Bingo Group Holdings Limited - Proxy Solicitation & Information Statement 2009

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Emcom International Limited (the “ Company ”), you should at once hand this circular and accompanying form of proxy 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 the transferee.

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 losses howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for any securities of Emcom International Limited.

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**EMCOM INTERNATIONAL LIMITED 帝通國際有限公司[*]**

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 8220)

(1) VERY SUBSTANTIAL ACQUISITION; AND (2) SHARE CONSOLIDATION

A notice convening an extraordinary general meeting (the “ EGM ”) of the Company to be held on Wednesday, 5 August 2009 at 9:30 a.m. at 30th Floor, Times Media Centre, 133 Wan Chai Road, Hong Kong is set out on pages 162 to 164 of this circular. A form of proxy for the EGM is enclosed with this circular. Whether or not you are able to attend the EGM, you are encouraged to complete and return the enclosed form of proxy in accordance with the instructions printed thereon and return the same to the branch share registrar of the Company in Hong Kong, Tricor Tengis Limited, at 26/F., Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event no later than 48 hours before the time appointed for the holding of the EGM. Completion and return of the enclosed form of proxy will not preclude you from attending and voting in person at such meeting or any adjournment meeting should you so wish.

This circular will remain on the GEM website at http://www.hkgem.com on the “Latest Company Announcements” page for seven days from the date of its publication.

for identification purpose only

20 July 2009

CHARACTERISTICS OF GEM

GEM has been positioned as a market designed to accommodate companies to which a higher investment risk may be attached than other companies listed on the Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.

Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board and no assurance is given that there will be a liquid market in the securities traded on GEM.

	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
APPENDIX I – ACCOUNTANTS’ REPORT ON THE TARGET GROUP. . . . . . . . . . .	28
APPENDIX II – FINANCIAL INFORMATION ON THE GROUP. . . . . . . . . . . . . . . . .	57
APPENDIX III – UNAUDITED PRO FORMA FINANCIAL
INFORMATION ON THE ENLARGED GROUP. . . . . . . . . . . . . . .	136
APPENDIX IV – VALUATION REPORT ON THE PROPERTY INTERESTS
OF THE ENLARGED GROUP. . . . . . . . . . . . . . . . . . . . . . . . . . . . .	146
APPENDIX V – GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	152
NOTICE OF EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	162

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DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions shall have the following meanings when used herein:

“Acquisition”

the acquisition by the Purchaser of the Sale Shares and the Sale Debts subject to and upon the terms and conditions of the Agreement

“Agreement” the Agreement dated 27 May 2009 (as supplemented by any supplemental agreements, if any) and entered into between the Company and the Vendors in relation to the Acquisition
“associates” has the meaning ascribed to this term under the GEM Listing Rules
“Board” the board of Directors
“Business Day” a day (other than Saturdays, Sundays and such other days where a “black” rainstorm warning or a tropical cyclone warning signal number 8 or above is in force in Hong Kong) on which licensed banks in Hong Kong are open for business throughout their normal business hours
“Company” or “Purchaser” Emcom International Limited, a company incorporated in the Cayman Islands with limited liability and the issued Shares of which are listed on GEM
“Completion” completion of the Acquisition pursuant to the terms and conditions of the Agreement
“Completion Date” the third Business Day after the fulfillment (or waiver) of the last of the conditions of the Agreement (or such other date as the parties to the Agreement may agree in writing as the date) on which Completion shall take place
“Completion Shares” 900 million Shares (equivalent to 450 million Consolidated Shares) to be issued and allotted to the Vendors or their respective nominees in equal portion at Completion under the Agreement, credited as fully paid, at the Issue Price of HK$0.05 per Consideration Share
“Consideration” the aggregate consideration payable for the Acquisition by the Purchaser to the Vendors in the manner provided in the Agreement as disclosed herein
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DEFINITIONS

“Consideration Share(s)”
“Consolidated Shares”
“Conversion Price”
“Conversion Shares”
“Convertible Bonds”
“Deposit Shares”
“Directors”
“EGM”
“Enlarged Group”
“Existing Bank Loan”
1,500 million Shares (equivalent to 750 million Consolidated Shares) (comprising the Deposit Shares and the Completion Shares) to be issued and allotted to the Vendors under the Agreement, credited as fully paid, at an Issue Price of HK$0.05 per Consideration Share
consolidated ordinary shares of HK$0.02 each in the issued and unissued share capital of the Company upon completion of the Share Consolidation
the initial conversion price of HK$0.05 per Conversion Shares, subject to adjustments
a maximum of 1,560 million new Shares (equivalent to 780 million Consolidated Shares) (subject to adjustment as provided under the Convertible Bonds instrument and the adjustment to the Consideration), which may be allotted and issued upon exercise by the holder(s) of the Convertible Bonds of the conversion rights attaching to the Convertible Bonds
convertible bonds to be issued by the Company to the Vendors under the Agreement having the aggregate principal amount of HK$78 million (subject to the adjustment to the Consideration) due on the second anniversary of the Completion Date in registered form to be created by the instrument of the Convertible Bonds
600 million Shares (equivalent to 300 million Consolidated Shares) to be issued and allotted to the Vendors or their respective nominees in equal portion under the Agreement, credited as fully paid, at the Issue Price, as non-refundable deposit
directors of the Company
an extraordinary general meeting of the Company to be convened and held to approve, among other matters, the Agreement and the transactions contemplated thereunder, including but not limited to the allotment and issue of the Consideration Shares and the Convertible Bonds
the Group as enlarged by the Acquisition upon its Completion
a loan taken out by the Hong Kong Subsidiary with a licensed bank in Hong Kong under a secured term loan with the facility amount limited to no more than HK$147 million, in respect of which a principal amount of HK$147 million is outstanding on 31 March 2009
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DEFINITIONS

“First Vendor” “GEM” the Growth Enterprise Market

Beglobal Investments Limited, a company incorporated in the British Virgin Islands which is ultimately owned by a discretionary trust founded by an Independent Third Party

“GEM Listing Rules” the Rules Governing the Listing of Securities on the GEM
“Group” the Company and its subsidiaries
“Hong Kong” the Hong Kong Special Administrative Region of the PRC
“Hong Kong Subsidiary” Power Alliance Investment Limited, a company incorporated in Hong Kong and a wholly owned subsidiary of the Target Company
“Independent Third Party(ies)” any person(s) or company(ies) and their respective ultimate beneficial owner(s) whom, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, are third parties independent of the Company and its connected persons of the Company in accordance with the GEM Listing Rules
“Issue Price” the price of HK$0.05 per Consideration Share
“Latest Practicable Date” 15 July 2009, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein
“Listing Committee” the listing committee of the Stock Exchange for considering applications for listing and the granting of listing
“Outstanding Bank Loan” the Existing Bank Loan or, where applicable, any loan taken out under the replacement loan or replacement loan facility as contemplated under the Agreement
“PRC” the People’s Republic of China which for the purposes of this circular, excludes Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan

“Property”

the shopping mall located in Tsimshatsui, Kowloon, Hong Kong with a gross floor area of 1,526.20 square meters owned by the Hong Kong Subsidiary

DEFINITIONS

“Sale Debt”	the amounts equal to the entirety of the face value of the loans
	outstanding as at Completion made by the Vendors to the Target
	Company
“Sale Shares”	the 2 shares of US$1.00 each in the share capital of the Target
	Company, representing the entire issued share capital in the
	Target Company, which is beneficially owned by the Vendors
	in equal portion
“Second Vendor”	Ryoden Property Development Company Limited, a company
	incorporated in Hong Kong which is ultimately owned by a
	discretionary trust founded by an Independent Third Party
“SFO”	the Securities and Futures Ordinance (Cap. 571, the Laws of
	Hong Kong)
“Share(s)”	ordinary share(s) of HK$0.01 each in the share capital of the
	Company
“Share Consolidation”	the proposed consolidation of every 2 Shares of HK$0.01 each
	in the issued and unissued share capital of the Company into one
	Consolidated Share of HK$0.02 each in the issued and unissued
	share capital of the Company
“Share Option(s)”	share options granted under the share option scheme adopted
	by the Company pursuant to a written resolution passed on 19
	October 2002
“Shareholder(s)”	holder(s) of the Share(s)
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Takeovers Code”	The Hong Kong Code on Takeovers and Mergers
“Target Company”	Harvest Yield Investments Limited, a company incorporated in
	the British Virgin Islands with limited liability
“Target Group”	the group of companies comprising the Target Company and
	the Hong Kong Subsidiary and their respective subsidiaries (if
	any)
“Vendors”	together the First Vendor and the Second Vendor
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“%”	per cent.

LETTER FROM THE BOARD

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**EMCOM INTERNATIONAL LIMITED 帝通國際有限公司[*]**

(incorporated in the Cayman Islands with limited liability) (Stock Code: 8220)

Executive Directors: Mr. Lam Kwok Ho Mr. Chan Cheong Yee

Independent non-executive Directors: Ms. Tsang Fung Chu Mr. Wong Chi Keung Patrick Mr. Chong Lee Chang

Registered office: Cricket Square, Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Head office and principal place of business in Hong Kong: 30th Floor, Times Media Centre No. 133 Wan Chai Road Hong Kong

20 July 2009

To the Shareholders

Dear Sir or Madam,

VERY SUBSTANTIAL ACQUISITION AND SHARE CONSOLIDATION

INTRODUCTION

Reference is made to the announcement of the Company dated 4 June 2009 in which the Board announced that on 27 May 2009, the Company as purchaser entered into the Agreement with the Vendors pursuant to which the Company has agreed to acquire and the Vendors have agreed to sell the Sale Shares and the Sale Debts for a total Consideration of HK$300 million less the Outstanding Bank Loan.

The entering into of the Agreement constitutes a very substantial acquisition on the part of the Company under Chapter 19 of the GEM Listing Rules.

Reference is made to the announcement of the Company dated 17 July 2009 in relation to the Share Consolidation of every 2 Shares of HK$0.01 each in the issued and unissued share capital of the Company into one Consolidated Share of HK$0.02 each in the issued and unissued share capital of the Company.

LETTER FROM THE BOARD

The purpose of this circular is to provide you with further details regarding the Acquisition and the Share Consolidation in accordance with the GEM Listing Rules.

THE AGREEMENT

The Agreement

Date:

27 May 2009

Parties:

First Vendor: Beglobal Investments Limited Second Vendor: Ryoden Property Development Company Limited Purchaser: the Company

The First Vendor is a company incorporated in the British Virgin Islands and the Second Vendor is a company incorporated in Hong Kong. The Vendors are principally engaged in investment holdings.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the First Vendor and the Second Vendor are ultimately owned by two different discretionary trusts, which were founded by two Independent Third Parties, respectively. The discretionary objects of such trusts include the founders and their respective family members and all of them are Independent Third Parties. Furthermore, except that (i) both the Vendors are parties to the Agreement; and (ii) both the Vendors are currently the indirect holding companies of the Hong Kong Subsidiary, which is the owner of the Property and has (as licensor) entered into a licence agreement with Gi Space (a subsidiary of the Company) in respect of the Property, the Vendors have no other relationship with the Company or its connected persons.

The First Vendor, the discretionary trust which beneficially owns the First Vendor, the founder of the said trust and his family members on one hand and the Second Vendor, the discretionary trust which beneficially owns the Second Vendor, the founder of the trust and his family members on the other hand are not associated with each other. Other than owning the Target Company and a project in connection with property development at the Peak, the two Vendors have no other business relationship with one another.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the Vendors (and their respective associates), the discretionary trusts, the trustees and the discretionary objects of the trusts are Independent Third Parties and none of the Vendors, the respective associates of the Vendors, their respective ultimate owners (being trustees of two different discretionary trusts) or the named discretionary objects of the said discretionary trusts have any interest in the Shares.

LETTER FROM THE BOARD

Assets to be acquired

Pursuant to the Agreement, the Company has agreed to acquire and the Vendors have agreed to sell the Sale Shares, representing the total issued share capital of the Target Company as at the date of the Agreement, and the Sale Debts, being such amounts equal to the entirety of the face value of the loans outstanding as at Completion made by the Vendors to the Target Company. The Sale Debts amounted to approximately HK$109,700,184 as at 31 December 2008 pursuant to the unaudited consolidated financial statements of the Target Group. There is no material change to the amount of the Sale Debts since 31 December 2008.

After Completion, the Purchaser will hold an aggregate of 2 Sale Shares of US$1.00 each in the issued share capital of the Target Company, representing the entire issued share capital of the Target Company.

Upon Completion, the Target Company will become a wholly owned subsidiary of the Company and the earnings, assets and liabilities of the Target Company will be consolidated with the accounts of the Company in the consolidated financial statements of the Group.

Consideration

The total Consideration for the Sale Shares and the Sale Debt shall be determined in accordance with the following formula (subject to such adjustment as set out below):

Consideration = HK$300 million less Outstanding Bank Loan

and as at the date of the Agreement, the Consideration amounts to HK$153 million.

The Outstanding Bank Loan is a loan taken out by the Hong Kong Subsidiary with a licensed bank in Hong Kong under a secured term loan with the facility amount limited to no more than HK$147 million, in respect of which a principal amount of HK$147 million is outstanding on 31 March 2009. The Outstanding Bank Loan is secured by, among others, the charge of the Property. As at the Latest Practicable Date, the Outstanding Bank Loan amounts to HK$147 million.

The Consideration (subject to adjustment as set out below) shall be payable in the following manner:

(1) within three Business Days after the EGM for considering (among other matters) the allotment and issue of the Deposit Shares, which date of such EGM in any event shall not be later than 31 July 2009), a non-refundable deposit of HK$30 million (the “ Deposit ”) in the form of Consideration Shares (i.e. 600 million Deposit Shares) shall be issued and allotted by the Purchaser to the Vendors (or their respective nominee(s)) in equal proportion;
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LETTER FROM THE BOARD

(2) upon Completion and satisfied by:
(a) as to HK$45 million in the form of Consideration Shares (i.e. 900 million Completion Shares) shall be allotted and issued by the Purchaser to the Vendors (or their respective nominee(s)) in equal proportion, provided that, if after such issue of Completion Shares, the aggregate percentage holding of the Vendors (or their respective nominee(s)), their respective ultimate owners (being the trustees of two different discretionary trusts) and the named discretionary objects of the said discretionary trusts in the Company would be equal to or more than 30% of the enlarged issued share capital of the Company, then the number of Completion Shares shall be adjusted downward such that the aggregate percentage holding of the Vendors (or their respective nominee(s)), their respective ultimate owners (being the trustees of two different discretionary trusts) and the named discretionary objects of the said discretionary trusts in the Company shall be equal to 29.5% of the enlarged issued share capital of the Company (immediately after the said issue), while the shortfall (“ Shortfall ”) arising therefrom shall then be settled by way of the issue of additional Convertible Bonds; and
(b) as to HK$78 million (subject to the issue of additional Convertible Bonds as provided in (a) above) payable by the Purchaser by way of issue to the Vendors (or their respective nominee(s)) in equal proportion of the Convertible Bonds in the said total principal amounts.

The Consideration Shares shall rank pari passu in all respects with the Shares in issue on the date of allotment and issue such Consideration Shares, including the right to all dividends, distributions and other payments made or to be made for which the record date falls on or after the date of such allotment and issue.

Consideration Adjustment

The Vendors shall as soon as practicable after the Completion and in any event within three months from the Completion Date procure that the Target Company shall prepare and issue the consolidated financial statements of the Target Group for the period beginning 1 January 2009 and ending the Completion Date and such consolidated financial statements of the Target Group (the “ Audited Completion Accounts ”) shall be audited by the auditors of the Hong Kong Subsidiary (or such other firm of auditors as may be mutually agreed by the Vendors and the Purchaser) (the “ Independent Accountants ”). The Consideration shall be subject to upward or downward adjustments based on the Audited Completion Accounts.

The Consideration shall be subject to the following adjustment in connection with the Audited Completion Accounts:

LETTER FROM THE BOARD

(a) Where the principal amount of the Outstanding Bank Loan as at the Completion Date as shown in the Audited Completion Accounts is more than HK$147 million, the Consideration shall be adjusted downward by such difference. For the avoidance of doubt, if the principal amount of the Outstanding Bank Loan as at the Completion Date as shown in the Audited Completion Accounts is equal to or less than HK$147 million, no adjustment is required to be made to the Consideration.
(b) Subject to paragraph (c) below, the Consideration shall be adjusted upward by the amount equal to (the aggregate of, if applicable) the following items as shown in the Completion Accounts:
(i) prepayments for interests payable, expenses and other outgoings (including but not limited to rates, Government rent and management fees) for any period after (and exclusive of) the Completion Date;
(ii) any rental, interest and other income accrued for any period before (and up to) the Completion Date, but not yet received as at the Completion Date;
(iii) utility and other deposits, account receivables (but for the avoidance of doubt, account receivables which do not arise from the Group’s ordinary course of business of property investment shall not be taken into account for the purpose of this Paragraph (b)), and cash and bank balances;

and the Consideration shall be reduced by:

(iv) interests payable, expenses and other outgoings (including but not limited to rates, Government rent and management fees) accrued for any period before (and up to) the Completion Date, but not yet paid as at the Completion Date; and
(v) advanced payments received in respect of any rental, interest and other income for any period before (and up to) the Completion Date.
(c) Any fair-value change in investment properties, deferred tax liability in relation to the fairvalue change in investment properties and depreciation (and, where applicable, provision therefor and write-back for over-provision therefor) as shown in the Audited Completion Accounts shall be disregarded for the purpose of the calculating the adjustment (if any) to the Consideration.

If the Consideration is subject to any upward adjustment, the additional amount of the Consideration shall be satisfied, at the discretion of the Purchaser after consulting the Vendors, by the Purchaser’s: (i) payment in cash, and/or (ii) issue of Convertible Bonds in the principal amount equivalent to such additional amount (or portion thereof) with a cap such additional principal amount of the Convertible Bonds so issued in any event shall not exceed HK$5 million, provided that the aggregate of the amount of cash so paid and the principal amount of the Convertible Bonds so issued shall together amount to the said additional amount of the Consideration.

LETTER FROM THE BOARD

If the Consideration is subject to any downward adjustment, the difference (“ Difference ”) shall be satisfied, at the discretion of the Vendors after consulting the Purchaser, by any or any combination of the following manner:

(a) payment to the Purchaser by the Vendors in cash, and/or
(b) the delivery by the Vendors to the Purchaser of certificates for Convertible Bonds in the principal amount equal to the Difference (or portion thereof) for cancellation of such Convertible Bonds;

provided that the aggregate of the amount of cash so paid and the principal amount of the Convertible Bonds so re-delivered for cancellation shall together amount to the Difference.

The Consideration for the Sale Shares and the Sale Debts was determined after arm’s length negotiations between the Vendors and the Purchaser after considering the value of the Property and also the prospects of the Target Group. The value of the Property was based on the valuation report by Prudential Surveyors International Limited, an independent professional valuer showing that the value of the Property amounts to approximately HK$300 million as at 10 May 2009.

Conditions precedent

Completion is subject to the following conditions having been fulfilled or waived (as the case may be):

(a) the Listing Committee of the Stock Exchange having granted or having agreed to grant the listing of, and permission to deal in, the Consideration Shares and the Conversion Shares which may be issued upon the exercise of the conversion rights attaching to the Convertible Bonds;
(b) the approval by the Shareholders (or, as the case may be, the independent Shareholders of the Purchaser) at the EGM of the Agreement and the transactions contemplated thereby (including but not limited to the allotment and issue of the Consideration Shares and the Conversion Shares) and all other consents and acts required under the GEM Listing Rules having been obtained and completed or, as the case may be, the relevant waiver from compliance with any of such rules having been obtained from the Stock Exchange;
(c) (if required) all requisite waivers, consents and approvals from any relevant governments or regulatory authorities or other relevant third parties in connection with the transactions contemplated by the Agreement having been obtained;
(d) the Purchaser being reasonably satisfied that, as at Completion, there has not been any material adverse change in respect of any member of the Target Group since the date of the Agreement;
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LETTER FROM THE BOARD

(e) the Vendors being reasonably satisfied that, as at Completion, there has not been any material adverse change in respect of any member of the Group since the date of the Agreement;
(f) no indication being received from the Stock Exchange that the transactions contemplated under the Agreement will be treated or, as the case may be, ruled by the Stock Exchange as a “reverse takeover” under the GEM Listing Rules;
(g) (i) the Purchaser being satisfied, from the date of the Agreement and at any time before the Completion, that the warranties given by the Vendors under the Agreement remain true and accurate in all material respects, and not misleading nor in breach in any material respect, and (ii) the Vendors being satisfied, from the date of the Agreement and at any time before the Completion, that the warranties given by the Purchaser under this Agreement remain true and accurate in all material respects, and not misleading nor in breach in any material respect; and
(h) the consent as referred to in section headed “Bank consent” in this circular being obtained or (in the case of such consent not being obtained) the replacement of the Existing Bank Loan being effected.

If the conditions are not fulfilled (or as the case may be, waived by the Purchaser or the Vendors, as the case may be) on or before 30 November 2009 (or such other date as the parties to the Agreement may agree in writing), the Agreement shall lapse in accordance with its terms and none of the parties to the Agreement shall have any claim against or liabilities towards each other thereunder save for any antecedent breaches thereof.

As at the Latest Practicable Date, save for condition (h), none of the above conditions have been fulfilled.

The warranties given by the Vendors under the Agreement cover ownership of the Sale Shares and the Sale Debts, accounts of the Target Group, the Property, assets of the Target Group, taxation, litigation, corporate matters and compliance with laws issues. To the best of the Directors’ information and knowledge, the Target Company and the Hong Kong Subsidiary do not have any other significant assets apart from the Property.

Bank Consent

Both the Vendors and the Purchaser shall use their reasonable endeavours to procure consent to be obtained prior to Completion under the Existing Bank Loan in respect of the change of the ultimate and beneficial ownership of the Hong Kong Subsidiary following the Completion, provided that if such consent is not forthcoming within three months from the date of the Agreement, the Purchaser undertakes to procure and arrange for, prior to Completion, the replacement of the Existing Bank Loan by loan facility from other bank(s) and/or financial institution(s). To the best of the Directors’ knowledge, the bank consent is required as the Property is currently charged as security for the Existing Bank Loan and the consent is required under the terms of the Existing Bank Loan. As at the Latest Practicable Date, the bank consent has been obtained.

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LETTER FROM THE BOARD

The parties to the Agreement also agree that any prepayment fee and related expenses arising from or in connection with the obtaining and effecting of the replacement loan or replacement loan facility and the prepayment of the Existing Bank Loan shall be borne and paid by the Purchaser on the one part and the Vendors on the other part in equal proportion. It is estimated that the prepayment fee and related expenses would not exceed HK$367,500.

Completion

Completion shall take place on the Completion Date after all the conditions of the Agreement have been fulfilled or waived or such later date as may be agreed between the parties thereto.

Consideration Shares

The Issue Price of HK$0.05 per Consideration Share represents:

(a) a discount of approximately 5.66% to the closing price of HK$0.053 per Share as quoted on the Stock Exchange on 27 May 2009, being the last trading day immediately prior to the entering into of the Agreement; and
(b) a discount of approximately 3.10% to the average of the closing prices of HK$0.0516 per Share as quoted on the Stock Exchange for the last five consecutive trading days up to and including 27 May 2009, being the last trading day immediately prior to the entering into of the Agreement.

The Issue Price was determined after arm’s length negotiations between the Vendors and the Purchaser taking into account of the market price of the Shares. In comparison the Issue Price with the recent market prices, the Directors consider that the Issue Price is fair and reasonable and in the interests of the Shareholders and the Company as a whole.

The Consideration Shares will be allotted and issued pursuant to the specific mandate to be sought at the EGM and will be allotted and issued on the Completion Date.

The Consideration Shares represent approximately 45.96% of the existing issued share capital of the Company and approximately 31.49% of the issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares.

The Consideration Shares, when allotted and issued, will rank pari passu in all respects with each other and with the Shares then in issue on the date of allotment and issue of the Consideration Shares. There are no provisions contained in the Agreement restricting the dealings in the Consideration Shares by the Vendor.

Application will be made by the Company to the Stock Exchange for the listing of, and permission to deal in, the Consideration Shares.

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LETTER FROM THE BOARD

Convertible Bonds

The principal terms of the Convertible Bonds are as follows:

Issuer: the Purchaser Principal amount: HK$78 million in aggregate (subject to Consideration adjustment as mentioned above)

Maturity date: The Business Day falling the second anniversary of the issue date of the Convertible Bonds

Interest: For the period commencing on the date of the issue of the Bonds and the first anniversary thereof, the Convertible Bonds shall accrue no interest. Following the passing of the said first anniversary, the Convertible Bonds shall accrue interest at the rate of 5 per cent. per annum.

Security:

(subject to the mortgagee bank’s consent (if required)) (i) first charge over the entire issued share capital in the Target Company, (ii) first charge over the entire issued capital in the Hong Kong Subsidiary, and (iii) second charge over the Property.

Transferability:

The Convertible Bonds will be freely transferable but may not be assigned or transferred to a connected person of the Company without the prior written consent of the Company (other than the holding company or fellow subsidiaries of the Vendors). The Company will notify the Stock Exchange as soon as reasonably practicable upon becoming aware of any dealings in the Convertible Bonds by any connected persons of the Company.

Conversion:

Provided that any conversion of the Convertible Bonds does not trigger a mandatory offer obligation under Rule 26 of the Takeovers Code on the part of the holder of the Convertible Bonds which exercised the conversion right and its party(ies) acting in concert as defined under the Takeovers Code subject as provided herein, a holder of Convertible Bonds shall have the right at any time and from time to time during the period commencing immediately on the date of issue of the Convertible Bonds up to the maturity date to convert the whole or any part of the principal amount of the Convertible Bond(s) into Conversion Shares. There is no restriction on subsequent sale of the Conversion Shares.

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LETTER FROM THE BOARD

Initial Conversion Price:

The Convertible Bonds shall be converted at the initial Conversion Price of HK$0.05 per Conversion Share (subject to adjustments).

The initial Conversion Price is subject to adjustments in case of customary anti-dilution events, including among others, (i) share subdivisions, consolidations and reclassifications; (ii) capitalisation of profits and reserves; (iii) capital distribution; (iv) rights issue; (v) issue of securities at a price lower than 93% of the then current market price; and (vi) any other event or circumstances which would have similar analogous dilution effect. The Company will make an announcement when there is any adjustment to the Conversion Price and the adjustment to the Conversion Price will be certified by the auditors of the Company or approved merchant banks.

Redemption:

The Company shall redeem any Convertible Bonds which remain outstanding on the maturity date at its principal amount.
Upon occurrence of an event of default, the holder of the Convertible Bonds may, unless such event of default has been waived by it in writing, require the Company to redeem the whole (but not part) of the outstanding principal amount of the Convertible Bonds at such outstanding principal amount and the Convertible Bonds shall be mandatorily redeemed by the Company.

Purchase:

Cancellation:

Subject always to the agreement of the holders of the outstanding Convertible Bonds at their absolute discretion, the Company may at any time and from time to time offer to purchase the Convertible Bonds that remain outstanding (whether in whole or in part) from the holders of such Convertible Bonds at any price as may be agreed between the Company and the relevant holder of the Convertible Bonds provided that (i) such purchase price shall not be more than 110% of the principal amount of the Convertible Bonds, and (ii) the Company shall at the same price offer to purchase from the other holders of the Convertible Bonds a like proportion of the Convertible Bonds registered in their names.

Immediately upon redemption or purchase by the Company, the Convertible Bonds so redeemed or purchased shall forthwith be cancelled. Any Convertible Bonds so cancelled shall not be re-issued or re-sold.

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LETTER FROM THE BOARD

Voting rights:

The holder of the Convertible Bonds will not be entitled to attend or vote at any general meeting of the Company by reason only of it being the holder of the Convertible Bonds.

Listing:

The Convertible Bonds will not be listed on the Stock Exchange or any other stock exchange.

Covenants:

The Company has give covenants to the holders of the Convertible Bond which include without limitation that the Company shall not issue (nor agree to issue) any new Shares, unless (i) such issue is a consideration issue, or (ii) a term of such issue providing for the setting aside of a sum of not less than 30% of the net proceeds arising from such issue for the purpose of redemption the outstanding Bonds, on a pro-rata basis, from those Bondholders who at their absolute discretion choose to agree to any early redemption, or (iii) such issue arises from the exercise of options granted or to be granted under the share option scheme of the Company.

The terms of the Convertible Bonds was arrived at after arm’s length negotiations between the Company and the Vendors and the Directors are of the view that the interest rate of 5% per annum and early purchase price of not more than 110% of the face value are fair and reasonable.

The initial Conversion Price of HK$0.05 per Conversion Share represents:

(a) a discount of approximately 5.66% to the closing price of HK$0.053 per Share as quoted on the Stock Exchange on 27 May 2009, being the last trading day immediately prior to the entering into of the Agreement; and
(b) a discount of approximately 3.10% to the average of the closing prices of HK$0.0516 per Share as quoted on the Stock Exchange for the last five consecutive trading days up to and including 27 May 2009, being the last trading day immediately prior to the entering into of the Agreement.

The Conversion Price was determined after arm’s length negotiations between the Vendors and the Purchaser taking into account of the market price of the Shares. In comparison the Conversion Price with the recent market prices, the Directors consider that the Conversion Price is fair and reasonable and in the interests of the Shareholders and the Company as a whole.

The terms of the Convertible Bonds were arrived at after arm’s length negotiations between the parties to the Agreement and the interest rate of 5% per annum and the early repurchase price were determined with reference to various factors, including but not limited the bank borrowing rate for loans secured by second charge over property and the terms of other similar convertible bonds. In addition, the limitation of the early repurchase price of not more that 110% of face value is based on the mutual understanding that the repurchase price shall not exceed the principal plus two years’

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LETTER FROM THE BOARD

interest when the Convertible Bonds are repurchased and that the repurchase price is to be agreed between the Company and holders of the Convertible Bonds. The Directors are of the view that the interest rate and the early repurchase price are fair and reasonable.

The Conversion Shares will be allotted and issued pursuant to the specific mandate to be sought at the EGM and will be allotted and issued upon the conversion of the Convertible Bonds.

The Conversion Shares represent 47.80% of the existing issued share capital of the Company and approximately 24.67% of the issued share capital of the Company as enlarged by the Consideration Shares and the allotment and issue of the Conversion Shares upon full conversion of the Convertible Bonds.

The Conversion Shares, when allotted and issued, will rank pari passu in all respects with each other and with the Shares then in issue on the date of allotment and issue of the Conversion Shares. There are no provisions contained in the Agreement restricting the dealings in the Conversion Shares by the Vendor.

Application will be made by the Company to the Stock Exchange for the listing of, and permission to deal in, the Conversion Shares.

As adjustment will be made to the number of Consideration Shares in the manner as provided in the sub-paragraph headed “Consideration” under the paragraph headed “The Agreement” above, and according to the terms and conditions of the Convertible Bonds that the holders of the Convertible Bonds may only exercise the conversion rights provided that any conversion of the Convertible Bonds does not trigger a mandatory offer obligation under the Rule 26 of the Takeovers Code, the Acquisition will not result in a change of control of the Company.

INFORMATION ON THE TARGET GROUP

The Target Company is a company incorporated in the British Virgin Islands and is principally engaged in investment holdings. As at the date hereof, the Target Company is the sole beneficial owner of the entire issued share capital of the Hong Kong Subsidiary.

The Hong Kong Subsidiary is a Company incorporated in Hong Kong and is principally engaged in investment holdings. The Hong Kong Subsidiary is the owner of the Property.

The Property is the shopping mall named “Granville Identity” or “gi”, located in Tsimshatsui, Kowloon, Hong Kong with a gross floor area of 1,526.20 square meters. The Property is currently managed by GI Space Limited, a wholly owned subsidiary of the Company. The Property is located on Nos. 34 & 36 Granville Road, Tsim Sha Tsui, Kowloon, Hong Kong and under government leases for a common term of 75 years from 24 June 1963. The shops of the Property have an occupation rate of approximately 90% and all shops of the Property are operated under license agreements. The lengths of tenancies of the shops of the Property vary from two weeks to 18 months.

For further details of the Property and GI Space Limited, please also refer to the announcement of the Company dated 3 December 2008. A valuation report on the property interests of the Enlarged Group including the Property is included in Appendix IV to this circular.

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LETTER FROM THE BOARD

According to the audited consolidated financial statements of the Target Group, the turnover, net profit before taxation and net profit after taxation of the Target Group for financial year ended 31 December 2007 would be approximately HK$11,230,000, HK$34,236,000 and HK$28,251,000 respectively and the turnover, net loss before taxation and net loss after taxation of the Target Group for financial year ended 31 December 2008 would be approximately HK$11,086,000, HK$9,890,000 and HK$7,813,000 respectively. The net profit of the Target Group is higher than its revenue for the financial year ended 31 December 2007 principally because of the adjustment in fair value change in the Property. The losses suffered by the Target Group for the financial year ended 31 December 2008 is also principally because of the adjustment in fair value change in the Property.

The audited consolidated total assets and net assets of the Target Group as at 31 December 2008 were approximately HK$292,867,000 and HK$27,315,000 respectively. The net assets of the Target Group (excluding the Sale Debts) amounted to approximately HK$137,015,000 as at 31 December 2008.

CHANGE IN SHAREHOLDING

The changes in the shareholding structure of the Company as a result of the allotment and issue of the Consideration Shares and the Conversion are as follows:

Shareholder Emcom Limited_(Note 1) Modern China Holdings Limited(Note 4)_ Lam Kwok Ho The First Vendor The Second Vendor Public Shareholders Total	At the Latest Practicable Date No. of Approximate Shares percentage 717,968,000 22.00% 151,684,000 4.65% 16,000 0.00% – – – – 2,394,132,253 73.35% 3,263,800,253 100%	Immediately after the allotment and issue of the Deposit Shares but before the allotment and issue of the Completion Shares and the exercise of conversion rights under the Convertible Bonds No. of Approximate Shares percentage 717,968,000 18.58% 151,684,000 3.92% 16,000 0.00% 300,000,000 7.77% 300,000,000 7.77% 2,394,132,253 61.96% 3,863,800,253 100%	Immediately after the allotment and issue of the Consideration Shares (up to 29.5%) but before the exercise of conversion rights under the Convertible Bonds No. of Approximate Shares percentage 717,968,000 15.51% 151,684,000 3.28% 16,000 0.00% 682,851,825 14.75% 682,851,825 14.75% 2,394,132,253 51.71% 4,629,503,903 100%	Immediately after the allotment and issue of the Consideration Shares and the exercise of the Convertible Bonds such that the Vendors will hold up to 29.9% of the enlarged issued share capital of the Company but before the exercise of conversion rights under the Convertible Bonds No. of Approximate Shares percentage 717,968,000 15.42% 151,684,000 3.26% 16,000 0.00% 696,060,111 14.95% 696,060,111 14.95% 2,394,132,253 51.42% 4,655,920,475 100%	Immediately after the allotment and issue of the Consideration Shares but before the exercise of conversion rights under the Convertible Bonds (Note 2) No. of Approximate Shares percentage 717,968,000 15.08% 151,684,000 3.18% 16,000 0.00% 750,000,000 15.74% 750,000,000 15.74% 2,394,132,253 50.26% 4,763,800,253 100%	Immediately after the allotment and issue of the Consideration Shares and the full exercise of conversion rights under the Convertible Bonds(Note 3) No. of Approximate Shares percentage 717,968,000 11.36% 151,684,000 2.40% 16,000 0.00% 1,530,000,000 24.19% 1,530,000,000 24.19% 2,394,132,253 37.86% 6,323,800,253 100%	Immediately after the allotment and issue of the Consideration Shares and the full exercise of conversion rights under the Convertible Bonds(Note 3) No. of Approximate Shares percentage 717,968,000 11.36% 151,684,000 2.40% 16,000 0.00% 1,530,000,000 24.19% 1,530,000,000 24.19% 2,394,132,253 37.86% 6,323,800,253 100%
	3,263,800,253	3,863,800,253	4,629,503,903	4,655,920,475	4,763,800,253		100%

Notes:

The issued share capital of Emcom Limited is beneficially owned as to 75% by Mr. Phang Wah, 15% by Mr. Yong Wai Hong and 10% by Mr. Lee Pin Yeow.
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LETTER FROM THE BOARD

Since the issue of the Completion Shares is subject to the 29.5% threshold, the shareholding table is for illustrative purpose only.
Since the issue of the Completion Shares is subject to the 29.5% threshold and that the conversion of the Convertible Bonds is subject to the 30% threshold under the Takeover Code, the shareholding table is for illustrative purpose only.
Modern China Holdings Limited is wholly and beneficially owned by Mr. Chen Jijin who was formerly the chairman and an executive Director. Modern China Holdings Limited is a party acting in concert with Emcom Limited under section 317(1)(a) of the SFO.
Mr. Lam Kwok Ho is an executive Director of the Company.
Pursuant to the terms of the Agreement, the Vendors will limit its shareholding to 29.5% if it holds 29.6% to 29.9% of the share capital of the Company immediately after the issue of the Consideration Shares but before the exercise of the conversion rights of the Convertible Bonds. For the avoidance of doubts, the Vendors may exercise the conversion rights under the Convertible Bonds such that the Vendors will hold 29.9% of the share capital of the Company.

REASONS FOR THE ACQUISITION

The Group is principally engaged in the sale and trading of telecommunication and electronic equipment, commodities and computer hardware and relevant peripherals, and also provision of property management.

The Board considers that it is in the benefit of the Company to seek suitable investment opportunities and broaden its sources of income. The Board believes that the rental income from the Property will generate stable income for the Group and will also broaden its sources of income. In addition, the Property represents an excellent investment opportunity as the Company can benefit from the gain in value of the Property as the Hong Kong property market grows.

As shown in the accountants’ report of the Target Group, the Target Group recorded profits for the years ended 31 December 2006 and 2007 and the primary reason for the losses of the Target Group for the year ended 31 December 2008 was the fair value adjustment. As shown in the accountants’ report, after the engagement of the management company, the Target Group recorded steady revenue of approximately HK$11 million per year and this was further affirmed by the fact that the Target Group recorded revenue of approximately HK$2,440,000 for the first three months ended 31 March 2009.

The Company is of the view that the value of investments in a company lies in its future potential growth, which in turn depends on the future prospects and potential of the underlying assets. As shown in the accountants’ report of the Target Group, the fair value gain was recognized for the years ended 31 December 2006 and 2007. While a fair value loss was recorded for the year ended 31 December 2008 as a result of the financial tsunami, the Directors is confident that as a result of the growth of property market in Hong Kong, the long-term prospect of the investment in the Target Group is promising. Although the current operating environment of retail industry in Hong Kong is affected by the financial tsunami, it is expected that the retail industry will recover with the economy. Despite the financial tsunami, the Property still have an occupation rate of approximately 90%, this further reinforce the view of the Board on the long-term prospect of the Property. The Directors further believe that the Acquisition represents an excellent investment opportunity as the Company can benefit from the gain in the appreciation of the value of the Property as the market recovers.

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In addition, given that the consideration of the Acquisition shall be satisfied by the Company with Consideration Shares and the Convertible Bonds, the Directors are of the view that the Acquisition provide the Company the opportunity to acquire an investment with good potential without depleting the cash resources of the Group which is to the interest of the Shareholders and the Company.

The Company has also considered other alternative methods to settle the consideration such as external bank borrowings or promissory notes. However, the Company is of the view that the financing costs of external financing has been increasing since the financial tsunami and the current settlement method will alleviate the need to repayment of substantial amount in future and is in the interests of the Company and the Shareholders.

As the Acquisition only involves the issue of Consideration Shares and the Convertible Bonds, the Acquisition will also not have any material impact on the cashflow of the Group.

In light of the growing potential of the Target Group, the Directors (including the independent non-executive Directors) consider that the terms and conditions of the Acquisition, including but not limited to the issue of the Consideration Shares and the Convertible Bonds, are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. The Directors consider the Acquisition to be in normal commercial terms of the Company.

MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET GROUP

Business Review

The Target Company is a company incorporated in the British Virgin Islands and is principally engaged in investment holdings. As at the Latest Practicable Date, the Target Company is owned in equal share by the First Vendor and the Second Vendor.

The Hong Kong Subsidiary is a company incorporated in Hong Kong and is principally engaged in investment holdings. As at the Latest Practicable Date, the Hong Kong Subsidiary is wholly owned by the Target Company.

Operating Results

Turnover of the Target Group for the years ended 31 December 2006, 2007 and 2008 and the three months ended 31 March 2009 were approximately HK$551,000, HK$11,230,000, HK$11,086,000 and HK$2,440,000 respectively.

The operating results were net profit of HK$7,113,000 for year ended 31 December 2006, net profit of HK$ 28,251,000 for year ended 31 December 2007, net loss of HK$7,813,000 for year ended 31 December 2008 and net loss of HK$26,000 for three months ended 31 March 2009.

Financial status and capital structure

As at 31 December 2006, 2007 and 2008 and 31 March 2009, the Target has authorised share capital of US$50,000, divided into 50,000 shares of US$1 each, Issued share capital as at 31 December 2006, 2007 and 2008 and 31 March 2009 were US$1.

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LETTER FROM THE BOARD

Set out below is the financial information relating to the assets and liabilities of the Target Group:

31 December 31 December 31 December 2006 2007 2008 HK$’000 HK$’000 HK$’000 Total assets 266,900 305,218 292,867 Total liabilities 260,023 270,090 265,552 Net assets 6,877 35,128 27,315	31 March 2009 HK$’000 292,605 265,316
	27,289

Employee and remuneration policies

As the Hong Kong Subsidiary and the Target Company is principally engaged in investment holdings, there was no employee as at 31 December 2006, 31 December 2007 and 31 December 2008 and 31 March 2009.

Particulars of pledged assets

As at 31 December 2006, 31 December 2007 and 31 December 2008 and 31 March 2009, save for the pledge of the Property to secure for the Outstanding Bank Loan, the Hong Kong Subsidiary and the Target Company had no material charges on its assets.

Borrowing and gearing ratio

Set out below is the financial information relating to the borrowing of the Target Group:

31 December 31 December 31 December 2006 2007 2008 HK$’000 HK$’000 HK$’000 Bank loan 147,000 147,000 147,000 Loan from shareholders 97,600 107,600 109,700 Gearing ratio 20.53 4.10 5.35	31 March 2009 HK$’000 147,000 109,700
	5.35

The gearing ratio represents the interest bearing liabilities less cash divided by shareholders’ equity.

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LETTER FROM THE BOARD

Capital commitments

As at 31 December 2006, 2007 and 2008 and 31 March 2009, the Target Group had no capital commitment.

Contingent liabilities

As at 31 December 2006, 2007 and 2008 and 31 March 2009, the Target Group had no significant contingent liabilities.

Foreign exchange exposure

Since the operations of the Hong Kong Subsidiary and the Target Company are in Hong Kong and most of the transactions, monetary assets and liabilities are dominated in HK$, the exposure to foreign currency risk is minimal.

Significant investment held

For the years ended 31 December 2006, 2007 and 2008 and the three months ended 31 March 2009, the sole investment of Target is its 100% equity interest in Power Alliance Investment Limited. Power Alliance Investment Limited has no significant investment held.

Material acquisition/disposal of subsidiary

The Target Group had no acquisition or disposal of subsidiary during the years ended 31 March 2006, 2007 and 2008 and the three months ended 31 March 2009.

Segment information

The Target Group has only one operating segment, which is property leasing in Hong Kong throughout the years ended 31 December 2006, 2007 and 2008 and the three months ended 31 March 2009. No segment information is presented.

Future plan and prospects

The Board considers that it is in the benefits of the Company to seek for suitable investment opportunities and broaden its sources of income. The Board believes that the rental income from the Property will generate stable income for the Group and will also broaden its sources of income. In addition, the Property represents an excellent investment opportunity as the Company can benefit from the gain in value of the Property as the Hong Kong property market grows.

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FINANCIAL EFFECT OF THE ACQUISITION

Immediately after the Completion, the Possible Acquisition will lead to an increase in the amount of the net asset value, total assets and total liabilities of the Group by approximately HK$78,714,000, HK$309,044,000 and HK$230,330,000 respectively and a decrease in the earnings of the Group by HK$11,527,000. It is expected that the investments in the Target Company will contribute positively to the results of the Group.

The following table was prepared to demonstrate the effect of the Acquisition on assets and liabilities of the Group, for illustrative purpose only, assuming the Completion had taken place on 31 March 2009:

Non-current assets Investment properties Property, plant and equipments Goodwill Current assets Current liabilities Net current liabilities Non current liabilities Bank loans – secured Loan from shareholders Deferred tax liabilities Convertible bonds Net assets	The Group as at 31 March 2009 HK$’000 (note 1) – 3,039 2,700 5,739 42,604 45,066 (2,462 ) – – – – – 3,277	Target Group as at 31 March 2009 HK$’000 (note 2) 290,000 253 – 290,253 2,352 3,135 (783 ) (147,000 ) (109,700 ) (5,481 ) – (262,181 ) 27,289	Pro forma Enlarged Group HK$’000 (note 3) 300,000 3,292 11,491 314,783 42,604 46,979 (4,375 ) (147,000 ) – (7,131 ) (74,286 ) (228,417 ) 81,991

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Notes:

extracted from the audited consolidated financial statements contained in the Company’s annual report for the year ended 31 March 2009 contained in Appendix II to this circular.
extracted from the audited consolidated financial statements of the Target Group contained in Appendix I to this circular.
extracted from the unaudited pro forma financial information of the Enlarged Group as contained in the Appendix III to this circular.

FINANCIAL AND TRADING PROSPECTS OF THE ENLARGED GROUP

The business segment of the Group on trading of sales and trading of telecommunication and electronic equipment, commodities, and computer hardware and relevant peripherals had been successfully launched and expanded while the business segments for telecommunication, mobile phones and DVD players had been significantly scaled down due to the current difficult operation environments.

Following the acquisition of GI Space Limited and TY Space Limited, the Group has stepped in the business segment of provision of services in property management that is expected to contribute steady income to the Group.

The Directors are of the view that the Enlarged Group can broaden its business horizon and diversify its income stream by exploring suitable business and investment opportunities with a view to enhancing shareholders’ value in the future. It is expected that the Acquisition represent an opportunity to an excellent investment opportunity as the Company can benefit from the gain in value of the Property as the Hong Kong property market grows. With the steady rental income, it is expected that the Acquisition would enhance the Shareholders’ value in the long run.

To take advantage of expanding business opportunities in the mobile note-books industry, the Group will reallocate and consolidate scarce financial resources and management time, and may close down or dispose its manufacturing facilities in China in due course.

PROPOSED SHARE CONSOLIDATION

The Board proposes that every 2 Shares of HK$0.01 each in the issued and unissued share capital of the Company be consolidated into one Consolidated Share of HK$0.02 each in the issued and unissued share capital of the Company. As at the date of this circular, there were 3,263,800,253 Shares of HK$0.01 each in issue and fully paid or credited as fully paid. Assuming no further Shares will be issued from the date of this circular up to the date of the EGM, there will be 1,631,900,126 Consolidated Shares of HK$0.02 each in issue and fully paid or credited as fully paid following the Share Consolidation.

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LETTER FROM THE BOARD

The implementation of the Share Consolidation is conditional upon:

(i) the passing of the necessary ordinary resolution by the Shareholders at the EGM to approve the Share Consolidation; and
(ii) the GEM Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Consolidated Shares.

Application will be made to the Stock Exchange for the listing of, and permission to deal in, the Consolidated Shares. All necessary arrangements will be made for the Consolidated Shares to be admitted into the Central Clearing and Settlement System established and operated by Hong Kong Securities Clearing Company Limited.

As at the Latest Practicable Date, Shares are traded in board lots of 8,000 Shares. Following the Share Consolidation, it is proposed that the Consolidated Shares will be traded in board lots of 20,000 Consolidated Shares. Based on the closing price of HK$0.056 per Share as at 17 July 2009, the value for each board lot of 20,000 Consolidated Shares, assuming the Share Consolidation had been effective, would be HK$2,240.

STATUS OF THE CONSOLIDATED SHARES

The Consolidated Shares will rank pari passu in all respects with each other and the Share Consolidation will not result in any change in the relative rights of the Shareholders. Fractional Consolidated Shares will not be issued by the Company to Shareholders. Any fractional entitlement to the Consolidated Shares will be aggregated, sold and retained for the benefit of the Company. In order to alleviate the difficulties arising from the existence of odd lots of Consolidated Shares, the Company will arrange to arrange for matching service regarding the sale and purchase of odd lots of Consolidated Shares from 20 August 2009 to 8 September 2009 (both days inclusive). Shareholders should note that matching of the sale and purchase of odd lots of Consolidated Shares is not guaranteed. Further details of the odd lot matching arrangement will be announced later as and when appropriate.

REASONS FOR THE SHARE CONSOLIDATION

The proposed Share Consolidation will increase the nominal value of the Shares and reduce the total number of Shares currently in issue. As such, it is expected to bring about a corresponding upward adjustment in the trading price of the Consolidated Shares on the Stock Exchange, which will enhance the attractiveness of the Consolidated Shares to potential Shareholders. Accordingly, the Board is of the view that the Share Consolidation is beneficial to the Company and Shareholders as a whole.

Other than the expenses to be incurred by the Company in relation to the Share Consolidation, the implementation thereof will not, by itself, affect the underlying assets, business operations, management or financial position of the Group or the interests of Shareholders as a whole.

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LETTER FROM THE BOARD

EXCHANGE OF CERTIFICATES FOR CONSOLIDATED SHARES

Subject to the Share Consolidation becoming effective, which is currently expected to be 6 August 2009, being the business day immediately after the date of the EGM, Shareholders may on or after 6 August 2009 and until 14 September 2009 (both days inclusive), submit their share certificates in light blue for Shares to the Registrar for exchange for share certificates in new colour for the Consolidated Shares at the expense of the Company.

Shareholders should note that after the prescribed time for free exchange of share certificates, a fee of HK$2.50 (or such higher amount as may from time to time be allowed by the Stock Exchange) will be payable by the Shareholders to the Registrar for exchange of share certificates.

With effect from 8 September 2009, trading will only be in Consolidated Shares. Share certificates in light blue for the Shares will cease to be valid for trading and settlement purpose, but will remain valid and effective as documents of title.

EXPECTED TIMETABLE

The expected timetable for the Share Consolidation is as follows:

Despatch of the Circular . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 July 2009 Publication of the notice of EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 July 2009 Latest time for lodging the form of proxy for the EGM. . . . . . . . . . . . . . . . . . 3 August 2009 EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 August 2009 Effective date of the Share Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 August 2009 Original counter for trading in Shares in board lots of 8,000 Shares temporarily closes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. 6 August 2009 Temporary counter for trading in Consolidated Shares in board lots of 4,000 Consolidated Shares opens (in the form of existing share certificates in light blue) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. 6 August 2009 First day for free exchange of existing share certificates in light blue for new share certificates in blue . . . . . . . . . . . . . . . . . . . . . . . . . 6 August 2009 Original counter for trading in Consolidated Shares in board lots of 20,000 Consolidated Shares reopens (in the form of new share certificates in blue). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. 20 August 2009

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Parallel trading in Consolidated Shares commences. . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. 20 August 2009 First day of operation of odd lot trading facility . . . . . . . . . . . . . . . . . . . . . . 20 August 2009 Temporary counter for trading in Consolidated Shares in board lots of 4,000 Consolidated Shares closes (in the form of existing share certificates in light blue) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. 8 September 2009 Parallel trading ends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. 8 September 2009 Last day of operation of odd lot trading facility . . . . . . . . . . . . . . . . . . . . .8 September 2009 Latest time for free exchange of share certificates. . . . . . . . . . . . . . . . . . .14 September 2009

GEM LISTING RULES IMPLICATION

The Acquisition constitutes a very substantial acquisition on the part of the Company under Chapter 19 of the GEM Listing Rules and the Acquisition is subject to the approval of the Shareholders at the EGM. To the best of the Directors’ knowledge, information and belief having made reasonable enquiries, no Shareholders have a material interest in the Acquisition and are required to abstain from voting at the EGM. The Company will seek Shareholders’ approval for the Agreement and the transactions contemplated thereunder, including but not limited to the issue and allotment of the Consideration Shares and the issue of the Convertible Bonds, at the EGM.

The Board confirm that to the best of their knowledge, information and belief having made all reasonable enquiries, as at the Latest Practicable Date, there was no voting trust or other agreement or other arrangement or understanding (other than an outright sale) entered into by or binding upon any Shareholder and there was no obligation or entitlement of any Shareholder whereby he has or may have temporarily or permanently passed control over the exercise of the voting right in respect of his Shares to a third part, either generally or on a case-by-case basis.

EGM

A notice convening the EGM to be held at 30th Floor, Times Media Centre, 133 Wan Chai Road, Hong Kong on Wednesday, 5 August 2009 at 9:30 a.m. is set out on pages 162 to 164 of this circular.

A form of proxy for use at the EGM is enclosed with this circular. Whether or not you are able to attend the EGM, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and deposit the same at the office of the branch share registrar of the Company in Hong Kong, Tricor Tengis Limited, at 26/F., Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof.

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LETTER FROM THE BOARD

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, no Shareholders have a material interest in the Acquisition and the Share Consolidation and therefore will require to be abstained from voting at the EGM.

Pursuant to Rule 17.47(4) of the GEM Listing Rules, any votes at the EGM on the resolutions will be taken by poll.

RECOMMENDATION

The Board considers that the terms of the Acquisition are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Shareholders to vote in favour of the resolution approving the Acquisition as set out in the notice of the EGM.

The Board also considers that the Share Consolidation is in the interests of the Company and the Shareholders as a whole and accordingly also recommends the Shareholders to vote in favour of the resolution approving the Share Consolidation at the EGM.

ADDITIONAL INFORMATION

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

By order of the Board EMCOM INTERNATIONAL LIMITED Chan Cheong Yee Executive Director

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ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX I

==> picture [245 x 49] intentionally omitted <==

Unit 1, 15/F., The Center, 99 Queen’s Road Central, Hong Kong 20 July 2009

The Directors Emcom International Limited

Dear Sirs,

We set out below our report on financial information (the “Financial Information”) of Harvest Yield Investments Limited (the “Target”) and its subsidiary (together, the “Target Group”) set out in Sections I to III below, for inclusion in the circular of Emcom International Limited (“Emcom Group”) dated 20 July 2009 (the “Circular”) in connection with the acquisition of the entire equity interest in the Target and Sale Debts by Emcom Group. The Financial Information comprises the consolidated statements of financial position as at 31 December 2006, 2007 and 2008, and 31 March 2009, and its consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for each of the three years ended 31 December 2006, 2007 and 2008, and the three-months period ended 31 March 2008 and 2009 (the “Relevant Periods”), and a summary of significant accounting policies and other explanatory notes.

The Target was incorporated in the British Virgin Islands with limited liability on 23 August 2004 with an authorised share capital of US$50,000 divided into 50,000 shares of US$1 each and is an investment holding company. As at the date of the report, the Target has the following subsidiary:

	Place of
	incorporation	Issued and fully	Effective	Nature of
Name of subsidiary	and operation	paid up capital	interest held	business
Directly held:
Power Alliance	Hong Kong	1 ordinary share	100%	Property
Investment Ltd		of HK$1 each		Investment

The Target Group has adopted 31 December as its financial year end date. The statutory financial statements of the Target and its subsidiary for each of the three years ended 31 December 2006, 2007 and 2008, which were prepared in accordance with all the prevailing applicable Hong Kong Financial Reporting Standards, which collective term includes all applicable individual Hong Kong Financial Reporting Standards (“HKFRSs”), Hong Kong Accounting Standards (“HKASs”) and Interpretations

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ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX I

(“INTs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), and accounting principles generally accepted in Hong Kong (the “HKFRS Financial Statements”), were audited by H L M & Co., Certified Public Accountants.

The Financial Information has been prepared based on the audited HKFRS Financial Statements of the Target and unaudited financial statements for the three months ended 31 March 2008 and 2009 prepared under HKFRS, on the basis set out in note 2 of Section II below.

DIRECTORS’ RESPONSIBILITY

The directors of the Target are responsible for the preparation and the true and fair presentation of the financial statements of the Target Group in accordance with HKFRS. The directors of Emcom Group are responsible for the preparation and the true and fair presentation of the Financial Information in accordance with HKFRSs. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of the Financial Information that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

REPORTING ACCOUNTANT’S RESPONSIBILITY

For the financial information for each of the years ended 31 December 2006, 2007 and 2008 and the three months ended 31 March 2009, our responsibility is to express an opinion on the financial information based on our examination and to report our opinion to you. We have examined the audited HKFRS Financial Statements of the Target Group or where appropriate, the unaudited financial statements of the Target Group used and the related adjustments made in preparing the financial information, and carried out such additional procedures as we considered necessary in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA.

In reviewing the HKFRS Financial Statement, the auditor’s reports of the Target for the year ended 31 December 2006 and 2007 were qualified that the Target was failure to include group accounts which is required by the Hong Kong Accounting Standard 27 “Consolidated and Separate Financial Statements” issued by the HKICPA. Such matter was resolved as the consolidated financial statements for the years ended 31 December 2006 and 2007 have been prepared by the directors to comply with the standard for the purpose of this report and additional procedures were satisfactorily carried out.

For the financial information for the three months ended 31 March 2008, our responsibility is to express a conclusion on the financial information based on our review and to report our conclusion to you. We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA. A review of the financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significantly matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

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ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX I

OPINION AND REVIEW CONCLUSION

In our opinion, the financial information for each of the years ended 31 December 2006, 2007 and 2008 and the three months ended 31 March 2009, for the purpose of this report, gives a true and fair view of the state of affairs of the Target Group as at 31 December 2006, 2007 and 2008, and 31 March 2009 and of the Target Group’s results and cash flows for the respective years and period then ended.

Based on our review, which does not constitute an audit, nothing has come to our attention that causes us to believe that the financial information for the three months ended 31 March 2008, for the purpose of this report, is not prepared, in all material respects, in accordance with the accounting policies set out in note 2 of Section II below which are in conformity with HKFRSs.

I. FINANCIAL INFORMATION ON THE TARGET GROUP

1. Consolidated Statements of Comprehensive Income

Note
Revenue
4
Operating costs
Gross profit/(loss)
Other income
5
Gain on deemed disposal
of properties under
development
Fair value change in
investment properties
Administrative expenses
Finance costs
6
Profit/(loss) before
income tax
7
Income tax credit/(expense)
8
Profit/(loss) attributable
to the shareholders
Total comprehensive income/
(loss) attributable to
shareholders

Period from Period from
1 January
1 January
2008 to
2009 to
For the year ended 31 December
31 March
31 March
2006
2007
2008
2008
2009
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
(Unaudited )
551
11,230
11,086
2,812
2,440
(4,100 )
(9,584 )
(9,073 )
(2,091 )
(2,148 )
(3,549 )
1,646
2,013
721
292
644
40
85
3
8
587
–
–
–
–
19,320
40,000
(7,997 )
–
–
(1,205 )
(213 )
(242 )
(47 )
(46 )
(7,111 )
(7,237 )
(3,749 )
(1,216 )
(280 )
8,686
34,236
(9,890 )
(539 )
(26 )
(1,573 )
(5,985 )
2,077
–
–
7,113
28,251
(7,813 )
(539 )
(26 )
7,113
28,251
(7,813 )
(539 )
(26 )

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ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX I

2. Consolidated Statements of Financial Position

Note Non-current assets Investment properties 10 Property, plant and equipment 11 Current assets Rental receivable 12 Other receivables and deposits Cash and bank balances Current liabilities Trade payable 13 Other payables Net current liabilities Total assets less current liabilities Non-current liabilities Bank loan – secured 14 Loan from shareholders 15 Deferred tax liabilities 16 Net assets Capital and reserves Share capital 17 Retained profits Total equity attributable to equity shareholders	As 2006 HK$’000 260,000 525 260,525 – 586 5,789 6,375 775 13,075 13,850 (7,475 ) 253,050 147,000 97,600 1,573 246,173 6,877 1 6,876 6,877	at 31 December 2007 2008 HK$’000 HK$’000 300,000 290,000 410 288 300,410 290,288 1,114 975 587 618 3,107 986 4,808 2,579 491 711 7,441 2,660 7,932 3,371 (3,124 ) (792 ) 297,286 289,496 147,000 147,000 107,600 109,700 7,558 5,481 262,158 262,181 35,128 27,315 1 1 35,127 27,314 35,128 27,315	As at 31 March 2009 HK$’000 290,000 253 290,253 664 665 1,023 2,352 466 2,669 3,135 (783) 289,470 147,000 109,700 5,481 262,181 27,289 1 27,288 27,289

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ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX I

3. Consolidated Statements of Change in Equity

At 1 January 2006 Total comprehensive income attributable to shareholders At 31 December 2006 At 1 January 2007 Total comprehensive income attributable to shareholders At 31 December 2007 At 1 January 2008 Total comprehensive loss attributable to shareholders At 31 December 2008 At 1 January 2009 Total comprehensive loss attributable to shareholders At 31 March 2009 At 1 January 2008 Total comprehensive loss attributable to shareholders At 31 March 2008 (unaudited)	(Accumulated losses)/ Share retained capital profits HK$’000 HK$’000 1 (237 ) – 7,113 1 6,876 1 6,876 – 28,251 1 35,127 1 35,127 – (7,813 ) 1 27,314 1 27,314 – (26 ) 1 27,288 1 35,127 – (539 ) 1 34,588	Total HK$’000 (236 ) 7,113 6,877 6,877 28,251 35,128 35,128 (7,813) 27,315 27,315 (26) 27,289 35,128 (539) 34,589

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ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX I

4. Consolidated Statements of Cash Flows

Note
Cash flows from
operating activities
Cash generated from/
(used in) operations
18
Interest received
Net cash from
operating activities
Cash flows from
investing activities
Purchase of
investment properties
Purchase of property,
plant and equipment
Net cash used in
investing activities
Cash flows from
financing activities
Loan from shareholders
Interest paid
Net cash from/(used in)
financing activities
Net increase/(decrease)
in cash and
cash equivalents
Cash and cash equivalents
at beginning of year/period
Cash and cash equivalents
at end of year/period

Period from Period from
1 January
1 January
2008 to
2009 to
For the year ended 31 December
31 March
31 March
2006
2007
2008
2008
2009
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
(Unaudited )
6,098
(5,880 )
1,376
493
316
47
40
85
3
1
6,145
(5,840 )
1,461
496
317
(20,680 )
–
–
–
–
(656 )
(20 )
(17 )
(4 )
–
(21,336 )
(20 )
(17 )
(4 )
–
26,010
10,000
2,100
–
–
(7,195 )
(6,822 )
(5,665 )
(2,908 )
(280 )
18,815
3,178
(3,565 )
(2,908 )
(280 )
3,624
(2,682 )
(2,121 )
(2,416 )
37
2,165
5,789
3,107
3,107
986
5,789
3,107
986
691
1,023

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ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX I

II. NOTES TO THE FINANCIAL INFORMATION

1. Organisation and principal activities

Harvest Yield Investments Limited (the “Target”) was incorporated on 23 August 2004 in the British Virgin Islands with limited liability. The address of the registered office and the principal place of business are Offshore Incorporation Limited, P.O. Box 957, Offshore Incorporation Centre, Road Town, Tortola, British Virgin Islands and 15 Floor, Manulife Tower, 169 Electric Road, North Point, Hong Kong respectively.

The principal activity of the Target is investment holding whilst the activity of its principal subsidiary, Power Alliance Investment Limited (together referred as “Target Group”) is as follows:

	Place of
	incorporation	Issued and fully	Effective	Nature of
Name of subsidiary	and operation	paid up capital	interest held	business
Directly held:
Power Alliance	Hong Kong	1 ordinary share	100%	Property
Investment Ltd		of HK$1 each		Investment

The Financial Information is presented in Hong Kong Dollar (“HKD”), which is the same as the functional currency of the Target.

2. Summary of significant accounting policies

(a) Basis of preparation

The Financial Information has been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (“HKFRSs”), which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“HKASs”) and Interpretations (“INT”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), accounting principles generally accepted in Hong Kong and the Hong Kong Companies Ordinance. The Financial Information has been prepared under the historical cost basis, except for the investment properties, which are stated at fair values as explained in the accounting policies set out below.

The preparation of Financial Information in conformity with HKFRSs requires the use of certain critical accounting estimates and assumptions. It also requires management to exercise its judgment in the process of applying the Target Group’s policies. Although these estimates are based on management’s best knowledge of current events and actions, actual results ultimately may differ from those estimates.

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ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX I

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements.

In the current year, the Target Group has applied, for the first time, the following new standards, amendments and interpretations (“new HKFRSs”) issued by the HKICPA, which are effective for the Target Group’s financial year beginning on 1 January 2009.

HKFRSs (Amendments)	Improvements to HKFRSs, except for amendment to
	HKFRS 5
HKAS 1 (Revised)	Presentation of Financial Statements
HKAS 23 (Revised)	Borrowing Costs
HKAS 32 and HKAS 1	Puttable Financial Instruments and Obligations Arising
(Amendments)	on Liquidation
HKFRS 1 and 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 13	Customer Loyalty Programmes
HK(IFRIC) – Int 15	Agreements for Construction of Real Estate
HK(IFRIC) – Int 16	Hedges of a Net Investment in a Foreign Operation

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 is required.

The Target Group has applied the disclosures requirements under HKAS 1 (Revised) “Presentation of Financial Statements” and HKFRS 8 “Operating Segments”, respectively.

Under HKAS 1 (Revised), the “Balance Sheet” is renamed as the “Statement of Financial Position” and the “Cash Flow Statement” is renamed as the “Statement of Cash Flows”. All income and expenses arising from transactions with non-owner (i.e., the non-owner movements of equity) are presented under the “Statement of Comprehensive Income”, while the owner changes in equity are presented in the “Statement of Changes in Equity”.

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ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX I

HKFRS 8 superseded HKAS 14 “Segment Reporting”, and requires operating segments to be identified on the basis of internal reports about components of the Target Groups that are regularly reviewed by the chief operating decision-makers in order to allocate resources to the segment and to assess its performance. As the business segments reported by the Target Group in accordance with the requirements of HKAS 14 are the same as the operating segments provided to chief operating decision-makers as required by HKFRS 8, there are no changes to the operating segments and the results of operating segments on the adoption of HKFRS 8.

The Target Group has not early applied the following new standards, amendments and interpretations that have been issued but are not yet effective. The directors of the Target Group anticipate that the application of these standards, amendments and interpretations will have no material impact on the financial statements of the Target Group.

HKFRSs (Amendments)	Improvements to HKFRS51
HKFRSs (Amendments)	Improvements to HKFRSs 20092
HKAS 27 (Revised)	Consolidated and Separate Financial Statements3
HKAS 39 (Amendment)	Eligible Hedged Items3
HKFRS 1 (Revised)	First-time Adoption of Hong Kong Financial
	Reporting Standards3
HKFRS 3 (Revised)	Business Combinations3
HK(IFRIC) – Int 9	Embedded Derivatives4
and HKAS 39
(Amendment)
HK(IFRIC) – Int 17	Distributions of Non-cash Assets to Owners3
HK(IFRIC) – Int 18	Transfer of Assets from Customers5

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

2 Effective for annual periods beginning on or after 1 January 2010, unless otherwise specified

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 from 1 July 2009

(b) Consolidation

The consolidated financial statements incorporate the financial statements of the Target and entities (including special purpose entities) controlled by the Target (its subsidiaries). Control is achieved where the Target 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 statements of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

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ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX I

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 Target Group.

The acquisition of subsidiaries is accounted for using the purchase method. The cost of acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Target Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under HKFRS 3 “Business Combinations” are recognised at their fair values at the acquisition date.

All intra-group transactions, balances, income and expenses are eliminated on consolidation. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment.

(c) Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Depreciation is calculated to write off the cost of other items of property, plant and equipment, less their estimated residual value, if any, using the straight line method over their estimated useful lives. The principal annual rates used for this purpose are as follows:

Equipment and tools	20%
Furniture and fixture	20%

Useful lives and depreciation method are reviewed and adjusted if appropriate, at the end of each reporting period.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use. The gain or loss on disposal or retirement of an asset is the difference between the net sales proceeds and the carrying amount of the relevant asset, and is recognised in the consolidated statements of comprehensive income.

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ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX I

(d) Investment properties

Investment properties are land and/or buildings which are owned or held under a leasehold interest to earn rental income and/or for capital appreciation. These include land held for a currently undetermined future use. Investment properties are stated in the consolidated statements of financial position at fair value, representing open-market value determined annually by the directors with reference to the current prices in the market for similar property in the same location and condition. Change in fair value or from the retirement or disposal of an investment property is recognised in the consolidated statements of comprehensive income.

When the Target holds a property interest under an operating lease to earn rental income and/or for capital appreciation, the interest is classified and accounted for as an investment property on a property-by-property basis. Any such property interest which has been classified as an investment property is accounted for as if it were held under a finance lease, and the same accounting policies are applied to that interest as are applied to other investment properties leased under finance leases.

(e) Financial instruments

Financial assets and financial liabilities are recognised on the consolidated statements of financial position when a Target Group has become 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 Target Group’s financial assets are classified as loans and receivables. The accounting policies adopted for the Target Group’s financial assets are set out below.

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 the end of each reporting period subsequent to initial recognition, loans and receivables (including trade and other receivables and bank balances and cash) are carried at amortised cost using the effective interest rate method, less any identified impairment losses (see accounting policy in respect of impairment on financial assets below), unless the effect of discounting would be immaterial, in which case they are stated at cost less provision for impairment.

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ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX I

Impairment of financial assets

Financial assets are assessed for indicators of impairment at the end of each reporting period. 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.

For loans and receivables, objective evidence of impairment could include:

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

For certain categories of financial asset, such as trade and other 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 receivables could include the Target 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.

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

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 recognized in profit or loss. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

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ACCOUNTANTS’ REPORT ON THE TARGET 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 the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Financial liabilities and equity instruments

Financial liabilities and equity instruments issued by the Target Group is 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 Target Group after deducting all of its liabilities.

Financial liabilities within the scope of HKAS 39 are classified as financial liabilities at fair value through profit or loss and other financial liabilities. The Target Group classifies its financial liabilities into other financial liabilities. The accounting policies adopted in respect of financial liabilities and equity instruments are set out below.

Other financial liabilities

Other financial liabilities, including trade and other payables, interest-bearing bank loans and loan from shareholders, are subsequently measured at amortised cost, using the effective interest rate method unless the effect of discounting would be immaterial, in which case they are stated at cost.

Equity instruments

Equity instruments issued by the Target Group 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 Target 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.

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ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX I

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

(f) Cash and cash equivalents

For the purpose of the consolidated statements of cash flows, cash and cash equivalents consist of cash in hand, deposits held at call with banks and short-term bank deposits with an original maturity period of three months or less.

(g) Impairment of non-financial assets

At the end of each reporting period, the Target Group reviews the carrying amounts of its non-financial assets (see the accounting policy in respect of financial assets above) 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.

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

(h) Income tax

Income tax comprises current tax and deferred tax.

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

Deferred tax is recognized 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 only to the extent that it is probable that future 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 accounting profit nor the taxable profit.

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ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX I

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Target Group is able to control the reversal of the temporary differences 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 the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be utilised.

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

(i) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. Capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in the consolidated statements of comprehensive income in the period in which they are incurred.

(j) Related parties

A party is considered to be related to the Target Group if:

(i) directly, or indirectly through one or more intermediaries, the party:
control, is controlled by, or is under common control with, the Target Group;
has an interest in the Target that gives it significant influence over the Target Group; or
has joint control over the Target Group
(ii) the party is a member of key management personnel of the Target or its parent company;
(iii) the party is a close member of the family of any individual referred to in (i) and (ii);
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ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX I

(iv) the party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting power in such entities resides with, directly or indirectly, the individual referred to in (ii) or (iii);
(v) the party is a post-employment benefit plan for the benefit of employees of the Target Group, or of any entity that is a related party of the Target Group.

(k) Revenue recognition

Rental income from counter sales is recognised when the goods are sold.

Interest income is recognised on a time proportion basis, taking into account the principal accounts outstanding and the interest rates applicable.

3. Financial instruments

(a) Categories of financial instruments

The carrying amounts of each of the categories of the Target Group’s financial assets and liabilities as at the reporting dates are as follows:

Financial assets

Loans and receivables: Rental receivable Other receivables Bank balances and cash	As 2006 HK$’000 – 358 5,789 6,147	at 31 December 2007 2008 HK$’000 HK$’000 1,114 975 399 424 3,107 986 4,620 2,385	As at 31 March 2009 HK$’000 664 471 1,023
			2,158

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ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX I

Financial liabilities

Financial liabilities measured at amortised cost: Trade payable Other payables Bank loan – secured Loan from shareholders	As 2006 HK$’000 775 12,163 147,000 97,600 257,538	at 31 December 2007 2008 HK$’000 HK$’000 491 711 6,527 2,644 147,000 147,000 107,600 109,700 261,618 260,055	As at 31 March 2009 HK$’000 466 2,649 147,000 109,700
			259,815

(b) Financial risk management

The Target Group’s activities expose it to a variety of financial risks: market risk (including interest rate risk), credit risk and liquidity risk.

(i) Interest rate risk

The Target Group’s exposure to interest rate risk arises primarily from its bank loans and bank deposits. Bank loans and bank deposits at variable rates expose the Target Group to cash flow interest rate risk.

The Target Group has not used any interest rate swaps to hedge its exposure to interest rate risk. The management monitors the Target Group’s exposure on ongoing basis.

With all other variables held constant, if a general increase/decrease of 100 basis points in interest rates, the corresponding increase/decrease in net finance costs would have resulted in a decrease/increase in the Target Group’s profit or loss for the year and equity as at 31 December 2006, 2007 and 2008 and 31 March 2009 by approximately HK$1,156,000, HK$1,186,000, HK$1,218,000 and HK$1,218,000 respectively.

The sensitivity analysis above has been determined assuming that the change in interest rates had occurred at the reporting date and had been applied to the Target Group’s exposure to interest rate risk for financial instruments in existence at that date. It was based on the observation of management on the historical trend of related interest rates over the past 1 year and the 100 basis point increase or

44 -

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX I

decrease represents management’s assessment of a reasonably possible change in interest rates over the period until the next annual balance sheet date. The analysis is performed on the same basis for 2006, 2007 and 2008.

(ii) Credit risk

The Target Group is exposed to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. Key areas where the Target Group is exposed to credit risk are trade and other receivables and bank balances.

In order to minimise the credit risk, the Target Group has properly put credit management policies in place with examination of the approval of client’s trading and credit limits, monitoring of credit exposures and follow up of credit risks associated with overdue debts. The credit policy is regularly revised, taking into account factors such as prevailing business and economic conditions, regulatory requirements and the Target Group’s capital resources. As at 31 December 2006, 2007 and 2008, and 31 March 2009, all the rental receivable was due from one debtor. Normally, the Target Group does not obtain collateral from customers.

Bank balances are placed with high-credit-quality institutions and directors of the Target Group consider that the credit risk for such is minimal.

Further quantitative disclosures in respect of the Target Group’s exposure to credit risk arising from trade receivables are set out in note 12.

(iii) Liquidity risk

At as 31 December 2006, 2007 and 2008, and 31 March 2009, the Target Group had net current liabilities amounting to approximately HK$7,475,000, HK$3,124,000, HK$792,000 and HK$783,000 respectively. The maintenance of the Target Group as a going concern depends on the ongoing support from the shareholders. For the management of the Target Group’s liquidity risk, the Target Group will consistently maintain a prudent financial policy and ensure that it maintains sufficient cash to meet its liquidity requirements.

The following table details the remaining contractual maturities at the reporting dates of the Target Group’s non-derivative financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on the rates current at the reporting date) and the earliest date the Target Group can be required to pay:

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ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX I

As at 31 March 2009

Trade payable Other payables Bank loan – secured Loan from shareholders	Less than 1 year HK$’000 466 2,649 – – 3,115	1 – 2 years HK$’000 – – 147,000 109,700 256,700	Total 2 – 5 undiscounted years cash flow HK$’000 HK$’000 – 466 – 2,649 – 147,000 – 109,700 – 259,815	Carrying Amount HK$’000 466 2,649 147,000 109,700
				259,815

As at 31 December 2008

Trade payable Other payables Bank loan – secured Loan from shareholders	Less than 1 year HK$’000 711 2,644 – – 3,355	1 – 2 years HK$’000 – – – 109,700 109,700	Total 2 – 5 undiscounted years cash flow HK$’000 HK$’000 – 711 – 2,644 147,000 147,000 – 109,700 147,000 260,055	Carrying Amount HK$’000 711 2,644 147,000 109,700
				260,055

As at 31 December 2007

Trade payable Other payables Bank loan – secured Loan from shareholders	Less than 1 year HK$’000 491 6,527 – – 7,018	1 – 2 years HK$’000 – – – 107,600 107,600	Total 2 – 5 undiscounted years cash flow HK$’000 HK$’000 – 491 – 6,527 147,000 147,000 – 107,600 147,000 261,618	Carrying Amount HK$’000 491 6,527 147,000 107,600
				261,618

46 -

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX I

As at 31 December 2006

Trade payable Other payables Bank loan – secured Loan from shareholders	Less than 1 year HK$’000 775 12,163 – – 12,938	1 – 2 years HK$’000 – – – 97,600 97,600	Total 2 – 5 undiscounted years cash flow HK$’000 HK$’000 – 775 – 12,163 147,000 147,000 – 97,600 147,000 257,538	Carrying Amount HK$’000 775 12,163 147,000 97,600
				257,538

There was no derivative financial liabilities as at 31 December 2006, 2007 and 2008, and 31 March 2009 included in the consolidated statements of financial position of the Target Group.

(c) Fair value estimation

The Target Group’s directors consider that the carrying amounts of the Target Group’s financial assets and financial liabilities recorded at amortised cost in the consolidated financial statements approximate their respective fair values as at 31 December 2006, 2007 and 2008, and 31 March 2009.

4. Revenue and segment information

Revenue, which is also the Target Group’s turnover, represents the rental income from counter sales received and receivable when the goods are sold by the Target Group to outsider customers during the years.

The Target Group determines its operating segments based on the reports reviewed by the chief operating decision-makers that are used to make strategic decisions.

The Target Group has only one operating segment, which is property leasing in Hong Kong throughout the years ended 31 December 2006, 2007 and 2008 and the three-month ended 31 March 2009. No segment information is presented.

For the years ended 31 December 2006, 2007 and 2008, and the three-month ended 31 March 2009, the revenue from the Target Group’s largest customer amounted to less than 20 per cent of the Target Group’s total revenue.

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ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX I

5. Other income

Interest income Compensation income received Sundry income	Period from Period from 1 January 1 January 2008 to 2009 to For the year ended 31 December 31 March 31 March 2006 2007 2008 2008 2009 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Unaudited ) 47 40 85 3 1 597 – – – – – – – – 7 644 40 85 3 8	Period from Period from 1 January 1 January 2008 to 2009 to For the year ended 31 December 31 March 31 March 2006 2007 2008 2008 2009 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Unaudited ) 47 40 85 3 1 597 – – – – – – – – 7 644 40 85 3 8
		8

6. Finance costs

The amount represents the interest on bank borrowings wholly repayable within five years.

7. Profit/(loss) before tax

Profit/(loss) before tax has been arrived at after charging/(crediting) the following:

					Period from	Period from
					1 January	1 January
					2008 to	2009 to
	For the year ended 31		December		31 March	31 March
	2006	2007	2008		2008	2009
	HK$’000	HK$’000	HK$’000		HK$’000	HK$’000
					(Unaudited )
Auditors’ remuneration	13	13		15	4	4
Depreciation	131	135	139		34	35
Outgoings in respect of
investment properties	4,100	9,584	9,073		2,091	2,148

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ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX I

8. Income tax

Deferred tax_(note 16)_ – underprovision in respect of prior years – attributable to a change in tax rate – current year	Period from Period from 1 January 1 January 2008 to 2009 to For the year ended 31 December 31 March 31 March 2006 2007 2008 2008 2009 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Unaudited ) 58 – – – – – – (432 ) – – 1,515 5,985 (1,645 ) – – 1,573 5,985 (2,077 ) – –	Period from Period from 1 January 1 January 2008 to 2009 to For the year ended 31 December 31 March 31 March 2006 2007 2008 2008 2009 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Unaudited ) 58 – – – – – – (432 ) – – 1,515 5,985 (1,645 ) – – 1,573 5,985 (2,077 ) – –
		–

No provision for Hong Kong profits tax has been made in the consolidated financial statements as the Target Group has no assessable profit for the years ended 31 December 2006, 2007 and 2008 and the three-month period ended 31 March 2009.

The applicable Hong Kong profits tax rate was 17.5%, 17.5%, 16.5% and 16.5% for the years ended 31 December 2006, 2007 and 2008 and the three-month period ended 31 March 2009, respectively.

The income tax expense/(credit) for the year/period can be reconciled to the profit/(loss) before tax per the consolidated statements of comprehensive income as follow:

Profit/(loss) before tax Tax at applicable Hong Kong profits tax rate Tax effect of non-deductible expenses Tax effect of non-taxable income Net decrease in opening deferred tax liabilities resulting from a decrease in applicable tax rate Underprovision in respect of prior years Income tax expense/(credit) for the year/period	Period from Period from 1 January 1 January 2008 to 2009 to For the year ended 31 December 31 March 31 March 2006 2007 2008 2008 2009 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Unaudited ) 8,686 34,236 (9,890 ) (539 ) (26 ) 1,520 5,991 (1,632 ) (89 ) (4 ) 3 1 1 90 6 (8 ) (7 ) (14 ) (1 ) (2 ) – – (432 ) – – 58 – – – – 1,573 5,985 (2,077 ) – –	Period from Period from 1 January 1 January 2008 to 2009 to For the year ended 31 December 31 March 31 March 2006 2007 2008 2008 2009 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Unaudited ) 8,686 34,236 (9,890 ) (539 ) (26 ) 1,520 5,991 (1,632 ) (89 ) (4 ) 3 1 1 90 6 (8 ) (7 ) (14 ) (1 ) (2 ) – – (432 ) – – 58 – – – – 1,573 5,985 (2,077 ) – –

		(4 ) 6 (2 ) – –
		–

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ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX I

9. Directors’ emoluments

None of the directors received or will receive any fees or emoluments in respect of their services to the Target Group during the years ended 31 December 2006, 2007 and 2008 and the three-month period ended 31 March 2009.

10. Investment properties

At valuation At 1 January 2006 Addition Fair value adjustment At 31 December 2006 and 1 January 2007 Fair value adjustment At 31 December 2007 and 1 January 2008 Write back of overprovision of renovation works Fair value adjustment At 31 December 2008, 1 January 2009 and 31 March 2009	HK$’000 220,000 20,680 19,320 260,000 40,000 300,000 (2,003 ) (7,997 ) 290,000

The investment properties are held on medium term leases of between 10 to 50 years in Hong Kong. As at 31 December 2006, 2007 and 2008, the investment properties were revalued on an open market value on their existing use basis by CB Richard Ellis Limited, CB Richard Ellis Limited and Prudential Surveyors International Limited respectively.

The investment properties have been pledged to secure general banking facilities granted to the Target Group (Note 20).

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ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX I

11. Property, plant and equipment

Cost At 1 January 2006 Addition At 31 December 2006 and 1 January 2007 Addition At 31 December 2007 and 1 January 2008 Addition At 31 December 2008 and 1 January 2009 Addition At 31 March 2009 Accumulated depreciation At 1 January 2006 Charge for the year At 31 December 2006 and 1 January 2007 Charge for the year At 31 December 2007 and 1 January 2008 Charge for the year At 31 December 2008 and 1 January 2009 Charge for the period At 31 March 2009 Net book value At 31 March 2009 At 31 December 2008 At 31 December 2007 At 31 December 2006	Equipment and tools HK$’000 – 629 629 17 646 17 663 – 663 – 126 126 129 255 133 388 33 421 242 275 391 503	Furniture and fixtures HK$’000 – 27 27 3 30 – 30 – 30 – 5 5 6 11 6 17 2 19 11 13 19 22	Total HK$’000 – 656
			656 20
			676 17
			693
			–
			693
			– 131
			131 135
			266 139
			405 35
			440
			253

			288

			410

			525

51 -

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX I

12. Rental receivable

The ageing analysis of rental receivable is as follows:

							As at
				As at 31 December			31 March
				2006	2007	2008	2009
				HK$’000	HK$’000	HK$’000	HK$’000
1	–	30	days	–	1,114	975	664

No credit period was granted to tenant according to the Target Group’s policies. The Target Group seeks to maintain strict control over its outstanding receivables. Overdue balances are reviewed regularly by management.

As at 31 December 2006, 2007 and 2008 and 31 March 2009, all the rental receivables are past due but not impaired, which are aged within 30 days. These receivables have a good track record with the Target Group. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. The Target Group does not hold any collateral over these balances.

The carrying amounts of rental receivable approximate their fair values.

13. Trade payable

The ageing analysis of the Target Group’s trade payable is as follows

							As at
				As at 31 December			31 March
				2006	2007	2008	2009
				HK$’000	HK$’000	HK$’000	HK$’000
1	–	30	days	775	491	711	466

14. Secured bank loans

Secured bank loans included variable-rate borrowings repayable within two to five years which carry effective interest rates of 4.61%, 5.88%, 0.76% and 0.78% per annum as at 31 December 2006, 2007 and 2008, and 31 March 2009.

As at 31 December 2006, 2007 and 2008, and 31 March 2009, the secured bank loans of the Target Group were secured by pledge of investment properties as set out in note 20, personal guarantees executed by a related person of another shareholder and corporate guarantee executed by a holding company of a shareholder on a 50/50 basis.

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ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX I

15. Loan from shareholders

The loan from shareholders is unsecured, interest free and has no fixed repayment terms. It has been agreed that the loan will not be repayable within 12 months from the reporting date.

16. Deferred tax

Accelerated Revaluation tax of investment depreciation properties HK$’000 HK$’000 At 1 January 2006 – – Underprovision in respect of prior years – 102 Credit to the consolidated statement of comprehensive income for the year 155 3,381 At 31 December 2006 155 3,483 At 1 January 2007 155 3,483 Credit to the consolidated statement of comprehensive income for the year 1,203 7,000 At 31 December 2007 1,358 10,483 At 1 January 2008 1,358 10,483 Attributable to a change in tax rate (78 ) (599 ) Credit to the consolidated statement of comprehensive income for the year 180 (1,320 ) At 31 December 2008, 1 January 2009 and 31 March 2009 1,460 8,564	Tax losses HK$’000 – (44 ) (2,021 ) (2,065 ) (2,065 ) (2,218 ) (4,283 ) (4,283 ) 245 (505 ) (4,543 )	Total HK$’000 – 58 1,515 1,573 1,573 5,985 7,558 7,558 (432 ) (1,645 ) 5,481

53 -

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX I

17. Share capital

(a) Authorised and issued share capital

Authorised: 50,000 ordinary shares of US$1 each Issued and fully paid: 2 ordinary shares of US$1 each	As 2006 HK$’000 390 1	at 31 December 2007 2008 HK$’000 HK$’000 390 390 1 1	As at 31 March 2009 HK$’000 390

			1

There was no movement in Target’s share capital for the year ended 31 December 2006, 2007 and 2008, and the three-month ended 31 March 2009.

(b) Capital management

Capital comprises of share capital and reserves stated on the consolidated statement of financial position. The Target Group’s objective when managing capital is to safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders.

The Target Group manages capital by regularly monitoring its current and expected liquidity requirements rather than using debt/equity ratio analyses.

Apart from the entity’s share capital, the Target Group’s operation is mainly sourced from the loan from shareholders which are interest free and has no fixed repayment term. In addition, the shareholders consent to provide financial support to the Target Group and will not call for any repayment of the loan account until the financial position of the Target Group permits.

Neither the Target nor its subsidiary are subject to externally imposed capital requirements.

54 -

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX I

18. Notes to the statements of cash flows

Reconciliation of profit/(loss) before tax to net cash from/(used in) operating activities

Profit/(loss) before tax
Adjustment for:
Depreciation
Gain on deemed disposal of
properties under development
Fair value change in
investment properties
Interest income
Interest expense
Operating cash flows
before working
capital changes
Decrease/(increase) in
trade and other receivables
Increase in rental deposit
Increase/(decrease) in trade
and other payables
Cash generated from/
(used in) operations

Period from Period from
1 January 1 January
2008 to
2009 to
For the year ended 31 December
31 March
31 March
2006
2007
2008
2008
2009
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
(Unaudited )
8,686
34,236
(9,890 )
(539 )
(26 )
131
135
139
34
35
(587 )
–
–
–
–
(19,320 )
(40,000 )
7,997
–
–
(47 )
(40 )
(85 )
(3 )
(1 )
7,111
7,237
3,749
1,216
280
(4,026 )
1,568
1,910
708
288
(563 )
(1,115 )
108
211
264
(1,465 )
–
–
–
–
12,152
(6,333 )
(642 )
(426 )
(236)
6,098
(5,880 )
1,376
493
316

19. Related party transactions

Details of directors’ emoluments and outstanding amount with shareholders, were disclosed in notes 9 and 15 respectively.

20. Pledge of assets

As at 31 December 2006, 2007 and 2008, and 31 March 2009, the Target Group’s investment properties of HK$260,000,000, HK$300,000,000, HK$290,000,000, and HK$290,000,000 were pledged to a bank for securing loan facilities as disclosed in note 14, respectively.

55 -

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX I

III. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of the Target and its subsidiary have been prepared in respect of any period subsequent to 31 March 2009.

Yours faithfully,

Graham H.Y. Chan & Co. Certified Public Accountants (Practising) Hong Kong

56 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

1. SUMMARY OF FINANCIAL INFORMATION

The following is the income statements and balance sheets of the Group for each of the three years ended 31 March 2009 as extracted from the annual reports of the Company for the respective years.

Consolidated Income statements

Continuing operations
Turnover
Cost of sales
Gross profit
Reimbursement from licensor
Other revenue and other net income
Selling expenses
Administrative expenses
Other losses
Share of loss of associates
Share of profit of a jointly controlled entity
Finance costs
Loss before taxation
Taxation
Loss for the year from continuing operations
Discontinued operations
Loss for the year from discontinued operations
Loss for the year
Attributable to:
Equity holders of the Company
Minority interests
Loss for the year
DIVIDEND
Loss per share (cents per share)
From continuing and discontinued operations
Basic
Diluted
From continuing operations
Basic
Diluted

Year ended 31 March
2009
2008
2007
HK$’000
HK$’000
HK$’000
(note 1)
(note 1)
213,195
98,779
63,072
(210,589 )
(98,111 )
(56,675 )
2,606
668
6,397
2,271
–
–
122
6,515
127
(116 )
(254 )
–
(29,606 )
(19,593 )
(32,845 )
(16,108 )
(11,401 )
–
(63 )
–
–
–
(1,337 )
940
(77 )
(2,313 )
(3,129 )
(40,971 )
(27,715 )
(28,510 )
(313 )
527
–
(41,284 )
(27,188 )
(28,510 )
(54,637 )
–
–
(95,921 )
(27,188 )
(28,510)
(95,531 )
(27,067 )
(28,510 )
(390 )
(121 )
–
(95,921 )
(27,188 )
(28,510)
–
–
–
(3.37 )
(1.47 )
(4.52)
N/A
N/A
N/A
(1.44 )
(1.47 )
(4.52)
N/A
N/A
N/A

57 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Consolidated Balance Sheets

As at 31 March
2009
2008
HK$’000
HK$’000
(restated)
(Note 2)
NON-CURRENT ASSETS
Property, plant and equipment
3,039
7,746
Interests in a jointly controlled entity
–
21,326
Interest in an associate
–
–
Payment for investment in a joint venture
–
8,653
Other intangible assets
–
–
Goodwill
2,700
–
5,739
37,725
CURRENT ASSETS
Inventories
15,050
4,940
Trade receivables
5,395
4,179
Other receivables, deposits and prepayments
5,307
15,014
Financial assets at fair value through profit or loss
–
–
Amount due from a jointly controlled entity
–
30
Amount due from a related company
–
–
Security deposit to a related company
800
–
Tax recoverable
–
–
Pledged bank deposit
150
150
Bank balances and cash
15,324
39,612
42,026
63,925
Assets classified as held for sale
578
–
42,604
63,925
CURRENT LIABILITIES
Trade payables
2,740
4,316
Other payables and accruals
20,899
6,480
Promissory note
900
–
Amount due to a director
–
–
Amount due to an associate
63
–
Amount due to minority interests
966
–
Amount due to a related company
–
1,509
Secured bank loans
–
–
Embedded financial derivatives
–
–
Tax payables
313
–
25,881
12,305
Liabilities associated with assets classified
as held for sale
19,185
–
45,066
12,305
NET CURRENT (LIABILITIES)/ASSETS
(2,462 )
51,620
TOTAL ASSETS LESS CURRENT LIABILITIES
3,277
89,345

2007
HK$’000
13,193
20,604
–
–
–
–
33,797
7,675
15,132
5,974
245
65
6,535
–
5,824
–
8,624
50,074
–
50,074
16,974
1,667
–
11,260
–
–
–
25,293
445
–
55,639
–
55,639
(5,565 )
28,232

58 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

NON-CURRENT LIABILITY Convertible note NET ASSETS CAPITAL AND RESERVES Share capital Reserves Minority Interests TOTAL EQUITY	As at 31 March 2009 2008 HK$’000 HK$’000 (restated) (Note 2) – (51,721 ) 3,277 37,624 32,590 24,790 (29,545 ) 12,955 3,045 37,745 232 (121 ) 3,277 37,624	2007 HK$’000 (15,747 ) 12,485 6,374 6,111 12,485 – 12,485

Notes:

The income statements for the years ended 31 March 2007 and 2008 are extracted from the annual reports for the respective years that they have not been restated to conform with the presentation for the year ended 31 March 2009.
The balance sheet for the year ended 31 March 2008 includes a restatement on Other receivables, deposits and prepayments, and Other payables and accruals to correct certain errors noted by the Group. Details of the restatement are set out in note 40 to the audited financial statements for the year ended 31 March 2009.
59 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following are the audited financial statements of the Group for the year ended 31 March 2009 together with accompanying notes as extracted from the 2009 Annual Report of the Company. References to page numbers in this appendix are to the page numbers of the 2009 Annual Report of the Company.

Consolidated Income Statement

For the Year ended 31 March 2009

Notes Continuing operations Turnover 6 Cost of sales Gross profit Reimbursement from licensor Other revenue and other net income 7 Selling expenses Administrative expenses Other losses 11 Share of loss of associates 23 Finance costs 8 Loss before taxation Taxation 14 Loss for the year from continuing operations 11 Discontinued operations Loss for the year from discontinued operations 9 Loss for the year 11 Attributable to: Equity holders of the Company 15 Minority interests Loss for the year DIVIDEND 16 Loss per share (cents per share) 17 From continuing and discontinued operations Basic Diluted From continuing operations Basic Diluted	2009 HK$’000 213,195 (210,589 ) 2,606 2,271 122 (116 ) (29,606 ) (16,108 ) (63 ) (77 ) (40,971 ) (313 ) (41,284 ) (54,637 ) (95,921 ) (95,531 ) (390 ) (95,921 ) – (3.37 ) N/A (1.44 ) N/A	2008 HK$’000 – – – – 3,620 – (12,932 ) (2,208 ) – (1,475 ) (12,995 ) – (12,995 ) (14,193 ) (27,188) (27,067 ) (121 ) (27,188) – (1.47) N/A (0.70) N/A

60 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Consolidated Balance Sheet

At 31 March 2009

Notes NON-CURRENT ASSETS Property, plant and equipment 18 Interests in a jointly controlled entity 22 Interests in an associate 23 Payment for investment in a joint venture Other intangible assets 20 Goodwill 19 CURRENT ASSETS Inventories 24 Trade receivables 25 Other receivables, deposits and prepayments Amount due from a jointly controlled entity 26 Security deposit to a related company 27 Pledged bank deposit 28 Bank balances and cash 28 Assets classified as held for sale 10 CURRENT LIABILITIES Trade payables 29 Other payables and accruals Promissory note 30 Amount due to an associate 23 Amount due to minority interests 32 Amount due to a related company 31 Tax payables Liabilities associated with assets classified as held for sale 10 NET CURRENT (LIABILITIES)/ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITY Convertible note 33 NET ASSETS CAPITAL AND RESERVES Share capital 35 Reserves 36 Minority Interests TOTAL EQUITY	2009 HK$’000 3,039 – – – – 2,700 5,739 15,050 5,395 5,307 – 800 150 15,324 42,026 578 42,604 2,740 20,899 900 63 966 – 313 25,881 19,185 45,066 (2,462 ) 3,277 – 3,277 32,590 (29,545 ) 3,045 232 3,277	2008 HK$’000 (restated) 7,746 21,326 – 8,653 – – 37,725 4,940 4,179 15,014 30 – 150 39,612 63,925 – 63,925 4,316 6,480 – – – 1,509 – 12,305 – 12,305 51,620 89,345 (51,721) 37,624 24,790 12,955 37,745 (121) 37,624

61 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Balance Sheet

At 31 March 2009

Notes NON-CURRENT ASSETS Interests in subsidiaries 21 CURRENT ASSETS Other receivables, deposits and prepayments Security deposit to a related company 27 CURRENT LIABILITIES Other payables and accruals Amount due to subsidiaries 21 NET CURRENT LIABILITIES TOTAL ASSETS LESS CURRENT LIABILITIES NON CURRENT LIABILITIES Convertible notes 33 NET ASSETS CAPITAL AND RESERVES Share capital 35 Reserves 36 TOTAL EQUITY	2009 HK$’000 27,356 3 800 803 3,944 820 4,764 (3,961 ) 23,395 – 23,395 32,590 (9,195 ) 23,395	2008 HK$’000 108,902 235 – 235 662 20 682 (447 ) 108,455 (51,721 ) 56,734 24,790 31,944 56,734

62 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Consolidated Statement of Changes in Equity

For the Year ended 31 March 2009

At 1 April 2007 Exchange difference arising from translation of financial statements Loss for the year Total recognised income and expense for the year Issue of new shares of HK$0.01 each completed on 31 July 2007 Issue of new shares of HK$0.01 each completed on 29 February 2008 Issue of convertible note on 11 October 2007 Equity-settled share option arrangement At 31 March 2008 Exchange difference arising from translation of financial statements Loss for the year Transfer to profit or loss on disposal of foreign operations Total recognised income and expense for the year Conversion from the convertible note took place on 9 April 2008 Issue of new shares of HK$0.01 each completed on 7 January 2009 Capital injection by minority interest holders of a subsidiary Issuing expenses Cancellation or lapse of share option granted Equity-settled share option arrangement At 31 March 2009	Share capital HK$’000 6,374 – – – 18,000 416 – – 24,790 – – – – 2,400 5,400 – – – – 32,590	Share Contributed premium surplus HK$’000 HK$’000 50,295 3,930 – – – – – – 12,600 – 4,961 – – – – – 67,856 3,930 – – – – – – – – 60,000 – 5,400 – – – (359 ) – – – – – 132,897 3,930	Equity component of convertible note HK$’000 – – – – – – 12,154 – 12,154 – – – – (12,154 ) – – – – – –	Share option reserve HK$’000 – – – – – – – 355 355 – – – – – – – – (355 ) 2,644 2,644	Exchange Accumulated reserve losses HK$’000 HK$’000 2,373 (50,487 ) 3,841 – – (27,067 ) 3,841 (27,067 ) – – – – – – – – 6,214 (77,554 ) (2,455 ) – – (95,531 ) (45 ) – (2,500 ) (95,531 ) – – – – – – – – – 355 – – 3,714 (172,730 )	Total HK$’000 12,485 3,841 (27,067 ) (23,226 ) 30,600 5,377 12,154 355 37,745 (2,455 ) (95,531 ) (45 ) (98,031 ) 50,246 10,800 – (359 ) – 2,644 3,045	Minority interests HK$’000 – – (121 ) (121 ) – – – – (121 ) (5 ) (390 ) – (395 ) – – 748 – – – 232	Total HK$’000 12,485
								3,841 (27,188 )
								(23,347 )
								30,600 5,377 12,154 355
								37,624
								(2,460 ) (95,921 ) (45 )
								(98,426 )
								50,246 10,800 748 (359 ) – 2,644
								3,277

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Consolidated Cash Flow Statement

For the Year ended 31 March 2009

Notes CASH FLOW FROM OPERATING ACTIVITIES Loss for the year: Adjustments for: Income tax expenses Interest on convertible notes Other interest expenses Share of loss of a jointly controlled entity Share of loss of an associate Loss on disposal of a subsidiary Interest income Depreciation and amortization Impairment loss in respect of property, plant and equipment Impairment loss in respect of goodwill Impairment loss in respect of other intangible assets Impairment loss in respect of inventory Written off in respect of interests in a jointly controlled entity Impairment loss in respect of payment for investment in a joint venture Impairment loss in respect of other receivables, deposits and prepayment Loss on disposal of property, plant and equipment Loss on redemption of convertible note Amount due to a former director written-off Equity-settled share option expense Operating cash flows before working capital changes (Increase)/decrease in inventories (Increase)/decrease in trade receivables Decrease/(increase) in other receivables, deposits and prepayments Increase in security deposit to a related company Decrease in amount due from a related company (Increase)/decrease in amount due from a jointly controlled entity (Decrease)/increase in amount due to a related company Increase/(decrease) in trade payables Increase in other payables and accruals Increase in amount due to minority interest CASH USED IN OPERATION Tax refunded NET CASH (USED IN)/FROM OPERATING ACTIVITIES	2009 HK$’000 (95,921 ) 313 77 – 721 63 580 (119 ) 4,313 888 3,759 2,080 15,783 18,928 8,653 1,025 9,069 – – 2,644 (27,144 ) (26,196 ) (432 ) 8,878 (800 ) – (1 ) (1,509 ) 3,285 22,744 966 (20,209 ) – (20,209 )	2008 HK$’000 (restated) (27,188 ) (527 ) 1,475 838 1,337 – – (565 ) 3,392 9,130 – – – – – – 6 2,208 (3,172 ) 355 (12,711 ) 2,735 10,953 (8,855 ) – 6,535 35 1,509 (12,658 ) 10,270 – (2,187 ) 6,351 4,164

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Consolidated Cash Flow Statement

For the Year ended 31 March 2009

Notes CASH FLOWS FROM INVESTING ACTIVITIES Payment for investment in a joint venture Acquisition of subsidiaries 37 Increase in pledged bank deposit Purchase of other intangible assets Purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Net cash outflow from disposal of subsidiaries 38 Interests in a jointly controlled entity Interest received NET CASH USED IN INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from placement of new shares Proceeds from issue of convertible notes Repayment of convertible note Repayment of bank loans Repayment of amount due to a director Repayment of promissory notes Capital injection from minority interests Interest paid NET CASH GENERATED 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 28	2009 HK$’000 – 3,747 – (2,340 ) (10,904 ) 941 (41 ) – 119 (8,478 ) 10,441 – – – – (5,900 ) 748 – 5,289 (23,398 ) 39,612 (811 ) 15,403	2008 HK$’000 (restated) (8,653 ) – (150 ) – (5,830 ) – (20 ) (513 ) 565 (14,601 ) 30,600 62,400 (18,400 ) (25,293 ) (8,088 ) – – (838 ) 40,381 29,944 8,624 1,044 39,612

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Notes to Financial Statements

For the Year ended 31 March 2009

1. CORPORATE INFORMATION

The principal activity of the Company is investment holding. The principal activities of the Company’s subsidiaries are set out in note 21 to the financial statements.

The registered office of the Company is located at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands and the head office and principal place of business of the Company in Hong Kong is located at 30th Floor, Times Media Centre, 133 Wan Chai Road, Hong Kong. The Company has its primary listing on the Growth Enterprise Market (“GEM”) of The Stock Exchange of Hong Kong Limited.

2. SIGNIFICANT ACCOUNTING POLICIES

a) Statement of compliance

These financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (“HKFRSs”), which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“HKASs”) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and accounting principles generally accepted in Hong Kong. These financial statements also comply with the applicable disclosure provisions of The Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the “GEM Listing Rules”) and the disclosure requirements of the Hong Kong Companies Ordinance. A summary of the significant accounting policies adopted by the Group is set out below. These financial statements have been prepared under historical cost convention except for certain financial instruments which are measured at fair value, as explained in the accounting policies set out below.

The Group has adopted the following new standards, amendments and interpretations (“new HKFRSs”) issued by the HKICPA that have been effective for the current year’s financial statements.

HKAS 39 & HKFRS 7 Reclassification of Financial Assets (Amendments) 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 these new HKFRSs had no material effect on how the results and financial position of the Company 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 ON THE GROUP

APPENDIX II

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

HKFRSs (Amendments) Improvements to HKFRSs[1] HKFRSs (Amendments) Improvements to HKFRSs 2009[2] HKAS 1 (Revised) Presentation of Financial Statements[3] HKAS 23 (Revised) Borrowing Costs[3] HKAS 27 (Revised) Consolidated and Separate Financial Statements[4] HKAS 32 & 1 (Amendments) Puttable Financial Instruments and Obligations Arising on Liquidation[3] HKAS 39 (Amendment) Eligible Hedged Items[4] HKFRS 1 & HKAS 27 Cost of an Investment in a Subsidiary, Jointly Controlled (Amendments) Entity or Associate[3] HKFRS 1 (Revised) First-time Adoption of Hong Kong Financial Reporting Standards[4] HKFRS 2 (Amendment) Vesting Conditions and Cancellations[3] HKFRS 3 (Revised) Business Combinations[4] HKFRS 7 (Amendment) Improving Disclosures about Financial Instruments[3] HKFRS 8 Operating Segments[3] HK(IFRIC) – Int 9 & HKAS 39 Embedded Derivatives[8] (Amendments) HK(IFRIC) – Int 13 Customer Loyalty Programmes[5] HK(IFRIC) – Int 15 Agreements for the Construction of Real Estate[3] HK(IFRIC) – Int 16 Hedge of a Net Investment in a Foreign Operation[6] HK(IFRIC) – Int 17 Distribution of Non-cash Assets to Owners[4] HK(IFRIC) – Int 18 Transfer of Assets from Customers[7]

1 Effective for annual periods beginning on or after 1 January 2009 except for the amendment
to HKFRS 5, which is effective for annual periods beginning on or after 1 July 2009
2 Effective for annual periods beginning on or after 1 January 2009, 1 July 2009 and
1 January 2010, as appropriate
3 Effective for annual periods beginning on or after 1 January 2009 4 Effective for annual periods beginning on or after 1 July 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 of assets from customers received on or after 1 July 2009 8 Effective for annual periods ending on or after 30 June 2009

The application of HKFRS 3 (Revised) may affect the accounting for business combination for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. HKAS 27 (Revised) will affect the accounting treatment for changes in a parent’s ownership interest in a subsidiary. The directors of the Company anticipate that the application of the other new and revised standards, amendments and interpretations will have no material impact on the results and the financial position of the Group.

b) Consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities (including special purpose entities) controlled by the Company (its subsidiaries). Control is achieved 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.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

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.

Minority interests represent the portion of the net assets of subsidiaries attributable to interests that are not owned by the Company, whether directly or indirectly through subsidiaries, and in respect of which the Group has not agreed any additional terms with the holders of those interests which would result in the Group as a whole having a contractual obligation in respect of those interests that meets the definition of a financial liability. Minority interests are presented in the consolidated balance sheet with equity, separately from equity attributable to the equity holders of the Company. Minority interests in the results of the Group are presented on the face of the consolidated income statement as an allocation of the total profit or loss for the year between minority interests and the equity holders of the Company.

Where losses applicable to the minority exceed the minority’s interest in the equity of a subsidiary, the excess, and any further losses applicable to the minority, are charged against the Group’s interest except to the extent that the minority has a binding obligation to, and is able to, make additional investment to cover the losses. If the subsidiary subsequently reports profits, the Group’s interest is allocated all such profits until the minority’s share of losses previously absorbed by the Group has been recovered.

c) Business combinations

The acquisition of businesses is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under HKFRS 3 “Business Combinations” are recognised at their fair values at the acquisition date.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in income statement.

The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

d) Goodwill

Goodwill arising on acquisitions on or after 1 January 2005

Goodwill arising on an acquisition of a business for which the agreement date is on or after 1 January 2005 represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities of the relevant business at the date of acquisition. Such goodwill is carried at cost less any accumulated impairment losses.

Capitalised goodwill arising on an acquisition of a business is presented separately in the consolidated balance sheet.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

For the purposes of impairment testing, goodwill arising from an acquisition is allocated to each of the relevant cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the acquisition. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, and whenever there is an indication that the unit may be impaired. For goodwill arising on an acquisition in a financial year, the cash-generating unit to which goodwill has been allocated is tested for impairment before the end of that financial year. When the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated to reduce the carrying amount of any goodwill allocated to the unit first, and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in the consolidated income statement. An impairment loss for goodwill is not reversed in subsequent periods.

On subsequent disposal of the relevant cash-generating unit, the attributable amount of goodwill capitalised is included in the determination of the amount of profit or loss on disposal.

e) Subsidiaries

A subsidiary is a company controlled by the Company. Subsidiaries are considered to be controlled if the Company has the power, directly or indirectly, to govern the financial and operating policies so as to obtain benefits from their activities.

Investments in subsidiaries are included in the Company’s balance sheet at cost less any identified impairment loss. The results of subsidiaries are accounted for by the Company on the basis of dividends received and receivable.

f) Jointly controlled entities

A jointly controlled entity is an entity which operates under a contractual arrangement between the Group or Company and other parties, where the contractual arrangement establishes that the Group or Company and one or more of the other parties share joint control over the economic activity of the entity.

An investment in a jointly controlled entity is accounted for in the consolidated financial statements under the equity method and is initially recorded at cost and adjusted thereafter for the post acquisition change in the Group’s share of the jointly controlled entity’s net assets, unless it is classified as held for sale. The consolidated income statement includes the Group’s share of the post-acquisition, post-tax results of the jointly controlled entities for the year.

When the Group’s share of losses exceeds its interest in the jointly controlled entity, the Group’s interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the jointly controlled entity. For this purpose, the Group’s interest in the jointly controlled entity is the carrying amount of the investment under the equity method together with the Group’s long-term interests that in substance form part of the Group’s net investment in the jointly controlled entity.

Unrealised profits and losses resulting from transactions between the Group and its jointly controlled entities are eliminated to the extent of the Group’s interest in the jointly controlled entity, except where unrealised losses provide evidence of an impairment of the asset transferred, in which case they are recognised immediately in profit or loss.

g) Investment in associates

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

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FINANCIAL INFORMATION ON THE GROUP

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 Group’s share of the net assets of the associates, less any identified impairment loss. When the 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 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 associate 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 the profit and 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.

h) Non-current assets held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition.

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

i) Property, plant and equipment

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

Major costs incurred in restoring property, plant and equipment to their normal working condition are charged to the income statement. Improvements are capitalised and depreciated over their expected useful lives.

Subsequent expenditure relating to property, plant and equipment that has already been recognised is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the enterprise. All other subsequent expenditure is recognised as an expense in the period in which it is incurred.

The gain or loss on disposal of property, plant and equipment is determined as the difference between the net sales proceeds and the carrying amount of the relevant asset, and is recognised in the income statement.

Depreciation is calculated on the straight-line basis to write-off the cost of each asset over its estimated useful life. The principal annual rates used for this purpose are as follows:

Computers	25%
Leasehold improvement	Over the shorter of the lease terms and 20%
Motor vehicles	20%
Furniture, fixtures and equipment	20%
Plant and machinery	10%
Moulds	20%

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Where parts of an item of property, plant and equipment have different useful lives, the cost or valuation of the item is allocated on a reasonable basis between the parts and each part is depreciated separately. Both the useful life of an asset and its residual value, if any, are reviewed annually.

j) Intangible assets

Intangible assets acquired separately

Intangible assets acquired separately and with finite useful lives are carried at costs less accumulated amortization and any accumulated impairment losses. Amortisation for intangible assets with finite useful lives is provided on a straight-line basis over their estimated useful lives. Alternatively, intangible assets with indefinite useful lives are carried at cost less any subsequent accumulated impairment losses (see the accounting policy in respect of impairment losses on tangible and intangible assets below).

Gains or losses arising from derecognition of an intangible asset are measured at the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the consolidated income statement when the asset is derecognised.

Research and development expenditures

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

An internally-generated intangible asset arising from development expenditure is recognised only if it is anticipated that the development costs incurred on a clearly-defined project will be recovered through future commercial activity.

The amount initially recognised for internally-generated intangible asset is the sum of the expenditure incurred from the date when the tangible asset first meets the recognition criteria. Where no internally-generated intangible asset can be recognised, development expenditure is charged to income statement in the period in which it is incurred.

Subsequent to initial recognition, internally-generated intangible asset is reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets acquired separately.

k) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost, calculated on a first-in, first-out basis, comprises all costs of purchases, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

l) Financial instruments

Financial assets and financial liabilities are recognised on the balance sheet when a group entity becomes a party to the contractual provisions of the instruments. 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 the consolidated income statement.

The Group’s financial assets are classified as loans and receivables. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Effective interest method

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

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, loans and receivables (including trade receivables, amount due from a jointly controlled entity, security deposit to a related company, pledged bank deposits and cash and cash equivalents) are carried at amortised cost using the effective interest method, less any identified impairment losses, (see accounting policy on impairment loss on financial assets below), unless the effect of discounting would be immaterial, in which case they are stated at cost less provision for impairment.

Impairment loss on 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.

For all the Group’s financial assets, objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty; or
default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial reorganisation.
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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

For certain categories of financial asset, such as trade and other 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 receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the credit period, observable changes in national or local economic conditions that correlate with default on receivables.

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

Financial liabilities and equity instruments

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.

Financial liabilities within the scope of HKAS 39 are classified as financial liabilities at fair value through profit or loss and other financial liabilities. The Group classifies its financial liabilities into other financial 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 expenses 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, when appropriate, a short period.

Interest expense is recognised on an effective interest basis.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Other financial liabilities

Other financial liabilities including trade and bills payables, other payables and accruals and borrowings are subsequently measured at amortised cost, using the effective interest method unless the effect of discounting would be immaterial, in which case they are stated at cost.

Convertible note

Convertible notes issued by the Company that can be converted to equity share capital at the option of the holder, where the number of shares that would be issued on conversion and the value of the consideration that would be received at that time do not vary, are accounted for as compound financial instruments which contain both a liability component and an equity component.

An initial recognition the liability component of the convertible notes is measured as the present value of the future interest and principal payments, discounted at the market rate of interest applicable at the time of initial recognition to similar liabilities that do not have a conversion option. Any excess of proceeds over the amount initially recognised as the liability component is recognised as the equity component. Transaction costs that relate to the issue of a compound financial instrument are allocated to the liability and equity components in proportion to the allocation of proceeds.

The liability component is subsequently carried at amortised cost. The interest expense recognised in income statement on the liability component is calculated using the effective interest method. The equity component is recognised in the convertible loan notes equity reserve until either the note is converted or redeemed.

If the note is converted, the convertible loan note equity reserve, together with the carrying amount of the liability component at the time of conversion, is transferred to share capital and share premium as consideration for the shares issued. If the note is redeemed, the convertible loan notes equity reserve is released directly to retained profits.

Equity instruments

Equity instruments issued by the Company 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 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 the cumulative gain or loss that had been recognised directly in equity is recognised in the consolidated income statement.

For financial liabilities, they are derecognised from the Group’s balance sheet when the obligation specified in the relevant contract is discharged, cancelled or expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid or payable is recognised in the consolidated income statement.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

m) Impairment of other assets other than goodwill (see the accounting policy in respect of goodwill above)

Internal and external sources of information are reviewed at each balance sheet date to identify indications that the following assets may be impaired or, except in the case of goodwill, an impairment loss previously recognised no longer exists or may have decreased:

property, plant and equipment;
intangible assets;
investments in subsidiaries;
investment in an associate and
investment in a jointly controlled entity.

If any such indication exists, the asset’s recoverable amount is estimated. In addition, for intangible assets that are not yet available for use and intangible assets that have indefinite useful lives, the recoverable amount is estimated annually whether or not there is any indication of impairment.

Calculation of recoverable amount

The recoverable amount of an asset is the greater of its fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e., a cash-generating unit).

Recognition of impairment losses

An impairment loss is recognised in the income statement whenever the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs to sell, or value in use, if determinable.

Reversal of impairment losses

An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.

A reversal of impairment losses is limited to the asset’s carrying amount that would have been determined had no impairment loss been recognised in prior years. Reversals of impairment losses are credited to the income statement in the year in which the reversals are recognised.

Interim financial reporting and impairment

Under the GEM Listing Rules, the Company is required to prepare an interim financial report in compliance with HKAS 34, Interim financial reporting, in respect of the first six months of the financial year. At the end of the interim period, the Group applies the same impairment testing, recognition, and reversal criteria as it would at the end of the financial year.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Impairment losses recognised in an interim period in respect of goodwill and available-for-sale financial asset carried at cost are not reversed in a subsequent period. This is the case even if no loss, or a smaller loss, would have been recognised had the impairment been assessed only at the end of the financial year to which the interim period relates.

n) Cash and cash equivalents

Cash and cash equivalents are short-term, highly liquid investments which are readily convertible into known amounts of cash without notice and which were within three months of maturity when acquired. Cash and cash equivalents include investments and advances denominated in foreign currencies provide that they fulfill the above criteria.

For the purposes of the cash flow statement, cash and cash equivalents would also include bank overdrafts and advances from banks repayable within three months from the date of the advance.

o) Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Group or the Company has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditure to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

p) Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Group and these benefits can be measured reliably.

(i) Revenue from the sale of goods is recognised on the transfer of risks and rewards of ownership, which generally coincides with the time when the goods are delivered to customers and title has passed.
(ii) Income in respect of telecommunication services provided to customers is recognised when the services are rendered.
(iii) Interest income is recognised on a time proportion basis, taking into account the principal amounts outstanding and the interest rates applicable.

q) Reimbursement from licensor

Pursuant to the agreement between the licensor of the shopping mall and the Group, the licensor will reimburse the Group all actual and renewable costs and expenses paid by the Group in connection with fulfillment of the obligation of the Group on the condition that the prior written approval of the licensor is obtained. Reimbursement from licensor is recognised when the relevant expenses incurred are certain to be reimbursable by the licensor and is presented as a separate item in the consolidated income statement.

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r) Income tax

Income tax for the year comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognised in the income statement except to the extent that they relate to items recognised directly in equity, in which case they are recognised in equity.

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

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.

Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax assets to the extent that it is probable that future taxable profits will be available against which the asset can be utilised, are recognised. Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary differences include those that will arise from the reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period as the expected reversal of the deductible temporary differences or in periods into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilised.

The limited exceptions to recognition of deferred tax assets and liabilities are those temporary differences arising from goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit (provided they are not part of a business combination), and temporary differences relating to investments in subsidiaries to the extent that, in the case of taxable differences, the Group controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable future, or in the case of deductible differences, unless it is probable that they will reverse in the future.

The amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. Deferred tax assets and liabilities are not discounted.

The carrying amount of a deferred tax asset is reviewed at each balance sheet date and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the related tax benefit to be utilised. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available.

Additional income taxes that arise from the distribution of dividends are recognised when the liability to pay the related dividends is recognised.

Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities, if the Company or the Group has the legally enforceable right to set off current tax assets against current tax liabilities and the following additional conditions are met:

in the case of current tax assets and liabilities, the Company or the Group intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously: or
in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either:
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the same taxable entity; or
different taxable entities which, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered, intend to realise the current tax assets and settle the current tax liabilities on a net basis or realise and settle simultaneously.

s) Operating leases

Lease where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Where the Group is the lessor, assets leased by the Group under operating leases are included in non-current assets and rentals receivable under the operating leases are credited to the income statement on the straight-line basis over the lease terms. Where the Group is the lessee, rentals payable under the operating leases are charged to the income statement on the straight-line basis over the lease terms. 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.

t) Employee benefits

(i) Short-term employee benefits

Salaries, annual bonuses, paid annual leave, leave passage and the cost to the Group of nonmonetary benefits are accrued in the year in which the associated services are rendered by employee of the Group. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

(ii) Contributions to defined contribution retirement plan

The Group operates a defined contribution mandatory provident fund retirement benefits scheme (the “Hong Kong Scheme”) under the Mandatory Provident Fund Scheme Ordinance, for those employees who are eligible to participate in the Hong Kong Scheme. The Hong Kong Scheme became effective on 1 December 2000. Contributions are made based on a percentage of the employees’ basic salaries and are charged to the income statement as they become payable in accordance with the rules of the Hong Kong Scheme. The assets of the Hong Kong Scheme are held separately from those of the Group in an independently administered fund. The Group’s employer contributions vest fully with the employees when contributed into the Hong Kong Scheme.

The Group contributes on a monthly basis to defined contribution retirement benefit plan organized by relevant municipal governments in the People’s Republic of China (“PRC”). The municipal governments undertake to assume the retirement benefit obligations of all existing and future retired employees payable under the plan. Contribution to the plan is expensed as incurred. The assets of the plan are held separately from those of the Group in independently administered funds managed by the PRC Government.

(iii) Share-based compensation

The Company operates an equity-settled share-based compensation plan. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each balance sheet date, the entity revises its estimates of the number of options that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the income statement, and a corresponding adjustment to equity over the remaining vesting period.

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The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised. When the share options are forfeited after the vesting date or are still not exercised at the expiry date, the amount previously recognised in share options reserve will be transferred to retained profits.

u) Share options granted to advisors

For share options granted to advisers in exchange for services, they are measured at the fair value of the services received. The fair values of the services are recognised as expenses immediately, unless the services qualify for recognition as assets. Corresponding adjustments have been made to equity (share option reserve).

v) Borrowing costs

Borrowing costs are expensed in the income statement in the period in which they are incurred, except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to get ready for its intended use or sale.

The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying assets for its intended use or sale are interrupted or complete.

w) Translation of foreign currencies

Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Hong Kong dollars (“HK$”), which is the Company’s functional and presentation currency, and all values are rounded to the nearest thousand except when otherwise indicated.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

Non-monetary assets and liabilities measured in terms of historical cost in a foreign currency are translated using the foreign exchange rates ruling at the transaction dates. Non-monetary assets and liabilities denominated in foreign currencies stated at fair value are translated using the foreign exchange rates ruling at the dates the fair value was determined.

Group companies

The financial statements of all the Group’s entity (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
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(ii) income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and
(iii) all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign operation is sold, such exchange differences are recognised in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

x) Related parties

A party is considered to be related to the Group if:

(i) directly, or indirectly through one or more intermediaries, the party:
control, is controlled by, or is under common control with, the Group;
has an interest in the Company that gives it significant influence over the Group; or
has joint control over the Group
(ii) the party is a member of key management personnel of the Company;
(iii) the party is a close member of the family of any individual referred to in (i) and (ii);
(iv) the party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting power in such entities resides with, directly or indirectly, the individual referred to in (ii) or (iii);
(v) the party is a post-employment benefit plan for the benefit of employees of the Group, or of any entity that is a related party of the Group.

y) Segment Reporting

A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.

In accordance with the Group’s internal financial reporting, the Group has chosen business segment information as the primary reporting format and geographical segment information as the secondary reporting format for the purpose of these financial statements.

Segment revenue, expenses, results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis to that segment. For example, segment assets may include inventories, trade receivables and property, plant and equipment. Segment revenue, expenses, assets and liabilities are determined before intra-group balances and intra-group transactions are eliminated as part of the consolidation process, except to the extent that such intra-group balances and transactions are between group enterprises within a single segment. Intra-segment pricing is based on similar terms as those available to other external parties.

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Segment capital expenditure is the total cost incurred during the year to acquire segment assets (both tangible and intangible) that are expected to be used for more than one year.

Unallocated items mainly comprise financial and corporate assets, interest-bearing loans, borrowings, corporate and financing expenses and minority interests.

3. FINANCIAL INSTRUMENTS

(a) Categories of financial instruments

The carrying amounts of each of the categories of the Group and the Company’s financial assets and liabilities as at the balance sheet date are as follows:

Financial assets Loans and receivables (including cash and cash equivalents) Financial liabilities Financial liabilities measured at amortised cost	The Group 2009 2008 HK$’000 HK$’000 (Restated) 22,082 54,102 29,665 63,406	The Company 2009 2008 HK$’000 HK$’000 28,155 109,133 3,769 51,803	The Company 2009 2008 HK$’000 HK$’000 28,155 109,133 3,769 51,803

			51,803

(b) Financial risk management objectives and policies

The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency risk and interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.

(i) Foreign currency risk

The Group is exposed to foreign currency risk primarily through sales and purchases that are denominated in a currency other than the functional currency of the operations to which they relate. The currencies giving rise to this risk are primarily Euros, Singapore dollars, United States dollars and Renminbi.

Most of the trading transactions of the Group were denominated in Euro, United States dollars and in Renminbi. As the Group considers the risk of movements in exchange rates between the Hong Kong dollar and the United States dollar to be insignificant, while the official rates for United States dollars has remained stable and the risk on Renminbi exposure is insignificant for both years, no hedging or similar measures have been implemented by the Group. However, the management monitors the foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.

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As at 31 March 2009 and 2008, most assets and liabilities of the Group were denominated in Hong Kong dollars. Given this, management does not expect that there will be any significant currency risk associated with the Group.

		2009			2008
	SGD’000	USD’000	RMB’000	SGD’000	USD’000	RMB’000
Assets	–	1,004	1,548	35	5,170	1,267
Liabilities	–	–	(18,280 )	(34 )	(42 )	(3,418 )

There is no significant effect on the Group’s result for 2009 and 2008 in response to reasonably possible changes in the foreign exchange rates to which the Group has exposure at the balance sheet date. In this respect, it is assumed that the change in foreign exchange rates had occurred at the balance sheet date and had been applied to the Group’s exposure to foreign exchange risk for financial instruments in existence at that date and that all other variables, in particular interest rates, remain constant. It is also assumed that the pegged rate between HKD and USD would be materially unaffected by any changes in movement in value of USD against other currencies. The analysis is performed on the same basis for 2008.

(ii) Interest rate risk

The Group is exposed to the cash flow interest rate risk and fair value interest rate risk due to its bank deposits and borrowings, respectively, carrying interest at variable and fixed rates which are disclosed in note 28 and note 33 to the financial statements respectively. The Group currently does not have an interest rate hedging policy and does not use any derivative instruments to reduce its economic exposure to the changes in interest rates.

There is no significant impact on the Group’s result for 2009 and 2008 in response to reasonably possible changes in the interest rates to which the Group has exposure at the balance sheet date. In this respect, it is assumed that the change in interest rates had occurred at the balance sheet date and had been applied to the Group’s exposure to interest rate risk for financial instruments in existence at that date, and that all other variables, in particular foreign exchange rates, remain constant.

(iii) Credit risk

The Group’s credit risk is primarily attributable to cash at bank, trade and other receivables and deposits. Management has a credit policy in place and the exposures to these credit risks are monitored on an ongoing basis.

Cash at bank are placed with high-credit-quality institutions and directors of the Group consider that the credit risk for such is minimal.

In respect of trade receivables, credit evaluations are performed on all customers requiring credit over a certain amount. These receivables are due within 60-120 days from the date of billing. Debtors with overdue balances, which will be reviewed on a case-by-case basis, are requested to settle all outstanding balances before any further credit is granted. Normally, the Group does not obtain collateral from customers.

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In order to minimise the credit risk in respect of deposit, trade and other receivables, the Group reviews the recoverable amount at each balance sheet date to ensure that adequate allowances are made for irrecoverable amounts. In this regard, the directors of the Group consider that the Group’s credit risk is significantly reduced.

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. At the balance sheet date, the Group has a certain concentration of credit risk as 81% (2008: 99%) of the total trade receivables was due from the Group’s five largest customers.

The maximum exposure to credit risk without taking account of any collateral held is represented by the carrying amount of each financial asset in the balance sheet after deducting any impairment allowance. The Group does not provide any guarantees which would expose the Group to credit risk.

Further quantitative disclosures in respect of the Group’s exposure to credit risk from trade receivables are set out in note 25 to the financial statements.

(iv) Liquidity risk

Individual operating entities within the Group are responsible for their own cash management, including the short-term investment of cash surpluses and the raising of loans to cover expected cash demands, subject to approval by the board of directors when the borrowings exceed certain predetermined levels of authority. The Group’s policy is to regularly monitor current and expected liquidity requirements and its compliance with lending covenants, to ensure that it maintains sufficient reserves of cash and readily realizable marketable securities and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term.

The following table details the remaining contractual maturities at the balance sheet date of the Group’s and the Company’s non-derivative financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on the rates current at the balance sheet date) and the earliest date the company can be required to pay:

The Group

Trade payables Other payables and accruals Promissory note Convertible notes Amount due to an associate Amount due to minority interests Amounts due to a related company	Carrying amount HK$’000 10,284 17,452 900 – 63 966 –	2009 Total Within contractual 1 year undiscounted or on cash flow demand HK$’000 HK$’000 10,284 10,284 17,452 17,452 900 900 – – 63 63 966 966 – – 29,665 29,665	2009 Total Within contractual 1 year undiscounted or on cash flow demand HK$’000 HK$’000 10,284 10,284 17,452 17,452 900 900 – – 63 63 966 966 – – 29,665 29,665	More than 1 year but less than 2 years HK$’000 – – – – – – –	Carrying amount (Restated) HK$’000 4,316 5,860 – 51,721 – – 1,509	2008 Total Within contractual 1 year undiscounted or on cash flow demand HK$’000 HK$’000 4,316 4,316 5,860 5,860 – – 51,721 – – – – – 1,509 1,509 63,406 11,685	2008 Total Within contractual 1 year undiscounted or on cash flow demand HK$’000 HK$’000 4,316 4,316 5,860 5,860 – – 51,721 – – – – – 1,509 1,509 63,406 11,685	More than 1 year but less than 2 years HK$’000 – – – 51,721 – – –
	29,665	29,665	29,665	–	63,406	63,406	11,685	51,721

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The Company

Other payables and accruals Convertible notes Amounts due to subsidiaries	Carrying amount HK$’000 2,949 – 820	2009 Total Within contractual 1 year undiscounted or on cash flow demand HK$’000 HK$’000 2,949 2,949 – – 820 820 3,769 3,769	2009 Total Within contractual 1 year undiscounted or on cash flow demand HK$’000 HK$’000 2,949 2,949 – – 820 820 3,769 3,769	More than 1 year but less than 2 years HK$’000 – – –	Carrying amount HK$’000 62 51,721 20	2008 Total Within contractual 1 year undiscounted or on cash flow demand HK$’000 HK$’000 62 62 51,721 – 20 20 51,803 82	2008 Total Within contractual 1 year undiscounted or on cash flow demand HK$’000 HK$’000 62 62 51,721 – 20 20 51,803 82	More than 1 year but less than 2 years HK$’000 – 51,721 –
	3,769	3,769	3,769	–	51,803	51,803	82	51,721

(v) Fair values

The fair values of debt elements of convertible notes is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices or rates from observable current market transactions as inputs.

All other financial instruments are carried at amounts not materially different from their fair values as at 31 March 2009 and 2008 due to short maturity of these instruments.

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal to the related actual results.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

a) Useful lives of property, plant and equipment and intangible assets (other than goodwill)

The Group’s management determines the estimated useful lives and related depreciation and amortization charges for its property, plant and equipment and intangible assets (other than goodwill). This estimate is based on the historical experience of the actual useful lives of property, plant and equipment and intangible assets of similar nature and functions. It could change significantly as a result of technical innovations and competitor actions in response to severe industry activities. Management will increase the depreciation and amortization charges where useful lives are less than previously estimated lives or it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold. Periodic review could result in a change in depreciable and amortization lives and therefore depreciation and amortization expense in future periods.

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b) Impairment of jointly controlled entity

The Group assesses annually whether the investment in the jointly controlled entity has suffered any impairment in accordance with the accounting policy stated in note 2(f). The recoverable amount of the investment in the jointly controlled entity is determined using discounted cash flows calculations.

c) Impairment of trade and other receivables

The Group makes impairment loss on doubtful debts based on an assessment of the recoverability of trade receivables and other receivables. Impairment is applied to trade receivables and other receivables where events or changes in circumstances indicate that the balances may not be collectible. The identification of doubtful debts requires the use of judgement and estimates. Where the expectation is different from the original estimate, such difference will impact carrying value of receivables and doubtful debt expenses in the period in which such estimate has been changed.

d) Estimated net realisable value of inventories

The Group determines the write-down for slow-moving or obsolete inventories based on an assessment of the net realisable value of the inventories. Write-down is applied to the inventories where events or changes in circumstances indicate that the net realisable value is less than cost. The determination of net realisable value requires the use of judgement and estimates. Where the expectation is different from the original estimate, such difference will impact the carrying value of the inventories and inventory expenses in the period in which such estimate has been changed.

e) Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. Where the actual future cash flows are less than expected, a material impairment loss may arise.

The carrying amount of goodwill at the balance sheet date was HK$2.7 million (2008: Nil) after an impairment loss of HK$3.7 million (2008: Nil) was recognised during the year ended 31 March 2009. Details of the impairment loss calculation are set out in note 19.

f) Fair value of debt elements and conversion option elements in respect of convertible notes

As described in note 33, Binomial option pricing model is selected for valuation of conversion option elements of convertible notes. It is based on the significant inputs into calculation included interest rate, risk free rate, terms and conditions of the convertible notes, and initial public offering date.

g) Valuation of share options granted

The fair value of share option granted was calculated using the Binomial pricing model based on the Group’s management’s significant inputs into calculation the volatility of share price, weighted average share prices and exercise price of the share options granted. Furthermore, the calculation assumes nil future dividends.

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5. BUSINESS AND GEOGRAPHICAL SEGMENTS

a) Primary reporting format – business segments

For management purposes, the Group is organised into five business segments:

Mobile phones	–	Manufacturing and trading of mobile phones
DVD players	–	Sales of digital versatile disc players
Telecommunication	–	Provision of telecommunication services
Trading	–	Sales and trading of telecommunication and electronic equipment,
		commodities, and computer hardware and relevant peripherals
Property management	–	Provision of property management services

The following tables present turnover, loss and certain assets and liabilities information for the Group’s business segments.

TURNOVER AND RESULTS

Year ended 31 March 2009

TURNOVER External SEGMENT RESULTS Interest income Unallocated corporate expenses Loss from operation Finance costs Share of loss of a jointly controlled entity Share of loss of an associate Loss before taxation Taxation Loss for the year	Continuing operations Property Trading management Sub-total HK$’000 HK$’000 HK$’000 212,683 512 213,195 (3,895 ) (1,462 ) (5,357 ) 111 (35,585 ) (40,831 ) (77 ) – (63 ) (40,971 ) (313 ) (41,284 )	Mobile phones HK$’000 – –	Discontinued operations DVD Telecom- players munication HK$’000 HK$’000 1,491 249 (5,293 ) (3,184 )	Sub-total HK$’000 1,740 (8,477 ) 8 (45,447 ) (53,916 ) – (721 ) – (54,637 ) – (54,637 )	Consolidated HK$’000 214,935 (13,834 ) 119 (81,032 ) (94,747 ) (77 ) (721 ) (63 ) (95,608 ) (313 ) (95,921 )

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CONSOLIDATED ASSETS AND LIABILITIES At 31 March 2009

Continuing operations Property Trading management Others HK$’000 HK$’000 HK$’000 ASSETS Segment assets 30,421 7,154 – Interests in an associate Interests in a jointly controlled entity Unallocated corporate assets Consolidated total assets LIABILITIES Segment liabilities 14,626 4,685 – Unallocated corporate liabilities OTHER INFORMATION Segment capital expenditure 2,144 – 1,920 Segment depreciation and amortization 1,004 – 1,297 Loss on disposal of property, plant and equipment 9 – 1,007 Impairment on other intangible asset 2,080 – – Impairment on property, plant and equipment – – – Loss on disposal of subsidiary – – – Impairment on inventory 291 – – Interests in a jointly controlled entity written off – – – Impairment on payment for investment in a joint venture – – 8,653 Impairment on goodwill – 3,759 – Impairment on other receivables, deposits and prepayment – – 309	Discontinued operations Mobile DVD Telecom- Sub-total phones players munication HK$’000 HK$’000 HK$’000 HK$’000 37,575 – 112 1,297 – – 9,359 46,934 19,311 – 19,185 266 6,304 25,615 4,064 – 6,486 354 2,301 – 725 1,287 1,016 – 7,499 554 2,080 – – – – – – 888 – – – 580 291 – 15,492 – – – 18,928 – 8,653 – – – 3,759 – – – 309 – – 716	Sub-total HK$’000 1,409 – – – 1,409 19,451 – 19,451 6,840 2,012 8,053 – 888 580 15,492 18,928 – – 716	Consolidated HK$’000 38,984 – – 9,359
			48,343

			38,762 6,304
			45,066

			10,904 4,313 9,069 2,080 888 580 15,783 18,928 8,653 3,759 1,025

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TURNOVER AND RESULTS

Year ended 31 March 2008

Others HK$’000 877	Discontinued operation Mobile DVD Telecom- phone players munication HK$’000 HK$’000 HK$’000 74,650 16,123 7,129	Continuing operation Sub-total Other HK$’000 HK$’000 98,779 –

70	1,261

		(12,545 ) (11,520 ) (24,065 ) (838 ) (1,475 ) (2,313 ) (1,337 ) – (1,337 )
		(14,720 ) (12,995 ) (27,715 ) 527 – 527
		(14,193) (12,995 ) (27,188 )

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CONSOLIDATED ASSETS AND LIABILITIES

At 31 March 2008

Discontinued operation Mobile DVD Telecom- phone players munication HK$’000 HK$’000 HK$’000 ASSETS Segment assets 25,663 5,542 9,816 Interests in a jointly controlled entity Unallocated corporate assets Consolidated total assets LIABILITIES Segment liabilities 18,086 3,906 3,541 Unallocated corporate liabilities Consolidated total liabilities OTHER INFORMATION Segment capital expenditure 208 45 2,985 Unallocated capital expenditure Consolidated capital expenditure Segment depreciation 2,192 474 392 Unallocated depreciation Depreciation for the year Segment impairment 7,436 1,606 –	Continuing operation Sub-total Other HK$’000 HK$’000 41,021 302 21,326 – – 53,719	Consolidated HK$’000 41,323 21,326 53,719
	62,347 54,021	116,368

	25,533 213 – 52,998	25,746 52,998
	25,533 53,211	78,744

	3,238 3 – 2,589	3,241 2,589
	3,238 2,592	5,830

	3,058 26 – –	3,084 308
	3,058 26	3,392

	9,042 88	9,130

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b) Secondary reporting format – geographical segments

The following tables present turnover and certain assets information for the Group’s geographical segments.

Year ended 31 March 2009

The PRC (including Hong Kong) HK$’000 2,004	Taiwan HK$’000 27,960	Singapore HK$’000 111,849	Indonesia Others HK$’000 HK$’000 71,677 1,445	Consolidated HK$’000 214,935

48,343 10,550	– –	– 354	– – – –	48,343 10,904

The PRC (including Hong Kong) HK$’000 92,237	Europe HK$’000 5,028	Singapore HK$’000 26	The United States of America (“U.S.A.”) Others HK$’000 HK$’000 1,105 383	Consolidated HK$’000 98,779

115,097 5,054	– –	1,271 776	– – – –	116,368 5,830

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

6. TURNOVER

An analysis of Group’s turnover for the year, for both continuing and discontinued operations, is as follows:

Continuing operations Revenue from sales of goods Revenue from rendering of services Discontinued operations Revenue from sales of goods Revenue from rendering of services	2009 HK$’000 212,683 512 213,195 1,491 249 1,740 214,935	2008 HK$’000 – –
		–
		91,650 7,129
		98,779
		98,779

7. OTHER REVENUE AND OTHER NET INCOME

Interest income Bad debt recovered Others Amount due to a former director waived	Continuing operations 2009 2008 HK$’000 HK$’000 111 400 – – 11 48 – 3,172 122 3,620	Discontinued operations 2009 2008 HK$’000 HK$’000 8 165 – 2,683 607 47 – – 615 2,895	Consolidated 2009 2008 HK$’000 HK$’000 119 565 – 2,683 618 95 – 3,172 737 6,515	Consolidated 2009 2008 HK$’000 HK$’000 119 565 – 2,683 618 95 – 3,172 737 6,515
				6,515

8. FINANCE COSTS

Bank loan interest Interest on convertible notes	Continuing operations 2009 2008 HK$’000 HK$’000 – – 77 1,475 77 1,475	Discontinued operations 2009 2008 HK$’000 HK$’000 – 838 – – – 838	Consolidated 2009 2008 HK$’000 HK$’000 – 838 77 1,475 77 2,313	Consolidated 2009 2008 HK$’000 HK$’000 – 838 77 1,475 77 2,313
				2,313

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

9. DISCONTINUED OPERATIONS

On 10 November 2008, the Board of Directors agreed to dispose the entire 100% shareholding interest in EmCall Singapore Pte Limited (“subsidiary”) which was rendering of telecommunication services. The cash consideration was SGD1. The loss on disposal of the subsidiary amounted to HK$580,000. Details of the assets and liabilities disposed of are disclosed in note 38.

The Board of Directors planned to dispose of the business of Telecommunication, Mobile phones and DVD players. The planned disposal is consistent with the Group’s long term policy to reallocate and consolidate scarce financial resources and management time to other business segments.

The combined results and cash flows of the discontinued operations (i.e. Telecommunication, Mobile phones and DVD players) included in the consolidated income statement and the consolidated cash flow statement are set out below.

Loss for the year from discontinued operations Revenue Expenses Other loss_(See note 11)_ Loss before taxation Taxation credit Loss on disposal of a subsidiary Share of loss of a jointly controlled entity Cash flows from discontinued operations Net cash (used in)/from operating activities Net cash from/(used in) investing activities Net cash used in financing activities Net cash flows	2009 HK$’000 2,355 (11,614 ) (44,077 ) (53,336 ) – (53,336 ) (580 ) (721 ) (54,637 ) (16,189 ) 15,480 – (709 )	2008 HK$’000 101,674 (105,921 ) (9,136 ) (13,383 ) 527 (12,856 ) – (1,337 ) (14,193) 21,381 (4,254 ) (24,729 ) (7,602)

The business of Telecommunication, Mobile phones and DVD players have been classified and accounted for at 31 March 2009 as a disposal group held for sale (See note 10).

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APPENDIX II

10. NON-CURRENT ASSETS HELD FOR SALE

Property, plant and equipment held for sale_(Note 1) Assets related to the manufacturing business(Note 2) Liabilities associated with assets held for sale(Note 2)_	2009 HK$’000 466 112 578 19,185	2008 HK$’000 – –
		–

		–

Note 1: The Group intends to dispose the telecommunication servers they no longer utilise in the future. A search is underway for the buyers. The impairment loss of HK$888,000 was recognised on reclassification of those property, plant and equipment as held for sale as 31 March 2009.

Note 2: As described in note 9, the Group is seeking to dispose of its manufacturing business, which involves the manufacturing and sale of Mobile phones and DVD players and anticipates that the disposal will be completed at the end of 2009. The major classes of assets and liabilities comprising the operations classified as held for sale at the balance sheet are as follows:

Notes Interests in a jointly controlled entity 22 Other receivables, deposits and prepayments Amount due from a jointly controlled entity 26 Bank and cash balances 28 Assets of manufacturing business classified as held for sale Trade payables 29 Other payables Liabilities of manufacturing business associated with assets classified as held for sale Net liabilities of manufacturing business classified as held for sale	2009 HK$’000 – 2 31 79 112 (7,544 ) (11,641 ) (19,185 ) (19,073 )	2008 HK$’000 – – – –
		–
		– –
		–
		–

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

11. LOSS FOR THE YEAR

Loss for the year is arrived at after charging/(crediting):

	Continuing	Continuing	Discontinued	Discontinued	Consolidated	Consolidated
	operations		operations
	2009	2008	2009	2008	2009	2008
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’0_00_
Auditor’s remuneration	415	600	221	2	636	602
Amortization of other
intangible assets	260	–	–	–	260	–
Bad debts written off	–	–	–	574	–	574
Cost of inventories sold	210,589	–	1,437	92,062	212,026	92,062
Cost of services provided
(Note (i))	–	–	1,781	6,049	1,781	6,049
Depreciation	2,042	193	2,011	3,199	4,053	3,392
Exchange loss	43	66	176	27	219	93
Other losses	16,108	2,208	44,077	9,136	60,185	11,344
– Impairment on property,
plant and machinery	–	–	888	9,130	888	9,130
– Impairment on inventory	291	–	15,492	–	15,783	–
– Impairment on goodwill	3,759	–	–	–	3,759	–
– Impairment on other
intangible assets	2,080	–	–	–	2,080	–
– Interests in a joint controlled
entity written off	–	–	18,928	–	18,928	–
– Impairment on payment for
investment in a joint
venture_(Note (iv))_	8,653	–	–	–	8,653	–
– Impairment on other
receivables, deposits
and prepayments	309	–	716	–	1,025	–
– Loss on disposal of
property, plant and
equipment	1,016	–	8,053	6	9,069	6
– Loss on redemption of
convertible notes	–	2,208	–	–	–	2,208
Operating lease rental in
respect of rented
premises_(Note (ii))_	3,954	1,013	27	857	3,981	1,870
Research and development
costs_(Note (iii))_	584	–	–	–	584	–
Staff costs (including
directors’ remuneration)
– Salaries and allowances	8,134	2,234	1,407	4,675	9,541	6,909
– Equity-settled share
option expense	151	84	–	–	151	84
– Termination benefits	–	–	5,055	–	5,055	–
– Retirement scheme
contributions	125	34	9	8	134	42

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APPENDIX II

Notes:

(i) Included in the cost of services provided are depreciation of HK$1,106,000 (2008: HK$2,940,000), which had also been included in depreciation disclosed above.
(ii) Included in the operating lease rentals in respect of rented premises are paid for the director’s and staff quarter of HK$496,000 (2008: Nil) which had also been included in staff costs disclosed above.
(iii) Included in the research and development expenditure are staff costs of HK$286,000 (2008: Nil) which had also been included in staff costs disclosed above.
(iv) The Group had entered into a joint venture agreement with Shanghai Jian Hua Satellite Communications Limited, for the purpose of conducting distant education and training. An amount of approximately HK$8,653,000 was paid for the capital investment of this potential joint venture during the year ended 31 March 2008. Despite the fact that the joint venture company has been set up during the year, the Group assessed the recoverable amount of the consideration paid by reference to value in use to be nil and determined that the consideration paid was impaired by HK$8,653,000 (2008: Nil).

12. DIRECTOR’S EMOLUMENTS

The emoluments paid or payable to the Company’s directors for the year ended 31 March 2009 and 2008 were as follows:

Executive directors Mr. Yong Wai Hong Mr. Lam Kwok Ho Independent non-executive directors Mr. Chan Cheong Yee_(Note 2) Mr. Chong Lee Chang(Note 1)_ Ms. Tsang Fung Chu Mr. Wong Chi Keung Patrick	Directors’ fee HK$’000 – 105 105 – 105 105		Year ended 31 Salaries, allowances and other benefits HK$’000 1,096 60 – – – 20 1,176	March 2009 Share based payment HK$’000 29 29 29 – 29 29 145	Total HK$’000 1,125 194 134 – 134 154
	420				1,741

Note 1 : Appointed on 31 March 2009.

Note 2 : Re-designated to executive director on 14 April 2009.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Directors’ fee HK$’000 Executive directors Mr. Yong Wai Hong – Mr. Lam Kwok Ho 70 Mr. Chen Jijin_(Note 3) 87 _Independent non-executive directors Mr. Chan Cheong Yee 70 Ms. Tsang Fung Chu 70 Mr. Wong Chi Keung Patrick 40 Mr. Chen Wei Rong_(Note 3) 25 Mr. Lam Hon Kueng(Note 3) 25 Mr. Law Chi Yuen(Note 3)_ 25 412	Year ended 31 Salaries, allowances and other benefits HK$’000 310 – – – – – – – – 310	March 2008 Share based payment HK$’000 – – – 6 6 6 – – – 18	Total HK$’000 310 70 87 76 76 46 25 25 25
			740

Note 3 : Resigned on 28 August 2007

During the year ended 31 March 2009 and 2008, no emoluments were paid 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 emoluments in the year ended 31 March 2009 and 2008.

13. INDIVIDUALS WITH HIGHEST EMOLUMENTS

Of the five individuals in the Group with the highest emoluments, one (2008: one) is a director of the Company whose emoluments are disclosed above. The emoluments of the remaining four individuals (2008: four), whose emoluments are individually below HK$1,000,000, are as follows:

Salaries and other benefits Retirement scheme contributions	2009 HK$’000 1,448 19 1,467	2008 HK$’000 1,037 16
		1,053

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APPENDIX II

14. TAXATION

The taxation charge/(credit) comprises: Current tax Hong Kong Overprovision in prior years: Hong Kong PRC Enterprises Income Tax Attributable to: Continuing operations Discontinued operations	2009 HK$’000 313 – – 313 313 – 313	2008 HK$’000 – – (527 ) (527) – (527 ) (527)

On 26 June 2008, the Hong Kong Legislative Council passed the Revenue Bill 2008 and reduced corporate profit tax rate from 17.5% to 16.5% which is effective from the year of assessment 2008/09. Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profit for the year ended 31 March 2009. No provision for Hong Kong profits tax has been made for the year ended 31 March 2008 as the Group’s income neither arising in, nor is derived from Hong Kong.

Taxes on profits assessable other than in Hong Kong are calculated at the rates of tax prevailing in the places in which the Group operates based on existing legislation, practices and interpretations thereof.

Guangdong Photar Digital & Electronic Company Limited (“Guangdong Photar”), the subsidiary which was classified as discontinued operation, was subject to the PRC enterprise income tax. As a wholly foreign-owned enterprise pursuant to the Income Tax Law of the PRC for Foreign Investment Enterprise and with the confirmation received from the 河源市國家稅務直屬稅務分局 on 24 August 2006, Guangdong Photar was exempted from the PRC enterprise income tax for the two years starting from its first profit making year after offsetting the accumulated losses, being the year ended 31 March 2007, and is entitled to a 50% relief for the subsequent three years.

On 16 March 2007, the PRC promulgated the Law of the PRC on Enterprise Income Tax (the “New Law”) by Order No. 63 of the President of the PRC. On 6 December 2007, the State Council of the PRC issued implementation Regulations of the New Law. The New Law and Implementation Regulations will change the tax rate to 25% for certain subsidiaries from 1 January 2008.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

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

Loss before taxation Continuing operations Discontinued operations Tax at the statutory tax rate Income not subject to taxation Expenses not deductible for tax purpose Effect of different tax rates of subsidiaries operating in other jurisdictions Effect of share of taxation of jointly controlled entity Tax effect of unrecognised temporary difference Tax effect of unrecognised tax loss Over-provision for taxation in prior year Taxation charge/(credit) for the year	2009 HK$’000 (40,971 ) (54,637 ) (95,608 ) (15,775 ) (309 ) 8,915 (724 ) – 448 7,758 – 313	2008 HK$’000 (12,995 ) (14,720 )
		(27,715)

		(4,850 ) (537 ) 3,087 (1,887 ) 441 (432 ) 4,178 (527 )
		(527)

15. LOSS FOR THE YEAR ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

The loss attributable to equity holders of the Company for the year dealt with in the financial statements of the Company is a net loss of HK$96,670,000 (2008: HK$11,461,000).

16. DIVIDEND

The directors do not recommend the payment of a dividend for the year ended 31 March 2009 (2008: Nil).

17. LOSS PER SHARE

(i) Basic loss per share

Basic loss per share From continuing operations From discontinued operations Total basic loss per share	2009 HK Cent 1.44 1.93 3.37	2008 HK Cent 0.70 0.77
		1.47

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

The loss and weighted average number of ordinary shares used in the calculation of basic loss per share are as follows:

Loss for the year attributable to equity holders of the Company Loss for the year from discontinued operations used in the calculation of basic loss per share from discontinued operation Loss used in the calculation of basic loss per share from continuing operations Weighted average number of ordinary shares for the purpose of basic loss per share	2009 HK$’000 95,531 (54,637 ) 40,894 2009 2,835,856,965	2008 HK$’000 27,067 (14,193 ) 12,874 2008 1,845,982,667

(ii) Diluted loss per share

Diluted loss per share for the year ended 31 March 2009 and 2008 are not presented as the effect of share option and convertible notes are anti-dilutive and are not included in the calculation of diluted loss per share for the years ended 31 March 2009 and 2008.

99 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

18. PROPERTY, PLANT AND EQUIPMENT

Leasehold Improvement HK$’000 Cost At 1 April 2007 462 Additions 1,452 Disposal – Exchange difference 12 At 31 March, 2008 and 1 April 2008 1,926 Additions 2,100 Disposal (1,808 ) Reclassified as held for sale – Exchange difference 6 At 31 March 2009 2,224 Accumulated depreciation and impairment At 1 April 2007 127 Charge for the year 284 Written back on disposal – Impairment loss 80 Exchange difference 1 At 31 March 2008 and 1 April 2008 492 Charge for the year 1,716 Written back on disposal (1,121 ) Impairment loss – Reclassified as held for sale – Exchange difference 8 At 31 March 2009 1,095 Net book value At 31 March 2009 1,129 At 31 March 2008 1,434	Mould HK$’000 10,338 63 – 1,004 11,405 754 (11,537 ) – 132 754 2,041 2,052 – 6,182 197 10,472 472 (11,014 ) – – 120 50 704 933	Plant and machinery HK$’000 4,148 130 – 404 4,682 7,060 (11,222 ) – 61 581 389 422 – 2,428 38 3,277 238 (3,531 ) – – 54 38 543 1,405	Computers HK$’000 54 396 – – 450 523 (224 ) (34 ) 3 718 25 42 – 35 – 102 145 (59 ) – (9 ) 1 180 538 348	Furniture, fixtures and equipment HK$’000 723 3,789 (66 ) 61 4,507 467 (2,157 ) (2,662 ) 13 168 168 538 (60 ) 308 16 970 1,442 (1,041 ) 888 (2,221 ) 5 43 125 3,537	Motor vehicles HK$’000 271 – – 27 298 – (301 ) – 3 – 53 54 – 97 5 209 40 (251 ) – – 2 – – 89	Total HK$’_00_0 15,996 5,830 (66 ) 1,508
						23,268 10,904 (27,249 ) (2,696 ) 218
						4,445
						2,803 3,392 (60 ) 9,130 257
						15,522 4,053 (17,017 ) 888 (2,230 ) 190
						1,406
						3,039

						7,746

During the year, the Group carried out a review of the recoverable amount of its plant and equipment used in the business of Telecommunication. The review led to the recognition of an impairment loss of HK$888,000, that has been recognised in profit or loss.

The impairment loss have been included in Loss for the year from discontinued operation in the consolidated income statement.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

19. GOODWILL

Cost At 1 April 2007 & 1 April 2008 Acquired on acquisition of subsidiaries_(See note 37)_ At 31 March 2009 Accumulated impairment At 1 April 2007 & 1 April 2008 Impairment loss recognised At 31 March 2009 Carrying amount At 31 March 2009 At 31 March 2008	HK$’000 – 6,459 6,459 – (3,759 ) (3,759) 2,700 –

The goodwill arose from the acquisition of subsidiaries during the year, which are engaged in property management. For the purpose of impairment testing, goodwill has been allocated to one cash generating unit.

During the financial year, the Group assessed the recoverable amount of goodwill, and determined that goodwill associated with the Group’s property management segment was impaired by HK$3,759,000 (2008: nil). The recoverable amount of the property management segment was assessed by reference to value in use. The calculations use post-tax cash flow projections based on financial budgets approved by management covering a three– year period. Cash flows beyond the three-year period are extrapolated assuming seasonality and other business conditions remain unchanged. A discount factor of 20% (2008: nil) per annum was applied in the value in use model. Management believes that the assumption is reasonable within the same industry.

20. OTHER INTANGIBLE ASSET

OTHER INTANGIBLE ASSET
	Capitalised
	development cost
	HK$’000
Cost
At 1 April 2007, 31 March 2008 & 1 April 2008	–
Additions	2,340
At 31 March 2009	2,340
Accumulated amortisation and impairment
At 1 April 2007, 31 March 2008 & 1 April 2008	–
Provided for the year	(260 )
Impairment loss recognised	(2,080 )
At 31 March 2009	(2,340 )
Carrying amount
At 31 March 2009 & 31 March 2008	–

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

The amortisation expense has been included in the line item depreciation and amortization expense in the consolidated income statement.

The capitalized development cost has definite useful lives. Such intangible asset is amortised on a straight-line basis over 3 years.

During the year, the Group carried out a review of the recoverable amount of capitalized development cost. As a result, the Group assessed the recoverable amount of this asset to be nil and the carrying amount was written down by HK$2,080,000.

21. INTERESTS IN SUBSIDIARIES

Unlisted shares, at cost Amount due from subsidiaries Less: impairment loss Amount due to subsidiaries	The 2009 HK$’000 1 114,601 (87,246 ) 27,356 (820 )	Company 2008 HK$’000 1 108,901 –
		108,902

		(20)

The amounts due from/(to) subsidiaries are unsecured, non-interest bearing and have no fixed terms of repayment.

The movement in the allowance for impairment as of balance sheet date is as follows:

Balance at beginning of the year Impairment losses recognised Balance at end of the year	The 2009 HK$’000 – 87,246 87,246	Company 2008 HK$’000 – –
		–

Included in the allowance are individually impaired amount due from subsidiaries which have significant loss for the year.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Particulars regarding the subsidiaries at 31 March 2009 are as follows:

	Place of		Issued and	Attributable	Attributable
	incorporation/		fully paid	equity interest held				Principal activities
Name of subsidiary	operation	Type of legal entity	share capital	by the Company
				Directly	Indirectly
				%		%
Easybuild Assets	BVI	Limited liability company	US$1	100			–	Investment holding
Management Limited
Emcom (HK) Pte Limited	Hong Kong	Limited liability company	HK$10	100			–	Investment holding
Faith Pro Trading Limited	BVI	Limited liability company	US$100	100			–	Dormant
Photar International Holdings	Hong Kong	Limited liability company	HK$1	100			–	Investment holding
Limited_(note 1)_
Sinotrans Resources Limited	BVI	Limited liability company	US$1	100			–	Trading of palm oil
(formally known as								and coal
“Emcom International
Investment Limited)
EmCall Pte Limited	Hong Kong	Limited liability company	HK$10	–	100			Provision of
								telecommunication
								services
Emcom International	Hong Kong	Limited liability company	HK$10	–	100			Investment holding
(China) Investment
Limited
Gi Space Limited	Hong Kong	Limited liability company	HK$1	–	100			Marketing and management
								of a shopping mall
Ty Space Limited	Hong Kong	Limited liability company	HK$1	–	100			Marketing and management
								of a shopping mall
Sparkle Success Investment	Hong Kong	Limited liability company	HK$1	–	100			Investment holding
Limited
Guangdong Photar Digital	The PRC	Wholly-foreign-owned	HK$60,000,000	–	100			Manufacture and sale of
Electronic Company		enterprise						electronic communication
Limited_(note 1)_								and consumer products
Skymax Investment	Hong Kong	Limited liability company	HK$100	–	100			Trading of servers
Development Limited
Smoothway Investment	Hong Kong	Limited liability company	HK$10	–		70		Investment holding and
Limited								trading of computer
								hardware
Sinoeye Limited	BVI	Limited liability company	US$1	–	100			Investment holding

103 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

	Place of		Issued and	Attributable	Attributable
	incorporation/		fully paid	equity interest held			Principal activities
Name of subsidiary	operation	Type of legal entity	share capital	by the Company
				Directly	Indirectly
				%		%
Emcom Management	The PRC	Limited liability company	US$307,800	–	100		Providing consultancy
Consultation (Shanghai)							services
Company Limited
E-Learning iTech Service	The PRC	Limited liability company	US$173,101	–		51	Providing consultancy
(Shanghai) Company							services
Limited
Smoothway Technology	The PRC	Limited liability company	HK$600,000	–		70	Provision of technical
(Shenzhen) Inc.							development on
							communication device

The Group acquired 100% equity interests of Gi Space Limited and Ty Space Limited from an independent third party at a consideration of HK$6,800,000 by way of issuing a promissory note which is obliged to settle the consideration on or before 31 May 2009 by the Group. The net assets of the subsidiaries acquired of are disclosed in note 37.

During the year ended 31 March 2009, the Group disposed one of the subsidiaries to a third party for a consideration of SGD1. The net assets of the subsidiary disposed of are disclosed in note 38.

During the year ended 31 March 2008, the Group disposed of four subsidiaries, which are inactive during the year 2008, to a third party for a consideration of approximately HK$232,000.

Note 1: These subsidiaries are not audited by Graham H.Y. Chan & Co.

22. INTERESTS IN A JOINTLY CONTROLLED ENTITY

Share of net assets Exchange difference Share of net assets Transfer to assets held for sale_(See note 10)_ Carrying amount	2009 HK$’000 – – – – –	2008 HK$’000 21,819 (493 ) 21,326 – 21,326

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Details of the group’s interest in the jointly controlled entity are as follows:

	Form of	Place of			Group’s	Held	Held
	business	establishment		Registered	effective	by the	by a
Name	structure	and operations		capital	interest	Company	subsidiary	Principal activities
					%	%	%
Photar Sagem	Corporate	The PRC	RMB100,000,000		20	–	20	Sales of fax machines
Electronics	(Joint
Co. Ltd	venture)

Summary financial information on jointly controlled entity – Group’s effective interest:

Non-current assets Current assets Current liabilities Net assets Income Expenses Loss for the year	2009 HK$’000 – – – – 23,907 (24,628 ) (721 )	2008 HK$’000 4,476 25,812 (8,469 )
		21,819

		48,473 (49,810 )
		(1,337)

The Group has lost the controlling power on the above jointly controlled entity, the management of the Group determined to write off the investment after sharing the loss of current year.

23. INTERESTS IN AN ASSOCIATE

Cost of investment in unlisted associate Share of post – acquisition results Amount due to an associate	2009 HK$’000 – (63 ) (63 )	2008 HK$’000 – –
		–

Amount due to an associate is unsecured, non-interest bearing and has no fixed terms of repayment.

The Group has incurred the legal obligation to make additional investment on the associate and the capital commitment was disclosed in the note 42 in the financial statement. As a result, the additional share of losses and the liability were recognized.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

As at 31 March 2009, the Group had interest in the following associate:

	Form of	Place of			Percentage of
Name of	business	incorporation/	Class of	Nominal value of	equity attributable
associate	structure	operations	shares held	issued capital	to the Group	Principal activities
Boss Education	Limited liability	Hong Kong	Ordinary	HK$1,000	49%	Not yet commenced business
Limited	company

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

Total assets Total liabilities Net liabilities Group’s share of net liabilities of the associate Revenue Loss for the period Group’s share of loss of associates for the year 24. INVENTORIES	2009 HK$’000 103 (230 ) (127 ) (63 ) – (128 ) (63 )	2008 HK$’000 – –
		–

		–

		–

		–

		–

Raw materials Work-in-Progress Finished goods	2009 HK$’000 129 323 14,598 15,050	2008 HK$’000 1,721 – 3,219
		4,940

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

25. TRADE RECEIVABLES

The aging of the Group’s trade receivables is analysed as follows:

Within 30 days 31 – 60 days 61 – 90 days Over 90 days	2009 HK$’000 702 81 42 4,570 5,395	2008 HK$’000 1,487 1,299 1,393 –
		4,179

For property management segment, no credit period was granted to the licensor and sub-licensees according to the Group’s policies. For trading and other segment, the credit terms granted by the Group to its customers normally ranged from COD (cash-on-delivery) to 120 days. The Group seeks to maintain strict control over its outstanding receivables. Overdue balances are reviewed regularly by senior management. All trade receivable are expected to be recovered within one year.

Impairment losses in respect of trade receivables are recorded using an allowance account unless the Group is satisfied that recovery of the amount is remote, in which case the impairment loss is written off against trade receivables directly.

As at 31 March 2009 and 31 March 2008, neither impairment loss nor allowance on bad debt had been made.

The aging analysis of trade receivables that are neither individually nor collectively considered to be impaired are as follows:

Neither past due nor impaired Past due but not impaired: Less than 1 month past due 1 to 3 months past due More than 3 months past due	The Group 2009 2008 HK$’000 HK$’000 671 – 31 1,487 4,489 2,692 204 – 5,395 4,179	The Group 2009 2008 HK$’000 HK$’000 671 – 31 1,487 4,489 2,692 204 – 5,395 4,179
		4,179

Receivables that were neither past due nor impaired relate to a wide range of customers for whom there was no recent history of default.

Receivables that were past due but not impaired relate to a number of independent customers that have a good track record with the Group. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. The Group does not hold any collateral over these balances.

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APPENDIX II

26. AMOUNT DUE FROM A JOINTLY CONTROLLED ENTITY

Photar Sagem Electronics Co. Ltd Less: Transfer to assets held for sales (See note 10)	The Group Year ended Maximum 31 March outstanding 2009 2008 2009 2008 HK$’000 HK$’000 HK$’000 HK$’000 31 30 31 30 (31 ) – – 30	The Group Year ended Maximum 31 March outstanding 2009 2008 2009 2008 HK$’000 HK$’000 HK$’000 HK$’000 31 30 31 30 (31 ) – – 30

The amount due from a jointly controlled entity is unsecured, non-interest bearing and has no fixed terms of repayment.

27. SECURITY DEPOSIT TO A RELATED COMPANY

Security deposit represents deposits pledged to Alliance Global Capital Finance Limited (“AGCF”), a company in which the director, Lam Kwok Ho has beneficial interest, in accordance with a loan agreement entered into with AGCF to secure financial facility line granted to the Group.

28. CASH AND CASH EQUIVALENTS/PLEDGED BANK DEPOSITS

Unpledged deposits with bank Cash at bank and in hand Bank and cash balances classified as held for sales_(See note 10)_ Cash and cash equivalents Pledged bank deposit	2009 HK$’000 – 15,324 79 15,403 150	2008 HK$’000 33,547 6,065 –
		39,612

		150

Cash at banks earns interest at floating rate based on daily bank deposit rates. The pledged bank deposits carry fixed deposit interest rates. The fair values of the Group’s bank balances and cash and pledged bank deposits at 31 March 2009 approximate their corresponding carrying amounts.

Pledged bank deposits of HK$150,000 (2008: HK$150,000) represents deposits pledged to a bank to secure short term banking facilities granted to the Group and is therefore classified as current assets. The amount of HK$50,000 of the pledged bank deposits have been released on 2 April 2009.

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29. TRADE PAYABLES

The following is an aged analysis of the Group’s trade payables at the balance sheet date:

Within 30 days 31-60 days 61-90 days Over 90 days Trade payables Trade payables associated with assets held for sale_(See note 10)_	The Group 2009 2008 HK$’000 HK$’000 2,680 954 – 8 60 308 7,544 3,046 10,284 4,316 2,740 4,316 7,544 – 10,284 4,316	The Group 2009 2008 HK$’000 HK$’000 2,680 954 – 8 60 308 7,544 3,046 10,284 4,316 2,740 4,316 7,544 – 10,284 4,316
		4,316

		4,316 –
		4,316

30. PROMISSORY NOTE

On 2 December 2008, the Group issued the Promissory Note in a principal amount of HK$6,800,000 for acquiring the entire issued share capital of Gi Space Limited and Ty Space Limited and is interest free.

Pursuant to the promissory notes, the note shall be repayable in one lump sum on 31 May 2009 (“maturity date”). The Group has the right to early redeem the promissory notes. The Company may at any time after three months from the date of issue of the promissory note to the date immediately before the maturity date of the promissory notes, redeem the promissory notes (in whole or in part) at the principal amount of the promissory notes to be redeemed. The Group called for early redemption of the principal amount of HK$5,900,000 during the year.

As security of the performance of the Group and its obligations under the promissory note, two share charges were duly executed by the Group to charge the entire issued share capital of Gi Space Limited and that of Ty Space Limited in favour of the payee.

31. AMOUNT DUE TO A RELATED COMPANY

Empire Communication Technology Pte Limited The amount due is unsecured, non-interest-bearing and has no fixed terms in full during the year.	The Group 2009 2008 HK$’000 HK$’000 – 1,509 of repayments. The amount was repaid

32. AMOUNT DUE TO MINORITY INTERESTS

The amount due is unsecured, non-interest-bearing and has no fixed terms of repayments.

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33. CONVERTIBLE NOTE

On 11 October 2007, the Company issued a new convertible note with face value of US$8,000,000 (or approximately HK$62,400,000) with a conversion price of HK$0.26 per conversion share. Assuming full conversion of the convertible note at the conversion price, the convertible note will be converted into 240,000,000 shares of the Company. The note holder or its nominee(s) will have the right to convert in whole or in part of the principal amount of the convertible note into shares of the Company on any business day prior to the maturity date of 10 October 2009. The interest of the convertible bond is 5% per annum, payable annually in arrears on dates falling at the first year and second year after the date of issue of the convertible note.

The fair value of the liability component was determined by an independent professional valuer, Asset Appraisal Limited on the date of issue.

The fair value of the liability component is the present value of the contractually determined stream of future cash flows discounted at the interest rate and providing substantially the same cash flows, on the same terms, but without the conversion option. The residual amount is assigned as the equity component and is included in shareholders’ equity.

During the year, the above convertible note was converted in whole the principal amount of the convertible note at the conversion price of HK$0.26 per conversion share and totally 240,000,000 shares were converted.

The movement of the liability component and equity component of the convertible note for the year is set out below:

As at 1 April 2007 Convertible note issued on 11 October 2007 Interest expenses charged As at 31 March 2008 and 1 April 2008 Interest expenses charged Conversion of entire convertible bonds into share As at 31 March 2009	Liability component HK$’000 – 50,246 1,475 51,721 77 (50,246 ) 1,552	Equity component HK$’000 – 12,154 – 12,154 – (12,154 ) –

The balance as at 31 March 2009 represents interest payable of the convertible note and has been included in Other payables and accruals in the consolidated and the Company balance sheet.

34. DEFERRED TAXATION

In accordance with the accounting policy set out in note 2(r), the Group has not recognised deferred tax assets in respect of cumulative tax losses of HK$38,972,000 (2008: HK$12,025,000) as it is not probable that future taxable profits against which the losses can be utilised will be available in the relevant tax jurisdiction and entity. The tax losses do not expire under current tax legislation.

As at 31 March 2009 and 2008, the Group has no material unprovided deferred tax.

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35. SHARE CAPITAL

Ordinary shares of HK$0.01 each Authorised: At the beginning and the end of the year Issued and fully paid: At the beginning of year Placing of new shares_(Note 1) Placing of new shares(Note 2) Conversion of convertible note(Note 3) Placing of new shares(Note 4)_ At the end of year	2009 Number of Nominal shares value ’000 HK$’000 10,000,000 100,000 2,478,980 24,790 – – – – 240,000 2,400 540,000 5,400 3,258,980 32,590	2009 Number of Nominal shares value ’000 HK$’000 10,000,000 100,000 2,478,980 24,790 – – – – 240,000 2,400 540,000 5,400 3,258,980 32,590	2008 Number of Nominal shares value ’000 HK$’000 10,000,000 100,000 637,432 6,374 1,800,000 18,000 41,548 416 – – – – 2,478,980 24,790	2008 Number of Nominal shares value ’000 HK$’000 10,000,000 100,000 637,432 6,374 1,800,000 18,000 41,548 416 – – – – 2,478,980 24,790

				6,374 18,000 416 – –
	3,258,980			24,790

Note 1: The Company issued 1,800,000,000 ordinary shares of HK$0.01 each on 31 July 2007.

Note 2: The Company issued 41,548,253 ordinary shares of HK$0.01 each on 29 February 2008.

Note 3: The Company issued 240,000,000 ordinary shares of HK$0.01 each as a result of the exercise of the conversion rights attached to the convertible note of entire principal amount of HK$62,400,000 at a conversion price of HK$0.26 each on 9 April 2008.
Note 4: The Company placed 540,000,000 ordinary shares of HK$0.01 each at a placing price of HK$0.02 per share on 7 January 2009 for the purpose of increase the working capital of the Company and also to finance its further funding requirements for acquisition of subsidiaries.

Capital management

Capital comprises of share capital and reserves stated on the consolidated balance sheet. The Group’s primary objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, by pricing products and services commensurately with the level of risk and by securing access to finance at a reasonable cost.

The Group actively regularly reviews and manages its capital structure to maintain a balance between the higher shareholder returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position, and makes adjustments to the capital structure in light of changes in economic conditions.

As in prior year and consistent with industry practice, the Group monitors its capital structure on the basis of a net debt to adjusted capital ratio. For this purpose the Group defines net debts as total debt (which includes interest-bearing loans and borrowings, trade and other payables and obligations under finance leases but excludes redeemable preference shares) plus unaccrued proposed dividends, less cash and cash equivalents. Adjusted capital comprises all components of equity and redeemable preference shares, other than amounts recognised in equity relating to cash flow hedges, less unaccrued proposed dividends.

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During the year ended 31 March 2009, the Group’s equity ratio has been increased due to the significant loss incurred in the Group business which is initially launched during the year.

The net debt-to-equity ratio at 31 March 2009 and 2008 was as follows:

Note Current liabilities: Trade payables 29 Other payables and accruals Promissory note 30 Amount due to an associate 23 Amount due to minority interests 32 Amount due to a related company 31 Amount due to subsidiaries 21 Tax payables Liabilities associated with assets classified as held for sale 10 Non-current liabilities: Convertible notes 33 Total debt Less: Cash and cash equivalents 28 Pledged bank deposits 28 Net debt Total equity Net debt-to-equity ratio	The Group 2009 2008 HK$’000 HK$’000 2,740 4,316 20,899 6,480 900 – 63 – 966 – – 1,509 – – 313 – 19,185 – 45,066 12,305 – 51,721 45,066 64,026 (15,403 ) (39,612 ) (150 ) (150 ) 29,513 24,264 3,277 37,624 901% 64%	The Group 2009 2008 HK$’000 HK$’000 2,740 4,316 20,899 6,480 900 – 63 – 966 – – 1,509 – – 313 – 19,185 – 45,066 12,305 – 51,721 45,066 64,026 (15,403 ) (39,612 ) (150 ) (150 ) 29,513 24,264 3,277 37,624 901% 64%	The Company 2009 2008 HK$’000 HK$’000 – – 3,944 662 – – – – – – – – 820 20 – – – – 4,764 682 – 51,721 4,764 52,403 – – – – 4,764 52,403 23,395 56,734 20% 92%	The Company 2009 2008 HK$’000 HK$’000 – – 3,944 662 – – – – – – – – 820 20 – – – – 4,764 682 – 51,721 4,764 52,403 – – – – 4,764 52,403 23,395 56,734 20% 92%
	45,066			682
	–			51,721
	45,066 (15,403 ) (150 )			52,403 – –
	29,513			52,403

	3,277			56,734

	901%			92%

Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirement.

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36. RESERVES

a) The Group

At 1 April 2007 Issue of new shares of HK$0.01 each completed on 31 July 2007 Issue of new shares of HK$0.01 each completed on 29 February 2008 Issue of convertible note on 11 October 2007 Equity-settled share option arrangement Exchange difference arising from translation of financial statements Loss for the year At 31 March 2008 At 1 April 2008 Conversion of convertible note into shares Issue of new shares of HK$0.01 each completed on 7 January 2009 Issuing expenses Transfer of cancelled/ lapsed share option to retained earning Equity-settled share option arrangement Exchange difference arising from translation of financial statements Transfer to profit or loss on disposal of foreign operations Loss for the year At 31 March 2009	Share Contributed premium surplus HK$’000 HK$’000 50,295 3,930 12,600 – 4,961 – – – – – – – – – 67,856 3,930 67,856 3,930 60,000 – 5,400 – (359 ) – – – – – – – – – – – 132,897 3,930	Equity component of convertible note HK$’000 – – – 12,154 – – – 12,154 12,154 (12,154 ) – – – – – – – –	Share option reserve HK$’000 – – – – 355 – – 355 355 – – – (355 ) 2,644 – – – 2,644	Exchange reserve HK$’000 2,373 – – – – 3,841 – 6,214 6,214 – – – – – (2,455 ) (45 ) – 3,714	Accumu- lated losses HK$’000 (50,487 ) – – – – – (27,067 ) (77,554 ) (77,554 ) – – – 355 – – – (95,531 ) (172,730 )	Total HK$’000 6,111 12,600 4,961 12,154 355 3,841 (27,067 ) 12,955 12,955 47,846 5,400 (359 ) – 2,644 (2,455 ) (45 ) (95,531 ) (29,545 )

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b) The Company

At 1 April 2007 Issue of new shares of HK$0.01 each completed on 31 July 2007 Issue of new shares of HK$0.01 each completed on 29 February 2008 Issue of convertible note on 11 October 2007 Equity-settled share option arrangement Loss for the year At 31 March 2008 At 1 April 2008 Conversion of convertible note into shares Issue of new shares of HK$0.01 each completed on 7 January 2009 Issuing expenses Transfer of cancelled/ lapsed share option to retained earning Equity-settled share option arrangement Loss for the year At 31 March 2009	Share premium HK$’000 50,295 12,600 4,961 – – – 67,856 67,856 60,000 5,400 (359 ) – – – 132,897	Contributed surplus HK$’000 1,988 – – – – – 1,988 1,988 – – – – – – 1,988	Equity component of convertible note HK$’000 – – – 12,154 – – 12,154 12,154 (12,154 ) – – – – – –	Share option Accumulated reserve losses HK$’000 HK$’000 – (38,948 ) – – – – – – 355 – – (11,461 ) 355 (50,409 ) 355 (50,409 ) – – – – – – (355 ) 355 2,644 – – (96,670 ) 2,644 (146,724 )	Total HK$’000 13,335 12,600 4,961 12,154 355 (11,461 ) 31,944 31,944 47,846 5,400 (359 ) – 2,644 (96,670 ) (9,195 )

At 31 March 2009, the Company had no reserve available for distribution to shareholders (2008: the aggregate amount of reserves available for distribution to equity holders of the Company was approximately HK$19,435,000)

The share premium is arising from the issue of shares of the Company.

The contributed surplus represents the difference between the combined net assets of the subsidiaries acquired by the Company and the nominal value of the shares of the Company at the time of the Group reorganisation.

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37. ACQUISITION OF SUBSIDIARIES

On 19 December 2008, the Group acquired the entire issued share capital of Gi Space Limited and Ty Space Limited for considerations of HK$5,000,000 and HK$1,800,000 respectively. The amount of goodwill arising as a result of the acquisition was approximately HK$6,459,000 in aggregate.

The net assets acquired in the transaction and the goodwill arising are as follows:

Net assets acquired: Bank balances and cash Trade receivables Other receivables, deposits and prepayment Amounts due from parent company before acquisition Trade payables Other payables and accruals Goodwill Total consideration satisfied by: Fair value of promissory note Net cash inflow arising on acquisition: Cash consideration paid Bank balances and cash acquired	Gi Space Limited Acquiree’s carrying amount and fair value HK$’000 3,548 685 70 115 (2,683 ) (1,443 ) 292	Ty Space Limited Acquiree’s carrying amount and fair value HK$’000 199 174 – 36 – (360 ) 49	Total fair value HK$’000 3,747 859 70 151 (2,683 ) (1,803 )
			341

			6,459
			6,800

			6,800

			– 3,747
			3,747

The net assets of acquirees are carried at amounts not materially different from their fair values as at acquisition date. The promissory note is carried at amounts not materially different from its fair values when issued at the acquisition date due to the short maturity of the promissory note.

The goodwill arising on the acquisition is attributable to the anticipated profitability of the new business and the anticipated future operating synergies form the combination.

Gi Space Limited and Ty Space Limited contributed HK$1,030,000 and HK$442,000 to the Group’s loss for the period between the date of acquisition and the balance sheet date respectively.

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If the acquisition had been completed on 1 April 2008, total group revenue for the year would have been HK$215,496,000, and loss for the year would have been HK$95,582,000. The proforma information is for illustrative purposes only and is not necessarily an indication of revenue and results of the Group that actually would have been achieved had the acquisition been completed on 1 April 2008, nor is it intended to be a projection of future results.

38. DISPOSAL OF SUBSIDIARIES

As referred to in note 9, on 10 November 2008, the Group disposed of one subsidiary, EmCall Singapore Pte Limited. The net assets of the EmCall Singapore Pte Limited at the date of disposal were as follows:

Net assets disposed of: Property, plant and equipment Inventories Trade receivables Other receivables, deposits and prepayments Bank and cash balances Other payables and accruals Release of exchange reserve Loss on disposal Total consideration Net cash outflow arising on disposal: Cash consideration Bank balances and cash disposed of	2009 HK$’000 222 303 75 23 41 (39 ) 625 (45 ) 580 – – (41 ) (41 )

The subsidiary disposed of during the year did not have any significant impact on the Group’s cash-flow.

39. SHARE OPTION SCHEME

The Company’s share option scheme was adopted pursuant to written resolutions passed on 19 October 2002 (the “Scheme”) for the primary purpose of providing incentives to directors, eligible employees and participants who have contributed to the Group, and will expire in 12 November 2012. Under the Scheme, the board of directors of the Company may grant options to full-time or part-time employees including directors (executive and non-executive) and any advisor, consultant, supplier, distributor, contractor, agent, business partner, promoter, service provider or customer of the Company or any of its subsidiaries, to subscribe for share in the Company.

Subject to the condition that the total number of shares which may be issued upon the exercise of all outstanding options granted and yet to be exercised under the Scheme and any other schemes of the Company must not exceed 30% of the shares of the Company in issue from time to time, the total number of shares in respect of which options may be granted under the Scheme when aggregated with any shares subject to any other schemes is not permitted to exceed 10% of the shares of the Company immediately upon the listing of the shares on the Stock Exchange (“Scheme Mandate Limit”), without prior approval from the Company’s shareholders. Options lapsed in accordance with the terms of the

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share option scheme will not be counted for the purpose of calculating the Scheme Mandate Limit. The number of shares in respect of which options may be granted to any individual in aggregate within any 12-month period is not permitted to exceed 1% of the shares of the Company in issue, without prior approval from the Company’s shareholders. Options granted to substantial shareholders or independent non-executive directors or any of his, her or its associates in the 12month period up to and including the date of offer of the option exceeding the higher of 0.1% of the Company’s shares in issue and with a value in excess of HK$5 million must be approved by the Company’s shareholders.

Options granted must be taken up within 21 days of the date of grant, upon payment of HK$1 per option. Options may be exercised at any time from the date of acceptance of the share option to such date as determined by the board of directors of the Company and will not be less than the highest of the closing price of the Company’s shares on the date of grant, the average closing prices of the shares for the five business days immediately preceding the date of grant and the nominal value of the Company’s shares.

The following share options were outstanding under the Scheme during the year:

Share Date of Category option type grant (note 1) Directors 2008A 3/10/2007 2009A 30/12/2008 Employees 2008A 3/10/2007 2009A 30/12/2008 Advisors 2008A 3/10/2007 2009A 30/12/2008 2009B 24/2/2009	Balance at 1 April 2008 ’000 600 – 2,264 – 9,296 – – 12,160	Number of shares issuable under options held Granted Exercised Lapsed Cancelled during during during during the year the year the year the year ’000 ’000 ’000 ’000 – – – (600 ) 13,500 – – – – – (1,904 ) (360 ) 640 – – – – – (8,608 ) (688 ) 171,000 – – – 49,000 – – – 234,140 – (10,512 ) (1,648 )	Balance at Exer- 31 March cisable Exercise 2009 price period ’000 HK$ – 0.312 3/10/2008 – 3/10/2012 13,500 0.027 30/12/2008 – 29/12/2011 – 0.312 3/10/2008 – 3/10/2012 640 0.027 30/12/2008 – 29/12/2011 – 0.312 3/10/2008 – 3/10/2012 171,000 0.027 30/12/2008 – 29/12/2011 49,000 0.036 24/2/2009 – 23/2/2012 234,140

Note 1 : For 2008A, the options are exercisable during the 4-year period from the first anniversary of the offer date to the expiry of the fifth anniversary of the offer date (i.e., from 3 October 2008 to 3 October 2012) in the following manner:

(1) 20% of the respective option shares will be exercisable by the related grantee after the first anniversary of the offer date; and
(2) The remaining 80% of the respective option shares will be exercisable by the related grantee after the third anniversary of the offer date.
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For 2009A, the options are exercisable in part or in full during the 3-year period from the offer date to the expiry of the third anniversary of the offer date (i.e., from 30 December 2008 to 29 December 2011).

For 2009B, the options are exercisable in part or in full during the 3-year period from the offer date to the expiry of the third anniversary of the offer date (i.e., from 24 February 2009 to 23 February 2012).

The fair value of the share options granted for 2009A and 2009B during the year ended 31 March 2009 was approximately to HK$1,977,000 and HK$667,000 respectively and the Company recognised total expenses of approximately HK$2,644,000 for the year (2008: HK$355,000).

The fair value of equity-settled share options granted during the year was estimated as at the date of grant using a Black-Scholes Option Pricing Model (2008: binomial model), taking into the account the terms and conditions upon which the options were granted. The following table lists the inputs to the model used:

		Share option type
	2008A	2009A	2009B
Option pricing model	Binomial	Black-Scholes	Black-Scholes
Grant date share price	HK$0.27	HK$0.027	HK$0.036
Exercise price	HK$0.312	HK$0.027	HK$0.036
Volatility	85.57%	84.3%	80.24%
Risk-free interest rate	4.079%	0.379%	0.447%
Life of options	5 years	3 years	3 years
Expected dividend yield	0%	0%	0%

Expected volatility was determined by using the historical weekly volatility of the Company’s share price over the previous 78 weeks (2008: over the previous 104 weeks).

At the date of approval of these financial statements, the Company had 234,140,000 share options outstanding under the Scheme, which represented approximately 7.2% of the Company’s shares in issue as at that date.

40. RESTATEMENT OF PRIOR PERIODS AND OPENING BALANCES

The financial statements for the year ended 31 March 2009 include a restatement of the 2008 financial statements to correct certain errors noted by the Group. The effects of the restatement on the 2008 financial statements are summarized below:

Effect on the consolidated balance sheets at 31 March 2008

Current assets Other receivables, deposits and prepayments Current liabilities Other payables and accruals	2008 HK$’000 (as previously reported) 29,732 21,198	Reclassification HK$’000 (note 1) (14,718 ) (14,718 )	2008 HK$’000 (as restated) 15,014

			6,480

There is no effect on the consolidated income statement for the year ended 31 March 2008 and other accounts of the consolidated balance sheet.

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Note 1: Guangdong Photar High Technology Co Ltd. (“GPHT”) is a company wholly owned by Mr. Chan Jijin (“Mr. Chan”), the former director and chairman of the Company. During the year ended 31 March 2008, the total receivables from GPHT amounted HK$21,328,000 classified in Other receivables that included a renovation fee amounted HK$14,718,000 paid on behalf of GPHT by the Company at the same time, while the Company also maintain an Other payable with the same amount HK$14,718,000 due to Mr. Chan. The board considered that the amount of HK$14,718,000 should have been offset in the Other payable and Other receivable. Accordingly, a prior period adjustment was made in the 2008 financial statements to reflect the reclassification.

41. OPERATING LEASE COMMITMENTS

The Group as lessee

At the balance sheet date, the Group had commitments for future minimum lease payments under noncancellable operating leases which fall due as follows:

Within one year In the second to fifth year, inclusive	2009 Properties Others HK$’000 HK$’000 1,708 – 703 – 2,411 –	2008 Properties Others HK$’000 HK$’000 2,896 195 2,149 585 5,045 780	2008 Properties Others HK$’000 HK$’000 2,896 195 2,149 585 5,045 780
	2,411		780

Other than as disclosed above, the Group and the Company had no material lease commitments outstanding at the balance sheet date.

42. CAPITAL COMMITMENTS

The Group

Contracted but not provided for – Property, plant and equipment – Additional capital injection in an associate, Boss Education Limited – Additional capital injection in a subsidiary, E-Learning i Tech Service (Shanghai) Company Limited Emcom Management Consultation (Shanghai) Company Limited	2009 HK$’000 – 2,550 1,206 1,499 5,255	2008 HK$’000 286 – – –
		286

Other than as disclosed above, the Group and the Company had no material capital commitments outstanding at the balance sheet date.

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43. CONTINGENT LIABILITIES

On 16 July 2008, the Company received a claim from Mr. Lee and Kwok Ning Lobo and Ms. Lin Wai Yan (collectively the “Vendors”) for approximately HK$180,000,000 alleging the breach of the conditional sales and purchase agreement and the supplemental agreement regarding the acquisition of a group of financial service companies. The legal action is still in progress.

Following the legal opinion received on 3 June 2009 from the legal advisor of the Company, the Company has a good arguable defence in the case. The Board is of the opinion that it is only a present obligation that may, but probably will not, require an outflow of resources. Accordingly, no provision is made in the consolidated financial statements.

44. RELATED PARTY TRANSACTIONS

In addition to the security deposit to a related company as disclosed in note 27 and transactions and balances disclosed elsewhere in these financial statements, the Group entered into the following material related party and connected transactions.

(a) During the year, the Group entered into the following material related party and connected transactions.

	2009	2008
	HK$’000	HK$’000
Rental expenses paid to Guangdong Photar
High Technology Co., Ltd.
(“Photar High Tech”)(Note)	–	255

Note: There is a common shareholder in the Company and Photar High Tech.

(b) Key management personnel remuneration

Remuneration for key management personnel, including amounts paid to the Company’s directors as disclosed in note 12 is as follows:

Salaries, allowances and other benefits Share-based payment	2009 HK$’000 1,596 145 1,741	2008 HK$’000 722 18
		740

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45. SUBSEQUENT EVENTS

A very substantial acquisition in relation to acquisition of interests in Harvest Yield Investments Limited (the “Acquisition”)

On 27 May 2009, the Company entered into an agreement with Beglobal Investments Ltd and Ryoden Property Development Company Ltd (the “Vendors”) whereby the Company has conditionally agreed, among other things, to acquire from the Vendors the entire issued share capital of Harvest Yield Investments Ltd and the sales debts, being such amounts equal to the entirety of face value of the loans outstanding as at Completion made by the Vendors to Harvest Yield Investments Ltd, at a consideration of HK$153 million.

The consideration for the Acquisition is to be satisfied at Completion as to HK$75 million in the form of consideration shares with the issue price of HK$0.05 per share and as to HK$78 million by issue of convertible bonds.

Harvest Yield Investments Ltd is the sole beneficial owner of the entire issued share capital of Hong Kong Subsidiary who is the owner of the shopping mall located in Tsimshatsui which is currently managed by Gi Space Ltd, a wholly owned subsidiary of the Company.

The Board considers that it is in the benefits of the Company to seek for suitable investment opportunities and broaden its source of income. The Board believes that the rental income from the shopping mall will generate stable income for the Group and will also broaden its source of income. In addition, the shopping mall represents an excellent investment opportunity as the Company can benefit from the gain in value of the shopping mall as the Hong Kong property market grows.

As more particularly described in the Company’s announcement dated 4 June 2009.

46. COMPARATIVE FIGURES

Certain comparative figures have been reclassified to conform with the current year’s presentation.

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3. INDEBTEDNESS

Indebtedness

At the close of business on 31 May 2009, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Enlarged Group had total outstanding borrowings of approximately HK$257.6 million, comprising secured bank loans of approximately HK$147 million, loan from shareholders of Target Group of approximately HK$109.7 million and promissory note payables of approximately HK$0.9 million.

The banking facilities of the Enlarged Group are secured by the Group’s pledged bank deposits of HK$100,000, leasehold land and buildings located in Hong Kong with an aggregate net book value of approximately HK$300 million as of 31 May 2009; guarantees executed by the Second Vendor and a related person of the First Vendor on a 50/50 basis. In addition, as security of the performance of the Enlarged Group and its obligation under the promissory note, two share charges were duly executed by the Enlarged Group to charge the entire issued share capital of two of the subsidiaries of the Group in favour of the payee.

Foreign currency amounts have been translated into Hong Kong dollars at the rates of exchange prevailing at the close of business on the latest practicable date for the purpose of indebtedness statement.

Save as disclosed above or as otherwise mentioned herein and apart from intra-group liabilities and normal trade payables arising in the ordinary course of business, as at the close of business on 31 May 2009, the Enlarged Group did not have any outstanding debt securities, bank loans and overdrafts or other similar indebtedness, liabilities under acceptances (other than normal trade bills) or acceptance credit, hire purchase or finance lease commitments, mortgages, charges, guarantees or other material contingent liabilities.

4. WORKING CAPITAL

The Directors, after due and careful consideration, are of the opinion that, taking into consideration the financial resources available to the Enlarged Group including the internally generated funds, the present bank and other facilities, the Enlarged Group will have sufficient working capital for at least twelve months from the date of this circular.

5. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, save as previous disclosed, the Directors confirm that there are no material adverse change in the financial or trading position of the Group as at 31 March 2009, the date to which the latest published audited financial statements of the Group were made up.

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6. MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS OF THE GROUP

Comparison of the year ended 31 March 2007 to the year ended 31 March 2006

In 2007, the Group recorded a decrease in turnover of approximately 1.68% to HK$63,072,000 because of the development stage of new AV products.

The Group recorded an increase in net loss of approximately 126.29% to HK$28,510,000, mainly due to bad debt written off for the impairment of trade receivables and increase in administrative expenses for paying the non-recurrent cost incurred in creating additional distribution and selling points throughout the Mainland China in order to strengthen and expand the existing distribution and selling network of the Group.

The following is the management discussion and analysis of the Company for the year ended 31 March 2007 as extracted from its annual report.

Financial Review Results

For year under review, the Group recorded a total turnover of approximately HK$63,072,000 (2006: HK$64,147,000). Loss attributable for the year to equity holders was approximately HK$28,510,000 (2006: loss HK$12,599,000).

Liquidity, Financial Resources and Capital Structure

As at 31 March 2007, the Group had total assets of approximately HK$83,871,000 (31 March 2006: HK$56,564,000), including cash and cash equivalents of approximately HK$8,624,000 (31 March 2006: HK$3,346,000). There was no pledged bank deposit as at 31 March 2007 (31 March 2006: Nil).

The Group generally financed its operations and investing activities mainly with its internally generated cash flows and net proceeds from placements of convertible note in June 2006 and borrowing from a shareholder. As at 31 March 2007, there was no bank overdraft (31 March 2006: Nil) and there was no charge on the Group’s assets (31 March 2006: Nil).

As at 31 March 2007, the debt ratio (defined as the ratio between total liabilities over total assets) was 0.85 approximately (31 March 2006: approximately 0.66).

The shares of the Company were listed on GEM on 12 November 2002. During the year under review, the Company had issued 49,976,000 shares in the placement of shares completed on 16 May 2006. As such, the number of issued and fully-paid of the Company increased to 637,432,000 ordinary shares as at 31 March 2007.

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Employees

As at 31 March 2007, the Group had 212 (31 March 2006: 61) staff including directors based in the PRC and Hong Kong. Total staff costs including directors remuneration were approximately HK$3,366,000 in the year under review (31 March 2006: HK$1,483,000).

Remuneration is determined with reference to market terms and the performance, qualification and experience of individual employee. Year-ended bonus based on individual performance will be paid to employees as recognition of and reward for their contributions. Other benefits include contribution to statutory mandatory provident fund scheme to its employees. To date, no share options have been granted to employees.

Segment Information

Sales of the Group comprise mainly sales of five major product lines of the Group, which are namely, Fax Machines, DVD players, Digital Video Broadcast, Digital Photo Frame and Home Theatre System. Business of Fax Machines is operated by Photar Sagem. During the year under review, sales of Fax Machines, DVD players, Digital Video Broadcast, Digital Photo Frame, Home Theatre System and cell phone represent approximately 0.1%, 67.9%, 4%, 4%, 4% and 20% respectively of the Group’s turnover (31 March 2006: Fax Machines: 78%, IC Recorders: 1%, MP3 players: 3%, DVD players: 16% and other IC components: 2%).

During the year ended under review, 29% of the Group’s products were sold to the PRC market and 71% of the Group’s products were sold to the overseas market. During the corresponding period in previous year, all of the Group’s products were only sold to the PRC market.

Exchange Ratio

The Group’s transactions during the year ended 31 March 2007 were mainly denominated in Renminbi, Hong Kong Dollars and United States Dollars. The Renminbi income received from sales in the PRC was fully applied to working capital need of the Group in the PRC.

Significant Investments

During the year ended 31 March 2007, other than setting up 2,800 points-of-sales, there was no other significant investment made by the Group. For the year ended 31 March 2006, other than investing in a jointly controlled entity, there was no other significant investment made by the Group.

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Contingent Liabilities

As at 31 March 2007, the Group had no contingent liabilities (31 March 2006: Nil).

Capital Commitments

i) During the year, the group entered into agreements with a supplier, whereby the group agreed to purchase a certain amount of cell phones from the supplier. Commitment payable amounted to approximately HK$14,089,000 as at 31 March 2007 (2006: HK$Nil).
ii) On 17 March 2007, the group entered into an agreement with a third party to purchase the machinery. Commitment payable amounted to approximately HK$212,000 as at 31 March 2007 (2006: Nil).
iii) As at 31 March 2007, the group has capital commitment of HK$505,860 (equivalent to RMB500,000) for the remaining balance of investment cost in a jointly controlled entity.

Operating Lease Commitments

As at 31 March 2007, the commitments under a non-cancellable 2-year operating lease in respect of premises are HK$1,668,000 (31 March 2006: HK$2,026,000) and detailed below:

Not later than one year Later than one year and not later than five years Total operating lease commitments	31 March 2007 (Audited) *HK$’000* 1,063 605 1,668	31 March 2006 (Audited) *HK$’000* 1,033 993
		2,026

Comparison of the year ended 31 March 2008 to the year ended 31 March 2007

In 2008, the Group recorded an increase in turnover of approximately 56.61% to HK$98,779,000 because the Group successfully expanded the business into mobile phones.

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APPENDIX II

As such, the Group recorded a decrease in net loss of approximately 5.06% to HK$27,067,000.

The following is the management discussion and analysis of the results of the Group for the year ended 31 March 2008 as extracted from its annual report

On behalf of the Board of Directors (the “Board”), I hereby present the annual report of Emcom International Limited (the “Company”) and its subsidiaries (collectively, the “Group”) for the year ended 31 March 2008 to our shareholders.

General

The Group is principally engaged in, among other things, the manufacturing and selling of electronics consumer products including electronic telecommunication, office automation and network products and the provision of telecommunication services. One of the objectives of the Group is to become a leading and major developer, producer and distributor world-wide by development, production and distribution of all kinds of high quality electronic telecommunication, office automation and network products adapted to the needs of the market. On the other hand, the telecommunication business run under the brand name of EmCall spearheads the marketing of telecommunication services to various market segments covering South East Asia, Taiwan and Hong Kong.

Financial review

During the year under review, the Group recorded a total turnover of approximately HK$98,779,000 (2007: HK$63,072,000). Loss attributable to shareholders for the year was approximately HK$27,067,000 (2007: HK$28,510,000).

Liquidity and financial resources

As at 31 March 2008, the Group had total assets of approximately HK$116,368,000 (31 March 2007: HK$83,871,000), including cash and cash equivalents of approximately HK$39,612,000 (31 March 2007: HK$8,624,000). There was pledged bank deposit of HK$150,000 as at 31 March 2008 (31 March 2007: Nil).

The Group financed its operations and investing activities mainly with its internally generated cash flows, net proceeds in the amount of HK$30,600,000 from placement of 1,800,000,000 new shares at issue price of HK$0.017 per share in July 2007 and net proceeds from issue of convertible note in the principal amount of US$8,000,000 in October 2007. As at 31 March 2007, there were secured bank loans of approximately HK$25,293,000 (31 March 2008: Nil). As at 31 March 2008, a bank deposit amounted to HK$150,000 was pledged to bank for securing bank facility (31 March 2007: Nil).

As at 31 March 2008, the debt ratio (defined as the ratio between total liabilities over total assets) was approximately 0.68 (31 March 2007: approximately 0.85).

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APPENDIX II

Capital structure

The shares of the Company were listed on GEM on 12 November 2002. During the year under review, the Company issued 1,800,000,000 shares to Emcom Limited pursuant to the placement completed on 31 July 2007 and further issued 41,548,253 shares to Mr. Zhang Jian Hua pursuant to the share transaction more particularly described in the Company’s announcement dated 6 February 2008. As such, the number of issued and fully paid shares of the Company increased to 2,478,980,253 as at 31 March 2008.

Employees

As at 31 March 2008, the Group had 32 (31 March 2007: 212) staff including directors based in the PRC and Hong Kong. Total staff costs including directors’ remuneration were approximately HK$7,035,000 during the year under review (31 March 2007: HK$3,366,000).

Remuneration is determined with reference to market terms and the performance, qualification and experience of individual employee. Year end bonus based on individual performance will be paid to employees as recognition of and reward for their contributions. Other benefits include contributions to statutory mandatory provident fund scheme to its employees. To date, total 12,160,000 share options have been granted to certain directors and employees.

Segment information

During the year under review, the Group is organized mainly into the following business segments – telecommunication services (“Telecommunication”), mobile phones (“Mobile Phones”) product segment and digital versatile disc players (“DVD players”) product segment. During the corresponding last year, the Group was also engaged in home theatre systems (“Home Theatre Systems”), digital photo frame (“Digital Photo Frame”) and digital video broadcast (“Digital Video Broadcast”) product segments.

During the year under review, Telecommunication, sales of Mobile Phones, DVD players and others represented 7%, 76%, 16% and 1% of the Group’s turnover (31 March 2007: Telecommunication Nil, Mobile Phones 20%, DVD players 68%, Home Theatre Systems 4%, Digital Photo Frame 4%, Digital Video Broadcast 4% and others 0%).

During the year under review, 93% (2007: 29%) of the Group’s products were sold to the P.R.C. market and 7% (2007: 71%) of the Group’s products were sold to the overseas markets.

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APPENDIX II

Exchange ratios

The Group’s transactions during the year ended 31 March 2008 were mainly denominated in Renminbi, HK Dollars, US Dollars and Singapore Dollars. The Renminbi income received from sales in the P.R.C. was fully applied to working capital need of the Group in the P.R.C.

Significant investments

In September 2007, the Company entered into an agreement to form a joint venture with Color City Enterprises Co., Ltd. to develop, market and deploy and deliver the T2Free platform and its related services. In February 2008, the Company entered into an agreement with Shanghai Jian Hua Satellite Communications Limited to form another joint venture to conduct distant education and training business. The details of the joint ventures are more particularly described in the section headed “Operation review” below. Save as the above, the Group did not make any significant investments during the year.

Contingent liabilities

As at 31 March 2008, the Group had no significant contingent liabilities (31 March 2007: Nil).

Capital commitments

As at 31 March 2008, the Group had capital commitments of approximately HK$286,000 (31 March 2007: approximately HK$14,807,000).

Operating lease commitments

As at 31 March 2008, the commitments under noncancellable operating lease are represented as follows:

Not later than one year Later than one year but not later than five years Total operating lease commitments	31 March 2008 Properties Others (Audited) (Audited) *HK$’000* *HK$’000* 2,896 195 2,149 585 5,045 780	31 March 2008 Properties Others (Audited) (Audited) *HK$’000* *HK$’000* 2,896 195 2,149 585 5,045 780	31 March 2007 Properties Others (Audited) (Audited) *HK$’000* *HK$’000* 1,063 – 605 – 1,668 –	31 March 2007 Properties Others (Audited) (Audited) *HK$’000* *HK$’000* 1,063 – 605 – 1,668 –
	5,045	780		–

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APPENDIX II

Operation review

During the year ended 31 March 2008, the Group successfully expanded the business into mobile phones whereas its revenue substantially exceeded that from other product segments. Nonetheless, due to the fierce competition in the market, the new product segment had not yet yielded satisfactory results to the Group.

On 30 September 2007, the Company entered into a joint venture agreement with Color City Enterprises Co., Ltd., an independent third party (the “JV Partner”). Pursuant to the joint venture agreement, the joint venture company shall be incorporated in Hong Kong to develop, market and deploy and deliver the T2Free platform and its related services. The joint venture company will be owned as to 70% by the Company and 30% by the JV Partner upon formation. The Company shall contribute up to the sum of US$1,000,000 (equivalent to approximately HK$7,800,000) (including the registered capital contributed by both parties of HK$100,000) in the form of loan financing for the working capital of the joint venture. As at the date of this report, the joint venture company has been incorporated and revenue has started coming into the Group.

During the year under review, the Company set up two wholly-owned subsidiaries, EmCall Pte Limited and EmCall Singapore Pte Limited (collectively the “EmCall Group”) to spearhead the marketing of telecommunication services to various market segments covering South East Asia, Taiwan and Hong Kong. EmCall Group will utilize the T2Free Platform (as mentioned above the paragraph), as well as its own and co-developed platforms to deliver the products and services to the markets. The focus of EmCall Group is to provide a combination of VoIP (Voice over Internet Protocol), fixed-line and mobile communication solutions to our customers at a reasonable price. EmCall Group has already generated positive results to the Company.

On 2 October 2007, following the approval obtained in the extraordinary general meeting, the Company’s name was changed to “Emcom International Limited” to reflect the change in controlling shareholders of the Company. The Company shall utilise the expertise and networks of the new controlling shareholders to expand into the telecommunication related businesses.

On 11 October 2007, the Company and Sunshine Empire Pte Limited (the “Subscriber”) entered into a subscription agreement whereby the Subscriber agreed to subscribe for convertible note in the principal amount of US$8,000,000 (or approximately HK$62,400,000). The net proceeds from the issue of the convertible note will be used as investment and general working capital. The subscription has been completed on 31 October 2007. On 8 April 2008 the Company received a notice from the Subscriber whereas the Subscriber will transfer in whole the principal amount of the convertible note to Sunshine Empire Limited, who nominated Beauvoir Holdings Limited (“Beauvoir”) to hold the convertible note. Subsequently on 9 April 2008, the Company received a conversion notice from Beauvoir that it will convert in whole the principal amount of the convertible note at the conversion price of HK$0.26 per share. The conversion has been completed on 10 April 2008. The Directors of the Company believe that the conversion of the convertible note provides an opportunity for the Company to enlarge its capital base.

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On 4 February 2008, the Company and Shanghai Jian Hua Satellite Communications Limited (“Jian Hua”) entered into an agreement pursuant to which Jian Hua agreed to cooperate with the Company to establish a joint venture to conduct, among other things, distant education and training business. In consideration of this, the Company shall pay to Jian Hua as to RMB3,000,000 (approximately HK$3,225,806) in cash and RMB5,000,000 (approximately HK$5,376,344) by allotment and issuance of new shares. Details of the transaction are contained in the Company’s announcement dated 6 February 2008.

Outlook

As regard the manufacturing business, the Group had strived over the past two years through strategic expansion of product portfolio and distribution networks. Different product types had been launched including mobile phones, DVD players, facsimile machines, digital photo frame, home theatre systems and digital video broadcast etc. Nonetheless, competition within the industry remains extremely keen. Coupled with the surge in labour related cost and appreciation of RMB recently, the future development of this sector does not look promising. As a result, the Group decided to gradually scale down the operations and withhold further investments in this segment until a robust solution comes across in future.

The voice business being carried out under the brand name of EmCall experienced a good start. Backed up by good quality of traffic and strong technical support, the Group expects to expand its market presence even more rapidly to clinch the vast amount of opportunities.

Comparison of the year ended 31 March 2009 to the year ended 31 March 2008

In 2009, the Group recorded a total turnover of approximately HK$214,935,000, representing increase of approximately 117% as compared with HK$98,779,000 for 2008.

As reported in the previous financial statements and the financial results, competition encountered by the business segments including Telecommunication, DVD Players and Mobile Phones were extremely keen, coupled with the surge in labour related cost and appreciation of Renminbi. Therefore, the Group decided to organize those business segments as discontinuing operations and to reallocate and consolidate scarce financial resources and management time to other business segments or opportunities.

In this regard, the loss attributable to shareholders in 2009 was approximately HK$95,531,000 compared with a loss of HK$27,067,000 for 2008, representing an increase of approximately 252.94%.

The following is the management discussion and analysis of the results of the Group for the year ended 31 March 2009 as extracted from its annual report.

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General

During the Year, the Group is principally organized into the business segments of continuing operations including sales and trading of telecommunication and electronic equipment, commodities, and computer hardware and relevant peripherals (“Trading”), and provision of property management services (“Property Management”); and the business segments of discontinuing operations comprising telecommunication services (“Telecommunication”), digital versatile disc players (“DVD Players”), and mobile phones (“Mobile Phones”).

Financial Review

During the Year, the Group recorded a total turnover of approximately HK$214,935,000, representing increase of approximately 117% as compared with HK$98,779,000 for 2008.

Loss attributable to shareholders for the Year was approximately HK$95,531,000 compared with a loss of HK$27,067,000 for 2008.

Liquidity, Financial Resources And Capital Structure

As at 31 March 2009, the Group had total assets of approximately HK$48,343,000 (31 March 2008 (restated): HK$101,650,000), including cash and cash equivalents of approximately HK$15,403,000 (31 March 2008: HK$39,612,000). There was pledged bank deposit of HK$150,000 as at 31 March 2009 (31 March 2008: 150,000).

During the Year, the Group financed its operations mainly with its own working capital, proceeds from convertible note converting in new shares of the Company at the conversion price of HK$0.26 per share in April 2008 and proceeds from top-up placing existing shares and top-up subscription new shares of the Company completed on 7 January 2009. As at 31 March 2009, save as disclosed in note 30 to the financial statement there was no bank overdraft (31 March 2008: Nil) and there was no other charge on the Group’s assets (31 March 2008: Nil).

As at 31 March 2009, the debt ratio (defined as the ratio between total liabilities over total assets) was approximately 0.93 (31 March 2008 (restated): approximately 0.63).

On 24 December 2008, the Company, Emcom Limited (“Emcom”) and the placing agent entered into the top-up placing and subscription agreement, pursuant to which Emcom agreed to place 540 million existing shares at a price of HK$0.02 per top-up placing share on a fully underwritten basis and agreed to subscribe for 540 million top-up subscription shares at a price of HK$0.02 per top-up subscription share (the “Top-up Placing and Top-up Subscription”). The Top-up Placing and the Top-up Subscription was completed on 5 January 2009 and 7 January 2009 respectively, of which the gross proceeds from the Top-up Subscription would be approximately HK$10,800,000 and the maximum net proceeds of approximately HK$10,440,000 from the Top-up Subscription would increase the working capital of the Company and also to finance its further funding requirements pursuant to the agreement entered into between the Easybuild Assets Management Limited, a wholly-owned subsidiary of the Company, and ISF Asset Manager Limited on 2 December 2008, details of which were disclosed in the announcement of the Company dated 3 December 2008. The details of the Top-up Placing and Top-up Subscription were set out in an announcement dated 24 December 2008 and 7 January 2009 respectively.

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APPENDIX II

Litigation

On 6 May 2008, the Company entered into a conditional sale and purchase agreement (the “Agreement”), supplemented by a supplemental agreement on 21 May 2008 (the “Supplemental Agreement”), with Mr. Lee Kwok Ning Lobo and Ms. Lin Wai Yan (collectively the “Vendors”) and Mr. Yong Wai Hong, the former Chairman and chief Executive Officer of the Company, as warrantor to acquire a group of financial service companies engaging in advising on securities, assets management, dealing in securities and advising on corporate finance, all being regulated activities under the Securities and Futures Ordinance, at a consideration of HK$180,000,000. The consideration for the acquisition will be satisfied at completion as to HK$30,000,000 in cash and as to HK$150,000,000 by issue of convertible notes by the Company to the Vendors or their respective nominees. Details of the transaction were contained in the Company’s circular dated 23 June 2008.

Nonetheless, at the extraordinary general meeting held on 16 July 2008, the relevant resolutions of the transaction were not passed and hence the transaction did not proceed further.

On 16 July 2008, the Company received a claim from the Vendors for approximately HK$180,000,000 alleging the breach of the Agreement and the Supplemental Agreement. On 22 July 2008, the Company had appointed P.C. Woo & Co. as the legal adviser of the Company (“Legal Adviser”) for the litigation (“Litigation”) and the legal opinion was received on 30 July 2008. The Legal Adviser is of the view that the Company has a good defense to the Litigation and further advises the Company to vigorously contest the Litigation once the writ is served by the Vendors’ solicitors.

Following the legal opinion received on 30 July 2008 from the Legal Adviser, the Company and the Directors received the Amended Writ of Summons served by the solicitors of the Vendors on 4 September 2008, the Legal Adviser filed the Acknowledgment of Service of the Amended Writ of Summons on behalf of the Company on 5 September 2008; on 18 September 2008, by a Notice of Discontinuance the Vendor had wholly discontinued their action against Mr. Lam Kwok Ho, Ms. Tsang Fung Chu and Mr. Wong Chi Keung Patrick, from the Litigation, subsequently on 29 October 2008, the Vendor by another Notice of Discontinuance had further wholly discontinued their action against Mr. Lee Pin Yeow and Jolly King Limited from the Litigation; on 30 October 2008 the Statement of Claim was served on the Company and the Directors. The Legal Adviser representing both the Company and Emcom Limited would obtain an extension of time from the court for the filing and service of the Company’s defence (the “Defence”) to 12 January 2009. According to the Legal Adviser, the Company’s Defense would be filed and served on or before 12 January 2009.

According to the Legal Adviser there was nothing critical that will cause them to amend their previous opinion as at 30 July 2008, the Company and the Directors are of the view that the Company has a very good defence to the Litigation and is seriously evaluating the potential counterclaim against the Vendor either in the Litigation or in a separate action and reserves the right to claim against the Vendor for any damages incurred. Details of the latest progress of the Litigation would be contained in the Company’s announcement dated 17 January 2009.

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APPENDIX II

Acquisitions

On 5 November 2008, Sinoeye Limited (“SL”), an indirectly wholly-owned subsidiary of the Company, entered into a joint venture agreement with an independent third party to subscribe 49% shareholding of a joint venture company at not more than RMB2,450,000. The details of the transaction were set out in an announcement dated 5 November 2008.

On 2 December 2008, Easybuild Assets Management Limited (“Easybuild”), a whollyowned subsidiary of the Company, entered into an agreement with an independent third party pursuant to which Easybuild agreed to acquire 100% shareholdings of Gi Space Limited (“Gi”) and Ty Space Limited (“Ty”) at HK$6.8 million to be settled by way of issuing a promissory note. The details of the transaction were set out in an announcement dated 2 December 2008 and 19 December 2008 and the circular dated 22 December 2008 respectively.

Subsequent Event

On 27 May 2009, the Company as purchaser entered into an agreement with Beglobal Investments Limited, a company incorporated in the British Virgin Islands and an independent third party of the Company, and Ryoden Property Development Company Limited, a company incorporated in Hong Kong and an independent third party of the Company (the “Vendors”) (the “Agreement”), pursuant to which the Company has agreed to acquire and the Vendors have agreed to sell of the (i) 2 shares of US$1.00 each in the share capital of the Harvest Yield Investments Limited, a company incorporated in the British Virgin Islands with limited liability (“Harvest”), representing the entire issued share capital in Harvest, which is beneficially owned by the Vendors in equal portion and (ii) the amounts equal to the entirety of the face value of the loans outstanding as at completion of the Acquisition pursuant to the terms and conditions of the Agreement made by the Vendors to Harvest for a total consideration of HK$300 million less the Outstanding Bank Loan. As at the date of the Agreement, the consideration amounts to HK$153 million.

Foreign Exchange Exposure

The Group’s transactions during the Year were mainly denominated in Renminbi, HK Dollars, US Dollars and Singapore Dollars. Risk on exposure to fluctuation in exchange rates was insignificant to the Group.

Employees

As at 31 March 2009, the Group had 45 (31 March 2008: 32) staff in the PRC and Hong Kong. Total staff costs including directors’ remuneration were approximately HK$14,881,000 during the Year (31 March 2008: HK$7,035,000).

Remuneration is determined with reference to market terms and the performance, qualification and experience of individual employee. Year end bonus based on individual performance will be paid to employees as recognition of and reward for their contributions. Other benefits include contributions to statutory mandatory provident fund scheme to its employees. To date, total 234,140,000 share options have been granted to certain directors, employees and advisors.

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APPENDIX II

Contingent Liabilities

As at 31 March 2009, the Group had no significant contingent liabilities (31 March 2008: Nil).

Capital Commitments

As at 31 March 2009, the Group had capital commitments of approximately HK$5,255,000 (31 March 2008: approximately HK$286,000).

Operating Lease Commitments

As at 31 March 2009, the commitments under non-cancellable operating lease are represented as follows:

Not later than one year Later than one year but not later than five years Total operating lease commitments	31 March 2009 Properties Others (Audited) (Audited) HK$’000 HK$’000 1,708,000 – 703,000 – 2,411,000 –	31 March 2008 Properties Others (Audited) (Audited) HK$’000 HK$’000 2,896 195 2,149 585 5,045 780	31 March 2008 Properties Others (Audited) (Audited) HK$’000 HK$’000 2,896 195 2,149 585 5,045 780
			780

Operation Review

The Year had turned out to be a rather unusual year. The financial tsunami triggered by the US sub-prime crisis had driven the world economy into one of the worst recessions in modern history, impacting on every corner of the globe and every type of business activities. As a result, our Group’s operating result for the Year was also inevitably affected, though the Group has taken every precautionary measure not only to ride out this unprecedented economic down-turn, but also to capture any opportunities arising therefrom.

For the Year, the Group recorded a total turnover of approximately HK$214,935,000, representing increase of approximately 117% as compared with HK$98,779,000 for 2008.

Loss attributable to shareholders for the Year was approximately HK$95,531,000 compared with a loss of HK$27,067,000 for 2008.

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APPENDIX II

For the Year the Trading business segment had been successfully launched and exceedingly expanded, and Property Management business segment could contribute steady income to the Group.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX III

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Unit 1, 15/F., The Center, 99 Queen’s Road central Hong Kong

ACCOUNTANTS’ REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION

TO THE DIRECTORS OF EMCOM INTERNATIONAL LIMITED

We report on the unaudited pro forma financial information (the ‘‘Unaudited Pro Forma Financial Information’’) of Emcom International Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Emcom Group”) and Harvest Yield Investments Limited and its subsidiary (the “Target Group”, together with the Emcom Group hereinafter collectively referred to as the “Enlarged Group”), which has been prepared by the Directors for illustrative purposes only, to provide information about how the very substantial acquisition involving acquisition of the entire equity interests in Target Group and the Sale Debts might have affected the historical financial information in respect of the Group for inclusion as Appendix III to the circular dated 20 July 2009 (the ‘‘Circular’’) issued by the Company. The basis of preparation of the Unaudited Pro Forma Financial Information is set out in Appendix III to 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 31 of Chapter 7 of the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the “GEM Rules”) and with reference to AG7 ‘‘Preparation of Pro Forma Financial Information for inclusion in Investment Circulars’’ issued by the Hong Kong Institute of Certified Public Accountants (‘‘HKICPA’’).

It is our responsibility to form an opinion, as required by paragraph 31(7) of Chapter 7 of the GEM Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any report 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.

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APPENDIX III

BASIS OF OPINION

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements (“HKSIR”) 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 purposes of the unaudited pro forma financial information as disclosed pursuant to paragraph 31(1) of Chapter 7 of the GEM Rules.

The unaudited pro forma financial information is for illustrative purposes only, based on the judgments 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 the future and may not be indicative of:

the financial position of the Enlarged Group as at 31 March 2009 or any future date; or
the result and cashflow of the Enlarged Group for the year ended 31 March 2009 or any future period.

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 31(1) of Chapter 7 of the GEM Rules.

Graham H.Y. Chan & Co.

Certified Public Accountants (Practising) Hong Kong

20 July 2009

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APPENDIX III

INTRODUCTION

1. Unaudited Pro Forma Consolidated Balance Sheet of the Enlarged Group

The unaudited pro forma consolidated balance sheet of the Enlarged Group was prepared to demonstrate the effect of the Acquisition on the consolidated balance sheet of the Group as if the Acquisition had been completed as at 31 March 2009 based on:

(a) the audited consolidated balance sheet of the Group as at 31 March 2009 which have been extracted from the published annual report of the Group for the year ended 31 March 2009;
(b) the audited consolidated balance sheet of the Target Group as at 31 March 2009 extracted from the accountant’s report of the Target Group as set out in Appendix I to this circular; and
(c) the pro forma adjustments as described in the notes thereto, relating to the Acquisition that are directly attributable to the transaction and factually supportable.

The unaudited pro forma consolidated balance sheet has been prepared for illustrative purpose only and because of its nature, it may not give true picture of the financial position of the Enlarged Group at any future date.

2. Unaudited Pro Forma Consolidated Income Statement and Cash Flow Statement of the Enlarged Group

The unaudited pro forma consolidated income statement and cash flow statement of the Enlarged Group were prepared to demonstrate the effect of the Acquisition on the consolidated income statement and cash flow statement of the Group as if the Acquisition had been completed as at 1 April 2008 based on:

(a) the audited consolidated income statement and cash flow statement of the Group for the year ended 31 March 2009 which have been extracted from the published annual report of the Group for the year ended 31 March 2009;
(b) the audited consolidated income statement and cash flow statement of Target Group for the year ended 31 December 2008, which have been extracted from the accountant’s report of the Target Group for the year ended 31 December 2008; and
(c) the pro forma adjustments, as described in the notes thereto.

The unaudited pro forma consolidated income statement and cash flow statement have been prepared for illustrative purpose only and because of its nature, it may not give true picture of the results and cash flows of the Enlarged Group for any future periods.

138 -

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX III

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET OF THE ENLARGED GROUP

The Target Group as Group as at 31 March at 31 March Pro forma 2009 2009 adjustments Notes HK$’000 HK$’000 HK$’000 Non-current assets Investment properties – 290,000 10,000 1a Property, plant and equipments 3,039 253 Goodwill 2,700 – 8,791 1a 5,739 290,253 Current assets Inventories 15,050 – Trade receivables 5,395 664 (708 ) 3 Other receivables, deposits and prepayment 5,307 665 (514 ) 3 Security deposit to a related company 800 – Pledged bank deposit 150 – Bank balances and cash 15,324 1,023 (1,130 ) 1b 42,026 2,352 Assets classified as held for sale 578 – 42,604 2,352 Current liabilities Trade payables 2,740 466 (755 ) 3 Other payables and accruals 20,899 2,669 (467 ) 3 Promissory note 900 – Amount due to an associate 63 – Amount due to minority interest 966 – Tax payables 313 – 25,881 3,135 Liabilities associated with assets classified as held for sale 19,185 – 45,066 3,135	Pro forma Enlarged Group HK$’000 300,000 3,292 11,491
	314,783
	15,050 5,351 5,458 800 150 15,217
	42,026 578
	42,604
	2,451 23,101 900 63 966 313
	27,794 19,185
	46,979

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UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX III

The
Target
Group as
Group as
at 31 March at 31 March
Pro forma
2009
2009 adjustments
Notes
HK$’000
HK$’000
HK$’000
Net current liabilities
(2,462 )
(783 )
Total assets less current liabilities
3,277
289,470
Non current liabilities
Bank loans – secured
–
(147,000 )
Loan from shareholders
–
(109,700 )
109,700
1e
Deferred tax liabilities
–
(5,481 )
(1,650 )
1f
Convertible bonds
–
–
(74,286 )
1d
–
(262,181 )
Net assets
3,277
27,289
Capital and reserves
Share capital
32,590
1
15,000
1c
(1)
2
Reserves
(29,545 )
27,288
60,000
1c
3,714
1d
(27,288 )
2
Minority interest
232
–
Total equity
3,277
27,289

Pro forma
Enlarged
Group
HK$’000
(4,375 )
310,408
(147,000 )
–
(7,131 )
(74,286 )
(228,417 )
81,991
47,590
34,169
232
81,991

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UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX III

UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT OF THE ENLARGED GROUP

Continuing operations Turnover Cost of sales Gross profit Other revenue and other net income Reimbursement from licensor Selling expenses Administrative expenses Other losses Share of loss of associates Fair value change in investment properties Finance costs Loss before taxation Taxation Loss for the year from continuing operations Discontinued operations Loss for the year from discontinued operations Loss for the year Attributable to: Equity holders of the Company Minority interests	The Group Target Group for the for the year ended year ended 31 March 31 December Pro forma 2009 2008 adjustments Notes HK$’000 HK$’000 HK$’000 213,195 11,086 (210,589 ) (9,073 ) 2,606 2,013 122 85 2,271 – (116 ) – (29,606 ) (242 ) (16,108 ) – (63 ) – – (7,997 ) (77 ) (3,749 ) (3,714 ) 4 (40,971 ) (9,890 ) (313 ) 2,077 (41,284 ) (7,813 ) (54,637 ) – (95,921 ) (7,813 ) (95,531 ) (7,813 ) (3,714 ) 4 (390 ) – (95,921 ) (7,813 )	Pro forma Enlarged Group HK$’000 224,281 (219,662 ) 4,619 207 2,271 (116 ) (29,848 ) (16,108 ) (63 ) (7,997 ) (7,540 ) (54,575 ) 1,764 (52,811 ) (54,637) (107,448) (107,058 ) (390) (107,448)

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UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX III

UNAUDITED PRO FORMA CONSOLIDATED CASH FLOWS STATEMENT OF THE ENLARGED GROUP

Operating activities Loss for the year Adjustment for: Income tax expenses Interest on convertible notes Interest expense Share of loss of a jointly controlled entity Share of loss of an associate Loss on disposal of a subsidiary Interest income Depreciation and amortization Fair value change in investment properties Impairment loss in respect of property, plant and equipment Impairment loss in respect of goodwill Impairment loss in respect of other intangible assets Impairment loss in respect of inventory Written off in respect of interests in a jointly controlled entity Impairment loss in respect of payment for investment in a joint venture Impairment loss in respect of other receivables, deposits and prepayment Loss on disposal of property, plant and equipment Equity-settled share option expense Operating cash flows before working capital changes Increase in inventories Decrease in trade and other receivables, deposits and prepayments Increase in security deposit to a related company Increase in amount due from a jointly controlled entity Decrease in amount due to a related company Increase/(decrease) in trade and other payables and accruals Increase in amount due to minority interest	The Group Target Group for the for the year ended year ended 31 March 31 December Pro forma 2009 2008 adjustments Notes HK$’000 HK$’000 HK$’000 (95,921 ) (7,813 ) (3,714 ) 4 313 (2,077 ) 77 – 3,714 4 – 3,749 721 – 63 – 580 – (119 ) (85 ) 4,313 139 – 7,997 888 – 3,759 – 2,080 – 15,783 – 18,928 – 8,653 – 1,025 – 9,069 – 2,644 – (27,144 ) 1,910 (26,196 ) – 8,446 108 (800 ) – (1 ) – (1,509 ) – 26,029 (642 ) 966 –	Pro forma Enlarged Group HK$’000 (107,448 ) (1,764 ) 3,791 3,749 721 63 580 (204 ) 4,452 7,997 888 3,759 2,080 15,783 18,928 8,653 1,025 9,069 2,644 (25,234 ) (26,196 ) 8,554 (800 ) (1 ) (1,509 ) 25,387 966

142 -

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX III

Cash (used in)/generated from operations Interest received Net cash (used in)/from operating activities Investing activities Acquisition of subsidiaries Purchase of other intangible assets Purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Net cash outflow from disposal of subsidiaries Interest received Net cash used in investing activities Financing activities Proceeds from placement of new shares Repayment of promissory notes Capital injection from minority interests Interest paid Loan from shareholders Net cash from/(used in) financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Effect of foreign exchange rate changes Cash and cash equivalents at end of year	The Group Target Group for the for the year ended year ended 31 March 31 December Pro forma 2009 2008 adjustments Notes HK$’000 HK$’000 HK$’000 (20,209 ) 1,376 – 85 (20,209 ) 1,461 3,747 – (1,130 ) 1b (2,340 ) – (10,904 ) (17 ) 941 – (41 ) – 119 – (8,478 ) (17 ) 10,441 – (5,900 ) – 748 – – (5,665 ) – 2,100 5,289 (3,565 ) (23,398 ) (2,121 ) 39,612 3,107 (811 ) – 15,403 986	Pro forma Enlarged Group HK$’000 (18,833 ) 85 (18,748 ) 2,617 (2,340 ) (10,921 ) 941 (41 ) 119 (9,625 ) 10,441 (5,900 ) 748 (5,665 ) 2,100 1,724 (26,649 ) 42,719 (811 ) 15,259

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UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX III

Notes:

1a. In accordance with Hong Kong Financial Reporting Standard 3 – Business Combinations (“HKFRS 3”), the Group will apply the purchase method to account for the acquisition of the Target Group. Under the purchase method, the identifiable assets, liabilities and contingent liabilities of the Target Group will be recorded on the unaudited pro forma consolidated balance sheet of the Enlarged Group at their fair values as if the Acquisition was completed on 31 March 2009. For the purpose of preparation of unaudited pro forma financial information, except the fair value of investment properties, it is assumed that the fair value of the other assets, liabilities and contingent liabilities of the Target Group approximate to their carrying amount as at 31 March 2009. The fair value adjustment on investment properties amounted to approximately HK$10,000,000. It represents the adjustment on fair value of the investment properties held by the Target Group which is based on the valuation report issued by Prudential Surveyors International Limited, after deducting the carrying amounts of investment properties as at 31 March 2009.

Deferred tax liabilities are increased by HK$1,650,000 as a result of the fair value adjustment on investment properties of the Target Group.

The above pro forma adjustments reflect the increase in the fair value of the investment properties and deferred tax liabilities of HK$10,000,000 and HK$1,650,000 respectively.

The amount of excess of the cost of the Acquisition (including the consideration of HK$153,000,000 and estimated cost of the Acquisition of HK$1,130,000) over the fair value of the acquired net assets of HK$8,791,000 is recognised as goodwill in the unaudited pro forma consolidated balance sheet as if the Acquisition had taken place on 31 March 2009.

The following set out the calculation of goodwill:

Target Group’s Fair value carrying amount adjustment HK$’000 HK$’000 Investment properties 290,000 10,000 Property, plant and equipment 253 Current assets 2,352 Current liabilities (3,135 ) Bank loan (147,000 ) Loan from shareholders (109,700 ) 109,700 Deferred tax liability (5,481 ) (1,650 ) Fair value of the acquired assets 27,289 Cost of the acquisition Goodwill	Fair value HK$’000 300,000 253 2,352 (3,135 ) (147,000 ) – (7,131 ) 145,339 154,130 8,791

The final amounts of the above adjustments will be determined on the completion date of the Acquisition and the fair value adjustments may be different from the amounts presented above.

144 -

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX III

The consideration of HK$153,000,000 will be satisfied as to

(i) HK$75,000,000 by the issue of the 1,500,000,000 Consideration Shares at the Issue Price of HK$0.05 per Shares credited as fully paid; and
(ii) HK$78,000,000 by the issue of the Convertible Bonds;
1b. It represents the estimated cost of the Acquisition. The adjustment is not expected to have a continuing cash flow effect on the Enlarged Group.
1c. It represents the allotment of 1,500,000,000 Consideration Shares at HK$0.01 per share. This gives rise to an increase in share capital of HK$15,000,000 and share premium of HK$60,000,000.
1d. As described in note 1a (ii), the Company issued Convertible Bonds of HK$78,000,000. By using the method of discounted cash flow, amounts of approximately HK$74,286,000 and HK$3,714,000 were allocated to the liability and equity component respectively of the Convertible Bonds in the Pro Forma Financial information of the Enlarged Group.
1e. Upon the Acquisition, the shareholder loan will be acquired by the Group. The pro forma adjustment represented the elimination of shareholder loan arising from the Acquisition on consolidation.
1f. According to Hong Kong Accounting Standard 12 – Income Taxes (“HKAS 12”), the deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Accordingly, the pro forma adjustments reflect the increase in deferred tax liabilities of HK$1,650,000 as a result of the fair value adjustment on investment properties of the Target Group as if the Acquisition was completed on 31 March 2009. The tax rate applicable for the calculation of the deferred tax liabilities is 16.5%.
The adjustment represents the elimination of share capital and pre-acquisition reserves of the Target Group on consolidation.
The adjustment represents the elimination of intra-group balances on consolidation as if the Acquisition had taken place on 31 March 2009.
The adjustment is to reflect the effect of the imputed interest expenses of the Convertible Bonds charged to proforma consolidated income statement assuming that the Convertible Bonds had been issued as at 1 April 2008 and no conversion was taken place during the year. It is also assumed that interest expenses would be paid on the maturity date (ie the second anniversary of the issue date of the Convertible bonds). This adjustment is expected to have a continuing effect on the financial statements of the Enlarged Group in subsequent year.
145 -

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE ENLARGED GROUP

APPENDIX IV

The following is the text of a letter from Prudential Surveyors International Limited, an independent property valuer, in connection with their valuation as at 10th May 2009 of the interests of the Enlarged Group in the properties described below for inclusion in the Composite Document and which has been reproduced in this Circular.

12/F Asian House No.1 Hennessy Road Hong Kong

Board of Directors

Emcom International Limited

Dear Sirs,

INSTRUCTIONS

We refer to your instructions to carry out valuations of the property interests of Emcom International Limited or its subsidiaries (together referred to as the “Emcom International Limited Group) and Target Company or its subsidiaries (together referred to as the “Target Group”) (the Emcom International Limited Group and the Target Group together referred to as the “Enlarged Group”).

We confirm that we have carried out inspections, made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the value of the properties as at 10th May 2009 (the “date of valuation”).

BASIS OF VALUATION AND ASSUMPTIONS

Our valuation of each property represents its market value which in accordance with the Valuation Standards on Properties of the Hong Kong Institute of Surveyors is defined as “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.”

Our valuation of each property excludes an estimated price inflated or deflated by special terms or circumstances such atypical financing, sale and leaseback arrangement, special considerations or concessions granted by anyone associated with the sale, or any element of special value.

146 -

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE ENLARGED GROUP

APPENDIX IV

No allowance has been made in our valuations for any charges, mortgages or amounts owing on the properties nor any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, its is assumed that the properties are free from encumbrances, restrictions and outgoings of an onerous nature which could affect their values.

VALUATION METHODOLOGY

Our valuation of the property is prepared in accordance with the Valuation Standards on Properties of the Hong Kong Institute of Surveyors and in compliance with Chapter 5 of the Listing Rules published by the Stock Exchange of Hong Kong Limited.

Property No.1 is held for investment. It comprises a shopping center with a total of 100 tenants and the occupancy rate is approximately 90%. The tenancies vary in length from 2 weeks to 18 months with the last expiry date 14 May 2010. The individual shops are the subject of licence agreements and the Target Group receives rental income in the form of licence fees. Details of total monthly rental income over a period of 17 months from 1st January 2008 to 31st May 2009 have been supplied to us. We have examined the rental details for consistency of income and trends. We have carried out a valuation using the Investment Method having regard to the rental income of the property.

Property No.2 is rented by the Enlarged Group. It is considered to have no commercial value due mainly to the prohibition against assignment or sub-letting or otherwise due to lack of substantial profit rents.

SOURCE OF INFORMATION

We have relied to a very considerable extent on the information given by you and have accepted advice given to us on such matters as planning approvals, statutory notices, easements, tenure and identification of property, particulars of occupancy, floor area and all other relevant matters. Dimensions and measurements are based on the copies of documents or other information provided to us by you and are therefore only approximations. No on-site measurement has been carried out.

We have no reason to doubt the truth and accuracy of the information provided to us by you which is material to the valuation. We were also advised by you that no material facts have been omitted from the information provided.

NON-PUBLICATION

Neither the whole nor any part of this valuation report nor any reference thereto may be included in any published document, circular or statements, nor published in any way whatsoever without the prior written approval of Prudential Surveyors International Limited as to the form and context in which it may appear.

In accordance with our standard practice, we must state that this report is for the exclusive use of the party to whom it is addressed and for the specific purpose stated above. No liability to any third party will be accepted for the whole or any part of its contents.

147 -

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE ENLARGED GROUP

APPENDIX IV

TITLE INVESTIGATION

We have not been provided with copies of the title documents relating to the properties but have caused searches to be made at the Land Registry. However, we have not searched the original documents to verify ownership or to ascertain any amendments. All documents have been used for reference only and all dimensions, measurements and areas are approximate.

PROPERTY INSPECTION

We have inspected the exterior of the property. However, no structural survey has been made, but in the course of our inspection, we did not note any serious defects. We are not, however, able to report whether the property is free of rot, infestation or any other structural defects. No test was carried out on any of the services.

REPORT

We enclose herewith our summary of valuations and valuation certificates.

Yours faithfully, For and on behalf of Prudential Surveyors International Limited G.J. Cattermoul FHKIS, MRICS General Manager

Note: Mr G.J. Cattermoul has over 29 years of experience in valuation of properties in Hong Kong.

148 -

APPENDIX IV

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE ENLARGED GROUP

SUMMARY OF VALUATIONS

No. Property

Market Value in Existing State as at 10th May 2009

Group I:

Property interest held by the Target Group in Hong Kong

Shops on the whole of Ground Floor, Upper Ground Floor, HK$300,000,000 1st and 2nd Floor, Lising Court, Nos. 34 & 36 Granville Road, Kowloon.

Group II:

Property interest rented and occupied by Emcom International Limited Group in Hong Kong

Office on 30th Floor of Times Media Centre, No commercial value
No. 133 Wan Chai Road, Hong Kong.
149 -

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE ENLARGED GROUP

APPENDIX IV

VALUATION CERTIFICATE

Group I:

Property interest held by the Target Group in Hong Kong

Market Value in Particulars of existing state as at No. Property Description and Tenure Occupancy 10th May 2009 1. Shops on the The property comprises The shops are subject HK$300,000,000 whole of Ground a shopping center on 4 to licence agreements Floor, Upper floors of the podium of for a fixed term of 1 Ground Floor, an 18-storey composite year. A licence fee is 1st Floor and building completed in paid monthly which is 2nd Floor, Lising 1979. The shopping either a fixed minimum Court, Nos.34 center is named ‘gi’ and fee or a variable fee & 36 Granville was modified in 2006 to whichever is the higher. Road, Kowloon. its existing layout with a The variable fee is total of 135 shops. calculated at 25% of the A total of 60/120 turnover on a monthly shares of and in The property has a total basis and is exclusive the Remaining floor area of 1,515.61 of management fee Portion of sq.m. (16,314 sq.ft.) and promotion fee but Kowloon Inland inclusive of Government Lot Nos.9475 The property is held rent, rates and cashier and 9529. under 2 Government service charge.

Shops on the The property comprises whole of Ground a shopping center on 4 Floor, Upper floors of the podium of Ground Floor, an 18-storey composite 1st Floor and building completed in 2nd Floor, Lising 1979. The shopping Court, Nos.34 center is named ‘gi’ and & 36 Granville was modified in 2006 to Road, Kowloon. its existing layout with a total of 135 shops.

A total of 60/120 shares of and in The property has a total the Remaining floor area of 1,515.61 Portion of sq.m. (16,314 sq.ft.) Kowloon Inland Lot Nos.9475 The property is held and 9529. under 2 Government leases for a term of 75 years from 24th June 1963.

Total rent for calendar year 2008 was HK$11,014,169.

The Ground Rent for
the Remaining Portion	Monthly rent	for first
of Kowloon Inland Lot	quarter 2009	is as
No.9475 is HK$18,634	follows:–
and for the Remaining
Portion of Kowloon	Month	Rent (HK$)
Inland Lot No.9529	Jan	$874,435
is HK$19,862 and no	Feb	$808,447
apportionments have	Mar	$766,690
been allotted for the
properties.

Notes:

a) Registered owner of the property is Power Alliance Investment Limited by an Assignment dated 12th April 2005.
b) Incumbrances, among other, include a mortgage in favour of Hang Seng Bank Limited dated 12th April 2005.
c) The property is within a ‘Commercial’ zone in Tsim Sha Tsui Outline Zoning Plan No.S/K1/24 dated 20th March 2009.
150 -

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE ENLARGED GROUP

APPENDIX IV

VALUATION CERTIFICATE

Group II:

Property interest rented and occupied by Emcom International Limited Group in Hong Kong

Market Value in Particulars of existing state as at No. Property Description and Tenure Occupancy 10th May 2009

Office on The property comprises 30th Floor of the whole of the 30th Times Media Floor of a 34-storey Centre, No.133 commercial building Wan Chai Road, completed in 1998. Hong Kong.

The property comprises The property is leased No commercial the whole of the 30th to the Enlarged Group value Floor of a 34-storey for a term of 1 year commercial building from 1st March 2009 completed in 1998. to 29th February 2010 at a monthly The property has a rent of HK$64,144.00 total gross floor area exclusive of rates and of approximately 3,376 management fees with sq.m. (36,339 sq.ft.) an option to renew for a and is occupied by the further term of 1 year. Enlarged Group as an office.

151 -

GENERAL INFORMATION

APPENDIX V

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief:

(1) the information contained in this circular is accurate and complete in all material respects and not misleading;
(2) there are no other matters the omission of which would make any statement in this circular misleading; and
(3) all opinions expressed in this circular have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable.

2. DISCLOSURE OF INTERESTS

(a) Director’s interests and short positions in the securities of the Company and its associated corporations

As at the Latest Practicable Date, the following Director had or was deemed to have interests or short positions in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) (i) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) which were, pursuant to rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions by Directors to be notified to the Company and the Stock Exchange:

(i) Long positions in the Shares

			Approximate
			percentage of
			issued share
		Number of	capital of
Name of Director	Nature of interest	Shares held	the Company
Mr. Lam Kwok Ho	Beneficial owner	16,000 (L)	0.0004%

L: Long Position

152 -

GENERAL INFORMATION

APPENDIX V

(ii) Long positions in the Share Options

		Number of
	Nature of	Share Options	Exercise
Name of Director	interest	granted	Price
Mr. Lam Kwok Ho	Beneficial owner	2,700,000 (L)	0.027
Mr. Chan Cheong Yee	Beneficial owner	2,700,000 (L)	0.027
Ms. Tsang Fung Chu	Beneficial owner	2,700,000 (L)	0.027
Mr. Wong Chi Keung,	Beneficial owner	2,700,000 (L)	0.027
Patrick

L: Long Position

Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor the chief executive of the Company had or was deemed to have any interests or short positions in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) (i) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) which were, pursuant to rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions by Directors to be notified to the Company and the Stock Exchange.

(b) Persons who have an interest or short position which is discloseable under Divisions 2 and 3 of Part XV of the SFO and substantial Shareholders

So far as is known to the Directors, as at the Latest Practicable Date, the following person (not being Directors or chief executive of the Company) had, or was deemed to have, interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO or who were directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group:

153 -

GENERAL INFORMATION

APPENDIX V

			Approximate
			percentage of
			issued share
	Number of		capital of
Name of Shareholder	Shares held	Position	the Company
Emcom Limited	869,652,000	Long	26.65%
(Note 1)
Modern China Holdings	869,652,000	Long	26.65%
Limited_(Note 1)_
Jolly King Limited_(Note 1)_	869,652,000	Long	26.65%
Mr. Phang Wah_(Note 1)_	869,652,000	Long	26.65%
Beauvoir Holdings Limited	192,464,000	Long	5.90%
(Note 2)
Shieldman Limited	220,240,095	Long	6.75%
First Vendor_(Note 3)_	1,530,000,000	Long	46.88%
Second Vendor_(Note 4)_	1,530,000,000	Long	46.88%

Notes:

The issued share capital of Emcom Limited is beneficially owned as to 75% by Jolly King Limited, 15% by Mr. Yong Wai Hong and 10% by Mr. Lee Pin Yeow. Mr. Yong Wai Hong is an executive Director. Emcom Limited is a party acting in concert with Modern China Holdings Limited under section 317(1)(a) of the SFO. Therefore, Emcom Limited is deemed to be interested in 869,652,000 Shares. Emcom Limited is beneficially interested in 717,968,000 Shares of the issued share capital of the Company.

Jolly King Limited holds 75% interest in Emcom Limited and is therefore entitled to exercise or control the exercise of one-third or more of the voting power of Emcom Limited. The entire issued share capital of Jolly King Limited is held by Mr. Phang Wah. By virtue of the SFO, Jolly King Limited and Mr. Phang Wah are deemed to be interested in 869,652,000 Shares.

Modern China Holdings Limited is wholly and beneficially owned by Mr. Chen Jijin who was formerly the chairman and an executive Director. Modern China Holdings Limited is a party acting in concert with Emcom Limited under section 317(1)(a) of the SFO. Therefore, Modern China Holdings Limited is deemed to be interested in 869,652,000 Shares. Modern China Holdings Limited is beneficially interested in 151,684,000 Shares of the issued share capital of the Company.

Beauvoir Holdings Limited is wholly and beneficially owned by Mr. Tsang Chi Man.
154 -

GENERAL INFORMATION

APPENDIX V

These Shares are which the First Vendor has interest in as beneficial owner. The First Vendor is wholly controlled by Treasure Offshore Holdings (PTC) Limited, which in turn is wholly controlled by GZ Trust Corporation. By virtue of the SFO, both Treasure Offshore Holdings (PTC) Limited and GZ Trust Corporation are deemed to be interested in 1,530,000,000 Shares.
These Shares are which the Second Vendor has interest in as beneficial owner. The Second Vendor is wholly controlled by Ryoden Development B.V.I. Limited, which in turn is wholly controlled by Ryoden Development Limited. Ryoden Development Limited is wholly controlled by Designcase Limited, which in turn is controlled as to 99% by Summit Holdings Limited. Summit Holdings Limited is in turn wholly controlled by Cititrust (Cayman) Limited. By virtue of the SFO, Ryoden Development B.V.I. Limited, Ryoden Development Limited, Designcase Limited, Summit Holdings Limited and Cititrust (Cayman) Limited are deemed to be interested in 1,530,000,000 Shares.

Save as disclosed above, as at the Latest Practicable Date, the Directors were not aware of any other person (other than the Directors and the chief executive of the Company) who had, or was deemed to have, interests or short positions in the Shares or underlying Shares (including any interests in options in respect of such capital), which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group.

3. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors has entered into any service contract or management agreement, proposed or otherwise with any member of the Group (excluding contracts expiring or terminable by the employer within one year without payment of compensation other than statutory compensation).

4. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors or the management Shareholders (as defined in the GEM Listing Rules) or substantial Shareholder or any of their respective associates has any interest in business which competes with or may compete with the business of the Group or has any other conflict of interests which any person has or may have with the Group.

5. LITIGATION

On 6 May 2008, the Company entered into a conditional sale and purchase agreement, supplemented by a supplemental agreement on 21 May 2008, with Mr. Lee Kwok Ning Lobo and Ms. Lin Wai Yan and Mr. Yong Wai Hong as warrantor to acquire a group of financial service companies engaging in advising on securities, assets management, dealing in securities and advising on corporate finance, all being regulated activities under the Securities and Futures Ordinance, at a consideration of HK$180,000,000. The consideration for the acquisition is to be satisfied at completion as to HK$30,000,000 in cash and as to HK$150,000,000 by issue of convertible notes by the Company to Mr. Lee Kwok Ning Lobo and Ms. Lin Wai Yan or their respective nominees. Details of the transaction

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APPENDIX V

are contained in the Company’s circular dated 23 June 2008. Nonetheless, at the extraordinary general meeting held on 16 July 2008, the relevant resolutions of the transaction were not passed and hence the transaction did not proceed further.

On 16 July 2008 the Company received a claim from Mr. Lee Kwok Ning Lobo and Ms. Lin Wai Yan for approximately HK$180,000,000 alleging the breach of the conditional sale and purchase agreement and the supplemental agreement. On 22 July 2008, the Company had appointed P.C. Woo & Co. as the legal adviser of the Company for the litigation and the legal opinion was received on 30 July 2008. The legal adviser is of the view that the Company has a good defense to the litigation and further advises the Company to vigorously contest the litigation once the writ is served by Mr. Lee Kwok Ning Lobo and Ms. Lin Wai Yan solicitors.

A statement of claim has been filed on 30 October 2008 The Legal Adviser representing both the Company and Emcom Limited has obtained an extension of time from the court for the filing and service of the Company’s defence (the “Defence”) to 12 January 2009.

According to the Legal Adviser, the Company’s Defense has to be filed and served on or before 12 January 2009. According to the Legal Adviser, there is nothing critical that will cause them to amend their previous opinion, the Company and the Directors are of the view that the Company has a very good defence to the Litigation and is seriously evaluating the potential counterclaim against the Vendor either in the Litigation or in a separate action and reserves the right to claim against the Vendor for any damages incurred. Details of the latest progress of the litigation would be contained in the Company’s announcement dated 7 January 2009.

As at the Latest Practicable Date, save as disclosed above, no member of the Enlarged Group was engaged in any litigation or arbitration of material importance and no litigation, arbitration or claim of material importance was known to the Directors to be pending or threatened against any member of the Enlarged Group.

6. INTERESTS IN CONTRACTS AND ASSETS

As at the Latest Practicable Date, no contract or arrangement of significance in relation to the Group’s business to which any members of the Enlarged Group was a party and in which any of the Directors had a material interest, whether directly or indirectly, subsisted as at the Latest Practicable Date.

None of the Directors nor expert referred to in paragraph 8 has any direct or indirect interests in any assets which had been acquired or disposed of by or leased to, or which are proposed to be acquired or disposed of by or leased to, any members of the Enlarged Group during the period since 31 March 2009, the date to which the latest published audited financial statements of the Group were made up, up to and including the Latest Practicable Date.

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APPENDIX V

7. MATERIAL CONTRACTS

The following contracts (not being contracts in the ordinary course of business) have been entered into by members of the Group within the two years immediately preceding the Latest Practicable Date which are or may be material:

(a) a joint venture agreement dated 30 September 2007 entered into between Sparkle Success Investment Limited, a wholly-owned subsidiary of the Company, and Colorcity Enterprises Co. Ltd., being the joint venture partner, to form a joint venture company with a total investment of US$1,000,000 to develop, market, deploy and deliver T2Free platform and its related services under the joint venture agreement;
(b) a subscription agreement dated 11 October 2007 entered into between the Company as issuer and Sunshine Empire Pte Limited as subscriber in relation to the issue of a convertible bond in the principal amount of US$8,000,000 (or approximately HK$62,400,000). The convertible bond will carry a right to convert into new Shares at the conversion price of HK$0.26 per Share;
(c) a co-operation agreement dated 4 February 2008 entered into between the Company and Shanghai Jian Hua Satellite Communication Limited with consideration payable by the Company of RMB8,000,000 to establish an equity joint venture company to conduct distance education and training;
(d) a sale and purchase agreement dated 6 May 2008 (as supplemented by a supplemental agreement dated 21 May 2008) entered into among the Company with Mr. Lee Kwok Ning Lobo and Ms. Lin Wai Yan and Mr. Yong Wai Hong as warrantor to acquire a group of financial service companies engaging in advising on securities, assets management, dealing in securities and advising on corporate finance, all being regulated activities under the Securities and Futures Ordinance, at a consideration of HK$180,000,000;
(e) a joint venture agreement dated 5 November 2008 entered into between Sinoeye Limited, a wholly owned subsidiary of the Company and China Net-PC Limited in relation to the establishment of a joint venture company in the PRC with capital commitment on the part of Sinoeye Limited of not more than RMB2,450,000 for 49% equity interests in the joint venture company;
(f) a sale and purchase agreement dated 2 December 2008 entered into between Easybuild Assets Management Limited, a wholly owned subsidiary of the Company, and ISF Asset Manager Limited in relation to the acquisition of the entire issued share capital of GI Space Limited and TY Space Limited for a consideration of HK$6,800,000; and
(g) the Agreement.
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APPENDIX V

8. EXPERTS

The following is the qualification of the experts who has given an opinion or advice contained in this circular:

Name Qualification Graham H.Y. Chan & Co. Certified Public Accountants Prudential Surveyors Independent Valuer International Limited

As at the Latest Practicable Date, each of Graham H.Y. Chan & Co and Prudential Surveyors International Limited did not have any interests, either direct or indirect, in any assets which have been acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 March 2009, the date to which the latest published audited consolidated financial statements of the Group were made up.

As at the Latest Practicable Date, each of Graham H.Y. Chan & Co and Prudential Surveyors International Limited was not interested beneficially or non-beneficially in any Shares in the Company or any of its subsidiaries or the Target Group or any right or option (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Enlarged Group.

Each of Graham H.Y. Chan & Co and Prudential Surveyors International Limited has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its respective letter and/or report and/or reference to its name in the form and context in which it respectively appears.

9. AUDIT COMMITTEE

The audit committee of the Company comprises Ms. Tsang Fung Chu, Mr. Wong Chi Keung Patrick and Mr. Chong Lee Chang, all being independent non-executive Directors. The audit committee reviews and provides supervision over the financial reporting process and internal control of the Group.

(i) Ms. Tsang Fung Chu (“Ms. Tsang”), aged 41, a certified public accountant, fellow of the Association of Chartered Certified Accountants and the Hong Kong Institute of Certified Public Accountants. Ms. Tsang holds a bachelor degree of social sciences from the University of Hong Kong and has broad experience in the finance and accounting field. She served as honorary auditor for several non-government organizations and non-profit making organization and has a number of government and public appointment, mainly in the Yaumatei/Tsimshatsui/Mongkok region in Hong Kong. She is also a member of All China Youth Federation in the PRC and is involved in the provision of professional services to various kinds of PRC companies and investors.
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APPENDIX V

(ii) Mr. Wong Chi Keung Patrick (“Mr. Wong”), aged 58, has been working in the insurance field for 30 years at senior management level in the area of sales management, during which several major sales awards and international recognitions have been achieved. Besides sales and marketing, Mr. Wong has put extensive effort in the training areas for insurance professionals, helping young recruits building a solid foundation in the financial planning career. Mr. Wong is currently working in Fortis Insurance Company as regional director, and he is also the master trainer and members of the Fortis Financial Services Academy, responsible for advising on the educational direction of the entire sales force, which is reaching a number of over 2,000 registered insurance agents. His major working areas are risk management and sales compliance. He is also an active member in the General Agents and Managers Association of Hong Kong and Life Underwriters Association of Hong Kong, which are the union and federation for the registered insurance mangers and agents in the professional insurance field.
(iii) Mr. Chong Lee Chang (“Mr. Chong”), aged 49, Malaysian, graduated with a BA (honours) degree in law from the Manchester Metropolitan University (formerly known as Manchester Polytechnic) in 1982. He was admitted to the Honourable Society of Lincoln’s Inn, London, in 1982 and was enrolled as a barrister at law in 1983. In 1984, he was admitted as an advocate and solicitor of the High Court of Malaya and is currently holding a legal practicing certificate to practice law in Malaysia. Mr. Chong has more than 20 years of experience in legal practice in Malaysia. Mr. Chong is a senior partner of a Kuala Lumpur based law firm, Messrs. LC Chong & Co. His legal experience has included advising various companies from Asia and United Kingdom, including steel millers from China. He has served as an executive director of Antah Holdings Berhad, a public company listed on the main board of Bursa Malaysia and also held directorship in Permanis Sdn. Bhd., the Malaysian franchise holder and bottler of Pepsi-Cola and Seven-up. He has also served as a non-executive Director of Midwest Corporation Limited, a public company that was previously listed on the Australian Stock Exchange, and is engaged in mining, exploring and processing iron ore. Mr. Chong also holds directorship in CVM Minerals Limited since 27 December 2007, a company listed on the main board of The Stock Exchange of Hong Kong Limited since 22 December 2008.
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APPENDIX V

10. SHARE CAPITAL

The authorised share capital of the Company as at the Latest Practicable Date and immediately following (i) the allotment and issue of the Consideration Shares and (ii) the allotment and issue of the maximum number of Convertible Shares upon exercise of the conversion rights attaching to the Convertible Bonds in full are as follows:

Authorised 10,000,000,000 Shares Issued and to be issued, fully paid or credited as fully paid 3,263,800,253 Shares in issue as at the Latest Practicable Date 1,500,000,000 Consideration Shares to be allotted and issued 1,560,000,000 maximum number of Conversion Shares to be allotted and issued 6,323,800,253 Shares	HK$ 100,000,000 32,638,002.53 15,000,000 15,600,000
	63,238,002.53

11. MISCELLANEOUS

(a) The registered office of the Company is at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands.
(b) The head office and principal place of business of the Company is at 30th Floor, Times Media Centre, 133 Wan Chai Road, Hong Kong.
(c) The Hong Kong branch share registrar and transfer office of the Company is Tricor Tengis Limited, 26/F Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.
(d) The company secretary of the Company is Mr. Cheng Chai Fu, who is an associate member of each of the Hong Kong Institute of Certified Public Accountants and the Hong Kong Institute of Chartered Secretaries.
(e) The compliance officer of the Company is Mr. Chan Cheong Yee, who is also an executive Director.
(f) The English text of this circular shall prevail over the Chinese text in case of any inconsistency.
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APPENDIX V

12. DOCUMENTS FOR INSPECTION

Copies of the following documents are available for inspection at the principal place of business of the Company in Hong Kong at 30th Floor, Times Media Centre, No. 133 Wan Chai Road, Hong Kong during normal business hours on any Business Day from the date of this circular up to and including the date of the EGM:

(a) the memorandum and articles of association of the Company;
(b) the accountants report issued by Graham H.Y. Chan & Co. in respect of the Target Group as set out in Appendix I to this circular;
(c) the annual reports of the Company for the three financial years ended 31 March 2009;
(d) the written consent from the experts referred to under the paragraph headed “Experts” in this appendix;
(e) the accountants report issued by Graham H.Y. Chan & Co. in respect of the unaudited pro forma financial information of the Enlarged Group as set out in Appendix III to this circular;
(f) the valuation report issued by Prudential Surveyors International Limited in respect of the valuation of the Property as set out in Appendix IV to this circular;
(g) the material contracts referred to under the paragraph “Material contracts” in this appendix;
(h) the circular dated 22 December 2008 in respect of the discloseable transaction on the part of the Company; and
(i) this circular.
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NOTICE OF EGM

==> picture [71 x 66] intentionally omitted <==

**EMCOM INTERNATIONAL LIMITED 帝通國際有限公司[*]**

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 8220)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “ Meeting ”) of Emcom International Limited (the “ Company ”) will be held at 30th Floor, Times Media Centre, 133 Wan Chai Road, Hong Kong on Wednesday, 5 August 2009 at 9:30 a.m. for the purpose of considering and, if thought fit, passing the following resolutions, with or without amendments as ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

“ THAT
(a) the conditional sale and purchase agreement (the “ Agreement ”) dated 27 May 2009 (as supplemented by any supplemental agreements, if any) entered into among the Company as purchaser and Beglobal Investments Limited (the “ First Vendor ”) as first vendor and Ryoden Property Development Company Limited (the “ Second Vendor ”, together with the First Vendor as the “ Vendors ”) as second vendor in relation to, among other matters, the sale and purchase of 2 shares (the “ Sale Shares ”) of US$1.00 each in the issued share capital of the Harvest Yield Investments Limited (the “ Target Company ”), representing the entire issued share capital of the Target Company, and all such amounts (the “ Sale Debts ”) equal to the entirety of the face value of the loans outstanding as at the date of completion of the Agreement made by the Vendors to the Target Company (a copy of which is marked “A” and produced to the Meeting and signed by the chairman of the Meeting for identification purpose) and the transactions contemplated thereunder be and is hereby ratified, confirmed and approved and any directors of the Company (the “ Directors ”) be and are hereby authorised to do all such acts and things and execute all such documents which they consider necessary, desirable or expedient in connection with or for the implementation of and giving effect to the Agreement and the transactions contemplated thereunder;
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NOTICE OF EGM

(b) subject to the terms and conditions of the Agreement, the allotment and issue of 1,500,000,000 ordinary shares (the “ Consideration Shares ” and each a “ Consideration Share ”) of HK$0.01 each in the share capital of the Company credited as fully paid at an issue price of HK$0.05 per Consideration Shares to the Vendors pursuant to the Agreement (including but not limited to the allotment and issue of 600,000,000 Consideration Shares to be allotted and issued as non-refundable deposit of HK$30 million) and the transactions contemplated thereunder be and are hereby approved and confirmed and any Director be and is hereby authorised to allot and issue the Consideration Shares in accordance with the terms of the Agreement and to take all steps necessary, desirable or expedient in his/her opinion to implement or to give effect to the allotment and issue of the Consideration Shares;
(c) subject to the terms and conditions of the Agreement, the issue of the convertible bonds (the “ Convertible Bonds ”) in the principal amount of HK$78,000,000 (subject to the adjustment to the consideration under the Agreement) by the Company to the Vendors in accordance with the terms and conditions of the Agreement and the transactions contemplated thereunder be and are hereby approved and confirmed and any Director be and is hereby authorised to take all steps necessary, desirable or expedient in his/her opinion to implement or to give effect to the issue of ordinary shares (the “ Conversion Shares ”) of HK$0.01 each in the share capital of the Company of which may fall to be allotted and issued upon the exercise of the conversion rights attaching to the Convertible Bonds.”
“ THAT subject to and conditional upon the granting by the Listing Committee of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) of the listing of, and permission to deal in, the issued ordinary shares of the Company consolidated in the manner as set out in paragraph (a) of this resolution below:
(a) with effect from the first business day immediately following the date on which this resolution is passed, being a day on which shares are traded on the Stock Exchange, every two issued and unissued ordinary shares (each a “ Share ”) of HK$0.01 each in the ordinary share capital of the Company be consolidated into one share of HK$0.02 (each a “ Consolidated Share ”), such Consolidated Shares shall rank pari passu in all respects with each other and have the rights and privileges and be subject to the restrictions in respect of ordinary shares contained in the articles of association of the Company;
(b) all fractions of the Consolidated Shares to which holders of issued shares of HK$0.01 each in the ordinary share capital of the Company would otherwise be entitled to be aggregated, sold and retained for the benefit of the Company; and
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NOTICE OF EGM

(c) the Directors be and are generally authorised to do all such acts and things and execute all such documents, including under seal where applicable, as they consider necessary or expedient to give effect to the foregoing arrangements.”

By order of the Board Emcom International Limited Chan Cheong Yee Executive Director

Hong Kong, 20 July 2009

Registered office: Head office and principal place of Cricket Square, Hutchins Drive business in Hong Kong: P.O. Box 2681 30th Floor, Times Media Centre Grand Cayman KY1-1111 No. 133 Wan Chai Road Cayman Islands Hong Kong

Notes:

Any member entitled to attend and vote at the meeting convened by the above notice is entitled to appoint one or more proxies. to attend and, in the event of a poll, vote in his/her stead. A proxy needs not be a member of the Company.
In order to be valid, the form of proxy must be duly lodged at the Company’s branch registrar in Hong Kong, Tricor Tengis Limited, at 26/F., Tesbury Center, 28 Queen’s Road East, Wanchai, Hong Kong together with a power of attorney or other authority, if any, under which it is duly signed or a notarially certified copy of that power of attorney or authority, not less than 48 hours before the time for holding the meeting or any adjourned meeting.
Completion and return of a form of proxy will not preclude a member from attending in person and voting at the above meeting or any adjournment thereof, should he so wish, and in such event, the form of proxy shall be deemed to be revoked.
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AI assistant

Bingo Group Holdings Limited — Proxy Solicitation & Information Statement 2009

51336_rns_2009-07-19_b9efdc3b-6abb-4978-860f-e9558122e1b9.pdf

EMCOM INTERNATIONAL LIMITED 帝通國際有限公司[*]

(1) VERY SUBSTANTIAL ACQUISITION; AND (2) SHARE CONSOLIDATION

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

EMCOM INTERNATIONAL LIMITED 帝通國際有限公司[*]

VERY SUBSTANTIAL ACQUISITION AND SHARE CONSOLIDATION

INTRODUCTION

THE AGREEMENT

The Agreement

Date:

Parties:

Assets to be acquired

Consideration

LETTER FROM THE BOARD

Consideration Adjustment

LETTER FROM THE BOARD

Conditions precedent

Bank Consent

Completion

Consideration Shares

Convertible Bonds

LETTER FROM THE BOARD

INFORMATION ON THE TARGET GROUP

CHANGE IN SHAREHOLDING

LETTER FROM THE BOARD

REASONS FOR THE ACQUISITION

MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET GROUP

Business Review

Operating Results

Financial status and capital structure

Employee and remuneration policies

Particulars of pledged assets

Borrowing and gearing ratio

Capital commitments

Contingent liabilities

Foreign exchange exposure

Significant investment held

Material acquisition/disposal of subsidiary

Segment information

Future plan and prospects

FINANCIAL EFFECT OF THE ACQUISITION

LETTER FROM THE BOARD

FINANCIAL AND TRADING PROSPECTS OF THE ENLARGED GROUP

PROPOSED SHARE CONSOLIDATION

STATUS OF THE CONSOLIDATED SHARES

REASONS FOR THE SHARE CONSOLIDATION

EXCHANGE OF CERTIFICATES FOR CONSOLIDATED SHARES

EXPECTED TIMETABLE

LETTER FROM THE BOARD

GEM LISTING RULES IMPLICATION

EGM

RECOMMENDATION

ADDITIONAL INFORMATION

DIRECTORS’ RESPONSIBILITY

REPORTING ACCOUNTANT’S RESPONSIBILITY

OPINION AND REVIEW CONCLUSION

I. FINANCIAL INFORMATION ON THE TARGET GROUP

1. Consolidated Statements of Comprehensive Income

2. Consolidated Statements of Financial Position

3. Consolidated Statements of Change in Equity

4. Consolidated Statements of Cash Flows

II. NOTES TO THE FINANCIAL INFORMATION

1. Organisation and principal activities

2. Summary of significant accounting policies

(a) Basis of preparation

(b) Consolidation

(c) Property, plant and equipment

(d) Investment properties

(e) Financial instruments

Financial assets

Impairment of financial assets

Financial liabilities and equity instruments

Other financial liabilities

Equity instruments

Bingo Group Holdings Limited Proxy Solicitation & Information Statement 2009

**EMCOM INTERNATIONAL LIMITED 帝通國際有限公司[*]**

**EMCOM INTERNATIONAL LIMITED 帝通國際有限公司[*]**