Automated Systems Holdings Limited - Proxy Solicitation & Information Statement 2009

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

Hong Kong Exchanges and Clearing 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.

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

If you have sold or transferred all your shares in COL Capital Limited, you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

(Incorporated in Bermuda with limited liability) (Stock Code: 00383)

MAJOR TRANSACTION RELATING TO ACQUISITION OF SALE SHARES

A letter from the Board is set out on pages 4 to 14 of this circular.

16 October 2009

	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Sale and Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Reasons for and Benefits of the Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Information on Greenfield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Shareholding Structure of Greenfield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Financial Effect of the Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Information on the Offeror and the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Intention of the Offeror regarding Greenfield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Maintaining the Listing Status of Greenfield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Listing Rules Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
APPENDIX I – FINANCIAL INFORMATION OF THE GROUP. . . . . . . . . . . . .	15
APPENDIX II – FINANCIAL INFORMATION OF GREENFIELD. . . . . . . . . . . .	109
APPENDIX III – UNAUDITED PRO FORMA FINANCIAL INFORMATION. . . . .	190
APPENDIX IV – GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	196

– i –

DEFINITIONS

In this circular, the following expressions have the meanings respectively set opposite them unless the context otherwise requires:

“acting in concert”	has the meaning ascribed thereto in the Takeovers Code
“Acquisition”	acquisition of the Sale Shares by the Offeror from the Vendors
	pursuant to the Sale and Purchase Agreement
“Announcement”	the announcement dated 11 September 2009 issued by the
	Company in relation to, among other things, the Acquisition
“associate”	has the meaning ascribed thereto in the Listing Rules
“Business Day”	a day (other than a Saturday or days on which a typhoon signal
	8 or above or black rainstorm signal is hoisted in Hong Kong at
	10:00 a.m.) on which banks in Hong Kong are generally open
	for business
“Company”	COL Capital Limited (Stock Code: 383), a company
	incorporated in Bermuda with limited liability and the shares
	of which are listed on the Main Board of the Stock Exchange
“Completion”	completion of the sale and purchase of the Sale Shares in
	accordance with the terms and conditions of the Sale and
	Purchase Agreement
“connected person(s)”	has the meaning ascribed thereto under the Listing Rules
“Consideration”	the consideration payable for the Sale Shares
“Directors”	directors of the Company
“Enlarged Group”	the Group immediately following Completion
“Greenfield”	Greenfield Chemical Holdings Limited (Stock Code: 582),
	a Company incorporated in the Cayman Islands with limited
	liability and the issued shares of which are listed on the Main
	Board of the Stock Exchange
“Greenfield Board”	the board of directors of Greenfield

– 1 –

DEFINITIONS

“Greenfield Shares”	ordinary shares of HK$0.10 each in the share capital of
	Greenfield
“Greenfield Group”	Greenfield and its subsidiaries
“Group”	the Company and its subsidiaries
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong”	Hong Kong Special Administrative Region of the People’s
	Republic of China
“Independent Third	party(ies) who, together with his/her ultimate beneficial
Party(ies)”	owner(s), is/are persons independent of Greenfield and its
	connected persons
“Jumbo Hill”	Jumbo Hill Group Limited, a wholly owned subsidiary of
	Mulpha Strategic and is the shareholder holding 32% of the
	issued share capital of Pacific Orchid
“Latest Practicable Date”	13 October 2009, being the latest practicable date prior to the
	printing of this circular for inclusion of certain information in
	this circular
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“Mulpha Strategic”	Mulpha Strategic Limited, a company incorporated in the
	British Virgin Islands with limited liability and is a shareholder
	holding 68% of the issued share capital of Pacific Orchid
“Offer”	the unconditional mandatory general cash offer to be made
	by Sun Hung Kai on behalf of the Offeror to the Offer
	Shareholders for their Greenfield Shares at HK$1.50 per share
	in compliance with the Takeovers Code
“Offer Shareholders”	Greenfield Shareholders other than the Offeror and parties
	acting in concert with it
“Offeror” or “Purchaser”	True Focus Limited, an Independent Third Party and a
	company incorporated in British Virgin Islands with limited
	liability and is a wholly owned subsidiary of the Company

– 2 –

DEFINITIONS

“Pacific Orchid”	Pacific Orchid Investments Limited, a company incorporated
	in the British Virgin Islands with limited liability and is the
	holder and beneficial owner of 187,500,000 Greenfield Shares
	representing approximately 68.72% of the issued share capital
	of Greenfield immediately prior to Completion
“Sale Shares”	the 10,000 shares in Pacific Orchid registered in the name of
	and beneficially owned by the Vendors (as to 6,800 shares
	owned by Mulpha Strategic and 3,200 shares owned by Jumbo
	Hill), representing the entire issued share capital of Pacific
	Orchid upon Completion
“SFO”	the Securities and Futures Ordinance (Cap 571 of the laws of
	Hong Kong)
“Sale and Purchase	the agreement dated 4 September 2009 entered into among the
Agreement”	Offeror, the Vendors, the Vendors’ Guarantor and the Company
	for the sale and purchase of the Sale Shares
“Shares”	ordinary shares of HK$0.01 each in the registered capital of
	the Company
“Shareholders”	shareholders of the Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Sun Hung Kai”	Sun Hung Kai International Limited, a corporation licensed
	to conduct types 1 (dealings in securities) and 6 (advising on
	corporate finance) regulated activities under the SFO which
	will make the Offer on behalf of the Offeror
“Takeovers Code”	Hong Kong Code on Takeovers and Mergers
“Vendors”	collectively Jumbo Hill and Mulpha Strategic
“Vendors’ Guarantor”	Mulpha International Bhd. a company incorporated in Malaysia
	with limited liability and the shares of which are listed on
	Bursa Malaysia Securities Bhd.
“Vigor Online”	Vigor Online Offshore Limited, a company incorporated in
	the British Virgin Islands and a controlling shareholder of the
	Company
“%”	per cent.

– 3 –

LETTER FROM THE BOARD

(Incorporated in Bermuda with limited liability)

(Stock Code: 00383)

Executive Directors: Ms. Chong Sok Un (Chairman) Dato’ Wong Peng Chong Mr. Kong Muk Yin

Independent Non-executive Directors: Mr. Lo Wai On Mr. Lau Siu Ki, Kevin Mr. Zhang Jian

Registered Office: Canon’s Court 22 Victoria Street Hamilton HM 12 Bermuda

Principal place of business in Hong Kong: 47th Floor China Online Centre 333 Lockhart Road Wan Chai Hong Kong 16 October, 2009

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION RELATING TO ACQUISITION OF SALE SHARES

INTRODUCTION

On 11 September 2009, the Company announced that on 4 September 2009 (after trading hours), the Vendors, the Offeror, the Vendors’ Guarantor and the Company has entered into the Sale and Purchase Agreement, pursuant to which the Vendors agreed to dispose of the and the Offeror agreed to acquire the Sale Shares for a consideration of HK$281.25 million. The Sale Shares represent the entire issued share capital of Pacific Orchid as at the date of the Announcement. Pacific Orchid is the holder and beneficial owner of 187,500,000 Greenfield Shares, representing approximately 68.72% of the issued share capital of Greenfield. Completion has taken place immediately after the signing of the Sale and Purchase Agreement.

– 4 –

LETTER FROM THE BOARD

Immediately following Completion, the Offeror indirectly owns an aggregate 187,500,000 Greenfield Shares, representing approximately 68.72% of the entire issued share capital of Greenfield. Therefore, the Offeror will under Rule 26.1 of the Takeovers Code make an unconditional mandatory general cash offer to acquire all the issued Greenfield Shares not already owned or agreed to be acquired by the Offeror or parties acting in concert with it.

Under the Listing Rules, the Acquisition and the making of the Offer as a result of the Agreement constitutes a major transaction for the Company under Chapter 14 of the Listing Rules and is subject to the approval of the Shareholders in general meeting.

As at the date of the Sale and Purchase Agreement, the Company has received a written approval of the Acquisition from Vigor Online, a controlling shareholder of the Company holding approximately 64.3% in nominal value of the issued Shares giving the right to attend and vote at the general meeting of the Company. Vigor Online has given irrevocable and unconditional approval of the Acquisition and the transactions contemplated as envisaged by Rule 14.44 of the Listing Rules. Accordingly, the Acquisition and the making of Offer have been duly approved and passed by the Shareholders and a general meeting of the Company to approve the Acquisition and the making of Offer is no longer required under the Listing Rules.

The purpose of this circular is to provide you with details on, among other things, (i) further details of the Acquisition and (ii) the financial information in accordance with the Listing Rules.

SALE AND PURCHASE AGREEMENT

Date : 4 September 2009 Purchaser : the Offeror, True Focus Limited, a company incorporated in the British Virgin Islands with limited liability and is an indirectly wholly owned subsidiary of the Company. Vendors : Mulpha Strategic Limited, a company incorporated in the British Virgin Islands with limited liability and is the holder and beneficial owner of 6,800 Sale Shares representing approximately 68% of the issued share capital of Pacific Orchid. Mulpha Strategic is wholly and beneficially owned by the Vendors’ Guarantor.

– 5 –

LETTER FROM THE BOARD

Jumbo Hill Group Limited, a company incorporated in the British Virgin Islands with limited liability and is the holder and beneficial owner of 3,200 Sale Shares representing approximately 32% of the issued share capital of Pacific Orchid. Jumbo Hill is a wholly-owned subsidiary of Mulpha Strategic, a company wholly and beneficially owned by the Vendors’ Guarantor.

Each of the Vendors is principally engaged in investment holding.

Vendors’ Guarantor : Mulpha International Bhd. a company incorporated in Malaysia with limited liability and the shares of which are listed on Bursa Malaysia Securities Bhd., which indirectly owns 100% interest in Mulpha Strategic.
Purchaser’s : the Company, an Independent Third Party and a company Guarantor incorporated in Bermuda with limited liability and the shares of which are listed on the Main Board of the Stock Exchange which indirectly owns 100% interest in the Purchaser.
Sale Shares : 10,000 shares in Pacific Orchid beneficially owned by the Vendors (as to 6,800 shares beneficially owned by Mulpha Strategic and 3,200 shares beneficially owned by Jumbo Hill), representing the entire issued share capital of Pacific Orchid. The Sale Shares are sold free from all liens, claims, equities, charges, encumbrances or third party rights of whatsoever nature on Completion. There are no restrictions imposed on the subsequent sale of the Sale Shares.

Pacific Orchid is principally engaged in investment holding with its sole asset being the 187,500,000 Greenfield Shares, representing approximately 68.72% of the issued share capital of Greenfield.

– 6 –

LETTER FROM THE BOARD

Consideration : HK$281.25 million which has been paid on Completion from internal resources of the Group as to approximately HK$100.1 million and borrowings from Sun Hung Kai Investment Services Limited as to approximately HK$181.15 million. The Consideration per Sale Share amounts to HK$28,125. Completion : Completion has taken place immediately after the signing of the Sale and Purchase Agreement.

To the best of the Directors’ knowledge, information and belief having made, all reasonable enquiries, each of the Offeror and the Company together with their respective ultimate beneficial owners are independent third parties not connected with the Vendors, Greenfield and their connected persons.

Save for the entering into of the loan agreement between Join Capital Limited (“Join Capital”), an indirectly wholly-owned subsidiary of the Company, as lender and Mulpha Strategic as borrower (the “Loan Agreement”) in relation to the revolving secured term loan in the amount of HK$250,000,000 (the “Loan”) granted by Join Capital to Mulpha Strategic as disclosed in the announcement and the circular of the Company dated 7 July 2009 and 28 July 2009 respectively, the Company and its ultimate beneficial owners did not have any prior transactions or relationship with the Vendors.

The principal terms of the Loan Agreement are as follows:

Amount : HK$250,000,000 Term : 1 year Repayment : Mulpha Strategic shall repay the outstanding principal and interest accrued thereon on 8 July 2010 or such other date as may be agreed to between Join Capital and Mulpha Strategic Purpose : The Loan shall be used for the general working capital of Mulpha Strategic Interest : 1% per month

– 7 –

LETTER FROM THE BOARD

Security : (a) deeds of charge executed by Mulpha Strategic and Jumbo Hill in favour of Join Capital by way of a first legal charge of all its rights, title and interest in and to 6,800 and 3,200 Sale Shares respectively;
(b) the debenture created by Pacific Orchid in favour of Join Capital by way of first fixed and floating charge cover all the undertaking, property and assets and rights of Pacific Orchid

Mulpha Strategic has repaid the outstanding amount of the Loan and interest accrued thereon of HK$265,266,771.48 in full immediately after Completion from the proceeds of the sale of the Sale Shares and the above security documents have been fully discharged and released.

The provision of the Loan is a transaction carried out as part of the ordinary and usual course of business activities of the Company and there is no relationship among the provision of the Loan, the Acquisition and the Offer.

The aggregate Consideration for the Sale Shares of HK$281.25 million (which is based on HK$1.50 per Greenfield Share in relation to the 187,500,000 Greenfield Shares, representing approximately 68.72% of the issued share capital of Greenfield, held by Pacific Orchid) was negotiated in arms length between the parties to the Sale and Purchase Agreement with reference to the prevailing market price of Greenfield Shares and the net asset value of Greenfield Group.

REASONS FOR AND BENEFITS OF THE ACQUISITION

Following the Completion, Greenfield becomes a subsidiary of the Company and the Company considers that the Offer represents an opportunity for the Company to widen its existing business scope of securities trading and investments, provision of financial services, property investment and strategic investment and to diversify its revenue base by allowing the Company to participate in the manufacture of industrial paints and trading of petrochemical and related products and to diversify into business sectors other than paint manufacturing, when opportunities arise, through a listed platform, though none has yet been identified.

– 8 –

LETTER FROM THE BOARD

In view of the above, the Directors (including independent non-executive directors of the Company) are of the view that the terms of the Sale and Purchase Agreement are on normal commercial terms, which are fair and reasonable and the entering into of the Sale and Purchase Agreement is in the interests of the Company and its Shareholders as a whole.

INFORMATION ON GREENFIELD

Greenfield is an exempted company incorporated in the Cayman Islands and Greenfield Shares are listed on the Main Board of the Stock Exchange. Greenfield Group is principally engaged in manufacture of paints and trading in petrochemical and related products.

Below are the audited financial information of Greenfield Group for the two years ended 31 December 2007 and 31 December 2008 extracted from the audited consolidated financial statements of Greenfield Group:

	For the	For the
	year ended	year ended
	31 December	31 December
	2008	2007
	(audited)	(audited)
	(HK$’000)	(HK$’000)
Turnover	335,697	317,066
Profit before taxation	18,230	26,573
Profit after taxation	14,904	23,226
Net assets	391,168	400,227
Total assets	565,734	590,179

– 9 –

LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE OF GREENFIELD

The following table sets out the shareholding structure of Greenfield as (i) immediately after the Completion and as at the Latest Practicable Date but before the Offer, (ii) immediately after the Completion and the Offer (assuming none of the Offer Shareholder accepts the Offer), and (iii) immediately after the Completion and the Offer (assuming all of the Offer Shareholders accept the Offer and assuming the Offeror has placed down the Greenfield Shares in order to maintain the public float) assuming that there is no change in the issued share capital of Greenfield:–

The Offeror and parties acting in concert (Note 1) Public Shareholders Total	Immediately after the Completion and as at the Latest Practicable Date but before the Offer Number of Shares Approximate % 187,500,000 68.72 85,360,000 31.28 272,860,000 100.00	Immediately after the Completion and the Offer (assuming none of the Offer Shareholders accepts the Offer) Number of Shares Approximate % 187,500,000 68.72 85,360,000 31.28 272,860,000 100.00	Immediately after the Completion and the Offer (assuming all the Offer Shareholders accept the Offer and assuming the Offeror has placed down the Greenfield Shares in order to maintain the public float) Number of Shares Approximate % 204,645,000 75.00 (Note 3) 68,215,000 25.00 (Notes 2 and 3) 272,860,000 100.00	Immediately after the Completion and the Offer (assuming all the Offer Shareholders accept the Offer and assuming the Offeror has placed down the Greenfield Shares in order to maintain the public float) Number of Shares Approximate % 204,645,000 75.00 (Note 3) 68,215,000 25.00 (Notes 2 and 3) 272,860,000 100.00
				100.00

Note (1) These Greenfield Shares are held by the Offeror through its shareholding in Pacific Orchid.
(2) The Offeror intends to maintain the listing of Greenfield Shares on the Stock Exchange. The Offeror and Greenfield Board jointly and severally undertake to the Stock Exchange to take appropriate steps to ensure that sufficient public float exists in Greenfield Shares immediately after completion of the Offer.
(3) The percentages held by the Offeror and parties acting in concert and those held by the public would be 75% and 25% respectively on the assumption that the public float is maintained after the Offer.

– 10 –

LETTER FROM THE BOARD

Below is the shareholding structure of Greenfield (i) before Completion; (ii) immediately upon Completion but before close of the Offer; and (iii) after Completion and the Offer:

Before Completion:

==> picture [329 x 206] intentionally omitted <==

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

Mulpha Strategic Jumbo Hill
68% 32%
Pacific Orchid
68.72%
68.72%
Greenfield
----- End of picture text -----

Immediately upon Completion but before close of the Offer:

==> picture [96 x 232] intentionally omitted <==

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

The Company
100%
True Focus
100%
Pacific Orchid
68.72%
Greenfield
----- End of picture text -----

– 11 –

LETTER FROM THE BOARD

After Completion and the Offer[#] :

==> picture [96 x 232] intentionally omitted <==

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

The Company
100%
True Focus
100%
Pacific Orchid
75% [#]
Greenfield
----- End of picture text -----

Assuming all Offer Shareholders accept the Offer. The Offeror intends to maintain the listing of Greenfield Shares on the Stock Exchange. The Offeror and Greenfield Board jointly and severally undertake to the Stock Exchange to take appropriate steps to ensure that sufficient public float exists in Greenfield Shares immediately after completion of the Offer.

FINANCIAL EFFECT OF THE ACQUISITION

Upon completion of the Acquisition, Greenfield will become a subsidiary of the Company and the financial results of Greenfield will be consolidated into the financial results of the Company.

As set out in the unaudited pro forma financial information of the Enlarged Group in Appendix III to this circular, the total asset and the total liabilities of the Group will be increased by approximate HK$199,998,000 to HK$2,226,887,000 and HK$40,376,000 to HK$528,482,000 respectively as a result of the Acquisition.

It is expected that both turnover and earnings of the Group will increase as a result of the Acquisition.

– 12 –

LETTER FROM THE BOARD

INFORMATION ON THE OFFEROR AND THE COMPANY

The Offeror is a company incorporated in the British Virgin Islands with limited liability and is a wholly owned subsidiary of the Company.

The Company is a company incorporated in Bermuda and the Shares are listed on the Main Board of the Stock Exchange. The principal business activity of the Company is investment holding and through its subsidiaries engaged in securities trading and investments, provision of financial services, property investment and strategic investment.

INTENTION OF THE OFFEROR REGARDING GREENFIELD

The Offeror does not have any concrete plan to change Greenfield Group’s existing business activities and management of Greenfield. However, it is the intention of the Offeror that, following Completion, it will initiate and commence a review on the business activities and assets of Greenfield Group, for the purpose of formulating new business plans and strategies for the future business development of Greenfield Group. Save as disclosed above, the Offeror has no intention to inject any material assets or businesses into Greenfield Group.

It is proposed that Mr. Chung Tze Hien and Mr. Ng Seng Nam will resign as directors of Greenfield and Dato’ Wong Peng Chong and Mr. Kong Muk Yin will be appointed as directors of Greenfield. Any such change will only take effect in accordance with the requirements of the Takeovers Code. In the event of any change in the composition of Greenfield Board, Greenfield will comply with the publication requirement under the Listing Rules to inform the public accordingly.

MAINTAINING THE LISTING STATUS OF GREENFIELD

The Offeror intends to maintain the listing of Greenfield Shares on the Stock Exchange. The Offeror and Greenfield Board jointly and severally undertake to the Stock Exchange to take appropriate steps to ensure that sufficient public float exists in Greenfield Shares immediately after completion of the Offer.

The Stock Exchange has stated that if, at the close of the Offer, less than the minimum prescribed percentage applicable to Greenfield, being 25% of the issued Greenfield Shares, are held by the public or if the Stock Exchange believes that:

(i) a false market exists or may exist in the trading of Greenfield Shares; or
(ii) there are insufficient Greenfield Shares in public hands to maintain an orderly market,

it will consider exercising its discretion to suspend dealings in Greenfield Shares.

– 13 –

LETTER FROM THE BOARD

LISTING RULES IMPLICATIONS

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, no Shareholder has a material interest in the Agreement and making of the Offer and accordingly no Shareholder is required to abstain from voting at the general meeting of the Company.

As at the date of the Sale and Purchase Agreement, the Company has received a written approval of the Acquisition from Vigor Online, a controlling shareholder of the Company holding approximately 64.3% in nominal value of the issued Shares (i.e. 354,544,374 Shares) giving the right to attend and vote at the general meeting of the Company. Vigor Online has given irrevocable and unconditional approval of the Acquisition and the transactions contemplated as envisaged by Rule 14.44 of the Listing Rules. Accordingly, the Acquisition and the making of Offer have been duly approved and passed by the Shareholders and a general meeting of the Shareholders to approve the Acquisition and the making of Offer is no longer required under the Listing Rules.

If a general meeting were held to approve the Acquisition, the Board would recommend the Shareholders to vote in favour of the Acquisition as the Acquisition is in the best interest of the Company and the Shareholders as a whole.

ADDITIONAL INFORMATION

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

By Order of the Board COL CAPITAL LIMITED Chong Sok Un Chairman

– 14 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. SUMMARY OF FINANCIAL INFORMATION

Set out below is a summary of the audited consolidated income statements and consolidated balance sheets of the Group for the last three years ended 31 December 2008, as extracted from the relevant published annual reports of the Company for the last three years ended 31 December 2008.

The auditors’ reports from Deloitte Touche Tohmatsu in respect of the Group’s audited consolidated financial statements for each of the three years ended 31 December 2008, 2007 and 2006 did not contain any qualifications. There were no other exceptional items or extraordinary items of the Group during each of the three years ended 31 December 2006, 2007 and 2008.

CONSOLIDATED INCOME STATEMENT

Revenue (excluding securities trading)
Gross proceeds from sale of investments held
for trading
Total
Continuing operations:
Revenue (excluding securities trading)
Net (loss) gain on investments
Other income
Administrative and other expenses
Finance costs
Share of profits (losses) of associates
Impairment loss recognised on associates
Gain on disposal of an associate
Fair value changes on investment properties
Revaluation surplus on buildings
(Loss) profit before taxation
Taxation
(Loss) profit from continuing operations

For the year ended 31 December
2008
2007
2006
HK$’000
HK$’000
HK$’000
80,592
55,315
30,589
579,716
2,234,125
1,132,153
660,308
2,289,440
1,162,742
80,592
55,315
30,589
(2,688,205)
1,560,870
801,269
5,707
24,943
22,297
(22,222)
(78,680)
(63,489)
(50,955)
(35,801)
(10,895)
3,701
(4,094)
–
(122,324)
–
–
–
–
1,740
(12,408)
37,351
6,856
54
144
387
(2,806,060)
1,560,048
788,754
2,377
(175,873)
(11,432)
(2,803,683)
1,384,175
777,322

– 15 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Discontinued operation: Loss for the year from discontinued operation (Loss) profit for the year Attributable to: Equity holders of the Company Minority interests Dividends recognised as distribution (Loss) earnings per share From continuing and discontinued operations – Basic From continuing operations – Basic Dividends per share	– (1,528) (4,805) (2,803,683) 1,382,647 772,517 (2,799,811) 1,378,824 772,468 (3,872) 3,823 49 (2,803,683) 1,382,647 772,517 11,047 13,846 14,280 HK$(9.79) HK$4.78 HK$2.67 HK$(9.79) HK$4.78 HK$2.69 HK$0.04 HK$0.05 HK$0.05 For the year ended 31 December 2008 2007 2006 HK$’000 HK$’000 HK$’000

– 16 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED BALANCE SHEET

Non-current assets
Investment properties
Property, plant and equipment
Prepaid lease payments
Interests in associates
Available-for-sale investments
Loan notes
Convertible bonds
Current assets
Available-for-sale investments
Loan notes
Inventories held for sale – finished goods
Investments held for trading
Amount due from a minority shareholder
Debtors, deposits and prepayments
Loan receivables
Tax recoverable
Pledged bank deposits
Bank balances and cash
Assets classified as held for sale

At 31 December
2008
2007
2006
HK$’000
HK$’000
HK$’000
103,105
110,925
81,589
3,036
3,796
4,712
54
1,001
2,424
138,501
368,297
–
356,835
849,923
557,375
–
–
50,476
–
–
6,626
601,531
1,333,942
703,202
124,055
9,801
–
–
52,401
–
–
–
1,471
818,971
3,617,216
1,690,510
–
–
–
36,648
41,284
33,708
164,875
174,015
123,598
4,050
4,050
3,543
1,167
10,718
–
66,279
67,824
58,007
1,216,045
3,977,309
1,910,837
–
–
134,419
1,216,045
3,977,309
2,045,256

– 17 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Current liabilities
Creditors and accrued charges
Customers’ deposits and receipts in advance
Other borrowings
Derivative financial instruments
Taxation payable
Liabilities associated with assets classified as held
for sale
Net current assets
Capital and reserves
Share capital
Reserves
Equity attributable to equity holders of the
Company
Minority interests
Total equity

At 31 December
2008
2007
2006
HK$’000
HK$’000
HK$’000
70,011
97,995
55,480
34,647
14,192
31,283
854,682
918,838
170,100
9,453
4,874
–
68,442
171,033
15,657
1,037,235
1,206,932
272,520
–
–
60,044
1,037,235
1,206,932
332,564
178,810
2,770,377
1,712,692
780,341
4,104,319
2,415,894
2,756
2,762
2,829
777,585
4,097,685
2,396,218
780,341
4,100,447
2,399,047
–
3,872
16,847
780,341
4,104,319
2,415,894

– 18 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR THE YEAR ENDED 31 DECEMBER 2008

The following is the audited financial statements and notes to the financial statements of the Group for the year ended 31 December 2008 extracted from the annual report 2008 of the Company:

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2008

NOTES Revenue (excluding securities trading) Gross proceeds from sale of investments held for trading Total Continuing operations: Revenue (excluding securities trading) 6 Net (loss) gain on investments 8 Other income 9 Administrative and other expenses Finance costs 10 Share of profits (losses) of associates Impairment loss recognised on associates Fair value changes on investment properties Revaluation surplus on buildings (Loss) profit before taxation Taxation credit (charge) 12 (Loss) profit from continuing operations Discontinued operation: Loss for the year from discontinued operation 13 (Loss) profit for the year 14	2008 HK$’000 80,592 579,716 660,308 80,592 (2,688,205) 5,707 (22,222) (50,955) 3,701 (122,324) (12,408) 54 (2,806,060) 2,377 (2,803,683) – (2,803,683)	2007 HK$’000 55,315 2,234,125 2,289,440 55,315 1,560,870 24,943 (78,680) (35,801) (4,094) – 37,351 144 1,560,048 (175,873) 1,384,175 (1,528) 1,382,647

– 19 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Attributable to: Equity holders of the Company Minority interests Dividends recognised as distribution 15 (Loss) earnings per share 16 From continuing and discontinued operations – Basic From continuing operations – Basic NOTES	(2,799,811) (3,872) (2,803,683) 11,047 HK$(9.79) HK$(9.79) 2008 HK$’000	1,378,824 3,823 2007 HK$’000
		1,382,647

		13,846

		HK$4.78

		HK$4.78

– 20 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED BALANCE SHEET

At 31 December 2008

NOTES Non-current assets Investment properties 17 Property, plant and equipment 18 Prepaid lease payments 19 Interests in associates 20 Available-for-sale investments 21 Current assets Available-for-sale investments 21 Loan notes 22 Investments held for trading 23 Debtors, deposits and prepayments 24 Loan receivables 25 Tax recoverable Pledged bank deposits 26 Bank balances and cash 26 Current liabilities Creditors and accrued charges 27 Customers’ deposits and receipts in advance Other borrowings 28 Derivative financial instruments 29 Taxation payable Net current assets Net assets Capital and reserves Share capital 30 Reserves Equity attributable to equity holders of the Company Minority interests	2008 HK$’000 103,105 3,036 54 138,501 356,835 601,531 124,055 – 818,971 36,648 164,875 4,050 1,167 66,279 1,216,045 70,011 34,647 854,682 9,453 68,442 1,037,235 178,810 780,341 2,756 777,585 780,341 – 780,341	2007 HK$’000 110,925 3,796 1,001 368,297 849,923
		1,333,942
		9,801 52,401 3,617,216 41,284 174,015 4,050 10,718 67,824
		3,977,309
		97,995 14,192 918,838 4,874 171,033
		1,206,932
		2,770,377
		4,104,319

		2,762 4,097,685
		4,100,447 3,872
		4,104,319

– 21 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2008

		Attribu	table to equity h	olders of the Company	olders of the Company		Total HK$’000 2,399,047	Minority interests HK$’000 16,847	Total equity HK$’000 2,415,894
Share capital HK$’000 2,829	Share premium HK$’000 625,061	Building revaluation reserve HK$’000 (Note) 1,274	Investment revaluation reserve HK$’000 432,100	Capital redemption reserve HK$’000 2,111	Translation reserve HK$’000 969	Retained profits (accumulated loss) HK$’000 1,334,703

– – – – –	– – – – –	– 3,242 520 – –	288,183 – – – –	– – – – –	– – – 5,944 2,123	– – – – –	288,183 3,242 520 5,944 2,123	– – – – –	288,183 3,242 520 5,944 2,123
– – – – – – – – (67) 2,762	– – – – – – – – (32,310) 592,751	3,762 – – 3,762 – – – – – 5,036	288,183 596 – 288,779 – – – – – 720,879	– – – – – – – – 67 2,178	8,067 – – 8,067 – – – – – 9,036	– – 1,378,824 1,378,824 – 68,265 (74) (13,846) (67) 2,767,805	300,012 596 1,378,824 1,679,432 – 68,265 (74) (13,846) (32,377) 4,100,447	– – 3,823 3,823 (16,798) – – – – 3,872	300,012 596 1,382,647
									1,683,255
									(16,798) 68,265 (74) (13,846) (32,377)
									4,104,319

– 22 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

			Attribu	table to equity h	olders of the Company	olders of the Company		Total HK$’000	Minority interests HK$’000	Total equity HK$’000
Share capital HK$’000 – – – – – – – – – – (6) – 2,756		Share premium HK$’000	Building revaluation reserve HK$’000 (Note)	Investment revaluation reserve HK$’000	Capital redemption reserve HK$’000	Translation reserve HK$’000	Retained profits (accumulated loss) HK$’000
	– – – – –	– – – – –	– 2,214 (50) – –	(514,802) – – – –	– – – – –	– – – 3,459 3,353	– – – – –	(514,802) 2,214 (50) 3,459 3,353	– – – – –	(514,802) 2,214 (50) 3,459 3,353
		– – – – – (1,371) 59 591,439	2,164 – – 2,164 – – – 7,200	(514,802) (2,104) – (516,906) – – – 203,973	– – – – – 6 – 2,184	6,812 – – 6,812 – – – 15,848	– – (2,799,811) (2,799,811) (11,047) (6) – (43,059)	(505,826) (2,104) (2,799,811) (3,307,741) (11,047) (1,377) 59 780,341	– – (3,872) (3,872) – – – –	(505,826) (2,104) (2,803,683) (3,311,613) (11,047) (1,377) 59 780,341

Note: At 31 December 2008, the balance of building revaluation reserve included surplus of HK$5,456,000 (2007: HK$3,242,000), arising from revaluation of prepaid lease payments on transfer of prepaid lease payments to investment properties carried at fair value.

– 23 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2008

OPERATING ACTIVITIES (Loss) profit before taxation Adjustments for: Interest income Depreciation of property, plant and equipment Loss on disposal of property, plant and equipment Reversal of inventories Interest expense Amortisation of prepaid lease payments Net (gain) loss on disposal of available-for-sale investments Change in fair value of investments held for trading Fair value changes on investment properties Revaluation surplus on buildings Share of (profits) losses of associates Impairment loss recognised on associates Change in fair value of derivative financial instruments Operating cash flow before movements in working capital Decrease in inventories held for sale Decrease (increase) in investments held for trading Decrease (increase) in debtors, deposits and prepayments Decrease (increase) in loan receivables (Decrease) increase in creditors and accrued charges Increase (decrease) in customers’ deposits and receipts in advance Cash generated from (used in) operating activities Interest paid Tax paid NET CASH FROM (USED IN) OPERATING ACTIVITIES	2008 HK$’000 (2,806,060) (4,016) 315 – – 50,955 1 (2,104) 1,893,094 12,408 (54) (3,701) 122,324 4,579 (732,259) – 905,151 4,636 9,140 (27,984) 20,455 179,139 (50,955) (100,214) 27,970	2007 HK$’000 1,558,547 (10,060) 284 293 (571) 35,801 25 596 (1,259,479) (37,351) (144) 4,094 – 4,874 296,909 2,042 (691,999) (7,576) (50,417) 42,515 (17,091) (425,617) (35,801) (21,031) (482,449)

– 24 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

INVESTING ACTIVITIES Proceeds from redemption of loan notes Proceeds from disposal of available-for-sale investments Decrease (increase) in pledged bank deposits Interest received Purchases of available-for-sale investments Purchases of property, plant and equipment Disposal of a subsidiary 37 Proceeds from redemption convertible bonds Acquisition of associates NET CASH FROM (USED IN) INVESTING ACTIVITIES FINANCING ACTIVITIES New borrowings raised Proceeds from issue of shares Repayments of borrowings Dividends paid Repurchase of shares NET CASH (USED IN) FROM FINANCING ACTIVITIES NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS EFFECT OF CHANGES IN FOREIGN EXCHANGE RATES CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT END OF THE YEAR, represented by bank balances and cash	52,401 9,864 9,551 4,016 (31,200) (979) – – – 43,653 2,008,953 59 (2,073,109) (11,047) (1,377) (76,521) (4,898) 3,353 67,824 66,279 2008 HK$’000	– 1,434 (10,718) 8,135 (15,600) (95) 71,330 6,626 (273,484) (212,372) 4,447,322 – (3,698,584) (13,846) (32,377) 702,515 7,694 2,123 58,007 67,824 2007 HK$’000

– 25 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2008

1. General

The Company is incorporated in Bermuda as an exempted company with limited liability 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 on page 2 of the annual report.

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

The Company is an investment holding company. The activities of its principal subsidiaries are set out in note 39.

2. Application of New and Revised Hong Kong Financial Reporting Standards (“HKFRSs”)

In the current year, the Group has applied the following amendments and interpretations (“new HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) which are or have become effective.

HKAS 39 & HKFRS 7 Reclassification of financial assets (Amendments) HK(IFRIC) – INT 11 HKFRS 2: Group and treasury share transactions HK(IFRIC) – INT 12 Service concession arrangements HK(IFRIC) – INT 14 HKAS 19 – The limit on a defined benefit asset, minimum funding requirements and their interaction

The adoption of the new HKFRSs had no material effect on how the Group’s results and financial position for the current or prior accounting years have been prepared and presented. Accordingly, no prior year adjustment has been required.

– 26 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group has not early applied the following new and revised standards, amendments or interpretations that have been issued but are not yet effective.

HKFRSs (Amendments) Improvements to HKFRSs[1] HKAS 1 (Revised) Presentation of financial statements[2] HKAS 23 (Revised) Borrowing costs[2] HKAS 27 (Revised) Consolidated and separate financial statements[3] HKAS 32 & 1 (Amendments) Puttable financial instruments and obligations arising on liquidation[2] HKAS 39 (Amendment) Eligible hedged items[3] HKFRS 1 & HKAS 27 Cost of an investment in a subsidiary, jointly (Amendments) controlled entity or associate[2] HKFRS 2 (Amendment) Vesting conditions and cancellations[2] HKFRS 3 (Revised) Business combinations[3] HKFRS 7 (Amendment) Improving disclosures about financial instruments[2] HKFRS 8 Operating segments[2] HK(IFRIC) – INT 9 & Embedded derivatives[4] HKAS 39 (Amendments) HK(IFRIC) – INT 13 Customer loyalty programmes[5] HK(IFRIC) – INT 15 Agreements for the construction of real estate[2] HK(IFRIC) – INT 16 Hedges of a net investment in a foreign operation[6] HK(IFRIC) – INT 17 Distributions of non-cash assets to owners[3] HK(IFRIC) – INT 18 Transfers of assets from customers[7]

1 Effective for annual periods beginning on or after 1 January 2009 except the amendments to HKFRS 5, effective for annual periods beginning on or after 1 July 2009.

2 Effective for annual periods beginning on or after 1 January 2009.

3 Effective for annual periods beginning on or after 1 July 2009.

4 Effective for annual periods ending on or after 30 June 2009.

5 Effective for annual periods beginning on or after 1 July 2008.

6 Effective for annual periods beginning on or after 1 October 2008.

7 Effective for transfers on or after 1 July 2009.

The application of HKFRS 3 (Revised) may affect the Group’s accounting for business combination for which the acquisition date is on or after 1 January 2010. HKAS 27 (Revised) will affect the accounting treatment for changes in the Group’s ownership interest in a subsidiary. The Directors of the Company anticipate that the application of the other new and revised standards, amendments or interpretations will have no material impact on the results and the financial position of the Group.

– 27 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. Significant Accounting Policies

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

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 and by the Hong Kong Companies Ordinance.

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.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement 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 on consolidation.

Minority interests in the net assets of consolidated subsidiaries are presented separately from the Group’s equity therein. Minority interests in the net assets consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

– 28 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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.

Sales of goods are recognised when goods are delivered and title has passed.

Rental income is recognised, on a straight-line basis, over the terms of the respective leases.

Dividend income from investments is recognised when the Group’s rights to receive payment have been established.

Interest income from a financial asset 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.

Investment properties

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

On initial recognition, investment properties are measured at cost, including any directly attributable expenditure. Subsequent to initial recognition, investment properties are measured at their fair value using the fair value model. Gains or losses arising from changes in the fair value of investment property are included in profit or loss for the period in which they arise.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use or no future economic benefits are expected from its disposal. 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 consolidated income statement in the year in which the item is derecognised.

– 29 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Property, plant and equipment

Property, plant and equipment are stated at cost or fair value less subsequent accumulated depreciation and accumulated impairment losses.

Buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the consolidated balance sheet at their revalued amounts, being the fair value at the date of revaluation less any subsequent accumulated depreciation and any subsequent accumulated impairment losses. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the balance sheet date.

Any revaluation increase arising on the revaluation of buildings is credited to the building revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognised as expense, in which case the increase is credited to the consolidated income statement to the extent of the decrease previously charged. A decrease in carrying amount arising on revaluation of an asset is dealt with as an expense to the extent that it exceeds the balance, if any, on the building revaluation reserve relating to a previous revaluation of that asset. On the subsequent sale or retirement of a revalued property, the attributable revaluation surplus is transferred to retained profits.

Depreciation is provided to write off the cost or fair value of items of property, plant and equipment over their estimated useful lives and after taking into account of their estimated residual value, using the straight-line method.

Where an item of property, plant and equipment together with the relevant prepaid lease payments, if any, is transferred to an investment property, any difference between the carrying amount and the fair value of that item at the date of transfer is recognised in building revaluation reserve. On the subsequent sale or retirement of the asset, the relevant revaluation reserve will be transferred directly to retained profits.

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 derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the consolidated income statement in the year in which the item is derecognised.

– 30 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Interests 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.

The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting. Under the equity method, investments in associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the associates, less any identified impairment losses. When the Group’s share of losses of associates equals or exceeds its interest in that associates (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. An additional share of losses is provided for and a liability is recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of that associate.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associates recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the investment.

Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

Where a group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group’s interest in the relevant associate.

For acquisition of associates which involved successive share purchases for which the investment was previously accounted for at fair value with changes in fair value included in profit or loss, cumulative changes in the fair value of previously held ownership interests are reversed through profit or loss and retained profits respectively. The investee’s profit or loss, changes in the investee’s retained profits and other equity balances after each exchange transaction are included in the profit or loss, retained profits or the relevant reserves respectively to the extent that they relate to the previously held ownership interests.

– 31 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Prepaid lease payments

Prepaid lease payments of land under operating lease are charged to the consolidated income statement on a straight-line basis over the lease terms.

Financial instruments

Financial assets and financial liabilities are recognised on the consolidated balance sheet when a group entity becomes a party to the contractual provisions of the instrument. 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 the three categories, including investments held for trading, loans and receivables and available-for-sale financial assets. 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. The accounting policies adopted in respect of each category of financial assets are set out below.

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.

Income is recognised on an effective interest basis for debt instruments.

– 32 –

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;
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.

At each balance sheet date subsequent to initial recognition, investments held for trading are measured at fair value, with changes in fair value recognised directly in profit or loss in the period in which they arise. The net gain or loss recognised in profit or loss excludes any dividend or interest earned in the financial assets.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. At each balance sheet date subsequent to initial recognition, loans and receivables including loan notes, debtors, loan receivables, pledged bank deposits and bank balances are carried at amortised cost using the effective interest method, less any identified impairment losses.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated or not classified as loans and receivables, held-to-maturity instruments or financial assets at fair value through profit or loss. The Group designated investments in equity securities, unit trusts investments and club debentures as available-for-sale financial assets. At each balance sheet date subsequent to initial recognition, available-for-sale financial assets (including certain equity securities investments and club debentures) are measured at fair value. Changes in fair value are recognised in equity, until the financial asset is disposed of or is determined to be impaired, at which time, the cumulative gain or loss previously recognised in equity is removed from equity and recognised in profit or loss.

– 33 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Impairment of financial assets

Financial assets, other than investments held for trading, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, 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;
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 assets, such as debtors, loan receivables and loan notes, assets that are assessed not to be impaired individually are subsequently 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 and observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, an impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of debtors and loan 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 debtors or loan receivables are considered uncollectible, they are written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

– 34 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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 loss 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 of 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 equity. For available-for-sale debt investments, impairment losses are subsequently reversed 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

Financial liabilities and equity instruments issued by a group entity are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The accounting policies adopted in respect of financial liabilities and equity instruments are set out below.

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 through the expected life of the financial liability, or, where appropriate, a shorter period.

Interest expense is recognised on an effective interest basis.

A financial liability is classified as held for trading if:

it has been incurred principally for the purpose of repurchasing in the near future; or

– 35 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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.

Financial liabilities

Financial liabilities including creditors and other borrowings are subsequently measured at amortised cost, using the effective interest method.

Equity instruments

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

Consideration paid to repurchase the Company’s own equity instruments are deducted from equity. No gain or loss is recognised in profit or loss.

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 each balance sheet date. The resulting gain or loss is recognised in profit or loss immediately.

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the assets expire or, the financial assets are transferred and the Group has transferred substantially all the risks and rewards of ownership of the financial assets. 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 directly in equity is recognised in profit or loss.

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

– 36 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Impairment losses

At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. 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, unless the relevant asset is carried at a revalued amount under another standard, in which case the impairment loss is treated as a revaluation decrease under that standard.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, such 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, unless the relevant asset is carried at a revalued amount under another standard, in which case the reversal of the impairment loss is treated as a revaluation increase under that standard.

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 as reported in the consolidated income statement because it excludes items of income or 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 at the balance sheet date.

Deferred tax is recognised on 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, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised 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.

– 37 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Deferred tax liabilities are recognised for taxable temporary differences arising on 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.

The carrying amount of deferred tax assets is reviewed at each balance sheet date 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 is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Borrowing costs

All borrowing costs are recognised as and included in finance costs in the consolidated income statement in the period in which they are incurred.

Leases

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 the consolidated income statement on a straight-line basis over the term of the relevant lease.

The Group as lessee

Rentals payable under operating leases are charged to profit or loss 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.

– 38 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Leasehold land and building

The land and building elements of a lease of land and building are considered separately for the purpose of lease classification, unless the lease payments cannot be allocated reliably between the land and building elements, in which case, the entire lease is generally treated as a finance lease and accounted for as property, plant and equipment. To the extent the allocation of the lease payments can be made reliably, leasehold interests in land are accounted for as operating leases except for those that are classified and accounted for an investment properties under fair value model.

Retirement benefits scheme

Payments to the Group’s defined contribution scheme or Mandatory Provident Fund Scheme are charged as an expense when employees have rendered service entitling them to the contributions.

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 each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet 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 translation 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 differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity, in which cases, the exchange differences are also recognised directly in equity.

– 39 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the purposes 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. Hong Kong dollars) at the rate of exchange prevailing at the balance sheet date, 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 as a separate component of equity (the translation reserve). Such exchange differences are recognised in profit or loss in the period in which the foreign operation is disposed of.

4. Key sources of estimation uncertainty

The following are the key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Income taxes

As at 31 December 2008, no deferred tax asset has been recognised in the Group’s consolidated balance sheet in relation to the estimated unused tax losses and deductible temporary differences of approximately HK$2,606 million (2007: HK$726 million) and HK$7.8 million (2007: HK$9.4 million) respectively. The realisability of the deferred tax asset mainly depends on whether sufficient future profits or taxable temporary differences will be available in the future. In cases where the actual future profits generated are more than expected, further recognition of deferred tax asset in relation to unutilised tax losses may arise, which would be recognised in the consolidated income statement for the period in which such a recognition takes place.

5. Financial instruments

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 Directors of the Company consider share capital and retained profits are the capital of the Group. The Group’s overall strategy remains unchanged from prior years.

– 40 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Directors of the Company review the capital structure by considering 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 the payment of dividends, new share issues and share buy-backs as well as the issue of new debt or the repayment of existing debt.

Categories of financial instruments

Financial assets Investments held for trading Loans and receivables (including cash and cash equivalents) Available-for-sale financial assets Financial liabilities Amortised cost Financial liabilities held for trading	2008 HK$’000 818,971 268,400 480,890 860,600 9,453	2007 HK$’000 3,617,216 345,722 859,724

		952,574 4,874

Financial risk management objectives and policies

The Group’s major financial instruments include equity investments, loan notes, loan receivables, debtors, creditors, other borrowings, pledged bank deposits and bank balances. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the policies 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.

Market risk

Currency risk

Foreign exchange risk is the risk of loss due to adverse movement in foreign exchange rate relating to foreign currency denominated loan receivables, bank balances, other debtors and other borrowings from financial institutions. 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.

– 41 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The carrying amounts of the Group’s foreign currency denominated monetary assets and liabilities at the reporting date are as follows:

	Assets	Assets	Liabilities	Liabilities
	2008	2007	2008	2007
	HK$’000	HK$’000	HK$’000	HK$’000
United States Dollars
(“USD”)	132,152	130,921	–	11,014
Renminbi (“RMB”)	90,263	107,221	–	–
Australian Dollars
(“AUD”)	14,968	–	–	–

Sensitivity analysis

As HK$ is pegged to USD, the Group does not expect any significant movements in the USD/HK$ exchange rates.

The following table details the Group’s sensitivity to a 10% (2007: 5%) increase and decrease in HK$ against relevant foreign currencies and all other variables were held constant. 10% (2007: 5%) is the sensitivity rate used by management in the assessment of the reasonably possible change in foreign exchange rates. As a result of volatile market, the sensitivity rate is increased to 10% in the current year. The sensitivity analysis includes only outstanding foreign currencies denominated monetary items and adjusts its translation at the year end for a 10% (2007: 5%) change in foreign currencies rates. A positive number below indicates a decrease in loss (2007: increase in profit) for the year where foreign currencies strengthen 10% (2007: 5%) against HK$. For a 10% (2007: 5%) weakening of foreign currencies against HK$ there would be an equal and opposite impact on the profit for the year.

Decrease in loss for the year Increase in profit for the year	RMB Impact 2008 2007 HK$’000 HK$’000 7,537 – – 4,423	AUD Impact 2008 2007 HK$’000 HK$’000 1,250 – – –	AUD Impact 2008 2007 HK$’000 HK$’000 1,250 – – –

			–

– 42 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Other price risk

(i) Equity price risk

The Group is exposed to equity price risk through its available-for-sale investments, investments held for trading and derivative financial instruments. The Group’s available-for-sale investments, investments held for trading and derivative financial instruments have significant concentration of price risk in Hong Kong stock market. The management manages the exposure by maintaining a portfolio of equity investments with different risk profiles.

Sensitivity analysis

The sensitivity analyses below have been determined based on the exposure to equity price risks at the reporting date. For sensitivity analysis purpose, the sensitivity rate is increased to 10% in the current year as a result of the volatile financial market.

If the prices of the respective equity instruments had been 10% (2007: 5%) higher/lower and all other variables were held constant, the Group’s:

loss for the year ended 31 December 2008 would decrease/ increase by HK$68,384,000 (2007: profit for the year would increase/decrease by HK$151,019,000) as a result of the changes in fair value of held for trading investments; and
investment revaluation reserve would increase/decrease by HK$48,021,000 (2007: HK$42,952,000) for the Group as a result of the changes in fair value of available-for-sale investments.
loss for the year ended 31 December 2008 would decrease/ increase by HK$1,498,000/HK$1,646,000 (2007: profit for the year would increase/decrease by HK$2,645,000/HK$3,980,000) as a result of the changes in the fair value of derivative financial instruments.
(ii) Foreign currencies risk on non-monetary items

The Group is engaged in securities trading and investments which are denominated in foreign currencies and is therefore exposed to foreign currency price risk. Approximately 32% (2007: 14%) of the Group’s investments are denominated in currencies other than the functional currency of the group entity.

– 43 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The carrying amounts of the Group’s foreign currency denominated investments held for trading and available-for-sale investments at the reporting date are as follows:

	2008	2007
	HK$’000	HK$’000
USD	56,135	66,740
Australian Dollars	97,329	186,330
Malaysian Ringgit	45,182	97,483
New Taiwan Dollars	108,323	263,909
RMB	113,989	–

Sensitivity analysis

The following table details the Group’s sensitivity to a 10% (2007: 5%) increase and decrease in HK$ against foreign currencies and all other variables were held constant. USD is not included in sensitivity analysis. As HK$ is pegged to USD, the Group does not expect any significant movements in the USD/HK$ exchange rate. 10% (2007: 5%) is the sensitivity rate used by management in the assessment of the reasonably possible change in foreign exchange rates. As a result of the volatile financial market in 2008, the management adjusted the sensitivity rate from 5% to 10% for purpose of assessing foreign currencies risk on non-monetary items. A positive number below indicates an decrease in loss (2007: increase in profit) for the year where foreign currencies strengthen 10% (2007: 5%) against HK$. For a 10% (2007: 5%) weakening of foreign currencies against HK$ there would be an equal and opposite impact on the profit for the year and the investment revaluation reserve.

	2008	2007
	HK$’000	HK$’000
Decrease in loss/increase in profit
for the year	14,251	14,191
Increase in investment revaluation
reserve	22,231	13,195

Interest rate risk

The Group’s fair value interest rate risk relates primarily to bank deposits, fixed rate loan notes and fixed rate loan receivables. The Group’s cash flow interest rate risk relates to its variable rate loan receivables, bank balances and other borrowings.

– 44 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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.

The Group’s exposures to interest rates on financial liabilities are detailed in the liquidity risk management section of this note. The Group’s cash flow interest rate risk is mainly concentrated on the fluctuation of Prime Rate arising from the Group’s variable interest rate instruments.

A 100 basis point change is used which represents management’s assessment of the reasonably possible change in interest rates. The analysis is prepared assuming the financial instruments outstanding at the balance sheet date were outstanding for the whole year.

If the interest rate of loan receivables and other borrowings had been 100 basis point higher/lower and all other variable were held constant, the Group’s loss for the year would increase/decrease by HK$6,577,000 (2007: profit for the year would decrease/increase by HK$7,656,000).

Credit risk

The Group’s credit risk is primarily attributable to trade debtors, loan notes, loan receivables and bank balances.

The Group’s maximum exposure to credit risk which will cause a financial loss to the Group in the event of the counterparties’ failure to perform their obligations as at 31 December 2008 in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the consolidated balance sheet.

Bank balances and deposits are placed in various banks and the Group has limited exposure to any single financial institution. The credit risk on liquid funds is limited because the counterparties are banks with good credit-rating.

– 45 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group has significant concentration of credit risk on loan notes and loan receivables as the credit risk is mainly attributable to certain counterparties. Other than these, there is no significant concentration of credit risk in trade debtors as the exposure spread over a number of counterparties and customers.

In order to minimise credit risk, management has delegated a team to be responsible for the determination of credit limits, credit approvals and other monitoring procedures. In addition, management reviews the recoverable amount of each individual debt, loan notes and loan receivables regularly to ensure that adequate impairment losses are recognised for irrecoverable debts. In this regard, management considers that the Group’s credit risk is significantly reduced.

Liquidity risk

In the management of the liquidity risk, the Group monitors and maintains 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 borrowings and ensures compliance with loan covenants.

The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities. For derivative financial instruments, the Group has approximately HK$30,136,000 (2007: HK$81,689,000) contractual cash outflow in return with listed securities within 1 year. The nature of the derivative financial instruments is disclosed in note 29 to the financial statements.

– 46 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For non-derivative financial liabilities, the table 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.

Weighted average interest rate % As at 31 December 2008 Non-derivative financial liabilities Creditors – Other borrowings – variable rates prime rate plus spread – fixed rates 8% As at 31 December 2007 Non-derivative financial liabilities Creditors – Other borrowings – variable rates prime rate plus spread	Repayable on demand HK$’000 – 489,682 – 489,682 – 918,838 918,838	Less than 1 month HK$’000 5,636 – – 5,636 29,826 – 29,826	1 – 3 months HK$’000 150 – – 150 380 – 380	3 months to 1 year HK$’000 132 307,500 66,733 374,365 3,530 – 3,530	Total undiscounted cash flows HK$’000 5,918 797,182 66,733 869,833 33,736 918,838 952,574	Carrying amount at year end HK$’000 5,918 789,682 65,000
						860,600

						33,736 918,838
						952,574

Fair values

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

the fair values of financial assets with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market bid prices and the fair values of the unit trusts have been determined based on the fair value of the underlying quoted investments;
the fair values of other financial assets and financial liabilities (excluding derivative financial instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using the relevant prevailing market rates as input; and

– 47 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

the fair values of derivative instruments are calculated using quoted prices. Where such prices are not available, use is made of discounted cash flow analysis using the applicable yield curve for the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives.

The Directors consider that the carrying amounts of financial assets and financial liabilities recorded in the consolidated financial statements approximate their fair value.

6. Revenue

Dividend income from listed investments Interest income from loan receivables Rental income	2008 HK$’000 60,932 15,654 4,006 80,592	2007 HK$’000 36,512 14,023 4,780
		55,315

7. Business and geographical information

Business segments

For management purposes, the Group is currently organised into three operating divisions – securities trading and investments, financial services and property investment. These divisions are the basis on which the Group reports its primary segment information.

The Group was also engaged in mobile phone distribution. This operation was discontinued in the year 2007 (see note 13).

– 48 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Segment information about these businesses is presented below:

For the year ended 31 December 2008

Gross proceeds from sale of investments held for trading Revenue Result Segment result Share of profits of associates Impairment loss recognised on associates Unallocated other income Unallocated corporate expenses Finance costs Loss before taxation Taxation Loss for the year	Continuing operations Securities trading and investments Financial services Property investment HK$’000 HK$’000 HK$’000 579,716 – – 60,932 15,654 4,006 (2,629,163) 15,301 (9,846)	Continuing operations Securities trading and investments Financial services Property investment HK$’000 HK$’000 HK$’000 579,716 – – 60,932 15,654 4,006 (2,629,163) 15,301 (9,846)	Consolidated HK$’000 579,716 80,592 (2,623,708) 3,701 (122,324) 5,250 (18,024) (50,955) (2,806,060) 2,377 (2,803,683)
	Securities trading and investments HK$’000 579,716 60,932 (2,629,163)	Financial services HK$’000 – 15,654 15,301

– 49 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

	Securities	Securities
	trading	and	Financial			Property
	investments			services	investment Consolidated
	HK$’000		HK$’000			HK$’000	HK$’000
Consolidated balance
sheet
Assets
Segment assets	1,334,624		164,983			105,792	1,605,399
Interests in associates							138,501
Unallocated corporate
assets							73,676
Consolidated total
assets							1,817,576

Liabilities
Segment liabilities	505,178			32,465		1,390	539,033
Unallocated corporate
liabilities							498,202
Consolidated total
liabilities							1,037,235

	Securities
	trading and	Financial		Property
	investments	services		investment		Unallocated	Consolidated
	HK$’000	HK$’000		HK$’000		HK$’000	HK$’000
Other information
Capital expenditure	–		–		125	854	979
Depreciation	–		–		131	184	315

– 50 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the year ended 31 December 2007

	Continuing	operations	Consolidated HK$’000 2,234,125
Securities trading and investments HK$’000 2,234,125 36,512 1,605,287	Financial services HK$’000 – 14,023 13,898	Property investment HK$’000 – 4,780 43,402

			62,996

			1,660,500 (4,094) 11,945 (74,003) (35,801)
			1,558,547 (175,900)
			1,382,647

– 51 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Securities trading and investments Financial services HK$’000 HK$’000 Consolidated balance sheet Assets Segment assets 4,564,299 174,253 Interests in associates Unallocated corporate assets Consolidated total assets Liabilities Segment liabilities 955,935 15,861 Unallocated corporate liabilities Consolidated total liabilities Continuing operations Securities trading and investments Financial services Property investment Total HK$’000 HK$’000 HK$’000 HK$’000 Other information Capital expenditure – – – – Depreciation – – 139 139 Loss on disposal of property, plant and equipment – – – – Reversal of write-down of inventories – – – –	Property investment Consolidated HK$’000 HK$’000 115,722 4,854,274 368,297 88,680 5,311,251 2,301 974,097 232,835 1,206,932 Discontinued operation Mobile phone distribution Unallocated Consolidated HK$’000 HK$’000 HK$’000 – 95 95 18 127 284 293 – 293 (571) – (571)	Consolidated HK$’000 4,854,274 368,297 88,680
		5,311,251

		974,097 232,835
		1,206,932

– 52 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Geographical segments

The Group’s operations are located in Hong Kong and the People’s Republic of China (the “PRC”).

The Group’s securities trading and investments and financial services are mainly carried out in Hong Kong. Rental income from property investment is derived from Hong Kong and the PRC.

The following table provides an analysis of the Group’s revenue by geographical market except for investments held for trading and available-for-sale investment, in which the business of securities trading and investments is operated:

Hong Kong The PRC	Revenue from continuing operations by geographical market 2008 2007 HK$’000 HK$’000 77,810 52,754 2,782 2,561 80,592 55,315	Revenue from continuing operations by geographical market 2008 2007 HK$’000 HK$’000 77,810 52,754 2,782 2,561 80,592 55,315
		55,315

Revenue of HK$7,681,000 from the Group’s discontinued distribution of mobile phone for the year ended 31 December 2007 was derived principally from Hong Kong.

– 53 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The following is an analysis of the carrying amount of segment assets, and additions to property, plant and equipment, analysed by the geographical area in which the assets are located and for investments held for trading and available-for-sale investments, in which the business of securities trading and investments is operated.

	Carrying amount	Carrying amount	Additions	to property,
	of segment assets		plant and	equipment
	At	At	Year ended	Year ended
	31.12.2008	31.12.2007	31.12.2008	31.12.2007
	HK$’000	HK$’000	HK$’000	HK$’000
Hong Kong	1,568,489	4,817,114	979	95
The PRC	36,910	37,160	–	–
	1,605,399	4,854,274	979	95

Net (loss) gain on investments
			2008	2007
		HK$’000		HK$’000
Change in fair value of investments held
for trading (Note a)		(2,685,835)		1,579,182
Change in fair value of derivative financial
instruments (Note b)			(4,474)	(17,716)
Net gain (loss) on disposal of
available-for-sale investments			2,104	(596)
		(2,688,205)		1,560,870

8. Net (loss) gain on investments

Notes:

(a) Approximately net realised loss of HK$792,741,000 (2007: net realised gain of HK$319,703,000) on disposal of investments held for trading are included in change in fair value of investments held for trading.
(b) Approximately net realised gain of HK$105,000 (2007: net realised loss of HK$12,842,000) on derivative financial instruments are included in change in fair value of derivative financial instruments.

– 54 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

9. Other income

Interest income from: – Loan notes – Bank deposits – Others Net exchange gain Others	Continuing 2008 HK$’000 762 737 2,517 4,016 – 1,691 5,707	operations 2007 HK$’000 4,036 982 4,995 10,013 9,538 5,392 24,943	Discontinued operation 2008 2007 HK$’000 HK$’000 – – – 47 – – – 47 – – – 539 – 586	Consolidated 2008 2007 HK$’000 HK$’000 762 4,036 737 1,029 2,517 4,995 4,016 10,060 – 9,538 1,691 5,931 5,707 25,529	Consolidated 2008 2007 HK$’000 HK$’000 762 4,036 737 1,029 2,517 4,995 4,016 10,060 – 9,538 1,691 5,931 5,707 25,529
					10,060 9,538 5,931
					25,529

10. Finance costs

The amounts represent interest on other borrowings wholly repayable within five years.

11. Directors’ emoluments and five highest paid individuals

Directors’ emoluments

The Directors’ emoluments are analysed as follows:

Executive Directors Ms. Chong Sok Un Dato’ Wong Peng Chong Mr. Kong Muk Yin Independent Non-executive Directors Mr. Lo Wai On Mr. Lau Siu Ki Mr. Zhang Jian		For the year ended 31 December 2008	For the year ended 31 December 2008	For the year ended 31 December 2008
	Directors’ fees HK$’000 – – – 180 180 80 440	Salaries and other benefits HK$’000 455 1,300 1,170 – – – 2,925	Performance related incentive payments HK$’000 (Note) – – – – – – –	Retirement benefits scheme contributions HK$’000 12 12 12 – – – 36	Total emoluments HK$’000 467 1,312 1,182 180 180 80
					3,401

– 55 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Executive Directors Ms. Chong Sok Un Dato’ Wong Peng Chong Mr. Kong Muk Yin Independent Non-executive Directors Mr. Lo Wai On Mr. Lau Siu Ki Mr. Zhang Jian		For the year ended 31 December 2007	For the year ended 31 December 2007	For the year ended 31 December 2007
	Directors’ fees HK$’000 – – – 180 180 80 440	Salaries and other benefits HK$’000 455 1,300 1,040 – – – 2,795	Performance related incentive payments HK$’000 (Note) 55,000 600 480 – – – 56,080	Retirement benefits scheme contributions HK$’000 12 12 12 – – – 36	Total emoluments HK$’000 55,467 1,912 1,532 180 180 80
					59,351

Note: The performance related incentive payments are determined by reference to the individual performance of the Directors and approved by the Remuneration Committee.

During the year, no remuneration was paid by the Group to the Directors as an inducement to join or upon joining the Group or as compensation for loss of office. None of the Directors has waived any remuneration during the year.

Five highest paid individuals

During the year, the five highest paid individuals included three Directors (2007: three), details of their emoluments are set out above. The emoluments for the remaining two (2007: two) highest paid individuals of the Group are as follows:

Salaries and other benefits Retirement benefits scheme contributions	2008 HK$’000 1,682 22 1,704	2007 HK$’000 1,000 24
		1,024

– 56 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The emoluments are within the following bands:

	2008	2007
	Number of	Number of
	employees	employees
Nil to HK$1,000,000	2	2

12. Taxation credit (charge)

Current tax: Hong Kong Profits Tax Enterprise income tax in the PRC Overprovision in prior years – Hong Kong Profits Tax	Continuing 2008 HK$’000 – (236) (236) 2,613 2,377	operations 2007 HK$’000 (172,005) (3,868) (175,873) – (175,873)	Discontinued operation 2008 2007 HK$’000 HK$’000 – (27) – – – (27) – – – (27)	Consolidated 2008 2007 HK$’000 HK$’000 – (172,032) (236) (3,868) (236) (175,900) 2,613 – 2,377 (175,900)	Consolidated 2008 2007 HK$’000 HK$’000 – (172,032) (236) (3,868) (236) (175,900) 2,613 – 2,377 (175,900)
					(175,900) –
					(175,900)

On 26 June 2008, the Hong Kong Legislative Council passed the Revenue Bill 2008 which reduced corporate profits tax rate from 17.5% to 16.5% with effect from the year of assessment 2008/2009. Therefore, Hong Kong Profits Tax is calculated at 16.5% (2007: 17.5%) of the estimated assessable profit for the year. No provision for taxation has been made for Hong Kong Profits Tax as there is no assessable profit for the year ended 31 December 2008.

On 16 March 2007, the PRC promulgated the Law of the People’s Republic of China on Enterprise Income Tax (the “New Law”) by Order No. 63 of the President of the People’s Republic of China. On 6 December 2007, the State Council of the PRC issued Implementation Regulations of the New Law. Under the New Law and Implementation Regulation, the Enterprise Income Tax rate of the Group’s subsidiary in the PRC was reduced from 33% to 25% from 1 January 2008 onwards. The relevant tax rates for the Group’s subsidiary in the PRC is 25% (2007: 33%).

– 57 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The taxation for the year can be reconciled to the (loss) profit before taxation per the consolidated income statement as follows:

(Loss) profit before taxation – Continuing operations – Discontinued operation Taxation credit (charge) at the income tax rate of 16.5% (2007: 17.5%) Tax effect of share of profits (losses) of associates Tax effect of expenses that are not deductible Tax effect of income that is not taxable Overprovision in respect of prior years Utilisation of tax losses/deductible temporary differences previously not recognised Tax effect of tax losses not recognised Effect of different tax rates of subsidiaries operating in other jurisdictions Others Taxation credit (charge)	2008 HK$’000 (2,806,060) – (2,806,060) 463,000 611 (165,378) 11,500 2,613 99 (310,020) (193) 145 2,377	2007 HK$’000 1,560,048 (1,501) 1,558,547 (272,746) (716) (12,885) 16,823 – 98,328 (5,364) (119) 779 (175,900)

– 58 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

13. Discontinued operation

The Group ceased the business operation of mobile phone distribution in year 2007.

The results of the discontinued operation which represented the mobile phone distribution operation from 1 January 2007 to 31 March 2007, which have been included in the consolidated income statement for year ended 31 December 2007, were as follows:

Revenue Cost of sales Other income Distribution expenses Administrative and other expenses Finance costs Loss before taxation Taxation Loss for the period	Period ended 31.3.2007 HK$’000 7,681 (7,501) 586 (1,050) (1,217) – (1,501) (27) (1,528)

During the period from 1 January 2007 to 31 March 2007, the business operation of mobile phone distribution paid HK$4,009,000 to the Group’s net operating cash flows, received HK$47,000 in respect of investing activities and paid HK$11,397,000 in respect of financing activities.

– 59 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

14. (Loss) profit for the year

Continuing 2008 HK$’000 1,168 – 1 315 – – 7,081 2,707	operations 2007 HK$’000 1,402 – 25 266 – – 61,784 –	Discontinued operation 2008 2007 HK$’000 HK$’000 – – – 7,855 – – – 18 – (571) – 293 – 944 – –	Discontinued operation 2008 2007 HK$’000 HK$’000 – – – 7,855 – – – 18 – (571) – 293 – 944 – –	Consolidated 2008 2007 HK$’000 HK$’000 1,168 1,402 – 7,855 1 25 315 284 – (571) – 293 7,081 62,728 2,707 –	Consolidated 2008 2007 HK$’000 HK$’000 1,168 1,402 – 7,855 1 25 315 284 – (571) – 293 7,081 62,728 2,707 –
(4,006) 898 363	(4,780) 1,423 22	– – –	– – –	(4,006) 898 363	(4,780) 1,423 22
		–		(2,745) (3,335) 2007 HK$’000 2,762 – 11,084 13,846

15. Dividends

The Directors do not recommend the payment of a final dividend for the year ended 31 December 2008.

– 60 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

16. (Loss) earnings per share

From continuing and discontinued operations

The calculation of basic (loss) earnings per share attributable to the ordinary equity holders of the Company is based on the following data:

(Loss) earnings for the purpose of basic (loss) earnings per share ((loss) profit for the year attributable to equity holders of the Company) Weighted average number of ordinary shares for the purposes of basic (loss) earnings per share	2008 HK$’000 (2,799,811) Number of shares 285,915,057	2007 HK$’000 1,378,824 Number of shares 288,522,498

No diluted loss per share has been presented because the exercise price of the Company’s outstanding warrants was higher than the average market price of shares for the period from date of issue to 31 December 2008.

The calculation of basic (loss) earnings per share attributable to the ordinary equity holders of the Company has been adjusted as a result of the Company’s rights issue subsequent to 31 December 2008. Details of the rights issue are disclosed in note 38(1).

– 61 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

From continuing operations

The calculation of the basic (loss) earnings per share from continuing operations attributable to the ordinary equity holders of the Company is based on the following data:

(Loss) earnings for the year attributable to equity holders of the Company Add: Loss for the period from discontinued operation (Loss) earnings for the purposes of basic (loss) earnings per share from continuing operations	2008 HK$’000 (2,799,811) – (2,799,811)	2007 HK$’000 1,378,824 1,528
		1,380,352

The denominators used are the same as those detailed above for basic (loss) earnings per share.

From discontinued operation

For the year ended 31 December 2007, basic loss per share for the discontinued operation is HK$0.005 per share. The calculation of the basic loss per share was based on the loss for the period from the discontinued operation of HK$1,528,000 attributable to the ordinary equity holders of the Company and the denominators detailed above for basic (loss) earnings per share.

– 62 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

17. Investment properties

FAIR VALUE At 1 January 2007 Transfer from prepaid lease payments Transfer from buildings Net change in fair value At 31 December 2007 Transfer from prepaid lease payments Transfer from buildings Net change in fair value At 31 December 2008	HK$’000 81,589 4,640 1,098 23,598
	110,925 3,160 1,428 (12,408)
	103,105

The Group’s investment properties are analysed as follows:

Properties held under medium term leases: – in Hong Kong – in the PRC Properties situated in the PRC held under long term leases	2008 HK$’000 66,815 33,030 3,260 103,105	2007 HK$’000 73,765 33,350 3,810
		110,925

The fair value of the Group’s investment properties at 31 December 2008 and 2007 has been arrived at on the basis of a valuation carried out on that date by DTZ Debenham Tie Leung Limited, independent qualified professional valuers not connected with the Group. DTZ Debenham Tie Leung Limited is a member of the institute of valuers and has appropriate qualifications and recent experiences in the valuation of similar properties in the relevant locations. The valuation was arrived at by reference to market evidence of transaction prices for similar properties in the same locations and conditions and on the basis of capitalisation of the net income with due allowance for the reversionary income.

– 63 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

All of the Group’s property interests held under operating leases to earn rentals or for capital appreciation purposes are measured using the fair value model and are classified and accounted for as investment properties.

18. Property, plant and equipment

COST OR VALUATION At 1 January 2007 Additions Disposals Revaluation increase Transfer to investment properties At 1 January 2008 Additions Disposals Revaluation decrease Transfer to investment properties At 31 December 2008 Comprising: At cost At valuation – 2008 DEPRECIATION At 1 January 2007 Provided for the year Eliminated on disposals Eliminated on revaluation At 1 January 2008 Provided for the year Eliminated on disposals Eliminated on revaluation At 31 December 2008 CARRYING VALUES At 31 December 2008 At 31 December 2007	Buildings in Hong Kong under medium-term lease HK$’000 4,105 – – 579 (1,098) 3,586 – – (62) (1,428) 2,096 – 2,096 2,096 – 85 – (85) – 66 – (66) – 2,096 3,586	Computer and electronic equipment HK$’000 2,285 35 (1,571) – – 749 141 – – – 890 890 – 890 2,084 67 (1,455) – 696 35 – – 731 159 53	Furniture and fixtures HK$’000 3,110 60 (1,491) – – 1,679 160 – – – 1,839 1,839 – 1,839 2,704 132 (1,314) – 1,522 101 – – 1,623 216 157	Motor vehicles HK$’000 501 – – – – 501 678 (501) – – 678 678 – 678 501 – – – 501 113 (501) – 113 565 –	Total HK$’000 10,001 95 (3,062) 579 (1,098)
					6,515 979 (501) (62) (1,428)
					5,503
					3,407 2,096
					5,503
					5,289 284 (2,769) (85)
					2,719 315 (501) (66)
					2,467
					3,036 3,796

– 64 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The above items of property, plant and equipment are depreciated on a straight-line basis at the following rates per annum:

Buildings	Over the shorter of the lease terms or
	30-50 years
Computer and electronic equipment	20%
Furniture and fixtures	20%
Motor vehicles	20% – 50%

The buildings of the Group were valued on 31 December 2008 and 2007 by DTZ Debenham Tie Leung Limited, a firm of independent professional property valuers, on a market value basis. DTZ Debenham Tie Leung Limited is not connected with the Group. A revaluation surplus on buildings of approximately HK$54,000 (2007: HK$144,000) has been credited to the consolidated income statement. A revaluation deficit on buildings of approximately HK$50,000 (2007: surplus of HK$520,000) has been charged to the building revaluation reserve.

If the buildings had not been revalued, they would have been included in these consolidated financial statements at historical cost less accumulated depreciation of HK$647,000 (2007: HK$1,360,000).

19. Prepaid lease payments

The Group’s prepaid lease payments represent leasehold land in Hong Kong held under medium term leases.

The leasehold land is amortised on a straight-line basis over the remaining term of the leases.

– 65 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

20. Interests in associates

Cost of investment in associates Listed in Hong Kong Unlisted Share of post-acquisition profits and reserves, net of dividends received Less: Impairment loss Fair value of listed investments	2008 HK$’000 184,640 67,175 9,010 (122,324) 138,501 57,379	2007 HK$’000 184,640 181,807 1,850 –
		368,297

		534,218

As at 31 December 2008 and 2007, the Group had interests in the following associates:

		Place/				Proportion of	Proportion of
	Form of	Country of	Principal		Number of	nominal value of
	business	incorporation/	place of	Class of	share held	issued capital		Proportion	of
Name of entities	structure	registration	operation	shares held	by the Group	held by the	Group	voting power	held	Principal activity
						2008	2007	2008	2007
						%	%	%	%
Shanghai Allied Cement	Incorporated	Bermuda	The PRC	Ordinary	197,858,680	27.1	27.1	27.1	27.1	Investment holding
Limited (“SAC”)
Printronics	Incorporated	Hong Kong	The PRC	Ordinary	2	40	40	40	40	Inactive
Electronics Limited
(“Printronics”)

During the year ended 31 December 2007, the Group acquired an additional 17% equity interest in SAC (“Acquisition”) at a consideration of approximately HK$87,763,000 and acquired 40% equity interest in Printronics at a consideration of approximately HK$181,807,000.

Before the Acquisition, the Group had 9.99% equity interest in SAC and the investment was accounted for as investments held for trading. Following the completion of the Acquisition on 29 June 2007, the Group has a 26.99% beneficially interest in SAC and is able to exercise significant influence on SAC. Accordingly, SAC has become an associate of the Group. On 29 June 2007, the cumulative fair value changes of the Group’s 9.99% equity interest in SAC was accounted for as explained in note 3.

– 66 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

On 20 September 2007, the Group further acquired 0.14% equity interest in SAC in open market at a consideration of approximately HK$3,914,000.

During the year, the Directors of the Company reviewed the recoverable amounts of the interests in associates based on the value in use calculation with the expected discounted future cash flows of the associates at discount rate of 12.94% is estimated to be less than the carrying amount and accordingly, an impairment loss of approximately HK$122,324,000 was recognised in the consolidated income statement.

At 31 December 2008 and 2007, the total number of SAC shares held by the Group was 197,858,680. On 6 March 2009, the Group disposed the entire shares and the details of the transaction is disclosed in note 38(4).

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 Revenue Losses for the year/since acquisition dates of relevant associates Group’s share of profits (losses) of associates for the year	2008 HK$’000 1,237,313 (921,836) 315,477 85,890 557,249 (4,564) 3,701	2007 HK$’000 1,284,974 (838,021) 446,953 140,538 434,300 (16,569) (4,094)

– 67 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

21. Available-for-sale investments

Available-for-sale investments comprise:

Listed investments: – Equity securities listed in Hong Kong – Equity securities listed elsewhere (Note) Unlisted investments: – Unit trusts – Club debentures Total Analysed for reporting purposes as: Current assets Non-current assets	2008 HK$’000 206,966 222,312 429,278 50,934 678 51,612 480,890 124,055 356,835 480,890	2007 HK$’000 557,853 263,909
		821,762
		37,284 678
		37,962
		859,724

		9,801 849,923
		859,724

Note: The currency of the equity securities listed elsewhere is mainly denominated in New Taiwan Dollars and RMB.

22. Loan notes

The loan notes were issued by Sun Hung Kai & Co. Limited (“SHK”). The loan notes bear interest at 4% per annum (effective interest rate: 7.9%) with maturity date on 7 March 2008 and are redeemable by SHK if specifically agreed by both parties. During the year ended 31 December 2008, the loan notes were redeemed.

– 68 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

23. Investments held for trading

Investments held for trading include:

Listed securities: – Equity securities listed in Hong Kong – Equity securities listed elsewhere (Note)	2008 HK$’000 669,130 149,841 818,971	2007 HK$’000 3,294,145 323,071
		3,617,216

Note: The currency of the equity securities listed elsewhere is mainly denominated in Australian Dollars, USD and Malaysian Ringgit.

As at 31 December 2008, particulars of the Group’s investments in the equity securities included in investments held for trading and available-for-sale investments which exceed 10% of the assets of the Group disclosed pursuant to Section 129(2) of the Hong Kong Companies Ordinance are as follows:

				Percentage of
			Number of	issued share
	Place of	Class of	shares held	capital held
Name of company	incorporation	shares	by the Group	by the Group
Allied Properties (H.K.)	Hong Kong	Ordinary	356,174,000	6.3%
Limited
SHK	Hong Kong	Ordinary	53,328,265	3.1%
APAC Resources Limited	Hong Kong	Ordinary	614,260,000	13.0%

– 69 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

24. Debtors, deposits and prepayments

The Group has a policy of allowing an average credit period of 30-90 days to its trade debtors.

An aged analysis of trade debtors is as follows:

Trade debtors within 90 days Other debtors, deposits and prepayments	2008 HK$’000 1,096 35,552 36,648	2007 HK$’000 1,992 39,292
		41,284

There is no allowance for doubtful debts in both years.

25. Loan receivables

Fixed-rate loan Variable-rate loan	2008 HK$’000 162,875 2,000 164,875	2007 HK$’000 172,015 2,000
		174,015

The Group has policy for allowance of bad and doubtful debts which is based on the evaluation of collectability and aging analysis of accounts and on management’s judgment, including the current creditworthiness, collaterals and the past collection history of each client.

In determining the recoverability of the loan receivables, the Group considers any change in the credit quality of the loan receivable from the date credit was initially granted up to the reporting date. Accordingly, the Directors believe that there is no further credit provision required.

The average interest rate for the fixed-rate loan receivables was approximately 10% (2007: 10%) per annum.

– 70 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The contracted interest rates of the variable-rate loan receivables denominated in Hong Kong dollars is The Hongkong and Shanghai Banking Corporation Limited (“HSBC”) prime rate (2007: from HSBC prime rate to HSBC prime rate plus 2%) with effective interest rate of 6% (2007: 8%). Interest is normally repriced every six months.

The loan receivables with a carrying amount of HK$164,875,000 (2007: HK$143,415,000) are secured by certain deposits and unlisted securities which are neither past due nor impaired at the reporting date for which the Group believes that the amounts are considered recoverable as the creditworthiness and the past collection history of each client are satisfactory.

26. Pledged bank deposits and bank balances

The pledged bank deposits represent deposit pledged to banks to secure banking facilities granted to the Group and carry fixed interest rate with a range from 0.5% to 3.8% (2007: 1% to 3.4%).

Bank balances carry interest at market rates with a range from 0.1% to 2.8% (2007: 2% to 5.25%).

27. Creditors and accrued charges

Creditors and accrued charges principally comprise amounts outstanding for trade purpose and ongoing costs.

An aged analysis of trade creditors is as follows:

Trade creditors due within 90 days Other creditors and accrued charges	2008 HK$’000 2,263 67,748 70,011	2007 HK$’000 29,778 68,217
		97,995

– 71 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

28. Other borrowings

The following table provides an analyses of the other borrowings:

Securities margin loans Unsecured term loan Secured term loan	2008 HK$’000 489,682 300,000 65,000 854,682	2007 HK$’000 918,838 – –
		918,838

(a) Securities margin loans

This represents securities margin financing received from stock broking, futures and options broking house and were secured by certain collateral of the Group as disclosed in note 32. Additional funds or collateral are required if the balance of the borrowings exceeds the eligible margin value of securities pledged to the broking house. The collateral can be sold at the broking house’s discretion to settle any outstanding borrowings owed by the Group. The entire loans are secured by the Group’s marketable securities as disclosed in note 32, repayable on demand and bear variable interest with a range from 0.95% to 7% (2007: 3.4% to 8.0%).

(b) Unsecured term loan

At the balance sheet date, the Group’s unsecured loan is denominated in Hong Kong dollars bearing variable interest rate (which is also equal to contracted interest rates) with a range from 5% to 5.25% per annum. The unsecured term loan is payable in July 2009.

(c) Secured term loan

At the balance sheet date, the term loan is denominated in Hong Kong dollars with fixed interest rate at 8% per annum and payable in April 2009. Pursuant to the loan agreement, the lender has incorporated first floating charge over the undertaking, property and assets of the Company.

– 72 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

29. Derivative financial instruments

The derivative financial instruments comprise option contracts linked with the equity securities listed in Hong Kong with certain brokers for a period of one year.

30. Share capital

Number of shares		Carrying	value
2008	2007	2008	2007
		HK$’000	HK$’000

Ordinary shares of HK$0.01 each Authorised: At beginning and end of the year Issued and fully paid: At beginning of the year Repurchase of shares Issue of shares due to exercise of warrants At end of the year	30,000,000,000 276,183,547 (578,000) 16,947 275,622,494	30,000,000,000 282,883,547 (6,700,000) – 276,183,547	300,000 2,762 (6) – 2,756	300,000

				2,829 (67) –
				2,762

During the year ended 31 December 2008 and 2007, the Company repurchased its own shares through the Stock Exchange as follows:

2008

Month of repurchase June 2008 September 2008 October 2008	Number of ordinary shares of HK$0.01 each Price per share Highest Lowest HK$ HK$ 235,000 4.20 4.18 223,000 1.62 1.16 120,000 1.20 0.70 578,000	Aggregate consideration paid HK$’000 984 299 94
		1,377

– 73 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2007

Month of repurchase February 2007 March 2007 April 2007 May 2007 June 2007 July 2007 August 2007	Number of ordinary shares of HK$0.01 each Price per share Highest Lowest HK$ HK$ 348,000 3.38 3.30 548,000 3.36 3.15 1,816,000 4.13 4.08 2,760,000 5.64 4.37 768,000 6.55 5.90 316,000 7.70 6.60 144,000 8.13 6.60 6,700,000	Aggregate consideration paid HK$’000 1,169 1,820 7,493 13,795 4,813 2,181 1,106 32,377

The repurchased shares were cancelled during the year and the issued share capital of the Company was reduced by the nominal value thereof. The premium payable on repurchase of the shares of HK$1,371,000 (2007: HK$32,310,000) has been charged to the share premium account. An amount equivalent to the nominal value of the shares cancelled has been transferred from the retained profits of the Company to the capital redemption reserve.

The repurchases of the Company’s shares during the year were effected by the Directors, pursuant to the mandate from shareholders, with a view to benefiting shareholders as a whole by enhancing the net asset value per share and earnings per share of the Group.

Warrants

During the year, 55,236,709 units of warrants in the value of HK$193,328,481.50 were issued on the basis of one warrant for every five ordinary shares held on 26 June 2008. Registered holders of warrants can exercise their rights to subscribe for the ordinary shares of the Company at HK$3.5 per share during the period from 28 July 2008 to 27 July 2009.

During the year, warrants in the value of HK$59,314.50 were exercised their rights to subscribe for 16,947 ordinary shares in the Company at HK$3.5 per share.

– 74 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

At 31 December 2008, the Company had outstanding 55,219,762 warrants to be exercised at any time on or before 27 July 2009. Exercise in full of such warrants would result in the issue of 55,219,762 additional ordinary shares of HK$0.01 each.

The exercise price in respect of warrants has been adjusted from HK$3.5 to HK$2.63 after the approval of the proposed rights issue exercise (announced by the Company on 1 December 2008) by the shareholders of the Company at the special general meeting held on 16 January 2009.

31. Deferred taxation

At 1 January 2007 Charge (credit) to consolidated income statement for the year At 31 December 2007 Effect of change in tax rate (Credit) charge to consolidated income statement for the year At 31 December 2008	Revaluation of properties HK$’000 417 2,672 3,089 (177) (1,076) 1,836	Tax losses HK$’000 (417) (2,672) (3,089) 177 1,076 (1,836)	Total HK$’000 – –
			– – –
			–

At 31 December 2008, the Group has estimated unused tax losses of approximately HK$2,617 million (2007: HK$744 million), for offset against future profits. A deferred tax asset has been recognised in respect of approximately HK$11.1 million (2007: HK$17.6 million) of such losses. No deferred tax asset has been recognised in respect of remaining estimated tax losses of approximately HK$2,606 million (2007: HK$726 million) due to the unpredictability of future profit streams. These estimated tax losses may be carried forward indefinitely.

The Group has deductible temporary differences in respect of accounting depreciation of approximately HK$7.8 million (2007: HK$9.4 million). No deferred tax asset has been recognised in relation to such deductible temporary difference as it is not probable that taxable profit will be available against which the deductible temporary differences can be utilised.

– 75 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

32. Pledge of assets

At the balance sheet date, the following assets of the Group were pledged to banks and securities brokers house to secure short term credit facilities:

Investment properties Investments held for trading Available-for-sale investments Pledged bank deposits	2008 HK$’000 – 773,077 108,323 1,167 882,567	2007 HK$’000 33,300 3,121,898 460,628 10,718
		3,626,544

33. Major non-cash transaction

During the year, dividends of HK$114,632,000 received from Printronics, an associate of the Group, were settled by receipt of 20,659,852 ordinary shares of Tianjin Printronics Circuit Corp. listed in Shenzhen Stock Exchange.

34. Lease commitments

The Group as lessee

Minimum lease payments paid under operating leases in respect of premises	2008 HK$’000 1,966	2007 HK$’000 1,920

– 76 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

At the balance sheet date, 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	2008 HK$’000 1,898 2,689 4,587	2007 HK$’000 1,966 4,587
		6,553

Operating lease payments represent rentals payable by the Group for certain of its office premises. Leases are negotiated and rentals are fixed for a lease term of four years.

The Group as lessor

Property rental income earned during the year was approximately HK$4,006,000 (2007: HK$4,780,000). The properties held have committed tenants for a lease term of two years.

At the balance sheet date, the Group had contracted with tenants for the following 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	2008 HK$’000 3,076 2,228 5,304	2007 HK$’000 3,293 472
		3,765

– 77 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

35. Retirement benefits schemes

The Group operates a defined contribution retirement benefits scheme for its qualifying employees in Hong Kong. The assets of the scheme are held separately from those of the Group in funds under the control of independent trustee.

The retirement benefits scheme contributions charged to the consolidated income statement represent contributions payable to the scheme by the Group at rates specified in the rules of the scheme. Where there are employees who leave the scheme prior to vesting fully in the contributions, the amount of the forfeited contributions will be used to reduce future contributions payable by the Group or will be refunded to the Company upon request.

There is no forfeited contribution for the year ended 31 December 2008. Forfeited contributions of HK$419,000 for the year ended 31 December 2007, which arose upon employees leaving the schemes, were available to reduce the contributions payable by the Group in future years.

In addition to the defined contribution retirement benefits scheme, the Group is required to contribute to Mandatory Provident Fund for certain employees in Hong Kong based on applicable rates of monthly salary in accordance with the relevant regulations.

During the year, the retirement benefits scheme contributions charged to consolidated income statement were HK$147,000 (2007: HK$157,000).

36. Related party transactions

Compensation of key management personnel

The remuneration of Directors and other members of key management of the Group during the year was as follows:

Salaries and other short-term employee benefits Retirement benefits costs	2008 HK$’000 5,047 58 5,105	2007 HK$’000 60,315 60
		60,375

The remuneration of Directors and key executives is determined by the Remuneration Committee having regard to the performance of individuals and market trends.

– 78 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

37. Disposal of a subsidiary

During the year ended 31 December 2007, the Group disposed of a non-wholly owned subsidiary:

NET ASSETS DISPOSED OF
Investment property
Property, plant and equipment
Debtors, deposits and prepayments
Amount due from a minority shareholder
Creditors and accrued charges
Deferred tax liability
Taxation liability
Minority interests
Net assets disposed of
Total consideration satisfied by:
Deposits received in advance
Bank balances and cash
Net cash inflow arising on disposal:
Cash consideration

HK$’000
94,706
48,046
615
4,805
(24,616)
(5,391)
(10)
118,155
(16,798)
101,357
30,027
71,330
101,357
71,330

The major asset held by the subsidiary is investment property. The fair value gain of HK$13,753,000 on the investment property upon the disposal was recognised in the consolidated income statement during the year ended 31 December 2007.

– 79 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

38. Post balance sheet events

Subsequent to 31 December 2008, the Group entered the following transactions:

(1) On 1 December 2008, the Company announced that it is proposed to raise not less than approximately HK$110 million before expenses by way of a rights issue (“Rights Issue”) of not less than 275,622,494 shares and not more than 330,842,256 shares at a price of HK$0.40 per share on the basis of one rights share for every existing share. On 11 February 2009, the Company announced 275,649,760 rights shares were issued in relation to the Rights Issue.
(2) On 1 December 2008, the Company announced that it and a placing agent entered into a placing agreement on 23 November 2008, whereby the Company has conditionally agreed to place, through the placing agent on a fully underwritten basis, a maximum of HK$300,000,000 value of convertible bonds. On 11 February 2009, the Company has issued HK$300,000,000 principal amount of the convertible bonds with maturity of three years at a conversion price of HK$0.75 and at an interest rate of 9% per annum convertible into shares of the Company. The Directors has commenced considering and quantifying the potential financial impact of the issuance of the convertible bonds.
(3) On 13 February 2009, the Group disposed of 38,000,000 shares of SHK, which were classified as available-for-sale investments as at 31 December 2008, at a consideration of approximately HK$178.6 million. The disposal will result in a gain of approximately HK$113.7 million.
(4) On 6 March 2009, the Group disposed of 197,858,680 shares in SAC, an associate of the Group at a price of HK$0.70 per share to an independent third party by crossing on market. The disposal will not result in material financial impact on the result of the Group by comparing the proceeds from the disposal with the carrying amount of SAC in the Group’s consolidated financial statements as at 31 December 2008.

– 80 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

39. Particulars of principal subsidiaries

Particulars of the principal subsidiaries as at 31 December 2008 and 2007 are as follows:

			Percentage
		Nominal value	of equity
	Place of	of issued	attributable to
	incorporation/	ordinary share/	the Company
Name of subsidiary	registration	registered capital	2008 & 2007	Principal activities
Directly held
Besford International Limited	The British Virgin	Ordinary	100%	Investment holding
	Islands	US$1
Classic Fortune Limited	The British Virgin	Ordinary	100%	Investment holding
	Islands	US$1
Mission Time Holdings Limited	The British Virgin	Ordinary	100%	Investment holding
	Islands	US$1
Star Paging (BVI) Limited	The British Virgin	Ordinary	100%	Investment holding
	Islands	US$400
Yuenwell Holdings Limited	The British Virgin	Ordinary	100%	Investment holding
	Islands	US$1
Indirectly held
China Capital Holdings Limited	Hong Kong	Ordinary	100%	Treasury service
		HK$2
China Online (Bermuda) Limited	Hong Kong	Ordinary	100%	Investment holding
		HK$2
China Online Nominees Limited	Hong Kong	Ordinary	100%	Investment holding and
		HK$200		provision of nominee
				services
China Online Secretaries Limited	Hong Kong	Ordinary	100%	Provision of secretarial
		HK$2		services
Focus Clear Limited	The British Virgin	Ordinary	100%	Securities trading in
	Islands	US$1		Hong Kong
Forepower Limited	The British Virgin	Ordinary	100%	Property investment in
	Islands	US$1		Hong Kong
Future Rise Investments Limited	The British Virgin	Ordinary	100%	Securities trading in
	Islands	US$1		overseas

– 81 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

			Percentage
		Nominal value	of equity
	Place of	of issued	attributable to
	incorporation/	ordinary share/	the Company
Name of subsidiary	registration	registered capital	2008 & 2007	Principal activities
Genwo Limited	Hong Kong	Ordinary	100%	Property investment
		HK$200,000
Gold Chopsticks Limited	The British Virgin	Ordinary	100%	Investment holding
	Islands	US$1
Honest Opportunity Limited	The British Virgin	Ordinary	100%	Securities trading and
	Islands	US$1		investment in Hong
				Kong and overseas
Join Capital Limited	Hong Kong	Ordinary	100%	Money lending
		HK$2
Keentime Investments Limited*	The British Virgin	Ordinary	50%	Securities trading in
	Islands	US$2		Hong Kong
Kintic Limited	Hong Kong	Ordinary	100%	Property investment
		HK$2
Konnic Limited	Hong Kong	Ordinary	100%	Property investment
		HK$2
Rich Investments Limited	Hong Kong	Ordinary	100%	Investment holding
		HK$2
Sparkling Summer Limited	The British Virgin	Ordinary	100%	Securities trading in
	Islands	US$6,500,000		Hong Kong and
				overseas
Star Charter Limited	Hong Kong	Ordinary	100%	Investment holding
		HK$2
Star Telecom (China Investment)	Hong Kong	Ordinary	100%	Investment holding
Limited		HK$2
Star Telecom Holding Limited	Hong Kong	Ordinary	100%	Investment holding
		HK$200
		Deferred#
		HK$4,000,000
Star Telecom Properties Limited	Hong Kong	Ordinary	100%	Investment and property
		HK$200		holding
Taskwell Limited	The British Virgin	Ordinary	100%	Investment holding
	Islands	US$1

– 82 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

			Percentage
		Nominal value	of equity
	Place of	of issued	attributable to
	incorporation/	ordinary share/	the Company
Name of subsidiary	registration	registered capital	2008 & 2007	Principal activities
Tricom Tianchi Limited	Hong Kong	Ordinary	100%	Investment holding
		HK$2
Vinka Limited	Hong Kong	Ordinary	100%	Investment holding
		HK$2
Widerich Limited	Hong Kong	Ordinary	100%	Property investment
		HK$2
星電電子技術發展（深圳）	The PRC	Registered	100%	Research and development
有限公司**		HK$1,000,000		for computer software
				and relevant technical
				consultancy services

The deferred shares, which are not held by the Group, practically carry no rights to any dividend or to receive notice of or to attend or vote at any general meeting of the company or to any distribution in winding up.
The Group is able to control the voting power at all general meetings of Keentime Investments Limited, accordingly, Keentime Investments Limited is accounted for as a subsidiary of the Company.
** Wholly foreign-owned enterprise.

The above table lists the subsidiaries of the Company which, in the opinion of the Directors, principally affected the results of the year or assets of the Group. To give details of other subsidiaries would, in the opinion of the Directors, result in particulars of excessive length.

All subsidiaries operate principally in their places of incorporation unless specified otherwise under “Principal activities”.

None of the subsidiaries had any debts securities subsisting at 31 December 2008 and 31 December 2007 or at any time during the respective years.

– 83 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR THE SIX MONTH ENDED 30 JUNE 2009

The following is the unaudited condensed consolidated financial statements and notes to the financial statements of the Group for the six months ended 30 June 2009 extracted from the 2009 interim report of the Company:

The unaudited condensed consolidated financial statements have not been audited, but have been reviewed by the Company’s auditor, Deloitte Touche Tohmatsu, in accordance with the Hong Kong Standard on Review Engagement 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” and by the Company’s Audit Committee. There were no other exceptional items or extraordinary items of the Group for the six months period ended 30 June 2009.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(For the six months ended 30 June 2009)

NOTES
Revenue (excluding securities trading)
3
Gross proceeds from sales of
investments held for trading
3
Total
Rental income
Dividend income from listed investments
Interest income from loan receivables
Net gain (loss) on investments
4
Other income
Fair value changes on
investment property
Administrative expenses
Finance costs
5
Gain on disposal of an associate
Share of losses of associates
Profit (loss) before taxation
Taxation
6
Profit (loss) for the period
7

Six months ended
30.6.2009
30.6.2008
HK$’000
HK$’000
(unaudited)
(unaudited)
18,474
13,939
504,836
169,423
523,310
183,362
1,805
2,056
9,385
4,192
7,284
7,691
634,584
(1,504,066)
17,470
5,375
4,900
–
(12,747)
(9,187)
(24,876)
(25,265)
10,756
–
(1,848)
(6,243)
646,713
(1,525,447)
(124)
(1,413)
646,589
(1,526,860)

– 84 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Other comprehensive income and expense
Fair value gain (loss) on available-for-
sale investments:
Gain (loss) arising during the period
Reclassification adjustment upon
disposal of available-for-sale
investments
Exchange difference arising on
translation:
Share of translation reserve of
associates
Exchange gain arising
during the period
Reclassification adjustment upon
disposal of an associate
Other comprehensive income and expense
for the period
Total comprehensive income and
expenses for the period
Profit (loss) for the period attributable to:
Owners of the Company
Minority interest

102,971
(292,814)
(119,344)
(2,104)
(16,373)
(294,918)
–
9,353
357
3,712
(9,406)
–
(9,049)
13,065
(25,422)
(281,853)
621,167
(1,808,713)
646,589
(1,528,615)
–
1,755
646,589
(1,526,860)
Six months ended
30.6.2009
30.6.2008
HK$’000
HK$’000
(unaudited)
(unaudited)

– 85 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Total comprehensive income and expenses attributable to: Owners of the Company Minority interests Earnings (loss) per share 9 – Basic – Diluted NOTES	621,167 (1,810,468) – 1,755 621,167 (1,808,713) HK$1.33 (HK$5.34) HK$0.83 – Six months ended 30.6.2009 30.6.2008 HK$’000 HK$’000 (unaudited) (unaudited)

– 86 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(At 30 June 2009)

NOTES Non-current assets Investment properties 10 Property, plant and equipment 10 Prepaid lease payments Interest in associates 11 Available-for-sale investments Current assets Available-for-sale investments Investments held for trading Debtors, deposits and prepayments 12 Loan receivables Taxation recoverable Pledged bank deposits Bank balances and cash Current liabilities Creditors and accrued charges 13 Customers’ deposits and receipts in advance Other borrowings 14 Derivative financial instruments Taxation payable Net current assets Total assets less current liabilities Non-current liabilities Convertible bonds 15 Net assets	30.6.2009 HK$’000 (unaudited) 86,705 2,896 54 – 288,211 377,866 6,522 1,241,068 150,845 141,475 4,050 10,531 94,532 1,649,023 24,435 36,129 80,233 – 68,442 209,239 1,439,784 1,817,650 278,867 1,538,783	31.12.2008 HK$’000 (audited) 103,105 3,036 54 138,501 356,835
		601,531
		124,055 818,971 36,648 164,875 4,050 1,167 66,279
		1,216,045
		70,011 34,647 854,682 9,453 68,442
		1,037,235
		178,810
		780,341
		–
		780,341

– 87 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Capital and reserves Share capital 16 Reserves Equity attributable to owners of the Company Minority interest Total equity NOTES	5,513 1,533,270 1,538,783 – 1,538,783 30.6.2009 HK$’000 (unaudited)	2,756 777,585 31.12.2008 HK$’000 (audited)
		780,341 –
		780,341

– 88 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(For the six months ended 30 June 2009)

At 1 January 2008 (audited) Fair value loss on available-for-sale investments Share of translation reserve of associates Exchange differences arising on translation Reclassification adjustment upon disposal of available-for-sale investments (Loss) profit for the period Total comprehensive income and expense for the period Repurchase of shares Dividends recognised as distribution At 30 June 2008 (unaudited) Share capital HK$’000 At 1 January 2009 (audited) 2,756 Fair value gain on available-for-sale investments – Exchange differences arising on translation – Reclassification adjustment upon disposal of associate – Reclassification adjustment upon disposal of available-for-sale investments – Profit for the period – Total comprehensive income and expense for the period – Issue of new shares upon exercise of warrants – Issue of new shares upon rights issue 2,757 Recognition of equity component of convertible bonds – Transaction costs attributable to issue of shares – At 30 June 2009 (unaudited) 5,513	Share capital HK$’000 2,762 – – – – – – (2) – 2,760 Share premium HK$’000 591,439 – – – – – – 145 107,504 – (1,373) 697,715	Share premium HK$’000 592,751 – – – – – – (981) – 591,770 Convertible bonds equity reserve HK$’000 – – – – – – – – – 28,242 – 28,242	Buildings revaluation reserve HK$’000 5,036 – – – – – – – – 5,036 Buildings revaluation reserve HK$’000 7,200 – – – – – – – – – – 7,200	Investments revaluation reserve HK$’000 720,879 (292,814) – – (2,104) – (294,918) – – 425,961 Investments revaluation reserve HK$’000 203,973 102,971 – – (119,344) – (16,373) – – – – 187,600	Capital redemption reserve HK$’000 2,178 – – – – – – 2 – 2,180 Capital redemption reserve HK$’000 2,184 – – – – – – – – – – 2,184	Translation reserve HK$’000 9,036 – 9,353 3,712 – – 13,065 – – 22,101 Translation reserve HK$’000 15,848 – 357 (9,406) – – (9,049) – – – – 6,799	Retained profits HK$’000 2,767,805 – – – – (1,528,615) (1,528,615) – (11,047) 1,228,143 (Accumulated losses) retained profits HK$’000 (43,059) – – – – 646,589 646,589 – – – – 603,530	Attributable to owners of the Company HK$’000 4,100,447 (292,814) 9,353 3,712 (2,104) (1,528,615) (1,810,468) (981) (11,047) 2,277,951 Attributable to owners of the Company HK$’000 780,341 102,971 357 (9,406) (119,344) 646,589 621,167 145 110,261 28,242 (1,373) 1,538,783	Minority interests HK$’000 3,872 – – – – 1,755 1,755 – – 5,627 Minority interests HK$’000 – – – – – – – – – – – –	Total HK$’000 4,104,319 (292,814) 9,353 3,712 (2,104) (1,526,860) (1,808,713) (981) (11,047) 2,283,578 Total HK$’000 780,341
										102,971 357 (9,406) (119,344) 646,589
										621,167
										145 110,261 28,242 (1,373)
										1,538,783

– 89 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(For the six months ended 30 June 2009)

NET CASH USED IN OPERATING ACTIVITIES
INVESTING ACTIVITIES
Proceeds from disposal of available-for-sale
investments
Proceeds from disposal of an investment property
Proceeds from disposal of an associate
Dividends received
Purchases of available-for-sale investments
Proceeds from redemption of loan notes
(Increase) decrease in pledged bank deposits
Other investing activities
NET CASH FROM INVESTING ACTIVITIES
FINANCING ACTIVITIES
New other borrowings raised
Repayments of other borrowings
Convertible bonds transaction costs
Issue of convertible bonds
Repurchase of shares
Proceeds from issue of shares
Expenses on issue of shares
NET CASH (USED IN) FROM FINANCING
ACTIVITIES
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
AT BEGINNING OF THE PERIOD
EFFECT OF CHANGES IN FOREIGN
EXCHANGE RATE
CASH AND CASH EQUIVALENTS
AT END OF THE PERIOD

Six months ended
30.6.2009
30.6.2008
HK$’000
HK$’000
(unaudited)
(unaudited)
(46,391)
(139,416)
301,225
9,864
21,300
–
138,003
–
9,385
4,192
(12,097)
(31,199)
–
52,401
(9,364)
1,873
251
(779)
448,703
36,352
5,422
1,153,111
(779,871)
(1,071,833)
(9,000)
–
300,000
–
–
(981)
110,406
–
(1,373)
–
(374,416)
80,297
27,896
(22,767)
66,279
67,824
357
3,712
94,532
48,769

– 90 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of preparation

The condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) and with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

2. Principal accounting policies

The condensed consolidated financial statements have been prepared on the historical cost basis except for certain properties and financial instruments, which are measured at revalued amounts or fair values, as appropriate.

In the current interim period, the Group has applied, for the first time, the following new or revised standards, amendments and interpretations issued by the HKICPA, which are effective for the Group’s financial year beginning on 1 January 2009.

HKFRSs (Amendments) Improvements to HKFRSs issued in 2008, except for the amendment to HKFRS 5 that is effective for annual periods beginning on or after 1 July 2009 HKFRSs (Amendments) Improvements to HKFRSs issued in 2009 in relation to the amendment to paragraph 80 of HKAS 39 HKAS 1 (Revised) Presentation of financial statements HKAS 23 (Revised) Borrowing costs HKAS 32 & 1 (Amendments) Puttable financial instruments and obligations arising on liquidation HKFRS 1 & HKAS 27 Cost of an investment in a subsidiary, jointly (Amendments) controlled entity or associate HKFRS 2 (Amendment) Vesting conditions and cancellations HKFRS 7 (Amendment) Improving disclosures about financial instruments HKFRS 8 Operating segments HK(IFRIC) – INT 9 & Embedded derivatives HKAS 39 (Amendments) HK(IFRIC) – INT 13 Customer loyalty programmes HK(IFRIC) – INT 15 Agreements for the construction of real estate HK(IFRIC) – INT 16 Hedges of a net investment in a foreign operation

– 91 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Except as described below, the same accounting policies and presentation have been followed in these condensed consolidated financial statements as were applied in the preparation of the Group’s consolidated financial statements for the year ended 31 December 2008.

HKAS 1 (Revised 2007) has introduced a number of terminology changes, including revised titles for the condensed consolidated financial statements, and has resulted in a number of changes in presentation and disclosure. HKFRS 8 is a disclosure standard that requires the identification of operating segments to be performed on the same basis as financial information that is reported internally for the purpose of allocating resources between segments and assessing their performance. The predecessor standard, HKAS 14 Segment Reporting, required the identification of two sets of segments (business and geographical) using a risks and returns approach. In the past, the Group’s primary reporting format was business segments. The application of HKFRS 8 has not resulted in a redesignation of the Group’s reportable segments as compared with the primary reportable segments determined in accordance with HKAS 14 (see note 3). The adoption of these new and revised HKFRSs has had no material effect on the reported results and financial position of the Group for the current or prior accounting periods. Accordingly, no prior period adjustment has been recognised.

Convertible bonds contain liability and equity components, and early redemption option

Convertible bonds issued by the Group that contain the liability (together with the early redemption option which is closely related to the host liability component) and conversion option components are classified separately into respective items on initial recognition. 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 liability component is determined using the prevailing market interest of similar non-convertible debts. The difference between the gross proceeds of the issue of the convertible bonds and the fair values assigned to the liability component, representing the conversion option for the holder to convert the convertible bonds into equity, is included in equity (convertible bonds equity reserve).

In subsequent periods, the liability component of the convertible bonds is carried at amortised cost using the effective interest method. The equity component, representing the option to convert the liability component into ordinary shares of the Company, will remain in convertible bonds equity reserve until the conversion option is exercised (in which case the balance stated in convertible bonds equity reserve will

– 92 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

be transferred to share premium). Where the conversion option remains unexercised at the expiry date, the balance stated in convertible bonds equity reserve will be released to the retained profits. No gain or loss is recognised in profit or loss upon conversion or expiration of the conversion option.

Transaction costs that relate to the issue of the convertible bonds are allocated to the liability and equity components in proportion to the allocation of the gross proceeds. Transaction costs relating to the equity component are charged directly to equity. Transaction costs relating to the liability component are included in the carrying amount of the liability portion and amortised over the period of the convertible bonds using the effective interest method.

Embedded derivatives

Derivatives embedded in non-derivative host contracts are treated as separate derivatives when 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 change in fair value recognised in profit or loss.

The Group has not early applied the following new or revised standards, amendments or interpretations that have been issued but are not yet effective.

HKFRSs (Amendments)	Improvements to HKFRSs1
HKFRSs (Amendments)	Improvements to HKFRSs 20092
HKAS 27 (Revised 2008)	Consolidated and separate financial statements3
HKAS 39 (Amendment)	Eligible hedged items3
HKFRS 1 (Amendment)	Additional exemptions for first-time adopters4
HKFRS 2 (Amendment)	Group cash-settled share-based payment
	transactions4
HKFRS 3 (Revised 2008)	Business combinations3
HK(IFRIC) – INT 17	Distributions of non-cash assets to owners3
HK(IFRIC) – INT 18	Transfers of assets from customers5

1 Amendments to HKFRS 5 as part of Improvement to HKFRSs issued in 2008, effective for annual periods beginning on or after 1 July 2009.
2 Amendments that are effective for annual periods beginning on or after 1 July 2009 and 1 January 2010, as appropriate.
3 Effective for annual periods beginning on or after 1 July 2009.
4 Effective for annual periods beginning on or after 1 January 2010.
5 Effective for transfers on or after 1 July 2009.

– 93 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Directors of the Company anticipate that the application of these standards, amendments or interpretations will have no material impact on the results and the financial position of the Group.

3. Segment information

The Group has adopted HKFRS 8 “Operating Segments” with effect from 1 January 2009. HKFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker, represented by the board of directors of the Company, in order to allocate resources to the segment and to assess its performance. The adoption of HKFRS 8 has not resulted in a redesignation of the Group’s reportable segments as compared with the reportable segments determined in accordance with HKAS 14 but the measure of segment profit or loss had been changed.

As a result, following the adoption of HKFRS 8, the identification of the Group’s reportable segments remains unchanged as follows:

Securities trading and investments – trading of securities in Hong Kong and oversea markets.

Financial services – provision of financial services.

Property investment – leasing of residential properties and office spaces.

– 94 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the six months ended 30 June 2009

Gross proceeds from sales of investments held for trading Revenue Segment profits Other income Central corporate expenses Share of losses of associates Gain on disposal of an associate Finance costs Profit before taxation	Securities trading and investments HK$’000 504,836 9,385 658,241	Financial services HK$’000 – 7,284 6,641	Property investment HK$’000 – 1,805 5,746	Consolidated HK$’000 504,836 18,474 670,628 2,430 (19,143) (1,848) 10,756 (16,110) 646,713

– 95 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the six months ended 30 June 2008

Gross proceeds from sales of investments held for trading Revenue Segment (losses) profits Other income Central corporate expenses Share of losses of associates Loss before taxation	Securities trading and investments HK$’000 169,423 4,192 (1,525,299)	Financial services HK$’000 – 7,691 7,392	Property investment HK$’000 – 2,056 1,489	Consolidated HK$’000 169,423

				13,939

				(1,516,418) 4,940 (7,726) (6,243)
				(1,525,447)

All of the segment revenue reported above is from external customers.

Segment profits or losses represents the profit or loss earned by each segment without allocation of bank interest income, net foreign exchange gain, central corporate expenses, share of losses of associates, gain on disposal of an associate and effective interest expense on convertible bonds. This is the measure reported to the Company’s Executive Directors for the purpose of resource allocation and assessment of segment performance.

The following is an analysis of the Group’s assets by operating segments:

Securities trading and investments Financial services Property investment	30.6.2009 HK$’000 1,691,701 147,682 86,885 1,926,268	31.12.2008 HK$’000 1,334,624 164,983 105,792
		1,605,399

– 96 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. Net gain (loss) on investments

Change in fair value of investments held for trading (Note a) Change in fair value of derivative financial instruments (Note b) Net realised gain on disposal of available-for- sale investments	Six months ended 30.6.2009 30.6.2008 HK$’000 HK$’000 509,162 (1,485,787) 6,078 (20,383) 119,344 2,104 634,584 (1,504,066)

Notes:

(a) Included in change in fair value of investments held for trading, approximately HK$126,177,000 (2008: loss of HK$3,939,000) represented net realised gain on disposal of investments held for trading.
(b) Included in change in fair value of derivative financial instruments, approximately HK$6,078,000 (2008: HK$425,000) represented net realised gain on derivative financial instruments.

5. Finance costs

The finance costs represent effective interest on convertible bonds and interest on other borrowings wholly repayable within five years.

– 97 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

6. Taxation

The current tax comprises: Hong Kong Profits Tax Enterprise income tax in the People’s Republic of China (“PRC”)	Six months ended 30.6.2009 30.6.2008 HK$’000 HK$’000 – 1,295 124 118 124 1,413	Six months ended 30.6.2009 30.6.2008 HK$’000 HK$’000 – 1,295 124 118 124 1,413
		1,413

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

Enterprise income tax in the PRC is calculated at 25% of estimated assessable profit for both periods.

7. Profit (loss) for the period

Profit (loss) for the period has been arrived at after charging (crediting): Staff costs including directors’ emoluments Depreciation and amortisation Interest income Net foreign exchange gain	Six months ended 30.6.2009 30.6.2008 HK$’000 HK$’000 3,384 3,644 162 149 (273) (1,039) (1,623) (3,901)

– 98 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

8. Dividends

Dividend recognised as distribution – Nil (2008: HK$0.04) per share Interim dividend, proposed – Nil (2008: Nil) per share	Six months ended 30.6.2009 30.6.2008 HK$’000 HK$’000 – 11,047 – –	Six months ended 30.6.2009 30.6.2008 HK$’000 HK$’000 – 11,047 – –

		–

9. Earnings (loss) per share

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

Earnings (loss) for the purpose of basic earnings (loss) per share attributable to the owners of the Company Effect of dilutive potential ordinary shares – interest on convertible bonds Earnings for the purpose of diluted earnings per share	Six months ended 30.6.2009 30.6.2008 HK$’000 HK$’000 646,589 (1,528,615) 16,110 662,699	Six months ended 30.6.2009 30.6.2008 HK$’000 HK$’000 646,589 (1,528,615) 16,110 662,699

– 99 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Weighted average number of ordinary shares for the purposes of basic earnings (loss) per share Effect of dilutive potential ordinary shares – convertible bonds Weighted average number of shares for the purpose of diluted earnings per share	Number of shares 485,818,576 309,392,265 795,210,841	Number of shares 286,110,383

As the exercise price of the Company’s outstanding warrants was higher than the average market price of shares during the period, the dilutive effect arisen from warrants is not presented.

Pursuant to the completion of rights issue on 11 February 2009, the weighted average number of ordinary shares for the purpose of earnings (loss) per share has been adjusted for both periods.

10. Movements in investment properties, property, plant and equipment

The Group’s investment properties and buildings were fair valued by the directors.

During the period, the Group disposed an investment property with a carrying amount of HK$16,400,000 for a consideration of HK$21,300,000, while no material addition in investment properties and property, plant and equipment noted during the six months ended 30 June 2009.

At 30 June 2009, the directors considered that the carrying amounts of the investment properties and buildings included in property, plant and equipment carried at revalued amounts did not differ significantly from that which would be determined using fair values at the reporting date.

– 100 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

11. Interests in associates

On 6 March 2009, the Group disposed of 197,858,680 shares in Shanghai Allied Cement Limited (“SAC”), an associate of the Group at a price of HK$0.70 per share to an independent third party by crossing on market for proceeds of approximately HK$138,003,000. A gain on disposal of HK$10,756,000 was recognised in profit or loss.

12. Debtors, deposits and prepayments

Debtors from securities trading Other debtors, deposits and prepayments Balance with brokerage companies	30.6.2009 HK$’000 3,090 11,854 135,901 150,845	31.12.2008 HK$’000 1,096 15,939 19,613
		36,648

The settlement terms of debtors from securities trading are 2-3 days after trade date.

13. Creditors and accrued charges

Creditors from securities trading Other creditors and accrued charges	30.6.2009 HK$’000 1,865 22,570 24,435	31.12.2008 HK$’000 2,263 67,748
		70,011

The settlement terms of creditors from securities trading are 2-3 days after trade date.

– 101 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

14. Other borrowings

Other borrowings represent securities margin financing received from stock broking, futures and options broking houses as well as both secured and unsecured term loans.

The securities margin loans are secured by the Group’s marketable securities, repayable on demand and bear interest at prevailing market rates.

The unsecured term loan which bore variable interest rate was fully settled in July 2009.

The secured term loan which bore fixed interest rate was fully settled in April 2009.

15. Convertible bonds

Pursuant to a placing agreement entered into between the Company and Sun Hung Kai International Limited dated 23 November 2008, the Company issued convertible bonds amounting to HK$300,000,000 on 11 February 2009 with maturity of three years. The convertible bonds are denominated in HK$. The convertible bonds entitle the holders to convert them into shares of the Company at any time within 3 years from the date of issue of the convertible bonds, at the conversion price per share of HK$0.75 and at an interest rate of 9% per annum. If the convertible bonds have not been converted, they will be redeemed on 10 February 2012 at par. The Company is allowed to redeem the convertibles bonds since the date of issue to the maturity date, at any time redeem at the price of the 100% of the principal amount of the bond to be redeemed as specified in the redemption notice, together with all interest accrued thereon up to and including the date on which payment of such principal amount of the redeemed bond and the interest accrued thereon shall have been paid by the Company in full.

– 102 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

16. Share capital

Ordinary shares of HK$0.01 each Authorised: At 31 December 2008 and 30 June 2009 Issued and fully paid: At 1 January 2008 Repurchase of shares Issue of shares due to exercise of warrants At 31 December 2008 Issue of shares due to rights issue Issue of shares due to exercise of warrants At 30 June 2009	Number of shares 30,000,000,000 276,183,547 (578,000) 16,947 275,622,494 275,649,760 46,730 551,318,984	Share capital HK$’000 300,000 2,762 (6) – 2,756 2,757 – 5,513

During the period, the Company allotted and issued 275,649,760 shares by way of a rights issue at a subscription price of HK$0.40 per share to the qualifying shareholders, on the basis of one rights share for every existing share then held. These new shares rank pari passu with the then existing shares in issue in all respects.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

17. Pledge of assets

At the end of the reporting period, the following assets of the Group were pledged to securities houses to secure short term credit facilities granted to the Group:

Investments held for trading Available-for-sale investments Pledged bank deposits	30.6.2009 HK$’000 1,116,824 158,635 10,531 1,285,990	31.12.2008 HK$’000 773,077 108,323 1,167
		882,567

18. Related party transactions

The remuneration of directors and other members of key management of the Group during the period was as follows:

Salaries and other short-term employee benefits Retirement benefit costs	Six months ended 30.6.2009 30.6.2008 HK$’000 HK$’000 2,565 2,262 79 30 2,644 2,292	Six months ended 30.6.2009 30.6.2008 HK$’000 HK$’000 2,565 2,262 79 30 2,644 2,292
		2,292

– 104 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

19. Post balance sheet events

On 2 September 2009, the Group early redeemed HK$60,000,000 convertible bonds at par as specified in the redemption notice.
On 4 September 2009, the Group entered into a sale and purchase agreement to acquire the entire issued share capital of Pacific Orchid Investment Limited (“Pacific Orchid”) which owns 187,500,000 shares, representing approximately 68.72% of the issued share capital, of Greenfield Chemical Holdings Limited (“Greenfield”), a company listed on The Stock Exchange of Hong Kong Limited (“Stock Exchange”), for a total consideration of HK$281,250,000 (“Acquisition”) on the basis of HK$1.50 per share. Completion of the Acquisition took place immediately after the signing of the sale and purchase agreement. The Group is required under the rules of the Hong Kong Code on Takeovers and Mergers to make a mandatory general cash offer (“General offer”) at a similar price of HK$1.50 per share to acquire the remaining 85,360,000 shares of Greenfield not already owned. It is the intention of the Group to maintain the listing of the shares of Greenfield after the General Offer.

Save for the entering into of the loan agreement between Join Capital Limited (“Join Capital”), a wholly-owned subsidiary of the Company, as lender and Mulpha Strategic Limited (“Mulpha Strategic”), a shareholder of Pacific Orchid, as borrower in relation to the revolving secured term loan of HK$250,000,000 granted by Join Capital to Mulpha Strategic as disclosed in the announcement and the circular of the Company dated 7 July 2009 and 28 July 2009 respectively, the Company did not have any prior transactions or relationship with Mulpha Strategic.

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APPENDIX I

4. WORKING CAPITAL

The Directors are of the opinion that, after taking into account the Enlarged Group’s existing cash and bank balances, the present available banking and credit facilities and margin loan facilities and the expected internally generated funds, the Enlarged Group has sufficient working capital for its present requirement for the next twelve months from the date of this circular.

5. STATEMENT OF INDEBTEDNESS

At the close of business on 31 August 2009, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Enlarged Group had outstanding securities margin loans of approximately HK$338,279,000 and convertible bonds liabilities with principal value of HK$300,000,000 (the carrying amounts of convertible bonds is approximately HK$272,613,000). As at 31 August 2009, the Enlarged Group’s investments held for trading, available-for-sale investments and securities brokers house deposits with respective carrying values of approximately HK$1,109,253,000, HK$127,644,000 and HK$16,749,000 were pledged to securities brokers houses to secure short term credit facilities granted to the Enlarged Group. The securities margin loans were secured by the Enlarged Group’s pledged marketable securities and securities brokers house deposits.

In addition, the Enlarged Group pledged certain land and buildings in Hong Kong with a carrying value of approximately HK$2,216,000 to a bank to secure general banking facilities of HK$10,000,000 granted to the Enlarged Group. There is no draw down on this banking facilities at the close of business on 31 August 2009.

Save as aforesaid, and apart from intra-group liabilities, the Enlarged Group did not have outstanding at the close of business on 31 August 2009 any loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances or acceptable credits, debentures, mortgages, charges, hire purchase commitments charges, guarantees or other material contingent liabilities.

– 106 –

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APPENDIX I

6. CONTINGENT LIABILITIES

(a) In respect of the disposal of a subsidiary in prior years, the Enlarged Group has given an indemnity to the purchaser against all liabilities, losses, costs and expenses suffered and/or incurred by the purchaser in relation to or arising out of the assignment of certain of the subsidiary’s business contracts.
(b) In 1997, the Enlarged Group had given a counter-indemnity to a former substantial shareholder and the ex-chairman of PCCW Limited (formerly known as Tricom Holdings Limited (“Tricom”)), and Chambord Investment Inc. in respect of certain indemnities given to Tricom at the time of and to facilitate the listing of Tricom’s shares on the Stock Exchange. These indemnities related to the use of the Tricom tradename, the infringement of the permitted use of properties, the guarantees granted to Tricom to secure banking facilities and tax liabilities.

The Directors consider it is not possible to estimate the financial effect of the indemnities and warranty given.

7. LITIGATION

As at 31 December 2008, the material litigations/claims of the Group are disclosed in the paragraph headed “Litigation” in Appendix III. Save as aforesaid, the Enlarged Group had no other material litigation as at 31 December 2008.

8. FUTURE PROSPECTS OF THE ENLARGED GROUP

The Group expects 2009 to be another difficult year with major uncertainties due to the continued economic downturn, rising unemployment and radical changes to the investment environment. Though governments worldwide have responded with massive fiscal stimulus and bailout packages together with aggressive monetary measures to counter the economic turmoil, it is expected that recovery may be a prolonged process. Although the signs of recovery were seen globally in the second half of the period under review, there is still uncertainty as whether such recovery is sustainable. Hence, the Group will remain cautiously optimistic in its investment approach and strategy in respect of its existing businesses in securities trading and investment, provision of financial services, property investment and strategic investment. As a value investor, the Group will continuously review and adjust its investment strategies and investment portfolio in light of the prevailing investment environment to seek and identify grossly undervalued investment and business opportunities in China, Hong Kong and the Asia Pacific region. The Group expects that opportunities will present themselves in these geographical areas and the Group’s renewed financial strength will enable it to take advantage of these opportunities as they arise, to enhance value for shareholders.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

On 4 September 2009, the Group entered into a sale and purchase agreement to acquire the entire issued share capital of Pacific Orchid Investment Limited which owns 187,500,000 shares, representing approximately 68.72% of the issued share capital, of Greenfield Chemical Holdings Limited (“Greenfield”), a company listed on The Stock Exchange of Hong Kong Limited (“Stock Exchange”), for a total consideration of HK$281,250,000 (“Acquisition”) on the basis of HK$1.50 per share. Completion of the Acquisition took place immediately after the signing of the sale and purchase agreement. The Group is required under the rules of the Hong Kong Code on Takeovers and Mergers to make a mandatory general cash offer (“General Offer”) at a similar price of HK$1.50 per share to acquire the remaining 85,360,000 shares of Greenfield not already owned. It is the intention of the Group to maintain the listing of the shares of Greenfield after the General Offer. The Group is of the view that the Acquisition represents an opportunity to utilize a listed platform to widen its business scope and to diversify its revenue base by participating in the manufacture of industrial paints and the trading of petrochemical and related products and expanding into other business sectors when opportunities arise.

In view of the escalating awareness of environment protection, the demand for environmental-friendly and high quality products increases. In order to meet the market requirement, the Enlarged Group continues to improve product quality, increase the sale in high-yield products and introduce innovation to the products.

With its improved financial strength, the Enlarged Group is well-positioned to continue to seek and identify grossly undervalued investment and business opportunities in China, Hong Kong and the Asia Pacific region to further enhance value for shareholders.

9. MATERIAL CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material change in the financial or trading position of the Group since 31 December 2008, being the date to which the latest published audited accounts of the Group were made up.

– 108 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

1. SUMMARY OF FINANCIAL INFORMATION

Set out below is a summary of the audited consolidated income statements and consolidated balance sheets of the Greenfield Group for the last three years ended 31st December, 2008, as extracted from the relevant published annual reports of Greenfield for the last three years ended 31st December, 2008.

The auditors’ reports from Deloitte Touche Tohmatsu in respect of the Greenfield Group’s audited consolidated financial statements for each of the three years ended 31st December, 2008, 2007 and 2006 did not contain any qualifications. There were no other exceptional items or extraordinary items of the Greenfield Group during each of the three years ended 31st December, 2006, 2007 and 2008.

CONSOLIDATED INCOME STATEMENT

Revenue
Cost of sales
Gross profit
Other income
Distribution and selling expenses
Administrative expenses
Loss on partial disposal of a subsidiary
Interest on bank borrowings wholly repayable
within five years
Share of profits of associates
Profit before taxation
Taxation
Profit for the year
Attributable to:
Equity holders of Greenfield
Minority interests
Dividends
Earnings per share, basic

For the year ended 31st December,
2008
2007
2006
HK$’000
HK$’000
HK$’000
335,697
317,066
279,133
(291,419)
(270,503)
(219,002)
44,278
46,563
60,131
22,800
17,840
16,543
(16,235)
(13,864)
(11,620)
(50,622)
(37,587)
(40,495)
–
(2,991)
–
–
–
(2)
18,009
16,612
17,451
18,230
26,573
42,008
(3,326)
(3,347)
(13,042)
14,904
23,226
28,966
4,376
24,535
28,966
10,528
(1,309)
–
14,904
23,226
28,966
18,000
22,500
27,500
HK1.5 cents
HK9.4 cents
HK11.6 cents

– 109 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

CONSOLIDATED BALANCE SHEET

NON-CURRENT ASSETS Property, plant and equipment Prepaid lease payments Interests in associates Available-for-sale investments Deposit for acquisition of a subsidiary Deposit for acquisition of property, plant and equipment Loans receivable Deferred tax assets CURRENT ASSETS Prepaid lease payments Inventories Trade and other receivables Advance to an associate Dividend receivable from an associate Tax recoverable Bank balances and cash CURRENT LIABILITIES Trade and other payables Deferred income Amounts due to related companies NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES CAPITAL AND RESERVES Share capital Reserves Equity attributable to equity holders of Greenfield Minority interests Total Equity	At 31st December, 2008 2007 2006 HK$’000 HK$’000 HK$’000 83,232 83,669 70,418 13,885 13,397 8,082 72,752 56,245 42,024 10 10 10 – 100,000 – – – 1,294 159,055 – – 163 114 25 329,097 253,435 121,853 340 320 203 29,745 35,431 33,110 84,596 102,815 82,753 10,000 18,566 15,000 4,500 4,500 6,300 511 1,164 3,053 106,945 173,948 47,212 236,637 336,744 187,631 29,439 53,933 37,546 – – 3,195 – 2,505 133 29,439 56,438 40,874 207,198 280,306 146,757 536,295 533,741 268,610 30,000 30,000 25,000 361,168 370,227 243,610 391,168 400,227 268,610 145,127 133,514 – 536,295 533,741 268,610	At 31st December, 2008 2007 2006 HK$’000 HK$’000 HK$’000 83,232 83,669 70,418 13,885 13,397 8,082 72,752 56,245 42,024 10 10 10 – 100,000 – – – 1,294 159,055 – – 163 114 25 329,097 253,435 121,853 340 320 203 29,745 35,431 33,110 84,596 102,815 82,753 10,000 18,566 15,000 4,500 4,500 6,300 511 1,164 3,053 106,945 173,948 47,212 236,637 336,744 187,631 29,439 53,933 37,546 – – 3,195 – 2,505 133 29,439 56,438 40,874 207,198 280,306 146,757 536,295 533,741 268,610 30,000 30,000 25,000 361,168 370,227 243,610 391,168 400,227 268,610 145,127 133,514 – 536,295 533,741 268,610
		121,853
		203 33,110 82,753 15,000 6,300 3,053 47,212
		187,631
		37,546 3,195 133
		40,874
		146,757
		268,610

		25,000 243,610
		268,610 –
		268,610

– 110 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GREENFIELD GROUP FOR THE YEAR ENDED 31ST DECEMBER, 2008

The following is the audited financial statements and notes to the financial statements of the Greenfield Group for the year ended 31st December, 2008 extracted from the annual report 2008 of Greenfield:

CONSOLIDATED INCOME STATEMENT

For The Year Ended 31st December, 2008

Notes Revenue 5 Cost of sales Gross profit Other income Distribution and selling expenses Administrative expenses Loss on partial disposal of a subsidiary Share of profits of associates Profit before taxation 7 Taxation 8 Profit for the year Attributable to: Equity holders of Greenfield Minority interests Dividends 9 Earnings per share, basic 10	2008 HK$’000 335,697 (291,419) 44,278 22,800 (16,235) (50,622) – 18,009 18,230 (3,326) 14,904 4,376 10,528 14,904 18,000 HK1.5 cents	2007 HK$’000 317,066 (270,503) 46,563 17,840 (13,864) (37,587) (2,991) 16,612 26,573 (3,347) 23,226 24,535 (1,309) 23,226 22,500 HK9.4 cents

– 111 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

CONSOLIDATED BALANCE SHEET

At 31st December, 2008

Notes NON-CURRENT ASSETS Property, plant and equipment 11 Prepaid lease payments 12 Interests in associates 13 Available-for-sale investments 14 Deposit for acquisition of a subsidiary 15 Loans receivable 16 Deferred tax assets 17 CURRENT ASSETS Prepaid lease payments 12 Inventories 18 Trade and other receivables 19 Advance to an associate 20 Dividend receivable from an associate 20 Tax recoverable Bank balances and cash 21 CURRENT LIABILITIES Trade and other payables 22 Amounts due to related companies 24 NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES CAPITAL AND RESERVES Share capital 23 Reserves Equity attributable to equity holders of Greenfield Minority interests Total Equity	2008 HK$’000 83,232 13,885 72,752 10 – 159,055 163 329,097 340 29,745 84,596 10,000 4,500 511 106,945 236,637 29,439 – 29,439 207,198 536,295 30,000 361,168 391,168 145,127 536,295	2007 HK$’000 83,669 13,397 56,245 10 100,000 – 114
		253,435
		320 35,431 102,815 18,566 4,500 1,164 173,948
		336,744
		53,933 2,505
		56,438
		280,306
		533,741

		30,000 370,227
		400,227 133,514
		533,741

– 112 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the Year Ended 31st December, 2008

		Attributable to equity holders of Greenfield	Attributable to equity holders of Greenfield	Attributable to equity holders of Greenfield	Attributable to equity holders of Greenfield	Total equity HK$’000 268,610
Share capital HK$’000 25,000 – – – – – – 5,000 – – – – 30,000 – – – – – – – 30,000	Share premium HK$’000 4,242 – – – – – – 120,000 – – (2,949) – 121,293 – – – – – – – 121,293	Special reserve HK$’000 (note a) 32,000 – – – – – – – – – – – 32,000 – – – – – – – 32,000	Translation reserve HK$’000 1,051 7,606 2,570 10,176 – – 10,176 – (2,185) – – – 9,042 3,035 1,530 4,565 – 4,565 – – 13,607	Non- distributable reserve HK$’000 (note b) 6,229 – – – (460) – (460) – – – – – 5,769 – – – – – – – 5,769	Retained profits HK$’000 200,088 – – – – 24,535 24,535 – – – – (22,500) 202,123 – – – 4,376 4,376 (18,000) – 188,499
						7,606 2,570
						10,176 (460) 23,226
						32,942 125,000 124,238 8,400 (2,949) (22,500)
						533,741
						6,572 2,998
						9,570 14,904
						24,474 (18,000) (3,920)
						536,295

Notes:

(a) The special reserve of the Greenfield Group represents the nominal values of 32,000,000 non-voting class A shares of HK$1 each issued by a subsidiary of Greenfield to its shareholders prior to a group reorganisation in 2002.
(b) The non-distributable reserve of the Greenfield Group mainly arises from the statutory reserves requirement that the foreign investment enterprises shall appropriate 10% of their profit after taxation of the subsidiaries of Greenfield registered in the People’s Republic of China other than Hong Kong (the “PRC”) to the nondistributable reserve, under the PRC laws and regulations.

– 113 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

CONSOLIDATED CASH FLOW STATEMENT

For the Year Ended 31st December, 2008

OPERATING ACTIVITIES Profit before taxation Adjustments for: Impairment losses on trade receivables Amortisation of prepaid lease payments Depreciation of property, plant and equipment Loss (gain) on disposal of property, plant and equipment Interest income Loss on partial disposal of a subsidiary Share of profits of associates Operating cash flows before movements in working capital Decrease (increase) in inventories Decrease (increase) in trade and other receivables (Decrease) Increase in trade and other payables Decrease in amounts due to related companies Cash generated from operations Hong Kong Profits Tax paid PRC income tax paid NET CASH FROM OPERATING ACTIVITIES INVESTING ACTIVITIES Increase in loans receivable Purchase of property, plant and equipment Repayment from (advance to) an associate Dividend received from associates Interest received Proceeds from disposal of property, plant and equipment Deposits paid for acquisition of a subsidiary Proceeds from partial disposal of a subsidiary NET CASH (USED IN) FROM INVESTING ACTIVITIES	2008 HK$’000 18,230 2,185 329 13,215 230 (5,281) – (18,009) 10,899 6,874 18,380 (26,689) (75) 9,389 (961) (1,782) 6,646 (59,055) (8,265) 8,566 4,500 3,911 164 – – (50,179)	2007 HK$’000 26,573 1,176 241 10,910 (40) (2,215) 2,991 (16,612) 23,024 (2,321) (18,110) 9,997 (58) 12,532 (979) (612) 10,941 – (23,858) (3,566) 6,300 2,215 1,072 (100,000) 122,500 4,663

– 114 –

APPENDIX II

FINANCIAL INFORMATION OF GREENFIELD

FINANCING ACTIVITIES Dividends paid to minority shareholders of subsidiaries Dividends paid to equity holders of Greenfield (Repayment to) advance from a minority shareholder Contribution from minority shareholders of a subsidiary Net proceeds from issue of shares NET CASH (USED IN) FROM FINANCING ACTIVITIES NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR EFFECT OF FOREIGN EXCHANGE RATE CHANGES CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR, represented by bank balances and cash	2008 HK$’000 (3,920) (18,000) (2,430) – – (24,350) (67,883) 173,948 880 106,945	2007 HK$’000 – (22,500) 2,430 8,400 122,051 110,381 125,985 47,212 751 173,948

– 115 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT

For The Year Ended 31st December, 2008

1. General

Greenfield was incorporated as an exempted company with limited liability in the Cayman Islands under the Companies Law of the Cayman Islands and its shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). Greenfield’s immediate holding company is Pacific Orchid Investments Limited, a company incorporated in the British Virgin Islands (“BVI”), and its ultimate holding company is Mulpha International Bhd., a company incorporated in Malaysia with its shares listed on Bursa Malaysia Securities Berhad. The addresses of the registered office and principal place of business of Greenfield are disclosed in the corporate information to the annual report.

Greenfield is an investment holding company. The principal activities of its subsidiaries and associates are set out in notes 33 and 13, respectively.

The consolidated financial statements are presented in Hong Kong dollar (“HK$”), which is also the functional currency of Greenfield.

2. Application of New and Revised Hong Kong Financial Reporting Standards (“HKFRS”)

In the current year, the Greenfield Group has applied for the first time the following amendments and interpretations (“new HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) which are or have become effective:

HKAS 39 & HKFRS 7	Reclassification of Financial Assets
(Amendments)
HK(IFRIC) – Int 11	HKFRS 2: Group and Treasury Share Transactions
HK(IFRIC) – Int 12	Service Concession Arrangements
HK(IFRIC) – Int 14	HKAS 19 – The Limit on a Defined Benefit Asset,
	Minimum Funding Requirements and their
	Interaction

The adoption of the new HKFRSs had no material effect on how the results and financial position for the current or prior accounting periods have been prepared and presented. Accordingly, no prior period adjustment has been required.

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FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

The Greenfield Group has not early applied the following new and revised standards, amendments or interpretations that have been issued but are not yet effective:

HKFRSs (Amendments) Improvements to HKFRSs[1] HKAS 1 (Revised) Presentation of Financial Statements[2] HKAS 23 (Revised) Borrowing Costs[2] HKAS 27 (Revised) Consolidated and Separate Financial Statements[3] HKAS 32 & 1 Puttable Financial Instruments and Obligations (Amendments) Arising on Liquidation[2] HKAS 39 (Amendment) Eligible hedged items[3] HKFRS 1 & HKAS 27 Cost of an Investment in a Subsidiary, Jointly (Amendments) Controlled Entity or Associate[2] HKFRS 2 (Amendment) Vesting Conditions and Cancellations[2] HKFRS 3 (Revised) Business Combinations[3] HKFRS 7 (Amendments) Improving Disclosures about Financial Instruments[2] HKFRS 8 Operating Segments[2] HK(IFRIC) – Int 9 & Embedded Derivatives[4] HKAS 39 (Amendments) HK(IFRIC) – Int 13 Customer Loyalty Programmes[5] HK(IFRIC) – Int 15 Agreements for the Construction of Real Estate[2] HK(IFRIC) – Int 16 Hedges of a Net Investment in a Foreign Operation[6] HK(IFRIC) – Int 17 Distribution of Non-cash Assets to Owners[3] HK(IFRIC) – Int 18 Transfers of Assets from Customers [7]

1 Effective for annual periods beginning on or after 1st January, 2009 except the amendments to HKFRS 5, effective for annual periods beginning on or after 1st July, 2009

2 Effective for annual periods beginning on or after 1st January, 2009
3 Effective for annual periods beginning on or after 1st July, 2009 4 Effective for annual periods ending on or after 30th June, 2009
5 Effective for annual periods beginning on or after 1st July, 2008
6 Effective for annual periods beginning on or after 1st October, 2008

7 Effective for transfers on or after 1st July, 2009

The application of HKFRS 3 (Revised) may affect the Greenfield Group’s accounting for business combination for which the acquisition date is on or after 1st January, 2010. HKAS 27 (Revised) will affect the accounting treatment for changes in the Greenfield Group’s ownership interest in a subsidiary. The directors of Greenfield anticipate that the application of the other new and revised standards, amendments or interpretations will have no material impact on the results and financial position of the Greenfield Group.

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FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

3. Significant Accounting Policies

The consolidated financial statements have been prepared on the historical cost basis.

The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards 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 (the “Listing Rules”) and by the Hong Kong Companies Ordinance.

Basis of consolidation

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

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

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

Minority interests in the net assets of consolidated subsidiaries are presented separately from the Greenfield Group’s equity therein. Minority interests in the net assets consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the Greenfield Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

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FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

Property, plant and equipment

Property, plant and equipment including land and buildings held for use in the production of goods, or for administrative purposes, other than construction in progress, are stated at cost less subsequent accumulated depreciation and accumulated impairment loss.

Depreciation is provided to write off the cost of items of property, plant and equipment, other than construction in progress, over their estimated useful lives, and after taking into account their estimated residual values, using the straight-line method.

Construction in progress represents property, plant and equipment in the course of construction for production and administrative purposes. Construction in progress is carried at cost less any identified impairment loss. 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, plant and equipment, commences when the assets are ready for their intended use.

Investments in associates

An associate is an entity over which the investor has significant influence and that is neither a subsidiary nor an interest in joint venture.

– 119 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting. Under the equity method, investments in associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Greenfield Group’s share of net assets of the associates, less any identified impairment loss. When the Greenfield Group’s share of losses of an associate equals or exceeds its interest in that associate (which includes any long-term interests that, in substance, form part of the Greenfield Group’s net investment in the associate), the Greenfield Group discontinues recognising its share of further losses. An additional share of losses is provided for and a liability is recognised only to the extent that the Greenfield Group has incurred legal or constructive obligations or made payments on behalf of that associate.

Where a group entity transacts with an associate of the Greenfield Group, profits and losses are eliminated to the extent of the Greenfield Group’s interest in the relevant associate.

Impairment loss on tangible assets

At each balance sheet date, the Greenfield Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. 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 in the profit or loss immediately.

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 in the profit or loss immediately.

Financial instruments

– 120 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

Financial assets

The Greenfield Group financial assets are classified into one of the two categories, including loans and receivables and available-for-sale financial assets. 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 timeframe established by regulation or convention in the marketplace.

Effective interest method

Interest income is recognised on an effective interest basis for debt instruments.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. At each balance sheet date subsequent to initial recognition, the Greenfield Group’s loans and receivables (including deposit for acquisition of a subsidiary, loans receivable, advance to an associate, trade and other receivables, dividend receivable from an associate and bank balances) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment of 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 fair value through profit or loss, loans and receivables or held-to-maturity investments.

– 121 –

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APPENDIX II

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 are carried at cost less any identified impairment loss at each balance sheet date subsequent to initial recognition (see accounting policy on impairment of financial assets below).

Convertible instruments

Convertible instruments held by the Greenfield Group which are the combined instruments that contain both the loans receivable and conversion option component and are classified separately into respective items on initial recognition. The derivative component is measured at fair value with changes in fair value recognised in profit or loss.

If the derivative component that is required to be separated cannot be reliably measured because it will be settled by an unquoted equity instrument whose fair value cannot be reliably measured, the combined instrument is measured at fair value. However, if the derivative component of the convertible bonds is sufficiently significant to preclude it from obtaining a reliable estimate of fair value of the combined instrument, the combined instrument is measured at cost less impairment.

Impairment of financial assets

Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been impacted.

Objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty;
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 assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of trade receivables could include the Greenfield Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, observable changes in national or local economic conditions that correlate with default on trade receivables.

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For loans and receivables and available-for-sale equity investments, an impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired. For loans and receivables, 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 original effective interest rate.

For available-for-sale equity investments which are carried at cost less any identified impairment loss, 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.

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 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.

For loans and receivables, 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.

Financial liabilities and equity

An equity instrument is any contract that evidences a residual interest in the assets of the Greenfield Group entity after deducting all of its liabilities.

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Effective interest method

Interest expense is recognised on an effective interest basis.

Financial liabilities

The Greenfield Group financial liabilities (including trade and other payables and amounts due to related companies) are subsequently measured at amortised cost, using the effective interest method.

Equity instruments

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

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the assets expire or, the financial assets are transferred and the Greenfield Group has transferred substantially all the risks and rewards of ownership of the financial assets. 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 directly in equity is recognised in profit or loss.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the first-in, first-out method.

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Revenue recognition

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

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

Management fee income and royalty fee income is recognised when services are provided.

Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established.

Retirement benefits costs

Payments to the defined contribution retirement benefits plan, including Occupational Retirement Scheme (the “ORSO Scheme”), the Mandatory Provident Fund Scheme (“MPF Scheme”) and the state-managed retirement benefit scheme, are charged as expenses when employees have rendered service entitling them to the contributions.

Leasing

The Greenfield Group as lessee

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APPENDIX II

Leasehold land and building

Prepaid lease payments

Prepaid lease payments represent the up-front payments to lease mediumterm leasehold land interests in the PRC and are charged to the consolidated income statement on a straight-line basis over the term of the relevant leases.

Taxation

Taxation represents the sum of the income tax expense currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from the profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes income statement items that are never taxable or deductible. The Greenfield Group liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised 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 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.

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APPENDIX II

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, except where the Greenfield 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.

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 its 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 each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. 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 translation of monetary items, are recognised in profit or loss in the period in which they arise.

For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Greenfield Group’s foreign operations are translated into the presentation currency of the Greenfield Group (i.e. HK$) at the rate of exchange prevailing at the balance sheet date, 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 as a separate component of 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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APPENDIX II

4. Key Sources of Estimation Uncertainty and Management Judgement

In the process of applying the Greenfield Group’s accounting policies, management has made the following estimates and judgement that have significant effect on the amounts recognised in the consolidated financial statements:

Taxation

During the year ended 31st December, 2006, the Hong Kong Inland Revenue Department (the “IRD”) issued additional assessments in aggregate of approximately HK$11,001,000 relating to certain previous years of assessment, details of which are set out in note 8. Income tax expense of HK$10,000,000 was recognised against the payment for tax reserve certificates in that year, and the remaining amount of HK$1,001,000 was included in tax recoverable as at 31st December, 2007 and 31st December, 2008. As the ultimate outcome of the additional assessments remain undetermined, the tax amount that would otherwise become payable or recoverable may change.

Estimated impairment of loans receivable

When there is objective evidence of impairment loss, the Greenfield Group takes into consideration the estimation of future cash flows. The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). Where the actual future cash flows are less than expected, a material impairment loss may arise. As at 31st December, 2008, the carrying amount of loans receivable is HK$159,055,000 (2007: Nil). Details of the loans receivable are set out in note 16.

Sufficiency of the security of loans receivable

Management regularly reviews the recoverability of loans receivable. In determining the estimated impairment of loans receivable, management has considered the sufficiency of security of loans receivable from Winfame Investment Limited (“Winfame”) and New Gold International Limited (“New Gold”). The loans receivable is secured by the pledge of the entire issued share capital of Winfame and Winfame’s equity interest in New Gold. Where the underlying assets of Winfame and New Gold are disposed of or transferred out, a material impairment loss may arise. As at 31st December, 2008, the carrying amount of loans receivable is HK$159,055,000 (2007: Nil). Details of the loans receivable are set out in note 16.

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APPENDIX II

5. Revenue and Segmental Information

Revenue represents the amounts received and receivable for goods sold, net of discount and sales related taxes, during the year.

The Greenfield Group is principally engaged in manufacturing and trading of liquid coatings, powder coatings and solvents which are subject to similar risks and returns and which accounts for more than 90% of the turnover and profits of the Greenfield Group for the current and prior years. Accordingly, no business segment is presented.

The Greenfield Group primary format for reporting segment information is geographical segments (based on location of customers).

2008

REVENUE External sales Inter-segment sales (note) Total revenue RESULTS Segment results Interest income Unallocated corporate income Unallocated corporate expenses Share of profits of associates Profit before taxation Taxation Profit for the year	Hong Kong HK$’000 178,700 144,238 322,938 12,833	The PRC HK$’000 156,997 3,408 160,405 5,251	Eliminations HK$’000 – (147,646) (147,646)	Consolidated HK$’000 335,697 – 335,697 18,084 5,281 9,508 (32,652) 18,009 18,230 (3,326) 14,904

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Hong Kong The PRC HK$’000 HK$’000 ASSETS Segment assets 27,788 51,406 Unallocated corporate assets Consolidated total assets LIABILITIES Unallocated corporate liabilities OTHER INFORMATION Hong Kong The PRC HK$’000 HK$’000 Impairment losses on trade receivables recognised in the consolidated income statement 1,462 723	Consolidated HK$’000 79,194 486,540
	565,734

	29,439

	Consolidated HK$’000 2,185

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2007

REVENUE External sales Inter-segment sales (note) Total revenue RESULTS Segment results Interest income Unallocated corporate income Unallocated corporate expenses Loss on partial disposal of a subsidiary Share of profits of associates Profit before taxation Taxation Profit for the year	Hong Kong HK$’000 195,576 166,284 361,860 13,562	The PRC HK$’000 121,490 581 122,071 7,999	Eliminations HK$’000 – (166,865) (166,865)	Consolidated HK$’000 317,066 – 317,066 21,561 2,215 7,002 (17,826) (2,991) 16,612 26,573 (3,347) 23,226

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Hong Kong The PRC HK$’000 HK$’000 ASSETS Segment assets 60,377 35,976 Unallocated corporate assets Consolidated total assets LIABILITIES Unallocated corporate liabilities OTHER INFORMATION Hong Kong The PRC HK$’000 HK$’000 Impairment losses on trade receivables recognised in the consolidated income statement – 1,176	Consolidated HK$’000 96,353 493,826
	590,179

	56,438

	Consolidated HK$’000 1,176

Note: Inter-segment sales are charged at prices with reference to the prevailing market rates.

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APPENDIX II

The following is an analysis of the carrying amount of segment assets and expenditure on property, plant and equipment, analysed by the geographical area in which the assets are located:

The PRC Hong Kong	Carrying amount of segment assets 2008 2007 HK$’000 HK$’000 174,049 166,161 37,749 69,471 211,798 235,632	Expenditure on property, plant and equipment 2008 2007 HK$’000 HK$’000 7,496 19,864 769 428 8,265 20,292	Expenditure on property, plant and equipment 2008 2007 HK$’000 HK$’000 7,496 19,864 769 428 8,265 20,292
			20,292

6. Directors’ and Employees’ Emoluments

(a) Directors’ Remuneration

The emoluments paid or payable to each of the seven (2007: ten) directors were as follows:

2008 Fees Other emoluments Salaries and other benefits Retirement benefit scheme contribution Total emoluments	Lau Yau Cheung Tsui Robert Che Kwong HK$’000 HK$’000 – – 1,298 389 12 12 1,310 401	Chung Tze Hien HK$’000 – – – –	Ng Seng Nam HK$’000 – – – –	Lau Siu Ki, Kevin HK$’000 100 – – 100	Wu Wing Kit HK$’000 100 – – 100	Chui Hong Sheung HK$’000 100 – – 100	Total HK$’000 300 1,687 24
							2,011

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2007 Fees Other emoluments Salaries and other benefits Retirement benefit scheme contribution Total emoluments	Lau Yau Cheung HK$’000 – 217 2 219	Tsui Robert Che Kwong HK$’000 – 65 2 67	Yuen Shu Wah HK$’000 – 1,279 106 1,385	Ko Jack Lum HK$’000 – 2,402 106 2,508	Ng Kai On HK$’000 – 821 54 875	Chung Tze Hien HK$’000 – – – –	Ng Seng Nam HK$’000 – – – –	Lau Siu Ki, Kevin HK$’000 100 – –	Wu Wing Kit HK$’000 100 – – 100	Chui Hong Sheung HK$’000 100 – – 100	Total HK$’000 300 4,784 270
								100			5,354

During the year ended 31st December, 2007, a director waived emoluments of HK$1,257,000. None of the directors waived any emoluments during the year.

(b) Employees’ Emoluments

Of the five individuals with the highest emoluments in the Greenfield Group, two (2007: three) were directors of Greenfield whose emoluments are included above. The emoluments of the remaining three (2007: two) individuals were as follows:

Salaries and other benefits Retirement benefit scheme contribution	2008 HK$’000 4,333 275 4,608	2007 HK$’000 1,405 58
		1,463

Their emoluments were within the following bands:

	2008	2007
	Number of	Number of
	employees	employees
Nil to HK$1,000,000	1	2
HK$1,000,001 to HK$1,500,000	1	–
HK$2,000,001 to HK$2,500,000	1	–

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During the year, no emoluments were paid by the Greenfield Group to the five highest paid individuals (including directors and employees) as an inducement to join or upon joining the Greenfield Group or as compensation for loss of office.

7. Profit Before Taxation

Profit before taxation has been arrived at after charging: Directors’ remuneration (note 6) Fees Other emoluments Other employee benefits expense Total employee benefits expense Impairment losses on trade receivables Amortisation of prepaid lease payments Auditor’s remuneration Cost of inventories recognised as expense Depreciation of property, plant and equipment Loss on disposal of property, plant and equipment Operating lease rentals in respect of rented premises Share of taxation of associates (included in share of profits of associates) and after crediting: Exchange gain, net Gain on disposal of property, plant and equipment Management fee income (note 24) Royalty fee income (note 24) Interest income earned from: Advance to an associate (note 24) Bank deposits Loans receivable	2008 HK$’000 300 1,711 87,269 89,280 2,185 329 660 291,419 13,215 230 1,769 4,502 1,937 – 6,474 4,231 1,092 827 3,362	2007 HK$’000 300 5,054 65,839
		71,193 1,176 241 640 270,503 10,910 – 1,025 3,924 2,397 40 6,783 3,807 1,333 882 –

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8. Taxation

The charge comprises: Hong Kong Profits Tax: Current year Underprovision in prior year PRC Enterprise Income Tax: Current year Underprovision in prior year Deferred tax (note 17): Current year Attributable to a change in tax rate	2008 HK$’000 2,154 133 2,287 839 249 1,088 (56) 7 (49) 3,326	2007 HK$’000 1,733 932 2,665 676 95 771 (89) – (89) 3,347

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APPENDIX II

On 26th June, 2008, the Hong Kong Legislative Council passed the Revenue Bill 2008 which reduced corporate profits tax rate from 17.5% to 16.5% effective from the year of assessment 2008/2009. Therefore, Hong Kong Profits Tax is calculated at 16.5% (2007: 17.5%) of the estimated assessable profits for the year.

Pursuant to the relevant laws and regulations in the PRC, certain of Greenfield’s PRC subsidiaries are entitled to exemption from PRC Enterprise Income Tax for two years starting from their first profit-making year, followed by a 50% reduction for the next three years while Greenfield’s other PRC subsidiaries are subject to preferential tax rate.

The newly promulgated Enterprise Income Tax Law (the “New Law”) of the PRC is effective on 1st January, 2008. In February 2008, the Ministry of Finance and the State Administration of Taxation issued several important tax circulars which clarify the implementation of the New Law. Following the New Law and tax circulars, one of Greenfield’s PRC subsidiaries which enjoyed the preferential tax rate of 15% in prior year is subject to 18% tax rate in the current year and the tax rate will increase progressively to 25% until 2012. Another PRC subsidiary which enjoyed 12% effective tax rate in prior year is subject to 25% tax rate starting from 1st January, 2008, while the remaining two PRC subsidiaries are entitled to full tax exemption in the current and prior years and therefore does not provide for PRC Enterprise Income Tax for both years.

In addition, the IRD issued additional assessment in aggregate of approximately HK$11,001,000 to an indirect wholly-owned subsidiary of Greenfield disallowing its offshore claims in respect of its production activities for years of assessment 2002/03, 2003/04, 2004/05 and 2005/06 during the year ended 31st December, 2006. The Greenfield Group had purchased tax reserve certificates totalling HK$11,001,000 and an amount of HK$10,000,000 was recognised as income tax expense against such tax reserve certificates in previous year and the remaining amount of tax reserve certificates of HK$1,001,000 was included in tax recoverable as at the balance sheet date. In the opinion of the directors of Greenfield, the ultimate outcome of the additional assessment remains undetermined and the Greenfield Group will continue to defend vigorously against the additional assessment.

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APPENDIX II

FINANCIAL INFORMATION OF GREENFIELD

The taxation charge for the year can be reconciled to the profit before taxation per the consolidated income statement as follows:

Profit before taxation Less: Share of profits of associates Tax at Hong Kong Profits Tax rate of 16.5% (2007: 17.5%) Tax effect of expenses not deductible for tax purpose Tax effect of income not taxable for tax purpose Tax effect of tax loses not recognised Effect of tax exemptions granted to PRC subsidiaries Effect of change in tax rate Effect of different tax rates of subsidiaries operating in the PRC Underprovision in respect of prior year Taxation charge for the year	2008 HK$’000 18,230 (18,009) 221 36 1,402 (260) 1,496 – (7) 277 382 3,326	2007 HK$’000 26,573 (16,612) 9,961 1,743 1,483 (660) – (439) – 193 1,027 3,347

Details of deferred taxation are set out in note 17.

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APPENDIX II

9. Dividends

Dividends paid and recognised as distribution during the year: 2008 Interim – Nil (2007: 2007 Interim – HK2.5 cents) per ordinary share 2007 Final – HK3 cents (2007: 2006 Final – HK3 cents) per ordinary share 2007 Special – HK3 cents (2007: 2006 Special – HK3 cents) per ordinary share	2008 HK$’000 – 9,000 9,000 18,000	2007 HK$’000 7,500 7,500 7,500
		22,500

No interim dividend for the current year was paid or proposed during 2008, nor has any final or special dividend been proposed since the balance sheet date.

10. Earnings per Share

The calculation of basic earnings per share attributable to equity holders of Greenfield is based on the profit for the year attributable to equity holders of Greenfield of HK$4,376,000 (2007: HK$24,535,000) and on the weighted average number of ordinary shares of 300,000,000 (2007: 262,054,795) in issue during the year.

No diluted earnings per share is presented as the Greenfield Group did not have any potential ordinary shares in issue at any time during the year.

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APPENDIX II

11. Property, Plant and Equipment

COST At 1st January, 2007 Exchange adjustments Additions Transfer Disposals At 31st December, 2007 Exchange adjustments Additions Transfer Disposals At 31st December, 2008 DEPRECIATION At 1st January, 2007 Exchange adjustments Provided for the year Eliminated on disposals At 31st December, 2007 Exchange adjustments Provided for the year Eliminated on disposals At 31st December, 2008 CARRYING AMOUNTS At 31st December, 2008 At 31st December, 2007	Land and buildings HK$’000 49,323 3,298 7,636 802 (464) 60,595 3,868 – – (188) 64,275 10,860 705 2,174 (244) 13,495 769 2,994 (4) 17,254 47,021 47,100	Leasehold improvements HK$’000 13,262 909 395 133 (165) 14,534 904 1,382 862 – 17,682 6,622 565 2,430 (65) 9,552 642 2,699 – 12,893 4,789 4,982	Furniture, fixtures and office equipment HK$’000 19,524 1,525 4,887 205 (522) 25,619 1,557 2,830 149 (501) 29,654 11,052 881 3,026 (329) 14,630 958 3,972 (411) 19,149 10,505 10,989	Motor vehicles HK$’000 8,648 525 2,071 – (1,551) 9,693 515 2,209 – (1,035) 11,382 5,258 273 1,402 (1,358) 5,575 256 1,291 (929) 6,193 5,189 4,118	Plant, machinery and equipment HK$’000 24,361 1,862 2,969 1,485 (545) 30,132 1,797 398 67 (127) 32,267 11,397 816 1,878 (219) 13,872 1,134 2,259 (113) 17,152 15,115 16,260	Construction in progress HK$’000 489 22 2,334 (2,625) – 220 25 1,446 (1,078) – 613 – – – – – – – – – 613 220	Total HK$’000 115,607 8,141 20,292 – (3,247)
							140,793 8,666 8,265 – (1,851)
							155,873
							45,189 3,240 10,910 (2,215)
							57,124 3,759 13,215 (1,457)
							72,641
							83,232
							83,669

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APPENDIX II

Certain of the Greenfield Group’s owner-occupied leasehold land located in Hong Kong and the PRC is included in the above land and buildings as the allocation between the land and buildings elements cannot be made reliably.

The above items of property, plant and equipment, other than construction in progress, are depreciated on a straight-line basis, and after taking into account their estimated residual values, at the following rates per annum:

Land and buildings	Over the shorter of the term of
	the lease or 50 years
Leasehold improvements	4.5% – 20%
Furniture, fixtures and office equipment	18% – 20%
Motor vehicles	18% – 25%
Plant, machinery and equipment	4% – 18%

The carrying values of land and buildings shown above comprise:

Medium-term leases in Hong Kong Medium-term leases in the PRC	2008 HK$’000 5,699 41,322 47,021	2007 HK$’000 5,861 41,239
		47,100

The Greenfield Group has pledged certain land and buildings in Hong Kong with a carrying amount of approximately HK$2,272,000 (2007: HK$2,348,000) to secure general banking facilities of HK$10,000,000 (2007: HK$10,000,000) granted to the Greenfield Group.

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APPENDIX II

12. Prepaid Lease Payments

The Greenfield Group prepaid lease payments represent land use rights in the PRC held under medium-term lease, and are analysed for reporting purposes as follows:

Non-current asset Current asset	2008 HK$’000 13,885 340 14,225	2007 HK$’000 13,397 320
		13,717

13. Interests in Associates

Unlisted investments, at cost Share of post-acquisition translation reserve Share of post-acquisition profits, net of dividends received	The Greenfield Group 2008 2007 HK$’000 HK$’000 178 178 7,459 4,461 65,115 51,606 72,752 56,245	The Greenfield Group 2008 2007 HK$’000 HK$’000 178 178 7,459 4,461 65,115 51,606 72,752 56,245
		56,245

Details of the Greenfield Group’s associates, which are held by a non-wholly owned subsidiary of Greenfield, at 31st December, 2008 and 31st December, 2007 are as follows:

Proportion of nominal value of issued capital/ Place of registered capital incorporation/ held by the Name of associate operations Greenfield Group Principal activity Chemfield Trading Company Hong Kong 49% Inactive Limited CMW Holding Limited Hong Kong 45% Investment holding

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APPENDIX II

		Proportion of
		nominal value
	Place of	of issued capital/
	incorporation	registered capital
Name of subsidiaries of	or establishment/	held by CMW
CMW Holding Limited	operations	Holding Limited	Principal activities
廣州卡秀堡萬輝塗料	PRC	100%	Manufacturing
有限公司			and trading in
CMW Coatings (Guangzhou)			paints and related
Limited			products
無錫卡秀堡萬輝塗料	PRC	100%	Manufacturing
有限公司			and trading in
CMW Coatings (Wuxi)			paints and related
Limited			products
CMW Coatings (Hong Kong)	Hong Kong	100%	Trading in paints
Limited			and related
			products

In prior years, the interests in associates were recorded in the consolidated balance sheet based on the Greenfield Group’s effective interests in the share capital of Chemfield Trading Company Limited and CMW Holding Limited.

In 2008, the Greenfield Group has used the proportion interest of equity held by Greenfield and its subsidiaries to state the carrying amount of the Greenfield Group’s interests in the net assets of its associates. The respective comparative figures have been restated. The previously stated amounts of interests in associates and minority interests, that are HK$28,685,000 and HK$105,954,000 respectively, have been restated to HK$56,245,000 and HK$133,514,000 respectively.

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FINANCIAL INFORMATION OF GREENFIELD

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

Total assets Total liabilities Net assets Group’s share of net assets of associates Revenue Profit for the year Group’s share of profits of associates for the year 14. Available-for-sale Investments Unlisted equity securities, at cost	2008 HK$’000 258,526 (96,855) 161,671 72,752 404,037 40,021 18,009	2007 HK$’000 274,351 (149,364) 124,987 56,245 332,233 36,915 16,612 2008 & 2007 HK$’000 10

The above unlisted investments represent investments in unlisted equity securities issued by a private entity incorporated in Hong Kong. They do not have a quoted market price in an active market and stated at cost less impairment at each balance sheet date because the range of reasonable fair value estimates is so significant that the directors of Greenfield are of the opinion that the fair value cannot be reliably measured.

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APPENDIX II

15. Deposit for Acquisition of a Subsidiary

On 5th November, 2007, Smart Million Limited (“Smart Million”), a wholly-owned subsidiary of Greenfield, entered into a conditional sale and purchase agreement (the “Agreement”) with independent third parties (the “Vendors”) for the acquisition of the entire issued share capital of Winfame, which held 99.9999875% of the issued share capital of New Gold which in turn held the entire equity interest in 呼倫貝爾東明礦業有限責任公司 (referred to as “Dong Ming Mining”), a wholly-owned foreign enterprise established in the PRC and engaged in coal mining. An initial refundable deposit of HK$100,000,000 was paid to the Vendors in November 2007. Such deposit is secured by the pledge of the entire issued share capital of Winfame and Winfame’s equity interest in New Gold (collectively referred to as the “Shares”). The deposit has been restructured as part of the loans receivable (the “First Loan”) (note 16) upon termination of the Agreement during the year.

16. Loans Receivable

In May 2008, Smart Million advanced a loan principal of HK$30,000,000 (the “Second Loan”) to Winfame to finance the purchase of plant and machinery in connection with the operation of the coal mines by Dong Ming Mining. The Second Loan is secured by the second mortgage of the Shares, bears interest at 1% per month and is repayable on demand.

In June 2008, Smart Million entered into a supplemental agreement (the “Supplemental Agreement”) with the Vendors and other parties to amend, inter alia, certain representations and warranties by the Vendors and the guarantor with respect to the audited profit after tax of Dong Ming Mining for the two years ending 31st December, 2010.

On 27th November, 2008, Smart Million entered into a deed of termination (the “Deed of Termination”) with, inter alia, the Vendors, New Gold and Winfame to terminate the Agreement and the Supplemental Agreement and to consolidate and restructure the First Loan, the Second Loan and a further loan to New Gold of HK$25,000,000 plus respective accrued interest (collectively refer to as the “Indebtedness”) for a term of two years (extendable for a further period of one year) from the date of the Deed of Termination. The Indebtedness bears interest at 10% per annum and the interest is payable by end of each quarter. At 31st December, 2008, the amount of the Indebtedness is HK$159,055,000 and the Indebtedness is secured by the Shares. Details of the transactions are disclosed in the circular of Greenfield dated 21st January, 2009.

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FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

As part of the conditions to safeguard the recovery by Smart Million of the Indebtedness under the Deed of Termination, Winfame granted to Smart Million a right to convert the Indebtedness into 25% equity interest of New Gold in satisfaction in full of the Indebtedness at Smart Million’s sole and absolute discretion at any time within the two-year period during the continuance of the Deed of Termination. The Indebtedness including this conversion right is stated at cost less impairment at the balance sheet date because the range of reasonable fair value estimates of the conversion right is so significant that the directors of Greenfield are of opinion that the fair value of the conversion right cannot be reliably measured and the conversion right is sufficiently significant to preclude it from obtaining a reliable estimate from the Indebtedness including the conversion right.

17. Deferred Taxation

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

At 1st January, 2007 (Credit) charge to consolidated income statement At 31st December, 2007 (Credit) charge to consolidated income statement Effect of change in tax rate At 31st December, 2008	Difference between tax allowance and depreciation HK$’000 23 (32) (9) 55 1 47	Allowance for trade receivables HK$’000 2 121 123 1 (8) 116	Total HK$’000 25 89 114 56 (7) 163

For the purpose of balance sheet presentation, the above deferred tax assets and liabilities have been offset.

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APPENDIX II

At 31st December, 2008, the Greenfield Group has unused tax losses of approximately HK$9,000,000 (2007: Nil) available for offset against future profits. No deferred tax asset has been recognised in respect of such tax losses due to the unpredictability of future profit streams. Included in unrecognised tax losses are losses of approximately HK$6,000,000 (2007: Nil) that will expire in 2013. Other tax losses may be carried forward indefinitely.

The New Law imposes withholding tax upon the distribution of profits earned by Greenfield’s PRC subsidiaries on or after 1st January, 2008 to their non-PRC shareholders. Deferred taxation has not been provided for in the consolidated financial statements in respect of temporary differences attributable to accumulated profits of one of Greenfield’s PRC subsidiaries amounting to approximately HK$1,222,000 (2007: Nil) as the Greenfield Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.

18. Inventories

Raw materials Work in progress Finished goods Trade and Other Receivables Trade receivables from third parties Trade receivables from associates Other receivables	2008 HK$’000 23,328 3,876 2,541 29,745 2008 HK$’000 68,753 10,441 5,402 84,596	2007 HK$’000 26,737 5,444 3,250
		35,431

		2007 HK$’000 81,639 14,714 6,462
		102,815

19. Trade and Other Receivables

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APPENDIX II

The Greenfield Group allows an average credit period of 30 days to 90 days to its trade customers. The following is an aged analysis of trade receivables net of allowance for doubtful debts at the balance sheet dates:

0-30 days 31-60 days 61-90 days Over 90 days	Trade receivables from third parties 2008 2007 HK$’000 HK$’000 18,659 23,699 19,694 26,583 15,877 20,117 14,523 11,240 68,753 81,639	Trade receivable from associates 2008 2007 HK$’000 HK$’000 1,984 8,222 2,903 1,679 2,704 1,292 2,850 3,521 10,441 14,714	Trade receivable from associates 2008 2007 HK$’000 HK$’000 1,984 8,222 2,903 1,679 2,704 1,292 2,850 3,521 10,441 14,714
			14,714

Before accepting any new customer, the Greenfield Group will assess the potential customer’s credit quality and defines its credit limits. Credit sales are made to customers with a satisfactory trustworthy credit history. Credit limits attributed to customers are reviewed regularly. Trade receivables that are neither past due nor impaired have good track records with the Greenfield Group.

Included in the Greenfield Group’s trade receivables balance are debtors with an aggregate carrying amount of HK$21,624,000 (2007: HK$14,761,000) which were past due at the balance sheet date for which the Greenfield 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 based on the historical experience. The Greenfield Group does not hold any collateral over these balances.

Ageing of trade receivables which are past due but not impaired:

61-90 days 91-120 days 121-150 days	2008 HK$’000 4,251 9,830 7,543 21,624	2007 HK$’000 – 9,518 5,243
		14,761

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APPENDIX II

FINANCIAL INFORMATION OF GREENFIELD

No interest is charged on the trade receivables. The Greenfield Group has provided fully for all trade receivables over 360 days because historical experience is such that trade receivables that are past due beyond 360 days are generally not recoverable. Trade receivables between 60 days and 360 days have been provided for based on estimated irrecoverable amounts from the sale of goods, determined by reference to past default experience.

Included in the allowance for doubtful debts are individually impaired trade receivables with an aggregate balance of HK$4,555,000 (2007: HK$2,980,000) that are considered irrecoverable by management after consideration on the credit quality of those individual customers, the ongoing relationship with the Greenfield Group and the ageing of these receivables. The Greenfield Group does not hold any collateral over these balances.

Movement in the allowance for doubtful debts is as follows:

Balance at the beginning of the year Impairment losses recognised Amounts written off as uncollectible Balance at the end of the year	2008 HK$’000 2,980 2,185 (610) 4,555	2007 HK$’000 3,221 292 (533) 2,980

20. Advance to an Associate/Dividend Receivable from an Associate

The amounts are owed by CMW Holding Limited. The advance is unsecured, bears interest at Hong Kong Prime Rate plus 1% per annum and is repayable within the next year.

21. Bank Balances and Cash

Bank balances and cash comprise cash held by the Greenfield Group and short term bank deposits with an original maturity of three months or less. The bank balances carry interest at prevailing market rate of 1% (2007: 1.5%) per annum.

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APPENDIX II

22. Trade and Other Payables

Trade payables to third parties Trade payable to an associate Other payables	2008 HK$’000 13,586 35 15,818 29,439	2007 HK$’000 34,059 4,212 15,662
		53,933

The following is an aged analysis of trade payables at the balance sheet dates:

0-30 days 31-60 days 61-90 days Over 90 days	Trade payables to third parties 2008 2007 HK$’000 HK$’000 4,282 19,991 8,264 10,498 1,040 2,706 – 864 13,586 34,059	Trade payable to an associate 2008 2007 HK$’000 HK$’000 35 4,212 – – – – – – 35 4,212	Trade payable to an associate 2008 2007 HK$’000 HK$’000 35 4,212 – – – – – – 35 4,212
			4,212

The average credit period on purchases of goods is 90 days. The Greenfield Group has financial risk management policies in place to ensure that all payables are within the credit timeframe.

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APPENDIX II

23. Share Capital

Ordinary shares of HK$0.1 each: Authorised: At 31st December, 2007 and 31st December, 2008 Issued and fully paid: At 1st January, 2007 Issue of new shares on placement At 31st December, 2007 and 31st December, 2008	Number of shares 1,000,000,000 250,000,000 50,000,000 300,000,000	Amount HK$’000 100,000

		25,000 5,000
		30,000

On 21st September, 2007, Greenfield entered into a placing agreement with a placing agent for placement of 50,000,000 new shares at the price of HK$2.50 per share to independent third parties, representing a discount of 14% to the closing market price of Greenfield’s shares on 20th September, 2007. An arrangement fee of HK$2,949,000 was setoff against share premium. All the shares issued during the year ended 31st December, 2007 ranked pari passu with the then existing shares in all respects.

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APPENDIX II

24. Connected and Related Party Transactions and Balances

During the year, the Greenfield Group had the following transactions and balances with related companies other than as disclosed in notes 19, 20 and 22:

Relationship Nature of transactions/balances Connected and related party: Minority shareholder that has significant influence over the Greenfield Group Non-trade payable owed by the Greenfield Group (note b) Sheffield Chemical Company Limited (note a) Trade payable owed by the Greenfield Group (note b) Related party: CMW Holding Limited Sales of goods by the Greenfield Group Management fee income received by the Greenfield Group Purchases of goods by the Greenfield Group Licence fee income received by the Greenfield Group Royalty fee income received by the Greenfield Group Interest income received by the Greenfield Group Dividend received by the Greenfield Group	2008 HK$’000 – – 45,131 6,474 14,296 – 4,231 1,092 4,500	2007 HK$’000 2,430 75 38,963 6,783 11,893 3,195 3,807 1,333 4,500

Notes:

(a) Greenfield was deemed to be a connected party in accordance with the provisions under the Listing Rules as Mr. Yuen Shu Wah, a director of Greenfield during the year ended 31st December, 2007, had beneficial interest in Greenfield.
(b) The amount is unsecured, interest-free and repayable on demand.

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APPENDIX II

In addition, the remuneration of directors and other members of key management during the year, which is determined by the remuneration committee having regard to the performance of individuals and market trends, is as follows:

Short-term benefits Post-employment benefits	2008 HK$’000 6,320 299 6,619	2007 HK$’000 6,489 328
		6,817

25. Non-cash Transaction

During the year, part of loans receivable amounting to HK$100,000,000 was transferred from refundable deposit for acquisition of Winfame as stated in note 15.

26. Balance Sheet of Greenfield

Details of the balance sheet of Greenfield as at balance sheet date are as follows:

Notes Assets and liabilities Investments in subsidiaries Amounts due from subsidiaries (a) Deposit and prepayment Bank balances Accruals Capital and reserves Share capital Reserves (b)	2008 HK$’000 60,766 195,959 – 62,520 319,245 (689) 318,556 30,000 288,556 318,556	2007 HK$’000 60,766 132,456 154 141,787
		335,163 (282)
		334,881

		30,000 304,881
		334,881

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APPENDIX II

Notes:

(a) The amounts are unsecured, interest-free and repayable on demand.
(b) Details of changes in reserves of Greenfield are as follows:

At 1st January, 2007 Issue of new shares on placement Transaction costs attributable to issue of shares Profit for the year Dividends At 31st December, 2007 Profit for the year Dividends At 31st December, 2008	Share premium HK$’000 4,242 120,000 (2,949) – – 121,293 – – 121,293	Contributed surplus HK$’000 119,071 – – – – 119,071 – – 119,071	Retained profits HK$’000 18,923 – – 68,094 (22,500) 64,517 1,675 (18,000) 48,192	Total HK$’000 142,236 120,000 (2,949) 68,094 (22,500)
				304,881 1,675 (18,000)
				288,556

(c) At 31st December, 2008, Greenfield had given guarantees to banks in respect of credit facilities granted to subsidiaries to the extent of HK$19,000,000 (2007: HK$19,000,000).

27. Capital Commitments

	2008	2007
	HK$’000	HK$’000
Capital expenditure in respect of the acquisition
of property, plant and equipment contracted
but not provided for in the consolidated
financial statements	1,023	1,043

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APPENDIX II

28. Operating Lease Commitments

At the balance sheet date, the Greenfield Group had commitments for future minimum lease payments in respect of office and factory premises under non-cancellable operating leases which fall due as follows:

Within one year In the second to fifth year inclusive Over five years	2008 HK$’000 961 2,231 6,913 10,105	2007 HK$’000 1,650 2,415 6,724
		10,789

Leases are negotiated and monthly rentals are fixed for terms ranging from 2 to 46 years (2007: 2 to 47 years).

29. Retirement Benefits Schemes

The Greenfield Group participates in defined contribution schemes which are registered under the ORSO Scheme and the MPF Scheme established under the MPF Ordinance in December 2000. The assets of the schemes are held separately from those of the Greenfield Group in funds under the control of trustees. Employees who were members of the ORSO Scheme prior to the establishment of the MPF Scheme were offered a choice of staying within the ORSO Scheme or switching to the MPF Scheme, whereas all new employees joining the Greenfield Group on or after 1st December, 2000 are required to join the MPF Scheme.

For members of the MPF Scheme, the Greenfield Group contributes 5% of relevant payroll costs to the scheme, which contribution is matched by the employee. The maximum monthly contribution by the Greenfield Group is limited to HK$1,000 per employee.

The ORSO Scheme is funded by monthly contributions by the Greenfield Group at 7% of the employee’s basic salary.

There are no forfeited contributions for both years which arose upon employees leaving the ORSO Scheme and which was available to reduce the contributions payable in future years.

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APPENDIX II

Employees in Greenfield’s PRC subsidiaries are required to participate in a defined contribution retirement scheme operated by the local municipal government. The PRC subsidiaries are required to contribute 10% of the employee payroll to such scheme to fund the retirement benefits of the employees.

The pension scheme contributions for the directors and employees, which have been dealt with in the consolidated income statement for the year, is HK$5,123,000 (2007: HK$3,930,000). No forfeited contributions have been applied to reduce the retirement benefits scheme contribution for both years.

30. Capital Risk Management

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

The capital structure of the Greenfield Group consists of equity attributable to equity holders of Greenfield, comprising issued share capital and reserves.

The directors of Greenfield review the capital structure on an on-going annual 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 Greenfield Group will balance its overall capital structure through the payment of dividends, new share issues and share buy-backs as well as the issue of new debt.

31. Financial Instruments

(a) Categories of financial instruments

	2008	2007
	HK$’000	HK$’000
Financial assets
Loans and receivables
(including cash and cash equivalents)	361,074	393,367
Available-for-sale investments	10	10
Financial liabilities
Amortised cost	16,740	44,333

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APPENDIX II

(b) Financial risk management objectives and policies

The Greenfield Group major financial instruments include deposit for acquisition of a subsidiary, loans receivable, advance to an associate, trade and other receivables, dividend receivable from an associate, bank balances, trade and other payables and amounts due to related companies. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below.

(i) Market risk

Currency risk

Several subsidiaries in the Greenfield Group have foreign currency transactions, which expose the Greenfield Group to foreign currency risk.

At the balance sheet date, the carrying amounts of the relevant group entities’ foreign currency denominated monetary liabilities are as follows:

	2008	2007
	HK$’000	HK$’000
United States dollars
(“USD”)	5	3,455

As HK$ is pegged with USD, the Greenfield Group’s currency risk in relation to the above monetary assets/liabilities is expected to be minimal.

Interest rate risk

The Greenfield Group is exposed to fair value interest rate risk in relation to loans receivable carrying fixed-rate interest. The Greenfield Group is also exposed to cash flow interest rate risk in relation to the fluctuation of Hong Kong Prime Rate arising from the Greenfield Group’s advance to an associate and bank balances carrying variable-rate interest.

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APPENDIX II

Sensitivity analysis

The sensitivity analysis below has been determined based on the exposure to variable interest rates for advance to an associate and bank balances at the balance sheet date. The analysis is prepared assuming the financial instruments outstanding at the balance sheet date were outstanding for the whole year. A 50 basis points increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 50 (2007: 50) basis points higher/lower and all other variables were held constant, the Greenfield Group’s profit for the year would increase/decrease by approximately HK$122,000 (2007: increase/decrease by HK$71,000).

(ii) Credit risk

As at 31st December, 2008, the maximum exposure to credit risk by the Greenfield Group which will cause a financial loss to the Greenfield Group due to failure to discharge an obligation by the counterparties is arising from the carrying amount of the respective recognised financial assets as stated in the consolidated balance sheet.

In order to manage its credit risk, management of the Greenfield Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. Credit sales of products are only made to customers with good repayment history. In addition, the Greenfield Group reviews the recoverable amount of individual debt on an on-going basis to ensure that adequate impairment losses are made for irrecoverable amounts. A net impairment loss of HK$2,185,000 (2007: HK$1,176,000) in respect of the net trade receivables was recognised by the Greenfield Group for the year.

The credit risk on liquid funds of the Greenfield Group is limited because the counterparties are banks with good reputation.

The Greenfield Group has concentration of credit risk as approximately 13% (2007: 15%) of trade receivables is due from associates, advance of HK$10,000,000 (2007: HK$18,566,000) has been made to an associate and loans receivable of HK$159,055,000 (2007: Nil) is owed to a counterparty at 31st December, 2008.

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APPENDIX II

(iii) Liquidity risk

In management of the liquidity risk, the Greenfield Group monitors and maintains a level of cash and cash equivalents deemed adequate by management to finance the Greenfield Group’s operations and mitigate the effects of fluctuations in cash flows. As at 31st December, 2008, the Greenfield Group has available unutilised overdraft facilities of approximately HK$19,000,000 (2007: HK$19,000,000).

The following table details the Greenfield Group’s remaining contractual maturity for its financial liabilities. For non-derivative financial liabilities, the table has been drawn up based on the undiscounted cash flows of the financial liabilities based on the earliest date on which the Greenfield Group can be required to pay.

2008 Non-derivative financial liability Trade and other payables 2007 Non-derivative financial liabilities Trade and other payables Amounts due to related companies	Weighted average effective interest rate % – – – –	Less than 1 month HK$’000 4,193 24,655 2,505 27,160	1-3 months HK$’000 8,265 13,203 – 13,203	3 months to 1 year HK$’000 4,282 3,970 – 3,970	Total undiscounted cash flow and carrying amount HK$’000 16,740 41,828 2,505
					44,333

(c) Fair value

The fair values of the Greenfield Group’s financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions. 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.

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APPENDIX II

32. Post Balance Sheet Event

Subsequent to the balance sheet date, Greenfield repurchased 27,140,000 ordinary shares in Greenfield through the Stock Exchange. The highest and lowest prices paid for such purchases were HK$0.85 and HK$0.84, respectively. The total amount paid to repurchase these shares amounted to approximately HK$23,000,000.

33. Subsidiaries

Details of Greenfield’s subsidiaries at 31st December, 2008 and 31st December, 2007 are as follows:

	Place of	Nominal value
	incorporation or	of issued share	Attributable equity
	establishment/	capital/paid up	interest	held	by
Name of subsidiary	operations	registered capital	Greenfield			Principal activities
			Directly	Indirectly
Rookwood Investments	BVI/Hong Kong	US$10,000	51%		–	Investment holding
Limited		Ordinary shares
Upflow Limited	Hong Kong	HK$1	100%		–	Provision of management
		Ordinary share				services
Smart Million Limited	BVI/Hong Kong	US$1	100%		–	Investment holding
		Ordinary share
Victoryline Limited	BVI	US$1	100%		–	Inactive
		Ordinary share
Manfield Coatings Company	Hong Kong	HK$1,000	–		51%	Investment holding and
Limited		Ordinary shares				trading in paints and
		HK$32,000,000				related products
		Non-voting
		class A shares
		(note i)
Manfield Chemical Limited	Hong Kong	HK$10,000	–		51%	Investment holding
		Ordinary shares
深圳松輝化工有限公司	PRC (note ii)	US$5,500,000	–		51%	Manufacture of paints and
Shenzhen Pinefield Chemical		Paid-up registered				trading in petrochemical
Enterprises Co, Ltd		capital				and related products

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APPENDIX II

FINANCIAL INFORMATION OF GREENFIELD

	Place of	Nominal value
	incorporation or	of issued share	Attributable equity
	establishment/	capital/paid up	interest	held	by
Name of subsidiary	operations	registered capital	Greenfield			Principal activities
			Directly	Indirectly
廣州市彩輝化工有限公司	PRC (note ii)	HK$3,000,000	–		51%	Manufacture of paints and
Champion Chemical		Paid-up registered				trading in petrochemical
(Guangzhou) Company		capital				and related products
Limited
常州萬輝化工有限公司	PRC (note ii)	HK$33,600,000	–		41%	Manufacture of paints and
Manfield Chemical		(2007: HK$21,840,000)		(note iii)		trading in petrochemical
(Changzhou) Limited		Paid-up registered				and related products
		capital
常州萬輝輸有限公司	PRC (note ii)	RMB1,500,000	–		51%	Provision of transportation
Changzhou Manfield		Paid-up registered				services
Transportation Limited		capital

Notes:

(i) The non-voting class A shares practically carry no rights to dividends, no rights to attend or vote at general meetings and no rights to receive any surplus assets in a return of capital in a winding-up.
(ii) The companies are registered in the form of wholly foreign owned enterprises.
(iii) 80% equity interest of Greenfield is indirectly held by Rookwood Investments Limited.

None of the subsidiaries had any debt securities outstanding at the end of the year or at any time during the year.

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APPENDIX II

3. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF THE GREENFIELD GROUP FOR THE SIX MONTH ENDED 30TH JUNE, 2009

The following is the unaudited condensed consolidated financial statements and notes to the financial statements of the Greenfield Group for the six months ended 30th June, 2009 extracted from the 2009 interim report of Greenfield:

The unaudited condensed consolidated financial statements have not been audited, but have been reviewed by Greenfield’s auditor, Deloitte Touche Tohmatsu, in accordance with the Hong Kong Standard on Review Engagement 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” and by Greenfield’s Audit Committee. There were no other exceptional items or extraordinary items of the Greenfield Group for the six months period ended 30th June, 2009.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Notes Revenue 3 Cost of sales Gross profit Other income Distribution and selling expenses Administrative expenses Share of profits of associates Profit before taxation 4 Taxation 5 Profit for the period Other comprehensive income Exchange differences arising on translation of foreign operations Share of translation reserve of associates	For the six months ended 30th June, 2009 2008 HK$’000 HK$’000 (Unaudited) (Unaudited) (Restated) 129,830 160,941 (92,195) (140,592) 37,635 20,349 14,456 8,644 (10,241) (9,283) (18,060) (22,376) 15,492 11,151 39,282 8,485 (5,718) (1,668) 33,564 6,817 72 5,487 96 2,943

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APPENDIX II

Notes Other comprehensive income for the period Total comprehensive income for the period Profit for the period attributable to – Owners of Greenfield – Minority interests Total comprehensive income attributable to – Owners of Greenfield – Minority interests Earnings per share, basic 7	For the six months ended 30th June, 2009 2008 HK$’000 HK$’000 (Unaudited) (Unaudited) (Restated) 168 8,430 33,732 15,247 19,661 1,835 13,903 4,982 33,564 6,817 19,794 6,133 13,938 9,114 33,732 15,247 HK7.1 cents HK0.6 cents	For the six months ended 30th June, 2009 2008 HK$’000 HK$’000 (Unaudited) (Unaudited) (Restated) 168 8,430 33,732 15,247 19,661 1,835 13,903 4,982 33,564 6,817 19,794 6,133 13,938 9,114 33,732 15,247 HK7.1 cents HK0.6 cents
		15,247
		1,835 4,982
		6,817

		6,133 9,114
		15,247

		HK0.6 cents

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APPENDIX II

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 30TH JUNE, 2009

Notes Non-current assets Property, plant and equipment 8 Prepaid lease payments Interests in associates Available-for-sale investments Loan receivable 9 Deferred tax assets Current assets Prepaid lease payments Inventories Trade and other receivables 10 Advance to an associate Dividend receivable from an associate Tax recoverable Bank balances and cash Current liabilities Trade and other payables 11 Tax payable Net current assets Total assets less current liabilities Capital and reserves Share capital 12 Reserves Equity attributable to owners of Greenfield Minority interests Total equity Non-current liabilities Deferred tax liabilities Total equity and liabilities	At 30th June, 2009 HK$’000 (Unaudited) 78,132 13,883 88,340 10 159,055 163 339,583 176 22,491 80,938 10,298 – 4,365 129,955 248,223 31,447 8,929 40,376 207,847 547,430 27,286 360,522 387,808 159,065 546,873 557 547,430	At 31st December, 2008 HK$’000 (Audited) 83,232 13,885 72,752 10 159,055 163 329,097 340 29,745 84,596 10,000 4,500 511 106,945 236,637 29,439 – 29,439 207,198 536,295 30,000 361,168 391,168 145,127 536,295 – 536,295

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APPENDIX II

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30TH JUNE, 2009

		Attributable to owners of Greenfield	Attributable to owners of Greenfield		Total HK$’000 533,741
Share capital HK$’000 30,000 – – – – – – 30,000 30,000 – – – – (2,714) 27,286	Share premium HK$’000 121,293 – – – – – – 121,293 121,293 – – – – (20,440) 100,853	Special reserve HK$’000 (Note a) 32,000 – – – – – – 32,000 32,000 – – – – – 32,000	Translation reserve Non- distributable reserve HK$’000 HK$’000 (Note b) 9,042 5,769 2,797 – 1,501 – – – 4,298 – – – – – 13,340 5,769 13,607 5,769 62 – 71 – – – 133 – – – 13,740 5,769	Retained profits HK$’000 202,123 – – 1,835 1,835 (18,000) – 185,958 188,499 – – 19,661 19,661 – 208,160
					5,487 2,943 6,817
					15,247 (18,000) (3,920)
					527,068

					536,295
					72 96 33,564
					33,732 (23,154)
					546,873

Notes:

(a) The special reserve of the Greenfield Group represents the nominal value of 32,000,000 non-voting class A shares of HK$1 each issued by a subsidiary of Greenfield to its then shareholders prior to the Greenfield Group reorganisation in 2002.
(b) The non-distributable reserve of the Greenfield Group mainly represents statutory reserve requirement that the foreign investment enterprises appropriated 10% of the profit after taxation of the subsidiaries of Greenfield registered in the People’s Republic of China other than Hong Kong (the “PRC”) to the nondistributable reserve, under the PRC laws and regulations until the transferred amount met 50% of the registered capital of these PRC subsidiaries. No transfer was noted for both periods, as the PRC subsidiaries had already transferred an amount equal to 50% of its relevant registered capital to non-distributable reserve in prior years or no profit after taxation was generated for the periods.

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APPENDIX II

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

FOR THE SIX MONTHS ENDED 30TH JUNE, 2009

Net cash from operating activities
Net cash from (used in) investing activities
New loan receivable granted
Purchase of property, plant and equipment
Interest received
Dividend received from an associate
Proceeds from disposal of property,
plant and equipment
Cash used in financing activities
Dividends paid
Dividends paid to minority shareholders of
subsidiary
Payment on repurchase of shares
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of
the period
Effect of foreign exchange rate changes
Cash and cash equivalents at the end of the period,
represented by bank balances and cash

For the six months ended
30th June,
2009
2008
HK$’000
HK$’000
(Unaudited)
(Unaudited)
(Restated)
38,132
4,572
–
(30,000)
(721)
(4,677)
8,365
1,760
–
4,500
374
100
8,018
(28,317)
–
(18,000)
–
(3,920)
(23,154)
–
(23,154)
(21,920)
22,996
(45,665)
106,945
173,948
14
615
129,955
128,898

– 166 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30TH JUNE, 2009

1. Basis of preparation

The condensed consolidated financial statements have been prepared in accordance with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and with Hong Kong Accounting Standard (“HKAS”) 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

Certain comparative financial information is reclassified to conform with the current period’s presentation.

2. Principal accounting policies

The condensed consolidated financial statements have been prepared under the historical cost convention.

The same accounting policies, presentation and methods of computation have been followed in these condensed consolidated financial statements as were applied in the preparation of the Greenfield Group’s consolidated financial statements for the year ended 31st December, 2008. In addition, the Greenfield Group has applied the following accounting policy for shares repurchase during the current interim period.

Shares repurchase

Repurchase of Greenfield’s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of Greenfield’s own equity instruments.

In the current interim period, the Greenfield Group has applied, for the first time, the following new or revised standards, amendments and interpretations issued by the HKICPA, which are effective for the Greenfield Group’s financial year beginning on 1st January, 2009.

– 167 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

HKFRSs (Amendments) Improvements to HKFRSs issued in 2008, except for amendment to HKFRS 5 that is effective for annual periods beginning or after 1st July, 2009 HKFRSs (Amendments) Improvements to HKFRSs issued in 2009 in relation to the amendment to paragraph 80 of HKAS 39 HKAS 1 (Revised 2007) Presentation of financial statements HKAS 23 (Revised 2007) Borrowing cost HKAS 32 and HKAS 1 Puttable financial instruments and (Amendments) obligations arising on liquidation HKFRS 1 and HKAS 27 Cost of an investment in a subsidiary, (Amendments) jointly controlled entity or associate HKFRS 2 (Amendment) Vesting conditions and cancellations HKFRS 7 (Amendment) Improving disclosures about financial instruments HKFRS 8 Operating segments HK(IFRIC) – INT 9 and Embedded derivatives HKAS 39 (Amendments) HK(IFRIC) – INT 13 Customer loyalty programmes HK(IFRIC) – INT 15 Agreements for the construction of real estate HK(IFRIC) – INT 16 Hedges of a net investment in a foreign operation

HKAS 1 (Revised 2007) has introduced a number of terminology changes (including revised titles for the condensed consolidated financial statements) and has resulted in a number of changes in presentation and disclosure.

HKFRS 8 is a disclosure standard that requires the identification of operating segments to be performed on the same basis as financial information that is reported internally for the purpose of allocating resources between segments and assessing their performance. The predecessor standard, HKAS 14 “Segment reporting”, required the identification of two sets of segments (business and geographical) using a risks and returns approach. In the past, the Greenfield Group’s primary reporting format was business segments. The application of HKFRS 8 has not resulted in a redesignation of the Greenfield Group’s reportable segments as compared with the primary reportable segments determined in accordance with HKAS 14 (see note 3).

– 168 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

The adoption of the new and revised HKFRSs has had no material effect on the reported results and financial position of the Greenfield Group for the current or prior accounting periods. Accordingly, no prior period adjustment has been recognised.

The Greenfield Group has not early applied the following new or revised standards, amendments and interpretations that have been issued but are not yet effective.

HKFRSs (Amendments) Amendment to HKFRS 5 as part of improvements to HKFRSs issued in 2008[1] HKFRSs (Amendments) Improvements to HKFRSs 2009[2] HKAS 27 (Revised in 2008) Consolidated and separate financial statement[1] HKAS 39 (Amendment) Eligible hedged items[1] HKFRS 1 (Amendment) Additional exemptions for first time adopters[3] HKFRS 2 (Amendments) Group cash-settled share-based payment transactions[3] HKFRS 3 (Revised in 2008) Business combinations[1] HK(IFRIC) – INT 17 Distribution of non-cash assets to owners[1] HK(IFRIC) – INT 18 Transfer of assets from customers[4]

1 Effective for annual periods beginning on or after 1st July, 2009.
2 Effective for annual periods beginning on or after 1st July, 2009 and 1st January, 2010, as appropriate.
3 Effective for annual periods beginning on or after 1st January, 2010.
4 Effective for transfers on or after 1st July, 2009.

The adoption of HKFRS 3 (Revised in 2008) may affect the Greenfield Group’s accounting for business combinations for which the acquisition dates are on or after 1st January, 2010. HKAS 27 (Revised in 2008) will affect the accounting treatment for changes in the Greenfield Group’s ownership interest in a subsidiary. The Directors anticipate that the application of other new and revised standards, amendments or interpretations will have no material impact on the results and the financial position of the Greenfield Group.

– 169 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

3. Segment information

The Greenfield Group has adopted HKFRS 8 “Operating segments” with effect from 1st January, 2009. HKFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Greenfield Group that are regularly reviewed by the chief operating decision maker, represented by the Directors, in order to allocate resources to segments and to assess their performance. The Greenfield Group is principally engaged in manufacturing of paints and trading in petrochemical and related products. The Greenfield Group chief operating decision maker make its decision on allocation of resources and assessment of performance based on the location of customers, which is the same as the geographical segment (based on location of customers) previously disclosed under HKAS 14. Therefore, the application of HKFRS 8 has not resulted in a redesignation of the Greenfield Group’s reportable segments as compared with the primary reportable segments determined in accordance with HKAS 14, nor has the adoption of HKFRS 8 changed the basis of measurement of segment profit or loss.

2009

REVENUE External sales RESULTS Segment results Interest income Management fee income Royalty fee income Central administration costs Share of profits of associates Profit before taxation	Hong Kong HK$’000 43,082 6,401	The PRC HK$’000 86,748 15,269	Consolidated HK$’000 129,830 21,670 8,365 1,725 1,707 (9,677) 15,492 39,282

– 170 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

2008

REVENUE External sales RESULTS Segment results Interest income Management fee income Royalty fee income Central administration costs Share of profits of associates Profit before taxation	Hong Kong HK$’000 95,005 2,487	The PRC HK$’000 65,936 1,479	Consolidated HK$’000 160,941 3,966 1,760 2,722 1,822 (12,936) 11,151 8,485

Segment results represent the profit or loss earned by each segment without allocation of interest income, management fee income, royalty fee income, unallocated central administration cost and share of profits of associates. This is the measure reported to the Directors for the purpose of resource allocation and performance assessments.

– 171 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

4. Profit before taxation

	For the six months	ended
	30th June,
	2009	2008
	HK$’000	HK$’000
Profit before taxation has been arrived
at after charging (crediting):
Amortisation of prepaid lease payments	176	170
Depreciation of property, plant and equipment	5,588	5,765
(Gain) loss on disposal of property,
plant and equipment	(94)	183
Share of taxation of associates
(included in share of profits of associates)	2,122	2,060
Net foreign exchange gain	(5)	(2,086)
Interest income on:
Advance to an associate	(298)	(613)
Bank deposits	(180)	(586)
Loan receivable	(7,887)	(561)

5. Taxation The charge comprises: Hong Kong Profits Tax – current period PRC Income Tax Current period (Over) under provision in prior period Deferred tax – current period (Note)	For the six months ended 30th June, 2009 2008 HK$’000 HK$’000 1,902 1,119 3,358 468 (99) 81 3,259 549 557 – 5,718 1,668	For the six months ended 30th June, 2009 2008 HK$’000 HK$’000 1,902 1,119 3,358 468 (99) 81 3,259 549 557 – 5,718 1,668
		468 81
		549
		–
		1,668

Note: For the period ended 30th June, 2009, the Greenfield Group recognised deferred tax of HK$557,000 in respect of the temporary difference attributable to the undistributed retained profits earned by certain of Greenfield’s associates in the PRC.

– 172 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

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

Pursuant to the relevant laws and regulations in the PRC, certain of Greenfield’s PRC subsidiaries are entitled to exemption from PRC Income Tax for two years starting from their first profit-making year, followed by a 50% reduction for the next three years. These PRC subsidiaries continue to enjoy their tax holiday during the period.

The newly promulgated Enterprise Income Tax Law (“Tax Law”) of the PRC is effective on 1st January, 2008. In February, 2008, the Ministry of Finance and the State Administration of Taxation issued several important tax circulars which clarify the implementation of the Tax Law and have an impact on certain of Greenfield’s PRC subsidiaries. Greenfield has certain PRC subsidiaries which previously enjoyed the preferential tax policies in the form of a reduced tax rate. These subsidiaries will have five years from the time when the Tax Law takes effect to transition progressively to the legally prescribed tax rate of 25%. These PRC subsidiaries that previously enjoyed the 15% tax rate are subject to the 18% tax rate from 1st January, 2008, and will be subject to the 20% tax rate for the financial year 2009, 22% tax rate for the financial year 2010, 24% tax rate for the financial year 2011 and 25% tax rate for the financial year 2012. For those PRC subsidiaries which previously enjoyed the 24% tax rate are subject to the 25% tax rate starting from 1st January, 2008.

In the previous years, the Inland Revenue Department issued additional assessment in aggregate of approximately HK$11,001,000 to an indirect wholly-owned subsidiary of Greenfield disallowing its offshore claims in respect of its production activities for years of assessment 2002/03, 2003/04, 2004/05 and 2005/06. The Greenfield Group had purchased tax reserve certificates totalling HK$11,001,000 and an amount of HK$10,000,000 was recognised as income tax expense against such tax reserve certificates in the previous year and the remaining amount of tax reserve certificates of HK$1,001,000 (31st December, 2008: HK$1,001,000) was included in tax recoverable as at the balance sheet date. In the opinion of the Directors, the ultimate outcome of the additional assessment remains undetermined and the Greenfield Group will continue to defend vigorously against the additional assessment.

Deferred taxation has not been provided for in the condensed consolidated financial statements in respect of the temporary differences attributable to the undistributed retained profits earned by Greenfield’s PRC subsidiaries starting from 1st January, 2008 under the Tax Law that requires withholding tax upon the distribution of such profits to the shareholders as, in the opinion of the Directors, the Greenfield Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.

– 173 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

6. Dividends

Dividends paid and recognised as distribution during the period: 2008 Final – nil (six months ended 30th June, 2008: 2007 Final – HK3 cents) per ordinary share 2008 Special – nil (six months ended 30th June, 2008: 2007 Special – HK3 cents) per ordinary share	For the six months ended 30th June, 2009 2008 HK$’000 HK$’000 – 9,000 – 9,000 – 18,000	For the six months ended 30th June, 2009 2008 HK$’000 HK$’000 – 9,000 – 9,000 – 18,000
		18,000

The Directors do not recommend the payment of interim dividend for both periods.

7. Earnings per share

The calculation of basic earnings per share attributable to owners of Greenfield for the period is based on the profit attributable to owners of Greenfield for the period of HK$19,661,000 (six months ended 30th June, 2008: profit of HK$1,835,000) and on 276,623,177 shares (six months ended 30th June, 2008: 300,000,000 shares) in issue throughout the period.

No diluted earnings per share is presented as Greenfield did not have any potential ordinary shares in issue at any time during the current and prior periods.

– 174 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

8. Property, plant and equipment

During the period, the Greenfield Group spent approximately HK$721,000 (six months ended 30th June, 2008: HK$4,677,000) on acquisition of property, plant and equipment.

In addition, during the current period, the Greenfield Group disposed of certain of its property, plant and equipment with a carrying amount of approximately HK$280,000 (six months ended 30th June, 2008: HK$283,000) for proceeds of approximately HK$374,000 (six months ended 30th June, 2008: HK$100,000).

9. Loan receivable

On 5th November, 2007, Smart Million Limited (“Smart Million”), a whollyowned subsidiary of Greenfield, entered into a conditional sale and purchase agreement (the “Agreement”) with independent third parties (the “Vendors”) for the acquisition of the entire issued share capital of Winfame Investments Limited (“Winfame”), which held 99.9999875% of the issued share capital of New Gold International Limited (“New Gold”) which in turn held the entire equity interest in 呼倫貝爾東明礦業有限責任公司 (referred to as “Dong Ming Mining”), a wholly-owned foreign enterprise established in the PRC and engaged in coal mining. An initial refundable deposit of HK$100,000,000 was paid to the Vendors in November 2007. Such deposit is secured by the pledge of the entire issued share capital of Winfame and Winfame’s equity interest in New Gold (collectively referred to as the “Shares”). The deposit was restructured as part of the loans receivable (the “First Loan”) upon termination of the Agreement during the year ended 31st December, 2008.

– 175 –

APPENDIX II

FINANCIAL INFORMATION OF GREENFIELD

On 27th November, 2008, Smart Million entered into a deed of termination (the “Deed of Termination”) with, inter alia, the Vendors, New Gold and Winfame to terminate the Agreement and the Supplemental Agreement and to consolidate and restructure the First Loan, the Second Loan and a further loan to New Gold of HK$25,000,000 plus respective accrued interest totalling HK$4,055,000 (collectively refer to as the “Indebtedness”) for a term of two years (extendable for a further period of one year) from the date of the Deed of Termination. The Indebtedness bears interest at 10% per annum and the interest is payable by end of each quarter. At 30th June, 2009 and 31st December, 2008, the amount of the Indebtedness is HK$159,055,000 and the Indebtedness is secured by the Shares. Details of the transactions are disclosed in the circular of Greenfield dated 21st January, 2009.

As part of the conditions to safeguard the recovery by Smart Million of the Indebtedness under the Deed of Termination, Winfame granted to Smart Million a right to convert the Indebtedness into 25% equity interest of New Gold in satisfaction in full of the Indebtedness at Smart Million’s sole and absolute discretion at any time within the two-year period during the continuance of the Deed of Termination. The Indebtedness including this conversion right is stated at cost less impairment at the end of the reporting period because the range of reasonable fair value estimates of the conversion right is so significant that the Directors are of opinion that the fair value of the conversion right cannot be reliably measured and the conversion right component of the Indebtedness is sufficiently significant to preclude them from obtaining a reliable estimate of the fair value of the entire instrument (i.e. the Indebtedness including the conversion right).

10. Trade and other receivables

Trade receivables from third parties Trade receivables from associates Other receivables	At 30th June, 2009 HK$’000 70,493 4,771 5,674 80,938	At 31st December, 2008 HK$’000 68,753 10,441 5,402 84,596

– 176 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

The Greenfield Group allows a credit period of 30 to 90 days to its trade customers. The following is an aged analysis of trade receivables at the end of the reporting period:

0 – 30 days 31 – 60 days 61 – 90 days Over 90 days	Trade receivables from third parties At 30th June, 2009 At 31st December, 2008 HK$’000 HK$’000 23,833 18,659 20,597 19,694 12,983 15,877 13,080 14,523 70,493 68,753	Trade receivables from associates At 30th June, 2009 At 31st December, 2008 HK$’000 HK$’000 1,287 1,984 1,243 2,903 1,056 2,704 1,185 2,850 4,771 10,441	Trade receivables from associates At 30th June, 2009 At 31st December, 2008 HK$’000 HK$’000 1,287 1,984 1,243 2,903 1,056 2,704 1,185 2,850 4,771 10,441
			10,441

11. Trade and other payables

Trade payables to third parties Trade payables to an associate Other payables	At 30th June, 2009 HK$’000 22,105 674 8,668 31,447	At 31st December, 2008 HK$’000 13,586 35 15,818
		29,439

– 177 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

The following is an aged analysis of trade payables at the end of the reporting period:

	Trade	payables		Trade	Trade	payables
	to third parties			to an associate
	At		At		At		At
	30th June,	31st December,		30th June,		31st December,
	2009		2008		2009		2008
	HK$’000	HK$’000		HK$’000		HK$’000
0 – 30 days	9,413		4,282		674		35
31 – 60 days	11,968		8,264		–		–
61 – 90 days	561		1,040		–		–
Over 90 days	163		–		–		–
	22,105		13,586		674		35

Share capital
			Number of
				shares		Amount
						HK$’000
Ordinary shares of HK$0.1 each:
Authorised:
At 31st December, 2008	and
30th June, 2009			1,000,000,000			100,000

Issued and full paid:
At 1st January, 2009			300,000,000				30,000
Share repurchased and cancelled			(27,140,000)				(2,714)
At 30th June, 2009			272,860,000				27,286

12. Share capital

– 178 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

During the current period, Greenfield repurchased its own shares through the Stock Exchange of Hong Kong Limited as follows:

	No. of ordinary			Aggregate
Month of	shares of	Price per share		consideration
repurchase	HK$0.1 each	Highest	Lowest	paid
January 2009	27,140,000	0.85	0.84	23,043,700

The above shares were cancelled upon repurchase.

13. Operating lease commitments

At the end of the reporting period, the Greenfield Group had commitments for future minimum lease payments in respect of office and factory premises under non-cancellable operating leases which fall due as follows:

Within one year In the second to fifth year inclusive	At 30th June, 2009 HK$’000 433 32 465	At 31st December, 2008 HK$’000 891 80 971

Leases are negotiated and monthly rentals are fixed for terms of two years.

14. Capital commitments

	At	At
	30th June,	31st December,
	2009	2008
	HK$’000	HK$’000
Capital expenditure in respect of
the acquisition of property, plant and
equipment contracted but not provided
for in the condensed consolidated
financial statements	40	1,023

– 179 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

15. Pledge of assets

At 30th June, 2009, the Greenfield Group pledged certain land and buildings in Hong Kong with a carrying value of approximately HK$2,241,000 (31st December, 2008: HK$2,272,000) to a bank to secure general banking facilities granted to the Greenfield Group.

16. Related party transactions

During the period, the Greenfield Group had the following significant transactions with the associates:

	For the six months	ended
	30th June,
Nature of transactions	2009	2008
	HK$’000	HK$’000
Sales of goods by the Greenfield Group	14,517	16,195
Management fee income received
by the Greenfield Group	1,725	2,722
Purchases of goods by the Greenfield Group	2,991	2,274
Royalty fee income received/receivable
by the Greenfield Group	1,707	1,822
Interest income received/receivable
by the Greenfield Group	298	613
Rental income received/receivable
by the Greenfield Group	801	110

The remuneration of directors and other members of key management during the period, which is determined by the remuneration committee having regard to the performance of individuals and market trends, is as follows:

Short-term benefits Retirement benefits scheme contribution	For the six months ended 30th June, 2009 2008 HK$’000 HK$’000 1,044 1,080 18 12 1,062 1,092	For the six months ended 30th June, 2009 2008 HK$’000 HK$’000 1,044 1,080 18 12 1,062 1,092
		1,092

– 180 –

APPENDIX II FINANCIAL INFORMATION OF GREENFIELD

4. MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS OF GREENFIELD GROUP

(a) Management Discussion and Analysis for the year ended 31st December, 2007

Review of Operations

The Greenfield Group’s increased turnover during the year was mainly due to the expansion of business scope and the launch of newly developed products to the market. However, as operating overheads and production costs, in particular, the prices of oil and other key raw materials and labour costs kept on rising, the increase in turnover was insufficient for the purpose of setting off the effect caused by such ascending operation costs in the year. In light of the customary narrow profit margin for manufacturing industries, only part of the rising operation costs can be shifted to customers. Hence, profit after taxation for the year decreased as compared with that of last year. The Greenfield Group implemented stringent cost-controls including sourcing for less expensive raw materials and expanding the sources of supply, sought to rationalize and streamline the work and production process and to introduce a logistics system with a view to improving operational efficiency and productivity and enhancing the Greenfield Group’s competitiveness.

Greenfield continued to face cut-throat competition from some of its competitors who persisted in their strategy of pricecutting measures to maintain their market shares. In response to such competition, Greenfield kept on improving its product and service quality and providing quality product and service at reasonable price in order to maintain the confidence of and solidify the business relationship with its customers. Greenfield launched market campaigns to strengthen the presence of Greenfield Group and its products in the market. Greenfield actively monitored market trends and its sales team regularly liaised with its customers to ascertain their feedback on its products and their needs in order to improve its products in time to their satisfaction such that Greenfield can maintain their confidence and their continual use of its products and services.

Seeking to mitigate the effect of the drop in business and to secure an immediate financial return for the purpose of obtaining additional resources, Greenfield disposed of its 49% interests in Rookwood Investments Limited, a then major wholly-owned subsidiary of Greenfield.

– 181 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

In addition, Pacific Orchid Investments Limited (“Pacific Orchid”), the major shareholder of Greenfield, entered into a top-up arrangement with the placing agent and Greenfield, whereby Pacific Orchid signed a placing agreement with the placing agent to place 50,000,000 shares at a placing price of HK$2.5 per share and signed a subscription agreement with Greenfield to subscribe for the same number of new share at the same price each share. Upon the 50,000,000 share being placed and the new 50,000,000 share being subscribed, there were net proceeds of approximately HK$120,000,000.00 for use by the Greenfield Group as general working capital.

Further, Greenfield, through its direct wholly-owned subsidiary, entered into a conditional agreement with independent third parties to acquire two coal mines in Inner Mongolia, the PRC, subject to the fulfillment of a number of conditions.

Outlook

Operation overheads and production costs will continue to rise with ascending prices in oil and other key raw materials. However, demand for Greenfield’s products would also rise with the continual growth and improvement of the economy in China. The Greenfield Group will strive to maintain and enlarge its market share in the China market. The Greenfield Group will also work to reinforce its competitiveness, consolidate its relationship with customers, expand its customer base, increase the sale of its high-yield products and invest resources to enhance product quality.

In light of the increasingly difficult business operating environment, Greenfield has been endeavouring to maximize return for shareholders by capitalizing on good investment opportunities. In view of the growing demand for coal on a global scale and in the PRC, Greenfield considers it an opportune time to develop its investment and business into the natural resources sector. Hence, Greenfield, through its direct wholly-owned subsidiary, entered into a conditional agreement with independent third parties to acquire two coal mines in Inner Mongolia, the PRC, subject to the fulfillment of a number of conditions. Upon completion of the acquisition of the coal mines after fulfillment of such conditions, Greenfield will diversify into the coal mining business, and since the two coal mines are being exploited pursuant to the mining right permits granted by the appropriate authority, it is anticipated that the purchase of the coal mines will demonstrate Greenfield’s ability to generate income and cash flow through its investment and trading activities in the natural resource sector.

– 182 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

Liquidity and Financial Resources

During the year ended 31st December, 2007, the Greenfield Group had no borrowings outstanding. The Greenfield Group has sufficient cash surplus to finance operation from internally generated cash flow. The Greenfield Group maintained a satisfactory financial position derived from the steady growth of its business. As at 31st December, 2007, the Greenfield Group had cash on hand of HK$173,948,000 (31st December, 2006: HK$47,212,000).

Pledge of Assets

As at 31st December 2007, the Greenfield Group has pledged certain land and buildings in Hong Kong with a carrying value of approximately, HK$2,348,000 to secure general banking facilities granted to the Greenfield Group.

Contingent Liabilities

As at 31st December 2007, the Greenfield Group had no contingent liabilities.

Exposure to Foreign Exchange Risk

Business transactions of the Greenfield Group are mainly denominated in Hong Kong dollars and Renminbi. Though the Greenfield Group has not entered into any hedging contract, the Greenfield Group’s exposure to foreign exchange risk is minimal. In view of the revaluation of the Renminbi during the year, the Greenfield Group will monitor the situation closely and will introduce suitable hedging measures if there are likely to be any changes in the value of the Renminbi that may have adverse effect on the Greenfield Group.

Employee and Remuneration Policies

As at 31st December, 2007, the Greenfield Group had around 1,330 employees, including management and administrative staff as well as technical and production workers. Most of the Greenfield Group’s staff members were stationed in Mainland China while the rest were in Hong Kong. Remuneration, promotion and salary increments for the Greenfield Group’s staff were determined on the basis of individual performance as well as professional and working experience with due regard to prevalent industry practices.

(b) Management Discussion and Analysis for the year ended 31st December, 2008

Review of Operations

During the year under review, despite the fierce competition in the paints market, the Greenfield Group achieved a moderate increase of 5.88% to HK$335,697,000 (2007: HK$317,006,000) in turnover. The increase in turnover was mainly due to the Greenfield Group’s constant efforts to upgrade products and services, develop new markets, deepen its contacts and consolidate closer ties with its customers.

– 183 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

The Greenfield Group endeavoured to tighten stringent cost control, search for less expensive raw material, expand sources of supply, rationalize and streamline the work and production process in order to improve operational efficiency and enhance the Greenfield Group’s competitiveness. However, with the escalation in price of crude oil, price of other key raw material, labour cost and administrative expenses prior to the financial crisis beginning in September 2008, the net profit for the year decreased by 35.83% to HK$14,904,000 (2007: HK$23,226,000), together with the dilution effect as a result of the disposal of 49% equity interests in Rookwood Investments Limited in the fourth quarter of 2007, the profit attributable to shareholders of Greenfield dropped by 82.16% to HK$4,376,000 (2007: HK$24,535,000).

In November 2007, the Greenfield Group entered into a conditional sale and purchase agreement (the “Conditional Agreement”) with independent third parties, subject to satisfaction of certain conditions precedent, to acquire two coal mines in Inner Mongolia. As a result of the financial crisis and decline in the economies of the world, the demand for natural resources including coal has become uncertain. After careful consideration and deliberation with the vendors, it was agreed and decided that it might not be in the interests of the parties concerned to proceed with the Conditional Agreement under the prevalent economic circumstances and the vendors and the Greenfield Group mutually agreed to terminate the Conditional Agreement in November 2008. Hence, a deed of termination to terminate the Conditional Agreement was executed to consolidate and restructure the debts in the form of the indebtedness for a term of two years from the date of the deed of termination in order to safeguard the repayment to and recovery by the Greenfield Group of the indebtedness. Interest income will be received quarterly by the Greenfield Group during the term of the indebtedness.

Outlook

The global financial tsunami hit the global economy badly and damaged business confidence throughout the world. Looking ahead, the growth of the business will depend on the ability of the global economy to recover from the financial crisis and the year 2009 will be very challenging for the industry of paints and petrochemical and related products. Despite the adverse market conditions, the Greenfield Group aims to reinforce its competitiveness, consolidate its relationship with customers, expand its customer base, increase the sale of its high-yield products and enhance product quality in order to maintain continual growth when the global economy revives from the financial crisis.

– 184 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

In light of the global financial crisis, the Greenfield Group will take a more cautious view in its investment activities. Equipped with a strong and healthy financial position, the Greenfield Group is well-placed to continue to identify grossly undervalued investment opportunities in order to diversify the business of the Greenfield Group and maximize returns for its shareholders.

Subsequent to the year end, Greenfield repurchased 27,140,000 ordinary shares of Greenfield on The Stock Exchange of Hong Kong Limited in the range from HK$0.84 to HK$0.85 for a total consideration of approximately HK$23,000,000. At the balance sheet date, the net asset value per share attributable to shareholders of Greenfield was HK$1.30, therefore, such repurchase would lead to an enhancement of the net asset value per share and earnings per share of Greenfield where the directors consider it to be in the best interests of Greenfield.

Financial Resources, Borrowings and Capital Structure

As at 31st December, 2008, the Greenfield Group’s non-current assets amounted to HK$329,097,000 (2007: HK$253,435,000) and net current assets amounted to HK$207,198,000 (2007: HK$280,306,000) with a current ratio of 8.0 (2007: 6.0) calculated on the basis of the Greenfield Group’s current assets over current liabilities.

During the year ended 31st December, 2008, the Greenfield Group had no borrowings outstanding. The Greenfield Group has sufficient cash surplus to finance operation from internally generated cash flow. The Greenfield Group maintained a satisfactory financial position derived from the steady growth of its business. As at 31st December, 2008, the Greenfield Group had cash on hand of HK$106,945,000 (2007: HK$173,948,000).

Pledge of Assets

As at 31st December 2008, the Greenfield Group has pledged certain land and buildings in Hong Kong with a carrying amount of approximately HK$2,272,000 to a bank to secure general banking facilities of HK$10,000,000 granted to the Greenfield Group.

Contingent Liabilities

As at 31st December 2008, the Greenfield Group had no contingent liabilities.

– 185 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

Exposure to Foreign Exchange Risk

Business transactions of the Greenfield Group are mainly denominated in Hong Kong dollars and Renminbi. Currently, the Greenfield Group does not engage in any hedging contract. In view of the fluctuation of Renminbi during the year, the Greenfield Group will monitor the situation closely and will introduce suitable measures if there are likely to be any changes.

Employee and Remuneration Policies

As at 31st December, 2008, the Greenfield Group had around 1,100 fulltime employees. They included management and administrative staff and production workers. Most of them were stationed in Mainland China while the rest were in Hong Kong. The remuneration, promotion and salary increments of employees are assessed according to individual performance, as well as professional and working experience, and in accordance with prevalent industry practices.

(c) Management Discussion and Analysis for the six months ended 30th June, 2009

Financial Results

For the six months ended 30th June, 2009, the Greenfield Group’s turnover decreased by 19% to HK$129,830,000 (2008: HK$160,941,000). However, the profit for the period attributable to shareholders of Greenfield increased by 971% to HK$19,661,000 (2008: HK$1,835,000) and the earnings per share was HK7.1 cents (2008: HK0.6 cents).

As at 30th June, 2009, the net asset value per share attributable to equity holders of Greenfield was HK$1.42 (31st December, 2008: HK$1.30).

Review of Operations

The global financial tsunami in the late of 2008 hit the global economy badly and the demand for paints and petrochemical and related products dropped inevitably during the first half of 2009. In response to the deteriorating business conditions, the Greenfield Group successfully consolidated its relationship with customers by providing better services, enhancing product quality and increasing the sale of highyield products. In light of implementation of the policies by the management and decrease in price of crude oil, prices of other key raw materials and labour cost, the gross profit increased by 85% to HK$37,635,000 (2008: HK$20,349,000). Combined with contribution of interest income of the loan receivable arising from consolidation and restructuring of debts as announced on 5th December, 2008, the profit for the period attributable to shareholders of Greenfield substantially increased by 971% to HK$19,661,000 (2008: HK$1,835,000).

– 186 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

During the period under review, the Greenfield repurchased 27,140,000 ordinary shares of the Greenfield on The Stock Exchange of Hong Kong Limited in the range from HK$0.84 per share to HK$0.85 per share for a total consideration of HK$23,043,700. At the balance sheet date, the net asset value per share attributable to shareholders of the Greenfield was HK$1.42, therefore, such repurchase led to an enhancement of the net asset value per share and earnings per share of the Greenfield Company where the directors of Greenfield considered it to be in the best interests of the Greenfield.

Liquidity, Financial Resources, Borrowings and Capital Structure

As at 30th June, 2009, the Greenfield Group’s non-current assets amounted to HK$339,583,000 (31st December, 2008: HK$329,097,000) and net current assets amounted to HK$207,847,000 (31st December, 2008: HK$207,198,000) with a current ratio of 6.1 (31st December, 2008: 8.0) calculated on the basis of the Greenfield Group’s currents assets over current liabilities.

During the period under review, the Greenfield Group had no borrowings outstanding and with sufficient cash surplus generated from its operations and maintained a satisfactory financial position derived from its business. As at 30th June, 2009, the Greenfield Group had bank balances and cash of HK$129,955,000 (31st December, 2008: HK$106,945,000).

Pledge of assets

As at 30th June, 2009, the Greenfield Group pledged certain land and buildings in Hong Kong with a carrying value of approximately HK$2,241,000 to a bank to secure general banking facilities granted to the Greenfield Group.

Contingent liabilities

As at 30th June, 2009, the Greenfield Group had no contingent liabilities.

Exposure to Foreign Exchange Risk and Hedging

Business transactions of the Greenfield Group are mainly denominated in Hong Kong dollars and Renminbi. Currently, the Greenfield Group does not engage in any hedging contract. In view of the fluctuation of the Renminbi in recent year, the Greenfield Group will monitor the situation closely and will introduce suitable measures if there are likely to be any changes.

– 187 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

Employees and Remuneration Policies

As at 30th June, 2009, the Greenfield Group had around 1,150 full-time employees. They included management and administrative staff and production workers. Most were stationed in Mainland China, while the rest were in Hong Kong. The remuneration, promotion and salary increments of employees are assessed according to the individual’s performance, as well as professional and working experience, and in accordance with prevailing industry practices.

5. OTHERS

(a) Material Acquisitions and Disposals

Material acquisitions and disposal based on the 2006, 2007 and 2008 annual reports of Greenfield:

(i) On 30th March, 2007, the Greenfield Group entered into a joint venture agreement, pursuant to which the parties have agreed to form a joint venture company to principally engage in manufacture of acrylic stoving enamel in the PRC. The registered capital of the joint venture company is HK$42,000,000 owned as to 80% by the Greenfield Group. The Greenfield Group had made capital contribution in the form of cash and/or raw materials in the aggregate sum of HK$33,600,000.
(ii) On 30th July, 2007, Greenfield entered into a conditional agreement with certain connected persons of Greenfield in connection with the disposal of 49% equity interest in Rookwood Investments Limited (“Rookwood”) for a total consideration of HK$122,500,000. Upon completion, Rookwood is now a 51% owned subsidiary of Greenfield.
(iii) On 5th November, 2007, Greenfield, through its direct wholly-owned subsidiary, entered into a conditional agreement with independent third parties to acquire two coal mines in Inner Mongolia, the PRC, subject to the fulfillment of a number of conditions. The acquisition was subsequently terminated on 27th November, 2008. (For further details, see note 15 and 16 as set out in pages 145 to 146 of this Circular)

Save as the above, the Greenfield Group did not engage in material acquisitions and disposals of subsidiaries and associated companies for the three financial years ended 31st December, 2008.

– 188 –

FINANCIAL INFORMATION OF GREENFIELD

APPENDIX II

(b) Future Investments

The Company does not have any concrete plan to change the Greenfield Group’s existing business activities and management of Greenfield. However, it is the intention of the Company that it will initiate and commence a review on the business activities and assets of the Greenfield Group, for the purpose of formulating new business plans and strategies for the future business development of the Greenfield Group. Save as disclosed above, the Company has no intention to inject any material assets or businesses into the Greenfield Group.

(c) Prospects

In view of the escalating awareness of environment protection, the demand for environmental-friendly and high quality products increases. In order to meet the market requirement, the Greenfield Group continues to improve product quality, increase the sale in high-yield products and introduce innovation to the products.

There are cautious signs that the global economy is recovering from the financial tsunami but the business environment in the second half of 2009 and the year 2010 remains to be challenging. However, having a strong and healthy financial position, the Greenfield Group is confident in its future business development and will continue to search for good investment opportunities in order to maximize returns for shareholders of Greenfield.

– 189 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX III

ACCOUNTANTS’ REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following is the text of a report, prepared for the purpose of inclusion in this circular, received from the independent reporting accountants, Deloitte Touche Tohmatsu. A copy of the following accountants’ report is available for inspection.

==> picture [75 x 58] intentionally omitted <==

==> picture [80 x 38] intentionally omitted <==

16 October 2009

TO THE DIRECTORS OF COL CAPITAL LIMITED

We report on the unaudited pro forma financial information of COL Capital Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”), Pacific Orchid Investments Limited (“Pacific Orchid”) and its subsidiaries (hereinafter collectively referred to as the “Enlarged Group”), which has been prepared by the directors of the Company for illustrative purposes only, to provide information about how the proposed acquisition of entire equity interests in Pacific Orchid might have affected the financial information presented, for inclusion in Appendix III of the circular dated 16 October 2009. The basis of preparation of the unaudited pro forma financial information is set out on page 192 to 195 of the Circular.

Respective responsibilities of directors of the Company and reporting accountants

It is the responsibility solely of the directors of the Company to prepare the unaudited pro forma financial information in accordance with paragraph 29 of Chapter 4 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” issued by the Hong Kong Institute of Certified Public Accountants.

It is our responsibility to form an opinion, as required by paragraph 29(7) of Chapter 4 of the Listing Rules, on the unaudited 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 unaudited pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

– 190 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX III

Basis of opinion

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants. Our work consisted primarily of comparing the unadjusted financial information with source documents, considering the evidence supporting the adjustments and discussing the unaudited pro forma financial information with the directors of the Company. This engagement did not involve independent examination of any of the underlying financial information.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the unaudited pro forma financial information has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purpose of the unaudited pro forma financial information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

The unaudited pro forma financial information is for illustrative purpose only, based on the judgements and assumptions of the directors of the Company, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in future and may not be indicative financial position of the Enlarged Group as at 30 June 2009 or any future date.

Opinion

In our opinion:

a) the unaudited pro forma financial information has been properly compiled by the directors of the Company 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 unaudited pro forma financial information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

Deloitte Touche Tohmatsu

Certified Public Accountants

Hong Kong, 16 October 2009

– 191 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX III

(A) UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Introduction

The unaudited pro forma assets and liabilities statement of the Enlarged Group has been prepared to illustrate the effect of the acquisition of entire equity interest of Pacific Orchid Investments Limited (the “Acquisition”).

The unaudited pro forma assets and liabilities statement of the Enlarged Group has been prepared in accordance with Rule 4.29 of the Listing Rules for the purpose of illustrating the effect of the Acquisition as if the Acquisition took place on 30 June 2009.

The unaudited pro forma assets and liabilities statement of the Enlarged Group is based upon the unaudited consolidated balance sheet of the Group as at 30 June 2009 (that has been extracted from the unaudited consolidated financial statements of the Group for the six months ended 30 June 2009, as set out in Appendix I to this circular), and the unaudited consolidated balance sheet of Greenfield Chemical Holdings Limited as at 30 June 2009 (that has been extracted from the unaudited consolidated financial statements of Greenfield for the six months ended 30 June 2009, as set out in Appendix II to this circular), after making pro forma adjustments relating to the Acquisition that are (i) directly attributable to the transaction, and (ii) factually supportable.

The unaudited pro forma assets and liabilities statement of the Enlarged Group is based on a number of assumptions, estimates and uncertainties. Accordingly, the accompanying unaudited pro forma assets and liabilities statement of the Enlarged Group does not purport to describe the actual financial position of the Enlarged Group that would have been attained had the Acquisition been completed on 30 June 2009. The unaudited pro forma assets and liabilities statement of the Enlarged Group does not purport to predict the future financial position of the Enlarged Group.

The unaudited pro forma assets and liabilities statement of the Enlarged Group should be read in conjunction with the historical information of the Group as set out in the unaudited consolidated financial statements of the Group for the period ended 30 June 2009 set out in Appendix I to this circular and other financial information included elsewhere in this circular.

The statement has been prepared by the Directors for illustrative purposes only and because of its nature, it may not give a true picture of financial position of the Enlarged Group following completion of the Acquisition.

– 192 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX III

Non-current assets Investment properties Property, plant and equipment Prepaid lease payments Interests in associates Goodwill Available-for-sale investments Loan receivable Deferred tax assets Current assets Available-for-sale investments Prepaid lease payments Inventories Advance to an associate Investments held for trading Debtors, deposits and prepayments Loan receivables Taxation recoverable Pledged bank deposits Bank balances and cash	The Group as at 30 June 2009 HK$’000 Note (a) 86,705 2,896 54 – – 288,211 – – 377,866 6,522 – – – 1,241,068 150,845 141,475 4,050 10,531 94,532 1,649,023	Greenfield as at 30 June 2009 Pro forma adjustments HK$’000 HK$’000 Note (b) Note (c) & (d) – – 78,132 – 13,883 – 88,340 – – 21,482 10 – 159,055 – 163 – 339,583 21,482 – – 176 – 22,491 – 10,298 – – – 80,938 – – – 4,365 – – – 129,955 (409,290) 248,223 (409,290)	Pro Forma Enlarged Group HK$’000 86,705 81,028 13,937 88,340 21,482 288,221 159,055 163 738,931 6,522 176 22,491 10,298 1,241,068 231,783 141,475 8,415 10,531 (184,803) 1,487,956

– 193 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION

Current liabilities Creditors and accrued charges Customers’ deposits and receipts in advance Other borrowings Taxation payable Net current assets Total assets less current liabilities Non-current liabilities Convertible bonds Net assets	24,435 36,129 80,233 68,442 209,239 1,439,784 1,817,650 278,867 1,538,783 The Group as at 30 June 2009 HK$’000 Note (a)	31,447 – – – – – 8,929 – 40,376 – 207,847 (409,290) 547,430 (387,808) – – 547,430 (387,808) Greenfield as at 30 June 2009 Pro forma adjustments HK$’000 HK$’000 Note (b) Note (c) & (d)	55,882 36,129 80,233 77,371 Pro Forma Enlarged Group HK$’000
			249,615
			1,238,341
			1,977,272
			278,867
			1,698,405

Notes:

(a) The amounts of assets and liabilities of the Group as at 30 June 2009 are extracted from the Group’s interim report for the six months ended 30 June 2009.
(b) Pacific Orchid is an investment holding company with a sole asset being the 68.72% equity interests in Greenfield Chemical Holdings Limited (“Greenfield”). Therefore, assets and liabilities of Greenfield (rather than investments in Greenfield recorded in the financial statements of Pacific Orchid) are included in the above pro forma financial information. Greenfield is a company listed on the Main Board of The Stock Exchange of Hong Kong. The amounts of assets and liabilities of Greenfield as at 30 June 2009 are extracted from Greenfield’s interim report for the six months ended 30 June 2009.

– 194 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX III

(c) Based on the relevant sales and purchase agreement dated 4 September 2009 in relation to the acquisition of the entire issued share capital of Pacific Orchid by the Group, the Group will acquire the entire issued share capital of Pacific Orchid. As mentioned in note (b) above, Pacific Orchid owns 68.72% equity interests in Greenfield. Hence, the acquisition will, in effect, result in the Group having 68.72% equity interests in Greenfield indirectly. In addition, based on Rule 26.1 of the Hong Kong Code on Takeover and Mergers, the Group is required to make an unconditional mandatory general cash offer to acquire the remaining equity interests in Greenfield (i.e. 31.28%). The above pro forma information is prepared on the basis that the entire equity interests in Greenfield are acquired by the Group.

Related pro forma adjustments are as follows:

(i) recognition of the cash consideration of HK$409,290,000 for the 100% equity interests in Greenfield; and
(ii) recognition of goodwill of HK$21,482,000 that represents the excess of the cash consideration of HK$409,290,000 over the aggregate carrying amount of net assets attributable to owners of Greenfield as at 30 June 2009 of HK$387,808,000. At the actual date of acquisition, the Group is required to assess the fair-value of all identifiable assets and liabilities of Greenfield in accordance with HKFRS 3 Business Combinations. Since the fair values of the identifiable assets, liabilities and contingent liabilities of Greenfield at the actual date of acquisition may be different to their carrying amounts as at 30 June 2009, the actual amount of goodwill arising may be different from the goodwill shown above.
(d) As confirmed by the director of the Company, the transaction is being financed by internal resource and credit facilities of the Group.

– 195 –

GENERAL INFORMATION

APPENDIX IV

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, opinions expressed in this circular have been arrived at after due and careful consideration and there are no other facts the omission of which would make any statement in this circular misleading.

2. DISCLOSURE OF INTERESTS

(a) Directors’ interests

Save as disclosed below, as at the Latest Practicable Date, none of the Directors and chief executive of the Company had any interest or short position in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), which (i) 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 the interests and short positions, if any, which they were taken or deemed to have under such provisions of the SFO); (ii) were required, pursuant to Section 352 of the SFO, to be entered in the register referred to in such provisions of the SFO; or (iii) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of the Listing Rules to be notified to the Company and the Stock Exchange:

Long Position in the shares of the Company

					Percentage
	Personal	Corporate	Other		over all
Name of Director	interests	interests	interests	Total	issued Shares
Ms. Chong Sok Un	–	355,176,374	–	355,176,374	64.42%
		(Note 1)

Note:

Vigor Online Offshore Limited (“Vigor”), a wholly-owned subsidiary of China Spirit Limited (“China Spirit”), owns 355,176,374 Shares. Ms. Chong maintains 100% beneficial interests in China Spirit. Accordingly, Ms. Chong is deemed to have corporate interest in 355,176,374 ordinary shares of the Company.

– 196 –

GENERAL INFORMATION

APPENDIX IV

(b) Substantial Shareholders’ interests

Save as disclosed below, the Directors and the chief executive of the Company were not aware that there was any person who, as at the Latest Practicable Date, had an interest or short position in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which would fall to be disclosed under provisions of Division 2 and 3 of Part XV of the SFO, or who, as at the Latest Practicable Date, was directly and indirectly interested in ten per cent. or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of the Enlarged Group.

Long Position in the shares of the Company

		Number of
		Shares or
		underlying	Percentage of
Name	Capacity	shares held	issued Shares
Ms. Chong Sok Un	Held by controlled	355,176,374	64.42%
(“Ms. Chong”)	corporation (Note 1)
China Spirit Limited	Held by controlled	355,176,374	64.42%
(“China Spirit”)	corporation (Note 1)
Vigor Online Offshore	Beneficial owner	355,176,374	64.42%
Limited (“Vigor”)	(Note 1)
Ma Hongyi (“Mr. Ma”)	Beneficial owner	240,000,000	43.53%
	(Note 2)
Lee and Lee Trust	Held by controlled	266,666,666	48.36%
	corporation (Note 3)
Allied Group Limited	Held by controlled	266,666,666	48.36%
(“Allied Group”)	corporation (Note 4)
Allied Properties (H.K.)	Held by controlled	266,666,666	48.36%
Limited	corporation (Note 5)
(“Allied Properties”)

– 197 –

GENERAL INFORMATION

APPENDIX IV

		Number of
		Shares or
		underlying	Percentage of
Name	Capacity	shares held	issued Shares
AP Jade Limited	Held by controlled	266,666,666	48.36%
(“AP Jade”)	corporation (Note 5)
AP Emerald Limited	Held by controlled	266,666,666	48.36%
(“AP Emerald”)	corporation (Note 5)
Sun Hung Kai &	Held by controlled	266,666,666	48.36%
Co. Limited	corporation (Note 6)
(“SHK & Co.”)
Sun Hung Kai	Held by controlled	266,666,666	48.36%
Securities Limited	corporation (Note 7)
(“SHK Securities”)
Sun Hung Kai	Held as security interest	266,666,666	48.36%
Structured Finance	and beneficial owner
Limited (“SHK	(Note 8)
Structured Finance”)

Notes:

Vigor Online Offshore Limited (“Vigor”), a wholly-owned subsidiary of China Spirit Limited (“China Spirit”), owns 355,176,374 Shares. Ms. Chong maintains 100% beneficial interests in China Spirit. Accordingly, Ms. Chong is deemed to have corporate interest in 355,176,374 ordinary shares of the Company.
Mr. Ma has beneficial interest in HK$180,000,000 convertible bonds of the Company convertible into 240,000,000 Shares.
Mr. Lee Seng Hui, Ms. Lee Su Hwei and Mr. Lee Seng Huang are the trustees of Lee and Lee Trust, being a discretionary trust. They together own approximately 44.54% interest in the issued share capital of Allied Group and are therefore deemed to have the same interest held by Allied Group.
Allied Group owns approximately 74.36% interest in the issued share capital of Allied Properties and is therefore deemed to have the same interest held by Allied Properties.

– 198 –

GENERAL INFORMATION

APPENDIX IV

Through AP Jade and AP Emerald, direct and indirect wholly-owned subsidiaries of Allied Properties respectively, Allied Properties owns approximately 61.93% interest in the issued share capital of SHK & Co. and is therefore deemed to have the same interest held by SHK & Co.
SHK & Co. is deemed to have interest in HK$200,000,000 convertible bonds of the Company convertible into 266,666,666 Shares through its 100% interest in SHK Securities.
SHK Securities is deemed to have interest in HK$200,000,000 convertible bonds of the Company convertible into 266,666,666 Shares through its 100% interest in SHK Structured Finance.
SHK Structured Finance owns HK$200,000,000 convertible bonds of the Company convertible into an aggregate of 266,666,666 Shares in which (i) HK$180,000,000 convertible bonds convertible into 240,000,000 Shares are held as security interest; and (ii) HK$20,000,000 convertible bonds convertible to 26,666,666 Shares are held as beneficial interest.

3. DIRECTORS’ INTERESTS IN COMPETING BUSINESSES

As at the Latest Practicable Date, none of the Directors and their respective associates were considered to have interests in businesses apart from the Group’s businesses which compete, or are likely to compete, either directly or indirectly, with the businesses of the Group pursuant to Rule 8.10 of the Listing Rules.

4. DIRECTORS’ INTERESTS IN CONTRACTS AND ASSETS

As at the Latest Practicable Date, there was no contract or arrangement subsisting in which any Director was materially interested and which was significant in relation to the business of the Group.

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which have been, since 31 December 2008 (being the date to which the latest published audited accounts of the Group were made up), (i) acquired or disposed of by; or (ii) leased to; or (iii) proposed to be acquired or disposed of by; or (iv) proposed to be leased to, any member of the Group.

– 199 –

GENERAL INFORMATION

APPENDIX IV

5. DIRECTORS’ SERVICE CONTRACTS

(a) As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group which does not expire or is not terminable by such member of the Group within one year without payment of compensation (other than statutory compensation).
(b) There are no service contracts in force between any Director and the Company or any of its subsidiaries or associated companies which are continuous contracts with a notice period of 12 months or more.
(c) There are no service contracts in force between any Director and the Company or any of its subsidiaries or associated companies which are fixed term contracts with more than 12 months to run irrespective of the notice period.

6. LITIGATION

(a) In November 1998, a writ was issued against the Company’s subsidiaries, Hongkong Digital Television Limited (“Digital TV”, formerly Star Interactive Television Limited) and Star Telecom Services Limited (“STSL”, formerly Hong Kong Star Internet Limited) by nCube Corporation (“nCube”), claiming the sum of approximately US$1,980,000 (equivalent to approximately HK$15,305,000) plus interest in relation to the alleged purchase of two MediaCube 3000 systems by Digital TV from nCube. The claim of nCube against STSL was on the basis of a chop of STSL on the contract between Digital TV and nCube. STSL had taken legal advice and had been advised that it was very unlikely that STSL would be held liable to the claim of nCube. Digital TV was also opposing the claim of nCube and had taken legal advice.

As advised by its lawyers, Digital TV had reasonable grounds in defending the claim and, accordingly, had not made any provision in the consolidated financial statements in connection with the claim. Digital TV filed a defence in this section on 14 December 1998 and nCube had failed to take further action since that date. There was no progress since then in respect of the litigation.

– 200 –

GENERAL INFORMATION

APPENDIX IV

(b) Stellar One Corporation (“Stellar One”) served a statutory demand under Section 178 of the Companies Ordinance for the sum of approximately US$1,152,000 (equivalent to approximately HK$8,983,000) upon Digital TV in November 1998. Stellar One filed a winding up petition against Digital TV in December 1998 which was vigorously opposed by Digital TV. Digital TV applied for an order for security for the costs against Stellar One. On 4 May 1999, the Court ordered Stellar One to pay HK$200,000 to the court as security for the costs of Digital TV on or before 7 May 1999. Stellar One failed to pay that amount to the court. The petition was dismissed in November 1999 and Stellar One was to pay Digital TV its cost of the petition, which amounted to HK$254,000. Stellar One had indicated that it would proceed to arbitration in Honolulu to recover the alleged amount. Digital TV took legal advice and was advised that the arbitration proceedings had not commenced as of the date of this document. As advised by its lawyers, Digital TV had reasonable grounds in defending the claims and, accordingly, had not made any provision in the consolidated financial statements in connection with the claims.

Save and except for the matters specified above, neither the Company nor any of its subsidiaries is engaged in any litigation or claims of material importance and, so far as the Directors are aware, no litigation or claims of material importance are pending or threatened by or against any companies of the Enlarged Group.

7. MATERIAL CONTRACTS

The following contract (not being a contract entered into in the ordinary course of business) has been entered into by members of the Enlarged Group within the two years immediately preceding the date of this circular and ending on the Latest Practicable Date and is or may be material:

(a) a subscription agreement dated 14 November 2007 entered into by Mission Time Holdings Limited (“Mission Time”) in respect of the subscription for the limited partnership interests in SHK Asian Opportunities Fund, L. P. by Mission Time at an aggregate commitment of up to US$20 million;
(b) an underwriting agreement dated 22 November 2007 entered into between the Company and Vigor in relation to the proposed open offer of 276,183,547 Shares;
(c) an underwriting agreement dated 23 November 2008 entered into between the Company and Vigor in relation to the proposed rights issue; and

– 201 –

GENERAL INFORMATION

APPENDIX IV

(d) a placing agreement dated 23 November 2008 entered into between the Company and Sun Hung Kai International Limited in relation to the placing of the convertible bonds;
(e) a loan agreement dated 6 July 2009 entered into between Join Capital Limited and Mulpha Strategic relating to the granting of the revolving secured term loan.
(f) the Sale and Purchase Agreement; and
(g) a loan agreement dated 11 October 2009 entered into between Join Capital Limited and Sunnysino (B.V.I.) Limited relating to the granting of the secured term loan.

Save as disclosed above, there are no other contracts (not being contracts in the ordinary course of business) being entered into by the members of the Group within the two years immediately preceding the Latest Practicable Date, which are or may be material.

8. GENERAL

(a) The registered office of the Company is Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda.
(b) The head office and principal place of business in Hong Kong of the Company is 47th Floor, China Online Centre, 333 Lockhart Road, Wanchai, Hong Kong.
(c) The secretary of the Company is Ms. Fung Ching Man, Ada, an associate member of the Institute of Chartered Secretaries and Administrators.
(d) This circular is prepared in both English and Chinese. In the event of inconsistency, the English text shall prevail.

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours from 9:00 a.m. to 6:00 p.m. (except Saturdays and public holidays) at the principal office of the Company at 47/F., China Online Centre, 333 Lockhart Road, Wanchai, Hong Kong, and will also be available on the websites of the Company at http://www.irasia.com/listco/hk/colcapital/ during normal business hours on any business day from the date of this circular up to and including 30 October 2009:–

(a) the Memorandum of Association and Bye-laws of the Company;
(b) the material contracts referred to under the paragraph headed “Material Contracts” in this Appendix;

– 202 –

GENERAL INFORMATION

APPENDIX IV

(c) the annual reports of the Company for the two financial years ended 31 December 2007 and 31 December 2008 and the interim report of the Company for the six months’ period ended 30 June 2009;
(d) the circulars of the Company dated 27 February 2009, 30 March 2009 and 28 July 2009; and
(e) this circular.

– 203 –

AI assistant

Automated Systems Holdings Limited — Proxy Solicitation & Information Statement 2009

49459_rns_2009-10-15_046c2a64-ba49-4d62-a75d-1354dde1282f.pdf

MAJOR TRANSACTION RELATING TO ACQUISITION OF SALE SHARES

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

LETTER FROM THE BOARD

(Stock Code: 00383)

MAJOR TRANSACTION RELATING TO ACQUISITION OF SALE SHARES

INTRODUCTION

LETTER FROM THE BOARD

SALE AND PURCHASE AGREEMENT

LETTER FROM THE BOARD

LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE ACQUISITION

LETTER FROM THE BOARD

INFORMATION ON GREENFIELD

LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE OF GREENFIELD

LETTER FROM THE BOARD

Before Completion:

Immediately upon Completion but before close of the Offer:

LETTER FROM THE BOARD

After Completion and the Offer[#] :

FINANCIAL EFFECT OF THE ACQUISITION

INFORMATION ON THE OFFEROR AND THE COMPANY

INTENTION OF THE OFFEROR REGARDING GREENFIELD

MAINTAINING THE LISTING STATUS OF GREENFIELD

LETTER FROM THE BOARD

LISTING RULES IMPLICATIONS

ADDITIONAL INFORMATION

1. SUMMARY OF FINANCIAL INFORMATION

CONSOLIDATED INCOME STATEMENT

APPENDIX I

CONSOLIDATED BALANCE SHEET

APPENDIX I

2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR THE YEAR ENDED 31 DECEMBER 2008

CONSOLIDATED INCOME STATEMENT

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED BALANCE SHEET

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED CASH FLOW STATEMENT

APPENDIX I

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. General

2. Application of New and Revised Hong Kong Financial Reporting Standards (“HKFRSs”)

3. Significant Accounting Policies

Basis of consolidation

Revenue recognition

Investment properties

Property, plant and equipment

Interests in associates

Prepaid lease payments

Financial instruments

Financial assets

Effective interest method

Loans and receivables

Available-for-sale financial assets

Impairment of financial assets

Financial liabilities and equity

Effective interest method

Financial liabilities

Equity instruments

Derivative financial instruments

Derecognition

Impairment losses

Taxation

Borrowing costs

Leases

Leasehold land and building

Retirement benefits scheme

Foreign currencies

4. Key sources of estimation uncertainty

Income taxes

5. Financial instruments

Automated Systems Holdings Limited Proxy Solicitation & Information Statement 2009