prepared using uniform accounting policies as those of the Group for like transactions and events in similar circumstances. Under the equity method, investments in associates are initially recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group’s share of the profit or loss and other comprehensive income of the associates. When the Group’s share of losses of an associate exceeds the Group’s interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of that associate.

I – 45

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The requirements of HKAS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group’s investment in an associate. When necessary, the entire carrying amount of the investment is tested for impairment in accordance with HKAS 36 “Impairment of Assets” as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with HKAS 36 to the extent that the recoverable amount of the investment subsequently increases.

Revenue recognition

Revenue from sales of goods is recognised when the goods are delivered and title has passed.

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of relevant lease.

Property, plant and equipment

Property, plant and equipment including land and buildings held for use in the production or supply of goods or services, or for administrative purposes (other than freehold land and construction in progress) are stated in the consolidated statement of financial position at cost less subsequent accumulated depreciation and accumulated impairment losses.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Depreciation is recognised so as to write off the cost of items of property, plant and equipment, other than freehold land, construction in progress and mining structures, over their estimated useful lives and after taking into account of their estimated residual value, using the straight-line method.

Mining structures (including the main and auxiliary mine shafts and underground tunnels) are depreciated on the units of production method utilising only recoverable coal reserves as the depletion base.

Freehold land is carried at cost less any recognised impairment loss.

Construction in progress includes property, plant and equipment in the course of construction for production or for its own use purposes. Construction in progress is carried at cost less any recognised impairment loss. Cost comprises direct costs of construction including borrowing costs attributable to the construction during the period of construction. Construction in progress is classified to the appropriate category of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the derecognition of the asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

Investment properties

Investment properties are properties held to earn rentals and/or for capital appreciation.

Investment properties are initially measured at cost, including any directly attributable expenditure. When an owner-occupied property becomes an investment property, the cost and accumulated depreciation of the owner-occupied property at the date of transfer are transferred to investment property. Subsequent to initial recognition, investment properties are stated at cost less subsequent accumulated depreciation and any accumulated impairment losses. Depreciation is recognised so as to write off the cost of investment properties over their estimated useful lives and after taking into account of their residual values, using the straight-line method.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposals. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the profit or loss in the year in which the item is derecognised.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as lessor

Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised as an expense on a straight-line basis over the lease term.

The Group as lessee

Operating leases are recognised as expenses on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are recognised as a reduction of rental expense over the lease term on a straight-line basis.

Leasehold land and building

When a lease includes both land and building elements, the Group assesses the classification of each element as a finance or an operating lease separately based on the assessment as to whether substantially all the risks and rewards incidental to ownership of each element have been transferred to the Group, unless it is clear that both elements are operating leases, in which case the entire lease is classified as an operating lease. Specifically, the minimum lease payments (including any lumpsum upfront payments) are allocated between the land and the building elements in proportion to the relative fair values of the leasehold interests in the land element and building element of the lease at the inception of the lease.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

To the extent the allocation of the lease payments can be made reliably, interest in leasehold land that is accounted for as an operating lease is presented as prepaid lease payments in the consolidated statement of financial position and is amortised over the lease term on a straight-line basis. When the lease payments cannot be allocated reliably between the land and building elements, the entire lease is generally classified as a finance lease and accounted for as property, plant and equipment.

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recorded in the respective functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are recognised in profit or loss in the period in which they arise. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for exchange differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in other comprehensive income, in which cases, the exchange differences are also recognised directly in other comprehensive income.

For the purpose of presenting the consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into the presentation currency of the Group (i.e. HK$) at the rate of exchange prevailing at the end of the reporting period, and their income and expenses are translated at the average exchange rates for the year, unless exchange rates fluctuate significantly during the period, in which case, the exchange rates prevailing at the dates of transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity (the translation reserve). Such exchange differences are recognised in profit or loss in the period in which the foreign operation is disposed of.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

On the disposal of a foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Company are reclassified to profit or loss. In addition, in relation to a partial disposal of a subsidiary that does not result in the Group losing control over the subsidiary, the proportionate share of accumulated exchange differences are reattributed to non-controlling interests and are not recognised in profit or loss. For all other partial disposals (i.e. partial disposals of associates or jointly controlled entities that do not result in the Group losing significant influence or joint control), the proportionate share of the accumulated exchange differences is reclassified to profit or loss.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Retirement benefit costs

Payments to the Group’s defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions.

The Group also operates a defined benefit retirement benefit plan. The cost of providing benefits is dependent on the length of services and the obligation arises when the services are rendered. Measurement of that obligation reflects the probability that payment will be required and the length of time of which payment is expected to be made.

The amount recognised in the consolidated statement of financial position represents the present value of the defined benefit obligation.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from “profit before tax” as reported in the consolidated statement of comprehensive income because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax base used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are generally recognised for all deductible temporary difference to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of the reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax is recognised in profit or loss, except when it relates to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax is also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

Mining rights

Mining rights acquired in a business combination are identified and recognised separately from goodwill where they satisfy the definition of an intangible asset and their fair values can be measured reliably. The cost of such mining rights is their fair value at the acquisition date. Mining rights acquired separately are initially measured at cost.

Subsequent to initial recognition, mining rights acquired in a business combination or acquired separately with finite useful lives are carried at costs less accumulated amortisation and any accumulated impairment losses. Amortisation for mining rights with finite useful lives is provided on the units of production method utilising only recoverable coal reserves as the depletion base.

Impairment losses on non-financial assets

At the end of the reporting period, the Group reviews the carrying amounts of its non-financial assets with finite useful lives to determine whether there is any indication 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 the impairment loss, if any. In addition, intangible assets with indefinite useful lives are tested for impairment annually, and whenever there is an indication that they may be impaired. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Costs of inventories are calculated using the weighted average method. Net realisable value represents the estimated selling price less all estimated costs to completion and costs necessary to make the sale.

Non-current assets held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the non-current asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale.

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell.

Financial instruments

Financial assets and financial liabilities are recognised on the consolidated statement of financial position when a group entity becomes a party to the contractual provisions of the instrument.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets

The Group’s financial assets are classified into one of three categories, including financial assets at fair value through profit or loss (“FVTPL”), loans and receivables and available-for-sale financial assets. The classification depends on the nature and purpose of the financial assets and it is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

Interest income is recognised on an effective interest basis for debt instruments, other than those financial assets classified as FVTPL, of which interest income is included in net gains or losses.

Financial assets at fair value through profit or loss

Financial assets at FVTPL has two subcategories, including financial assets held for trading and those designated as at FVTPL on initial recognition.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

A financial asset is classified as held for trading if:

it has been acquired principally for the purpose of selling in the near future; or
it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.

A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if:

such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
it forms part of a contract containing one or more embedded derivatives, and HKAS 39 permits the entire combined contract (asset or liability) to be designated as at FVTPL.

Financial assets at FVTPL are measured at fair value, with changes in fair value arising from remeasurement recognised directly in profit or loss in the period in which they arise. The net gain or loss recognised in profit or loss includes any dividend or interest earned on the financial assets.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including deposits, amounts due from associates, trade receivables, bills receivable, other receivables, loan receivables, consideration receivable, bank balances and cash) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment loss on financial assets below).

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated or not classified as financial assets at FVTPL, loans and receivables or held-tomaturity investments. Equity and debt securities held by the Group that are classified as available-for-sale and are traded in an active market are measured at fair value at the end of each reporting period. Changes in the carrying amount of availablefor-sale monetary financial assets relating to interest income calculated using the effective interest method and dividends on available-for-sale equity investments are recognised in profit or loss. Other changes in the carrying amount of available-forsale financial assets are recognised in other comprehensive income and accumulated under the heading of asset revaluation reserve. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the asset revaluation reserve is reclassified to profit or loss (see the accounting policy in respect of impairment loss on financial assets below).

Dividends on available-for-sale equity instruments are recognised in profit or loss when the Group’s right to receive the dividends is established.

For available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured, they are measured at cost less any identified impairment losses at the end of the reporting period (see accounting policy on impairment loss on financial assets below).

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of the reporting period. Financial assets are considered to be impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial assets, the estimated future cash flows of the financial assets have been affected.

For an available-for sale equity investment, a significant or prolonged decline in the fair value of that investment below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty; or
default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 30 to 60 days, observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the financial asset’s original effective interest rate.

For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss in the period in which the impairment takes place.

For financial assets measured at amortised cost, if, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment losses was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Impairment losses on available-for-sale equity investments will not be reversed in profit or loss in subsequent periods. Any increase in fair value subsequent to impairment loss is recognised directly in other comprehensive income and accumulated in asset revaluation reserve. For available-for-sale debt investments, impairment losses are subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

Financial liabilities and equity instruments

Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Interest expense is recognised on an effective interest basis, other than those financial liabilities classified as at FVTPL, of which the interest expense is included in net gains or losses.

Financial liabilities designated as at FVTPL

A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:

such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
it forms part of a contract containing one or more embedded derivatives, and HKAS 39 permits the entire combined contract (asset or liability) to be designated as at FVTPL.

Financial liabilities at FVTPL are measured at fair value, with changes in fair value arising from remeasurement recognised directly in profit or loss in the period in which they arise. The net gain or loss recognised in profit or loss includes any interest earned on the financial liabilities.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Convertible notes contain debt and equity components

Convertible loan notes issued by the Company that contain both the debt and conversion option components are classified separately into respective items on initial recognition in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. Conversion option that will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Company’s own equity instruments is classified as an equity instrument.

On initial recognition, the fair value of the debt component is determined using the prevailing market interest of similar non-convertible debts. The difference between the fair value of the entire convertible notes and the fair value assigned to the debt component, representing the conversion option for the holder to convert the convertible notes into equity, is included in equity (convertible note equity reserve).

In subsequent periods, the debt component of the convertible notes is carried at amortised cost using the effective interest method. The equity component, representing the option to convert the debt component into ordinary shares of the Company, will remain in convertible note equity reserve until the embedded option is exercised. Where the option remains unexercised at the expiry date, the balance stated in the convertible note equity reserve will be released to the accumulated losses. No gain or loss is recognised in profit or loss upon conversion or expiration of the option.

Transactions costs that relate to the issue of convertible notes are allocated to the debt and equity components in proportion to their fair value. Transaction costs relating to the equity component are charged directly to equity. Transaction costs relating to the debt component are included in the carrying amount of the debt portion and amortised over the period of the convertible notes using the effective interest method.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Convertible notes contain debt component and conversion option derivative

Convertible notes issued by the Group that contain both debt and conversion option components are classified separately into respective items on initial recognition. Conversion option that will be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Company’s own equity instruments is a conversion option derivative. At the date of issue, both the debt and conversion option components are recognised at fair value.

In subsequent periods, the debt component of the convertible notes is carried at amortised cost using the effective interest method. The conversion option derivative is measured at fair value with changes in fair value recognised in profit or loss.

Transaction costs that relate to the issue of the convertible notes are allocated to the debt and conversion option components in proportion to their relative fair values. Transaction costs relating to the conversion option derivative are charged to profit or loss immediately. Transaction costs relating to the debt component are included in the carrying amount of the debt portion and amortised over the period of the convertible loan notes using the effective interest method.

Re-measurement of debt components of convertible notes

If the Group revises its estimates of payments of the convertible notes, the carrying amount of the debt component of the convertible notes will be adjusted to reflect the actual and revised estimate of cash flows. The carrying amount of the debt component of the convertible notes is recalculated by computing the present value of estimated future cash flows discounted at the original effective interest rate. The difference between the carrying amount before such revision and the present value of the estimated future cash flows is recognised in profit or loss as loss on remeasurement of debt components of convertible notes.

Other financial liabilities

Other financial liabilities including trade payables, other payables and accruals are subsequently measured at amortised cost, using the effective interest method.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Equity instruments

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

Warrants

Warrants issued by the Company that will be settled by a fixed amount of cash for a fixed number of the Company’s own equity instruments are equity instruments. The net proceeds received from the issue of warrants are recognised in equity (warrant reserve). The warrant reserve will be transferred to share capital and share premium accounts upon the exercise of the warrants. When the warrants are still not exercised at the expiry date, the amount previously recognised in the warrant reserve will be transferred to accumulated losses.

Convertible shares

Convertible shares issued by the Company that will be settled by a fixed number of the Company’s own equity instruments are equity instruments. The fair value of the convertible shares is recognised in equity. The convertible shares will be transferred to share capital and share premium accounts upon the exercise of the conversion right of the convertible shares.

Derivative financial instruments

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of the reporting period. The resulting gain or loss is recognised in profit or loss immediately.

Embedded derivatives

Derivatives embedded in non-derivative host contracts are treated as separate derivatives when they meet the definition of a derivative, their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at fair value with changes in fair value recognised in profit or loss.

Derecognition

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Where the Group redeems a convertible note through exercise of the early redemption option that is classified as a compound instrument with an equity component, a debt component with early redemption option which is closely related to the host debt instrument as at the date of the early redemption, the consideration paid to redeem the convertible note is allocated to the debt component and equity component using the same method as that used to make the allocation between the debt component and equity component on initial recognition of the component instrument. The fair value of the debt component upon the early redemption option is exercised is deemed to be equal to the redemption price. To the extent that the amount of the consideration allocated to the debt component exceeds the carrying amount of the debt component at the date of the early redemption, a loss is recognised in profit or loss. The equity component is reclassified to accumulated loss.

Share-based payment transactions

Equity-settled share-based payment transactions

Share options granted to employees and others providing similar services

The fair value of services received determined by reference to the fair value of share options granted at the grant date is expensed on a straight-line basis over the vesting period, with a corresponding increase in equity (share option reserve).

At the end of the reporting period, the Group revises its estimates of the number of options that are expected to ultimately vest. The impact of the revision of the original estimates during the vesting period, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to share option reserve.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

When share options are exercised, the amount previously recognised in share option reserve will be transferred to share premium. When the share options are forfeited after the vesting date or are still not exercised at the expiry date, the amount previously recognised in share option reserve will be transferred to accumulated losses.

Equity-settled share-based payment of acquisition of assets through purchase of subsidiaries

Convertible shares issued as part of consideration for acquisition of assets through purchase of subsidiaries are measured at fair values of the assets acquired, unless that fair value cannot be reliably measured, in which case, the assets are measured by reference to the fair value of convertible shares.

Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect is material).

Provisions for the Group’s restoration, rehabilitation and environmental expenses are based on estimates of required expenditure at the mines in accordance with PRC rules and regulations. The Group estimates its liabilities for final reclamation and mine closure based upon detailed calculations of the amount and timing of the future cash expenditure to perform the required work. Spending estimates are escalated for inflation, then discounted at a discount rate that reflects current market assessments of the time value of money and the risks specific to the liability such that the amount of provision reflects the present value of the expenditures expected to be required to settle the obligation.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Fair value of financial instruments not quoted in an active market

As at 31 March 2013, the fair value of the Group’s financial assets designated at fair value through profit or loss and secured notes (2012: embedded derivatives of convertible notes) were determined by valuation technique as these financial instruments do not have quote market price. The directors use their judgments in selecting an appropriate valuation technique. Valuation techniques commonly used by market practitioners are applied. In determining the fair value of these instruments, assumptions are made based on currently available market data adjusted for specific features of these instruments (see notes 24, 34 and 35 for details). As at 31 March 2013, the fair value of financial assets designated at fair value through profit or loss and secured notes were HK$21,556,000 and HK$122,582,000 respectively (2012: embedded derivatives of HK$43,000).

5. Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from prior year.

As at 31 March 2013, the capital structure of the Group consists of debt, which include secured notes and equity attributable to owners of the Company (2012: convertible notes and equity attributable to owners of the Company). Equity attributable to owners of the Company comprises issued share capital, reserves and set off with accumulated losses.

The directors of the Company review the capital structure on a continuous basis. As part of this review, the directors consider the cost of capital and the risks associated with each class of capital. Based on recommendations of the directors, the Group will balance its overall capital structure through new share issues, as well as the issue of new debts or the redemption of existing debt.

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APPENDIX I

6. Financial instruments

(a) Categories of financial instruments

Financial assets Financial assets at FVTPL – Held for trading – Designated as FVTPL Loans and receivables (including cash and cash equivalents) Available-for-sale investments Financial liabilities Financial liabilities at FVTPL Amortised cost	2013 HK$’000 142 21,556 746,025 173,479 941,202 122,582 28,944 151,526	2012 HK$’000 118 – 69,173 11,212
		80,503

		43 678,215
		678,258

(b) Financial risk management objectives and policies

As at 31 March 2013, the Group’s financial instruments include deposits, trade receivables, bills receivable, other receivables, amounts due from associates, loan receivables, consideration receivable, bank balances and cash, trade payables, other payables and accruals, available-for-sale investments, financial assets at fair value through profit or loss, investments held for trading and secured notes (2012: deposits, trade receivables, other receivables, bank balances and cash, trade payables, other payables and accruals, available-for-sale investments, investments held for trading, convertible notes and embedded derivatives). Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the polices on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

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APPENDIX I

There has been no significant change to the Group’s exposure to market risks or the manner in which it manages and measures the risk from prior year.

Market risk

Foreign currency risk management

Several subsidiaries of the Company have foreign currency sales and purchases, which expose the Group to foreign currency risk. The Group currently does not have a foreign currency hedging policy. However, the management monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.

The carrying amounts of the Group’s foreign currency denominated monetary assets and liabilities excluding intra-group balances as at 31 March 2013 are as follows:

	Assets		Liabilities	Liabilities
	2013	2012	2013	2012
	HK$’000	HK$’000	HK$’000	HK$’000
HK$	52	9,541	297	351
United States Dollars
(“US$”)	18,892	20,110	124,777	380,471
Euro	3,004	1,279	573	1,027
Renminbi (“RMB”)	188,246	6,496	100	82
Others	495	154	–	–

In addition, as at 31 March 2013, the directors considered that the Group’s exposure to foreign currency risk arisen from intra-group loans due to foreign operation of approximately HK$43,947,000 (2012: HK$32,816,000), which were not denominated in the functional currency of the respective group entities. These intra-group loans do not form part of the Group’s net investment in foreign operations.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Sensitivity analysis

The Group is mainly exposed to exchange rate fluctuation of HK$, US$, Euro and RMB against the functional currency of respective group entities, which is mainly HK$, Euro and RMB. The directors considered that, as HK$ is pegged to US$, the subsidiaries with HK$ as functional currency, are subject to insignificant foreign currency risk from change in foreign exchange rate of HK$ against US$, so US$ is not considered in the sensitivity analysis.

5% is the sensitivity rate used by directors in the assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis below demonstrated the effect of the foreign exchange differences by 5% change in exchange rate of the functional currencies against the relevant foreign currencies of the Company and respective subsidiaries, other than US$ for those with HK$ functional currency, assuming all other variables were held constant. The sensitivity analysis include external loans as well as loans to foreign operations within the Group where the denomination of the loan is in a currency other than the functional currency of the lender or borrower. A positive number below indicates a decrease in post-tax loss where the functional currencies weaken 5% against the relevant foreign currencies of the Company and respective subsidiaries, other than US$ (for those with HK$ functional currency). For a 5% strengthening of the functional currencies of the Company and respective subsidiaries, there would be an equal and opposite impact on the results for the year.

	2013	2012
	HK$’000	HK$’000
Decrease (increase) in loss
for the year	7,344	(840)

Interest rate risk management

As at 31 March 2013, the Group is exposed to cash flow interest rate risk in relation to bank balances (2012: bank balances and pledged bank deposits) carrying prevailing market interest rate. The interest rate risk on bank balances (2012: bank balances and pledged bank deposits) is limited because of the short maturity. In the opinion of the directors, the expected change in interest rate on these financial assets will not have a significant change in the coming year, hence sensitivity analysis is not presented.

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APPENDIX I

As at 31 March 2013, the Group is also exposed to fair value interest rate risk in relation to loan receivables and secured notes (2012: convertible notes).

The Group currently does not have an interest rate hedging policy. However, the management monitors interest rate exposure and will consider hedging significant interest rate exposure should the need arise.

Price risk equity and debt investments

The Group is exposed to other price risk through its available-for-sale investments, investments held for trading and available-for-sale debt securities through its investments in debentures listed outside Hong Kong. For availablefor-sale investments measured at cost less impairment as the fair value could not be measured reliably, they have not been included in the sensitivity analysis.

Sensitivity analysis

The sensitivity analysis below has been determined based on the exposure to equity and debt price risks at the end of the reporting period. The sensitivity analysis included those available-for-sale investments and investments held for trading carried at fair values. If the prices of the respective available-for-sale investments in listed equity securities and investments held for trading had been 10% (2012: 10%) higher, assuming all other variables were held constant, the impact to the Group would be:

Decrease in loss for the year Increase in other comprehensive income for the year	2013 HK$’000 14 13,412	2012 HK$’000 12

		612

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

If the prices of respective available-for-sale investments and held for trading investments had been 10% (2012: 10%) lower, assuming all other variables were held constant, the impact to the Group would be:

Increase in loss for the year Decrease in other comprehensive income for the year	2013 HK$’000 2,533 10,893	2012 HK$’000 12

		612

10% (2012: 10%) change in price represents the directors’ assessment of the reasonably possible change in price.

As at 31 March 2013 and 2012, the Group was exposed to concentration risk on the available-for-sale investments in listed equity securities as they comprise equity shares issued by several companies listed in Hong Kong.

Price risk on financial assets designated at fair value through profit or loss

As at 31 March 2013, the Group was exposed to price risk through its financial assets designated at fair value through profit or loss. As at 31 March 2013, the fair value of the embedded derivative of the secured note is insignificant, hence, no sensitivity analysis for secured notes has been included.

The sensitivity analysis below has been determined based on the exposure to price risk at the end of the reporting period. If the prices of the listed equity securities, which was used as key input in the valuation of financial assets designated at fair value through profit or loss (particulars are set out in note 24), had been 10% higher/lower, assuming all other variables were held constant, the impact to the Group would be: 2013 HK$’000 Increase in post-tax loss for the year (1,800) Decrease in post-tax loss for the year 1,800

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APPENDIX I

In opinion of the directors of the Company, the sensitivity analysis above are unrepresentative of the inherent market risk as the pricing model used in the fair value valuation of the financial assets designated at fair value through profit or loss involves multiple variables and certain variables are interdependent.

Price risk on embedded conversion option of CN1 (as defined in note 35)

The Group was required to estimate the fair value of the conversion option embedded in the convertible notes classified as financial liabilities at FVTPL at the end of the reporting period with changes in fair value recognised in the profit or loss as long as the convertible notes were outstanding. The fair value adjustment would be affected either positively or negatively, amongst others, by the changes in market interest rate, the Company’s share market price and share price volatility. As at 31 March 2012, due to the re-measurement of the debt components of the convertible notes, the Group expected the convertible notes would be repaid within twelve months, in the opinion of the directors, the price risk as at 31 March 2012 was insignificant as the expected repayment period is short, hence, no sensitivity analysis is presented. During the year ended 31 March 2013, all the outstanding convertible notes were fully repaid.

In the opinion of the directors of the Company, the sensitivity analysis was unrepresentative of the inherent market risk as the pricing model used in the fair value valuation of the conversion option embedded in the convertible notes involves multiple variables and certain variables are interdependent. Thus, no sensitivity analyses are provided.

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APPENDIX I

Credit risk

The Group’s maximum exposure to credit risk in the event of the counterparties’ failure to perform their obligations as at 31 March 2013 in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the consolidated statement of financial position. As at 31 March 2013, the Group has concentration of credit risk in respect of the financial assets designated as fair value through profit or loss, loan receivables, consideration receivable and trade receivables (2012: trade receivables). As at 31 March 2013, the Group’s investments in financial assets designated as fair value through profit or loss represent investments in loan receivables with embedded derivatives issued by the counterparties (see note 24); the Group’s loan receivables were due from five counterparties (see note 29); and the Group’s consideration receivable was due from one counterparty buyer (see note 31a). As at 31 March 2013, five customers for the Group’s plastic and paper boxes comprised over 61% (2012: 75%) of the Group’s trade receivables. These five customers are internationally recognised and luxury brand owners in Europe and the United States, with long business relationship with the Group. In order to minimise the credit risk, the Group has monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual debt at the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group’s credit risk is significantly reduced.

The Group has a concentration of credit risk on liquid funds deposited with a few major banks. The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.

As at 31 March 2013, the Group had an outstanding consideration receivable of HK$149,875,000 due from a counterparty buyer in respect to the disposal of subsidiaries. The Group is exposed to credit risk for this consideration receivable especially for an amount of HK$100,254,000 which had been due as at 31 March 2013. The management of the Group takes active negotiation and follow-up action to recover the consideration receivable in order to minimise the credit risk. Details are set out in note 40.

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APPENDIX I

Liquidity risk

The Group manages its liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate by the management to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. The management monitors the utilisation of borrowing and ensures compliance with loan covenants.

The following table details the Group’s remaining contractual maturity for its financial liabilities (including embedded derivatives of the convertible notes as at 31 March 2012). It has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.

2013 Trade payables Other payables and accruals Secured notes 2012 Trade payables Other payables and accruals CN1# CN2#	Weighted average effective interest rate % – – 22.98 – – 8.52 18.01	On demand or between 1 to 3 months HK$’000 7,832 21,112 – 28,944 11,157 29,002 – 1,290 41,449	Between 4 to 12 months HK$’000 – – 126,383 126,383 – – 380,056 258,000 638,056	Total undiscounted cash flows HK$’000 7,832 21,112 126,383 155,327 11,157 29,002 380,056 259,290 679,505	Total carrying amount at 31 March HK$’000 7,832 21,112 122,582
					151,526

					11,157 29,002 380,099 258,000
					678,258

CN1 and CN2 as defined in note 35.

On 1 February 2012, the Company reached agreement with the noteholders to settle the entire CN1 and CN2 within the next twelve months (details are set out in note 35).

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APPENDIX I

(c) Fair value

The fair value of financial assets and financial liabilities are determined as follows:

the fair value of listed equity securities and listed debentures with standard terms and conditions and traded in active liquid markets are determined with reference to quoted market bid prices;
the fair value of club debentures is determined by reference to the transaction prices in the secondary markets. The price of the most recent transaction provides evidence of the current fair value if there has not been significant change in economic circumstances since the time of the transaction;
the fair value of option-based derivative instruments (embedded derivative as included in financial assets designated at FVTPL, secured notes and convertible notes), is estimated using option pricing model; and
the fair value of other financial assets and financial liabilities (excluding derivative financial instruments) is determined in accordance with generally accepted pricing models based on discounted cash flow analysis.

The directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the consolidated financial statements approximate to their fair values.

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active market for identical assets or liabilities.
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

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APPENDIX I

Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Available-for-sale investments Non-derivative financial assets held for trading Financial assets designated at FVTPL Secured notes Available-for-sale investments Non-derivative financial assets held for trading Embedded conversion option of convertible notes	Level 1 HK$’000 134,120 142 – – 134,262 Level 1 HK$’000 3,407 118 – 3,525	31 March 2013 Level 2 Level 3 HK$’000 HK$’000 2,258 – – – – 21,556 – (122,582) 2,258 (101,026) 31 March 2012 Level 2 Level 3 HK$’000 HK$’000 2,710 – – – – (43) 2,710 (43)	Total HK$’000 136,378 142 21,556 (122,582) 35,494 Total HK$’000 6,117 118 (43) 6,192

There were no transfer between Level 1 and 2 in both years.

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APPENDIX I

Reconciliation of level 3 fair value measurements of financial assets and financial liabilities

At 1 April 2011 Total gain or loss recognised in profit or loss – Change in fair value At 31 March 2012 Addition Disposal Coupon interest Total gain or loss recognised in profit or loss – Change in fair value Derecognition upon modification of terms and conditions (defined in note 24(iii)) Recognition upon modification of terms and conditions (defined in note 24(iii)) At 31 March 2013	Secured notes HK$’000 – – – (113,358) – 11,588 (20,812) – – (122,582)	Financial assets designated at FVTPL HK$’000 – – – 78,000 (20,000) – (30,872) (11,144) 5,572 21,556	Embedded conversion option of convertible notes HK$’000 (180,882) 180,839 (43) – – – 43 – – –

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

7. Revenue

Revenue represents the amounts received or receivable for goods sold by the Group to outside customers, less sales tax and sales returns during the year. An analysis of the Group’s revenue for the year from continuing operations is as follows:

	2013	2012
	HK$’000	HK$’000
Sale of plastic and paper boxes
for luxury consumer goods	112,513	140,218

8. Segment information

The Group is currently organised into below operating divisions:

Sale of plastic and paper boxes for luxury consumer goods:

(i) France Operation – Dardel S.A.S.
(ii) China Operation – Winbox Company Limited, Dongguang Ever Green Plastic Manufacturing Company Limited, Winbox Plastic Manufacturing (Shenzhen) Company Limited and Winpac Trading Co. Limited

The Group’s operations in respect of developing of underground coking coal mine, coal production and sale of coal (“Coal Mining Operation”) were discontinued in the current year. The segment information reported below does not include any amounts for the Group’s Coal Mining Operation, which is described in more details in notes 31 and 32.

No segment assets and liabilities are presented as the chief operating decision maker does not regularly review segment assets and liabilities.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Segment revenue and results

The following is an analysis of the Group’s revenue and results for continuing operations by operating and reportable segment.

For the year ended 31 March 2013

Revenue Segment results from continuing operations Other income Other gain and loss Share of results of associates Central administration costs Other expenses Finance costs Loss before taxation from continuing operations	Sale of plastic and paper boxes for luxury consumer goods China France Operation Operation Consolidated HK$’000 HK$’000 HK$’000 86,262 26,251 112,513 (2,393) 2,268 (125) 4,353 (71,890) 18 (59,759) (4,596) (1,293) (133,292)

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the year ended 31 March 2012 (Restated)

Revenue Segment results from continuing operations Other income Other gain and loss Central administration costs Other expenses Finance costs Loss before taxation from continuing operations	Sale of plastic and paper boxes for luxury consumer goods China France Operation Operation Consolidated HK$’000 HK$’000 HK$’000 112,957 27,261 140,218 3,263 4,580 7,843 2,634 (248,474) (49,205) (8,817) (49,002) (345,021)

All of the segment revenue reported for both years were from external customers. The accounting policies of the operating segments are the same as the Group’s accounting policies described in note 3.

Segment results represent the profit earned or loss incurred by each segment without allocation of other income, other gain and loss, other expenses, central administration costs, share of results of associates and finance costs. This is the measure reported to the chief operating decision maker for the purpose of resource allocation and performance assessment.

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APPENDIX I

Other segment information

For the year ended 31 March 2013 Amounts included in the measure of segment profit or loss: Allowance for slow moving inventories Depreciation of property, plant and equipment and investment property Loss on disposal of property, plant and equipment Amounts regularly provided to the chief operating decision maker but not included in the measure of segment profit or loss: Share of profit of associates Finance costs Taxation charge For the year ended 31 March 2012 (Restated) Amounts included in the measure of segment profit or loss: Depreciation of property, plant and equipment and investment property Amounts regularly provided to the chief operating decision maker but not included in the measure of segment profit or loss: Finance costs Taxation charge	Sale of plastic and paper boxes for luxury consumer goods France Operation China Operation HK$’000 HK$’000 1,000 6,425 114 900 4 – – – – – 907 1,296 Sale of plastic and paper boxes for luxury consumer goods France Operation China Operation HK$’000 HK$’000 126 961 – – 1,934 2,078	Segment total HK$’000 7,425 1,014 4 – – 2,203 Segment total HK$’000 1,087 – 4,012	Unallocated HK$’000 – 1,927 181 (18) 1,293 – Unallocated HK$’000 171 49,002 –	Consolidated HK$’000 7,425 2,941 185

				(18) 1,293 2,203

				Consolidated HK$’000 1,258

				49,002 4,012

Geographical information

The Group’s customers are located in Hong Kong, Europe, North America and other regions.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group’s revenue from external customers from continuing operations by geographical location of markets, or customer irrespective of the origin of the goods/ services are detailed below:

Sale of plastic and paper boxes for luxury consumer goods Hong Kong France Germany Italy Switzerland Brazil Other regions	Revenue from external customers 2013 2012 HK$’000 HK$’000 21,534 22,703 42,698 44,375 20,890 38,377 3,254 3,214 16,772 24,296 2,469 846 4,896 6,407 112,513 140,218	Revenue from external customers 2013 2012 HK$’000 HK$’000 21,534 22,703 42,698 44,375 20,890 38,377 3,254 3,214 16,772 24,296 2,469 846 4,896 6,407 112,513 140,218
		140,218

The information about the Group’s non-current assets by geographical area in which the assets are located is detailed below:

Hong Kong The PRC France	Non-current 2013 HK$’000 82,236 3,445 1,651 87,332	assets(Note) 2012 HK$’000 6,834 1,683,598 1,550
		1,691,982

Note: Non-current assets excluded financial instruments and deferred tax assets. As at 31 March 2012, the amount included non-current assets which were reclassified to assets classified as held for sale during the year ended 31 March 2013.

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APPENDIX I

Information about major customers

Revenue from customers from continuing operations for the year ended 31 March 2013 and 2012 contributing over 10% of total sales of the Group, each deriving revenue from sales of plastic and paper boxes for luxury consumer goods segment, are as follows:

	2013	2012
	HK$’000	HK$’000
Customer A	20,839	34,509
Customer B	20,200	22,027
Customer C	15,911	N/A*
Customer D	11,707	N/A*

Customer A, C and D are located in Europe and Customer B is located in Hong Kong.

The corresponding revenue did not contribute over 10% of the revenue of the Group from continuing operations for the year ended 31 March 2012.

9. Other income

Continuing operations Interest earned on bank deposits Interest earned on listed available-for-sale investments Interest earned on loan receivables Sundry income	2013 HK$’000 449 429 1,995 1,480 4,353	2012 HK$’000 73 430 – 2,131
		2,634

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APPENDIX I

10. Other gain and loss

Continuing operations Fair value gain (loss) on derivative financial instruments Fair value gain (loss) on investments held for trading Fair value loss on secured notes Fair value loss on financial assets at FVTPL (Loss) gain on disposal of property, plant and equipment Loss on disposal of available-for-sale investments Net foreign exchange loss Impairment loss on available-for-sale investments 11. Finance costs Continuing operations Imputed interest expense on convertible notes (note 35)	2013 HK$’000 43 24 (20,812) (30,872) (185) (3,327) (1,206) (15,555) (71,890) 2013 HK$’000 1,293	2012 HK$’000 (245,300) (66) – – 1,560 (999) (2,954) (715) (248,474) 2012 HK$’000 49,002

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APPENDIX I

12. Taxation

Continuing operations Current tax: Hong Kong Other jurisdictions Underprovision in prior years: Hong Kong Taxation	2013 HK$’000 16 955 971 1,232 2,203	2012 HK$’000 3 2,009
		2,012 2,000
		4,012

Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profit for both years.

Taxation arising in other jurisdictions are calculated at the rates prevailing in the relevant jurisdictions.

Under the Law of the PRC on Enterprise Income Tax (the “EIT Law”) Implementation Regulations of the EIT Law, the tax rate is 25% from 1 January 2008 onwards. The implementation to the EIT Law has impact to the Company’s wholly owned subsidiary, Winbox Plastic Manufacturing (Shenzhen) Company Limited, which previously enjoyed the preferential tax policy in the form of a reduced tax rate is entitled to use a tax rate of 24% for the period from 1 January 2011 to 31 December 2011 and 25% for the period from 1 January 2012 to 31 March 2012. For the year ended 31 March 2013, the subsidiary is subjected to a tax rate of 25% on EIT.

French income tax is calculated at 33.3% of the estimated assessable profit of Dardel S.A.S. for both years.

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APPENDIX I

In 2009, the Hong Kong Inland Revenue Department (“IRD”) initiated a tax audit on certain group companies and has issued estimated additional assessments for certain years of assessments. Objections against these assessments were lodged and the Group applied holdover for the full amount of tax demanded. As at 31 March 2013, total amount of tax reserve certificate purchased was HK$4.5 million (2012: HK$3.3 million) which is included in the consolidated statement of financial position as tax recoverable of which HK$1.2 million (2012: HK$2 million) was purchased during the year ended 31 March 2013. During the year ended 31 March 2013, after reassessing the tax provision of these group companies, an amount of HK$1.2 million (2012: HK$2 million) was additionally provided and charged to profit or loss as under-provision of taxation in respect of prior years. During the year ended 31 March 2013, the IRD proposed a preliminary settlement basis to the Group. The Group is in the process of discussing with the IRD on the basis to be applied in settling the tax audit, and in the opinion of the directors, the tax provision made by the Group is adequate at this stage.

The taxation for the year from continuing operations can be reconciled to the loss before taxation per the consolidated statement of comprehensive income as follows:

Loss before taxation Tax at Hong Kong Profits Tax rate of 16.5% Tax effect of expenses not deductible for tax purposes Tax effect of income not taxable for tax purposes Effect of different tax rates of subsidiaries operating in other jurisdictions Underprovision in respect of prior years Tax effect of estimated tax losses not recognised Taxation for the year	2013 HK$’000 (133,292) (21,993) 18,723 (2,033) 313 1,232 5,961 2,203	2012 HK$’000 (345,021) (56,928) 82,698 (30,239) 816 2,000 5,665 4,012

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APPENDIX I

13. Loss for the year from continuing operations

	2013	2012
	HK$’000	HK$’000
Continuing operations
Loss for the year from continuing operations
have been arrived at after charging:
Auditor’s remuneration	1,884	1,658
Cost of inventories recognised as an expense	90,405	104,907
Allowance for inventories (included in cost of
inventories recognised as an expense)	7,425	–
Depreciation of property, plant and
equipment and investment property	2,941	1,258
Operating lease rentals in respect of
rented premises	11,764	5,309
Staff costs:
Directors’ emoluments	4,606	11,213
Chief executive’s emoluments	3,755	4,694
Other staff costs
– salaries, bonus and other allowances	46,472	56,278
– retirement benefit scheme contributions	3,708	3,276
– share-based payments	6,471	8,063
	65,012	83,524

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APPENDIX I

14. Directors’ and chief executive’s emoluments

The emoluments paid or payable to each of the directors and chief executive were as follows:

Directors Ma Lishan (Note a) Fung Ka Pun (Note b) Ng Cheuk Fan, Keith (Note b) Fung Wing Ki, Vicky (Note b) Tam Hok Lam, Tommy (Note c) Zhu Yongguang Chan William (Note d) Ma Lin (Note e) Xu Hai Ying (Note e) Chan Ming Sun, Jonathan (Note f) Mak Yiu Tong (Note g) Ou Zhiliang (Note h) Lam Kwan Sing (Note i) Chief executive Li Shao Yu (Note j)	Fee HK$’000 – – – – – 65 – 180 – 181 – 29 117 572 – 572	Salaries and other allowances HK$’000 1,067 – – – – – – – 515 – 100 1,408 – 3,090 1,810 4,900	20 Discretionary or performance based contributions HK$’000 (Note j) – – – – – – – – – – – – – – 44,150 44,150	13 Retirement benefit scheme bonuses HK$’000 6 – – – – – – – – – 2 – – 8 15 23	Share-based payments HK$’000 894 – – – – – – – – – 42 – – 936 1,780 2,716	Total HK$’000 1,967 – – – – 65 – 180 515 181 144 1,437 117 4,606 47,755 52,361	Fee HK$’000 – – – – 180 180 135 45 – – – – – 540 – 540	Salaries and other allowances HK$’000 2,213 963 199 160 – – – – 67 – 338 – – 3,940 1,176 5,116	2012 Retirement benefit scheme contributions HK$’000 12 – 6 6 – – – – – – 11 – – 35 12 47	Share-based payments HK$’000 3,690 1,857 573 209 – – – – – – 369 – – 6,698 3,506 10,204	Total HK$’000 5,915 2,820 778 375 180 180 135 45 67 – 718 – –
											11,213 4,694
											15,907

Notes:

(a) On 9 August 2012, Mr. Ma Lishan (“Mr. Ma”) resigned as a director of the Company. Subsequently, Mr. Ma served the Group as a consultant. His remuneration as a consultant was excluded from above.
(b) On 21 September 2011, Mr. Fung Ka Pun, Mr. Ng Cheuk Fan, Keith and Fung Wing Ki, Vicky resigned as directors of the Company.
(c) On 29 March 2012, Mr. Tam Hok Lam, Tommy resigned as a director of the Company.
(d) On 1 January 2012, Mr. Chan William resigned as a director of the Company.
(e) On 1 January 2012, Mr. Ma Lin and Mr. Xu Hai Ying were appointed as directors of the Company.
(f) On 29 March 2012, Mr. Chan Ming Sun, Jonathan was appointed as a director of the Company.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(g) On 31 May 2012, Mr. Mak Yiu Tong resigned as a director of the Company.
(h) On 11 June 2012, Dr. Zhiliang Ou, JP was appointed as independent non-executive director of the Company. On 9 August 2012, he was redesignated as an executive director of the Company.
(i) On 9 August 2012, Mr. Lam Kwan Sing was appointed as a director of the Company.
(j) Ms. Li is the chief executive of the Company and her remuneration disclosed above represents those for services rendered by her as chief executive. Ms. Li is also a substantial shareholder who can exercise significant influence to the Group. During the year ended 31 March 2013, the Group paid a special bonus of HK$44,000,000 to Ms. Li, in respect to the completion of the disposal of subsidiaries, which was included in discontinued operations for determining the gain on disposal of subsidiaries. Details are set out in note 40(ii).

During the year, no emoluments were paid by the Group to any of the directors as an inducement to join or upon joining the Group or as compensation for loss of office. None of the directors or chief executive has waived any emoluments during the year.

15. Employee’s emoluments

Of the five individuals with the highest emoluments in the Group, one (2012: two) was director and the chief executive of the Company whose emoluments were included in the disclosures in note 14 above. The emoluments of the remaining four individuals (2012: three individuals) were as follows:

Salaries and other allowances Discretionary or performance based bonus Retirement benefit scheme contributions Share-based payments	2013 HK$’000 4,285 4,645 38 3,115 12,083	2012 HK$’000 3,457 – 36 5,046
		8,539

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The emoluments were within the following bands:

		2013	2012
		No. of	No. of
		employees	employees
HK$1,000,001	to HK$1,500,000	–	1
HK$2,000,001	to HK$2,500,000	1	1
HK$2,500,001	to HK$3,000,000	2	–
HK$4,000,001	to HK$4,500,000	1	–
HK$4,500,001	to HK$5,000,000	–	1

During the year, no emoluments or discretionary bonus were paid by the Group to the above highest paid individuals as an inducement to join or upon joining the Group or as compensation for loss of office.

16. Dividend

No dividend was paid or proposed by the directors for both years nor has any dividend been proposed since the end of the reporting period.

17. Loss per share

From continuing and discontinued operations

The calculation of basic and diluted loss per share attributable to the owners of the Company is based on the following data:

	2013	2012
	HK$’000	HK$’000
Loss for the purposes of basic and
diluted loss per share	(219,324)	(378,458)

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

	2013	2012
	’000	’000
Number of shares:
Weighted average number of ordinary
shares for the purposes of basic and
diluted loss per share	3,927,700	2,915,454

From continuing operations

The calculation of basic and diluted loss per share from continuing operations attributable to the owners of the Company is based on the following data:

Loss for the year attributable to owners of the Company Add: Loss for the year from discontinued operations Loss for the purposes of calculating basic and diluted loss per share from continuing operations	2013 HK$’000 (219,324) 83,831 (135,493)	2012 HK$’000 (Restated) (378,458) 29,425
		(349,033)

The denominators used are the same as those detailed above for basic and diluted loss per share from continuing and discontinued operations.

From discontinued operation

Basic and diluted loss per share from discontinued operations is HK2.13 cents (2012: HK1.01 cents), based on the loss for the year from discontinued operations of HK$83,831,000 (2012: HK$29,425,000) and the denominators detailed above for both basic and diluted loss per share from continuing and discontinued operations.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the year ended 31 March 2013, the computation of diluted loss per share for both continuing and discontinued operations does not assume the exercise of the Company’s outstanding share options and warrants, since the assumed exercise would reduce loss per share from continuing operations.

For the year ended 31 March 2012, the computation of diluted loss per share for both continuing and discontinued operations did not assume the exercise of the conversion rights of the Company’s outstanding convertible notes and the Company’s outstanding share options and warrants, since the assumed exercise would reduce loss per share from continuing operations.

18. Property, plant and equipment

COST At 1 April 2011 Exchange adjustments Additions Acquisition of subsidiaries (note 41) Transfer to assets classified as held for sale (note 31a) Transfer Disposal At 31 March 2012 Exchange adjustments Additions Transfer to assets classified as held for sale (note 31b) Transfer Disposal At 31 March 2013 DEPRECIATION AND IMPAIRMENT At 1 April 2011 Exchange adjustments Provided for the year Transfer to assets classified as held for sales (note 31a) Disposal At 31 March 2012 Exchange adjustments Provided for the year Transfer to assets classified as held for sales (note 31b) Disposal At 31 March 2013 CARRYING VALUES At 31 March 2013 At 31 March 2012	Freehold land HK$’000 536 (29) – – – – – 507 (20) – – – – 487 – – – – – – – – – – – 487 507	Buildings on freehold land HK$’000 7,440 (374) – – – – (5,689) 1,377 (53) – – – – 1,324 1,223 (69) 51 – (585) 620 (24) 3 – – 599 725 757	Leasehold land and buildings HK$’000 15,150 (144) 202 2,085 (8,385) 4,209 – 13,117 54 1,112 (9,012) 5,559 – 10,830 3,565 1,069 823 (1,668) – 3,789 3 611 (461) – 3,942 6,888 9,328	Mining structures HK$’000 59,856 126 – 4,780 (58,669) 870 – 6,963 39 – (14,877) 7,875 – – – 145 1,069 – – 1,214 2 283 (1,499) – – – 5,749	Construction in progress Leasehold improvements HK$’000 HK$’000 164,015 6,611 7,004 84 33,593 332 2,535 – (194,344) – (5,079) – – (2,442) 7,724 4,585 35 16 6,152 805 (477) – (13,434) – – – – 5,406 – 5,215 – 51 – 547 – – – (2,411) – 3,402 – 6 – 367 – – – – – 3,775 – 1,631 7,724 1,183	Plant and machinery HK$’000 20,727 347 5,826 7,020 (17,313) – – 16,607 115 2,973 (10,900) – – 8,795 8,963 320 2,823 (3,899) – 8,207 58 1,361 (2,083) – 7,543 1,252 8,400	Furniture, fixtures, and equipment HK$’000 6,324 (45) 1,961 248 (2,420) – (159) 5,909 (20) 704 (832) – (180) 5,581 3,840 27 1,046 (909) (123) 3,881 (36) 679 (423) (101) 4,000 1,581 2,028	Moulds HK$’000 8,258 127 – – – – – 8,385 58 79 – – – 8,522 8,138 126 69 – – 8,333 57 68 – – 8,458 64 52	Motor vehicles HK$’000 6,722 304 11,283 2,583 (4,668) – (1,938) 14,286 29 50 (2,044) – (1,288) 11,033 925 66 1,638 (1,203) (220) 1,206 4 1,989 (348) (542) 2,309 8,724 13,080	Yacht HK$’000 – – – – – – – – – 65,000 – – – 65,000 – – – – – – – – – – – 65,000 –	Total HK$’000 295,639 7,400 53,197 19,251 (285,799) – (10,228)
											79,460 253 76,875 (38,142) – (1,468)
											116,978
											31,869 1,735 8,066 (7,679) (3,339)
											30,652 70 5,361 (4,814) (643)
											30,626
											86,352

											48,808

I – 91

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Depreciation is provided to write off the cost of items of property, plant and equipment, other than freehold land, mining structures and construction in progress, over their estimated useful lives and after taking into account of their estimated residual value, using the straight-line method, at the following rates per annum:

Freehold land	Nil
Buildings on freehold land	2%
Leasehold land and buildings	shorter of remaining term of lease or 2% to 10%
Construction in progress	Nil
Leasehold improvements	20%
Plant and machinery	62/3% to 331/3%
Furniture, fixtures and
equipment	20%
Moulds	20%
Motor vehicles	10% to 25%
Yacht	5%

The freehold land and buildings on freehold land of the Group are located outside Hong Kong.

At the end of the reporting period, leasehold land and buildings of HK$3,445,000 (2012: HK$5,731,000) are located outside Hong Kong and remaining of HK$3,443,000 (2012: HK$3,597,000) are located in Hong Kong. The leasehold land and buildings of the Group are held under medium-term lease.

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APPENDIX I

19. Prepaid lease payments

Analysed for reporting purpose as Current asset Non-current asset The Group’s prepaid lease payments comprise: Leasehold land outside Hong Kong	2013 HK$’000 – – – –	2012 HK$’000 104 1,886
		1,990

		1,990

The leasehold land of the Group was held under medium-term lease and charged to profit or loss on a straight-line basis over the lease terms, which was reclassified to assets classified as held for sale during the year ended 31 March 2013.

20. Investment property

COST At 1 April 2011, 31 March 2012 and 2013 DEPRECIATION At 1 April 2011 Provided for the year At 31 March 2012 Provided for the year At 31 March 2013 CARRYING VALUES At 31 March 2013 At 31 March 2012	HK$’000 1,624
	599 32
	631 32
	663
	961

	993

In the opinion of the directors, the estimated fair value of investment property as at 31 March 2013 is approximately HK$9,712,000 (2012: HK$4,696,000) which is estimated by reference to the recent transaction prices of similar properties.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The above investment property is located in Hong Kong, held under medium-lease term and depreciated on a straight-line basis over the term of the lease of 50 years.

21. Mining rights

COST
At 1 April 2011
Acquisition of subsidiaries (note 41)
Transfer to assets classified as held for sales (note 31a)
Exchange realignment
At 31 March 2012
Transfer to assets classified as held for sales (note 31b)
Exchange realignment
At 31 March 2013
AMORTISATION
At 1 April 2011
Provided for the year
At 31 March 2012
Provided for the year
Exchange realignment
Transfer to assets classified as held for sales (note 31b)
At 31 March 2013
CARRYING VALUES
At 31 March 2013
At 31 March 2012

HK$’000
1,988,480
1,520,465
(2,041,108)
84,702
1,552,539
(1,569,650)
17,111
–
–
556
556
992
11
(1,559)
–
–
1,551,983

Mining rights are amortised based on the units of production method utilising only recoverable coal reserves as the depletion base.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

22. Interests in associates and amounts due from associates

Interests in associates

Unlisted investments, at cost Share of post-acquisition profits	2013 HK$’000 1 18 19	2012 HK$’000 – –
		–

During the year ended 31 March 2013, the Group and a director of subsidiaries incorporated two entities, in which the Group and the director of subsidiaries hold 40% and 60% equity interests respectively. Details of the Group’s associates as at 31 March 2013 are as follows:

		Proportion
		of nominal
		value of
		issued
		ordinary
	Place of	shares
	incorporation/	held by
Name of associate	operation	the Group	Principal activity
Richluck International Limited	Hong Kong	40%	Property leasing
Double Rich Cooperation Limited	Hong Kong	40%	Property leasing

I – 95

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The summarised financial information in respect of the Group’s associates is set out below:

Total assets Total liabilities Net assets Group’s share of net assets of associates Total revenue Total profit for the year Group’s share of results of associates for the year	2013 HK$’000 9,265 (9,218) 47 19 70 45 18	2012 HK$’000 – –
		–

		–

		–

		–

		–

Amounts due from associates

Amounts due from associates are unsecured, non-interest bearing and have no fixed repayment terms. In the opinion of the directors, the amount will not be repaid in the next 12 months from the end of the reporting period.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

23. Available-for-sale investments Available-for-sale investments include: Equity securities listed in Hong Kong, at fair value Equity securities listed outside Hong Kong, at fair value Debentures listed outside Hong Kong with fixed interest of 10.5% and maturity date on 14 January 2016, at fair value Unlisted equity securities, at cost Club debentures, at fair value	2013 HK$’000 129,424 369 4,327 37,101 2,258 173,479	2012 HK$’000 – 146 3,261 5,095 2,710
		11,212

Fair values of listed equity securities are based on quoted market bid price in the active market.

Unlisted equity securities represent investments in unlisted equity securities issued by two private entities. The business of these companies are investment holding and securities trading. They are measured at cost less impairment at the end of the reporting period because the range of reasonable fair value estimates is so significant that the directors of the Company are of the opinion that their fair values cannot be measured reliably. During the year ended 31 March 2012, the Group disposed of certain unlisted equity securities with an aggregate carrying value of approximately HK$1,560,000 to an independent third party at HK$561,000, which has been carried at cost less impairment before the disposal. Loss on disposal of HK$999,000 was recognised in profit or loss.

Club debentures are stated at fair values which have been determined by reference to the quoted prices in the secondary markets.

As at 31 March 2013, the available-for-sale investments of approximately HK$6,416,000 (2012: HK$3,696,000) are denominated in currencies other than the functional currency of the respective group entities.

I – 97

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

24. Financial assets designated at fair value through profit or loss

Celebrate Bond (Note i) Mascotte Bond (Note ii) Convertible ICube Bond (Note iii) Innotech Bond (Note iv)	2013 HK$’000 8,735 – 5,572 7,249 21,556	2012 HK$’000 – – – –
		–

Notes:

(i) On 5 September 2012, the Group purchased an unlisted zero coupon convertible bond issued by Celebrate International Holdings Limited (“Celebrate Bond”) with principal amount of HK$20 million from an independent third party at a consideration of HK$20 million. The Celebrate Bond is denominated in HK$ and will mature on 27 May 2016. The Group has the right to convert the Celebrate Bond to ordinary shares of Celebrate International Holdings Limited, at any time before the maturity date, at a conversion price of HK$9.902 per share. If the Group does not exercise the conversion right, the Celebrate Bond will be repayable at the maturity date at 100% of the principal amount. The Group designated the entire Celebrate Bond as financial assets at FVTPL at initial recognition.

The fair value of the debt component of the Celebrate Bond was determined based on the present value of the estimated future cash flows discounted at the prevailing market rate of interest of similar instruments. The fair value of the embedded options was calculated using the binomial model. The inputs into the valuation of the Celebrate Bond were as follows:

	At 31 March
	2013
Stock price of Celebrate International Holdings Limited	HK$0.345
Conversion price	HK$9.902
Risk free rate (Note a)	0.274%
Expected life (Note b)	3.159 years
Expected volatility (Note c)	82.709%
Discount rate	30.157%

As at 31 March 2013, the fair value of the Celebrate Bond was HK$8,735,000, with a fair value loss of HK$11,265,000 charged to profit or loss.

I – 98

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(ii) On 5 September 2012, the Group purchased an unlisted bond issued by Mascotte Holdings Limited (“Mascotte Bond”) with principal amount of HK$30 million from an independent third party at a consideration of HK$30 million. The Mascotte Bond is denominated in HK$. According to the terms of the Mascotte Bond, the maturity date is two years from the issue date (i.e. 4 January 2014). At the maturity date, Mascotte Holdings Limited may elect at its discretion to extend the term for another 5 years. The Mascotte Bond bears interest at 2.5% per annum for the first 2 years and 12.5% per annum afterwards for the extension period of five years. Interest is payable quarterly in arrears. Mascotte Holdings Limited may also redeem part or all of the Mascotte Bond any time before the maturity date (or the extended maturity date if the term is extended) at principal amount and interest accrued up to redemption date. The Group designated the entire Mascotte Bond as financial assets at FVTPL at initial recognition.

The Mascotte Bond was fully disposed of on 27 November 2012 to an independent third party, at a total consideration of HK$20,000,000, with a fair value loss of HK$10,000,000 charged to profit or loss.

(iii) On 10 December 2012, the Group purchased an unlisted zero coupon convertible bond issued by ICube Technology Holdings Limited (“ICube Bond”) with principal amount of HK$19 million from an independent third party at a consideration of HK$18 million. The ICube Bond is denominated in HK$ and will mature on 30 November 2013. The Group has the right to convert the ICube Bond to ordinary shares of ICube Technology Holdings Limited, at any time before the maturity date, at a conversion price of HK$0.125 per share. ICube Technology Holdings Limited may also redeem part or all of the ICube Bond on the maturity date at principal amount. The Group designated the entire ICube Bond as financial assets at FVTPL at initial recognition.

On 8 February 2013, ICube Technology Holdings Limited, the Group and other noteholders of the ICube Bond entered into a deed of variation and agreed to vary certain terms and conditions of the ICube Bond. On 26 March 2013, such variations had been effective. The ICube Bond is notionally divided into two equal portions, namely Interest Bearing ICube Bond and Convertible ICube Bond, and the maturity date is changed to 30 November 2016. The Interest Bearing ICube Bond bears interest at 2.5% per annum, which is accrued since 26 March 2013 and is payable upon maturity with no conversion right being embedded. The Convertible ICube Bond is non-interest bearing and the Group has the right to convert the Convertible ICube Bond to ordinary shares of ICube Technology Holdings Limited, at any time before the maturity date, at a conversion price of HK$0.33 per share. If the Group does not exercise the conversion right, the Convertible ICube Bond will be repayable at the maturity date at 100% of the principal amount. On 26 March 2013, the Group derecognised the ICube Bond as the terms and conditions of the ICube Bond had been significantly changed and recognised the Interest Bearing ICube Bond and Convertible ICube Bond as loan receivables and financial assets designated at FVTPL respectively in accordance with the revised terms and conditions.

I – 99

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The fair value of the debt component of the Convertible ICube Bond was determined based on the present value of the estimated future cash flows discounted at the prevailing market rate of interest of similar instruments. The fair value of the embedded options attached to the convertible portion was calculated using the binomial model. The inputs into the valuation of the Convertible ICube Bond were as follows:

	At 26 March	At 31 March
	2013	2013
Stock price of ICube Technology
Holdings Limited	HK$0.210	HK$0.200
Conversion price	HK$0.330	HK$0.330
Risk free rate (Note a)	0.349%	0.349%
Expected life (Note b)	3.682 years	3.671 years
Expected volatility (Note c)	40.003%	40.003%
Discount rate	19.543%	19.543%

Fair value of the Interest Bearing ICube Bond as at 26 March 2013 was determined by applying discount rate of 19.543%. The Interest Bearing ICube Bond is stated at amortised cost and is included in the consolidated statement of financial position as loan receivables (see note 29b).

At the date of derecognition, the fair value of ICube Bond was HK$11,144,000, with a fair value loss of HK$6,856,000 charged to profit or loss. Fair value of the Interest Bearing ICube Bond and the Convertible ICube Bond at the date of recognition were HK$5,572,000 and HK$5,572,000 respectively.

As at 31 March 2013, the fair value of the Convertible ICube Bond was HK$5,572,000.

(iv) On 10 December 2012, the Group purchased an unlisted zero coupon convertible bond issued by Inno-Tech Holdings Limited (“Innotech Bond”) with principal amount of HK$10 million from an independent third party at a consideration of HK$10 million. The Innotech Bond is denominated in HK$ and will mature on 28 August 2014. The Group had the right to convert the Innotech Bond to ordinary shares of Inno-Tech Holdings Limited, at any time before the maturity date, at a conversion price of HK$3.80 per share. If the Group does not exercise the conversion right, the Innotech Bond will be repayable at the maturity date at 100% of the principal amount. The Group designated the entire Innotech Bond as financial assets at FVTPL at initial recognition.

I – 100

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The fair value of the debt component of the Innotech Bond was determined based on the present value of the estimated future cash flows discounted at the prevailing market rate of interest of similar instruments. The fair value of the embedded options was calculated using the binomial model. The inputs into the valuation of the Innotech Bond were as follows:

Stock price of Inno-Tech Holdings Limited Conversion price Risk free rate (Note a) Expected life (Note b) Expected volatility (Note c) Discount rate	At 31 March 2013

	HK$0.249
	HK$3.800
	0.188%
	1.414 years
	59.487%
	34.310%

As at 31 March 2013, the fair value of the Innotech Bond was HK$7,249,000, with a fair value loss of HK$2,751,000 charged to profit or loss.

Notes:

(a) Risk free rate is determined by reference to the yield of the Hong Kong Exchange Fund Notes with duration similar to the expected life of the relevant bonds.
(b) Expected life is the expected remaining life of the relevant bonds.
(c) Expected volatility is estimated by calculating the historical weekly share price volatility of the stock price of Celebrate International Holdings Limited, ICube Technology Holdings Limited and Inno-Tech Holdings Limited of the relevant bonds.

I – 101

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

25. Deposits

Pledged bank deposit (Note a) Other deposits (Note b) Deposits for purchase of property, plant and equipment Deposit paid for purchase of a land use right (Note c)	2013 HK$’000 – – 991 150,000 150,991	2012 HK$’000 5,724 1,721 88,312 –
		95,757

Notes:

(a) The pledged bank deposit carried effective interest at 1.55% per annum. As at 31 March 2013, the pledged bank deposit was transferred to assets classified as held for sale.
(b) Being deposits paid to different government regulators for operating in mining industry, the deposits were refundable upon the cessation of mining activities. As at 31 March 2013, the amount was transferred to assets classified as held for sale.
(c) During the year ended 31 March 2013, the Group entered into a memorandum of understanding with directors of a subsidiary pursuant to which, the Group intends to acquire a land use right situated in the PRC through acquisition of a company owned by these directors. A refundable deposit of HK$150,000,000 has been paid.

26. Deferred taxation

For the purpose of presentation in the consolidated financial statement of financial position, certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances for financial reporting purposes:

	2013	2012
	HK$’000	HK$’000
Deferred tax assets	205	205

I – 102

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The following are the major deferred tax assets (liabilities) recognised and movements thereon during the current and prior years:

At 1 April 2011 Reclassified as held for sales Exchange realignment At 31 March 2012 and 2013	Fair value adjustment on mining rights HK$’000 (493,235) 506,262 (13,027) –	Fair value adjustments on property, plant and equipment and prepaid lease payments HK$’000 (3,130) 3,353 (223) –	Withholding tax arise from PRC subsidiaries (Note) HK$’000 (185) – – (185)	Tax losses HK$’000 390 – – 390	Total HK$’000 (496,160) 509,615 (13,250)
					205

Note: Under the Law of the PRC, withholding tax is imposed on dividends declared in respect of profits earned by PRC subsidiaries from 1 January 2008 onwards.

At 31 March 2013, the Group has unused estimated tax losses of HK$108,345,000 (2012: HK$72,218,000) available to offset against future profits. A deferred tax asset has been recognised in respect of HK$2,364,000 (2012: HK$2,364,000) of such losses. No deferred tax asset has been recognised in respect of the remaining tax losses of HK$105,981,000 (2012: HK$69,854,000) due to the unpredictability of future profit streams. The tax losses may be carried forward indefinitely.

27. Inventories

Raw materials Work in progress Finished goods Coal, consumables and others	2013 HK$’000 4,658 5,138 6,641 2,840 19,277	2012 HK$’000 10,618 5,300 9,003 1,205
		26,126

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

28. Other current financial assets

Trade and bills receivables

Trade receivables Bills receivable	2013 HK$’000 13,178 217 13,395	2012 HK$’000 23,034 –
		23,034

Included in the Group’s trade and bills receivables are receivables of approximately HK$6,431,000 (2012: HK$13,686,000) denominated in US$ which is the currency other than the functional currency of the respective group entities.

The Group allows an average credit period of 30 to 60 days to its customers. The aged analysis of trade and bills receivables presented based on the invoice date at the end of the reporting period, which approximated the respective revenue recognition dates, is stated as follows:

0 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days	2013 HK$’000 9,351 2,533 1,006 505 13,395	2012 HK$’000 20,474 906 627 1,027
		23,034

In determining the recoverability of trade and bills receivables, the Group considers any change in the credit quality of the trade receivables from the date credit was initially granted up to the report date. The Group considers the trade and bills receivables are determined to be impaired if they are aged for more than 180 days based on the management past experience the balances are not recoverable. The directors believe that there is no further credit provision required as at the end of the reporting period.

I – 104

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Included in the Group’s trade receivable balance are debtors with aggregate carrying amount of approximately HK$4,044,000 (2012: HK$2,559,000) as at 31 March 2013, which are past due at the end of the reporting period for which the Group has not provided for impairment loss as there has not been a significant change in credit quality and the amounts are still considered recoverable. The Group does not hold any collateral over these balances. The average age of these trade receivables is 64 days (2012: 72 days) in the year of 2013.

Ageing of trade receivables which are past due but not impaired

Overdue by 1 to 30 days Overdue by 31 to 60 days Overdue by 61 to 180 days	2013 HK$’000 2,481 1,006 557 4,044	2012 HK$’000 1,000 955 604
		2,559

Other receivables, deposits and prepayments

Other receivables and deposits comprise amounts receivable from third parties and recoverable within one year.

As at 31 March 2012, included in the Group’s other receivables are receivables of approximately HK$8,000 denominated in currencies other than the functional currency of the respective group entities.

Bank balances and cash

Bank balances and cash comprise cash held by the Group and short-term bank deposits with original maturity date less than three months, carrying effective interest at approximate 0.27% (2012: 0.32%) per annum.

The bank balances and cash of approximately HK$47,963,000 (2012: HK$20,073,000) are denominated in currencies other than the functional currency of the respective group entities.

I – 105

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

29. Loan receivables

Non-current: Promissory note (Note a) Interest bearing bond (Note b) Current: Fixed-rate loan receivables (Note c) Notes:	2013 HK$’000 25,000 5,572 30,572 110,000 140,572	2012 HK$’000 – –
		– –
		–

(a) On 6 December 2012, the Group purchased promissory note (“Carnival Note”) issued by Carnival Group International Holdings Limited, which is a company with its shares listed on The Stock Exchange of Hong Kong Limited with principal amount of HK$25 million from an independent third party at a consideration of HK$25 million. The Carnival Note is denominated in HK$ and will mature on 21 December 2014. The Carnival Note bears interest at 3.5% per annum which is payable on the maturity date. The Carnival Note will be repayable at the maturity date at 100% of the principal amount with the accrued interest.
(b) Details of the Interest Bearing ICube Bond are set out in note 24(iii).
(c) As at 31 March 2013, loan receivables represent loan provided to three borrowers with effective interests ranging from 20% to 24% per annum and all are repayable in 2013. Other than a loan receivable with principal amount of HK$50,000,000 which was secured by equity shares of a private company, the remaining two loan receivables were unsecured. Subsequent to the end of the reporting period, loan receivables with aggregate amount of HK$60,000,000 were early repaid.

Loan receivables at the end of reporting period are neither past due nor impaired. The Group did not provide impairment loss to loan receivables.

I – 106

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

30. Investments held for trading

Investments held for trading include: Equity securities listed in Hong Kong, at fair value Equity securities listed outside Hong Kong, at fair value	2013 HK$’000 138 4 142	2012 HK$’000 115 3
		118

Fair values of listed investments held for trading are based on quoted market bid price in the active market.

As at 31 March 2013, the investments held for trading of approximately HK$4,000 (2012: HK$3,000) are denominated in currencies other than the functional currency of the respective group entities.

I – 107

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

31. Assets classified as held for sale

(a) Inner-Mongolia Mining Operation

On 7 September 2011, the Group entered into a sales and purchase agreement with an independent third party, Inner-Mongolia Shuangxin Resources Group Co., Ltd. (the “Purchaser”). Pursuant to this sales and purchase agreement, the Group agreed to dispose of Wuhai City Menggang Industrial Development Co., Ltd. and its subsidiaries (collectively referred to as the “Menggang Group”) (the “Disposal”), which operated the Group’s coal mines in the Inner-Mongolia Autonomous Region in the PRC (the “Inner-Mongolia Coal Mining Operation”), for a cash consideration of RMB1,503,000,000 (“Total Consideration”). In addition to the Total Consideration, the Purchaser was required to advance to the Menggang Group RMB300,000,000 (the “Settlement Fund”), which shall be used to repay the Menggang Group’s existing payables to third parties and the current account with the Company and its subsidiaries, before completion of the Disposal. The Settlement Fund had been provided by the Purchaser during the year ended 31 March 2012 and the Settlement Fund was payable to the Purchaser by the Menggang Group. As at 31 March 2012, unused fund was HK$27,554,000, which was deposited in a special purpose bank account of the Menggang Group.

Completion of the Disposal was subject to fulfilment of conditions precedent including, amongst others, the approval from the relevant PRC government departments. During the year ended 31 March 2013, all these conditions were fulfilled and the Disposal was completed on 30 May 2012 (see note 40).

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As at 31 March 2012, the assets and liabilities attributable to the Menggang Group to be sold within twelve months had been classified as assets and liabilities held for sale and were separately presented in the consolidated statement of financial position. The Inner Mongolia Coal Mining Operation for the current and prior years were presented as discontinued operation (see note 32).

Property, plant and equipment Prepaid lease payments Mining rights Deposits Inventories Other receivables and prepayments Cash deposited in a special purpose account Bank balances and cash Total assets classified as held for sale Other payables Deferred tax liabilities The Settlement Fund Total liabilities associated with assets classified as held for sale	31 March 2012 HK$’000 346,500 26,176 2,058,378 14,137 3,081 13,913 27,554 2,931 2,492,670 (7,029) (513,503) (368,280) (888,812)

(b) Xinjiang Coal Mining Operation

On 12 October 2012, the Group and Up Energy Mining Limited, an independent third party, entered into a sales and purchase agreement (“S&P Agreement”). Pursuant to the S&P Agreement, the Group conditionally agreed to dispose of its entire interest in Champ Universe Limited and its subsidiaries (collectively referred as the “Champ Universe Group”), which operates the Group’s coal mines in the Xinjiang Uygur Autonomous Region in the PRC (“the Xinjiang Coal Mining Operation”) and to assign HK$1.6 billion shareholder’s loan at a consideration of HK$1,580,000,000 subject to adjustments pursuant to the terms of the S&P Agreement (the “Proposed Disposal”).

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The consideration will be satisfied by: (i) issue of 367,500,000 shares of Up Energy Development Group Limited (“Up Energy”), ultimate holding company of Up Energy Mining Limited with its shares listed on the Stock Exchange, at an issue price of HK$2 per share (“Up Energy Share(s)”). However, if as at the third anniversary of the completion date of this disposal (“Third Anniversary Date”), the average closing price of the Up Energy Share for the five trading days immediately preceding and including the Third Anniversary Date is less than HK$2 per share, Up Energy shall allot and issue additional new Up Energy Share to the Company (details as set out in the Company’s announcement dated 29 October 2012); (ii) HK$845,000,000 by way of cash payment; (iii) put option granted to the Company, pursuant to which, as at the Third Anniversary Date, the Company has the right to request Up Energy to arrange for the sale of the Up Energy Shares, up to a maximum of 140,000,000 shares by way of placing through an independent qualified placing agent nominated by Up Energy at a price to be agreed between Up Energy and such placing agent (“Placing Price”). If the Placing Price is less than HK$2.2 per share, Up Energy shall pay the shortfall as cash compensation to the Company.

Completion of the Proposed Disposal is subject to fulfilment of conditions precedent including, amongst others, the approval from shareholders of the Company and Up Energy. The resolution for the Proposed Disposal was passed by shareholders of the Company in an extraordinary general meeting on 22 February 2013. In the opinion of the directors, the sale of the Champ Universe Group is considered as highly probable as at 31 March 2013.

According to the announcement released by Up Energy on 11 June 2013, a special general meeting will be held by Up Energy on 27 June 2013 to approve the Proposed Disposal as this transaction constitutes a very substantial acquisition for Up Energy under the Listing Rules.

The fair value of the consideration for the Proposed Disposal is expected to exceed the net carrying amount of the relevant assets and liabilities of the Champ Universe Group of HK$1,576,531,000 as at 31 March 2013, accordingly, no impairment losses were recognised, neither when the operation was classified as held for sale nor at the end of the reporting period.

As at 31 March 2013, the assets and liabilities attributable to the Champ Universe Group to be sold within twelve months have been classified as assets and liabilities held for sale and were separately presented in the consolidated statement of financial position. The Xinjiang Coal Mining Operation for the current and prior years were presented as discontinued operation (see note 32).

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Assets of Champ Universe Group: Property, plant and equipment Prepaid lease payments Mining rights Deposits Inventories Trade receivables Other receivables and prepayments Bank balances and cash Total assets classified as held for sale Liabilities of Champ Universe Group: Trade payables Other payables Provision for restoration and environment costs Borrowing (Note) Deposit received from Up Energy Total liabilities associated with assets classified as held for sale	31 March 2013 HK$’000 33,328 1,898 1,568,091 7,973 13,917 1,980 775 4,031
	1,631,993

	2,039 13,252 6,802 33,369
	55,462 10,000
	65,462

Note: During the year ended 31 March 2013, the Group obtained a loan of RMB27 million (equivalent to HK$33,369,000) from a rural credit cooperative union. The loan is unsecured, bears interest at a fixed rate of 9.93% per annum and is repayable on 17 July 2013.

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32. Discontinued operations

The combined results of the discontinued operations (i.e. the Inner-Mongolia Coal Mining Operation and Xinjiang Coal Mining Operation) (as defined in note 31) included in the loss for the year are set out below. The comparative loss and cash flows from discontinued operations have been re-presented to include the Xinjiang Coal Mining Operation, which was classified as discontinued operation in the current year.

Loss for the year from discontinued operations is analysed as follows: Revenue Cost of sales Other income, gain and loss Distribution and selling costs Administrative expenses Written off of deposits for purchase of property, plant and equipment (Note a) Other expenses (Note b) Finance costs – interest on borrowings wholly repayable within five years Tax credit Gain on disposal of operation Attributable income tax expenses Loss for the year from discontinued operations	2013 HK$’000 32,997 (26,810) 2,620 (394) (20,418) (86,693) (266) (2,365) – (101,329) 141,619 (124,121) (83,831)	2012 HK$’000 (Restated) 2,861 (1,451) 2,322 (110) (18,051) – (15,273) – 277 (29,425) – – (29,425)

Notes:

(a) The amount represents the deposits paid to suppliers in previous years for purchase of property, plant and equipment for the planned technical improvement works to be carried out by the Group’s Xinjiang Coal Mining Operation. During the year ended 31 March 2013, as a result of the Proposed Disposal, the Group entered into termination agreements with these suppliers to cancel the purchase of property, plant and equipment. Since the deposits paid were non-refundable, after entering into the termination agreements, the deposits paid were written off accordingly.

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(b) The Inner-Mongolia Coal Mining Operation was in the process of various technical and quality improvements to attain the safety standards in accordance with the regulation imposed by the PRC authorities. Therefore, there were no coal production and sale of coal by the Inner-Mongolia Mining Operation for both years. Production of the Xinjiang Coal Mining Operation was also suspended production by the relevant PRC authorities for the period from 7 July 2011 to 9 November 2011 to address certain safety issues. There were no coal production and sale of coal by the Xinjiang Coal Mining Operation during this suspended period.

Other expenses represent wages, depreciation expense, consumables and other direct attributable costs incurred during the suspension periods of both the Inner-Mongolia Coal Mining Operation and Xinjiang Coal Mining Operation.

Loss for the year from discontinued operations have been arrived at after charging (crediting): Auditor’s remuneration Allowance for inventories Depreciation of property, plant and equipment Amortisation of mining rights Release of prepaid lease payments Loss on disposal of property, plant and equipment Directors’ emoluments Chief executive’s emoluments Bonus (Note) Other staff costs Fees, salaries, bonus and other allowances (Note) Retirement benefit scheme contributions Interest income Cash flows from discontinued operation: Net cash flows used in operating activities Net cash flows used in investing activities Net cash flows from financing activities	2013 HK$’000 18 4,149 3,142 992 706 340 – 44,000 37,815 2,453 84,268 (166) (27,788) (21,344) 52,647	2012 HK$’000 (Restated) 28 – 6,840 556 734 – – – 6,478 1,094 7,572 (1,047) (28,573) (25,205) 57,261

Note: During the year ended 31 March 2013, amount included a special bonus of HK$44,000,000 and HK$6,000,000 paid to the chief executive and other staff respectively in respect of the completion of the disposal of subsidiaries which was included in determining the gain on disposal of subsidiaries. Details are set out in note 40(ii).

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33. Other current financial liabilities

Trade payables

Trade payables principally comprise amounts outstanding for trade purchases. The average credit period taken for trade purchases is 30 to 60 days. The aged analysis of trade payables is stated as follows:

0 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days	2013 HK$’000 6,345 1,220 184 83 7,832	2012 HK$’000 6,589 3,686 402 480
		11,157

As at 31 March 2013, included in the Group’s trade payables, HK$680,000 (2012: HK$1,404,000) are denominated in currencies other than the functional currency of the respective group entities.

Other payables, deposits received and accruals

Other payables principally comprise amounts outstanding for ongoing costs.

As at 31 March 2013, included in other payables, deposits received and accruals, HK$2,485,000 (2012: HK$428,000) are denominated in currencies other than the functional currency of the respective group entities.

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34. Secured notes

On 6 September 2012, the Company entered into an investment agreement (the “Investment Agreement”) with Cheer Hope Holdings Limited, an independent third party subscriber (the “Investor”), pursuant to which, the Company agreed to issue and the Investor agreed to subscribe for a note (the “Notes”) in the aggregate principal amount of up to US$40,000,000. Pursuant to the Investment Agreement, the Company also agreed to issue warrants to the Investor (the “Warrants”) to subscribe the Company’s ordinary shares with an aggregate exercise price of up to US$10,000,000 for a period of one year commencing from the date of issue of the Warrants. The subscription price of the Warrants had not been agreed by the Company and the Investor. On 4 October 2012, the Company and the Investor entered into an agreement, pursuant to which, the date to agree on the subscription price of the Warrants was extended to 31 December 2012. On 24 December 2012, the Company further entered into an agreement (the “Supplementary Investment Agreement”), pursuant to which, the Company and the Investor agreed that the Warrants would not be issued and the Company’s obligation to issue the Warrants was released.

The maturity date of the Notes is one year after the issue date. The Notes bear fixed interest rate at 17% per annum. The Notes may be early redeemed in whole or in part by the Company at 100% of the principal amount of the Notes to be redeemed and together with all accrued interest.

The Notes are secured by equity charges of certain subsidiaries of the Company.

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The fair value of the Notes was determined based on the present value of the estimated future cash flows discounted by the prevailing market rate of interest of similar instruments. The fair value of the embedded early redemption option was calculated using the option pricing model. The inputs into the valuation of the Notes were as follows:

	At 31 March
	2013
Risk free rate (Note a)	0.097%
Credit and other spread (Note b)	22.503%
Discount rate	22.975%

As at 31 March 2013, the fair value of the Notes was HK$122,582,000, with a fair value loss of HK$20,812,000 charged to profit or loss.

Notes:

a) Risk free rate is determined by reference to the yield of the Hong Kong Exchange Fund Bills with duration similar to the expected life of the Notes.
b) Credit and other spread is determined by reference to credit analysis of the Company and market yield of bonds issued by comparable companies with similar credit strength as well as the Company’s specific risk premium.

35. Convertible notes and embedded derivatives

As at 31 March 2012, the Group had two types of outstanding convertible notes, which were issued on 24 January 2010 (“CN1”) and 15 June 2011 (“CN2”). CN1 is denominated in United States dollars, non-interest bearing, with conversion price of HK$0.88 per share and will mature on 24 January 2018. CN2 is denominated in Hong Kong dollars, bears interest at 2% per annum, with conversion price of HK$0.77 per share and will mature on 15 June 2016.

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CN1 contained the following components:

(a) Debt component represented the present value of the contractually determined stream of future cash flows discounted at the rate of interests, on initial recognition, of instruments of comparable credit status and providing substantially the same cash flows, on the same terms, but without the conversion option. The effective interest rate of the debt component for CN1 was 8.52% per annum; and
(b) Embedded derivative represented the embedded conversion option of CN1 to convert the liability into equity of the Company but the conversion would be settled other than by the exchange of a fixed number of the Company’s own equity.

CN2 contained the following components:

(a) Debt component represented the present value of the contractually determined stream of future cash flows discounted at the rate of interests, on initial recognition, of instruments of comparable credit status and providing substantially the same cash flows, on the same terms, but without the conversion option. The effective interest rate of the debt component for CN2 was 18.01% per annum. The debt component also included the value of the early redemption option, which the Company may redeem CN2 at 100% of the principal amount together with the accrued interests at any time before the maturity date of the CN2 as the option was closely related to the host debt instrument; and
(b) Equity component represented the embedded conversion option to convert the liability into equity of the Company and the conversion would be settled by the exchange of fixed amount of cash or another financial asset for a fixed number of the Company’s own equity.

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FINANCIAL INFORMATION OF THE GROUP

At 1 April 2011 At initial recognition of CN2 Coupon interest Redemption during the year (Note i) Transfer to accumulated losses upon redemption Imputed interest charged (Note 11) Gain arising from change in fair value recognised in profit or loss Re-measurement of the debt components (Note ii) At 31 March 2012 (Note iii) Gain arising from change in fair value recognised in profit or loss Interest charged (Note 11) Repayment (Note iv) Transfer to accumulated losses upon redemption At 31 March 2013	Debt component HK$’000 217,835 270,116 (8,036) (248,824) – 49,002 – 357,963 638,056 – 1,293 (639,349) – –	CN1 embedded conversion option HK$’000 180,882 – – – – – (180,839) – 43 (43) – – – –	CN2 equity HK$’000 – 304,884 – – (168,084) – – – 136,800 – – – (136,800) –	Total HK$’000 398,717 575,000 (8,036) (248,824) (168,084) 49,002 (180,839) 357,963
				774,899 (43) 1,293 (639,349) (136,800)
				–

Notes:

(i) On 28 November 2011 and 16 March 2012, the Company redeemed CN2 through exercise of early redemption option with principal amount of HK$137,000,000 and HK$180,000,000 respectively. The difference of HK$68,176,000 between the carrying value of the redeemed debt component of HK$248,824,000 with its fair value at the date of redemption, which is equivalent to the redemption price of HK$317,000,000, was charged to profit or loss as loss on redemption.

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(ii) Subsequent to entering into the sales and purchase agreement in relation to the Disposal (as set out in note 31a), the Company reached agreement with the noteholders that, upon completion of the Disposal, the Group would settle the entire outstanding amount of CN1 and CN2 by proceeds obtained from the Disposal. The resolution for the Disposal was passed by shareholders in extraordinary general meeting on 10 February 2012 and accordingly, the Group re-measured the carrying value of CN1 and CN2 to their present value of the estimated future cash flows, which were approximately HK$380,056,000 and HK$258,000,000 respectively, with the difference charged to profit or loss as “loss on remeasurement of the debt components of convertible notes”.
(iii) As at 31 March 2012, the debt components of CN1 and CN2 with aggregated carrying amount of HK$638,056,000 and the embedded derivatives of CN1 of HK$43,000 were classified as current liabilities, as in the opinion of the directors, the entire outstanding amount of CN1 and CN2 would be settled within the next twelve months.
(iv) During the year ended 31 March 2013, the Group repaid the entire principal amount of CN1 and CN2 and accrued interests by cash.

The fair value of the embedded conversion option of CN1 was calculated using the Binomial Option Pricing Model. The inputs into the model at 31 March 2012 were as follows:

	31 March
	2012
Share price	HK$0.24
Conversion price	HK$0.88
Expected life (Note a)	0.25 years
Risk free rate (Note b)	0.672%
Expected volatility (Note c)	84.233%

Notes:

(a) Expected life was the expected remaining life of the embedded conversion option. As at 31 March 2012, as the Company reached agreement with the noteholders to settle the entire outstanding amount of CN1 by proceeds obtained from the Disposal, and the directors expected the settlement would be completed in approximately three months, the expected life was revised accordingly.
(b) The risk free rate was determined by reference to the Hong Kong Exchange Fund Note.
(c) Expected volatility for embedded conversion option was estimated by calculating the historical weekly share price volatility of the comparable companies engaged in similar businesses as the Group’s various business segments.

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The fair value of the embedded conversion option of CN2 at the date of issue was calculated using the Binomial Option Pricing Model. The inputs into the model at the date of issue were as follows:

	15 June
	2011
Share price (Note a)	HK$0.75
Conversion price	HK$0.77
Expected life (Note b)	5 years
Risk free rate (Note c)	1.422%
Expected volatility (Note d)	74.47%

Notes:

(a) Based on the quoted market price.
(b) Expected life was the expected remaining life of the embedded conversion option.
(c) The risk free rate was determined by reference to the Hong Kong Exchange Fund Note.
(d) Expected volatility for embedded conversion option was estimated by calculating the historical weekly share price volatility of the comparable companies engaged in similar businesses as the Group’s various business segments.

As at 31 March 2012, the debt component of CN1 amounting to HK$380,056,000 and embedded derivatives amounting to HK$43,000 were denominated in currency other than the function currency of the Company.

36. Retirement benefit schemes

The Group operated a pension scheme under rules and regulations of Mandatory Provident Fund Schemes Ordinance (“MPF Scheme”). The assets of the MPF Scheme are held separately in an independently administrated fund. The Group has chosen to follow the minimum statutory contribution requirement of 5% of eligible Hong Kong employees’ monthly relevant income but limited to the cap of HK$1,250 per month starting from 1 June 2012 (prior to 1 June 2012: HK$1,000). The contributions are charged to profit or loss.

The employees of the Group’s subsidiaries in the PRC and a subsidiary in France are members of state-managed retirement benefit schemes operated by respective local governments. The subsidiaries are required to contribute a specific percentage of their payroll costs to the retirement benefit schemes. The only obligation of the Group with respect to the retirement benefit scheme is to make the specified contributions.

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During the year, the total amounts contributed by the Group to the schemes and cost charged to profit or loss of HK$6,184,000 (2012: HK$4,417,000) represent contribution paid or payable to the schemes by the Group at rates specified in the rules of the schemes.

Defined benefit plan

The Group operates an unfunded defined benefit plan for qualifying employees of its subsidiary in France. Under the scheme, the employees are entitled to retirement benefits which are based on the estimated final salary and the length of the service to the retirement. No other post-retirement benefits are provided.

37. Provision for restoration and environmental costs

At 1 April 2011 Acquisition of subsidiaries (Note 41) Unwinding of discounting effect for the year Exchange adjustment At 31 March 2012 Estimation adjustment Unwinding of discounting effect for the year Exchange adjustment Transfer to assets classified as held for sale (Note 31b) At 31 March 2013	HK$’000 – 6,145 1,020 124 7,289 (1,118) 584 47 (6,802) –

The provision for restoration and environmental costs has been determined by the directors based on their best estimate. The discount rate applied is approximate 6%.

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38. Share capital

Ordinary shares of HK$0.05 each Authorised: At 1 April 2011 Increased on 15 July 2011 At 31 March 2012 and 2013 Issued and fully paid: At 31 March 2011 Placing of shares Shares issued upon conversion of convertible shares At 31 March 2012 Shares issued upon exercise of warrants At 31 March 2013	Number of shares 5,000,000,000 5,000,000,000 10,000,000,000 2,411,463,553 574,513,810 941,558,441 3,927,535,804 3,000,000 3,930,535,804	Share capital HK$’000 250,000 250,000
		500,000

		120,573 28,726 47,078
		196,377 150
		196,527

Details of the changes in the Company’s share capital for the year ended 31 March 2012 and 2013 are as follows:

(a) On 16 March 2012, private placements to independent private investors of 574,513,810 new shares of HK$0.05 each in the Company were completed, at a placing price at HK$0.325 per share.
(b) During the year ended 31 March 2012, a total of 941,558,441 new ordinary shares of the Company of HK$0.05 each were issued upon the conversion of the convertible shares of the Company. Details are set out in note 42.

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(c) During the year ended 31 March 2013, a total of 3,000,000 new ordinary shares of the Company of HK$0.05 each were issued upon the exercise of 3,000,000 warrants at HK$0.1625 per share. Details of the warrants are set out in note 39.

All the shares which were issued during both years rank pari passu with the then existing shares in all respects.

39. Reserves

Share premium

At the beginning of year Issue of new shares upon exercise of warrants Issue of new shares upon placing Issue of new shares upon conversion of convertible shares Transaction costs attributable to issue of new shares upon placing At the end of year Warrant reserve At the beginning of year Warrants matured Issue of warrants (Note) Transaction costs attributable to issue of warrants Exercise of warrants (Note) At the end of the year (Note)	2013 HK$’000 2,819,303 337 – – – 2,819,640 2013 HK$’000 6,331 (6,331) 7,855 (256) (29) 7,570	2012 HK$’000 2,008,087 – 157,991 659,091 (5,866) 2,819,303 2012 HK$’000 – – 6,547 (216) – 6,331

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Note: On 21 January 2013, 785,500,000 warrants of the Company were issued under a placing arrangement to 19 independent placees at issue price of HK$0.01 per warrant at exercise price of HK$0.1625 per share. The proceeds from the placing of the warrants were approximately HK$7,855,000. The warrants issued by the Company were classified as equity instrument, which is stated at the proceeds received, net of direct issue cost.

During the year ended 31 March 2013, a total of 3,000,000 warrants were exercised. As at 31 March 2013, there was 782,500,000 warrants outstanding which is convertible into 782,500,000 new ordinary shares of the Company.

Statutory surplus reserve

At the beginning and the end of year Convertible note equity reserve At the beginning of year Issue of convertible notes Transfer to accumulated losses upon redemption At the end of the year	2013 HK$’000 3,539 2013 HK$’000 136,800 – (136,800) –	2012 HK$’000 3,539 2012 HK$’000 – 304,884 (168,084) 136,800

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Share option reserve

At the beginning of year Transfer to accumulated losses upon forfeiture of share options Recognition of equity-settled share-based payments At the end of year Asset revaluation reserve At the beginning of year Fair value changes on available-for-sale investments Reclassification adjustment to profit or loss on impairment loss Reclassification adjustment to profit or loss upon disposal At the end of year Special reserve At the beginning and the end of year	2013 HK$’000 34,719 (6) 9,187 43,900 2013 HK$’000 1,826 (4,011) 15,555 3,327 16,697 2013 HK$’000 (5,754)	2012 HK$’000 16,585 (133) 18,267 34,719 2012 HK$’000 1,400 (289) 715 – 1,826 2012 HK$’000 (5,754)

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Translation reserve

At the beginning of year Exchange differences arising on translation of foreign operations Reclassification adjustments relating to foreign exchange operation disposed of At the end of year	2013 HK$’000 181,956 15,458 (120,505) 76,909	2012 HK$’000 85,700 96,256 –
		181,956

40. Disposal of subsidiaries

During the year ended 31 March 2013, the Group disposed of its entire interest in the Menggang Group. The net gain on disposal of the Menggang Group was as follows:

Analysis of assets and liabilities over which control was lost:

Property, plant and equipment Prepaid lease payments Mining rights Deposits Inventories Other receivables and prepayments Cash deposited in a special purpose account Other payables Deferred tax liabilities The Settlement Fund	2013 HK$’000 359,600 25,891 2,056,632 19,137 3,070 20,033 8,285 (3,920) (513,018) (366,990)
	1,608,720

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Net gain on disposal of subsidiaries:

Consideration received and receivable (Note i) Adjustment on consideration (Note i) Net assets disposed of Reclassification of cumulative translation reserve upon disposal of the Menggang Group to profit or loss Stamp duty and other direct costs (Note ii) Net gain on disposal	2013 HK$’000 1,846,817 (92,870) (1,608,720) 120,505 (124,113) 141,619

Net gain on disposal of HK$141,619,000, together with attributable income tax expenses related to this disposal of HK$124,121,000, are included in profit or loss from discontinued operation in the consolidated statement of comprehensive income (see note 32).

Net cash inflow arising on disposal at the date of:

Total cash consideration received (Note iii) Stamp duty and other direct costs paid (Note ii) Withholding tax paid (Note iv)	2013 HK$’000 1,604,072 (124,113) (105,589) 1,374,370

Notes:

(i) According to the sales and purchase agreement entered into between the Group and the Purchaser, the Total Consideration of RMB1,503,000,000 (approximately HK$1,846,817,000) will be satisfied by four instalments: HK$949,417,000 by completion; HK$523,759,000 by 90 days subsequent to the completion; HK$280,763,000 by 180 days subsequent to the completion and the remaining HK$92,878,000 by fifteen months subsequent to the completion. On 19 November 2012, the Group and the Purchaser entered into a supplemental agreement in relation to the Disposal (“Supplemental Agreement”), pursuant to which the Group and the Purchaser agreed to reduce the Total Consideration by RMB75,000,000 (approximately HK$92,870,000). Such reduction shall be settled by deducting the third installment by RMB40,000,000 (approximately HK$49,613,000) and deducting the final installment by RMB35,000,000 (approximately HK$43,257,000).

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(ii) The successful completion of the Disposal generated significant cash flows and net gain on disposal of subsidiaries to the Group. In order to recognise the efforts of certain employees participating in this transaction, the remuneration committee of the Company approved a special bonus of HK$50 million in September 2012. Included in this special bonus, HK$44 million was paid to the chief executive and the remaining HK$6 million was paid to other staff.
(iii) During the year ended 31 March 2013, the Purchaser fully settled the first and second installment, plus HK$130,896,000 of the third installment, which is RMB80 million (or equivalent to HK$100,254,000) less than the adjusted third installment amount in accordance with the Supplemental Agreement.

On 6 December 2012, the Purchaser received a notice (the “Notice”) from the tax bureau of Wuhai City Hainan District in the Inner Mongolia Autonomous Region (the “Tax Bureau”). Pursuant to which, the Tax Bureau requested the Purchaser to withhold additional business tax of RMB80 million. In the view of the directors of the Company, such additional business tax is not applicable to this transaction, hence the Group negotiated with the Tax Bureau and finally the Tax Bureau revoked the Notice on 3 April 2013. However, this RMB80 million outstanding amount has not been settled by the Purchaser.

On 16 May 2013, an arbitration was filed by the Group to China International Economic and Trade Arbitration Commission to claim this unsettled amount. As the arbitration is in a preliminary stage, the Purchaser has not yet shared its reason and position for not settling the outstanding amount. In view of the Notice was revoked by Tax Bureau, in the opinion of the directors, the Group has a meritorious ground on the arbitration, so the risk of non-recoverability of the amount is minimal, and no impairment is required as at 31 March 2013.

As at 31 March 2013, consideration receivable of RMB120,150,000 (or equivalent to HK$149,875,000) represents the unsettled portion of the third installment and the undue fourth installment.

(iv) Withholding tax recognised in respect of the Disposal was HK$124,121,000. As at 31 March 2013, HK$18,532,000 of the total withholding tax was not yet settled and will be settled according to the repayment schedule as stated in note (i) above.

41. Acquisition of assets through purchase of subsidiaries

On 28 January 2011, the Company, Champ Universe Limited, a wholly owned subsidiary of the Company, and Tai Rong Xin Ye International Power Generating Inc. (“Tai Rong”) entered into a sale and purchase agreement, pursuant to which, Champ Universe Limited agreed to acquire the entire interest of Venture Path Limited and its subsidiaries (collectively referred to as the “Venture Path Group”) from Tai Rong at an aggregate consideration with fair value of HK$1,531,169,000, satisfied by (i) HK$250,000,000 cash consideration; (ii) HK$575,000,000 by issue of the CN2 (see note 35); and (iii) HK$706,169,000 by the issue of the convertible shares (see note 42). The Venture Path Group owns Baicheng Wenzhou Mining Development Co., Ltd. which is principally engaged in the Xinjiang Coal Mining Operation. During the year ended 31 March 2011, the Company paid HK$250,000,000 to Tai Rong as deposit for the acquisition. The acquisition was completed on 15 June 2011.

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FINANCIAL INFORMATION OF THE GROUP

Assets and liabilities recognised at the date of acquisition:

Property, plant and equipment
Prepaid lease payments
Mining right
Deposits
Inventories
Other receivables
Bank balances and cash
Other payables
Tax liabilities
Provision for restoration and environmental costs
Net assets and liabilities acquired
Total consideration satisfied by:
Cash deposit paid and included in deposit paid for
acquisition of subsidiaries as at 31 March 2011
Convertible notes
Convertible shares
Net cash outflow arose on acquisition:
Net cash consideration paid
Bank balances and cash acquired

2012
HK$’000
19,251
1,952
1,520,465
5,988
780
1,132
273
(11,168)
(1,359)
(6,145)
1,531,169
250,000
575,000
706,169
1,531,169
–
273
273

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42. Convertible shares

On 15 June 2011, 941,558,441 convertible shares were issued by the Company as part of the consideration for the acquisition of assets through purchase of subsidiaries (set out in note 41). Fair value of the convertible shares at the date of issue, based on the market price of the ordinary shares of the Company, was HK$706,169,000.

Convertible shares issued by the Company had the same right on return of capital on liquidation or otherwise, but did not carry voting right and did not entitle to dividend or other distribution. Each convertible share could be converted at any time into one ordinary share of the Company, given that, immediately following the conversion, the Company would be able to meet the public float requirement under the Listing Rules and the relevant convertible shareholder, together with the parties acting in concert with it, would not hold or control such amount of the Company’s voting power at general meetings as may trigger a mandatory general offer under the Codes on Takeovers and Mergers and Share Repurchases issued by the Securities and Future Commission. The convertible shares were transferrable at any time at the option of the convertible shareholder and the convertible shares were not redeemable and have no maturity period.

During the year ended 31 March 2012, all convertible shares issued were converted into ordinary shares of the Company.

43. Pledge of assets

Other than as disclosed at note 34, at 31 March 2012, the Group pledged its leasehold land and buildings with carrying values of HK$2,914,000 to secure the unutilised general banking facilities granted to the Group. The pledge was released during the year ended 31 March 2013 due to the cancellation of the banking facilities.

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44. Commitments

(a) Operating lease commitments

The Group as lessee

At the end of the reporting period, the Group had commitments for future minimum lease payments under non-cancellable operating leases in respect of rented premises which fall due as follows:

Within one year In the second to fifth year inclusive	2013 HK$’000 10,937 6,182 17,119	2012 HK$’000 8,108 12,307
		20,415

Operating lease payments represent rentals payable by the Group for certain of its office and factory premises. Leases are negotiated for lease term of two to five years and rentals are fixed over the relevant lease term.

The Group as lessor

At the end of the reporting period, the Group had contracted with tenants for the following future minimum lease payments:

Within one year Within two to five years After five years	2013 HK$’000 420 1,456 – 1,876	2012 HK$’000 420 1,799 77
		2,296

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During the year ended 31 March 2013, rental income under operating leases recognised was HK$420,000 (2012: HK$350,000), less outgoings of HK$88,000 (2012: HK$79,000).

(b) Capital commitments in respect of addition of property, plant and equipment (Note):

Capital expenditure in respect of addition of property, plant and equipment contracted for but not provided in the consolidated financial statements Capital expenditure in respect of addition of property, plant and equipment authorised but not contracted for	2013 HK$’000 5,080 1,174,700	2012 HK$’000 89,569

		189,038

Note: Capital commitments in respect of addition of property, plant and equipment also included those related to the Group’s Xinjiang Coal Mining Operation.

45. Share option scheme

The Company’s existing share option scheme was adopted on 16 May 2006 (the “Scheme”). The major terms of the Scheme are set out below:

(i) The purpose was to provide incentives to the participants;
(ii) The participants included any full-time or part-time employees, executives and officers of the Company and any of its subsidiaries (including executives, nonexecutive directors and independent non-executive directors of the Company and any of its subsidiaries) and business consultants and legal and other professional advisors of the Company or its subsidiaries which, in the opinion of the Company’s board of directors, has or had made contribution to the Group;

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(iii) The maximum number of shares in respect of which options might be granted under the Scheme must not exceed 30% of the issued share capital of the Company from time to time. The number of shares issued and to be issued in respect of which options granted and may be granted to any individual in any 12-month period is not permitted to exceed 1% of the shares of the Company in issue at any point in time, without prior approval from the Company’s shareholders. Options granted to a substantial shareholder or an independent non-executive director in excess of 0.1% of the Company’s share capital or with a value in excess of HK$5 million must be approved in advance by the Company’s shareholders;
(iv) In relation to each grantee of the options granted under the Scheme, the right of the grantee to exercise the option shall vest in three stages: 30% of share options granted (rounded down to the nearest whole number of shares) will vest from the expiry of one year from the acceptance date of the option (the “Acceptance Date”) up to the day immediately before the fourth anniversary of the Acceptance Date; 30% of share options granted (rounded down to the nearest whole number of shares) will vest from the expiry of two years from the Acceptance Date up to the day immediately before the fifth anniversary of the Acceptance Date; and 40% of the share options granted (round down to the nearest whole number of shares) will vest from the expiry of three years from the Acceptance Date up to the day immediately before the sixth anniversary of the Acceptance Date;
(v) The exercise price of an option will be determined by the board of directors of the Company and will not be less than the highest of:
the closing price of the share on the date of grant;
the average closing price of the share for the 5 business days immediately preceding the date of grant;
the nominal value of the share; and
(vi) A consideration of HK$1 is payable on acceptance of the offer of grant of options.

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Details of the share options outstanding under the Scheme and movements during the two years were as follows:

			Number of s	hare options
Exercise price per share HK$ 0.800 0.800 0.800 0.860 1.202 1.202 1.202 0.800 0.800 0.800 0.800 0.800 0.800 0.800 0.800 0.800 0.800 0.800 0.800 0.860 0.860 0.860 0.536 0.536 0.800 0.800 0.800 0.800 0.800 0.800 0.740 0.740 0.740	Outstanding at 1 April 2011 6,000,000 6,000,000 8,000,000 240,000 6,000,000 6,000,000 8,000,000 1,500,000 1,500,000 2,000,000 600,000 600,000 800,000 600,000 600,000 800,000 5,700,000 5,700,000 7,600,000 30,000 30,000 140,000 – – 1,950,000 1,950,000 2,600,000 4,470,000 4,470,000 5,960,000 – – – 89,840,000 0.890	Granted during the year – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 2,160,000 2,160,000 2,880,000 7,200,000 0.740	Lapsed during the year – – – – – – – – – – – – – – – – – – – (15,000) – – – – – – – – – – – – – (15,000) 0.860	Forfeited during the year – – – – – – – – – – – – – – – – – – – (15,000) (15,000) (120,000) – – – – – – – – (210,000) (210,000) (280,000) (850,000) 0.761	Outstanding at 31 March 2012 6,000,000 6,000,000 8,000,000 240,000 6,000,000 6,000,000 8,000,000 1,500,000 1,500,000 2,000,000 600,000 600,000 800,000 600,000 600,000 800,000 5,700,000 5,700,000 7,600,000 – 15,000 20,000 – – 1,950,000 1,950,000 2,600,000 4,470,000 4,470,000 5,960,000 1,950,000 1,950,000 2,600,000 96,175,000 0.880 27,095,000	Forfeited during the year – – – – – – – – – – – – – – – – – – – – (15,000) – – – – – – – – – – – – (15,000) 0.860	Outstanding at 31 March 2013 6,000,000 6,000,000 8,000,000 240,000 6,000,000 6,000,000 8,000,000 1,500,000 1,500,000 2,000,000 600,000 600,000 800,000 600,000 600,000 800,000 5,700,000 5,700,000 7,600,000 – – 20,000 – – 1,950,000 1,950,000 2,600,000 4,470,000 4,470,000 5,960,000 1,950,000 1,950,000 2,600,000
							96,160,000

							0.880

							55,850,000

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Notes:

(a) Mr. Ma Lishan resigned as a director of the Company on 9 August 2012.
(b) Mr. Fung Ka Pun, Mr. Ng Cheuk Fan, Keith and Ms. Fung Wing Ki, Vicky resigned as directors effective from 21 September 2011.
(c) Mr. Mak Yiu Tong resigned as a director of the Company on 31 May 2012.
(d) Ms. Li is a substantial shareholder of the Company and was appointed as chief executive on 23 February 2012.

During the year ended 31 March 2012, the Company granted 7,200,000 options at exercise price of HK$0.74 per share to employees under the Scheme. The fair value of the share options granted determined at the date of grant using Trinomial Option Pricing Model was approximately HK$2,965,000. The fair value of the share option granted will be expensed on straight-line basis over the vesting period from 1 to 3 years.

In determining the fair value of the share options granted during the year ended 31 March 2012, Trinomial Option Pricing Model had been used. The inputs into the model were as follows:

	8 April 2011
Share price at grant date	HK$0.74
Exercise price	HK$0.74
Expected life of options (Note a)	4 to 6 years
Expected volatility (Note b)	63.34% to 68.67%
Risk free rate (Note c)	1.60% to 2.22%

Notes:

(a) The expected life of options ranges from 4 to 6 years from the date of grant.
(b) Expected volatility was estimated by calculating the historical weekly share price volatility of the comparable companies engaged in similar businesses as the Group’s various business segments.
(c) The risk free rate was determined by reference to the Hong Kong Exchange Fund Note.

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FINANCIAL INFORMATION OF THE GROUP

The Trinomial Option Pricing Model had been used to estimate the fair value of the options. The variables and assumptions used in computing the fair value of the share option are based on directors’ best estimate. The value of an option varies with different variables of certain subjective assumptions.

The closing price of the Company’s shares immediately before 8 April 2011 being the date of grant of the share options during the year, was HK$0.74.

In the current year, share option expenses of approximately HK$9,187,000 (2012: HK$18,267,000) were recognised with a corresponding credit in the Group’s share option reserve.

46. Related party transactions

During the year, the Group entered into the following transactions with related parties:

(a) During the year ended 31 March 2013, the Group settled the entire outstanding amount of CN1 and CN2 with an aggregate carrying amount of HK$639,349,000. Noteholders of CN1 and CN2 are companies in which Ms. Li has controlling interests.
(b) During the year ended 31 March 2013, the Group paid HK$150,000,000 as deposit to directors of a subsidiary for acquisition of a land use right situated in the PRC through acquisition of a company owned by these directors. Details are set out in note 25(c).
(c) During the year ended 31 March 2013, interest of HK$1,293,000 (2012: HK$49,002,000) was charged for the convertible notes with the noteholders, in which Ms. Li has controlling interests.
(d) During the year ended 31 March 2013, the Group and a director of subsidiaries incorporated two associates with capital injection of HK$1,000. As at 31 March 2013, the Group has amounts due from associates of HK$3,669,000.
(e) During the year ended 31 March 2012, the Group acquired the entire interest of the Venture Path Group from Tai Rong satisfied by (i) issue of convertible notes with fair value of HK$575,000,000; (ii) issue of convertible shares with fair value of HK$706,169,000; and (iii) cash of HK$250,000,000.

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(f) During the year ended 31 March 2012, the Group early redeemed CN2 with principal amount of HK$317,000,000 at par value, which was owned by Tai Rong.
(g) During the year ended 31 March 2012, Tai Rong converted 279,347,000 convertible shares into 279,347,000 new ordinary shares of the Company.

The remuneration of directors and other members of key management during the year was as follows:

Salaries and other short-term benefits Post-employment benefits Share-based payments	2013 HK$’000 58,811 74 4,477 63,362	2012 HK$’000 7,712 48 12,669
		20,429

The remuneration of directors and key executive is determined by the remuneration committee having regard to the performance of individuals and market trends.

47. Major non-cash transactions

(a) During the year ended 31 March 2013, the consideration for the disposal of subsidiaries of HK$149,875,000 was yet to be received and included in the consolidated statement of financial position as consideration receivable. In addition, withholding tax of HK$18,532,000 was yet to be settled and included in consolidated statement of financial position as tax payable.
(b) During the year ended 31 March 2013, the actual consideration received by the Group for the disposal of subsidiaries was HK$1,498,483,000, which represented consideration of HK$1,604,072,000 and net of withholding tax of HK$105,589,000.

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(c) During the year ended 31 March 2013, upon the change in certain terms and conditions of the ICube Bond, the fair value of the ICube Bond of HK$11,144,000 was derecognised. The Interest Bearing ICube Bond and the Convertible ICube Bond of HK$5,572,000 and HK$5,572,000 were recognised as financial assets designated at fair value through profit or loss and loan receivables respectively.
(d) During the year ended 31 March 2012, as part of the consideration for the acquisition of assets through purchase of subsidiaries, the Group issued convertible notes and convertible shares with fair value of HK$575,000,000 and HK$706,169,000 respectively for this transaction. In addition, cash consideration of HK$250,000,000 was paid in prior year as deposit paid for acquisition of subsidiaries.
(e) During the year ended 31 March 2012, convertible shares with carrying amount of HK$706,109,000 were converted into 941,558,441 ordinary shares of the Company.
(f) As at 31 March 2012, accrued coupon of CN2 redeemed during the year ended 31 March 2012 of HK$6,783,000 was not yet settled and included in other payables, deposits received and accruals.
(g) During the year ended 31 March 2012, addition of property, plant and equipment of HK$4,983,000 was acquired by utilisation of deposits paid in the prior year.

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48. Particulars of principal subsidiaries of the company

Details of the Company’s principal subsidiaries at 31 March 2013 and 2012 are as follows:

			Issued and fully	Proportion of nominal value	Proportion of nominal value	Proportion of nominal value	of
	Place of incorporation		paid up share		issued share capital/
	or registration/	Class of	capital/registered		registered capital
Name of subsidiary	operations	shares held	capital		held by the	Company			Principal activities
				2013		2012
				Directly	Indirectly	Directly	Indirectly
Winbox (BVI) Limited	The British Virgin	Ordinary	US$460	100%	–	100%		–	Investment holding
	Islands (“BVI”)
Win Team Investments Limited	BVI	Ordinary	US$1	100%	–	100%		–	Investment holding
Champ Universe Limited	BVI	Ordinary	US$1	100%	–	100%		–	Investment holding
Baicheng Wenzhou Mining	The PRC (Note ii)	Contributed capital	RMB9,280,000	–	100%	–		100%	Development of underground
Development Co., Ltd.									coking coal mine
Dardel S.A.S.	France	Ordinary	EUR470,000	–	100%	–		100%	Sale of quality plastic and paper
									boxes for luxury consumer
									goods
Donguang Ever Green Plastic	The PRC (Note ii)	Contributed capital	US$1,000,000	–	100%	–		100%	Manufacture and sale of quality
Manufacturing Company Limited									plastic and paper boxes for
									luxury consumer goods and
									provision of sub-contracting
									services (intra group service)
Fairich Investment Limited	Hong Kong	Ordinary	HK$2	–	100%	–		100%	Investment holding
Grand Cast Limited	Hong Kong	Ordinary	HK$2	–	100%	–		100%	Investment holding
Golden Hope Holdings Limited	Hong Kong	Ordinary	HK$1	–	100%	–		100%	Investment holding
Merrymaking Investment Limited	BVI	Ordinary	US$10,000	–	100%	–		100%	Investment holding
Tianyu Coal Company Limited	The PRC (Note ii)	Contributed capital	RMB170,000,000	–	–	–		100%	Development of underground
									capital coking coal mine
Tianyu Gongmao Company Limited	The PRC (Note ii)	Contributed capital	RMB75,500,000	–	–	–		100%	Exploration of coal business,
									capital coal mining and
									development of underground
									coking coal mine
Pleasing Results Limited	BVI	Ordinary	US$50,000	–	100%	–		100%	Investment holding
Venture Path Limited	BVI	Ordinary	US$10,000	–	100%	–		100%	Investment holding
Winbox Company Limited	Hong Kong	Ordinary	Ordinary shares	–	100%	–		100%	Sale of quality plastic and paper
			HK$5,500,000						boxes for luxury consumer
			Non-voting						goods
			deferred shares
			HK$5,500,000
			(Note i)

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FINANCIAL INFORMATION OF THE GROUP

			Issued and fully	Proportion of nominal value	Proportion of nominal value	Proportion of nominal value	of
	Place of incorporation		paid up share		issued share capital/
	or registration/	Class of	capital/registered		registered capital
Name of subsidiary	operations	shares held	capital		held by the	Company			Principal activities
				2013		2012
				Directly	Indirectly	Directly	Indirectly
Winbox Plastic Manufacturing	The PRC (Note ii)	Contributed capital	HK$30,000,000	–	100%	–		100%	Manufacture and sale of quality
(Shenzhen) Company Limited									plastic and paper boxes for
									luxury consumer goods and
									provision of sub-contracting
									services (intra group service)
Winpac Europe Limited	United Kingdom	Ordinary	£500,000	–	100%	–		100%	Investment holding
Winpac International Limited	Hong Kong	Ordinary	HK$2	–	100%	–		100%	Investment holding
Winpac Trading Co. Limited	Hong Kong	Ordinary	HK$500,000	–	100%	–		100%	Sale of quality plastic and paper
									boxes for luxury consumer
									goods
Winpac SARL	France	Ordinary	EUR10,000	–	100%	–		100%	Property holding
Wuhai City Menggang Industrial	The PRC (Note ii)	Contributed capital	HK$400,000,000	–	–	–		100%	Investment holding
Development Co., Ltd.
Hao Tian Management	Hong Kong	Ordinary	HK$10,000	–	100%	–		100%	Investment holding and provision
(Hong Kong) Limited									of management services
Hao Tian Finance Company Limited	Hong Kong	Ordinary	HK$1	–	100%	–		100%	Money lending
Hao Tian Hua Chen International	Hong Kong (Note iii)	Ordinary	HK$10,000,000	–	50%	–		–	Investment holding
Group HK Limited

Notes:

(i) The holders of the non-voting deferred shares are not entitled to receive notice of or to attend or vote at any general meeting of this subsidiary, and not entitle to participate in the profits of this subsidiary. On a winding up, the holders of the non-voting deferred shares are entitled to be paid out of the surplus assets a return of the capital paid up on such shares after a total of HK$100,000,000 has been distributed in respect of each of the shares.
(ii) These subsidiaries were established in the PRC as wholly foreign-owned enterprise. The English names of these subsidiaries were for identification purpose only.
(iii) The Group holds 50% interest of this subsidiary. In accordance with the shareholder’s agreement signed between the Group and other investor, the Group is eligible to appoint three directors of the subsidiary while the other investor can only appoint two directors. Hence, the Group has control over this subsidiary.

None of the subsidiaries had any debt securities outstanding at the end of the year or at any time during the year.

The above table lists the subsidiaries of the Company which, in the opinion of the directors, principally affected the results or assets of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

49. Events after the reporting period

(i) On 11 April 2013, the Company entered into a sales and purchase agreement with an independent third party, Mascotte Holdings Limited, to purchase approximately 5.82% of the issued share capital of Sun Mass Funding Corporation which owns 50% of the equity interest in Sun Materials Technology Co. Ltd. for a cash consideration of HK$50,000,000. Sun Materials Technology Co. Ltd. is principally engaged in the manufacture of solar grade polycrystalline silicon.

This acquisition has been completed on the same day and such investment is accounted for as available-for-sale investment.

(ii) On 6 May 2013, the Group entered into a facility agreement with a bank (the “Facility Agreement”), pursuant to which, the bank will make available to the Group a term loan facility of up to an aggregate of US$40,000,000 with a final maturity date falling three months after the facility is utilised (the “Facility”). The Facility bears interest at the rate of 4.50% per annum and an up-front fee calculated at 1% of the amount being drawn down.

The Facility is secured by two bank accounts, which the Company shall deposit an amount of RMB120,150,000 (approximately HK$149,875,000) upon the receipt of the remaining consideration receivables from the Purchaser (as set out in note 31a) and is secured by shares of the Company and certain subsidiaries.

The Facility has been fully drawn down on 8 May 2013 and the proceeds raised were fully used to redeem the Notes with principal amount of US$40 million (US$16 million issued as at 31 March 2013 and US$24 million issued on 3 April 2013).

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APPENDIX I

(iii) On 7 June 2013, the Group acquired a convertible bond with principal amount of HK$90 million issued by Mascotte Holdings Limited from an independent third party at a consideration of HK$90 million. The bond bearing interest at 5% per annum is denominated in HK$ and will mature on 14 July 2014. The Group has the right to convert the bond to ordinary shares of Mascotte Holdings Limited, at any time before the maturity date, at a conversion price of HK$0.09 per share. If the Group does not exercise the conversion right, the bond will be repayable at the maturity date at 100% of the principal amount. Such investment is accounted for as financial assets designated at FVTPL.

On 17 June 2013, the Group converted the entire bond into 1,000,000,000 ordinary shares of Mascotte Holdings Limited at conversion price of HK$0.09 per share. The investment in equity shares of Mascotte Holdings Limited is accounted for as available-for-sale investments.

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APPENDIX I

4. INDEBTEDNESS STATEMENT

Indebtedness

As at 30 April 2014, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group had outstanding indebtedness as follows:

Borrowings

i. The Group had outstanding loans with principal amounts of HK$15.0 million due to a bank. The borrowings were secured by a bank deposit of HK$10.0 million, bore interest at Hong Kong Interbank Offered Rate (“ HIBOR ”) plus 5.0% per annum and were repayable in year 2014;
ii. The Group had outstanding loan with principal amount of HK$2.0 million due to a bank. The borrowing was secured by a bank deposit of HK$10.0 million, bore interest at Prime Rate per annum and was repayable in years 2014 and 2015 respectively;
iii The Group had outstanding loan with principal amount of HK$5.0 million due to a bank. The borrowing was secured by a bank deposit of HK$10.0 million, bore interest at Prime Rate plus 1.0% per annum and was repayable on 30 July 2014;
iv. The Group had an outstanding secured loan with a principal amount of HK$ 197.0 million due to a bank. The borrowing was secured by certain of the Group’s assets, including certain of the Group’s available-for-sale investments of HK$205.8 million, the entire issued capital of Hao Tian Finance and its immediate holding company, Guo Guang Limited, both of which are wholly owned subsidiaries of the Company, certain bank accounts of Hao Tian Finance and a yacht of the Group. The borrowing bore interest at HIBOR plus 4.0% per annum and was repayable in Year 2014;
v. The Group had an outstanding note with a principal amount of HK$10.0 million due to an independent third party. The note was unsecured, unguaranteed, bore interest at a fixed rate of 5.5% per annum and was repayable on 9 June 2021; and

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vi. The Group had outstanding notes with an aggregate principal amount of HK$ 7.0 million due to an independent third party. The notes were unsecured, unguaranteed, bore interest at a fixed rate of 5.5% per annum and were repayable in year 2021.
vii The Group had an outstanding note with a principal amount of HK$10.0 million due to an independent third party. The note was unsecured, unguaranteed, bore interest at a fixed rate of 5.5% per annum and was repayable on 10 October 2021.

Pledged Assets

In addition to the charge created over assets described under the heading of “Borrowings” which is set out on page I-144 of this circular, the Group had pledged its bank deposit of HK$10.0 million as deposit for a banking facility which had not been drawn down as at 30 April 2014.

Save as aforesaid , and apart from intra-group liabilities, the Group did not have any loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances or acceptance credits, debentures, mortgages, charges, hire purchases commitments, guarantees or other material contingent liabilities at the close of business on 30 April 2014.

5. WORKING CAPITAL

The Directors, after due and careful enquiry, are of the opinion that, after taking into consideration the financial resources presently available to the Group, including banking facilities and other internal resources, and the estimated net proceeds from the Open Offer, the Group has sufficient working capital for its present requirements, that is for at least the next twelve months from the date of this circular.

6. MATERIAL CHANGE

Taking into account the Company’s latest annual results for the year ended 31 March 2014 as published on 27 June 2014, save for the uncertainties relating to the possible outcome of the litigation as set out in the section headed “9. Litigation” in Appendix III to this circular, the Directors confirm that there is no material change in the financial position or trading position or outlook of the Group since 31 March 2014, being the date to which the latest published audited financial statements of the Group was made up, to and including the Latest Practicable Date.

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APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

(A) INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE COMPILATION OF PRO FORMA FINANCIAL INFORMATION

TO THE DIRECTORS OF HAO TIAN DEVELOPMENT GROUP LIMITED

We have completed our assurance engagement to report on the compilation of pro forma financial information of Hao Tian Development Group Limited (the “ Company ”) and its subsidiaries (hereinafter collectively referred to as the “ Group ”) by the directors of the Company (the “ Directors ”) for illustrative purposes only. The pro forma financial information consists of the unaudited pro forma statement of adjusted consolidated net tangible assets of the Group as at 31 March 2014 and related notes as set out on pages II-4 to II-6 of the circular issued by the Company dated 2 July 2014 (the “ Circular ”) in connection with, among others, the proposed issue of new shares of the Company by way of open offer to qualifying shareholders (the “ Open Offer ”) and proposed issue of bonus shares (the “ Bonus Issue ”). The applicable criteria on the basis of which the Directors have compiled the pro forma financial information are described on pages II-4 to II-6 of the Circular.

The pro forma financial information has been compiled by the Directors to illustrate the impact of the proposed Open Offer and Bonus Issue on the Group’s financial position as at 31 March 2014 as if the proposed Open Offer and Bonus Issue had taken place at 31 March 2014. As part of this process, information about the Group’s financial position has been extracted by the Directors from the Company’s published results announcement for the year ended 31 March 2014 .

Directors’ Responsibilities for the Pro Forma Financial Information

The Directors are responsible for compiling the pro forma financial information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “ Listing Rules ”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” (“ AG 7 ”) issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”).

Reporting Accountants’ Responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

II – 1

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420 “Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus” issued by the HKICPA. This standard requires that the reporting accountants comply with ethical requirements and plan and perform procedures to obtain reasonable assurance about whether the Directors have compiled the pro forma financial information in accordance with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the pro forma financial information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the pro forma financial information.

The purpose of pro forma financial information included in an investment circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the Group as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the event or transaction at 31 March 2014 would have been as presented.

A reasonable assurance engagement to report on whether the pro forma financial information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the Directors in the compilation of the pro forma financial information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

The related pro forma adjustments give appropriate effect to those criteria; and
The pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountants’ judgment, having regard to the reporting accountants’ understanding of the nature of the Group, the event or transaction in respect of which the pro forma financial information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the pro forma financial information.

II – 2

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion:

(a) the pro forma financial information has been properly compiled on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the pro forma financial information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

Deloitte Touche Tohmatsu

Certified Public Accountants Hong Kong, 2 July 2014

II – 3

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

(B) UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP

The unaudited pro forma statement of adjusted consolidated net tangible assets of the Group (the “ Unaudited Pro Forma Financial Information ”) has been prepared by the Directors in accordance with Paragraph 4.29 of the Listing Rules to illustrate the effect of the proposed Open Offer on the basis of two Offer Shares for every one Adjusted Share at HK$0.25 per Offer Share and the Bonus Issue on the basis of one Bonus Share for every one Offer Share on the consolidated net tangible assets of the Group as if the Open Offer and Bonus Issue had taken place on 31 March 2014 assuming that either the maximum number or minimum number of shares to be issued from the Open Offer and Bonus Issue have been achieved. For the basis of determining the maximum and minimum shares to be issued under the Open Offer and Bonus Issue, please refer to the “Letter from the Board” section of this circular.

The Unaudited Pro Forma Financial Information is prepared for illustrative purposes only, and because of its hypothetical nature, it may not reflect a true picture of the consolidated net tangible assets of the Group attributable to owners of the Company immediately after completion of the Open Offer and Bonus Issue.

The Unaudited Pro Forma Financial Information is prepared based on the consolidated net tangible assets of the Group attributable to owners of the Company derived from the consolidated statement of financial position of the Group as at 31 March 2014 as extracted from the published results announcement of the Company for the year ended 31 March 2014, after incorporating the adjustments described in the accompanying notes.

II – 4

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

			Unaudited
			pro forma
			adjusted
			consolidated
			net tangible
			assets of
			the Group
	Consolidated		attributable
	net tangible		to owners of
	assets of		the Company
	the Group		immediately
	attributable		after the
	to owners of		completion
	the Company	Estimated	of the
	as at	net proceeds	Open Offer
	31 March	from the	and
	2014	Open Offer	Bonus Issue
	HK$’000	HK$’000	HK$’000
	(Note 1)	(Note 2)
Minimum number of 794,407,160 Offer
Shares and 794,407,160 Bonus Shares	2,548,903	192,232	2,741,135
Maximum number of 951,787,160 Offer
Shares and 951,787,160 Bonus Shares	2,548,903	230,593	2,779,496
Consolidated net tangible assets of the Group
per share attributable to owners of the
Company as at 31 March 2014 before
Open Offer and Bonus Issue
(Note 3)			HK$ 6.42
Unaudited pro forma adjusted consolidated
net tangible assets of the Group
attributable to owners of the Company
per share immediately after the
completion of the Open Offer and
Bonus Issue (based on minimum number
of shares to be issued from Open Offer
and Bonus Issue)
(Note 4)			HK$ 1.38
Unaudited pro forma adjusted consolidated
net tangible assets of the Group
attributable to owners of the Company
per share immediately after the
completion of the Open Offer and
Bonus Issue (based on maximum number
of shares to be issued from Open Offer
and Bonus Issue )
(Note 5)			HK$ 1.21

II – 5

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

Notes:

The amount of approximately HK$ 2,548,903,000 is the consolidated net tangible assets of the Group attributable to owners of the Company as at 31 March 2014, which is extracted from the consolidated statement of financial position of the Group as at 31 March 2014 set out in the published results announcement of the Company dated 27 June 2014.
The estimated net proceeds from the Open Offer of approximately HK$192,232,000 and HK$230,593,000 are based on the minimum number of 794,407,160 Offer Shares to be issued and maximum number of 951,787,160 Offer Shares to be issued respectively, at the subscription price of HK$0.25 per share and after the deduction of the estimated related expenses, including, among others, underwriting commission, financial advisory fee and other professional fees, which are directly attributable to the Open Offer, of approximately HK$6,370,000 and HK$ 7,354,000 respectively.
The number of shares of 397,203,580 used for the calculation of the consolidated net tangible assets of the Group attributable to owners of the Company per share as at 31 March 2014 is based on 397,203,580 Adjusted Shares of the Company, represent ing 3,972,035,804 shares as at 31 March 2014 and adjusted for the Share Consolidation comprising of consolidation of every ten shares of HK$0.05 each into one consolidated share of HK$0.5 each .
The number of shares of 1,986,017,900 used for the calculation of the unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to owners of the Company immediately after the completion of the Open Offer and Bonus Issue is based on: i) 397,203,580 Adjusted Shares as discussed above in note 3; ii) 794,407,160 Offer Shares (assuming no new share being issued and no share being repurchased by the Company on or before Record Date) to be issued from Open Offer and iii) 794,407,160 Bonus Shares to be issued from Bonus Issue.
The number of shares of 2,300,765,900 used for the calculation of the unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to owners of the Company immediately after the completion of the Open Offer and Bonus Issue is based on: i) 397,203,580 Adjusted Shares as discussed above in note 3; ii) 951,781,160 Offer Shares (assuming no new share being issued other than those falling to be issued upon full exercise of the Share Options (save for those under Irrevocable Undertakings) and the Warrants and no share being repurchased by the Company on or after the Record Date) to be issued from Open Offer and; iii) 951,781,160 Bonus Shares to be issued from Bonus Issue.
No adjustment has been made to reflect any trading results or other transactions of the Group entered into subsequent to 31 March 2014.
No adjustment has been made to reflect the proceeds from the assumed exercise of the Share Options and Warrants.

II – 6

GENERAL INFORMATION

APPENDIX III

1. SHARE CAPITAL

The authorized and issued share capital of the Company (i) as at the Latest Practicable Date and (ii) immediately after completion of the Oper Offer (with the Bonus Issue) is set out as follows:

(I) Assuming no new Shares being issued or repurchased by the Company on or before the Record Date:
(i) As at the Latest Practicable Date

==> picture [372 x 332] intentionally omitted <==

----- Start of picture text -----

Authorized: HK$
10,000,000,000 Shares 500,000,000.00
Issued and fully paid:
3,972,035,804 Shares 198,601,790.20
(ii) Immediately after completion of the Open Offer (with the Bonus Issue)
Authorized: HK$
50,000,000,000 Adjusted Shares 500,000,000.00
Issued and fully paid:
397,203,580 Whole Adjusted Shares 3,972,035.80
794,407,160 Offer Shares 7,944,071.60
794,407,160 Bonus Shares 7,944,071.60
1,986,017,900 Total 19,860,179.00
----- End of picture text -----

III – 1

GENERAL INFORMATION

APPENDIX III

(II) Assuming no new Shares being issued other than those falling to be issued upon full exercise of the Share Options (save for those Share Options under the Irrevocable Undertakings) and the Warrants and no Share being repurchased by the Company on or before the Record Date.

(i) (ii)	At at Latest Practicable Date Authorized: HK$ 10,000,000,000 Shares 500,000,000.00 Issued and fully paid: 3,972,035,804 Shares 198,601,790.20 Immediately after completion of the Open Offer (with the Bonus Issue) Authorized: HK$ 50,000,000,000 Adjusted Shares 500,000,000.00 Issued and fully paid: 397,203,580 Whole Adjusted Shares 3,972,035.80 4,590,000 Adjusted Shares issued under the Share Options (save for those Share Options under the Irrevocable Undertakings) 45,900.00 74,100,000 Adusted Shares issued under the Warrants 741,000.00 951,787,160 Offer Shares 9,517,871.60 951,787,160 Bonus Shares 9,517,871.60 2,379,467,900 Total 23,794,679.00	HK$ 500,000,000.00

		198,601,790.20


		3,972,035.80 45,900.00 741,000.00 9,517,871.60 9,517,871.60
		23,794,679.00

III – 2

GENERAL INFORMATION

APPENDIX III

As at the Latest Practicable Date, each of Ms. Li, Mr. Ma Lishan, Mr. Ma Bao Shan and Ms. Ma Lirong is respectively interested in 19,000,000 Share Options, 20,000,000 Share Options, 2,000,000 Share Options and 3,000,000 Share Options and they do not hold any Shares of the Company directly. Pursuant to the Irrevocable Undertakings as detailed in the section entitled “UNDERWRITING ARRANGEMENT” in the “LETTER FROM THE BOARD” of this circular, each of Ms. Li, Mr. Ma Lishan, Mr. Ma Bao Shan and Ms. Ma Lirong has given an irrevocable undertaking to each of the Company and the Underwriters that they will not exercise any of the rights attaching to the Share Options respectively owned by them at any time on or prior to the completion of the Open Offer and will remain as the beneficial holders of the those Share Options at any time from the date of the Irrevocable Undertakings to the date of completion of the Open Offer.

Save for the Share Options and Warrants, the Company has no other outstanding derivatives, warrants, options and conversion rights or other similar rights which are convertible or exchangeable into Shares as at the Latest Practicable Date.

No new Shares have been issued by the Company since 31 March 2014 (being the end of the latest financial year of the Company). All issued Shares rank pari passu with each other in all respects including the rights as to voting, dividends and capital. The Offer Shares and the Bonus Shares to be allotted and issued will, when issued and fully paid, rank pari passu in all respects with the Shares then in issue.

No part of the share capital or any other securities of the Company is listed or dealt in on any stock exchange other than the Stock Exchange and no application is being made or is currently proposed or sought for the Shares or Offer Shares or Bonus Shares or any other securities of the Company to or be listed or dealt in on any other stock exchange.

As at the Latest Practicable Date, there was no arrangement under which future dividends are waived or agreed to be waived.

As at the Latest Practicable Date, no share or loan capital of the Company or any of its subsidiaries had been put under option or agreed conditionally or unconditionally to be put under option.

III – 3

GENERAL INFORMATION

APPENDIX III

2. MARKET PRICE

The table below shows the closing prices of the Shares as recorded on the Stock Exchange on (i) the Last Trading Date; (ii) the last trading day of each of the calendar months during the period 6 months prior to the date of the Announcement, being 25 April 2014, and ending on the Latest Practicable Date; and (iii) the Latest Practicable Date:

	Closing price	Closing price
Date	per	Share
	(HK$)
31 October 2013		0.345
29 November 2013		0.365
31 December 2013		0.320
30 January 2014		0.260
28 February 2014		0.255
31 March 2014		0.200
17 April 2014 (Last Trading Date)		0.153
30 April 2014		0.121
30 May 2014		0.142
27 June 2014 (Latest Practicable Date)		0.140

The highest and lowest closing prices of the Shares as quoted on the Stock Exchange during the Relevant Period were HK$ 0.370 on 9 December 2013 and HK$ 0.120 on 28 April 2014 respectively.

III – 4

GENERAL INFORMATION

APPENDIX III

3. DISCLOSURE OF INTERESTS

As at the Latest Practicable Date, the interests and short positions of each Director, chief executive of the Company and their respective associates in the Shares, underlying shares and debentures of the Company or any of its associated corporation(s) (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he was taken or deemed to have under such provisions of the SFO); or were required pursuant to Section 352 of the SFO to be entered into the register referred to therein; or were required pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers to be notified to the Company and the Stock Exchange are set out below:

(a) Directors and Chief Executive of the Company

==> picture [371 x 218] intentionally omitted <==

----- Start of picture text -----

Number of
Number of underlying Total
Shares held and shares held and interests and
approximate approximate approximate
Name of percentage to percentage to percentage to
Director/ total issued total issued total issued
chief executive Capacity Nature of interest share capital share capital share capital
(Note 1) (Note 1) (Notes 1 and 4)
Li Shao Yu Interest held by Corporate interest 1,141,804,853 – 1,160,804,853
controlled corporations (28.14%) (29.22%)
(Note 2)
Beneficial owner Personal interest – 19,000,000
(0.48%)
(Note 3)
Fok Chi Tak Beneficial owner Personal interest – 2,000,000 2,000,000
(0.05%) (0.05%)
(Note 3)
----- End of picture text -----

Notes:

The percentage of shareholding is calculated on the basis of 3,972,035,804 Shares in issue as at the Latest Practicable Date.
These Shares were held (a) directly by TRXY International, which was a wholly-owned subsidiary of Hao Tian Integrated Group Development Limited. Hao Tian Integrated Group Development Limited was wholly-owned by Ms. Li; (b) both directly and indirectly by TRXY Development, which was owned as to 90.00%, 9.00% and 1.00% by Hao Tian Integrated Group Development Limited, Hao Tian Group Holdings Limited and Ms. Li respectively. Hao Tian Group Holdings Limited was wholly owned by Ms. Li; and (c) directly by Real Power, which is beneficially owned as to 99.90% and 0.10% by TRXY Development and China Capital respectively. Accordingly, Ms. Li was deemed to be interested in 1,141,804,853 Shares under the SFO.
These are the number of Shares which may fall to be allotted and issued upon exercise of any subscription rights attaching to the share options granted by the Company under the share option scheme adopted on 16 May 2006.
The total interests represent the direct interests and short positions to the total issue share capital of the Company as at the Latest Practicable Date.

III – 5

GENERAL INFORMATION

APPENDIX III

Save as disclosed above, as at the Latest Practicable Date, none of the Directors, chief executives of the Company and their respective associates had any interests or short positions in the Shares, underlying shares and debentures of the Company or any of its associated corporation(s) (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he was taken or deemed to have under such provisions of the SFO); or were required pursuant to Section 352 of the SFO to be entered into the register referred to therein; or were required pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers to be notified to the Company and the Stock Exchange.

(b) Substantial Shareholders

As at the Latest Practicable Date, so far as was known to the Directors and chief executives of the Company, the following persons (other than a Director or chief executive of the Company) had , or were deemed or taken to have, any interest or a short position in the Shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, who was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group:

(i) Interest in the Shares

Long positions in Shares and underlying shares of equity derivatives of the Company as at the Latest Practicable Date:

					Approximate
		Number of			percentage of
	Number of	underlying		Total	total issued
Name of Shareholder	Shares held	shares held	Capacity	interests	share capital
TRXY Development	359,655,351	–	Beneficial owner	882,055,912	22.21%
(HK) Limited					(Note 1)
	522,400,561	–	Interest held by
	(Note 2)		a controlled
			corporation
Real Power	522,400,561	–	Beneficial owner	522,400,561	13.15%
Holdings Limited					(Note 1)
TRXY International	259,748,941	–	Beneficial owner	259,748,941	6.54%
					(Note 1)
Hao Tian Integrated	1,141,804,853	–	Interest held by	1,141,804,853	28.72%
Group Development	(Note 3)		controlled		(Note 1)
Limited			corporations

III – 6

APPENDIX III

GENERAL INFORMATION

					Approximate
		Number of			percentage of
	Number of	underlying		Total	total issued
Name of Shareholder	Shares held	shares held	Capacity	interests	share capital
Asia Link	1,637,072,000	–	Beneficial owner	1,637,072,000	41.21%
	(Note 4)				(Note 1)
Kingston Securities	266,502,320	–	Beneficial owner	266,502,320	11.20%
	(Note 5)				(Note 6)
Galaxy Sky Investments	266,502,320	–	Interest in controlled	266,502,320	11.20%
Limited	(Note 5)		corporation		(Note 6)
Kingston Capital Asia	266,502,320	–	Interest in controlled	266,502,320	11.20%
Limited	(Note 5)		corporation		(Note 6)
Kingston Financial Group	266,502,320	–	Interest in controlled	266,502,320	11.20%
Limited	(Note 5)		corporation		(Note 6)
Active Dynamic Limited	266,502,320	–	Interest in controlled	266,502,320	11.20%
	(Note 5)		corporation		(Note 6)
Ms. Chu Yuet Wah	266,502,320	–	Interest in controlled	266,502,320	11.20%
	(Note 5)		corporation		(Note 6)

Notes:

The percentage of shareholding is calculated on the basis of 3,972,035,804 Shares in issue as at the Latest Practicable Date.
These Shares are held by Real Power , which is beneficially owned as to 99.9% by TRXY Development .
These Shares were held directly or indirectly by TRXY International , TRXY Development and Real Power , all of which were subsidiaries of Hao Tian Integrated Group Development Limited.
The total of 1,637,072,000 Shares represent (i) the maximum of 818,536,000 Offer Shares which are underwritten by Asia Link under the Underwriting Agreement and (ii) the 818,536,000 Bonus Shares entitling under the Bonus Issue on the assumption of no new Shares being issued other than those falling to be issued upon full exercise of the Share Options (save for those Share Options under the Irrevocable Undertakings) and Warrants and no Shares being repurchased by the Company before the Record Date.

III – 7

GENERAL INFORMATION

APPENDIX III

The total of 266,502,320 Shares represent (i) the maximum of 133,251,160 Offer Shares which are underwritten by Kingston Securities under the Underwriting Agreement and (ii) the 133,251,160 Bonus Shares entitling under the Bonus Issue on the assumption of no new Shares being issued other than those falling to be issued upon full exercise of the Share Options (save for those Share Options under the Irrevocable Undertakings) and Warrants and no Shares being repurchased by the Company before the Record Date. Kingston Securities Limited is wholly-owned by Galaxy Sky Investments Limited which in turn is wholly owned by Kingston Capital Asia Limited. Kingston Capital Asia Limited is 100% owned by Kingston Financial Group Limited which is 42.53% owned by Active Dynamic Limited. Ms. Chu Yuet Wah owns 100% interest in Active Dynamic Limited.
The percentage of shareholding is calculated on the basis of 2,379,467,900 Shares in issue, assuming (i) the Capital Reorganisation having become effective and (ii) no new Shares being issued other than those falling to be issued upon full exercise of the Share Options (save for those Share Options under the Irrevocable Undertakings) and Warrants and no Shares being repurchased by the Company before the Record Date.

(ii) Interest in shares of other members of the Group

		Registered
		capital/
Name of subsidiary/	Name of shareholder/	number of	Percentage of
member of the Group	beneficial owner	shares held	shareholding
Hao Tian Hua Chen	China National Huachen	5,000,000	50%
International Group Limited	Energy Group Co., Ltd.	Shares
（昊天華辰國際集團有限公司）	（中能華辰集團有限公司）

Save as disclosed above, as at the Latest Practicable Date, there was no other person so far as was known to the Directors and chief executives of the Company (other than a Director or chief executive of the Company) had , or were deemed to have, any interest or a short position in the Shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, who was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group.

III – 8

GENERAL INFORMATION

APPENDIX III

4. ADDITIONAL DISCLOSURE OF INTEREST

(i) As at the Latest Practicable Date, save as disclosed in the paragraph headed “EFFECTS ON SHAREHOLDING STRUCTURE” and “UNDERWRITING ARRANGEMENT” in the “LETTER FROM THE BOARD” of this circular and in the paragraphs headed “Share capital” and “Disclosure of interests” in this appendix, none of the directors of Asia Link, Asia Link or any member of the Concert Group owned or controlled or were interested in any Shares, convertible securities, warrants, options or derivatives of the Company ;
(ii) None of the directors of Asia Link, Asia Link or any member of the Concert Group had dealt for value in any Shares, convertible securities, warrants, options or derivatives of the Company during the Relevant Period and up to and including the Latest Practicable Date ;
(iii) During the Relevant Period and up to and including the Latest Practicable Date, no persons had irrevocably committed themselves to vote for or against the Open Offer (with the Bonus Issue), the Underwriting Agreement and/or the Whitewash Waiver ;
(iv) During the Relevant Period and up to and including the Latest Practicable Date, no person had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code (which includes any arrangement involving rights over shares, any indemnity arrangement, and any agreement or understanding, formal or informal, of whatever nature, relating to such securities which may be an inducement to deal or refrain from dealing) with any member of the Concert Group ;
(v) During the Relevant Period and up to and including the Latest Practicable Date, none of the members of the Concert Group had borrowed or lent any Shares, convertible securities, warrants, options or derivatives of the Company ;
(vi) As at the Latest Practicable Date, none of the Company and the Directors were interested in or owned or controlled any shares, convertible securities, warrants, options or derivatives of Asia Link. None of the Company and the Directors had dealt for value in any shares, convertible securities, warrants, options or derivatives of Asia Link during the Relevant Period and up to and including the Latest Practicable Date ;
(vii) As at the Latest Practicable Date, save as disclosed in the paragraph headed “DISCLOSURE OF INTERESTS” in this appendix, none of the Directors were interested in or owned or controlled any Shares, convertible securities, warrants, options or derivatives of the Company. None of the Directors had dealt for value in any Shares, convertible securities, warrants, options or derivatives of the Company during the Relevant Period and up to and including the Latest Practicable Date ;

III – 9

GENERAL INFORMATION

APPENDIX III

(viii) None of the subsidiaries of the Company, or pension fund of the Company or of a subsidiary of the Company or the advisers to the Company as specified in class (2) of the definition of associate in the Takeovers Code owned or controlled any Shares, convertible securities, warrants, options or derivatives of the Company during the Relevant Period and up to and including the Latest Practicable Date ;
(ix) During the Relevant Period and up to and including the Latest Practicable Date , save for the Irrevocable Undertakings, no person had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with the Company or with any person who is an associate of the Company by virtue of classes (1), (2), (3) and (4) of the definition of associate under the Takeovers Code
(x) No fund managers connected with the Company managed on a discretionary basis any Shares, convertible securities, warrants, options or derivatives of the Company during the Relevant Period and up to and including the Latest Practicable Date ;
(xi) As at the Latest Practicable Date, none of the Directors is interested in any Shares and hence no Directors had irrevocably committed themselves to vote for or against the Open Offer (with the Bonus Issue), the Underwriting Agreement and the Whitewash Waiver ;
(xii) As at the Latest Practicable Date, none of the Company and the Directors had borrowed or lent any Shares, convertible securities, warrants, options or derivatives of the Company ;
(xiii) As at the Latest Practicable Date, save for the Underwriting Agreement, Irrevocable Undertakings and the Facility, there was no agreement, arrangement or understanding (including any compensation arrangement) between any member of the Concert Group and any Director, recent Director, Shareholder or recent Shareholder which had any connection with or dependence upon the Open Offer (with the Bonus Issue), the Underwriting Agreement and/or the Whitewash Waiver ;
(xiv) As at the Latest Practicable Date, there was no agreement or arrangement between any Director and any other person which was conditional on or dependent upon the outcome of the Open Offer (with the Bonus Issue), the Underwriting Agreement and/ or the Whitewash Waiver or otherwise connected with the Open Offer (with the Bonus Issue), the Underwriting Agreement and/or the Whitewash Waiver ;
(xv) As at the Latest Practicable Date, no benefit had been or would be given to any Director as compensation for loss of office or otherwise in connection with the Open Offer (with the Bonus Issue) and/or the Underwriting Agreement and/or the Whitewash Waiver ;

III – 10

GENERAL INFORMATION

APPENDIX III

(xvi) As at the Latest Practicable Date, no material contracts had been entered into by Asia Link in which any Director had a material personal interest ; and
(xvii) A loan agreement has been entered into between Asia Link and Kingston Securities pursuant to which Kingston Securities shall provide Asia Link with the Facility for the purpose of subscribing for the Offer Shares in performance of its obligations under the Underwriting Agreement. The maximum loan amount under the Facility is HK$205 million. Pursuant to the terms of the Facility, the Offer Shares to be subscribed by Asia Link through the Open Offer (with the Bonus Shares) shall be pledged to Kingston Securities. The registered office of Kingston Securities is at Suite 2801, One International Finance Centre, 1 Harbour View Street, Central, Hong Kong. As at the Latest Practicable Date, save for the Facility, there was no agreement, arrangement or understanding between Asia Link and any other persons whereby the Offer Shares subscribed and acquired under the Open Offer (with the Bonus Issue) would be transferred, charged or pledged to any persons .

5. SERVICE CONTRACTS

Dr. OU Zhiliang, an executive Director, has entered into a service agreement with the Company for a term of three years which commenced on 9 August 2012 and expiring on 8 August 2015 for his appointment as an executive Director, which is subject to retirement by rotation and reelection at annual general meetings in accordance with the Articles and other terms of the service agreement, unless and until terminated either by the Company or by Dr. Ou giving to the other not less than three months’ notice in writing to determine the same. Dr. Ou is currently entitled to a director’s remuneration of HK$650,000 per annum (equivalent to HK$50,000 per month and an extra month of salary payable around Lunar New Year). Under his service contract with the Company, Dr. Ou is also entitled to a discretionary bonus as may be determined by the Board based on performance of the Company and that of the Director, and is eligible to participate for awards under the Company’s share award scheme or other incentive scheme as put in place from time to time.

Mr. FOK Chi Tak, an executive Director, has entered into a service agreement with the Company for a term of three years which commenced on 27 September 2013 and expiring on 26 September 2016 for his appointment as an executive Director, which is subject to retirement by rotation and re-election at annual general meetings in accordance with the Articles and other terms of the service agreement, unless and until terminated either by the Company or by Mr. Fok giving to the other not less than one month’s notice in writing to determine the same. Mr. Fok is currently entitled to a director’s remuneration of HK$ 1,716,000 per annum (equivalent to HK$132,000 per month and an extra month of salary payable around Lunar New Year). Under his service contract with the Company, Mr. Fok is also entitled to a discretionary bonus as may be determined by the Board based on performance of the Company and that of the Director, and is eligible to participate for awards under the Company’s share award scheme or other incentive scheme as put in place from time to time.

III – 11

APPENDIX III

GENERAL INFORMATION

Mr. LAM Kwan Sing, an independent non-executive Director, has entered into a letter of appointment with the Company for a fixed term of three years which commenced on 9 August 2012 and expiring on 8 August 2015 for his appointment as an independent non-executive Director, which is subject to retirement by rotation and re-election at annual general meetings in accordance with the Articles and other terms of the letter of appointment, unless and until terminated either by the Company or by Mr. Lam giving to the other not less than two months’ notice in writing to determine the same. Under the letter of appointment entered into between Mr. Lam and the Company, Mr. Lam is currently entitled to a director’s remuneration of HK$180,000 per annum (equivalent to HK$15,000 per month). Mr. Lam is not entitled to any variable pay or discretionary bonus.

Save as aforesaid, none of the Directors had service contract with the Company or any of its subsidiaries or associated companies (i) which (including both continuous and fixed term contract) had been entered into or amended within six months before the date of the Announcement; (ii) which were continuous contracts with a notice period of 12 months or more; (iii) which were fixed term contracts with more than 12 months to run irrespective of the notice period; or (iv) which were not expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation).

6. MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business of the Group) have been entered into by members of the Group after the date two years immediately preceding the date of the Announcement, being 25 April 2014, and up to and including the Latest Practicable Date which are or may be material:

(i) the memorandum of understanding dated 23 July 2012 (as supplemented by supplemental agreements dated 14 September 2012 and 5 October 2012) entered into between the Company as seller, Up Energy Mining Limited as buyer and Champ Universe Limited in relation to the disposal of the entire issued capital in Champ Universe Limited at the total consideration of HK$1.58 billion;
(ii) the investment agreement dated 6 September 2012 (as supplemented by a supplemental deed dated 10 September 2012, a letter agreement dated 4 October 2012, a letter agreement dated 24 December 2012 and a supplemental deed dated 1 March 2013) entered into between the Company as issuer and Cheer Hope Holdings Limited as subscriber in relation to, among others, subscription and issue of secured notes due 2013 in the principal amount of US$40,000,000;
(iii) the subscription agreement dated 18 September 2012 entered into between HEC Capital Limited as issuer and Hao Tian Management (Hong Kong) Limited, a wholly-owned subsidiary of the Company as subscriber in relation to subscription of 5,000,000 shares in HEC Capital Limited at the consideration of HK$30,000,000;

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GENERAL INFORMATION

APPENDIX III

(iv) the sale and purchase agreement dated 12 October 2012 (as supplemented by two letter agreements dated 28 June 2013) entered into between the Company as seller, Up Energy Mining Limited as buyer and Up Energy Development Group Limited in relation to the disposal of the entire issued capital in Champ Universe Limited at the total consideration of HK$1.58 billion;
(v) the supplemental agreement dated 19 November 2012 entered into, among others, the Company as seller and Inner-Mongolia Shuangxin Resources Group Co., Ltd as buyer in relation to the disposal of 烏海市蒙港投資有限公司 (Wuhai City Menggang Industrial Development Co., Ltd.*) and its subsidiaries, whereby the consideration of the transaction was reduced by RMB75 million;
(vi) the memorandum of understanding dated 21 December 2012 (as supplemented by a supplemental agreement dated 22 March 2013) entered into among Tenfield Investments Limited, a wholly-owned subsidiary of the Company as buyer, Sunshine Zhong Xing Capital Holdings Limited as seller and Access Profit Global Enterprises Group Limited in relation to the acquisition of the entire equity interest in Access Profit Global Enterprises Group Limited at a consideration to be agreed (further information see item (xi) below);
(vii) the placing agreement dated 27 December 2012 entered into between the Company and Fortune (HK) Securities Limited as placing agent in relation to the placement of 785,500,000 unlisted warrants of the Company under the general mandate at a issue price of HK$0.01 per warrant on a best effort basis and the placing agent received a commission at the rate of 1.5% of the aggregate placing price;
(viii) the sale and purchase agreement dated 11 April 2013 entered into between Mascotte Holdings Limited as seller and Hao Tian Management (Hong Kong) Limited, a wholly-owned subsidiary of the Company as buyer in relation to the purchase of 531,575 shares in Sun Mass Funding Corporation at the consideration of HK$50,000,000;
(ix) the facility agreement dated 6 May 2013 entered into between the Company as guarantor, Hao Tian Finance Company Limited, a wholly-owned subsidiary of the Company as borrower and China Minsheng Banking Corp., Ltd. as lender, Hong Kong Branch in relation to a loan facility of up to USD40,000,000 which were secured by certain security interests granted by members of the Group;
(x) the sale and purchase order dated 7 June 2013 entered into between Hao Tian Management (Hong Kong) Limited, a wholly-owned subsidiary of the Company as buyer and Chung Nam Securities Limited as agent for the acquisition of bonds in the principal amount of HK$90,000,000 convertible into shares in Mascotte Holdings Limited at the consideration of HK$90,000,000;

III – 13

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APPENDIX III

(xi) the sale and purchase agreement dated 27 June 201 3 (as supplemented by a supplemental agreement dated 27 December 2013) entered into among Tenfield Investments Limited, a wholly-owned subsidiary of the Company as buyer, Sunshine Zhong Xing Capital Holdings Limited as seller and Access Profit Global Enterprises Group Limited in relation to the acquisition of the entire equity interest in Access Profit Global Enterprises Group Limited at the consideration of not more than HK$300 million, subject to downward adjustments;
(xii) the capital increment agreement dated 17 July 2013 (which was subsequently terminated by a termination agreement dated 27 September 2013) entered into, among others, Sino Million Investment Group Limited, a wholly-owned subsidiary of the Company as subscriber and 北京泰通恆業投資有限公司 (Beijing Taitong Hengye Investment Company Limited), an existing shareholder of the target company, in relation to the subscription of increased registered capital in 新疆陽光忠興房地產開發有限公司 (Xinjiang Yangguan Zhongxing Real Estate Development Company Limited) at the subscription price of RMB46.66 million and agreement to make additional capital contribution of RMB93.34 million;
(xiii) the sale and purchase agreement dated 22 July 2013 entered into between Ristora Investments Limited as seller and Hao Tian Management (Hong Kong) Limited, a wholly-owned subsidiary of the Company as buyer in relation to acquisition of 45,000,000 shares in HEC Capital Limited at the consideration of HK$270,000,000;
(xiv) the facility agreement dated 26 September 2013 entered into between the Company as guarantor, Hao Tian Finance Company Limited, a wholly-owned subsidiary of the Company as borrower and China Minsheng Banking Corp., Ltd., Hong Kong Branch as lender in relation to a loan facility of up to HK$450 million which were secured by certain security interests granted by members of the Group;
(xv) the rules for share award scheme adopted by the Company on 27 September 2013;
(xvi) the sale and purchase agreement dated 8 November 2013 entered into between Mascotte Holdings Limited as buyer and Hao Tian Management (Hong Kong) Limited, a wholly-owned subsidiary of the Company as seller in relation to the sale of 531,575 shares in Sun Mass Funding Corporation at the consideration of HK$20,000,000;
(xvii) the sale and purchase agreement dated 16 December 2013 entered into between the Company as seller and Goodwill International (Holdings) Limited as buyer in relation to the disposal of the entire issued capital of Winbox (BVI) Limited at the consideration of HK$80,000,000;

(xviii ) the Underwriting Agreement ; and

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APPENDIX III

(xix) the second supplemental agreement dated 20 June 2014 to the sale and purchase agreement (as particularized in item (xi) above) and entered into among Tenfield Investments Limited, a wholly-owned subsidiary of the Company as buyer, Sunshine Zhong Xing Capital Holdings Limited as seller and Access Profit Global Enterprises Group Limited, whereby the parties agreed, among others, that the consideration of the transaction will be adjusted to HK$150 million.

7. INTERESTS IN THE GROUP’S ASSETS OR CONTRACTS OR ARRANGEMENT SIGNIFICANT TO THE GROUP

As at the Latest Practicable Date, none of the Directors had any direct or indirect interests in any assets which had been acquired or disposed of by, or leased to, or which were proposed to be acquired or disposed of by, or leased to, any member of the Group since 31 March 2013, being the date to which the latest published audited accounts of the Group were made up.

As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement entered into by any member of the Group which was subsisting as at the Latest Practicable Date and which was significant in relation to the business of the Group.

8. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors or their respective associates had any interests in businesses which compete or are likely to compete, either directly or indirectly, with the businesses of the Group, other than those businesses where the Directors were appointed as directors to represent the interests of the Company and/or the Group.

9. LITIGATION

In connection with the sale and purchase agreement (the “ Menggang Agreement ”) entered into between Brilliant Wise Limited, Favour Mind Limited and Max Joyce Limited who are whollyowned subsidiaries of the Company as sellers and Inner-Mongolia Shuangxin Resources Group Co., Ltd, (“ Shuangxin ”) as buyer for the sale and purchase of Wuhai City Menggang Industrial Development Co., Ltd. and its subsidiaries, which operated the Group’s coal mines in the InnerMongolia Autonomous Region in the PRC, on 16 May 2013, the Group filed an arbitration claim to the China International Economic and Trade Arbitration Commission for the outstanding instalment of RMB80,000,000 payable by Shuangxin under the Mengang Agreement. Shuangxin withheld the payment of RMB80,000,000 initially on the ground of a tax demand note issued from the local tax bureau, after revocation of the tax demand note, on the ground of non-fulfilment by the Group of certain terms and obligations under the Menggang Agreement. Shuangxin filed a counter claim for RMB65,000,000 on 8 October 2013. After taking PRC legal advice on the grounds and facts set out in the defense and counter claim filed by Shuangxin, the Board has been advised that the Group has a meritorious case to recover the outstanding amount and defense to the counter claim. The first hearing before the arbitration tribunal was held on 26 November 2013. It is expected that the arbitration award will be delivered on 15 July 2014.

III – 15

GENERAL INFORMATION

APPENDIX III

The final instalment in the amount of RMB30,500,000 payable by Shuangxin, which is in addition to the aforementioned RMB80,000,000, under the Mengang Agreement (as supplemented by a supplemental agreement dated 19 November 2012) has been due and owing. Another arbitration claim has been filed with the China International Economic and Trade Arbitration Commission for such outstanding amount.

Save as aforesaid, as at the Latest Practicable Date, there was no litigation or claim of material importance pending or threatened against any member of the Group or to which a member of the Group is a party.

10. EXPENSES

The expenses in connection with the Open Offer, including financial advisory fees, underwriting commission, printing, registration, translation, legal and accountancy charges are estimated to be not less than approximately HK$ 6.37 million and not more than approximately HK$7.36 million, which are payable by the Company.

11. EXPERTS AND CONSENTS

The following are the qualifications of the experts who have given opinions or advice which are contained in this circular:

Name	Qualification
Pan Asia Corporate Finance Limited	A corporation licensed to carry out type 1 (dealing in
	securities) and type 6 (advising on corporate finance)
	regulated activities under the SFO
Deloitte Touche Tohmatsu	Certified public accountants
Kingston Corporate Finance Limited	A corporation licensed to carry on Type 6 (advising
	on corporate finance) regulated activities under the
	SFO

As at the Latest Practicable Date, none of the above experts had any direct or indirect shareholdings in any member of the Group, or any right to subscribe for or to nominate persons to subscribe for shares in any member of the Group, or any interests, directly or indirectly, in any assets which had been acquired, disposed of or leased to or which were proposed to be acquired, disposed of or leased to the Company or any of their respective subsidiaries, respectively, since 31 March 2013, the date to which the latest published audited financial statements of the Group were made up.

Each of the above experts has given and has not withdrawn its written consent to the issue of the circular with the inclusion therein of its reports and references to its name in the form and context in which the appear.

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GENERAL INFORMATION

APPENDIX III

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection (i) at the Company’s head office and principal place of business in Hong Kong at Rooms 4917-4932, 49th Floor, Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong during normal business hours from 9:00 a.m. to 6:00 p.m. on any week day (except public holidays); (ii) on the website of the SFC at www.sfc.hk; and (iii) on the Company’s website at http://www.haotianhk.com/ from the date of this circular up to and including the date of the Open Offer EGM:

(a) the memorandum of association of the Company and the Articles ;
(b) the memorandum and articles of association of Asia Link;
(c) the annual results announcement dated 27 June 2014 for the year ended 31 March 2014 of the Company;
(d) the 2013 annual report of the Company containing audited consolidated financial statements of the Group for the two years ended 31 March 2012 and 2013 respectively;
(e) the letter from the Board to the Shareholders, the text of which is set out in the section headed “LETTER FROM THE BOARD” in this circular;
(f) the letter of recommendation from the Independent Board Committee to the Independent Shareholders, the text of which is set out in the section headed “LETTER FROM THE INDEPENDENT BOARD COMMITTEE” in this circular;
(g) the letter from Pan Asia Corporate Finance Limited containing its advice to the Independent Board Committee and the Independent Shareholders, the text of which is set out in the section headed “LETTER FROM PAN ASIA” in this circular;
(h) the letter from Deloitte Touch Tohmatsu in respect of the unaudited pro forma financial information following completion of the Open Offer (with the Bonus Issue), the text of which is set out in appendix II to this circular;
(i) the unaudited pro forma statement of adjusted consolidated net tangible asset of the Group, the text of which is set out in appendix II to this circular;
( j) the material contracts referred to in the paragraph headed “Material contracts” in this appendix;
( k) the written consents referred to in the paragraph headed “Experts and consents” in this appendix;
(l) the service contracts referred to in the paragraph headed “Service Contracts” in this appendix;
( m) the Irrevocable Undertakings ; and
(n) this circular.

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GENERAL INFORMATION

APPENDIX III

13. PARTICULARS OF DIRECTORS

Executive Directors

Dr. Zhiliang Ou , J.P., (Australia), aged 45 , was appointed as a Independent Nonexecutive Director of the Company on 11 June 2012 and was re-designated as an Executive Director of the Company in August 2012. Dr. Ou holds a Doctor of Philosophy degree in Civil & Resource Engineering from The University of Western Australia, Australia. He also holds two Bachelor of Engineering degrees in Engineering Management & Structural Engineering respectively from Tongji University（同濟大學）. Dr. Ou has over 25 years of professional engineering and management experience in oil & gas, mining and infrastructure industries both in Australia and China. He has been a senior staff member in the world’s leading energy & resource firms including Kellogg Brown & Root (formerly known as KBR Halliburton), WorleyParsons Pty Ltd., as well as Sedgman Ltd., which is specialising in coal processing and handling plants. Dr. Ou participated in a number of key energy and resource projects around the world such as acting as the Lead Civil and Structural Engineer for BHP Billiton RGP6 Jimblebar project; Rio Tinto iron ore Dove Siding expansion project; Chevron Wheatstone Domgas LNG Pipeline project; Yemen LNG Project (in the Republic of Yemen) and Western Australia Dampier to Bunbury Natural Gas Pipeline (Stage 5B) project, etc. Dr. Ou also has extensive experience and network in China. He was the general manager of 福建省黎明建築工程公司 (Fujian Liming Construction Company*) from 1993 to 1997. He is currently a Guest Professor for Inner Mongolia University（內蒙古大學）and Inner Mongolia University of Science & Technology（內蒙古科技大學）in China.

Mr. Xu Hai Ying , aged 60 , was appointed as a Non-executive Director of the Company on 1 January 2012 and was re-designated as an Executive Director of the Company in February 2012. Mr. Xu is the senior technical consultant and senior manager of 中國節能環保集團有限公司 (China Jieneng Huangbao Group Company Limited), whose principal business is the development of energy conservation technologies, clean and new energy, and energy infrastructure construction. Mr. Xu has substantial management experience and has been the manager of the representative offices of Wallem & Company Limited（華林船務集團有限公司）in Shanghai and Tianjin, The People’s Republic of China (“ PRC* ”) and the chief representative of the Shanghai representative office of Hong Kong Maritime Company Limited（香港海運有限公司）and has served other management positions.

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GENERAL INFORMATION

APPENDIX III

Executive Director and Chief Financial Officer

Mr. Fok Chi Tak , aged 38, was appointed as an Executive Director of the Company in September 2013. Mr. Fok has been the Chief Financial Officer of the Company since December 2010 and will continue to hold this office after his appointment. He is responsible to oversee the Company’s finance unit and functions, provide other operational support to the Board, and assist the chief executive officer on the formulation of strategic plans for the business development of the Company and its subsidiaries. Mr. Fok graduated from Oxford Brookes University in the United Kingdom with a bachelor’s degree in accounting and finance and The University of Hong Kong with a master’s degree in business administration. Mr. Fok is a fellow member of the Hong Kong Institute of Certified Public Accountants and the Association of Chartered Certified Accountants. Mr. Fok is also a fellow member of the Institute of Chartered Secretaries and Administrators and the Hong Kong Institute of Chartered Secretaries. Mr. Fok has over 13 years of experience in corporate finance, corporate governance, mergers and acquisitions, auditing and financial management. Mr. Fok is the company secretary of various subsidiaries of the Company. Mr. Fok was the company secretary and qualified accountant of Golden Eagle Retail Group Limited (stock code 3308, a company listed on the main board of the Stock Exchange of Hong Kong Limited (“ Stock Exchange ”) and resigned in December 2010.

Independent non-executive Directors

Mr. Chan Ming Sun Jonathan , aged 41, was appointed as an Independent Nonexecutive Director of the Company in March 2012. Mr. Chan graduated from the University of New South Wales, Australia with a Bachelor of Commerce degree in Accounting and Computer Information Systems. He is an associate member of the Hong Kong Institute of Certified Public Accountants and a member of Certified Public Accountants, Australia. Mr. Chan has over 15 years of experience in auditing, accounting, investment and financial management. Mr. Chan is currently an associate director of Go-To-Asia Investment Limited. Mr. Chan is also an independent non-executive director of China Dredging Environment Protection Holdings Limited (formerly known as Xiangyu Dredging Holdings Limited) (Stock code: 871) , whose securities are listed on the main board of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”), and of Changhong Jiahua Holdings Limited (Stock code: 8016), whose securities are listed on the growth enterprise market of the Stock Exchange. Mr. Chan resigned as independent non-executive director of Beautiful China Holdings Company Limited (formerly known as FinTronics Holdings Company Limited) (Stock code: 706) on 28 February 2014.

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APPENDIX III

GENERAL INFORMATION

Mr. Ma Lin , aged 61 , was appointed as an Independent Non-executive Director of the Company in January 2012. Mr. Ma graduated from the Capital University of Economics and Business（首都經濟貿易大學）in 1982 with a bachelor degree in economics. Mr. Ma has been an officer of the State Commission for Economic Restructuring（國家經濟體制改革委員會）in the PRC. In 1988, Mr. Ma joined the State Administration of Taxation（國家稅務總局）in the PRC and served various important positions, including the Head of the Import and Export Tax Division*（進出口稅司司長）and the Head of Income Tax Division（所得稅司司長）. Mr. Ma is now an independent non-executive director of Ping An Bank Co., Ltd. (Stock Code: 000001) and Henan Shuanghui Investment & Development Co., Ltd.（河南雙匯投資發展股份有限公司）(Stock Code: 000895), both of which are listed on the Shenzhen Stock Exchange in the PRC.

Mr. Lam Kwan Sing , aged 44 , was appointed as an Independent Non-executive Director of the Company in August 2012. Mr. Lam graduated from the City University of Hong Kong with a degree in Bachelor of Arts in Accountancy. He has more than 16 years of experience in the commercial and corporate finance field. Currently, Mr. Lam is a director of China National Resources, Inc. (a company listed on NASDAQ since 2003) and an executive director of two companies listed on the main board of the Stock Exchange, namely Rising Development Holdings Limited (stock code: 1004) and Enterprise Development Holdings Limited (stock code: 1808). Mr. Lam was an executive director of Shanghai Industrial Urban Development Group Limited (a company listed on the main board of the Stock Exchange, stock code: 563) from May 2008 to July 2010.

Senior Management

Chief executive officer

Ms. Li Shao Yu , aged 43, was appointed as Chief Executive Officer in February 2012. Ms. Li is a director of various members of the Group. Ms. Li is a substantial shareholder of the Company. She is not a Director of the Company.

III – 20

GENERAL INFORMATION

APPENDIX III

14.	CORPORATE INFORMATION
	Head office and principal place of business	Rooms 4917-4932, 49th Floor,
		Sun Hung Kai Centre,
		30 Harbour Road, Wanchai,
		Hong Kong
	Registered office	Cricket Square, Hutchins Drive,
		P.O. Box 2681,
		Grand Cayman KY1-1111,
		Cayman Islands
	Auditors	Deloitte Touche Tohmatsu
		Certified Public Accountants
		35/F, One Pacific Place
		88 Queensway
		Hong Kong
	Principal bankers	The Hongkong and Shanghai Banking
		Corporation Limited
		1 Queen’s Road Central
		Hong Kong
		China Minsheng Banking Corp. Ltd.,
		Hong Kong Branch
		36/F., Bank of America Tower,
		12 Harcourt Road,
		Central, Hong Kong
		Dah Sing Bank, Limited
		36/F., Dah Sing Financial Centre,
		108 Gloucester Road,
		Hong Kong
	Principal share registrar and transfer agent	Royal Bank of Canada Trust Company
		(Cayman) Limited
		4th Floor, Royal Bank House
		24 Shedden Road, George Town
		Grand Cayman KY1-1110
		Cayman Islands

III – 21

GENERAL INFORMATION

APPENDIX III

Hong Kong branch share registrar and Computershare Hong Kong Investor transfer office Services Limited Shops 1712-1716, 17th Floor Hopewell Centre 183 Queen’s Road East Hong Kong Authorised representatives Dr. Ou Zhiliang Mr. Fok Chi Tak Company secretary Ms. Chan Lai Ping

15. PARTIES INVOLVED IN THE OPEN OFFER (WITH THE BONUS ISSUE) AND WHITEWASH WAIVER

Underwriters Asia Link Capital Investment Holdings Limited Rooms 4917-4932, 49th Floor Sun Hung Kai Centre 30 Harbour Road Wanchai Hong Kong Kingston Securities Limited Suite 2801, 28th Floor One International Finance Centre 1 Harbour View Street, Central Hong Kong Financial adviser to the Company Kingston Corporate Finance Limited Suite 2801, 28th Floor One International Finance Centre 1 Harbour View Street, Central Hong Kong Independent financial adviser to Pan Asia Corporate Finance Limited the Independent Board Committee and Unit 1504, 15th Floor the Independent Shareholders The Center 99 Queen’s Road Central, Central, Hong Kong

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GENERAL INFORMATION

APPENDIX III

Auditors of the Company

Deloitte Touche Tohmatsu Certified Public Accountants 35/F One Pacific Place 88 Queensway Hong Kong

16. MISCELLANEOUS

(i) The principal members of the Concert Group are Asia Link, its beneficial owner(s), Ms. Ma Lirong, TRXY Development, TRXY International and Real Power .
(ii) The registered office address of Asia Link is OMC Chambers, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands. The correspondence address of Asia Link is Rooms 4917-4932, 49th Floor, Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong. Asia Link is wholly-owned by Ms. Li. Ms. Li and Ms. Ma Lirong are the directors of Asia Link.
(iii) The correspondence address of Ms. Li and Ms. Ma Lirong is Rooms 4917-4932, 49th Floor, Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong.
(iv) The registered office address of TRXY Development is Rooms 4917-4932, 49th Floor, Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong. The correspondence address of TRXY Development is Rooms 4917-4932, 49th Floor, Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong. TRXY Development is beneficially wholly-owned by Ms. Li. Ms. Li and Ms. Ma Lirong are the directors of TRXY Development.
(v ) The registered office address of TRXY International is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. The correspondence address of TRXY International is Rooms 4917-4932, 49th Floor, Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong. TRXY International is beneficially wholly-owned by Ms. Li. Ms. Li and Ms. Ma Lirong are the directors of TRXY International.
( vi) The registered office address of Real Power is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. The correspondence address of Real Power is Rooms 4917-4932, 49th Floor, Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong. Real Power is beneficially owned as to 99.90% and 0.10% by TRXY Development and China Capital respectively. TRXY Development is beneficially wholly-owned by Ms. Li. China Capital is beneficially owned as to 50.00%, 40.00% and 10.00% by Ms. Li, Mr. Ma Lishan and Mr. Liu Zhbin respectively. Ms. Li and Mr. Ma Lishan are the directors of Real Power.
( vii) In the event of inconsistency, the English text of this circular and the accompanying form of proxy shall prevail over the Chinese text.

III – 23

NOTICE OF EXTRAORDINARY GENERAL MEETING

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(Incorporated in the Cayman Islands with limited liability)

(Stock code: 00474)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “ Meeting ”) of Hao Tian Development Group Limited (the “ Company ”) will be held at Room 2702, 27/F, 200 Gloucester Road, Wanchai, Hong Kong on Wednesday, 30 July 2014 at 10:30 a.m. for the purposes of considering and, if thought fit, passing with or without modification, the following resolutions of the Company:

ORDINARY RESOLUTIONS

“ THAT subject to and conditional upon: (i) the passing of each of the ordinary resolutions numbered 2 , 3 and 4 as set out below; (ii) the Executive (as defined in the circular of the Company dated 2 July 2014 (the “ Circular ”), a copy of which has been produced to this meeting marked “A” and initialed by the chairman of the meeting for the purpose of identification), granting to Asia Link Capital Investment Holdings Limited (“ Asia Link ”) the Whitewash Waiver (as defined in the Circular) and the satisfaction of any condition attached to the Whitewash Waiver imposed by the Executive; (iii) the Listing Committee of the Stock Exchange of Hong Kong Limited granting the listing of, and permission to deal in, the Offer Shares and Bonus Shares (as defined below); (iv) the necessary filing and registration of all documents relating to the Open Offer (with the Bonus Issue) (as defined below) under applicable laws; (v) the obligations of the Underwriters under the Underwriting Agreement (as defined in the Circular) becoming unconditional and not being terminated in accordance with the terms of that agreement and (vi) the Capital Reorganisation (as defined in the Circular) becoming effective:
(a) the Underwriting Agreement a copy of which has been produced to this meeting marked “B” and initialed by the Chairman of the meeting for the purpose of identification and the transactions contemplated therein be and are hereby confirmed, approved and ratified in all respects;

EGM – 1

NOTICE OF EXTRAORDINARY GENERAL MEETING

(b) the issue by way of open offer (with the Bonus Issue (as defined below)) (the “ Open Offer ”) of not less than 794,407,160 shares of the Company (the “ Shares ”) and not more than 951,787,160 Shares of HK$0.01 each of the Company (the “ Offer Shares ”) to the shareholders of the Company (the “ Shareholders ”) whose names appear on the register of members of the Company on 8 August 2014 (the “ Record Date ”) in the proportion of two Offer Shares for every Share then held with bonus shares (the “ Bonus Shares ”) in the proportion of one Bonus Share for every one Offer Share taken up under the Open Offer (the “ Bonus Issue ”), at the subscription price of HK$0.25 per Offer Share excluding those Shareholders whose registered address as shown on such register are outside Hong Kong on the Record Date whom the directors of the Company (the “ Directors ”) consider necessary or expedient to exclude after making the relevant enquiries regarding the legal restrictions under the laws of the relevant place and the requirements of the relevant regulatory body or stock exchange in the place where those Shareholders reside (the “ Excluded Shareholders ”), and on the terms and conditions as set out in the Circular and on such other terms and conditions as may be determined by the Directors be and are hereby approved;
(c) the Directors be and are hereby authorised to allot and issue the Offer Shares and the Bonus Shares pursuant to or in connection with the Open Offer (with the Bonus Issue), and in particular, the Directors be and are hereby authorised to make such exclusions or other arrangements in relation to fractional entitlements, odd lots or the entitlements of the Excluded Shareholders as they deem necessary or expedient having regard to any restriction or obligation under the laws of, or the requirements of any regulatory body or stock exchange in any territory outside Hong Kong;
(d) the Directors be and are hereby authorised to sign and execute such documents and do all such acts and things incidental to the Open Offer (with the Bonus Issue) or as they consider necessary, desirable, or expedient in connection with the implementation of or giving effect to the Open Offer (with the Bonus Issue), the Underwriting Agreement and the transactions contemplated thereunder.”
“ THAT subject to the passing of each of the ordinary resolutions numbered 1 and 3 as set out in the notice convening this meeting, the absence of arrangements for application for the Offer Shares by the Qualifying Shareholders in excess of their entitlements under the Open Offer as referred to in Rule 7.26A(2) of the Listing Rules (as defined in the Circular) be and is hereby approved.”

EGM – 2

NOTICE OF EXTRAORDINARY GENERAL MEETING

“ THAT subject to (i) the passing of each of the ordinary resolutions numbered 1 and 2 as set out in the notice convening this meeting, and (ii) the Executive granting to Asia Link the Whitewash Waiver and the satisfaction of any conditions attached to the Whitewash Waiver imposed by the Executive, the Whitewash Waiver pursuant to Note 1 on dispensation from Rule 26 of the Takeovers Code (as defined in the Circular) waiving any obligation on the part of Asia Link, to make a mandatory general offer to the holders of securities to acquire all securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company other than those already owned by Asia Link and parties acting in concert with it which would otherwise arise under Rule 26.1 of the Takeovers Code as a result of the fulfilment of Asia Link’s underwriting obligations under the Underwriting Agreement and all of the terms set out therein, be and are hereby approved.”
“ THAT the Directors of the Company be and are hereby specifically authorised to allot and issue new Shares (the “ Warrant Shares ”) to be allotted, issued and dealt with upon the exercise of the subscription rights attaching to the 785,500,000 outstanding warrants issued by the Company on 21 January 2013 and the Directors, acting together, individually or by committee, be and are hereby authorised to allot and issue and deal with Warrant Shares and to take such actions, do such things and execute such further documents or deeds for and on behalf of the Company as such Directors may, in their opinion, consider necessary, desirable or expedient to carry out or give effect to any or all the transactions contemplated in this resolution.”

SPECIAL RESOLUTION

“ THAT the articles of association of the Company (the “ Articles ”) be amended by deleting the existing article 147 in its entirety and substituted therefor with the following:
“147. The Company may, upon the recommendation of the Board, at any time and from time to time pass an ordinary resolution to the effect that it is desirable to capitalise all or any part of any amount for the time being standing to the credit of any reserve or fund (including a share premium account and capital redemption reserve and the profit and loss account) whether or not the same is available for distribution and accordingly that such amount be set free for distribution among the Members or any class of Members who would be entitled thereto if it were distributed by way of dividend and in the same proportions (or such other proportions as the Board may propose and as approved by an ordinary resolution of the Company), on the footing that the same is not paid in cash but is applied either in or towards paying up the amounts for the time being unpaid on any shares in the Company held by such

EGM – 3

NOTICE OF EXTRAORDINARY GENERAL MEETING

Members respectively or in paying up in full unissued shares, debentures or other obligations of the Company, to be allotted and distributed credited as fully paid up among such Members, or partly in one way and partly in the other, and the Board shall give effect to such resolution provided that, for the purposes of this Article, a share premium account and any capital redemption reserve or fund representing unrealised profits, may be applied only in paying up in full unissued shares the Company to be allotted to such Members credited as fully paid.””

Your faithfully,

By order of the Board of Hao Tian Development Group Limited Chan Lai Ping Company Secretary

Hong Kong, 2 July 2014

Principal place of business in Hong Kong: Rooms 4917-4932, 49th Floor Sun Hung Kai Centre 30 Harbour Road, Wanchai Hong Kong

EGM – 4

NOTICE OF EXTRAORDINARY GENERAL MEETING

Notes:

A form of proxy for use at the Meeting is enclosed herewith.
The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of any officer or attorney duly authorised.
Any shareholder of the Company entitled to attend and vote at the Meeting convened by the above notice shall be entitled to appoint another person as his proxy to attend and vote instead of him. A proxy need not be a shareholder of the Company. If more than one proxy is so appointed, the appointment shall specify the number and class of shares in respect of which each such proxy is so appointed .
In order to be valid, the form of proxy, together with the power of attorney or other authority (if any) under which it is signed, or a certified copy of such power of attorney or authority, must be deposited at the Company’s branch share registrar of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited at Shops 17121716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong not less than 48 hours before the time appointed for holding of the above Meeting or any adjournment thereof (as the case may be).
Completion and return of the form of proxy will not preclude a shareholder of the Company from attending and voting in person at the Meeting convened or at any adjourned meeting (as the case may be) and in such event, the form of proxy will be deemed to be revoked.
Where there are joint holders of any share of the Company, any one of such joint holders may vote, either in person or by proxy, in respect of such share as if he/she were solely entitled thereto, but if more than one of such joint holders are present at the Meeting, whether in person or by proxy, priority shall be determined by the order in which the names stand on the register of members of the Company in respect of the joint holding.

As at the date of this notice, the board comprises three executive Directors, namely Mr. Xu Hai Ying, Dr. Zhiliang Ou, JP (Australia), and Mr. Fok Chi Tak and three independent non-executive Directors, namely Mr. Chan Ming Sun Jonathan, Mr. Ma Lin, and Mr. Lam Kwan Sing.

EGM – 5

AI assistant

Aceso Life Science Group Limited — Proxy Solicitation & Information Statement 2014

49235_rns_2014-07-02_fb492d16-4ce1-43ea-823d-7dd3247d5d28.pdf

CONTENTS

EXPECTED TIMETABLE

EXPECTED TIMETABLE

EXPECTED TIMETABLE

EFFECT OF BAD WEATHER ON THE LATEST TIME FOR ACCEPTANCE OF AND PAYMENT FOR THE OFFER SHARES

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

TERMINATION OF THE UNDERWRITING AGREEMENT

RESPONSIBILITY STATEMENT

LETTER FROM THE BOARD

(Stock code: 00474)

AND ( 6) NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

LETTER FROM THE BOARD

LETTER FROM THE BOARD

PROPOSED OPEN OFFER (WITH THE BONUS ISSUE)

Issue statistics

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Qualifying Shareholders

Closure of register of members

Rights of the Overseas Shareholders

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Offer Shares and Bonus Shares to the issued share capital of the Company

LETTER FROM THE BOARD

Subscription Price

LETTER FROM THE BOARD

Basis of determining the Subscription Price

LETTER FROM THE BOARD

Status of the Offer Shares and the Bonus Shares

Certificates of the Offer Shares and the Bonus Shares

No application for excess Offer Shares

LETTER FROM THE BOARD

Fractional entitlements to the Offer Shares (if any)

Application for listing and dealings of the Offer Shares

LETTER FROM THE BOARD

UNDERWRITING ARRANGEMENT

Irrevocable Undertakings

LETTER FROM THE BOARD

Underwriting Agreement

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Information of Asia Link

Conditions of the Underwriting Agreement

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Termination of the Underwriting Agreement

LETTER FROM THE BOARD

LETTER FROM THE BOARD

REASONS FOR THE OPEN OFFER (WITH THE BONUS ISSUE) AND USE OF PROCEEDS

LETTER FROM THE BOARD

BUSINESS REVIEW OF THE GROUP

Money Lending Business

LETTER FROM THE BOARD

Natural Gas Business

Trading of Commodities Business

Coal Mining Business

Packaging Box Business

LETTER FROM THE BOARD

FINANCIAL AND TRADING PROSPECTS OF THE GROUP

EFFECTS ON SHAREHOLDING STRUCTURE

LETTER FROM THE BOARD

LETTER FROM THE BOARD

ADJUSTMENTS TO THE OUTSTANDING SHARE OPTIONS AND WARRANTS AND PROPOSED GRANT OF SPECIFIC MANDATE TO ISSUE NEW ADJUSTED SHARES UPON EXERCISE OF WARRANTS

LETTER FROM THE BOARD

LETTER FROM THE BOARD

PROPOSED AMENDMENTS TO ARTICLES

IMPLICATION UNDER THE TAKEOVERS CODE AND APPLICATION FOR WHITEWASH WAIVER

LETTER FROM THE BOARD

Aceso Life Science Group Limited Proxy Solicitation & Information Statement 2014