Bingo Group Holdings Limited - Proxy Solicitation & Information Statement 2012

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Bingo Group Holdings Limited, you should at once hand this circular together with the accompanying form of proxy to the purchaser or the transferee, or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

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

BINGO GROUP HOLDINGS LIMITED 比高集團控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8220)

(i) CONNECTED TRANSACTION IN RELATION TO SUBSCRIPTION OF NEW SHARES BY A SUBSTANTIAL SHAREHOLDER;

(ii) CONNECTED TRANSACTION IN RELATION TO CAPITALISATION OF LOANS; (iii) APPLICATION FOR WHITEWASH WAIVER; AND

(iv) PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL

Financial adviser to Bingo Group Holdings Limited

Optima Capital Limited

Independent financial adviser to the Whitewash IBC, the GEM Listing Rules IBC and the Independent Shareholders

Capitalised terms used on this cover page shall have the same meanings as those defined in the section headed “Definitions” in this circular.

A letter from the Board is set out on pages 6 to 21 of this circular. A letter from the Whitewash IBC is set out on pages 22 to 23 of this circular. A letter from the GEM Listing Rules IBC is set out on pages 24 to 25 of this circular. A letter from Messis Capital containing its advice to the Whitewash IBC, the GEM Listing Rules IBC and the Independent Shareholders is set out on pages 26 to 48 of this circular.

A notice convening the EGM to be held at City Garden Hotel, 1st Floor, Yue – Function Room II, 9 City Garden Road, Hong Kong on 12 March 2012 at 10:00 a.m. is set out on pages EGM-1 to EGM-3 of this circular. Whether or not you are able to attend the meeting, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof to the office of the Company’s branch share registrar and transfer office in Hong Kong, Tricor Tengis Limited at 26/F, Tesbury Centre, 28 Queen’s Road East, Hong Kong. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting or any adjournment thereof should you so wish.

24 February 2012

		Page
Definitions		1
Letter from	the Board 6
Letter from	the Whitewash IBc 22
Letter from	the GeM Listing Rules IBc 24
Letter from	Messis capital 26
Appendix I	– Financial information of the Group I-1
Appendix II	– General information II-1
notice of eGM EGM-1

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 Stock 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 of the Stock Exchange and no assurance is given that there will be a liquid market in the securities traded on GEM.

ii -

Definitions

In this circular, unless the context requires otherwise, the following expressions have the meanings set out below:–

“2011 CBs”
convertible bonds of the Company in the aggregate principal amount of HK$78 million which became due and mature on 6 October 2011
“acting in concert”

has the meanings ascribed to it under the Takeovers Code

“Announcement” the Company’s announcement dated 19 January 2012 in relation to, among other things, the Subscription, the Capitalisation, the Whitewash Waiver and the proposed increase in the authorised share capital of the Company
“associate(s)”
has the meaning ascribed to it under the GEM Listing Rules
“Beglobal”
Beglobal Investments Limited, a company incorporated in the British Virgin Islands and a substantial Shareholder
“Board”

the board of Directors

“Business Day”
a day (other than a Saturday, Sunday or public holiday) on which banks are open for business in Hong Kong
“Capitalisation”
the capitalisation of the Loans by way of allotment and issue of the Capitalisation Shares pursuant to the Capitalisation Agreements
“Capitalisation Agreement(s)”
the conditional agreement(s) dated 12 January 2012 entered into among the Company and each of the Creditors in relation to the Capitalisation
“Capitalisation Price”
the issue price of HK$0.03 per Capitalisation Share pursuant to the Capitalisation Agreements
“Capitalisation Shares”
the 1,706,249,999 new Shares to be allotted and issued by the Company to the Creditors pursuant to the Capitalisation Agreements
“Company”

Bingo Group Holdings Limited, a company incorporated in the Cayman Islands with limited liability, the issued Shares of which are listed on GEM (stock code: 8220)

“connected person(s)”

has the meaning ascribed to it under the GEM Listing Rules

Definitions

“Creditor(s)” the creditor(s) of the Company, being Beglobal, Ms. Fung, Ms. Wong, Mr. Lee and Mr. Asvaintra, to whom the Company owes the Loans
“Director(s)” director(s) of the Company “EGM” the extraordinary general meeting of the Company to be convened to consider and, if thought fit, to approve the Subscription Agreement and the transactions contemplated thereunder, the Capitalisation Agreements and the transactions contemplated thereunder, the Whitewash Waiver and the proposed increase in authorised share capital of the Company
“Executive” the Executive Director of the Corporate Finance Division of the Securities and Futures Commission of Hong Kong or any of his delegates
“GEM” the Growth Enterprise Market of the Stock Exchange “GEM Listing Rules” the Rules Governing the Listing of Securities on GEM
“GEM Listing Rules IBC” the independent committee of the Board comprising all the independent non-executive Directors, namely Mrs. Chen Chou Mei Mei, Vivien, Mr. Wong Chak Keung and Mr. Chum Kwan Yue, Desmond, established to advise the Independent Shareholders in respect of the terms of the Subscription Agreement and the transactions contemplated thereunder, the Capitalisation Agreements and the transactions contemplated thereunder
“Golden Treasure” Golden Treasure Global Investment Limited, a company incorporated in the British Virgin Islands and a wholly-owned subsidiary of Beglobal
“Group”
the Company and its subsidiaries
“Hong Kong” the Hong Kong Special Administrative Region of the PRC
“Independent Shareholders” (i) in respect of the Subscription and the Capitalisation, the Shareholders other than Beglobal, Golden Treasure, the Other Creditors and their respective associates; and (ii) in respect of the Subscription and the Whitewash Waiver, the Shareholders other than Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure and parties acting in concert with any of them, the Other Creditors, the Directors who were involved in the Subscription and the Whitewash Waiver and those who are interested in or involved in the Subscription and the Whitewash Waiver
2 -

Definitions

“Last Trading Day” 12 January 2012, being the last trading day prior to the suspension of trading in the Shares on the Stock Exchange pending the release of the Announcement
“Latest Practicable Date” 22 February 2012, being the latest practicable date prior to the despatch of this circular for the purpose of ascertaining certain information contained in this circular
“Loan(s)” the outstanding principal amount of loan(s), together with unpaid interest accrued thereon up to and including 6 October 2011, in the aggregate amount of HK$51,187,500, owed by the Company to the Creditors
“Messis Capital” Messis Capital Limited, a licensed corporation under the SFO to carry on Type 6 regulated activity (advising on corporate finance) and the independent financial adviser appointed to advise (i) the GEM Listing Rules IBC and the Independent Shareholders in respect of the Subscription and the Capitalisation; and (ii) the Whitewash IBC and the Independent Shareholders in respect of the Subscription and the Whitewash Waiver
“Mr. Asvaintra” Mr. Bhanusak Asvaintra, one of the Creditors to whom the Company owes the Loan in the amount of HK$9,450,000.00
“Mr. Chiau” Mr. Chiau Sing Chi, an executive Director
“Mr. Lee” Mr. Sherman Lee, one of the Creditors to whom the Company owes the Loan in the amount of HK$11,025,000.00
“Ms. Fung” Ms. Fung See Mun Catherine, a director of a wholly-owned subsidiary of the Company and one of the Creditors to whom the Company owes the Loan in the amount of HK$25,945.35
“Ms. Wong” Ms. Wong Ching Kuen, one of the Creditors to whom the Company owes the Loan in the amount of HK$327,456.87
“Other Creditors” collectively, Ms. Fung, Ms. Wong, Mr. Lee and Mr. Asvaintra
“PRC” the People’s Republic of China, for the purpose of this circular, excluding Hong Kong, the Macau Special Administrative Region and Taiwan
“Relevant Period” the period from 19 July 2011, being the date falling six months preceding the date of the Announcement, up to and including the Latest Practicable Date
3 -

Definitions

“Service CBs”	the zero-coupon convertible bonds in the aggregate outstanding
	principal amount of HK$30,000,000 issued by the Company to
	Mr. Chiau
“Service Options”	the outstanding share options granted by the Company to Mr.
	Chiau which entitle him to subscribe for 250,000,000 new
	Shares
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the Laws
	of Hong Kong)
“Share(s)”	share(s) of HK$0.02 each in the share capital of the Company
“Share Options”	the outstanding share options granted by the Company pursuant to
	the share option scheme of the Company adopted on 19 October
	2002
“Shareholder(s)”	holder(s) of the Share(s)
“SMP Trustees”	SMP Trustees Limited, the present trustee of the Trust
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subscription”	the subscription of the Subscription Shares by Beglobal pursuant
	to the Subscription Agreement
“Subscription Agreement”	the conditional agreement dated 12 January 2012 entered
	into between the Company and Beglobal in relation to the
	Subscription
“Subscription Price”	the issue price of HK$0.03 per Subscription Share pursuant to
	the Subscription Agreement
“Subscription Shares”	the 1,300,000,000 new Shares to be allotted and issued by the
	Company to Beglobal pursuant to the Subscription Agreement
“Takeovers Code”	the Hong Kong Code on Takeovers and Mergers
“Trust”	The Sino Star Trust, a discretionary trust founded by Mr.
	Chiau, the discretionary objects of which are Mr. Chiau and his
	family

Definitions

“Whitewash IBC” the independent committee of the Board comprising all the nonexecutive Directors and independent non-executive Directors, namely Mr. Chong Lee Chang, Mrs. Chin Chow Chung Hang, Roberta, Mrs. Chen Chou Mei Mei, Vivien, Mr. Wong Chak Keung and Mr. Chum Kwan Yue, Desmond, established to advise the Independent Shareholders in respect of the Subscription and the Whitewash Waiver
“Whitewash Waiver” a waiver from the Executive pursuant to Note 1 on Dispensations from Rule 26 of the Takeovers Code to waive the obligation of Beglobal to make a mandatory general offer for all the issued securities of the Company not already owned or agreed to be acquired by Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure and parties acting in concert with any of them which obligation would otherwise arise as a result of the issue of the Subscription Shares to Beglobal pursuant to the Subscription Agreement
“HK$” Hong Kong dollars, the lawful currency of Hong Kong “RMB” Renminbi, the lawful currency of the PRC “%” per cent

Throughout this circular, amounts in RMB have been translated, for illustration only, into HK$ at the exchange rate of RMB1.0 = HK$1.232. No representation is made that any amounts in RMB or HK$ have been, could have been or could be converted at the above rate or at any other rates or at all.

LETTER FROM THE BOARD

BINGO GROUP HOLDINGS LIMITED 比高集團控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8220)

Executive Directors: Mr. Chiau Sing Chi Mr. Chan Cheong Yee Mr. Yik Chok Man Mr. Fok Wai Ming, Jackie

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

Non-executive Directors: Mr. Chong Lee Chang Mrs. Chin Chow Chung Hang, Roberta

Independent non-executive Directors: Mrs. Chen Chou Mei Mei, Vivien Mr. Wong Chak Keung Mr. Chum Kwan Yue, Desmond

Principal place of business in Hong Kong: Room 1201-1204, 12th Floor, Sea Bird House, 22-28 Wyndham Street, Central, Hong Kong

24 February 2012

To the Shareholders

Dear Sir or Madam,

(i) CONNECTED TRANSACTION IN RELATION TO SUBSCRIPTION OF NEW SHARES BY A SUBSTANTIAL SHAREHOLDER;

(ii) CONNECTED TRANSACTION IN RELATION TO CAPITALISATION OF LOANS;

(iii) APPLICATION FOR WHITEWASH WAIVER;

AND

(iv) PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL

INTRODUCTION

On 19 January 2012, the Company announced that after the Stock Exchange trading hours on 12 January 2012, the Company and Beglobal entered into the Subscription Agreement pursuant to which Beglobal conditionally agreed to subscribe for, and the Company conditionally agreed to allot and issue, 1,300,000,000 Subscription Shares at the Subscription Price of HK$0.03 per Subscription Share.

LETTER FROM THE BOARD

After the Stock Exchange trading hours on 12 January 2012, the Company and each of the Creditors entered into the Capitalisation Agreements pursuant to which the Company conditionally agreed to capitalise the Loans in the aggregate amount of HK$51,187,500 owed by the Company to the Creditors by way of allotment and issue of an aggregate of 1,706,249,999 Capitalisation Shares to the Creditors at the Capitalisation Price of HK$0.03 per Capitalisation Share.

As at the Latest Practicable Date, Beglobal together with Golden Treasure were beneficially interested in 905,000,000 Shares, representing approximately 29.28% of the issued share capital of the Company. Immediately after completion of the Subscription, Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure and parties acting in concert with any of them will be interested in an aggregate of 2,205,000,000 Shares, representing approximately 50.22% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares. Taking into account the 1,011,969,926 Capitalisation Shares to be issued to Beglobal pursuant to the Capitalisation Agreement, Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure and parties acting in concert with any of them will be interested in 3,216,969,926 Shares, representing approximately 52.76% of the issued share capital of the Company upon completion of the Subscription and the Capitalisation. In the circumstances, an obligation on the part of Beglobal to make a general offer for all the issued securities in the Company not already owned or agreed to be acquired by Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure and parties acting in concert with any of them will arise under Rule 26 of the Takeovers Code as a result of the issue of the Subscription Shares to Beglobal. Beglobal has made an application to the Executive for the Whitewash Waiver and the Executive has indicated that it will grant the Whitewash Waiver subject to, among other things, the approval of the Independent Shareholders at the EGM by way of poll.

In order to facilitate the allotment and issue of the Subscription Shares and the Capitalisation Shares and to accommodate the Company’s future growth and expansion, the Company proposes to increase its authorised share capital from HK$100,000,000 divided into 5,000,000,000 Shares to HK$200,000,000 divided into 10,000,000,000 Shares by the creation of an additional 5,000,000,000 unissued Shares.

The purpose of this circular is to provide you with, among other things, (i) details of the Subscription, the Capitalisation, the Whitewash Waiver and the proposed increase in authorised share capital of the Company; (ii) the financial information of the Group; (iii) a letter of recommendation from the Whitewash IBC to the Independent Shareholders in respect of the Subscription and the Whitewash Waiver; (iv) a letter of recommendation from the GEM Listing Rules IBC to the Independent Shareholders in respect of the Subscription and the Capitalisation; (v) a letter from Messis Capital to the Whitewash IBC, the GEM Listing Rules IBC and the Independent Shareholders in respect of the Subscription, the Capitalisation and the Whitewash Waiver; (vi) the notice convening the EGM; and (vii) other information as required under the GEM Listing Rules and the Takeovers Code.

THE SUBSCRIPTION AGREEMENT

Date

12 January 2012 (after the Stock Exchange trading hours)

LETTER FROM THE BOARD

Parties

Issuer: the Company Subscriber: Beglobal

The Subscription

Pursuant to the Subscription Agreement, Beglobal conditionally agreed to subscribe for, and the Company conditionally agreed to allot and issue, 1,300,000,000 Subscription Shares at the Subscription Price of HK$0.03 per Subscription Share.

The Subscription Price of HK$0.03 per Subscription Share was determined after arm’s length negotiations between the Company and Beglobal taking into account, among other things, (i) the recent market price of the Shares; (ii) the prevailing market condition; and (iii) the unaudited consolidated net asset value of the Group as at 30 September 2011.

As at the Latest Practicable Date, the Company has 3,090,559,126 Shares in issue. Assuming that there is no change in the issued share capital of the Company other than the issue of the Subscription Shares and the Capitalisation Shares since the Latest Practicable Date up to completion of the Subscription Agreement and the Capitalisation Agreements, the 1,300,000,000 Subscription Shares represent (i) approximately 42.06% of the issued share capital of the Company as at the Latest Practicable Date; (ii) approximately 29.61% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares; and (iii) approximately 21.32% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares and the Capitalisation Shares. The aggregate nominal value of the Subscription Shares is HK$26,000,000.

The Subscription Shares, when issued and fully paid, will rank pari passu in all respects with all the Shares in issue as at the date of completion of the Subscription and will be subject to a lockup period of six months from the date of completion of the Subscription.

The Subscription Shares will be allotted and issued under a specific mandate to be sought for approval from the Independent Shareholders at the EGM.

An application will be made by the Company to the Stock Exchange for the listing of, and permission to deal in, the Subscription Shares.

LETTER FROM THE BOARD

Conditions precedent

Completion of the Subscription Agreement is conditional upon:

(i) trading in the Shares on GEM not being revoked or withdrawn at any time prior to completion of the Subscription; the Shares continuing to be traded on the Stock Exchange (save for any temporary suspension pending any announcement in connection with the Subscription Agreement and/or the Capitalisation Agreements) at all times up to the date of completion of the Subscription;
(ii) there being no indication from the Stock Exchange or the Securities and Futures Commission of Hong Kong or any other relevant regulatory authorities that listing of the Shares will be revoked or withdrawn at any time after completion of the Subscription, whether in connection with any of the transactions contemplated by the Subscription Agreement or otherwise;
(iii) the warranties set out in the Subscription Agreement remaining true and accurate in all material respects at completion of the Subscription, as if repeated at all times between the date of the Subscription Agreement and up to completion of the Subscription;
(iv) all necessary consents and approvals required to be obtained in respect of the Subscription Agreement and the transactions contemplated thereunder, including but not limited to the Subscription, having been obtained;
(v) the passing by the Independent Shareholders who are entitled to vote and not required to abstain from voting under the GEM Listing Rules and/or the Takeovers Code at the EGM to approve the Subscription Agreement and the transactions contemplated thereunder including, among others, the allotment and issue of the Subscription Shares to Beglobal and the grant of the Whitewash Waiver;
(vi) the Listing Committee of the Stock Exchange granting, and not having withdrawn or revoked up to completion of the Subscription, the listing of and permission to deal in the Subscription Shares on GEM;
(vii) the granting of the Whitewash Waiver by the Executive; and
(viii) the increase in authorised share capital of the Company to facilitate the allotment and issue of the Subscription Shares.

None of the conditions set out above can be waived by the Company or Beglobal.

In the event that not all the conditions set out above are fulfilled by 12:00 noon on 31 March 2012 (or such other date and time as may be agreed between the Company and Beglobal in writing), all rights, obligations and liabilities of the Company and Beglobal under the Subscription Agreement shall cease and terminate and neither of them shall have any claim against the other, save for any antecedent breaches of the terms of the Subscription Agreement.

LETTER FROM THE BOARD

Completion

Completion of the Subscription Agreement shall take place within three Business Days following the fulfillment of all the conditions set out above (or such other date and time as the Company and Beglobal may agree in writing).

THE CAPITALISATION AGREEMENTS

Date

12 January 2012 (after the Stock Exchange trading hours)

Parties

(i) the Company; and
(ii) each of the Creditors

As at the Latest Practicable Date, as a result of non-redemption of the 2011 CBs, the Company is indebted to the Creditors in the following amounts:

Creditors Beglobal Ms. Fung Ms. Wong Mr. Lee Mr. Asvaintra Total	Principal amount (HK$) 28,913,426.46 24,709.86 311,863.68 10,500,000.00 9,000,000.00 48,750,000.00	Interest accrued up to 6 October 2011 (HK$) 1,445,671.32 1,235.49 15,593.19 525,000.00 450,000.00 2,437,500.00	Subtotal (HK$) 30,359,097.78 25,945.35 327,456.87 11,025,000.00 9,450,000.00
			51,187,500.00

Ms. Fung is a director of a wholly-owned subsidiary of the Company and is therefore a connected person of the Company. To the best of the Directors’ knowledge, information and belief, and having made all reasonable enquiries, the Creditors (other than Beglobal and Ms. Fung) are third parties independent of the Company and its connected persons. As at the Latest Practicable Date, the Other Creditors do not hold any Shares. The Other Creditors are not parties acting in concert with Mr. Chiau and his family, the Trust, SMP Trustees or Beglobal.

The Capitalisation

Pursuant to the Capitalisation Agreements, the Creditors conditionally agreed to capitalise the Loans in the aggregate amount of HK$51,187,500 owed by the Company to the Creditors. The Company shall allot and issue an aggregate of 1,706,249,999 Capitalisation Shares to the Creditors (pro rata to the amount of the Loans owed to each Creditors) at the Capitalisation Price of HK$0.03 per Capitalisation Share as the full and final settlement of the Loans. Each of the Creditors conditionally agreed to waive all its rights in the unpaid interest accrued on the Loans from 7 October 2011 up to the date of completion of the Capitalisation.

10 -

LETTER FROM THE BOARD

The Capitalisation Price of HK$0.03 per Capitalisation Share was determined after arm’s length negotiations between the Company and the Creditors taking into account, among other things, (i) the recent market price of the Shares; (ii) the prevailing market condition; and (iii) the unaudited consolidated net asset value of the Group as at 30 September 2011.

Assuming that there is no change in the issued share capital of the Company other than the issue of the Subscription Shares and the Capitalisation Shares since the Latest Practicable Date up to completion of the Subscription Agreement and the Capitalisation Agreements, the 1,706,249,999 Capitalisation Shares represent (i) approximately 55.21% of the issued share capital of the Company as at the Latest Practicable Date; (ii) approximately 35.57% of the issued share capital of the Company as enlarged by the allotment and issue of the Capitalisation Shares; and (iii) approximately 27.99% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares and the Capitalisation Shares. The aggregate nominal value of the Capitalisation Shares is approximately HK$34,125,000.

The Capitalisation Shares, when issued and fully paid, will rank pari passu in all respects with all the Shares in issue as at the date of completion of the Capitalisation and will be subject to a lockup period of six months from the date of completion of the Capitalisation.

The Capitalisation Shares will be allotted and issued under a specific mandate to be sought for approval from the Independent Shareholders at the EGM.

An application will be made by the Company to the Stock Exchange for the listing of, and permission to deal in, the Capitalisation Shares.

Conditions precedent

Completion of the Capitalisation Agreements is conditional upon:

(i) the passing by the Independent Shareholders at the EGM of the necessary resolution(s) to approve the Capitalisation Agreements and the transactions contemplated thereunder including, among others, the allotment and issue of the Capitalisation Shares to the Creditors;
(ii) the Listing Committee of the Stock Exchange granting, and not having withdrawn or revoked up to completion of the Capitalisation, the listing of and permission to deal in the Capitalisation Shares on GEM;
(iii) all necessary consents and approvals required to be obtained in respect of the Capitalisation Agreements and the transactions contemplated thereby having been obtained;
(iv) the Subscription Agreement having become unconditional; and
(v) the increase in authorised share capital of the Company to facilitate the allotment and issue of the Capitalisation Shares.

None of the conditions set out above can be waived by the Company or any of the Creditors. The Capitalisation Agreements are conditional on the Subscription Agreement. Each of the Capitalisation Agreements is not conditional on each other. Completion of the Capitalisation Agreements will take place as soon as practicable after completion of the Subscription Agreement.

11 -

LETTER FROM THE BOARD

In the event that not all the conditions set out above are fulfilled by 31 March 2012 (or such other date as may be agreed between the Company and the Creditors in writing), all rights, obligations and liabilities of the Company and each of the Creditors under the respective Capitalisation Agreements shall cease and terminate and neither of them shall have any claim against the other, save for any antecedent breaches of the terms of the Capitalisation Agreements.

Completion

Completion of the Capitalisation Agreements shall take place within three Business Days following the satisfaction of all the conditions set out above (or such other date and time as the Company and the Creditors may agree in writing).

COMPARISON OF VALUES

The Subscription Price and the Capitalisation Price of HK$0.03 represents:

(i) a discount of approximately 71.43% to the closing price of HK$0.105 per Share as quoted on the Stock Exchange on the Latest Practicable Date;
(ii) a discount of approximately 59.46% to the closing price of HK$0.074 per Share as quoted on the Stock Exchange on the Last Trading Day;
(iii) a discount of approximately 58.90% to the average of the closing prices of the Share as quoted on the Stock Exchange over the last 5 trading days up to and including the Last Trading Day of approximately HK$0.073 per Share;
(iv) a discount of approximately 58.33% to the average of the closing prices of the Share as quoted on the Stock Exchange over the last 10 trading days up to and including the Last Trading Day of approximately HK$0.072 per Share;
(v) a discount of approximately 62.03% to the average of the closing prices of the Share as quoted on the Stock Exchange over the last 30 trading days up to and including the Last Trading Day of approximately HK$0.079 per Share;
(vi) a premium of approximately 36.36% over the unaudited net asset value of approximately HK$0.022 per Share as at 30 September 2011 (based on the unaudited consolidated net assets of the Group of approximately HK$66,449,000 as at 30 September 2011 as shown in the Company’s interim report for the six months ended 30 September 2011 and 3,090,559,126 Shares in issue as at the Latest Practicable Date); and
(vii) a premium of 20.0% over the audited net asset value of approximately HK$0.025 per Share as at 31 March 2011 (based on the audited consolidated net assets of the Group of approximately HK$78,725,000 as at 31 March 2011 as shown in the Company’s annual report for the year ended 31 March 2011 and 3,090,559,126 Shares in issue as at the Latest Practicable Date).
12 -

LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE OF THE COMPANY

Set out below are the shareholding structures of the Company (i) as at the Latest Practicable Date; (ii) immediately after the allotment and issue of the Subscription Shares; (iii) immediately after the allotment and issue of the Subscription Shares and the Capitalisation Shares; and (iv) immediately after the allotment and issue of the Subscription Shares and the Capitalisation Shares, the full conversion of the Service CBs and the full exercise of the Service Options and the Share Options:

								Immediately after the
								allotment and issue of
								the Subscription Shares
								and the Capitalisation
						Immediately after	the	Shares, the full conversion
						allotment and issue		of the Service CBs and
			Immediately after the			of the Subscription		the full exercise of the
	As at the Latest		allotment and issue of			Shares and the		Service Options and the
Shareholders	Practicable Date(Note 1)		the Subscription Shares			Capitalisation Shares		Share Options (Note 7)
	Number of		Number of			Number of		Number of
	Shares Approx. %		Shares	Approx.	%	Shares Approx. %		Shares Approx. %
Beglobal	325,000,000	10.51	1,625,000,000	37.01		2,636,969,926	43.25	2,636,969,926 39.25
Golden Treasure_(Note 2)_	580,000,000	18.77	580,000,000	13.21		580,000,000	9.51	580,000,000 8.63
Mr. Chiau	–	–	–		–	–	–	550,000,000 8.19

Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure and parties acting in concert with any of them Mr. Chan Cheong Yee (Note 3) Mr. Yik Chok Man (Note 3) Mr. Chong Lee Chang (Notes 3 and 4) Mrs. Chen Chou Mei Mei, Vivien (Note 3) Ms. Fung_(Note 5) Public Shareholders (Note 6)_ Total	905,000,000 10,000 564,000 90,631,999 5,500,000 – 2,088,853,127 3,090,559,126	29.28 0.00 0.02 2.93 0.18 – 67.59 100.00	2,205,000,000 10,000 564,000 90,631,999 5,500,000 – 2,088,853,127 4,390,559,126	50.22 0.00 0.01 2.06 0.13 – 47.58 100.00	3,216,969,926 10,000 564,000 90,631,999 5,500,000 864,845 2,782,268,355 6,096,809,125	52.76 0.00 0.01 1.49 0.09 0.01 45.64 100.00	3,766,969,926 10,010,000 564,000 90,631,999 5,500,000 864,845 2,843,268,355 6,717,809,125	56.07 0.15 0.01 1.35 0.08 0.01 42.33
								100.00

13 -

LETTER FROM THE BOARD

Notes:

As disclosed in the Announcement, there were 3,087,559,126 Shares in issue as at the date of the Announcement. On 3 February 2012, the Company issued 3,000,000 new Shares to an independent third party pursuant to the exercise of 3,000,000 Share Options granted to such independent third party by the Company on 24 February 2009 under the share option scheme of the Company adopted on 19 October 2002 at an exercise price of HK$0.072 per Share. Save for the aforesaid, the Company had not issued any other new Share since the date of the Announcement up to and including the Latest Practicable Date.
Golden Treasure is a wholly-owned subsidiary of Beglobal.
Mr. Chan Cheong Yee, Mr. Yik Chok Man, Mr. Chong Lee Chang and Mrs. Chen Chou Mei Mei, Vivien are Directors and thus their shareholdings in the Company are not counted as public.
Mr. Chong Lee Chang personally owned 16,131,952 Shares and is deemed to be interested in 74,500,047 Shares through his beneficial interest in 100% of the entire issued share capital of Shieldman Limited.
Ms. Fung is a director of a wholly-owned subsidiary of the Company and thus her shareholding in the Company after completion of the Capitalisation will not be counted as public.
The shareholdings of the Creditors (other than Beglobal and Ms. Fung) will be counted as public after completion of the Capitalisation as their respective shareholding in the Company will be less than 10% upon completion of the Subscription and the Capitalisation.
The shareholdings illustrated under this column is calculated based on the prevailing conversion price of the Service CBs and the prevailing exercise prices of the Service Options and the Share Options. Adjustments to the conversion price of the Service CBs and/or the exercise prices and numbers of the Service Options and the Share Options may have to be made upon completion of the Subscription and the Capitalisation.

FUND RAISING ACTIVITIES OVER THE PAST 12 MONTHS

The Company has not conducted any fund raising activities in the 12 months immediately preceding the date of the Announcement.

REASONS FOR THE SUBSCRIPTION

The Group is principally engaged in sales and trading of coal and palm oil, movie production, licensing and derivatives, crossover marketing, provision of interactive contents and cinema investment and management.

With a view to capitalising on the highly promising prospects of the cinema industry in the PRC, it has been the business strategy of the Group to put more focus on its cinema business since 2011. On 17 May 2011, the Group entered into certain agreements in relation to the acquisition of four cinemas in Chongqing, Chengdu and Shanghai, the PRC at an aggregate consideration of approximately RMB29.9 million (equivalent to approximately HK$36.8 million), of which approximately RMB12.9 million (equivalent to approximately HK$15.9 million) is still outstanding as at the Latest Practicable Date. The aforesaid cinemas have an aggregate operating area of 11,537 square meters and 25 movie screens with nearly 4,000 seats. As at the Latest Practicable Date, completion of the acquisition of one of the two cinema projects in Chongqing and the cinema project in Shanghai had taken place.

14 -

LETTER FROM THE BOARD

The conditions precedent to completion of the acquisition of the remaining two cinema projects in Chongqing and Chengdu have been fulfilled and the Company expects that completion will take place by the end of February 2012. On 9 June 2011, the Group also entered into a formal agreement with CineChina Limited in relation to the formation a joint venture for the purpose of identifying suitable investment opportunities in high-end digital cinemas in the PRC. To further strengthen the Group’s portfolio of cinemas in the PRC, on 9 June 2011, Bingo Cinema Investment Company Limited (formerly known as Shine Wisdom Limited), a wholly-owned subsidiary of the Company, entered into a transfer agreement to accept the assignment of certain leasing agreements in relation to the leasing of premises for development into four cinemas located in Linan, Hangzhou, Zhongshan and Tianjin, the PRC. The four cinemas under the aforesaid leasing agreements are all located in central commercial districts in the respective cities with steady stream of people. The development of the cinemas in Linan and Hangzhou have been completed and have commenced commercial operations since December 2011. As at the Latest Practicable Date, completion of the transfer of leasing agreements in respect of the two remaining cinemas in Zhongshan and Tianjin are still subject to due diligence review being conducted by the Group. On 12 July 2011, the Group also entered into two memorandum of understandings in relation to potential development of two cinema projects in Tieling and Dongguan, the PRC. It is the vision of the Group to become one of the leading cinema investment and management companies in the PRC in the future. As at the Latest Practicable Date, the total estimated construction and development costs for the cinema projects in Linan and Hangzhou is approximately RMB33.5 million (equivalent to approximately HK$41.3 million), of which RMB7.5 million (equivalent to approximately HK$9.2 million) remain outstanding. In order to meet the financial obligations of the Group, at the request of the Company, Beglobal agreed to advance a bridging loan of HK$5,000,000 which is unsecured, carries interest at the rate of 5% per annum and shall be repayable on or before 31 March 2012. The interest rate of 5% per annum of the bridging loan was determined after arm’s length negotiation between the Company and Beglobal with reference to the prevailing prime rate for Hong Kong dollars quoted by The Hongkong and Shanghai Banking Corporation Limited and taking into account that the loan is unsecured. The bridging loan had been used to settle certain capital expenditures of the Group’s aforesaid cinema projects due in January 2012. The Company intends to settle the aforesaid bridging loan by setting off the equivalent amount of payment obligation of Beglobal under the Subscription upon completion of the Subscription with a view to reducing the financing cost of the Company. Since the advance of the aforesaid unsecured bridging loan by Beglobal to the Company is on normal commercial terms and no security over the assets of the Group is granted thereunder, it constitutes an exempt connected transaction of the Company under Chapter 20 of the GEM Listing Rules. The Company may continue to seek short-term financing from Beglobal pending completion of the Subscription and will comply with the relevant GEM Listing Rules when necessary. For the avoidance of doubt, save for the 1,300,000,000 Subscription Shares and the 1,011,969,926 Capitalisation Shares to be issued to Beglobal under the Subscription and the Capitalisation respectively, no new Shares will be issued to Beglobal for the repayment of the aforesaid bridging loan.

In view of the forthcoming capital requirements of the Group, particularly for its capital-intensive cinema and filmed entertainment businesses, the Company has been actively searching for equity fund raising opportunities over the past few months. However, the Company has been unable to secure any interest from financial institutions given the current highly volatile market condition. Apart from equity financing, the Board has also considered other financing options such as debt financing and bank borrowings to finance the capital requirements of the Group. Having considered the interest

15 -

LETTER FROM THE BOARD

expenses which would have imposed additional interest burden to the Group and increased the gearing level of the Group, the Board is of the view that such financing means may not be appropriate to the Group given its current financial position.

The Directors are of the view that the Subscription will provide an opportunity to the Group to raise the necessary capital for the ongoing development of its core businesses without imposing additional interest burden to or deteriorating the gearing position of the Group had such capital been funded by borrowings. As such, the Directors consider that the terms of the Subscription Agreement are fair and reasonable and on normal commercial terms and the Subscription is in the interests of the Company and the Shareholders as a whole.

The gross proceeds from the Subscription amounts to HK$39 million and the net proceeds from the Subscription after deducting related fees and expenses is estimated to be approximately HK$37 million. Accordingly, the net subscription price per Subscription Share is estimated to be approximately HK$0.028. The Group intends to apply the net proceeds from the Subscription as to (i) approximately HK$32 million for the aforesaid acquisitions and development of cinema projects; and (ii) the remaining HK$5 million for general working capital of the Group.

REASONS FOR THE CAPITALISATION

On 7 October 2009, the Company issued the 2011 CBs in an aggregate principal amount of HK$78 million, which accrued interest since the first anniversary of its issuance at the rate of 5% per annum. The 2011 CBs entitled the holders thereof to convert the outstanding principal amount into new Shares at the conversion price of HK$0.90 per Share and were redeemable by the Company on 7 October 2011 at its principal amount. As at 7 October 2011, the 2011 CBs in the principal amount of HK$48,750,000 were still outstanding and the Company is obliged to redeem such convertible bonds. As disclosed in the Company’s interim report for the six months ended 30 September 2011, the Group had unaudited cash and bank balances of approximately HK$46.6 million. Taking into account the financial position of the Group, the capital expenditures for the Group’s cinema project and administrative and overhead costs of the Group, the Group was not able to redeem the 2011 CBs and pay the accrued interest thereon at the maturity date unless the Group obtains new funds from equity fund raising or borrowings. The Company therefore has not redeemed the 2011 CBs at their maturity. The non-redemption of the 2011 CBs upon their maturity technically constituted an event of default on the part of the Company and the Loans become due for repayment if any of the Creditors serves a notice on the Company.

After arm’s length negotiations with the Creditors, the Company and the Creditors entered into the Capitalisation Agreements on 12 January 2012 pursuant to which the Loans will be capitalised by way of allotment and issue of the Capitalisation Shares by the Company to the Creditors. The Directors believe that the Capitalisation will enable the Group to (i) remove entirely the repayment pressure of the Loans on the Group; (ii) retain cashflow of the Group for the continuous development of its cinema projects; and (iii) enlarge the capital base of the Company and reduce the gearing level of the Group. The Directors consider that the terms of the Capitalisation Agreements are fair and reasonable and on normal commercial terms and the Capitalisation is in the interests of the Company and the Shareholders as a whole.

16 -

LETTER FROM THE BOARD

TAKEOVERS CODE IMPLICATIONS

Whitewash Waiver

As at the Latest Practicable Date, (i) Beglobal together with Golden Treasure were beneficially interested in 905,000,000 Shares, representing approximately 29.28% of the issued share capital of the Company; and (ii) the Loan owed by the Company to Beglobal amounts to HK$30,359,097.78. As at the Latest Practicable Date, Mr. Chiau holds the Service CBs in the aggregate principal amount of HK$30 million, of which HK$25,000,000 was issued on 1 June 2010 and HK$5,000,000 was issued on 1 June 2011. The Service CBs bear no interest, are convertible into new Shares at the prevailing conversion price of HK$0.10 per Share (subject to adjustments) and shall mature on the day falling the 10th anniversary after the date of their respective issue. Mr. Chiau also holds the Service Options which entitle him to subscribe for 250,000,000 new Shares at an exercise price of HK$0.10 during the exercise period from 1 December 2011 to 30 September 2013. Save for the aforesaid, as at the Latest Practicable Date, Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure and parties acting in concert with any of them do not hold any other Shares, warrants, options or other convertible or exchangeable securities of the Company.

Immediately after completion of the Subscription, Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure and parties acting in concert with any of them will be interested in an aggregate of 2,205,000,000 Shares, representing approximately 50.22% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares. Taking into account the 1,011,969,926 Capitalisation Shares to be issued to Beglobal pursuant to the Capitalisation Agreement, Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure and parties acting in concert with any of them will be interested in 3,216,969,926 Shares, representing approximately 52.76% of the issued share capital of the Company upon completion of the Subscription and the Capitalisation. In the circumstances, an obligation on the part of Beglobal to make a general offer for all the issued securities in the Company not already owned or agreed to be acquired by Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure and parties acting in concert with any of them will arise under Rule 26 of the Takeovers Code as a result of the issue of the Subscription Shares to Beglobal.

Beglobal has made an application to the Executive for the Whitewash Waiver and the Executive has indicated that it will grant the Whitewash Waiver subject to, among other things, the approval of the Independent Shareholders at the EGM by way of poll. It is one of the conditions of the Subscription Agreement that the Whitewash Waiver be granted by the Executive and approved by the Independent Shareholders at the EGM. The aforesaid condition is not capable of being waived. If the Whitewash Waiver is not granted, the Subscription will not proceed. As completion of the Capitalisation is conditional upon, among other things, the Subscription Agreement having become unconditional, if the Subscription does not proceed, completion of the Capitalisation will not take place.

Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure and parties acting in concert with any of them, their respective associates, the Other Creditors and those Shareholders who are interested in or are involved in the Subscription and/or the Whitewash Waiver shall abstain from voting on the resolutions approving the Subscription and the Whitewash Waiver at the EGM. Mr.

17 -

LETTER FROM THE BOARD

Chiau, Mr. Chan Cheong Yee and Mr. Yik Chok Man who are the Directors involved in the negotiations of the Subscription and/or the Capitalisation shall also abstain from voting on the resolutions approving the Subscription and the Whitewash Waiver at the EGM.

If the Whitewash Waiver is approved by the Independent Shareholders, the aggregate shareholding of Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure and parties acting in concert with any of them in the Company will exceed 50% after completion of the Subscription. Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure and parties acting in concert with any of them may further increase their shareholdings in the Company without incurring any further obligations under Rule 26 of the Takeovers Code to make a general offer.

Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure and parties acting in concert with any of them have confirmed to the Company that they have not dealt in any securities of the Company for the six months preceding the date of the Announcement. As at the Latest Practicable Date, neither Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure nor any parties acting in concert with any of them has received any irrevocable commitment from any Independent Shareholders as to whether they will vote for or against the resolution approving the Subscription and/or the Whitewash Waiver at the EGM.

As at the Latest Practicable Date, the Company has 3,090,559,126 Shares, the Service CBs in the aggregate principal amount of HK$30 million which are convertible into 300,000,000 new Shares at the prevailing conversion price of HK$0.10 per Share, the Service Options which entitle Mr. Chiau to subscribe for 250,000,000 new Shares at the exercise price of HK$0.10 per Share, the 71,000,000 Share Options outstanding which entitle the holders thereof to subscribe for an aggregate of 71,000,000 new Shares at exercise prices of HK$0.1012 per Share (for 45,500,000 Shares) and HK$0.246 per Share (for 25,500,000 Shares). Save for the 10,000,000 Share Options held by Mr. Chan Cheong Yee, an executive Director, the other holders of the Share Options are third parties independent of the Company and its connected persons. Save for the aforesaid, the Company does not have any other outstanding options, derivatives, warrants or securities which are convertible or exchangeable into Shares.

INTENTION OF BEGLOBAL

It is the intention of Beglobal to maintain the listing of the Shares on the Stock Exchange. Following completion of the Subscription, Beglobal intends to continue the existing businesses and the employment of the existing employees of the Group. Beglobal does not intend to introduce any major changes to the existing operations and management structure of the Group, including any redeployment of the fixed assets of the Group.

PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL

As at the Latest Practicable Date, the authorised share capital of the Company is HK$100,000,000 divided into 5,000,000,000 Shares, of which 3,090,559,126 Shares are in issue. In order to facilitate the allotment and issue of the Subscription Shares and the Capitalisation Shares and to accommodate the Company’s future growth and expansion, the Company proposes to increase its authorised share

18 -

LETTER FROM THE BOARD

capital from HK$100,000,000 divided into 5,000,000,000 Shares to HK$200,000,000 divided into 10,000,000,000 Shares by the creation of an additional 5,000,000,000 unissued Shares which will rank pari passu in all respects with the existing Shares. The proposed increase in the authorised share capital of the Company is subject to the approval of the Shareholders by way of an ordinary resolution at the EGM. The Directors consider that the proposed increase in the authorised share capital of the Company is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

GEM LISTING RULES IMPLICATIONS

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, as at the Latest Practicable Date, Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure and parties acting in concert with any of them were interested in (i) 905,000,000 Shares, representing approximately 29.28% of the issued share capital of the Company; (ii) the Service CBs in the aggregate principal amount of HK$30 million which are convertible into new Shares at the prevailing conversion price of HK$0.10 per Share (subject to adjustments); and (iii) the Service Options which entitle Mr. Chiau to subscribe for 250,000,000 new Shares at the exercise price of HK$0.10 per Share during the exercise period. Beglobal is a substantial Shareholder and is therefore a connected person of the Company. Ms. Fung is a director of a wholly-owned subsidiary of the Company and is therefore a connected person of the Company. Accordingly, the Subscription and the Capitalisation both constitute connected transactions of the Company under Chapter 20 of the GEM Listing Rules and are subject to the approval of the Independent Shareholders by way of poll. Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure, the Other Creditors, their respective associates and parties acting in concert with any of them shall abstain from voting on the resolution approving the Subscription Agreement and the transactions contemplated thereunder at the EGM. Mr. Chan Cheong Yee (who was interested in 10,000 Shares and the Share Options which entitle him to subscribe for 10,000,000 new Shares at the exercise price of HK$0.1012 per Share as at the Latest Practicable Date) and Mr. Yik Chok Man (who was interested in 564,000 Shares as at the Latest Practicable Date) had been involved in the negotiations of the Subscription and/or the Capitalisation and shall also abstain from voting on the resolution approving the Subscription Agreement and the transactions contemplated thereunder at the EGM. Beglobal, Golden Treasure, the Other Creditors (who did not hold any Shares as at the Latest Practicable Date) and their respective associates shall abstain from voting on the resolution approving the Capitalisation Agreements and the transactions contemplated thereunder at the EGM. The proposed increase in the authorised share capital of the Company is also subject to the approval of the Shareholders at the EGM pursuant to the GEM Listing Rules.

ADJUSTMENTS TO THE SERVICE CBs, THE SERVICE OPTIONS AND THE SHARE OPTIONS

The allotment and issue of the Subscription Shares and the Capitalisation Shares may cause adjustment(s) to the exercise price and the number of Shares to be issued under the Service Options and the Share Options and the conversion price and the number of Shares to be issued upon conversion of the Service CBs. The Company will instruct its auditors or financial adviser to review and certify the basis of such adjustments as soon as possible. Further announcement will be made by the Company in respect of such adjustments as and when appropriate.

19 -

LETTER FROM THE BOARD

GENERAL

The Whitewash IBC comprising all the non-executive Directors and independent non-executive Directors, namely Mr. Chong Lee Chang, Mrs. Chin Chow Chung Hang, Roberta, Mrs. Chen Chou Mei Mei, Vivien, Mr. Wong Chak Keung and Mr. Chum Kwan Yue, Desmond, has been established to advise the Independent Shareholders in respect of the Subscription and the Whitewash Waiver. Messis Capital has been appointed by the Company with the approval of the Whitewash IBC as independent financial adviser to advise the Whitewash IBC and the Independent Shareholders in this regard. None of the members of the Whitewash IBC has been involved in, or are interested in (other than as a Shareholder), the Subscription, the Capitalisation and the Whitewash Waiver.

Mr. Chiau who has a material interest in the Subscription and the Capitalisation has abstained from voting on the Board resolutions approving the Subscription and the Capitalisation.

EGM

A notice convening the EGM to be held at City Garden Hotel, 1st Floor, Yue – Function Room II, 9 City Garden Road, Hong Kong on 12 March 2012 at 10:00 a.m. is set out on pages EGM-1 to EGM-3 of this circular. Ordinary resolutions will be proposed at the EGM to consider and, if thought fit, to approve the Subscription Agreement, the Capitalisation Agreements and the transactions contemplated thereunder, the Whitewash Waiver and the proposed increase in the authorised share capital of the Company by way of poll.

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 should you so wish and in such event, the proxy shall be deemed to be revoked.

RECOMMENDATIONS

The Directors (excluding members of the Whitewash IBC and the GEM Listing Rules IBC) consider that the terms of the Subscription Agreement and the Capitalisation Agreements are fair and reasonable, and the Subscription Agreement and the transactions contemplated thereunder, the Capitalisation Agreements and the transactions contemplated thereunder, and the Whitewash Waiver are in the interests of the Company and the Shareholders as a whole.

20 -

LETTER FROM THE BOARD

You are advised to read carefully the letter from the Whitewash IBC set out on pages 22 to 23 and the letter from the GEM Listing Rules IBC set out on pages 24 to 25 of this circular respectively. You are also advised to read carefully the letter from Messis Capital on pages 26 to 48 of this circular which contains its advice to the Whitewash IBC, the GEM Listing Rules IBC and the Independent Shareholders in respect of the Subscription, the Capitalisation and the Whitewash Waiver.

ADDITIONAL INFORMATION

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

By order of the Board Bingo Group Holdings Limited Chan Cheong Yee Executive Director

21 -

Letter from the WhiteWash iBC

The following is the text of a letter from the Whitewash IBC setting out its recommendation to the Independent Shareholders in relation to the Subscription Agreement and the Whitewash Waiver:

BiNGo GroUP hoLDiNGs LimiteD 比高集團控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8220)

24 February 2012

To the Independent Shareholders

Dear Sir or Madam,

(i) CoNNeCteD traNsaCtioN iN reLatioN to sUBsCriPtioN of NeW shares BY a sUBstaNtiaL sharehoLDer aND

(ii) aPPLiCatioN for WhiteWash WaiVer

We refer to the circular of the Company dated 24 February 2012 (the “Circular”), of which this letter forms part. Unless specified otherwise, capitalised terms used herein shall have the same meanings as those defined in the Circular.

We have been appointed as the Whitewash IBC to advise you as to whether, in our opinion, the terms of the Subscription Agreement and the Whitewash Waiver are (i) fair and reasonable so far as the Independent Shareholders are concerned; and (ii) in the interests of the Company and the Shareholders as a whole. Messis Capital has been appointed as the independent financial adviser to advise the Whitewash IBC in this regard. Details of their independent advice, together with the principal factors and reasons they have taken into consideration, are set out on pages 26 to 48 of the Circular.

22 -

Letter from the WhiteWash iBC

Having considered the terms of the Subscription Agreement and the independent advice of Messis Capital in relation thereto, we are of the opinion that (i) the terms of the Subscription Agreement and the Whitewash Waiver are conducted on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned; (ii) the Subscription Agreement and the transactions contemplated thereunder are in the interests of the Company and the Independent Shareholders as a whole; and (iii) the granting of the Whitewash Waiver is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole. We therefore recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the EGM to approve the Subscription Agreement and the Whitewash Waiver.

mr. Chong Lee Chang Non-executive Director

Yours faithfully, Whitewash IBC mrs. Chin Chow mrs. Chen Chou Chung hang, roberta mei mei, Vivien Non-executive Independent Director non-executive Director

mr. Wong Chak Keung Independent non-executive Director

mr. Chum Kwan Yue, Desmond

Independent non-executive Director

23 -

Letter from the Gem ListinG ruLes iBC

The following is the text of a letter from the GEM Listing Rules IBC setting out its recommendation to the Independent Shareholders in relation to the Subscription Agreement and the Capitalisation Agreements:

BinGo GrouP hoLDinGs LimiteD 比高集團控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8220)

24 February 2012

To the Independent Shareholders

Dear Sir or Madam,

(i) ConneCteD trAnsACtion in reLAtion to suBsCriPtion of neW shAres BY A suBstAntiAL shArehoLDer AnD

(ii) ConneCteD trAnsACtion in reLAtion to CAPitALisAtion of LoAns

We have been appointed as the GEM Listing Rules IBC to advise you as to whether, in our opinion, the terms of the Subscription Agreement and the Capitalisation Agreements are fair and reasonable so far as the Independent Shareholders are concerned and whether the Subscription Agreement, the Capitalisation Agreements and the transactions contemplated thereunder are in the interests of the Company and the Shareholders as a whole. Messis Capital has been appointed as the independent financial adviser to advise the GEM Listing Rules IBC and the Independent Shareholders in this regard. Details of their independent advice, together with the principal factors and reasons they have taken into consideration, are set out on pages 26 to 48 of the Circular.

Having considered the terms of the Subscription Agreement and the Capitalisation Agreements and the independent advice of Messis Capital in relation thereto, we are of the opinion that the terms of the Subscription Agreement and the Capitalisation Agreements are conducted on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned, and the Subscription Agreement and the Capitalisation Agreements and the transactions contemplated under the respective agreements are in the interests of the Company and the Independent Shareholders as a whole. We

24 -

Letter from the Gem ListinG ruLes iBC

therefore recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the EGM to approve the Subscription Agreement and the transactions contemplated thereunder, the Capitalisation Agreements and the transactions contemplated thereunder.

Yours faithfully,

GEM Listing Rules IBC

mrs. Chen Chou mei mei, Vivien

Independent non-executive Director

mr. Wong Chak Keung mr. Chum Kwan Yue, Independent Desmond non-executive Independent Director non-executive Director

25 -

Letter from messis CapitaL

The following is the full text of the letter from Messis Capital which sets out its advice to the GEM Listing Rules IBC, Whitewash IBC and the Independent Shareholders for inclusion in this circular.

24 February 2012

To: The GEM Listing Rules IBC, Whitewash IBC and the Independent Shareholders of Bingo Group Holdings Limited

Dear Sir/Madam,

(i) CoNNeCteD traNsaCtioN iN reLatioN to sUBsCriptioN of NeW sHares BY a sUBstaNtiaL sHareHoLDer; (ii) CoNNeCteD traNsaCtioN iN reLatioN to CapitaLisatioN of LoaNs; aND (iii) appLiCatioN for WHiteWasH WaiVer

iNtroDUCtioN

We refer to our appointment as the independent financial adviser to the GEM Listing Rules IBC, Whitewash IBC and the Independent Shareholders in connection with (i) the Subscription Agreement and the Capitalisation Agreements, and the transactions contemplated under the respective agreements; and (ii) the Whitewash Waiver, details of which are set out in the letter from the Board (the “ Letter from the Board ”) contained in the circular of the Company to the Shareholders dated 24 February 2012 (the “ Circular ”), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as defined in the Circular unless the context otherwise requires.

On 12 January 2012 (after trading hours of the Stock Exchange), the Company and Beglobal entered into the Subscription Agreement pursuant to which Beglobal conditionally agreed to subscribe for, and the Company conditionally agreed to allot and issue, 1,300,000,000 Subscription Shares at the Subscription Price of HK$0.03 per Subscription Share.

On 12 January 2012 (after trading hours of the Stock Exchange), the Company and each of the Creditors entered into the Capitalisation Agreements pursuant to which the Company conditionally agreed to capitalise the Loans in the aggregate amount of HK$51,187,500 owed by the Company to the Creditors by way of allotment and issue of an aggregate of 1,706,249,999 Capitalisation Shares to the Creditors at the Capitalisation Price of HK$0.03 per Capitalisation Share.

26 -

Letter from messis CapitaL

As at the Latest Practicable Date, Beglobal, which was ultimately owned by the Trust, is a substantial Shareholder and together with Golden Treasure were beneficially interested in 905,000,000 Shares, representing approximately 29.28% of the existing issued share capital of the Company, and is therefore a connected person of the Company. Ms. Fung is a director of a wholly-owned subsidiary of the Company. Accordingly, the Subscription and the Capitalisation both constitute connected transactions of the Company under Chapter 20 of the GEM Listing Rules and are subject to the approval of the Independent Shareholders by way of poll. Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, the Other Creditors, their respective associates and parties acting in concert with any of them shall abstain from voting in respect of the resolution approving the Subscription Agreement and the transactions contemplated thereunder at the EGM. Mr. Chan Cheong Yee (who was interested in 10,000 Shares and the Share Options which entitle him to subscribe for 10,000,000 new Shares at the exercise price of HK$0.1012 per Share as at the Latest Practicable Date) and Mr. Yik Chok Man (who was interested in 564,000 Shares as at the Latest Practicable Date) had been involved in the negotiations of the Subscription and/or the Capitalisation and shall also abstain from voting in respect of the resolution approving the Subscription Agreement and the transactions contemplated thereunder at the EGM. Beglobal, Golden Treasure, the Other Creditors (who did not hold any Shares as at the Latest Practicable Date) and their respective associates shall abstain from voting in respect of the resolution approving the Capitalisation Agreements and the transactions contemplated thereunder at the EGM.

Beglobal has made an application to the Executive for the Whitewash Waiver and the Executive has indicated that it will grant the Whitewash Waiver subject to, among other things, the approval of the Independent Shareholders at the EGM by way of poll. Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure and parties acting in concert with any of them, their respective associates, the Other Creditors and those Shareholders who are interested in or are involved in the Subscription and/or the Whitewash Waiver shall abstain from voting on the resolutions approving the Subscription and the Whitewash Waiver at the EGM. Mr. Chiau, Mr. Chan Cheong Yee and Mr. Yik Chok Man who are the Directors involved in the negotiations of the Subscription and/or the Capitalisation shall also abstain from voting on the resolutions approving the Subscription and the Whitewash Waiver at the EGM.

The GEM Listing Rules IBC comprising all the independent non-executive Directors, namely Mrs. Chen Chou Mei Mei, Vivien, Mr. Wong Chak Keung and Mr. Chum Kwan Yue, Desmond, has been established to advise the Independent Shareholders in respect of the terms of the Subscription Agreement and the Capitalisation Agreements and the transactions contemplated under the respective agreements. The Whitewash IBC comprising all the non-executive Directors and independent nonexecutive Directors, namely Mr. Chong Lee Chang, Mrs. Chin Chow Chung Hang, Roberta, Mrs. Chen Chou Mei Mei, Vivien, Mr. Wong Chak Keung and Mr. Chum Kwan Yue, Desmond, has been established to advise the Independent Shareholders in respect of the terms of the Subscription and the Whitewash Waiver. We, Messis Capital, have been appointed by the Company as the independent financial adviser to advise the GEM Listing Rules IBC, Whitewash IBC and the Independent Shareholders in these regards. Our appointment as the independent financial adviser to the GEM Listing Rules IBC, the Whitewash IBC and the Independent Shareholders has been approved by the GEM Listing Rules IBC and the Whitewash IBC respectively.

27 -

Letter from messis CapitaL

Basis of oUr opiNioN aND reCommeNDatioN

In arriving at our recommendation, we have relied on the statements, information and representations contained in the Circular and the information and representations provided to us by the Directors and the management of the Company. We have assumed that all information and representations contained or referred to in the Circular and all information and representations which have been provided by the Directors and the management of the Company are true and accurate at the time they were made and will continue to be accurate as at the date of the despatch of the Circular. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors and the management of the Company.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in the Circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, opinions expressed in the Circular have been arrived at after due and careful consideration and there are no other facts not contained in the Circular the omission of which would make any such statement contained in the Circular, including this letter, misleading. We consider that we have been provided with sufficient information on which to form a reasonable basis for our opinion. We have no reason to suspect that any relevant information has been withheld, nor are we aware of any facts or circumstances which would render the information provided and representations made to us untrue, inaccurate or misleading. We consider that we have performed all the necessary steps to enable us to reach an informed view and to justify our reliance on the information provided so as to provide a reasonable basis for our opinion.

We have not, however, carried out any independent verification of the information provided by the Directors and the management of the Company, nor have we conducted an independent investigation into the business and affairs of the Group, Beglobal, the Creditors and their respective associates.

This letter is issued for the information for the Board solely in connection with their consideration of (i) the terms of the Subscription Agreement and the Capitalisation Agreements, and the transactions contemplated under the respective agreements; and (ii) the Whitewash Waiver, except for its inclusion in the Circular, is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purposes, without our prior written consent.

28 -

Letter from messis CapitaL

priNCipaL faCtors aND reasoNs CoNsiDereD

In arriving at our advice with regard to (i) the terms of the Subscription Agreement and the Capitalisation Agreements, and the transactions contemplated under the respective agreements; and (ii) the Whitewash Waiver, we have taken into consideration the following factors and reasons:

1. review of historical performance of the Group

The table below summaries the consolidated financial results of the Group for each of the three years ended 31 March 2011 as extracted from the Group’s annual report for the year ended 31 March 2011 (the “ 2011 annual report ”) and for the year ended 31 March 2010 (the “ 2010 annual report ”) and the Group’s third quarterly report for the nine months ended 31 December 2011 (the “ 2011 third Quarterly report ”):

table a – summary of the consolidated financial results of the Group

Turnover
– Trading
– Property holding and
management
– Filmed entertainment,
online games and
licensing businesses
– Cinema
Gross profit
Loss before taxation
Loss attributable to
the Shareholders

for the nine months
ended 31 December
for the year ended 31 march
2011
2010
2011
2010
2009
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
(Unaudited) (Unaudited)
(Audited)
(Audited)
(Audited)
177,660
486,919
557,637
687,987
213,195
166,875
478,195
547,359
678,730
212,683
–
6,965
8,199
9,257
512
8,810
1,759
2,079
–
–
1,975
–
–
–
–

9,685
3,465
6,701
3,965
2,606

(58,722 )
(136,166 )
(166,762 )
(52,835 )
(40,971 )
(57,731 )
(127,105 )
(156,921 )
(32,916 )
(95,531 )

29 -

Letter from messis CapitaL

For the nine months ended 31 December 2011, the Group recorded a turnover of HK$177,660,000, representing a decrease of approximately 63.5% as compared with HK$486,919,000 for the nine months ended 31 December 2010. As explained in the 2011 Third Quarterly Report, the fall in turnover during the period was mainly attributable to the decrease in trading income by approximately 65.1% to HK$166,875,000 due to intense competition and deteriorating market conditions. In 2011, the Group was shifting business strategy more focus onto the newly developing filmed entertainment, online games and licensing business and cinema business and generated a total income of HK$10,785,000 for the period ended 31 December 2011, representing an increase of approximately 513.1% as compared with HK$1,759,000 for the period ended 31 December 2010. The Group’s gross profit for the nine months ended 31 December 2011 increased to HK$9,685,000 from HK$3,465,000 in the previous corresponding period. The Group’s loss attributable to the Shareholders for the nine months ended 31 December 2011 was approximately HK$57,731,000 as compared with a loss of HK$127,105,000 for the period ended 31 December 2010. As explained in the 2011 Third Quarterly Report, the improvement on the results of the Group for the period ended 31 December 2011 was mainly attributable to the decrease in shared-based payments recognized during the period.

For the year ended 31 March 2011, the Group recorded a turnover of HK$557,637,000, representing a decrease of approximately 18.9% from HK$687,987,000 in the preceding financial year. The Group’s gross profit for the year ended 31 March 2011 increased to HK$6,701,000 from HK$3,965,000 in the previous financial year. The Group’s loss attributable to the Shareholders increased by approximately 376.7% from HK$32,916,000 for the year ended 31 March 2010 to HK$156,921,000 for the year ended 31 March 2011. As explained in the 2011 Annual Report, the negative effect on the results of the Group for the year ended 31 March 2011 was mainly attributable to recognition of convertible bonds and shares options at fair values under shared-based payments during the year ended 31 March 2011.

For the year ended 31 March 2010, the Group recorded a turnover of HK$687,987,000, representing a sharp increase of approximately 222.7% as compared to HK$213,195,000 for the year ended 31 March 2009. The Group’s gross profit for the year ended 31 March 2010 increased to HK$3,965,000 from HK$2,606,000 in the previous financial year. The Group’s loss attributable to the Shareholders for the year ended 31 March 2010 was HK$32,916,000, representing a significant drop of approximately 65.5% from the preceding financial year. According to the 2010 Annual Report, the decrease in the loss for the year ended 31 March 2010 was mainly attributable to the gain arising from the disposal of the entire 100% shareholding interest in Photar International Limited, the Group’s manufacturing business which involved the manufacturing and sale of mobile phones and DVD players.

The table below shows the consolidated statement of financial position of the Group as at 30 September 2011, 31 March 2011, 31 March 2010 and 31 March 2009 as extracted from the Group’s interim report for the six months ended 30 September 2011 (the “ 2011 interim report ”), 2011 Annual Report and 2010 Annual Report:

30 -

Letter from messis CapitaL

table B – Consolidated statement of financial position of the Group

as at
30 september
2011
(Unaudited)
HK$’000
Non-Current assets
Property, plants and equipment
313
Interest in the jointly controlled entities
27,886
Goodwill
15,060
Deferred tax assets
803

44,062

Current assets
Inventories
–
Trade receivables
45,033
Other receivables, deposits and prepayments
19,300
Security deposit to a related company
–
Pledged bank deposit
–
Film in progress
67,032
Bank balances and cash
46,649

178,014
Assets classified as held for sale
–

178,014

Current Liabilities
Trade payables
44,497
Deposits received,
other payables and accruals
51,085
Promissory note
–
Amount due to an associate
–
Amount due to non-controlling interests
–
Tax payables
734
Obligation under finance lease
–
Bank loans, secured
–
Convertible bonds
51,155

147,471
Liabilities associated with
assets classified as held for sale
–

147,471

Net Current assets/(Liabilities)
30,543

total assets Less Current Liabilities
74,605

as at 31 march

2011
2010
2009
(Audited) (Audited)
(Audited)

HK$’000
HK$’000
HK$’000
(restated)

578
2,182
3,039

–
–
–

15,060
7,556
2,700

803
–
–

16,441
9,738
5,739

24,710
–
15,050

322
1,177
5,395

4,262
54,245
5,307

–
–
800

–
–
150

8,389
–
–

116,765
9,796
15,324

154,448
65,218
42,026

–
320,000
578

154,448
385,218
42,604

–
8,236
2,740

34,090
61,589
20,899

–
–
900

–
147
63

–
483
966

736
631
313

–
83
–

–
155,000
–

49,182
–
–

84,008
226,169
25,881

–
–
19,185

84,008
226,169
45,066

70,440
159,049
(2,462)

86,881
168,787
3,277

31 -

Letter from messis CapitaL

30 Non-Current Liabilities Obligation under finance lease Convertible bonds Deferred tax liability Net assets Current ratio (Note 1) Debt ratio (Note 2)	as at september 2011 (Unaudited) HK$’000 – 8,156 – 8,156 66,449 1.21 0.70	as at 31 march 2011 2010 2009 (Audited) (Audited) (Audited) HK$’000 HK$’000 HK$’000 (restated) – 111 – 8,156 72,645 – – 9,061 – 8,156 81,817 – 78,725 86,970 3,277 1.84 1.70 0.95 0.54 0.78 0.93	as at 31 march 2011 2010 2009 (Audited) (Audited) (Audited) HK$’000 HK$’000 HK$’000 (restated) – 111 – 8,156 72,645 – – 9,061 – 8,156 81,817 – 78,725 86,970 3,277 1.84 1.70 0.95 0.54 0.78 0.93
			–
			3,277

			0.95 0.93

Notes:

The current ratio is calculated by dividing current assets by current liabilities.
The debt ratio is calculated by dividing total liabilities by total assets.

As shown in Table B, the non-current assets of the Group increased from HK$16,441,000 as at 31 March 2011 to HK$44,062,000 as at 30 September 2011 mainly due to the recognition of interest in the jointly controlled entity of HK$27,886,000 as at 30 September 2011. We note from the 2011 Interim Report that the Company entered into the memorandum of understanding with CineChina Limited on 13 April 2011 in relation to formation of the joint venture for investment in and management of highend digital cinemas in the PRC. CineChina Limited undertakes to the Company that it shall introduce not less than 36 cinemas with not less than 260 screens and 30,000 seats in aggregate within 3 years after the formation of the joint venture, subject to the Company being satisfied with the results of its due diligence review on such potential cinema projects. The current assets of the Group amounted to HK$178,014,000 as at 30 September 2011 (HK$154,448,000 as at 31 March 2011). Within current assets, film in progress increased sharply from HK$8,389,000 as at 31 March 2011 to HK$67,032,000 as at 30 September 2011. The current liabilities of the Group increased from HK$84,008,000 as at 31 March 2011 to HK$147,471,000 as at 30 September 2011 mainly due to increase in trade payables, deposits received, other payables and accruals. The net current assets and net assets as at 30 September 2011 amounted to HK$30,543,000 and HK$66,449,000 respectively.

The Group’s current assets reduced from HK$385,218,000 as at 31 March 2010 to HK$154,448,000 as at 31 March 2011 mainly due to assets classified as held for sale of HK$320,000,000 recognized in 2010 but not in 2011. The current liabilities of the Group decreased from HK$226,169,000 as at

32 -

Letter from messis CapitaL

31 March 2010 to HK$84,008,000 as at 31 March 2011 mainly due to the full settlement of the bank loans during the year ended 31 March 2011. The net current assets and net assets as at 31 March 2011 amounted to HK$70,440,000 and HK$78,725,000 respectively.

The Group’s current assets increased from HK$42,604,000 as at 31 March 2009 to HK$385,218,000 as at 31 March 2010 mainly due to increase in assets classified as held for sale, other receivables, deposits and prepayments. The current liabilities of the Group increased from HK$45,066,000 as at 31 March 2009 to HK$226,169,000 as at 31 March 2010 mainly attributable to increase in bank loans of HK$155,000,000 (31 March 2009: nil). Non-current liabilities increased sharply to HK$81,817,000 (31 March 2009: nil). As shown in the 2010 Annual Report, the increase was mainly due to the issue of the 2011 CBs by the Company on 7 October 2009 due on the second anniversary of the date of the issue of the bonds. The net current assets and net assets as at 31 March 2010 amounted to HK$159,049,000 and HK$86,970,000 respectively.

The Group’s current ratio (calculated by dividing currents assets over current liabilities) decreased from approximately 1.84 as at 31 March 2011 to approximately 1.21 as at 30 September 2011. The Group’s total assets amounted to HK$48,343,000 as at 31 March 2009, HK$394,956,000 as at 31 March 2010, HK$170,889,000 as at 31 March 2011 and HK$222,076,000 as at 30 September 2011. The total liabilities of the Group amounted to HK$45,066,000 as at 31 March 2009, HK$307,986,000 as at 31 March 2010, HK$92,164,000 as at 31 March 2011 and HK$155,627,000 as at 30 September 2011. The Group’s debt ratio (calculated by diving total liabilities over total assets) increased from approximately 0.54 as at 31 March 2011 to approximately 0.70 as at 30 September 2011.

The table below summaries the consolidated statement of cash flows of the Group for the six months ended 30 September 2011 and for the three years ended 31 March 2011 as extracted from the 2011 Interim Report, 2011 Annual Report and 2010 Annual Report:

table C – summary of the consolidated statement of cash flows of the Group

for the six
months ended
30 september
for the year ended 31
2011
2011
2010
(Unaudited)
(Audited)
(Audited)
HK$’000
HK$’000
HK$’000
Net cash from/(used in):
– operating activities
(38,614 )
(11,962 )
(86,711 )
– investing activities
(18,088 )
118,193
47,696
– financing activities
(13,128 )
791
33,583
Net increase/(decrease) in cash
and cash equivalents
(69,830 )
107,022
(5,432 )
Cash and cash equivalents at start of period
116,765
9,796
15,403
Effect of foreign rate exchanges
(286 )
(53 )
(175 )
Cash and cash equivalents at end of period
46,649
116,765
9,796

march

2009

(Audited)

HK$’000

(20,209 )

(8,478 )

5,289

(23,398 )

39,612

(811)

15,403

33 -

Letter from messis CapitaL

The Group recorded a net cash outflow from operating activities of HK$20,209,000, HK$86,711,000, HK$11,962,000 and HK$38,614,000 for the three years ended 31 March 2011 and for the six months ended 30 September 2011 respectively. Except for the year ended 31 March 2011, the Group recorded net decreases in cash and cash equivalents for the two years ended 31 March 2010 and for the six months ended 30 September 2011. As shown from the 2011 Annual Report, the net increase in cash and cash equivalents for the year ended 31 March 2011 was mainly due to deposit received in respect of sale of investment properties of HK$117,600,000 grouped under net cash from investing activities which is non-recurring in nature. As shown in Tables B and C, bank balances and cash decreased by approximately 60.0% from HK$116,765,000 as at 31 March 2011 to HK$46,649,000 as at 30 September 2011. According to the 2011 Interim Report, the Company has commenced the principal photography of a full length feature movie, working title as “Journey to the West – 除魔傳奇” (formerly known as “Journey to the West – 西遊記”) (“ movie project ”) during the six months ended 30 September 2011. In addition, the Company has been acting as the project manager of the Movie Project and the required funding of the Movie Project will be cash-flowed by internal resources of the Group. The Company intends to cooperate and has been in active negotiation with a number of well-known movie companies to complete the production and distribution of the Movie Project. According to the 2011 Interim Report, the Group believes that the setting up of the joint venture with CineChina Limited allows the Group to expand its operation and cinema business in the PRC and the Group will further explore new opportunities to stretch its reach into the cinema operation and development in various cities in the PRC. Based on the above, we are of the view that the Movie Project and the acquisition and development of cinema projects in the PRC will require the usage of the Group’s internal cash resources. According to the 2011 Research Report on Chinese Film Industry published by the China Film Association (中國電影家協會), it is estimated that (i) the total number of cinema screens in the PRC will increase from approximately 6,000 at the end of 2010 to over 12,000 in 2015; and (ii) the total movie box office in the PRC will increase from RMB14.5 billion in 2011 to RMB41.0 billion in 2015. Based on the above, we are of the view that there are growth opportunities in the movie and cinema industries in the PRC in the next few years and the development of the Group’s movie and cinema businesses will provide future income to the Group.

Having considered that (i) the Group had net cash outflow from operating activities for the past three years ended 31 March 2011 and for the six months ended 30 September 2011; (ii) the Group recorded net decreases in cash and cash equivalents for the past two years ended 31 March 2010 and for the six months ended 30 September 2011 while the net increase in cash and cash equivalents for the year ended 31 March 2011 was due to cash inflow arising from sale of investment properties which is non-recurring in nature; (iii) the funding of the Movie Project and the acquisition and development of cinema projects in the PRC requires the Group’s internal cash resources; (iv) the Group’s debt ratio increased while its current ratio decreased during the six months ended 30 September 2011; and (v) there are growth opportunities in the movie and cinema industries in the PRC in the next few years, we are of the view that it is necessary and expedient for the Group to preserve its cash resources and alleviate its present/future liabilities so as to improve the overall liquidity and financial stability position in view of the current uncertain business and economic environment all over the world. Therefore, we consider that the Subscription and the Capitalisation, which enable the Company to raise additional funding to develop the Group’s movie and cinema businesses, are in the interests of the Company and the Shareholders as a whole.

34 -

Letter from messis CapitaL

2. Background and reasons for the subscription and the Capitalisation and use of proceeds

As advised by the Directors, it has been the business strategy of the Group to put more focus on its cinema business since 2011 with a view to capitalising on the highly promising prospects of the cinema industry in the PRC and it is the vision of the Group to become one of the leading cinema investment and management companies in the PRC in the future.

As set out in the Letter from the Board, the Group entered into certain agreements on 17 May 2011 in relation to the acquisition of four cinemas in Chongqing, Chengdu and Shanghai, the PRC at an aggregate consideration of approximately RMB29.9 million (equivalent to approximately HK$36.8 million), of which approximately RMB12.9 million (equivalent to approximately HK$15.9 million) was still outstanding as at the Latest Practicable Date. As at the Latest Practicable Date, completion of the acquisition of one of the two cinema projects in Chongqing and the cinema project in Shanghai had taken place. The conditions precedent to completion of the acquisition of the remaining two cinema projects in Chongqing and Chengdu have been fulfilled and the Company expects that completion will take place by the end of February 2012. On 9 June 2011, the Group also entered into a formal agreement with CineChina Limited in relation to the formation of a joint venture for the purpose of identifying suitable investment opportunities in high-end digital cinemas in the PRC. To further strengthen the Group’s portfolio of cinemas in the PRC, on 9 June 2011, Bingo Cinema Investment Company Limited (formerly known as Shine Wisdom Limited), a wholly-owned subsidiary of the Company, entered into a transfer agreement to accept the assignment of certain leasing agreements in relation to the leasing of premises for development into four cinemas located in Linan, Hangzhou, Zhongshan and Tianjin, the PRC. The four cinemas under the aforesaid leasing agreements are all located in central commercial districts in the respective cities with steady stream of people. The development of the cinemas in Linan and Hangzhou has been completed and the two cinemas have commenced commercial operations since December 2011. As at the Latest Practicable Date, completion of the transfer of leasing agreements in respect of the two remaining cinemas in Zhongshan and Tianjin are still subject to due diligence review being conducted by the Group. On 12 July 2011, the Group also entered into two memorandum of understandings in relation to potential development of two cinema projects in Tieling and Dongguan, the PRC. According to the 2011 Research Report on Chinese Film Industry published by the China Film Association (中國電影家協會), it is estimated that (i) the total number of cinema screens in the PRC will increase from approximately 6,000 at the end of 2010 to over 12,000 in 2015; and (ii) the total movie box office in the PRC will increase from RMB14.5 billion in 2011 to RMB41.0 billion in 2015. Based on the above, we are of the view that there are growth opportunities in the cinema industry in the PRC in the next few years and the development and acquisitions of the above mentioned cinema projects will provide future income to the Group. As at the Latest Practicable Date, the total estimated construction and development costs for the cinema projects in Linan and Hangzhou was approximately RMB33.5 million (equivalent to approximately HK$41.3 million), of which RMB7.5 million (equivalent to approximately HK$9.2 million) remain outstanding. In order to meet the financial obligations of the Group, at the request of the Company, Beglobal agreed to advance a bridging loan of HK$5,000,000 which is unsecured, carries interest at the rate of 5% per annum and shall be repayable on or before 31 March 2012. The interest rate of 5% per annum of the bridging loan was determined after arm’s length negotiation between the Company and Beglobal with reference to the prevailing prime rate for Hong Kong dollars quoted by The Hongkong

35 -

Letter from messis CapitaL

and Shanghai Banking Corporation Limited and taking into account that the loan is unsecured. The bridging loan had been used to settle certain capital expenditures of the Group’s aforesaid cinema projects due in January 2012. The Company intends to settle the aforesaid bridging loan by setting off the equivalent amount of payment obligation of Beglobal under the Subscription upon completion of the Subscription with a view to reducing the financing cost of the Company.

As set out in the Letter from the Board, on 7 October 2009, the Company issued the 2011 CBs in an aggregate principal amount of HK$78 million, which accrued interest since the first anniversary of its issuance at the rate of 5% per annum. The 2011 CBs entitled the holders thereof to convert the outstanding principal amount into new Shares at the conversion price of HK$0.90 per Share and were redeemable by the Company on 7 October 2011 at its principal amount. As at 7 October 2011, the 2011 CBs in the principal amount of HK$48,750,000 were still outstanding and the Company is obliged to redeem such convertible bonds. According to the 2011 Interim Report, the Group had unaudited cash and bank balances of approximately HK$46.6 million. Taking into account the financial position of the Group, the capital expenditures for the Group’s cinema project and administrative and overhead costs of the Group, the Group was not able to redeem the 2011 CBs and pay the accrued interest thereon at the maturity date unless the Group obtains new funds from equity fund raising or borrowings. The Company therefore has not redeemed the 2011 CBs at their maturity. The non-redemption of the 2011 CBs upon their maturity technically constituted an event of default on the part of the Company and the Loans become due for repayment if any of the Creditors serves a notice on the Company.

The proceeds from the issue of the Capitalisation Shares will be used as full and final settlement of the Loans in the aggregate amount of HK$51,187,500 owed by the Company to the Creditors.

Having considered that (i) the Group needs to preserve its cash resources given that it has generated net cash outflow from operating activities for the past few years and the Subscription allows the Company to raise additional cash for the acquisitions and development of cinema projects; (ii) the Capitalisation allows the Group to reduce its debt ratio and to remove entirely the repayment pressure of the Loans on the Group while at the same time retaining cashflow of the Group for the continuous development of its cinema projects, we are of the view that the Subscription and the Capitalisation are in the interests of the Company and the Shareholders as a whole.

36 -

Letter from messis CapitaL

3. other alternative methods of financing

As stated from the Letter from the Board, the Company has been actively searching for equity fund raising opportunities over the past few months in view of the forthcoming capital requirements of the Group, particularly for its capital-intensive cinema and filmed entertainment businesses. However, the Company has been unable to secure any interest from financial institutions given the current highly volatile market condition. Apart from equity financing, the Board has also considered other financing options such as debt financing and bank borrowings to finance the capital requirements of the Group. Having considered the interest expenses which would have imposed additional interest burden to the Group and increased the gearing level of the Group, the Board is of the view that such financing means may not be appropriate to the Group given its current financial position.

Given that the Group’s debt ratio increased during the six months ended 30 September 2011 as analyzed under the section headed “Review of historical performance of the Group” above, we consider that taking on additional debt financing or bank borrowings will increase the Group’s total liabilities and hence its debt ratio. Furthermore, the use of new debt or bank loans will inevitably incur additional interest expense and the Company will be required to repay such debt or bank loans upon maturity within a short period of time if the maturity of the debt or loans is short-term. Other forms of equity fund raising such as rights issue or open offer may incur substantial costs to the Company in the form of underwriting commission, as a typical rights issue or open offer would involve the engagement of underwriter(s). As advised by the Company, it is difficult to find an underwriter under the current market conditions and as a measure of support from Beglobal and the Creditors, the Subscription Shares and the Capitalisation Shares, when issued and fully paid, will be subject to a lock-up period of six months from the date of completion of the Subscription and the Capitalisation respectively. According to the website of the Stock Exchange, the total number of rights issues and open offers conducted by listed companies on GEM in the fourth quarter 2010, the first quarter 2011, the second quarter 2011, the third quarter 2011 and the fourth quarter 2011 was 6, 4, 4, 4 and 1 respectively while the total funds raised for rights issues and open offers by listed companies on GEM in the fourth quarter 2011 amounted to approximately HK$32.9 million, representing a decrease of approximately 94.0% compared to approximately HK$545.3 million in the fourth quarter 2010. Having considered the weakening market conditions in relation to rights issues and open offers, we are of the view that it is difficult to find an underwriter under the current market conditions as a typical rights issue or open offer would involve the engagement of underwriter(s). Based on the above, we consider that (i) the Subscription represents the best available option for the Company to obtain additional funding for its working capital and future development of cinema projects in light of the current market conditions; and (ii) the Capitalisation represents the best way to settle the Loans due to the Creditors.

4. principal terms of the subscription and the Capitalisation

As stated in the Letter from the Board, the Subscription Price of HK$0.03 per Subscription Share and the Capitalisation Price of HK$0.03 per Capitalisation Share were determined after arm’s length negotiations between the Company and Beglobal and between the Company and the Creditors respectively taking into account, among other things, (i) the recent market price of the Shares; (ii) the prevailing market condition; and (iii) the unaudited consolidated net asset value of the Group as at 30 September 2011.

37 -

Letter from messis CapitaL

The Subscription Price and the Capitalisation Price of HK$0.03 represents:

(a) a discount of approximately 59.46% to the closing price of HK$0.074 per Share as quoted on the Stock Exchange on the Last Trading Day;
(b) a discount of approximately 58.90% to the average of the closing prices of the Share as quoted on the Stock Exchange over the last 5 trading days up to and including the Last Trading Day of approximately HK$0.073 per Share;
(c) a discount of approximately 58.33% to the average of the closing prices of the Share as quoted on the Stock Exchange over the last 10 trading days up to and including the Last Trading Day of approximately HK$0.072 per Share;
(d) a discount of approximately 62.03% to the average of the closing prices of the Share as quoted on the Stock Exchange over the last 30 trading days up to and including the Last Trading Day of approximately HK$0.079 per Share;
(e) a discount of approximately 71.43% to the closing price of HK$0.105 per Share as quoted on the Stock Exchange on the Latest Practicable Date;
(f) a premium of approximately 36.36% over the unaudited net asset value of approximately HK$0.022 per Share as at 30 September 2011 (based on the unaudited consolidated net assets of the Group of approximately HK$66,449,000 as at 30 September 2011 as shown in the Company’s interim report for the six months ended 30 September 2011 and 3,090,559,126 Shares in issue as at the Latest Practicable Date); and
(g) a premium of 20.0% over the audited net asset value of approximately HK$0.025 per Share as at 31 March 2011 (based on the audited consolidated net assets of the Group of approximately HK$78,725,000 as at 31 March 2011 as shown in the Company’s annual report for the year ended 31 March 2011 and 3,090,559,126 Shares in issue as at the Latest Practicable Date).

Shareholders are reminded that both the Subscription Shares and the Capitalisation Shares, when issued and fully paid, will be subject to a lock-up period of six months from the date of completion of the Subscription and the Capitalisation respectively.

38 -

Letter from messis CapitaL

Historical performance of Share price

Chart A shows the Subscription Price/Capitalisation Price and the closing prices of the Shares as quoted on the Stock Exchange during the period commencing from 3 January 2011 to the Latest Practicable Date (the “ review period ”):

Chart a – share price performance

==> picture [399 x 288] intentionally omitted <==

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

Share price (HK$)
Closing Price
0.3
Subscription Price/
Capitalisation Price
0.25
0.2
0.15
0.1
Subscription Price/Capitalisation Price of
HK$0.03
0.05
0
Source: website of the Stock Exchange (www.hkex.com.hk)
Jan 2011Feb 2011Mar 2011Apr 2011May 2011Jun 2011Jul 2011Aug 2011Sep 2011Oct 2011Nov 2011Dec 2011Jan 2012Feb 2012
----- End of picture text -----

Note: Trading of the Shares was suspended from 19 April 2011 to 21 April 2011 and 13 January 2012 to 19 January 2012, both days inclusive.

From Chart A, the closing price of the Shares showed a general increasing trend at the start of the Review Period when it started to rise from HK$0.123 on 18 March 2011 to HK$0.244 on 18 April 2011 (which is the highest closing price during the Review Period). We note that the increase occurred when (i) the Company announced on 13 April 2011 that it entered into the memorandum of understanding with CineChina Limited in relation to formation of the joint venture for investment in and management of high-end digital cinemas in the PRC; and (ii) the Company published an announcement on 18 April 2011 (after trading hours) in relation to placing of existing Shares and subscription of new Shares. Since then, the closing price of the Shares showed a decreasing trend and reached HK$0.061 on 3 October 2011 which is the lowest closing price during the Review Period. As illustrated in the chart above, the Subscription Price/Capitalisation Price of HK$0.03 was always lower than the closing price of the Shares during the Review Period. As at the Latest Practicable Date, the closing price of the Shares was HK$0.105 which represents a premium of 250% to the Subscription Price/Capitalisation Price.

39 -

Letter from messis CapitaL

Trading liquidity of the Shares

Chart B sets out the daily trading volume of the Shares during the Review Period:

Chart B – trading volume of the shares

==> picture [422 x 234] intentionally omitted <==

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

300,000,000
250,000,000
200,000,000
150,000,000
100,000,000
50,000,000
0
Jan 2011Feb 2011Mar 2011Apr 2011May 2011Jun 2011Jul 2011Aug 2011Sep 2011Oct 2011Nov 2011Dec 2011Jan 2012Feb 2012
----- End of picture text -----

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

40 -

Letter from messis CapitaL

Table C below sets out the monthly trading volume, the average daily number of Shares traded per month and the respective percentage daily trading volume compared with the issued share capital and the public float respectively during the Review Period:

table C – trading volume of the shares

				percentage of	percentage of
			percentage of	average daily
			average daily	trading volume to
			trading volume to	total number of
	total monthly	average daily	total number of	shares held by the
month	trading volume	trading volume	shares in issue	public shareholders
	(in number of Shares)	(in number of Shares)	(%)		(%)
		(Note 1)	(Note 2)		(Note 3)
2011
January	140,356,250	6,683,631	0.22%		0.32%
February	56,944,000	3,163,556	0.10%		0.15%
March	398,301,000	17,317,435	0.56%		0.83%
April	1,162,868,800	77,524,587	2.51%		3.71%
May	174,724,000	8,736,200	0.28%		0.42%
June	211,494,000	10,071,143	0.33%		0.48%
July	204,130,000	10,206,500	0.33%		0.49%
August	86,141,800	3,745,296	0.12%		0.18%
September	81,956,000	4,097,800	0.13%		0.20%
October	214,620,000	10,731,000	0.35%		0.51%
November	164,852,000	7,493,273	0.24%		0.36%
December	82,368,000	4,118,400	0.13%		0.20%
2012
January	49,800,000	3,830,769	0.12%		0.18%
February (up to the Latest
Practicable Date)	170,920,000	10,682,500	0.35%		0.51%

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

Notes:

Average daily trading volume is calculated by dividing the total trading volume of the Shares for the month/period by the number of trading days during the month/period.
Based on 3,090,559,126 Shares in issue as at the Latest Practicable Date.
Based on 2,088,853,127 Shares held by public Shareholders as at the Latest Practicable Date.
41 -

Letter from messis CapitaL

As illustrated above, during the Review Period, the average daily trading volume of the Shares as a percentage of the average total number of issued Shares ranged from 0.10% to 2.51% while the average daily trading volume of the Shares as a percentage of the average total number of Shares held by the public Shareholders ranged from 0.15% to 3.71%. The highest average daily trading volume of the Shares occurred in April 2011 when the Company announced on 13 April 2011 that it entered into the memorandum of understanding with CineChina Limited in relation to formation of the joint venture for investment in and management of high-end digital cinemas in the PRC. Since April 2011, the percentage of average daily trading volume of the Shares to the total number of Shares and to the total number of Shares held by the public Shareholders showed a general decreasing trend which coincides with the decreasing trend in the closing price of the Shares as shown in Chart A. Given the low liquidity of the Shares in recent months and the fact that it is difficult to find an underwriter under the current market conditions as analyzed under the section headed “Other alternative methods of financing” above, we consider that it would be difficult for the Company to conduct equity fund raising activities such as placing, rights issue or open offer under the current market condition as a typical rights issue or open offer would involve the engagement of underwriter(s).

Comparison with the Comparable Companies

In assessing the fairness and reasonableness of the Subscription Price and the Capitalisation Price, we have conducted a comparable analysis based on the identification of companies listed on GEM which (i) engage in businesses similar to those of the Group with the majority of assets related to film and entertainment businesses; and (ii) announced subscription or placement of new shares to be issued under specific mandate and represent more than 20% of the issued share capital of the respective GEM listed companies for the period from 1 January 2011 up to 19 January 2012 (being the date of the Announcement). We have excluded open offer or rights issue in our comparison because we consider that the nature of subscription or placement of new shares is different compared to open offer or rights issue as the latters would typically involve the engagement of underwriter(s) and the involvement of the existing shareholders. Therefore, the discounts of the subscription price under open offer or rights issue may not be directly comparable to that under subscription or placement of new shares. In general, in assessing whether a business segment is principal to a company, we consider it is a justifiable basis to make reference to the assets from a business segment which contributes more than half of the total assets of a company. Based on the above, we have thus identified an exhaustive list of 2 companies (the “ Comparable Companies ”) by searching through published information on the Stock Exchange’s website. We consider that the Comparable Companies represent an exhaustive list and are fair and representative samples for comparison as the principal business of the Comparable Companies is similar to that of the Group. We have excluded GEM listed companies whose principal businesses are not similar to those of the Group since the subscription or placement of new shares announced by these companies may not be directly comparable to the Subscription and Capitalisation due to different nature of businesses. The findings in relation to the Comparable Companies are summarized in the table below:

42 -

Letter from messis CapitaL

table D – the Comparable Companies

							premium over/
					average		(discount to)
					closing price		the average
					of the last		closing price
					5 trading days	premium over/	of the last
					up to and	(discount to)	5 trading days
				Closing	including	the closing	up to and
Date of	Company name		subscription/	price at last	the last	price on the	including the
announcement	(stock code)	principal activities	placing price	trading day	trading day	last trading day	last trading day
			(HK$)	(HK$)	(HK$)	(%)	(%)
10-Jan-12	China 3D Digital	Artiste management services;	0.08	0.158	0.158	(49.37)%	(49.37)%
	Entertainment	film and television
	Limited (8078)	programme production,
		distribution and licensing
31-Mar-11	Media Asia Group	Event organisation and event	(i) 0.016	0.385	0.372	(95.84)%	(95.70)%
	Holdings Limited	management; investment,	(ii) 0.02785	0.385	0.372	(92.77)%	(92.51)%
	(8075)(Note)	production, sale and
		distribution of films;
		development and licensing
		of software and technology
		for use in connection with
		the provision of value added
		telecommunications services
					maximum	(49.37)%	(49.37)%
					minimum	(95.84)%	(95.70)%
					average	(79.33)%	(79.19)%
19-Jan-12	The Company (8220)	Sales and trading of coal and	0.03	0.074	0.073	(59.46)%	(58.90)%
		palm oil; movie production,
		licensing and derivatives,
		crossover marketing,
		provision of interactive
		contents and cinema
		investment and management

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

Note: According to the announcement of Media Asia Group Holdings Limited dated 31 March 2011, there are two subscription prices which are HK$0.016 and HK$0.02785 respectively for four tranches of subscription shares to four different share subscribers.

43 -

Letter from messis CapitaL

As shown in Table D above, the subscription/placing prices of the Comparable Companies range from (i) a discount of approximately 49.37% to 95.84% to the closing price on the last trading day (the “ market range ”) with an average discount of approximately 79.33%; and (ii) a discount of approximately 49.37% to 95.70% to the average closing price of the last five trading days up to and including the last trading day (the “ 5-day market range ”) with an average discount of approximately 79.19%. The discounts of the Subscription Price and the Capitalisation Price to the closing price on the Last Trading Day and the average closing price of the last five trading days up to and including the Last Trading Day of 59.46% and 58.90% respectively fall within the corresponding Market Range and 5-day Market Range and are better than the corresponding average discount of the Comparable Companies.

Having considered that (i) the Group incurred losses attributable to the Shareholders in the past few years; (ii) both the Group’s current ratio and debt ratio deteriorated during the six months ended 30 September 2011 and the Group recorded net cash outflow from operating activities for the past few years as analysed under the section headed “Review of historical performance of the Group”; (iii) the risk of possible legal actions that may be brought by the Creditors against the Group if the Loans cannot be capitalised by way of allotment and issue of the Capitalisation Shares pursuant to the Capitalisation Agreements, completion of which is conditional upon the Subscription Agreement having become unconditional; (iv) as analyzed under the section headed “Other alternative methods of financing” above, the lock-up of the Subscription Shares and the Capitalisation Shares provides a measure of support from Beglobal and the Creditors to the Company given that it is difficult to find an underwriter under the current market conditions and the lock-up period allows further commitment from Beglobal and the Creditors in relation to the future development of the Company; and (v) the discounts of the Subscription Price and the Capitalisation Price to the closing price on the Last Trading Day and the average closing price of the last five trading days up to and including the Last Trading Day of 59.46% and 58.90% respectively fall within the corresponding Market Range and 5-day Market Range and are better than the corresponding average discount of the Comparable Companies, we consider that the terms of the Subscription and the Capitalisation are fair and reasonable so far as the Independent Shareholders are concerned.

5. financial effects of the subscription and the Capitalisation

Working capital

According to the 2011 Interim Report, the unaudited current assets and current liabilities of the Group amounted to HK$178,014,000 and 147,471,000 respectively as at 30 September 2011, translating into a current ratio (current assets/current liabilities) of approximately 1.21 and net current assets of HK$30,543,000. Upon completion of the Subscription, the liquidity and cash position of the Group will be improved as the Subscription will facilitate the Company to raise aggregate net proceeds of approximately HK$37 million. Upon completion of the Capitalisation, the Loans owed by the Company will be fully settled and hence the current liabilities of the Group will be reduced. Accordingly, the net current assets and current ratio of the Group are expected to be improved upon completion of the Subscription and the Capitalisation.

44 -

Letter from messis CapitaL

Net asset value

According to the 2011 Interim Report, the Group’s unaudited consolidated net assets as at 30 September 2011 amounted to approximately HK$66,449,000 translating into an unaudited net asset value per Share of approximately HK$0.022 (based on 3,090,559,126 Shares in issue as at the Latest Practicable Date). Upon completion of the Subscription and the Capitalisation, the net asset value of the Group will be improved as the Subscription and the Capitalisation would increase the share capital of the Group. Accordingly, the completion of the Subscription and the Capitalisation will have a positive impact on the net asset value of the Group. Furthermore, since the Subscription Price and the Capitalisation Price represent a premium of approximately 36.36% over the unaudited net asset value per Share of approximately HK$0.022, the net asset value per Share of the Group will be increased upon completion of the Subscription and the Capitalisation.

Earnings

Save for the expenses relating to the Subscription, the Subscription and the Capitalisation will not have any immediate material impact on the earnings of the Company since the Subscription and the Capitalisation are equity transactions in nature. Hence, there will be no material effect on the earnings of the Company upon completion of the Subscription and the Capitalisation. Since 1,300,000,000 Subscription Shares and 1,706,249,999 Capitalisation Shares will be issued upon completion of the Subscription and the Capitalisation, there will be dilution effect on the earnings per Share of the Group.

Gearing and current ratio

The debt ratio of the Group, being the ratio of total liabilities to total assets increased from approximately 0.54 as at 31 March 2011 to 0.70 as at 30 September 2011. Meanwhile, the Group’s current ratio decreased from approximately 1.84 as at 31 March 2011 to approximately 1.21 as at 30 September 2011. Upon completion of the Subscription and the Capitalisation, the Company’s current assets and thus total assets will be increased while current liabilities and thus total liabilities will be decreased. Therefore, both the Group’s current ratio and debt ratio are expected to improve upon completion of the Subscription and the Capitalisation.

Based on the above, the Subscription and the Capitalisation would have an overall positive effect on the financial position of the Group in terms of net asset value, working capital, current ratio and gearing upon completion of the Subscription and the Capitalisation. Meanwhile, the Subscription and the Capitalisation will not have any material impact on earnings of the Group. In spite of the dilution effect on the earnings per Share, the Group’s overall financial position will be strengthened upon completion of the Subscription and the Capitalisation. Taken into account that the additional funds raised from the Subscription can allow the Company to acquire and develop cinema projects in the PRC which may provide future earnings to the Group, we are of the view that the dilution in earnings per Share of the Group upon completion of the Subscription and the Capitalisation to be acceptable. Accordingly, we are of the view that the Subscription and the Capitalisation are in the interests of the Company and the Shareholders as a whole.

45 -

Letter from messis CapitaL

6. effect on the shareholding structure of the Company

As shown in the Letter from the Board under the sub-section headed “Shareholding structure of the Company”, the shareholding in the Company held by the existing public Shareholders will be diluted from approximately 67.59% as at the Latest Practicable Date to approximately 45.64% immediately after the allotment and issue of the Subscription Shares and the the Capitalisation Shares. Notwithstanding the dilution of the existing public Shareholders, having taken into account (i) the need for the Group to preserve its cash resources and alleviate its present/future liabilities so as to improve the overall liquidity and financial stability position in view of the current uncertain business and economic environment; and (ii) the issue of the Subscription Shares and the Capitalisation Shares will strengthen the capital base of the Company and enhance the net asset value, working capital, current ratio and gearing of the Group, we are of the view that the dilution to the shareholding of the existing public Shareholders is acceptable so far as the Independent Shareholders are concerned.

7. Whitewash Waiver

As set out in the Letter from the Board, Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure and parties acting in concert with any of them will be interested in an aggregate of 2,205,000,000 Shares, representing approximately 50.22% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares immediately after completion of the Subscription. Taking into account the 1,011,969,926 Capitalisation Shares to be issued to Beglobal pursuant to the Capitalisation Agreement, Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure and parties acting in concert with any of them will be interested in 3,216,969,926 Shares, representing approximately 52.76% of the issued share capital of the Company upon completion of the Subscription and the Capitalisation. Under Rule 26 of the Takeovers Code, Beglobal is required to make a general offer for all the issued securities in the Company not already owned or agreed to be acquired by Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure and parties acting in concert with any of them as a result of the issue of the Subscription Shares to Beglobal. In this regard, Beglobal has made an application to the Executive for the Whitewash Waiver and the Executive has indicated that it will grant the Whitewash Waiver subject to, among other things, the approval of the Independent Shareholders at the EGM by way of poll.

The Subscription is conditional upon, among other things, the granting of the Whitewash Waiver by the Executive and the approval of the Whitewash Waiver by the Independent Shareholders at the EGM. The aforesaid condition is not capable of being waived. If the Whitewash Waiver is not granted, the Subscription will not proceed. As completion of the Capitalisation is conditional upon, among other things, the Subscription Agreement having become unconditional, if the Subscription does not proceed, completion of the Capitalisation will not take place.

46 -

Letter from messis CapitaL

Having considered the benefits of the Subscription and the Capitalisation as mentioned in the previous sections in this letter, in particular, (i) the Subscription allows the Company to raise additional cash given that the Group generated net cash outflow from operating activities for the past few years and the funding of the Movie Project requires the Group’s internal cash resources; (ii) the Capitalisation allows the Group to reduce its debt ratio and to remove entirely the repayment pressure of the Loans on the Group and to mitigate the risk of possible legal actions that may be brought by the Creditors against the Group; (iii) the Subscription represents the best available option for the Company to obtain additional funding for its working capital and future development of cinema projects in light of the current market conditions and the Capitalisation represents the best way to settle the Loans due to the Creditors; and (iv) the Subscription and the Capitalisation would have an overall positive effect on the financial position of the Group in terms of net asset value, working capital, current ratio and gearing upon completion of the Subscription and the Capitalisation, and that the lock-up of the Subscription Shares and the Capitalisation Shares provides a measure of support from Beglobal and the Creditors to the Company, we are of the view that the granting of the Whitewash Waiver is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

reCommeNDatioN

Having taken into account the above principal factors and reasons, in particular,

(i) the Group recorded net decreases in cash and cash equivalents for the past two years ended 31 March 2010 and for the six months ended 30 September 2011 while the net increase in cash and cash equivalents for the year ended 31 March 2011 was due to cash inflow arising from sale of investment properties which is non-recurring in nature;
(ii) the Group incurred losses attributable to Shareholders in the past few years and the development and acquisitions of cinema projects will provide future income to the Group in light of the growth opportunities in the cinema industry in the PRC in the next few years;
(iii) the Subscription allows the Company to raise additional funding for the acquisition and development of cinema projects including but not limited to the Movie Project;
(iv) the Capitalisation allows the Group to reduce the debt ratio and to remove entirely the repayment pressure of the Loans on the Group as well as mitigating the risk of possible legal actions that may be brought by the Creditors against the Group;
(v) the Group’s difficulty in obtaining alternative methods of financing in view of the current volatile market conditions;
(vi) the Subscription represents the best available options for the Company to obtain additional funding for its working capital and future development of cinema projects whereas the Capitalisation represents the best way to settle the Loans due to the Creditors;
47 -

Letter from messis CapitaL

(vii) the discounts of the Subscription Price and the Capitalisation Price to the closing price on the Last Trading Day and the average closing price of the last five trading days up to and including the Last Trading Day of 59.46% and 58.90% respectively fall within the corresponding Market Range and 5-day Market Range and are better than the corresponding average discount of the Comparable Companies;
(viii) the Subscription/Capitalisation Price represents a premium over the unaudited net asset value per Share of the Company as at 30 September 2011; and
(ix) the Group’s current ratio and debt ratio deteriorated during the six months ended 30 September 2011 and the Subscription and the Capitalisation would have an overall positive effect on the financial position of the Group in terms of net asset value, working capital, current ratio and gearing upon completion of the Subscription and the Capitalisation,

we consider that the terms of the Subscription Agreement, the Capitalisation Agreements and the Whitewash Waiver are conducted on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned, and the Subscription Agreement, the Capitalisation Agreements and the transactions contemplated under the respective agreements are in the interests of the Company and the Independent Shareholders as a whole. We also consider that the granting of the Whitewash Waiver is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole. Accordingly, we advise the GEM Listing Rules IBC to recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the EGM to approve the Subscription Agreement, the Capitalisation Agreements and the transactions contemplated thereunder. We also advise the Whitewash IBC to recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the EGM to approve the Subscription Agreement and the Whitewash Waiver.

Yours faithfully, For and on behalf of

messis Capital Limited robert siu Executive Director

48 -

finAnciAl informAtion of the group

Appendix i

1. finAnciAl SummArY

The following is a summary of (i) the audited financial results of the Group for each of the three financial years ended 31 March 2009, 2010 and 2011; (ii) the audited assets and liabilities as at 31 March 2009, 2010 and 2011; (iii) the unaudited financial results of the Group for the six months ended 30 September 2011; and (iv) the unaudited assets and liabilities of the Group as at 30 September 2011 as extracted from the published financial statements of the Group for the relevant years/period. The auditors of the Company did not issue any qualified opinion on the financial statements of the Group for each of the three years ended 31 March 2009, 2010 and 2011. The Company had no items which are exceptional or extraordinary because of size, nature or incidence, and no dividend had been paid or declared by the Company for each of the three years ended 31 March 2009, 2010 and 2011 and the six months ended 30 September 2011.

(i) consolidated income statement

continuing operations Turnover Gross profit Loss before taxation Taxation Loss for the year/period from continuing operations discontinued operations (Loss)/profit for the year/period from discontinued operations Loss for the year/period Loss attributable to: – Owners of the Company – Non-controlling interests	for the year ended 31 2009 2010 HK$’000 HK$’000 (audited) (audited) 213,195 687,987 2,606 3,965 (40,971 ) (52,835 ) (313 ) (2,719 ) (41,284 ) (55,554 ) (54,637 ) 22,042 (95,921 ) (33,512 ) (95,531 ) (32,916 ) (390 ) (596 ) (95,921 ) (33,512 )	for the six months ended march 30 September 2011 2011 HK$’000 HK$’000 (audited) (unaudited) 557,637 120,972 6,701 8,900 (166,762 ) (39,221 ) 9,841 – (156,921 ) (39,221 ) – – (156,921 ) (39,221 ) (156,921 ) (38,608 ) – (613 ) (156,921 ) (39,221 )

I-1 -

finAnciAl informAtion of the group

Appendix i

Loss per Share (cents) from continuing and discontinued operations – Basic – Diluted from continuing operations – Basic – Diluted Dividend Dividend per Share	for the year ended 31 2009 2010 HK$’000 HK$’000 (audited) (audited) (6.74 ) (1.50 ) N/A N/A (2.88 ) (2.51 ) N/A N/A – – – –	for the six months ended march 30 September 2011 2011 HK$’000 HK$’000 (audited) (unaudited) (5.34 ) (1.27 ) N/A N/A (5.34 ) (1.27 ) N/A N/A – – – –

(ii) consolidated statement of financial position

Total assets Total liabilities Net assets Equity attributable to owners of the Company Non-controlling interests Total equity	As at 31 march 2009 2010 HK$’000 HK$’000 (audited) (audited) 48,343 394,956 45,066 307,986 3,277 86,970 3,045 87,212 232 (242 ) 3,277 86,970	As at 30 September 2011 2011 HK$’000 HK$’000 (audited) (unaudited) 170,889 222,076 92,164 155,627 78,725 66,449 78,725 67,054 – (605 ) 78,725 66,449

I-2 -

finAnciAl informAtion of the group

Appendix i

2. Audited conSolidAted finAnciAl StAtementS

The following is the full text of the audited financial statements of the Group for the year ended 31 March 2011 as extracted from the annual report of the Company for the year ended 31 March 2011:

“ consolidated income statement

For the Year ended 31 March 2011

Notes continuing operations Turnover 6 Cost of sales Operating cost Gross profit Reimbursement from licensor Gain arising on change in fair value of investment properties Gain on disposal of subsidiaries 37 Other revenue and other net income 7 Selling expenses Administrative expenses Share-based payments 45 Other losses 11 Share of loss of associates 21 Finance costs 8 Loss before taxation Taxation 14 Loss for the year from continuing operations 11 discontinued operations Profit for the year from discontinued operations 9 loss for the year loss attributable to: Owners of the Company 15 Non-controlling interests loss per share (cents per share) 17 From continuing and discontinued operations Basic: Diluted From continuing operations Basic: Diluted	2011 HK$’000 557,637 (546,373 ) (4,563 ) 6,701 – – 15,540 334 (5,608 ) (50,536 ) (124,202 ) (1,368 ) (13 ) (7,610 ) (166,762 ) 9,841 (156,921 ) – (156,921 ) (156,921 ) – (156,921 ) (5.34 ) N/A (5.34 ) N/A	2010 HK$’000 687,987 (676,631 ) (7,391) 3,965 3,347 20,000 – 48 (33 ) (41,986 ) (8,950 ) (24,322 ) (84 ) (4,820) (52,835 ) (2,719) (55,554 ) 22,042 (33,512) (32,916 ) (596) (33,512) (1.50) N/A (2.51) N/A

Details of dividend payable to owners of the Company are set out in note 16.

I-3 -

finAnciAl informAtion of the group

Appendix i

consolidated statement of comprehensive income

For The Year ended 31 March 2011

loss for the year other comprehensive loss Exchange differences on translating foreign operations – Exchange differences arising during the year – Reclassification adjustment relating to foreign operations disposed during the year Other comprehensive loss for the year, net of tax total comprehensive loss for the year total comprehensive loss attributable to: Owners of the Company Non-controlling interests	2011 HK$’000 (156,921 ) (53 ) (58 ) (111 ) (157,032 ) (157,032 ) – (157,032 )	2010 HK$’000 (33,512) (290 ) (3,366) (3,656) (37,168) (36,572 ) (596) (37,168)

I-4 -

finAnciAl informAtion of the group

Appendix i

consolidated statement of financial position

At 31 March 2011

Notes NON-CURRENT ASSETS Property, plant and equipment 18 Goodwill 19 Deferred tax assets 33 CURRENT ASSETS Inventories 22 Trade receivables 23 Other receivables, deposits and prepayments 24 Security deposit to a related company Pledged bank deposit Film in progress 25 Bank balances and cash 26 Assets classified as held for sale 10 CURRENT LIABILITIES Trade payables 27 Deposits received, other payables and accruals_28_ Promissory note Amount due to an associate 21 Amount due to non-controlling interests 29 Tax payables Obligation under finance lease 30 Bank loans, secured 31 Convertible bonds 32 Liabilities associated with assets classified as held for sale 10 NET CURRENT ASSETS/(LIABILITIES) TOTAL ASSETS LESS CURRENT LIABILITIES	As at 31 march 2011 HK$’000 578 15,060 803 16,441 24,710 322 4,262 – – 8,389 116,765 154,448 – 154,448 – 34,090 – – – 736 – – 49,182 84,008 – 84,008 70,440 86,881	As at 31 march 2010 HK$’000 (restated) 2,182 7,556 – 9,738 – 1,177 54,245 – – – 9,796 65,218 320,000 385,218 8,236 61,589 – 147 483 631 83 155,000 – 226,169 – 226,169 159,049 168,787	As at 1 April 2009 HK$’000 (restated) 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

I-5 -

finAnciAl informAtion of the group

Appendix i

Notes NON-CURRENT LIABILITIES Obligation under finance lease 30 Convertible bonds 32 Deferred tax liability 33 NET ASSETS CAPITAL AND RESERVES Share capital 34 Reserves 35 Non-controlling interests TOTAL EQUITY	As at 31 march 2011 HK$’000 – 8,156 – 8,156 78,725 61,431 17,294 78,725 – 78,725	As at 31 march 2010 HK$’000 (restated) 111 72,645 9,061 81,817 86,970 54,231 32,981 87,212 (242 ) 86,970	As at 1 April 2009 HK$’000 (restated) – – – – 3,277 32,590 (29,545) 3,045 232 3,277

I-6 -

finAnciAl informAtion of the group

Appendix i

Statement of financial position

At 31 March 2011

Notes NON-CURRENT ASSETS Property, plant and equipment 18 Interests in subsidiaries 20 CURRENT ASSETS Other receivables, deposits and prepayments 24 Bank balances and cash CURRENT LIABILITIES Other payables and accruals 28 Amounts due to subsidiaries 20 Convertible bonds 32 NET CURRENT LIABILITIES TOTAL ASSETS LESS CURRENT LIABILITIES NON CURRENT LIABILITIES Convertible bonds 32 NET ASSETS CAPITAL AND RESERVES Share capital 34 Reserves 35 TOTAL EQUITY	2011 HK$’000 136 173,219 173,355 2,203 114,069 116,272 4,321 147,069 49,182 200,572 (84,300 ) 89,055 8,156 80,899 61,431 19,468 80,899	2010 HK$’000 – 157,038 157,038 443 2 445 3,504 1,649 – 5,153 (4,708) 152,330 72,645 79,685 54,231 25,454 79,685

I-7 -

finAnciAl informAtion of the group

Appendix i

consolidated statement of changes in equity

For the Year ended 31 March 2011

At 1 April 2009 Loss for the year Other comprehensive loss for the year Total comprehensive loss for the year Share consideration of HK$0.02 each for acquisition of subsidiary Issue of new shares of HK$0.02 each completed on 14 October 2009 Issue of ordinary shares under share option scheme Issuing expenses Issue of convertible bonds on 7 October 2009 Equity-settled share option arrangement Acquisition of non-controlling interests At 31 March 2010 Loss for the year Other comprehensive loss for the year Total comprehensive loss for the year Issue of convertible bonds on 1 June 2010 Issue of ordinary shares under convertible bonds Issue of new shares of HK$0.02 each under share option scheme Equity settled share option arrangement Disposal of subsidiaries At 31 March 2011	Share capital HK$’000 32,590 – – – 15,000 3,000 3,641 – – – – 54,231 – – – – 6,500 700 – – 61,431	equity component of Share contributed convertible premium surplus note HK$’000 HK$’000 HK$’000 132,897 3,930 – – – – – – – – – – 60,000 – – 12,000 – – 16,895 – – (280 ) – – – – 8,202 – – – – – – 221,512 3,930 8,202 – – – – – – – – – – – 85,910 24,662 – (3,076 ) 4,467 – – – – – – – – 250,641 3,930 91,036	Share options reserve HK$’000 2,644 – – – – – (6,669 ) – – 8,950 – 4,925 – – – – – (1,741 ) 31,123 – 34,307	Attributable to owners non- exchange Accumulated of the controlling reserve losses company interests HK$’000 HK$’000 HK$’000 HK$’000 3,714 (172,730 ) 3,045 232 – (32,916 ) (32,916 ) (596 ) (3,656 ) – (3,656 ) – (3,656 ) (32,916 ) (36,572 ) (596 ) – – 75,000 – – – 15,000 – – – 13,867 – – – (280 ) – – – 8,202 – – – 8,950 – – – – 122 58 (205,646 ) 87,212 (242 ) – (156,921 ) (156,921 ) – (111 ) – (111 ) – (111 ) (156,921 ) (157,032 ) – – – 85,910 – – – 28,086 – – – 3,426 – – – 31,123 – – – – 242 (53 ) (362,567 ) 78,725 –	total HK$’000 3,277
					(33,512 ) (3,656 )
					(37,168 )
					75,000 15,000 13,867 (280 ) 8,202 8,950 122
					86,970

					(156,921 ) (111 )
					(157,032 )
					85,910 28,086 3,426 31,123 242
					78,725

I-8 -

finAnciAl informAtion of the group

Appendix i

consolidated statement of cash flows

For the Year ended 31 March 2011

Notes CASH FLOWS FROM OPERATING ACTIVITIES Loss for the year: Adjustments for: Income tax (credit)/expenses Finance costs recognised in profit or loss Interest income Share of loss of an associate Gain on disposal of a subsidiary Gain arising on change in fair value of investment properties Depreciation and amortisation Write off of property, plant and equipment Impairment loss in respect of property, plant and equipment Impairment loss in respect of goodwill Write down of inventory Impairment loss in respect of trade and other receivables, deposits and prepayments Loss on disposal of property, plant and equipment Share-based payments Operating cash flows before working capital changes (Increase)/Decrease in inventories Decrease in trade receivables Decrease/(Increase) in other receivables, deposits and prepayments Increase in film in progress Decrease in security deposit to a related company (Decrease)/Increase in trade payables Increase/(Decrease) in other payables, accruals and deposit received Decrease in amount due to non-controlling interests CASH USED IN OPERATION Tax paid NET CASH USED IN OPERATING ACTIVITIES	2011 HK$’000 (156,921 ) (9,841 ) 7,610 (152 ) 13 (15,540 ) – 1,102 – – – – – 12 124,202 (49,515 ) (24,710 ) 393 48,761 (8,389 ) – (2,748 ) 24,301 – (11,907 ) (55 ) (11,962 )	2010 HK$’000 (33,512 ) 2,719 4,820 (4 ) 84 (22,439 ) (20,000 ) 1,225 381 1,033 5,465 14,402 2,577 867 8,950 (33,432 ) 648 4,538 (50,321 ) – 800 3,115 (11,354 ) (483) (86,489 ) (222) (86,711)

I-9 -

finAnciAl informAtion of the group

Appendix i

Notes CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of subsidiaries 36 Refund of investment costs Decrease in pledged bank deposit Purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Deposit received in respect of sale of investment properties Net cash outflow from disposal of subsidiaries 37 Interests received NET CASH FROM INVESTING ACTIVITIES CASH FLOWS FROM FINANCIAL ACTIVITIES Net proceeds from placement of new shares Proceeds from shares issued under share option scheme Repayment of promissory notes Bank loans arised Repayment of bank loan Repayment of finance lease Interest on finance lease paid Bank interest paid NET CASH GENERATED FROM FINANCING ACTIVITIES INCREASE/(DECREASE) 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 26	2011 HK$’000 195 791 – (382 ) 40 117,600 (203 ) 152 118,193 – 3,426 – – (600 ) (35 ) (4 ) (1,996 ) 791 107,022 9,796 (53 ) 116,765	2010 HK$’000 52 – 150 (525 ) 94 48,000 (79 ) 4 47,696 14,720 13,867 (900 ) 7,925 – (56 ) (6 ) (1,967) 33,583 (5,432 ) 15,403 (175) 9,796

I-10 -

finAnciAl informAtion of the group

Appendix i

notes to financial statements

For the Year ended 31 March 2011

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 20 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 Room 1201-1204, 12th Floor, Sea Bird House, 22-28 Wyndham Street, Central, 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 and investment properties which are measured at fair value, as explained in the accounting policies set out below.

In the current year, the Group has applied, for the first time, the following new standards, amendments and interpretations (“new and revised HKFRSs”) issued by the HKICPA, which are effective for the company’s financial year beginning on 1 April 2010.

HKFRSs (Amendments)	Improvements to HKFRSs issued in 2009
HKFRSs (Amendments)	Amendments to HKFRS 5 as part of Improvements to
	HKFRSs issued in 2008
HKAS 27 (as revised in 2008)	Consolidated and Separate Financial Statements
HKAS 32 (Amendments)	Classification of Rights Issues
HKAS 39 (Amendments)	Eligible Hedged Items
HKFRS 2 (Amendments)	Group Cash-settled Share-based Payment Transactions
HKFRS 3 (as revised in 2008)	Business Combinations
HK(IFRIC) – Int 17	Distributions of Non-cash Assets to Owners
HK – Int 5	Presentation of Financial Statements – Classification by
	the borrower of a Term Loan that Contains a Repayment
	on Demand Clause

HKAS 27 (as revised in 2008) “Consolidated and Separate Financial Statements” and HKFRS 3 (as revised in 2008) “Business Combinations”

The Group applies HKFRS 3 (as revised in 2008) prospectively to business combinations for which the acquisition date is on or after 1st April, 2010. The requirements in HKAS 27 (as revised in 2008) in relation to accounting for changes in ownership interests in a subsidiary after control is obtained and for loss of control of a subsidiary are also applied prospectively by the Group on or after 1st April, 2010.

I-11 -

finAnciAl informAtion of the group

Appendix i

The impact of the application of HKFRS 3 (as revised in 2008) is as follows:

HKFRS 3 (as revised in 2008) allows a choice on a transaction-by-transaction basis for the measurement of non-controlling interests at the date of acquisition either at fair value or at the non-controlling interests’ share of recognised identifiable net assets of the acquiree.
HKFRS 3 (as revised in 2008) changes the recognition and subsequent accounting requirements for contingent consideration. Previously contingent consideration was recognised at the acquisition date only if payment of the contingent consideration was probable and it could be measured reliably; any subsequent adjustments to the contingent consideration were always made against the cost of the acquisition. Under the revised Standard, contingent consideration is measured at fair value at the acquisition date; subsequent adjustments to the consideration are recognised against the cost of acquisition only to the extent that they arise from new information obtained within the measurement period (a maximum of 12 months from the acquisition date) about the fair value at the acquisition date. All other subsequent adjustments to contingent consideration classified as an asset or a liability are recognised in profit or loss.
HKFRS 3 (as revised in 2008) requires the recognition of a settlement gain or loss when the business combination in effect settles a pre-existing relationship between the Group and the acquiree.
HKFRS 3 (as revised in 2008) requires acquisition-related costs to be accounted for separately from the business combination, generally leading to those costs being recognised as an expense in profit or loss as incurred, whereas previously they were accounted for as part of the cost of the acquisition.

The application of HKFRS 3 (as revised in 2008) has no material effect on the financial statements of the Group for the current year.

As a result of the amendments to HKAS 27, as from 1st April, 2010, any losses incurred by a non wholly owned subsidiary will be allocated between the controlling and non-controlling interests in proportion to their interests in that entity, even if this results in a deficit balance within consolidated equity being attributed to the non-controlling interests. Previously, if the allocation of losses to the noncontrolling interests would have resulted in a deficit balance, the losses were only allocated to the noncontrolling interests if the non-controlling interests were under a binding obligation to make good the losses. In accordance with the transitional provisions in HKAS 27, this new accounting policy is being applied prospectively and therefore previous periods have not been restated. The application of this new accounting policy does not have any effect on the allocation of losses to the non-controlling interests in the current period as none of the non controlling interests have a deficit balance.

Hong Kong Interpretation 5 “Presentation of Financial Statements – Classification by the Borrower of a Term Loan that Contains a Repayment on Demand Clause”

Hong Kong Interpretation 5 “Presentation of Financial Statements – Classification by the Borrower of a Term Loan that Contains a Repayment on Demand Clause” (“HK Int 5”) clarifies that term loans that include a clause that gives the lender the unconditional right to call the loans at any time (“repayment on demand clause”) should be classified by the borrower as current liabilities irrespective of the probability that the lender will invoke the clause without cause. The Group has applied HK Int 5 for the first time in the current year. HK Int 5 requires retrospective application.

I-12 -

finAnciAl informAtion of the group

Appendix i

In order to comply with the requirements set out in HK Int 5, the Group has changed its accounting policy on classification of term loans with a repayment on demand clause. Under the new policy, term loans with a repayment on demand clause are classified as current liabilities in the statement of financial position. Previously, such term loans were classified in accordance with the agreed scheduled repayment dates set out in the loan agreements unless the Group had breached any of the loan covenants set out in the agreements as of the reporting date or otherwise had reason to believe that the lender would invoke its rights under the immediate repayment clause within the foreseeable future.

The new accounting policy has been applied retrospectively by re-presenting the opening balances at 1st April, 2009, with consequential reclassification adjustments to comparatives for the year ended 31st March, 2010. The reclassification has had no effect on reported profit or loss, total comprehensive income or equity for any period presented.

At 31st	At 31st	At 31st
match 2011	march 2010	march 2009
HK$’000	HK$’000	HK$’000

Increase (decrease) in Current liabilities Bank loans, secured Non-current liabilities Bank loans, secured	– – –	76,800 (76,800 ) –	– –
			–

Such term loans have been presented in the earliest time band in the maturity analysis for financial liabilities that reflects the remaining contractual maturities (see note 3).

The company 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 issued in 2010[1] HKFRS 1 (Amendments) Limited Exemption from Comparative HKFRS 7 Disclosures for First– time Adopters[6] HKFRS 7 (Amendments) Disclosures – Transfers of Financial Assets[2] HKFRS 9 Financial Instruments[3] HKAS 12 (Amendments) Deferred Tax: Recovery of Underlying Assets[4] HKAS 24 (as revised in 2009) Related party Disclosures[5] HK (IFRIC) – Int 14 (Amendments) Prepayments of Minimum Funding Requirement[5] HK (IFRIC) – Int 19 Extinguishing Financial Liabilities with Equity Instruments[6]

1 Effective for annual periods beginning on or after 1 July 2010 or 1 January 2011, as appropriate.
2 Effective for annual periods beginning on or after 1 July 2011. 3 Effective for annual periods beginning on or after 1 January 2013. 4 Effective for annual periods beginning on or after 1 January 2012. 5 Effective for annual periods beginning on or after 1 January 2011.
6 Effective for annual periods beginning on or after 1 July 2010.
I-13 -

finAnciAl informAtion of the group

Appendix i

HKFRS 9 Financial Instruments (as issued in November 2009) introduces new requirements for the classification and measurement of financial assets. HKFRS 9 Financial Instruments (as revised in November 2010) adds requirements for financial liabilities and for derecognition.

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

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

HKFRS 9 is effective for annual periods beginning on or after 1 January 2013, with earlier application permitted. It is required to be applied retrospectively, but if adopted prior to 1 January 2012, an entity will be exempt from the requirement to restate prior period comparative information. The Group is presently studying the implications of applying HKFRS 9. It is impracticable to quantify the impact of HKFRS 9 as at the date of publication of these financial statements.

The Group anticipates that the application of the other new and revised standards, amendments or interpretations will have no material impact on the consolidated financial statements.

b) Basis of 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.

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

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

Non-controlling interests in the net assets of consolidated subsidiaries are presented in the consolidated statement of financial position within equity, separately from the equity attributable to the owners of the Company. Non-controlling interests in the net assets of consolidated subsidiaries consist of the amount of those interests at the date of the original business combination and the non-controlling interests’ share of changes in equity since the date of the combination.

I-14 -

finAnciAl informAtion of the group

Appendix i

Non-controlling interests in the results of the Group are presented on the face of the consolidated income statement and the consolidated statement of comprehensive income as an allocation of the total profit or loss and total comprehensive income for the year between non-controlling interests and the owners of the Company.

Allocation of total comprehensive income to non-controlling interests

Total comprehensive income and expense of a subsidiary is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. Prior to 1st January, 2010, losses applicable to the non-controlling interests in excess of the non-controlling interests in the subsidiary’s equity were allocated against the interests of the Group except to the extent that the non-controlling interests had a binding obligation and were able to make an additional investment to cover the losses.

Changes in the Group’s ownership interests in existing subsidiaries

Changes in the Group’s ownership interests in existing subsidiaries on or after 1st April, 2010

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. Where certain assets of the subsidiary are measured at revalued amounts or fair values and the related cumulative gain or loss has been recognised in other comprehensive income and accumulated in equity, the amounts previously recognised in other comprehensive income and accumulated in equity are accounted for as if the Company had directly disposed of the related assets (i.e. reclassified to profit or loss or transferred directly to retained earnings). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under HKAS 39 “Financial Instruments: Recognition and Measurement” or, when applicable, the cost on initial recognition of an investment in an associate or a jointly controlled entity.

Changes in the Group’s ownership interests in existing subsidiaries prior to 1st January, 2010

Increases in interests in existing subsidiaries were treated in the same manner as the acquisition of subsidiaries, with goodwill or a bargain purchase gain being recognised where appropriate. For decreases in interests in subsidiaries, regardless of whether the disposals would result in the Group losing control over the subsidiaries, the difference between the consideration received and the adjustment to the noncontrolling interests was recognised in profit or loss.

In the Company’s statement of financial position, an investment in a subsidiary is stated at cost less any impairment losses, unless the investment is classified as held for sale or included in a disposal group that is classified as held for sale.

I-15 -

finAnciAl informAtion of the group

Appendix i

c) Business combinations

Business combinations that took place on or after 1st April, 2010

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that:

i) deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with HKAS 12 “Income Taxes” and HKAS 19 “Employee Benefits” respectively;
ii) liabilities or equity instruments related to share-based payment transactions of the acquiree or the replacement of an acquiree’s share-based payment transactions with share-based payment transactions of the Group are measured in accordance with HKFRS 2 “Sharebased Payment” at the acquisition date; and
iii) assets (or disposal groups) that are classified as held for sale in accordance with HKFRS 5 “Noncurrent Assets Held for Sale and Discontinued Operations” are measured in accordance with that standard.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after assessment, the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at their fair value or another measurement basis required by another standard.

Business combinations that took place prior to 1st April, 2010

Acquisition of businesses was accounted for using the purchase method. The cost of the acquisition was 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 met the relevant conditions for recognition were generally recognised at their fair value at the acquisition date.

I-16 -

finAnciAl informAtion of the group

Appendix i

Goodwill arising on acquisition was recognised as an asset and initially measured at cost, being the excess of the cost of the acquisition over the Group’s interest in the recognised amounts of the identifiable assets, liabilities and contingent liabilities recognised. If, after assessment, the Group’s interest in the recognised amounts of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeded the cost of the acquisition, the excess was recognised immediately in profit or loss.

The non-controlling interest in the acquiree was initially measured at the non-controlling interest’s proportionate share of the recognised amounts of the assets, liabilities and contingent liabilities of the acquiree.

d) goodwill

Goodwill arising on an acquisition of a business is carried at cost less accumulated impairment losses, if any, and is presented separately in the consolidated statement of financial position.

For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit on a pro-rata basis based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss in the consolidated income statement. An impairment loss recognised for goodwill is not reversed in subsequent periods.

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

e) 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 Group’s share of the post-acquisition, post-tax results of the jointly controlled entities and any impairment losses for the year are recognised in the consolidated income statement, whereas the Group’s share of the post-acquisition post-tax items of the investees’ other comprehensive is recognised in the consolidated statement of comprehensive income.

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.

I-17 -

finAnciAl informAtion of the group

Appendix i

f) 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.

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 statement of financial position 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 not tested for impairment separately. Instead, the entire carrying amount of the investment is tested for impairment as a single asset. Any impairment loss recognised is not allocated to any asset, including goodwill, that forms part of the carrying amount of the investment in the associate. Any reversal of impairment loss is recognised to the extent that the recoverable amount of the investment subsequently increases.

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

Where a Group entity transacts with an associate of the Group, unrealised profits and losses are eliminated to the extent of the Group’s interest in the relevant associate, except to the extent that unrealized losses provide evidence of an impairment of the asset transferred, in which case, the full amount of losses is recognised.

In the Company’s statement of financial position, investment in an associate is stated at cost less provision for impairment loss. The result of associate is accounted for by the Company on the basis of dividends received and receivable.

g) non-current assets held for sale and discontinued operations

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. A disposal group is a group of assets to be disposed of together as a group in a single transaction, and liabilities directly associated with those assets that will be transferred in the transaction.

Except for certain assets as explained below, non-current assets and disposal groups classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell. The principal exceptions to this measurement policy so far as the financial statements of the Group and the Company are concerned are deferred tax assets, assets arising from employee benefits, financial assets (other than investments in subsidiaries, associates and jointly controlled entity) and investment properties. These assets, even if held for sale, would continue to be measured in accordance with the policies set out elsewhere in note 2.

I-18 -

finAnciAl informAtion of the group

Appendix i

Impairment losses on initial classification as held for sale, and on subsequent re-measurement while held for sale, are recognised in profit or loss. As long as a non-current asset is classified as held for sale, or is included in a disposal group that is classified as held for sale, the non-current asset is not depreciated or amortised.

Discontinued operations

A discontinued operation is a component of the Group’s business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which represents a separate major line of business or geographical area of operations, or is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations, or is a subsidiary acquired exclusively with a view to resale.

Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. It also occurs if the operation is abandoned.

Where an operation is classified as discontinued, a single amount is presented on the face of the income statement, which comprises:

i) the post-tax profit or loss of the discontinued operation; and
ii) the post-tax gain or loss recognised on the measurement to fair value less costs to sell, or on the disposal, of the assets or disposal group constituting the discontinued operation.

h) 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 profit or loss. 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 profit or loss.

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%

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.

I-19 -

finAnciAl informAtion of the group

Appendix i

i) 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 and property that is being constructed or developed for future use as investment property. Investment properties are stated in the consolidated statements of financial position at fair value, unless they are still in the course of construction or development at the end of the reporting period and their fair value cannot be reliably determined at that time. Any gain or loss arising from a change in fair value or from the retirement or disposal of an investment property is recognised in profit or loss.

When the Group 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.

j) intangible assets

Intangible assets acquired separately

Intangible assets acquired separately and with finite useful lives are carried at costs less accumulated amortisation 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 profit or loss 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 (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:

the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits;
the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
the ability to measure reliably the expenditure attributable to the intangible asset during its development.
I-20 -

finAnciAl informAtion of the group

Appendix i

The amount initially recognised for internally generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred.

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.

l) financial instruments

Financial assets and financial liabilities are recognised on the consolidated statement of financial position when a group entity becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets

The Group’s financial assets are classified 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.

I-21 -

finAnciAl informAtion of the group

Appendix i

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. At the end of each reporting period subsequent to initial recognition, loans and receivables (including trade and other 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 the end of the 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 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.

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, as well as 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 financial asset’s original effective interest rate.

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

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 amounts 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 trade receivables or amounts due from group companies are considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

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.

I-22 -

finAnciAl informAtion of the group

Appendix i

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.

Other financial liabilities

Other financial liabilities including trade and bills payables, other payables and accruals, amounts due to group companies 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 the fair value of the compound instrument 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 profit or loss 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.

I-23 -

finAnciAl informAtion of the group

Appendix i

Equity instruments

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

Financial guarantee

A financial guarantee is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.

Where the Group issues a financial guarantee, the fair value of the guarantee (being the transaction price, unless the fair value can otherwise be reliably estimated) is initially recognised as deferred income within other payables and accruals. Where consideration is received or receivable for the issuance of the guarantee, the consideration is recognised in accordance with the Group’s policies applicable to that category of asset. Where no such consideration is received or receivable, an immediate expense is recognised in profit or loss on initial recognition of any deferred income.

The amount of the guarantee initially recognised as deferred income is amortised in profit or loss over the term of the guarantee as income from financial guarantees issued. In addition, provisions are recognised in accordance with note 2(o) if and when (i) it becomes probable that the holder of the guarantee will call upon the Group under the guarantee, and (ii) the amount of that claim on the Group is expected to exceed the amount currently carried in other payables and accruals in respect of that guarantee i.e. the amount initially recognised, less accumulated amortisation.

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 in other comprehensive income and accumulated in equity is recognised in profit or loss.

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.

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 the end of each reporting period 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.
I-24 -

finAnciAl informAtion of the group

Appendix i

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 profit or loss 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 profit or loss 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.

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

I-25 -

finAnciAl informAtion of the group

Appendix i

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) leases

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

Assets held under finance leases are initially recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation.

Lease payments are apportioned between finance costs and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance costs are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group’s policy on borrowing costs.

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 profit or loss on the straight-line basis over the lease terms. Where the Group is the lessee, rentals payable under the operating leases are charged to profit or loss 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.

q) 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 management services is recognised when the services are rendered.
(iii) Royalty income from the sub-licensing of programme right and intellectual property right is recognised on an accrual basis evenly over the contract period.
(iv) Rental income from counter sales is recognised when the goods are sold.
(v) Interest income is recognised on a time proportion basis, taking into account the principal amounts outstanding and the interest rates applicable.
I-26 -

finAnciAl informAtion of the group

Appendix i

r) 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.

s) 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 profit or loss except to the extent that they relate to items recognised in other comprehensive income or directly in equity, in which case they are recognised in other comprehensive income or directly in equity, respectively.

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

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

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

The carrying amount of deferred tax assets is reviewed at the end of 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 recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised. The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

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

I-27 -

finAnciAl informAtion of the group

Appendix i

t) films in progress

Films in progress represents films and televisions drama series under production and is stated at cost incurred to date, less any identified impairment loss. Cost is transferred to film rights upon completion.

u) retirement benefit costs

Payments to Mandatory Provident Fund Scheme and state-managed retirement benefit schemes which are defined contribution schemes are charged as an expense when employees have rendered service entitling them to the contributions.

v) Share-based payment arrangement

Share options granted to directors and employees in an equity-settled share-based payment arrangement

For grants of share options that are conditional upon satisfying specified vesting conditions, the fair value of services received is determined by reference to the fair value of share options granted at the grant date and is expensed on a straight-line basis over the vesting period, with a corresponding increase in equity (share options reserve).

For share options that vest immediately at the date of grant, the fair value of the share options granted is expensed immediately to profit or loss. When share options are exercised, the amount previously recognised in share options reserve will be transferred to share premium. When 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 earnings.

When share options are exercised, the amount previously recognised in share options reserve will be transferred to share premium. When 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 earnings.

Share options granted to advisers

For share options granted to advisers in exchange for services, they are measured at the fair value of the services received. If the entity cannot estimate reliably the fair value of the services received, the entity shall measure their value, indirectly, by reference to the fair value of the equity instruments granted. The fair values of the services are recognised as expenses immediately, unless the services qualify for recognition as assets, with corresponding increase in equity (share options reserve).

w) Borrowing costs

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

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

I-28 -

finAnciAl informAtion of the group

Appendix i

x) foreign currencies

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

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

For the purpose of presenting the consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into the presentation currency of the Company (i.e. HKD) at the rate of exchange prevailing at the end of the reporting period, and their income and expenses are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case, the exchange rates prevailing at the dates of transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity under the heading of translation reserve (attributed to non-controlling interests as appropriate).

From 1st January, 2010 onwards, on the disposal of a foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, a disposal involving loss of joint control over a jointly controlled entity that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Company are reclassified to profit or loss. In addition, in relation to a partial disposal that does not result in the Group losing control over a subsidiary that includes a foreign operation, the proportionate share of accumulated exchange differences are reattributed to non-controlling interests and are not recognised in profit or loss. For all other partial disposals (i.e. partial disposals of associates or jointly controlled entities that do not result in the Group losing significant influence or joint control), the proportionate share of the accumulated exchange differences is reclassified to profit or loss.

Goodwill and fair value adjustments on identifiable assets acquired arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising are recognised in the translation reserve.

y) 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;
I-29 -

finAnciAl informAtion of the group

Appendix i

(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.

z) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the executive directors that make strategic decisions.

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 end of the reporting period are as follows:

the group 2011 2010 HK$’000 HK$’000 financial assets Loans and receivables (including cash and cash equivalents) Trade receivables 322 1,177 Financial assets included in other receivables, deposits and prepayments 3,629 49,400 Amounts due from subsidiaries – – Bank balance and cash 116,765 9,796 120,716 60,373 financial liabilities Financial liabilities measured at amortised cost Trade payables – 8,236 Financial liabilities included in deposits received, other payables and accruals 8,743 8,126 Amounts due to subsidiaries – – Amount due to associates – 147 Amount due to non-controlling interests – 483 Obligation under finance lease – 194 Bank loan, secured – 155,000 Convertible bonds 57,338 72,645 66,081 244,831	the company 2011 2010 HK$’000 HK$’000 – – 1,946 285 132,060 115,087 114,069 2 248,075 115,374 – – 3,952 3,037 147,069 1,649 – – – – – – – – 57,338 72,645 208,359 77,331	the company 2011 2010 HK$’000 HK$’000 – – 1,946 285 132,060 115,087 114,069 2 248,075 115,374 – – 3,952 3,037 147,069 1,649 – – – – – – – – 57,338 72,645 208,359 77,331
		115,374

		– 3,037 1,649 – – – – 72,645
		77,331

I-30 -

finAnciAl informAtion of the group

Appendix i

(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, purchases and recognised assets and liabilities 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 United States dollars and Renminbi.

The Group currently does not expect any significiant movements in the exchange rate of USD to HKD and it is mainly exposed to the effects of fluctuation in RMB. The Group currently does not have a foreign currency hedging policy, however, the management monitors the foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.

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

Assets Liabilities	2011 USD’000 RMB’000 113 53,089 – (3,467 )	2010 USD’000 RMB’000 2,290 629 – (7,607 )

The following table details the Group sensitivity to a 3% increase and decrease in HKD dollars against RMB. The sensitivity analysis includes outstanding foreign currency denominated monetary items. A positive number below indicates an increase in profit where HKD weaken 3%. For a 3% strengthening of the HKD against RMB, there would be an equal and opposite impact on the profit, and the balances below would be negative.

	impact of rmB
Sensitivity rate	3%
Profit after tax and retained earnings	1,268

This is mainly attributable to the exposure to cash and cash equivalents denominated in RMB.

It is assumed that the change in foreign exchange rates had occurred at the end of the reporting period 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 the Hong Kong dollar and the United States dollar would be materially unaffected by any changes in movement in value of the United States dollar against other currencies. There was no significant effect on the Group’s result for 2010 in response to reasonably possible changes in the foreign exchange rates to which the Group had exposure at the end of the reporting period.

I-31 -

finAnciAl informAtion of the group

Appendix i

(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 notes 26, 30, 31 and 32 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.

The sensitivity analysis below has been determined based on the exposure to interest rates for the Group’s variable-rate bank deposits and borrowings. The analysis is prepared assuming these financial instruments outstanding at the end of the reporting period were outstanding for the whole year. A 100 basis point increase or decrease is used when reporting period interest rate risk internally to key management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 100 basis points higher/lower and all other variables were held constant, the Group’s post-tax profit for the year ended 31 March 2011 would increase/decrease by HK$613,000 (2010: decrease/increase by HK$1,469,000). This mainly attributable to the Group’s exposure to interest rates on its variable rate bank deposits and borrowings.

(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. 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.

In order to minimise the credit risk in respect of deposit, trade and other receivables, the Group reviews the recoverable amount at the end of each reporting period 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 31 March 2011, the Group has a certain concentration of credit risk as 55% of the total trade and other receivables was due from a major customer of the Group. (2010: 24% of the trade receivables was due from the Group’s five largest customers and 88% of the total other receivables, deposits and prepayments was deposit held by the legal adviser of the Company on behalf of the Group).

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 statement of financial position 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 and other receivables are set out in notes 23 and 24 to the financial statements.

I-32 -

finAnciAl informAtion of the group

Appendix i

(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 realisable 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 end of the reporting period 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 end of the reporting period) and the earliest date the company can be required to pay.

Specifically, for term loans which contain a repayment on demand clause which can be exercised at the bank’s sole discretion, the analysis shows the cash outflow based on the earliest period in which the entity can be required to pay, that is if the lenders were to invoke their unconditional rights to call the loans with immediate effect. The maturity analysis for other bank borrowings is prepared based on the scheduled repayment dates.

the group

Trade payables Financial liabilities included in other payables and accruals Convertible notes Amount due to an associate Amount due to non-controlling interest Obligation under finance lease Bank loans	carrying amount HK$’000 – 8,743 57,338 – – – – 66,081	total contractual undiscounted cash flow HK$’000 – 8,743 96,188 – – – – 104,931	2011 Within more than 1 year 1 year but or on less than demand 2 years HK$’000 HK$’000 – – 8,743 – 51,188 – – – – – – – – – 59,931 –	more than 2 years but less than 5 years HK$’000 – – – – – – – –	more than 5 years HK$’000 – – 45,000 – – – –
					45,000

I-33 -

finAnciAl informAtion of the group

Appendix i

Trade payables Financial liabilities included in other payables and accruals Convertible notes Amount due to an associate Amount due to non-controlling interest Obligation under finance lease Bank loans	carrying amount (restated) HK$’000 8,236 8,126 72,645 147 483 194 155,000 244,831	total contractual undiscounted cash flow HK$’000 8,236 8,126 81,900 147 483 216 156,874 255,982	2010 Within more than 1 year 1 year but or on less than demand 2 years HK$’000 HK$’000 8,236 – 8,126 – – 81,900 147 – 483 – 93 92 156,874 – 173,959 81,992	more than 2 years but less than 5 years HK$’000 – – – – – 31 – 31	more than 5 years HK$’000 – – – – – – –
					–

the company

			2011					2010
		total	Within	more than			total	Within	more than
		contractual	1 year	1 year but			contractual	1 year	1 year but
	carrying	undiscounted	or on	less than	more than	carrying	undiscounted	or on	less than	more than
	amount	cash flow	demand	5 years	5 years	amount	cash flow	demand	5 years	5 years
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Financial liabilities included in
other payables and accruals	3,952	3,952	3,952	–	–	3,037	3,037	3,037	–	–
Convertible notes	57,338	96,188	51,188	–	45,000	72,645	81,900	–	81,900	–
Amounts due to subsidiaries	147,069	147,069	147,069	–	–	1,649	1,649	1,649	–	–
	208,359	247,209	202,209	–	45,000	77,331	86,586	4,686	81,900	–

(c) 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.

The carrying amounts of the group’s and the company’s financial instruments carried at cost or amortised cost are not materially different from their fair values as at 31 March 2011 and 2010.

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.

I-34 -

finAnciAl informAtion of the 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 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.

b) 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.

c) 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.

d) 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.

e) Valuation of share options and convertible bonds granted

The fair value of share option granted and convertible bonds were 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.

f) realisation of deferred tax assets

Deferred tax assets relating to tax losses are recognised as management considers it is probable that future taxable profit will be available against which the temporary differences or tax losses can be utilised. Where the expectation is different from the original estimate, such differences will impact the recognition of deferred taxation assets and taxation in the periods in which such estimate is changed.

I-35 -

finAnciAl informAtion of the group

Appendix i

5. Segment informAtion

Management has determined the operating segments based on the reports reviewed by the executive directors that are used to make strategic decisions. The Group’s operating business are structured and managed separately according to the nature of their operations.

For management purposes, the Group is organised into three operating segments:

Trading – Sales and trading of coal and crude oil

Property holding and management – Property holding and provision of property management services

Filmed entertainment, online games and licensing businesses – Movie production, licensing and derivatives, crossover marketing, provision of interactive contents, artist development and last miles engagement

The revenue from external customers reported to the management is measured in a manner consistent with that in the income statement. Revenue between segments are carried out on terms equivalent to those that prevail in arm’s length transactions.

Segment result represents the profit or loss by each segment without allocation of central administration costs including directors’ salaries, share of loss of associates, investment and other income, finance costs and income tax expense. This is the measure reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance.

I-36 -

finAnciAl informAtion of the group

Appendix i

The following is an analysis of the Group’s revenue, results, assets and liabilities by reportable segment. Amounts reported for the prior year have been restated to conform to the requirements of HKFRS 8.

Segment revenue Reportable segment revenue Inter-segment revenue Revenue from external customers (continuing operations) Segment result Reportable segment result Interest income Gain an disposal of subsidiaries Gain arising on change in fair value of investment properties Unallocated corporate expenses Share of loss of an associate Share-based payments Finance cost Loss before taxation (continuing operations) Segment Assets Reportable segment assets Deferred tax assets Unallocated corporate assets Consolidated total assets Segment liabilities Reportable segment liabilities Amount due to an associate Amount due to non-controlling interests Tax payables Obligation under finance lease Deferred tax liabilities Convertible bonds Bank loan, secured Unallocated corporate liabilities Consolidated total liabilities	Year ended 31 march 2011 filmed entertainment, online property games and holding and licensing trading management Businesses HK$’000 HK$’000 HK$’000 547,359 8,199 2,079 – – – 547,359 8,199 2,079 986 3,790 1,925 25,563 8,083 9,344 24,837 1,625 719	total HK$’000 557,637 – 557,637 6,701 152 15,540 – (57,330 ) (13 ) (124,202 ) (7,610 ) (166,762 ) 42,990 803 127,096 170,889 27,181 – – 736 – – 57,338 – 6,909 92,164	Year ended 31 march 2010 property holding and trading management total HK$’000 HK$’000 HK$’000 678,730 9,257 687,987 – – – 678,730 9,257 687,987 (18,181 ) (16,937 ) (35,118 ) 4 – 20,000 (23,867 ) (84 ) (8,950 ) (4,820 ) (52,835 ) 8,255 380,161 388,416 – 6,540 394,956 5,599 60,142 65,741 147 483 632 194 9,061 72,645 155,000 4,083 307,986

I-37 -

finAnciAl informAtion of the group

Appendix i

For the purposes of monitoring segment information and allocating resources between segment:

all assets are allocated to reportable segments other than interest in an associate, deferred tax assets and unallocated corporate assets. Goodwill is allocated to reportable segments as described in note 19.
all liabilities are allocated to reportable segments other than current and deferred tax liabilities, amount due to an associate and non-controlling interests, borrowings and unallocated corporate liabilities.

other segment information:

		Year ended 31 march 2011	Year ended 31 march 2011
			filmed
			entertainment,
			online		Year	ended 31 march 2010
		property	games and			property
		holding and	licensing			holding and
	trading	management	Businesses	total	trading	management	total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Additions to non-current assets	–	–	–	–	55	698	753
Interest income	–	16	–	16	–	1	1
Finance costs	–	2,000	–	2,000	–	1,786	1,786
Depreciation and amortisation	–	999	77	1,076	288	413	701
Loss on disposal of property,
plant and equipment	–	12	–	12	778	–	778
Write down of inventory	–	–	–	–	14,402	–	14,402
Impairment on goodwill	–	–	–	–	–	5,465	5,465

revenue from major products and services:

The Group’s revenue from continuing operations from its major products and services were as follows:

Sales of palm oil and coal Sales of computer hardware and relevant peripherals Property management fee income Rental income Royalty income	2011 HK$’000 547,359 – 3,673 4,526 2,079 557,637	2010 HK$’000 668,628 10,102 2,619 6,638 –
		687,987

geographical information:

The Group is domiciled in Hong Kong. The geographical location of customers is based on the location of the customers, irrespective of the origin of the goods or services. The geographical location of the non-current assets is based on the physical location of assets in the case of property, plant and equipment, and the location of the operation to which they are allocated in the case of Goodwill. Revenue from continuing operations from external customers and information about non-current assets by geographical location are detailed below:

I-38 -

finAnciAl informAtion of the group

Appendix i

PRC (including Hong Kong) Taiwan Singapore Indonesia Others	revenue from external customers 2011 2010 HK$’000 HK$’000 10,278 18,565 – 761 244,429 387,760 213,668 280,901 89,262 – 557,637 687,987	non-current assets 2011 2010 HK$’000 HK$’000 15,638 9,738 – – – – – – – – 15,638 9,738	non-current assets 2011 2010 HK$’000 HK$’000 15,638 9,738 – – – – – – – – 15,638 9,738
			9,738

information about major customers:

Included in revenues arising from sales of palm oil and coal of HK$547 million (2010: HK$669 million) are revenues of approximately HK$214 million (2010: HK$281 million) which arose from sales to the Group’s largest customer.

revenue from major customers:

The group's sales to customers which accounted for 10% or more of its total revenue are as follows:

Customer A Customer B Customer C Customer D	2011 HK’000 213,668 179,871 89,262 N/A 482,801	2010 HK’000 280,901 197,132 N/A 179,850
		657,883

The sales to customer A, B, C and D are included in the segment of trading.

6. turnoVer

An analysis of Group’s turnover for the year from operations, is as follows:

Revenue from sales of goods Revenue from rendering of services Royalty income	2011 HK$’000 547,359 8,199 2,079 557,637	2010 HK$’000 678,730 9,257 –
		687,987

I-39 -

finAnciAl informAtion of the group

Appendix i

7. other reVenue And other net income

Interest income Others 8. finAnce coStS continuing operations Bank loan interest Effective interest on convertible bonds Finance lease charges	2011 HK$’000 152 182 334 2011 HK$’000 1,996 5,610 4 7,610	2010 HK$’000 44 4
		48

		2010 HK$’000 1,967 2,847 6
		4,820

9. diScontinued operAtionS

In 2010, the Group had discontinued its business of manufacturing and telecommunication. The disposal is consistent with the Group’s long term policy to reallocate and consolidate scarce financial resources and management time to other business segments.

On 30 June 2009, the Board of Directors agreed to dispose the entire 100% shareholding interest in Photar International Limited, the Group’s manufacturing business which involved the manufacturing and sale of Mobile phones and DVD players. The gain on disposal of the manufacturing business for the year amounted to HK$22,439,000. Details of the assets and liabilities disposed of are disclosed in note 37.

The combined results and cash flows of the discontinued operations (i.e. manufacturing business and telecommunication service) included in the consolidated income statement and the consolidated statement of cash flows are set out below.

I-40 -

finAnciAl informAtion of the group

Appendix i

profit for the year from discontinued operations Revenue Expenses Gain on disposal of property, plant and equipment Write off of property, plant and equipment Loss before taxation Taxation_(note 14)_ Gain on disposal of subsidiaries cash flows from discontinued operations Net cash used in operating activities Net cash used in investing activities Net cash used in financing activities Net cash flows 10. non-current ASSetS held for SAle investment property held for sale Fair value as at 31 March 2010 and 1 April 2010 Disposal Fair value as at 31 March 2011	2011 HK$’000 – – – – – – – – – – – – –	2010 HK$’000 – (25 ) 9 (381 ) (397 ) – (397 ) 22,439 22,042 (25 ) (79 ) – (104 ) HK$’000 320,000 (320,000 ) –

Note i: During the year, the Group disposed of the property located in Kowloon at consideration of HK$320,000,000, to Success Build Limited. This transaction constituted a very substantial disposal and was approved by the shareholders at an extraordinary general meeting held on 16 August 2010, pursuant to Rules 19.06 of the GEM Listing Rules.

I-41 -

finAnciAl informAtion of the group

Appendix i

11. loSS for the YeAr from continuing operAtionS

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

	2011	2010
	HK$’000	HK$’000
Auditor’s remuneration	366	479
Cost of inventories sold	546,373	676,631
Direct operating expenses from investment properties
that generated rental income during the year	4,409	7,391
Direct expenses of licensing business	154	–
Depreciation	1,102	1,225
– Owned assets	1,057	1,186
– Assets held under finance leases	45	39
Exchange loss	(98 )	(311 )
Other losses	1,368	24,322
– Impairment on property, plant and machinery	–	1,033
– Write down of inventory	–	14,402
– Impairment on goodwill	–	5,465
– Loss on acquisition of non-controlling interests	–	121
– Impairment on accounts receivables	344	–
– Impairment on other receivables, deposits and prepayments	–	2,425
– Write off of receivables and deposits	1,012	–
– Loss on disposal of property, plant and equipment	12	876
Operating lease rental in respect of rented premises	3,913	2,622
Research and development costs	–	204
Staff costs (including directors’ remuneration)
– Salaries and allowances	14,046	10,686
– Equity-settled share based payment	123,119	1,088
– Termination benefits	–	–
– Retirement scheme contributions	350	306

I-42 -

finAnciAl informAtion of the group

Appendix i

12. directorS’ emolumentS

The emoluments paid or payable to the Company’s directors for the year ended 31 March 2011 and 2010 were as follows:

Executive directors Mr. Chiau Sing Chi_(note i) Mr. Chan Cheong Yee Mr. Yik Chok Man Mr. Keung Kwok Hung(note ii) _Non-executive director Mr. Chong Lee Chang Mrs. Chin Chow Chung Hang, Roberta_(note iii) _Independent non-executive directors Mrs. Chen Chou Mei Mei Vivien Mr. Chum Kwan Yue, Desmond_(note iv) Mr. Wong Chak Keung(note iv) Ms. Tsang Fung Chu(note v) Mr. Wong Chi Keung Patrick(note v) Mr. Leung Ka Kui Johnny(note vi) _Executive directors Mr. Chan Cheong Yee Mr. Keung Kwok Hung Mr. Yik Chok Man Mr. Yong Wai Hong Mr. Lam Kwok Ho Non-executive director Mr. Chong Lee Chang Independent non-executive directors Ms. Tsang Fung Chu Mr. Wong Chi Keung Patrick Mr. Leung Ka Kui Johnny Ms. Chen Chou Mei Mei Vivien Mr. Tsang Zee Ho Paul	Year ended 31 march 2011 Salaries, allowances and Share based directors’ fee other benefits payment HK$’000 HK$’000 HK$’000 – – 121,797 180 – – 108 – – – 375 – 108 – – 102 – – 108 – – 77 – – 77 – – 29 – – 29 – – 42 – – 860 375 121,797 Year ended 31 march 2010 Salaries, allowances and Share based directors’ fee other benefits payment HK$’000 HK$’000 HK$’000 177 – 544 – 630 435 40 – – – 95 – 27 – – 84 – – 84 – – 84 – – 47 – – 40 – – 40 – – 623 725 979	total HK$’000 121,797 180 108 375 108 102 108 77 77 29 29 42
		123,032

		total HK$’000 721 1,065 40 95 27 84 84 84 47 40 40
		2,327

I-43 -

finAnciAl informAtion of the group

Appendix i

Note:

(i) Appointed on 1 June 2010

(ii) Resigned on 23 July 2010
(iii) Appointed on 27 May 2010
(iv) Appointed on 9 August 2010
(v) Resigned on 6 August 2010
(vi) Resigned on 30 September 2010

13. indiViduAlS With higheSt emolumentS

Of the five individuals in the Group with the highest emoluments, two (2010: two) are directors of the Company whose emoluments are disclosed above. The emoluments of the remaining three individuals (2010: three), are as follows:

Salaries and other benefits Retirement scheme contributions Staff Share based payment expenses	2011 HK$’000 2,737 30 1,322 4,089	2010 HK$’000 1,166 20 –
		1,186

Analysis of emoluments of the five highest paid individuals (including directors and other employees) by emolument range is as follows:

Not exceeding HK$1,000,000 Exceeding HK$1,000,000 but not exceeding HK$1,500,000 Exceeding HK$2,500,000 but not exceeding HK$3,000,000 Exceeding HK$121,500,000 but not exceeding HK$122,000,000	number of employees 2011 2010 3 4 – 1 1 – 1 –

During the years ended 31 March 2010 and 2011, no emoluments were paid by the Group to the five highest paid individuals, including directors, as an inducement to join the Group or as compensation for loss of office. In addition, during the years ended 31 March 2010 and 2011, no directors waived any emoluments.

I-44 -

finAnciAl informAtion of the group

Appendix i

14. tAxAtion

The taxation (credit)/charge comprises: Current tax Hong Kong Overseas Deferred tax_(note 33)_ Current year Tax recognised in profit or loss Attributable to: Continuing operations Discontinued operations	2011 HK$’000 – 23 (9,864 ) (9,841 ) (9,841 ) – (9,841 )	2010 HK$’000 540 – 2,179
		2,719

		2,719 –
		2,719

No provision for Hong Kong profits tax has been made in the financial statements for the year ended 31 March 2011 since there is no assessable profit derived from Hong Kong for the year. Hong Kong profits tax was calculated at 16.5% of the estimated assessable profit for year ended 31 March 2010.

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.

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 Tax effect of unrecognised temporary difference Tax effect of unrecognised tax loss Tax effect of utilization of fair losses previously not recognised Tax effect for reversal of deferred tax liability due to disposal of investment property Taxation charge for the year	2011 HK$’000 (166,762 ) – (166,762 ) (27,501 ) (19,723 ) 45,035 169 15 588 (47 ) (8,377 ) (9,841 )	2010 HK$’000 (52,835 ) 22,042
		(30,793 )

		(6,011 ) (10,330 ) 12,367 (359 ) 894 6,158 – –
		2,719

I-45 -

finAnciAl informAtion of the group

Appendix i

The tax charge relating to components of other comprehensive loss is as follows:

Exchange difference on translating foreign operations: – Exchange differences arising during the year – Reclassification adjustments relating to foreign operations disposed during the year	Before tax HK$’000 53 58 111	2011 tax charge HK$’000 – – –	After tax HK$’000 53 58 111	Before tax HK$’000 290 3,366 3,656	2010 tax charge HK$’000 – – –	After tax HK$’000 290 3,366
						3,656

15. loSS for the YeAr AttriButABle to oWnerS of the compAnY

The loss attributable to owners of the Company for the year dealt with in the financial statements of the Company is a net loss of HK$147,331,000 (2010: HK$64,449,000).

16. diVidend

The directors do not recommend the payment of a dividend for the year ended 31 March 2011 (2010: 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	2011 HK Cent (5.34 ) – (5.34 )	2010 HK Cent (2.51 ) 1.01
		(1.50 )

I-46 -

finAnciAl informAtion of the group

Appendix i

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 owners of the Company Less: Profit/(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	2011 HK$’000 (156,921 ) – (156,921 ) 2011 2,936,887,893	2010 HK$’000 (32,916 ) 22,042 (54,958 ) 2010 2,189,949,797

(ii) diluted loss per share

Diluted loss per share for the year ended 31 March 2011 and 2010 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 2011 and 2010.

I-47 -

finAnciAl informAtion of the group

Appendix i

18. propertY, plAnt And equipment

leasehold the group improvement HK$'000 cost At 1 April 2009 2,224 Additions 442 Acquired on acquisition of subsidiaries_(Note 36) 1,680 Disposal (2,229 ) Exchange difference 5 At 31 March 2010 and 1 April 2010 2,122 Additions 38 Acquired on acquisition of subsidiaries(Note 36) – Disposal – Disposal of subsidiaries(Note 37) (2,160 ) At 31 March 2011 – Accumulated depreciation and impairment At 1 April 2009 1,095 Acquired on acquisition of subsidiaries(Note 36) 607 Charge for the year 691 Written back on disposal (1,451 ) Impairment loss – Exchange difference 2 At 31 March 2010 and 1 April 2010 944 Charge for the year 766 Eliminated upon disposal – Disposal of subsidiaries(Note 37)_ (1,710 ) At 31 March 2011 – Net book value At 31 March 2011 – At 31 March 2010 1,178	mould HK$'000 754 – – – – 754 – – – (754 ) – 50 – 151 – 553 – 754 – – (754 ) – – –	plant and machinery HK$'000 581 6 – – 2 589 – – – (589 ) – 38 – 61 – 480 1 580 – – (580 ) – – 9	computers HK$'000 718 – 266 (117 ) 2 869 328 341 – (806 ) 732 180 35 168 (103 ) – – 280 191 – (317 ) 154 578 589	furniture, fixtures and equipment HK$'000 168 32 705 (190 ) – 715 16 – – (93 ) 638 43 513 115 (106 ) – – 565 100 – (27 ) 638 – 150	motor vehicles HK$'000 – 295 – – – 295 – – (295 ) – – – – 39 – – – 39 45 (84 ) – – – 256	total HK$'000 4,445 775 2,651 (2,536 ) 9 5,344 382 341 (295 ) (4,402 ) 1,370 1,406 1,155 1,225 (1,660 ) 1,033 3 3,162 1,102 (84 ) (3,388 ) 792 578 2,182

I-48 -

finAnciAl informAtion of the group

Appendix i

	computers, furniture,
the company	fixtures and equipment
	HK$’000
cost
At 1 April 2009, 31 March 2010 and 1 April 2010	–
Additions	162
At 31 March 2011	162
Accumulated depreciation and impairment
At 1 April 2009, 31 March 2010 and 1 April 2010	–
Charge for the year	26
At 31 March 2011	26
Net book value
At 31 March 2011	136
At 31 March 2010	–

19. goodWill

cost At beginning of the year Acquired on acquisition of subsidiaries_(Note 36)_ Refund of investment cost Disposal of subsidiaries At end of the year Accumulated impairment losses At beginning of the year Impairment loss recognised Eliminated upon disposal At end of the year carrying amount At 31 March	the group 2011 2010 *HK$’000* *HK$’000* 16,780 6,459 8,295 10,321 (791 ) – (4,516 ) – 19,768 16,780 (9,224 ) (3,759 ) – (5,465 ) 4,516 – (4,708 ) (9,224 ) 15,060 7,556	the group 2011 2010 *HK$’000* *HK$’000* 16,780 6,459 8,295 10,321 (791 ) – (4,516 ) – 19,768 16,780 (9,224 ) (3,759 ) – (5,465 ) 4,516 – (4,708 ) (9,224 ) 15,060 7,556
		16,780
		(3,759 ) (5,465 ) –
		(9,224 )
		7,556

I-49 -

finAnciAl informAtion of the group

Appendix i

The carrying amount of goodwill (net of accumulated impairment losses) was allocated to cash-generating units as follows:

Licensing business – Raxco Property investment – Harvest Yield	2011 HK$’000 8,295 6,765 15,060	2010 HK$’000 – 7,556
		7,556

property management

The goodwill associated with property management arose when Gi Space Limited, Gi Space (Canton) Limited and ISpace Investment Limited were acquired by the Group. Gi Space Limited is the retail facility manager for the investment properties of the Group. The goodwill related to property management was fully impaired in prior years. During the Year, the Group disposed its interests in Gi Space (Canton) Limited and ISpace Investment Limited that the goodwill associated with these subsidiaries are disposed.

property investment

The goodwill arose from the acquisition of Harvest Yield Investments Limited (“Harvest Yield”), which is engaged in property investment. For the purpose of impairment testing, goodwill has been allocated to one cash generating unit.

Subsequent to the disposal of Property Held for Sales during the Year, Harvest Yield will redesign its business model from property management to cinema investment/operations.

During the Year, the Group assessed the recoverable amount of goodwill associated with the Harvest Yield by reference to value in use. The calculations use post-tax cash flow projections based on financial budgets. Taking into account the business plan in respect of the cinema projects, management believe that the recoverable amount would exceed its carrying amount and therefore, no impairment is necessary.

licensing business

The goodwill arose from the acquisition of Raxco Assets Corp. (“Raxco”) during the year, which is engaged in online game business. After acquisition, Raxco diversified to licensing and other related business. For the purpose of impairment testing, goodwill has been allocated to one cash generating unit.

During the Year, the Group assessed the recoverable amount of goodwill associated with the Raxco by reference to value in use. The calculations use post-tax cash flow projections based on financial budgets. Taking into account the potential of licensing business, management believe that the recoverable amount would exceed its carrying amount and therefore, no impairment is necessary.

I-50 -

finAnciAl informAtion of the group

Appendix i

20. intereStS in SuBSidiArieS

Unlisted shares, at cost Amount due from subsidiaries Less: impairment loss Amount due to subsidiaries	the company 2011 2010 HK$’000 HK$’000 41,159 41,951 213,327 201,731 (81,267 ) (86,644 ) 173,219 157,038 (147,069 ) (1,649 )

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 is as follows:

Balance at beginning of the year Impairment losses recognised Amounts written off as uncollectible Balance at end of the year	the company 2011 2010 HK$’000 HK$’000 86,644 87,246 – 38,665 (5,377 ) (39,267 ) 81,267 86,644

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

I-51 -

finAnciAl informAtion of the group

Appendix i

Particulars regarding the subsidiaries at 31 March 2011 are as follows:

				Attributable	Attributable
	place of		issued and	equity	interest
	incorporation/		fully paid	held by the company
name of subsidiary	operation	type of legal entity	share capital	directly	indirectly	principal activities
				%	%
Art Champ Limited	Hong Kong	Limited liability company	HK$1	100	–	Movie production
Billion Success Limited	Hong Kong	Limited liability company	HK$1	100	–	Dormant
Bingo Management	Hong Kong	Limited liability company	HK$1	100	–	Management services
Services Limited
Bingo Trademark Limited	Hong Kong	Limited liability company	HK$1	100	–	Dormant
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
Harvest Yield	BVI	Limited liability company	US$2	100	–	Investment holding
Investments Limited
High Amuse Limited	BVI	Limited liability company	US$1	100	–	Investment holding
Huge Art Limited	Hong Kong	Limited liability company	HK$1	100	–	Cartoon production
Shine Wisdom Limited	Hong Kong	Limited liability company	HK$1	100	–	Cinema business
Sinotrans Resources Limited	BVI	Limited liability company	US$1	100	–	Trading of palm oil
						and coal
Art Aim Limited	Hong Kong	Limited liability company	HK$1	–	100	Movie production
Brillant Tech Limited	Hong Kong	Limited liability company	HK$1	–	100	Online game business

I-52 -

finAnciAl informAtion of the group

Appendix i

Particulars regarding the subsidiaries at 31 March 2011 are as follows:

				Attributable	Attributable
	place of		issued and	equity	interest
	incorporation/		fully paid	held by the company
name of subsidiary	operation	type of legal entity	share capital	directly	indirectly	principal activities
				%	%
EmCall Pte Limited	Hong Kong	Limited liability company	HK$10	–	100	Dormant
Gi Space Limited	Hong Kong	Limited liability company	HK$1	–	100	Marketing and
						management of
						a shopping mall
Power Alliance	Hong Kong	Limited liability company	HK$1	–	100	Property investment
Investment Limited
Raxco Assets Corp	BVI	Limited liability company	US$1	–	100	Licensing business
Shanghai Bingo Interactive	PRC	Limited liability company	US$2.642m	–	100	Online game business
Information Technology
Co. Ltd

The Group acquired 100% equity interest of Raxco Assets Corp (“Raxco”) and the Shareholder’s loan in sum of HK$56,637,748 (the “Sale Loan”) (representing the entire shareholders’ loan due from Raxco) from Teamgreat Investments Limited (“Teamgreat”), which is a connected party of the Company, at the consideration of HK$10 payable in cash. Teamgreat is beneficially owned by the discretionary trust founded by Mr. Chiau Shing Chi, thus a connected person of the Company. The net assets of the subsidiaries acquired of are disclosed in note 36.

During the year 31 March 2011, the Company disposed the entire 100% shareholding interest in (i) GI Space (Hunghom), GI Space (Canton) Limited and ISpace Investment Limited, which engaged in provision of property management services; (ii) Sparkle Success Investment Limited, Sinoeye Limited and Emcom International (China) Investment Limited which were dormant companies. The net assets of the subsidiary disposed of are disclosed in note 37.

Note: The entire issued capital in Harvest Yield Limited and Power Alliance Investment Limited are pledged to secure the convertible bonds issued by the Company.

21. intereStS in An ASSociAte

Cost of investment in unlisted associate Share of post – acquisition results Amount due to an associate	the group 2011 2010 HK$’000 HK$’000 – – – (147 ) – (147 )

Amount due to an associate was unsecured, non-interest bearing and has no fixed terms of repayment. During the year, the Group disposed its interest in an associate.

I-53 -

finAnciAl informAtion of the group

Appendix i

As at 31 March 2010, the Group had interest in the following associate:

		place of			percentage of
	form of	incorporation/	class of	nominal value of	equity attributable
name of associate	business structure	operations	shares held	issued capital	to the group	principal activities
Boss Education Limited	Limited liability company	Hong Kong	Ordinary	HK$1,000	49%	Promoting multimedia
						training, job training
						and consultation services

The Group’s share of loss of associate amounted to HK$13,000 for the year ended 31 March 2011 (2010: HK$84,000).

22. inVentorieS

Palm oil and Coal	the group 2011 2010 HK$’000 HK$’000 24,710 –

23. 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 Provision	the group 2011 2010 HK$’000 HK$’000 127 56 – 298 147 25 48 950 322 1,329 – (152 322 1,177	the group 2011 2010 HK$’000 HK$’000 127 56 – 298 147 25 48 950 322 1,329 – (152 322 1,177
		1,329 (152
		1,177

For property holding and management segment, no credit period was granted to the sub-licensees according to the Group’s policies. For trading and licensing segment, the credit terms granted by the Group to its customers normally ranged from COD (cash-on-delivery) to 120 days. For 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 2011, no impairment loss has been made (2010: HK$152,000). The movement in the allowance is as follows:

I-54 -

finAnciAl informAtion of the group

Appendix i

Balance at beginning of the year Impairment loss recognised Amounts written off as uncollectible	the group 2011 2010 HK$’000 HK$’000 152 – – 152 (152 ) – – 152	the group 2011 2010 HK$’000 HK$’000 152 – – 152 (152 ) – – 152
		152

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 2011 2010 HK$’000 HK$’000 127 53 – 31 147 306 48 787 322 1,177	the group 2011 2010 HK$’000 HK$’000 127 53 – 31 147 306 48 787 322 1,177
		1,177

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.

24. other receiVABleS, depoSitS And prepAYmentS

Other receivables Deposits and prepayments	the 2011 HK$’000 3,629 633 4,262	group 2010 HK$’000 49,472 4,773 54,245	the company 2011 2010 HK$’000 HK$’000 1,946 288 257 155 2,203 443	the company 2011 2010 HK$’000 HK$’000 1,946 288 257 155 2,203 443
				443

Included in other receivables at 31 March 2010 were deposits amounted of HK$48 million in respect of disposal of properties of the Group held by legal adviser of the Company. Such deposits have been released to the Group during the year.

I-55 -

finAnciAl informAtion of the group

Appendix i

25. film in progreSS

	the	group
	2011	2010
	HK$’000	HK$’000
Film in progress	8,389	–

The film in progress were measured at cost less any identifiable impairment loss.

26. cASh And cASh equiVAlentS

Cash at bank and in hand	the group 2011 2010 HK$’000 HK$’000 116,765 9,796

Cash at banks earns interest at floating rate based on daily bank deposit rates. The fair values of the company’s bank balance and cash at 31 March 2011 and 2010 approximate their corresponding carrying amounts.

27. trAde pAYABleS

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

Within 30 days 31-60 days 61-90 days Over 90 days	the group 2011 2010 HK$’000 HK$’000 – 2,706 – 201 – 31 – 5,298 – 8,236	the group 2011 2010 HK$’000 HK$’000 – 2,706 – 201 – 31 – 5,298 – 8,236
		8,236

28. depoSitS receiVed, other pAYABleS And AccruAlS

Sales deposits received Deposits received in respect of sale of investment properties Security deposits received Other payables and accruals	the 2011 HK$’000 25,230 – – 8,860 34,090	group 2010 HK$’000 222 48,000 660 12,707 61,589	the company 2011 2010 HK$’000 HK$’000 – – – – – – 4,321 3,504 4,321 3,504	the company 2011 2010 HK$’000 HK$’000 – – – – – – 4,321 3,504 4,321 3,504
				3,504

I-56 -

finAnciAl informAtion of the group

Appendix i

29. Amount due to non-controlling intereStS

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

30. oBligAtion under finAnce leASe

The motor vehicle under finance lease has been disposed at consideration of HK$200,000 during the year.

The Group leased a motor vehicle under finance lease. The lease term was 3 years. Interest rate underlying the finance lease was fixed at contract date at 7.15% per annum. No arrangement had been entered into for contingent rental payments.

At 31 March 2011, the Group had obligation under finance lease repayable as follows:

Within 1 year After 1 year but within 2 years After 2 years but within 5 years Less total future interest expenses Present value of lease obligation	the group 2011 2010 present present value of the total value of the total minimum minimum minimum minimum lease lease lease lease payments payments payments payments HK$’000 HK$’000 HK$’000 HK$’000 – – 83 93 – – 83 93 – – 28 31 – – 111 124 – – 194 217 – (23 ) – 194	the group 2011 2010 present present value of the total value of the total minimum minimum minimum minimum lease lease lease lease payments payments payments payments HK$’000 HK$’000 HK$’000 HK$’000 – – 83 93 – – 83 93 – – 28 31 – – 111 124 – – 194 217 – (23 ) – 194
		93 31
		124
		217 (23 )
		194

The Group’s obligation under finance lease was secured by the charge over the leased assets.

31. BAnk loAnS, SecuredS

The bank loans have been fully settled during the year.

At 31 March 2010, the bank loans were repayable as follows, which were based on the scheduled repayment dates set out in the loan agreements and ignore the effect of any repayment on demand clause:

Repayable on demand or within one year After one year but within two years After two years but within five years After five years	the group HK$’000 78,200 1,200 19,200 56,400
	155,000

I-57 -

finAnciAl informAtion of the group

Appendix i

The bank loans included variable-rate borrowings repayable within one to ten years which carry interest rates of prevailing market rate plus 2.25% or HIBOR plus 2.25% per annum, whichever is higher. The effective interest rate on the bank loan is 2.45% per annum at 31 March 2010.

At 31 March 2010, the bank loans of the Group were secured by pledge of investment properties of the Group and corporate guarantee executed by the Company.

32. conVertiBle BondS

(a) On 7 October 2009, the Company issued HK$78 million convertible bonds due on the second anniversary of the date of the issue of the bonds for the acquisition of the entire interests in Harvest Yield. For the period commencing on the date of the issue of the convertible bonds and expiring on the first anniversary of such date of issue, 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 annum of the outstanding principal amount of the convertible bonds. Interest is payable on the maturity date or such earlier date of redemption of the convertible bonds. The convertible bonds are secured by (i) first charge over the entire issued share capital in Harvest Yield; (ii) first charge over the entire issued capital in Power Alliance; and (iii) second charge over the investment properties of the Group.

The bondholders have the right at any time up to maturity date to convert the whole or any part of the principal amount of the convertible bonds into ordinary share at the initial conversion price of HK$0.10 per share (subject to adjustments). If the convertible bonds have not been converted on the maturity date, they will be redeemed at the principal amount.

The convertible bonds contain two components, liability and equity components. The fair value of the liability component, which was determined by independent professional valuers, DTZ Debenham Tie Leung Limited and Roma Appraisals Limited on the date of issue, is the present value of the contractually determined stream of future cash flows discounted at the effective interest rate of 8.29% 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 equity.

(b) On 22 February 2010, the Company entered into the Service Agreement with Mr. Chiau whereby the Company appointed Mr. Chiau as an executive director of the Company and Mr. Chiau accepted the appointment with prescribed duties for an initial term of five year from 1 June 2010. In consideration of the performance by Mr. Chiau of his duties for the Company, the Company shall, as a remuneration package to issue the convertible bonds to Mr. Chiau with an aggregate principal amount of HK$45 million. Details of share-based payment as described in note 45.

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

Convertible bonds issued on 7 October 2009 Interest expenses charged As at 1 April 2010 Convertible band issued on 1 June 2010 Interest expenses charged Conversion of convertible note into share At 31 March 2011	liability component HK$’000 69,798 2,847 72,645 7,170 5,610 (28,087 ) 57,338	equity component HK$’000 8,202 – 8,202 85,910 – (3,076 ) 91,036

I-58 -

finAnciAl informAtion of the group

Appendix i

Mature with 1 year Mature later than 1 year	2011 HK$’000 49,182 8,156 57,338	2010 HK$’000 – 72,645
		72,645

33. deferred tAxAtion

The components of deferred tax (assets)/liabilities recognised in the consolidated statement of financial position and the movements during the year are as follows:

At 1 April 2009 Acquired on acquisition of subsidiaries_(Note 36)_ Charged/(credited) to profit of loss At 1 April 2010 Charged/(credited) to profit or loss At 31 March 2011	Accelerated tax depreciation HK$’000 – 1,613 45 1,658 (684 ) 974	revaluation of investment property HK$’000 – 10,149 3,300 13,449 (13,449 ) –	unused tax loss HK$’000 – (4,880 ) (1,166 ) (6,046 ) 4,269 (1,777 )	total HK$’000 – 6,882 2,179
				9,061 (9,864 )
				(803 )

In accordance with the accounting policy set out in note 2(s), the Group has not recognised deferred tax assets in respect of cumulative tax losses of HK$38,385,000 (2010: HK$33,708,000) 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 2010 and 2011, the Group and the Company has no material unprovided deferred tax.

34. ShAre cApitAl

Ordinary shares of HK$0.02 each Authorised: At the beginning of the year Consolidation of share from 2 shares into one consolidated share_(note 3)_ At the end of the year	2011 number of nominal shares value ’000 HK$’000 5,000,000 100,000 – – 5,000,000 100,000	2010 number of nominal shares value ’000 HK$’000 10,000,000 100,000 (5,000,000 ) – 5,000,000 100,000	2010 number of nominal shares value ’000 HK$’000 10,000,000 100,000 (5,000,000 ) – 5,000,000 100,000
			100,000

I-59 -

finAnciAl informAtion of the group

Appendix i

2011 number of nominal shares value ’000 HK$’000 Ordinary shares of HK$0.02 each Issued and fully paid: At the beginning of the year 2,711,559 54,231 Conversion of convertible note_(note 1) 325,000 6,500 Share allotment under share option scheme before share consolidation(note 5) – – Share consolidation(note 2) – – Share consideration for acquisition of subsidiary(note 3) – – Placing of new shares(note 4) – – Share allotment under share option scheme after share consolidation(note 5)_ 35,000 700 At the end of year 3,071,559 61,431	2010 number of nominal shares value ’000 HK$’000 3,258,980 32,590 – – 66,898 669 (1,662,939 ) – 750,000 15,000 150,000 3,000 148,620 2,972 2,711,559 54,231	2010 number of nominal shares value ’000 HK$’000 3,258,980 32,590 – – 66,898 669 (1,662,939 ) – 750,000 15,000 150,000 3,000 148,620 2,972 2,711,559 54,231
		54,231

Note 1: The Company issued 325,000,000 ordinary shares of HK$0.02 each as a result of the exercise of the conversion rights attached to the convertible note of entire principal amount of HK$29,250,000 at a conversion price of HK$0.09 each on 24 August 2010.
Note 2: Pursuant to an ordinary resolution passed on 5 August 2009, a capital reorganization was undertaken that the issued and unissued ordinary share of HK$0.01 each in the capital of the Company was consolidated on the basis of every 2 shares being consolidated into 1 share of HK$0.02 each (“Consolidated share”).
Note 3: 750,000,000 Consolidated shares were issued at a price of HK$0.1 per share to satisfy part of the consideration pursuant to the sale and purchase agreement dated 27 May 2009 entered into between the Company and the vendors for the acquisition of Harvest Yield.
Note 4: The Company placed 150,000,000 Consolidated shares at a placing price of HK$0.1 per share on 14 October 2009 for the purpose of increase the working capital of the Company and enhance the liquidity strength of the Group.
Note 5: During the year, 35,000,000 ordinary shares of HK$0.02 each pursuant to the share option scheme of the Company at consideration of HK$3,426,000.

capital management

Capital comprises of share capital and reserves stated on the consolidated statement of financial position. 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 owners of the Company 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 owners’ 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.

I-60 -

finAnciAl informAtion of the group

Appendix i

As in prior year, 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, obligation under finance lease and convertible bonds) plus unaccrued proposed dividends, less cash and cash equivalents. Adjusted capital comprises all components of equity, other than amounts recognised in equity relating to cash flow hedges, less unaccrued proposed dividends.

During the year ended 31 March 2011, the Group changed to net asset position due to cash consideration received from the disposal of the property during the year.

The net debt-to-equity ratio at 31 March 2011 and 2010 was as follows:

Notes Current liabilities Trade payables Deposits received, other payables and accruals Amount due to an associate Amount due to non-controlling interests Amounts due to subsidiaries Tax payables Obligation under finance lease Bank loans, secured Convertible bonds Non-current liabilities: Obligation under finance lease Convertible bonds Total debt Less: Cash and cash equivalents 26 Net (asset)/debt Total equity Net debt-to-equity ratio	the group 2011 2010 HK$’000 HK$’000 – 8,236 34,090 61,589 – 147 – 483 – – 736 631 – 83 – 155,000 49,182 – 84,008 226,169 – 111 8,156 72,645 8,156 72,756 92,164 298,925 (116,765 ) (9,796 ) (24,601 ) 289,129 78,725 86,970 N/A 332%	the company 2011 2010 HK$’000 HK$’000 – – 4,321 3,504 – – – – 147,069 1,649 – – – – – – 49,182 – 200,572 5,153 – – 8,156 72,645 8,156 72,645 208,728 77,798 (114,069 ) (2 ) 94,659 77,796 80,899 79,685 117% 97%

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

I-61 -

finAnciAl informAtion of the group

Appendix i

35. reSerVeS

the company

At 1 April 2009 Share consideration of HK$0.02 each for acquisition of subsidiary Issue of ordinary shares of HK$0.02 each completed on 14 October 2009 Issue of ordinary shares under share option scheme Issuing expenses Issue of convertible bonds on 7 October 2009 Equity-settled share option arrangement Loss for the year At 31 March 2010 At 1 April 2010 Conversion of convertible note into shares Issue of convertible note on 1 June 2010 Issue of ordinary shares under share option scheme Equity-settled share option arrangement Loss for the year At 31 March 2011	equity component of Share contributed convertible premium surplus note HK$’000 HK$’000 HK$’000 132,897 1,988 – 60,000 – – 12,000 – – 16,895 – – (280 ) – – – – 8,202 – – – – – – 221,512 1,988 8,202 221,512 1,988 8,202 24,662 – (3,076 ) – – 85,910 4,467 – – – – – – – – 250,641 1,988 91,036	Share option reserve HK$’000 2,644 – – (6,669 ) – – 8,950 – 4,925 4,925 – – (1,741 ) 31,123 – 34,307	exchange Accumulated reserve losses HK$’000 HK$’000 – (146,724 ) – – – – – – – – – – – – – (64,449 ) – (211,173 ) – (211,173 ) – – – – – – – – – (147,331 ) – (358,504 )	total HK$’000 (9,195 ) 60,000 12,000 10,226 (280 ) 8,202 8,950 (64,449 ) 25,454 25,454 21,586 85,910 2,726 31,123 (147,331 ) 19,468

At 31 March 2011, no reserves is available for distribution to owners of the Company (2010: HK$12,327,000).

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.

I-62 -

finAnciAl informAtion of the group

Appendix i

36. AcquiSition of SuBSidiArieS

Acquisition in 2011

On 22 February 2010, the Company acquired (i) the entire issued share capital of Raxco Assets Corp. (“Raxco”) free from rights of mortgage, charge. Pledge, pre-emption, option, lien and any other third party right, equity security interest or other encumbrances (“Raxco Sale Shares); and (ii) the shareholder’s loan in the sum of HK$56,637,748 (representing the entire shareholders’ loan from Raxco) (“Sale Loan”). Raxco is a company incorporated in BVI in 2004 and has started operation since January 2005. Raxco is in the establishment stage of operating its online software and game development business through its wholly owned subsidiary in the PRC, Shanghai Bingo Interactive Information Technology Co. Ltd (“Shanghai Bingo”) (previously named as Shanghai NorthStar Software Co., Ltd.)., a wholly owned foreign enterprise of Raxco established in the PRC for the purpose of online software development, online game development, technical consultancy services and information technology support for online software and online game.

On 1 June 2010, the Company acquired Raxco Sale Shares and the Sale Loan at consideration of HK$10, payable in cash.

The fair value of net assets acquired in the transactions approximate to their carrying amounts at the date of acquisition and the goodwill arising are as follows:

Net assets/(liabilities) acquired: Property, plant and equipment Bank balances and cash Trade and other payables Other payables and accruals Provision of taxation Goodwill_(note 19)_ Total consideration satisfied by: Cash Net cash inflow arising on acquisition: Bank balances and cash acquired	raxco HK$’000 341 195 (8 ) (8,801 ) (22 ) (8,295 ) 8,295 – 195

The goodwill arising on the acquisition was attributable to the anticipated profitability of Raxco Assets Corp, and its subsidiary (“Raxco Sub Group”).

Raxco Sub Group contributed profit of HK$1,292,000 to the Group’s loss for the period between the date of acquisition and 31 March 2011.

If the acquisition had been completed on 1 April 2010, total group revenue and loss for the year ended 31 March 2011 would have been HK$557,750,000 and HK$158,281,000 respectively. 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 2010, nor is it intended to be a projection of future results.

I-63 -

finAnciAl informAtion of the group

Appendix i

Acquisition in 2010

On 7 October 2009, the Company acquired the entire issued share capital of Harvest Yield and the sale debts, being the amounts equal to the entirety of the face value of the loans outstanding at 7 October 2009 made by the vendors to Harvest Yield. Harvest Yield is the sole beneficial owner of the entire issued share capital of Power Alliance, a company incorporated in Hong Kong, who is the owner of the shopping mall located in Tsimshatsui which was managed by Gi Space Limited, a wholly owned subsidiary of the Company.

On 1 January 2010, the Company acquired the entire issued share capital of ISpace Investment Limited at consideration of HK$1.

The fair value of net assets acquired in the transactions approximate to their carrying amounts at the date of acquisition and the goodwill arising are as follows:

Net assets/(liabilities) acquired: Investment properties Property, plant and equipment Trade and other receivables Bank and cash balance Trade and other payables Bank loan, secured Deferred tax liabilities Goodwill Total consideration satisfied by: Issue of shares Issue of convertible bonds Net cash inflow arising on acquisition: Bank balances and cash acquired	harvest Yield HK$’000 300,000 192 1,375 51 (2,217 ) (147,075 ) (6,882 ) 145,444 7,556 153,000 75,000 78,000 153,000 51	iSpace HK$’000 – 1,304 132 1 (4,202 ) – – (2,765 ) 2,765 – – – – 1	total HK$’000 300,000 1,496 1,507 52 (6,419 ) (147,075 ) (6,882 ) 142,679 10,321 153,000 75,000 78,000 153,000 52

The fair value of the consideration shares was based on the published share price. The basis of fair value calculation of convertible bonds is set out in note 32.

The goodwill arising on the acquisition was attributable to the anticipated profitability of Harvest Yield and ISpace.

Harvest Yield and ISpace contributed profit of HK$11,026,000 and loss of HK$3,074,000 respectively to the Group’ loss for the period between the date of acquisition and 31 March 2010.

I-64 -

finAnciAl informAtion of the group

Appendix i

If the acquisition had been completed on 1 April 2009, total group revenue and loss for the year ended 31 March 2010 would have been HK$693,512,000 and HK$29,016,000 respectively. 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 2009, nor is it intended to be a projection of future results.

37. diSpoSAl of SuBSidiArieS

for year ended 31 march 2011

During the year, the Board of Director agreed to dispose the entire 100% shareholding interest in (i) GI Space (Hunghom) Limited, GI Space (Canton) Limited and Ispace Investment Limited, which engaged in provision of property management services and; (ii) Sparkle Success Investment Limited, and its subsidiaries which engaged in trading business and (iii) Sinoeye Limited, E-leaming iTech Service (Shanghai) Company Limited and Emcom International (China) Investment Ltd which were dormant companies. Details of the net liabilities disposed of are as follows:

Net liabilities disposed of: Plant and equipment Tax recoverable Trade and other receivables Bank and cash balances Trade and other payables Amount due to an associate Amount due to non-controlling interest Gain on disposal of subsidiaries: Consideration received and receivable Net liabilities disposed of Non controlling interest Release of exchange reserve Gain on disposal Net cash outflow arising on disposal: Cash consideration Bank balances and cash disposed of	trading HK$’000 401 115 1,109 44 (5,599 ) – – (3,930 ) – 3,930 – 155 4,085 – (44 ) (44 )	property management HK$’000 613 – 540 136 (12,428 ) – – (11,139 ) – 11,139 – – 11,139 – (136 ) (136 )	others HK$’000 – – 35 23 (70 ) (160 ) (483 ) (655 ) – 655 (242 ) (97 ) 316 – (23 ) (23 )	total HK$’000 1,014 115 1,684 203 (18,097 ) (160 ) (483 ) (15,724) – 15,724 (242 ) 58 15,540 – (203 ) (203)

I-65 -

finAnciAl informAtion of the group

Appendix i

for year ended 31 march 2010

On 30 June 2009, the Group disposed of the entire equity interests in Photar International Limited at a consideration of HK$1 to an independent third party. Details of the net liabilities disposed of are as follows:

Net liabilities disposed of:
Interests in a jointly controlled entity
Other receivables, deposits and prepayments
Amount due from a jointly controlled entity
Bank and cash balances
Trade and other payables
Gain on disposal of subsidiaries:
Consideration received and receivable
Net liabilities disposed of
Release of exchange reserve
Gain on disposal
Net cash outflow arising on disposal:
Cash consideration
Bank balances and cash disposed of

HK$’000
–
2
31
79
(19,185 )
(19,073)
–
19,073
3,366
22,439
–
(79 )
(79)

38. 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 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.

I-66 -

finAnciAl informAtion of the group

Appendix i

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.

Details of specific categories of options are as follows:

				Adjusted
			exercise	exercise
option type	date of grant	exercise period	price	price
			HK$	HK$
2009A	30/12/2008	30/12/2008 – 29/12/2011	0.027	0.054
2009B	24/2/2009	24/2/2009 – 23/2/2012	0.036	0.072
2010	26/8/2009	26/8/2009 – 25/8/2012	0.1012	–
2011A	1/6/2010	1/12/2011 – 30/9/2013	0.1000	–
2011B	20/8/2010	15/6/2011 – 19/8/2016	0.2460	–

Note 1: 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).

For 2010, 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 26 August 2009 to 25 August 2012).

For 2011A, the options are exercisable in part or in full from the date of expiry of the eighteenth months from the date of grant of options to the date falling on the expiry of the fortieth month from the date of grant of the options (i.e., from 1 December 2011 to 30 September 2013).

For 2011B, the options are exercisable in part or in full from 15 June 2011 to 19 August 2016.

Note 2: The exercise price and number of options outstanding as at 5 August 2009 of option type 2009A and 2009B have been adjusted in accordance with share consolidation of two shares into one consolidated share.

I-67 -

finAnciAl informAtion of the group

Appendix i

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

category Directors Employees Advisor	Share option type 2010 2011A 2009A 2010 2011B 2009B 2010 2011B	number of shares issuable under options held	number of shares issuable under options held	number of shares issuable under options held	number of shares issuable under options held
		Balance at 1 April 2010 ’000 15,000 – 1 1,500 18,000 65,000 – 99,501	granted ’000 – 250,000 – – 24,000 – – 18,000 292,000	exercised ’000 (5,000 ) – – (1,000 ) (4,000 ) (25,000 ) – (35,000 )	Balance at 31 march 2011 ’000 10,000 250,000 1 500 24,000 14,000 40,000 18,000
					356,501

The weighted average share price during the year was HK$0.2135.

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

category Directors Employees Advisor	Share option type 2009A 2010 2009A 2010 2009A 2009B 2010	Balance at 1 April 2009 ’000 13,500 – 640 – 171,000 49,000 – 234,140	number	of shares issuable under options held	of shares issuable under options held	of shares issuable under options held	exercised after share consolidation ’000 (1,350 ) (3,000 ) (20 ) (500 ) (57,750 ) (6,500 ) (79,500 ) (148,620 )	lapsed ’000 – – – – – – –	Balance at 31 march 2010 ’000 – 15,000 1 1,500 – 18,000 65,000
			exercised before share consolidation ’000 (10,800 ) – (598 ) – (55,500 ) – –	Balance before share consolidation ’000 2,700 – 42 – 115,500 49,000 –	Adjusted balance upon share consolidation ’000 1,350 – 21 – 57,750 24,500 –	granted ’000 – 18,000 – 2,000 – – 144,500
			(66,898 )	167,242	83,621	164,500		–	99,501

I-68 -

finAnciAl informAtion of the group

Appendix i

The fair value of the share options of 2011 A and 2011B granted for 2011 during the year ended 31 March 2011 were approximately to HK$51,692,000 and HK$5,324,000 respectively (2010: HK$8,950,000) and the Company recognised total expenses of approximately HK$31,123,000 for the year. (2010: HK$8,950,000)

The fair value of equity-settled share options granted during the year was estimated as at the date of grant using a Binomial Option Pricing 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
	2011A	2011B
Option pricing model	Binomial	Binomial
Grant date share price	HK$0.270	HK$0.240
Exercise price	HK$0.100	HK$0.246
Volatility	94.74%	91.85%
Risk-free interest rate	1.08%	1.28%
Life of options	40 months	6 years
Expected dividend yield	0%	0%

At the date of approval of these financial statements, the Company had 326,501,000 share options outstanding under the Scheme, which represented approximately 11% of the Company’s shares in issue as at that date.

39. operAting leASe commitmentS

the group as lessee

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

Within one year In the second to fifth year, inclusive	2011 HK$’000 702 225 927	2010 HK$’000 445 195
		640

Other than as disclosed above, the Group and the Company had no material lease commitments outstanding at the end of reporting period.

I-69 -

finAnciAl informAtion of the group

Appendix i

40. cApitAl commitmentS

the group Contracted but not provided for – Additional cost to be incurred for animation under production – Additional capital injection in an associate, Boss Education Limited – Additional capital injection in a subsidiary, E-Learning i Tech Service (Shanghai) Company Limited	2011 HK$’000 11,462 – – 11,462	2010 HK$’000 – 2,450 1,206
		3,656

Other than as disclosed above, the Group and the Company had no material capital commitments outstanding at the end of the report period.

41. contingent liABilitieS

At 31 March 2010, the Company had issued a corporate guarantee for an amount of not less than HK$155,000,000 to a bank in respect of banking facilities granted to a wholly owned subsidiary. The directors of the Company did not consider it probable that a claim will be made against the Company under the corporate guarantee. The maximum liability of the Company at the end of the reporting period under the corporate guarantee issued was the outstanding amount of the bank loans of HK$155,000,000. The Company had not recognised any deferred income in respect of the corporate guarantee as its fair value is nominal.

Saved as disclosed above, the Group and the Company did not have any significant contingent liabilities as at 31 March 2010 and 2011.

42. pledge of ASSetS

As at 31 March 2011, the convertible bond issued on 7th October 2009 are secured by first charges over the entire issued share capital in Harvest Yield Investments Limited and Power Alliance Investment Limited.

As at 31 March 2010, the investment properties (which is classified as held for sale) with carrying amount of HK$320,000,000 have been pledged to secure general banking facilities granted to the Group and convertible bonds. In addition, the convertible bonds are also secured by first charges over the entire issued share capital in Harvest Yield Investments Limited and Power Alliance Investment Limited.

As at 31 March 2010, the Group’s obligation under finance lease is secured by the lessor’s charge over the leased asset, which has a carrying amount of HK$256,000.

43. non-cASh trAnSActionS

The Group entered into the following non-cash investing and financing activities which were not reflected in the consolidated statement of cash flows for year ended 31 March 2010:

I-70 -

finAnciAl informAtion of the group

Appendix i

During the year, the Group acquired a motor vehicle with a capital value of HK$295,000 under a finance lease.
As detailed in note 36, the Group acquired Harvest Yield at the consideration of HK$153 million during the year. The amount was settled in the way of issue of consideration shares and convertible bonds by the Company during the year.

44. relAted pArtY trAnSActionS

In addition to the balances disclosed elsewhere in these financial statements, the Group entered into the following material related party and connected transactions.

(a) 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:

2011 HK$’000 Salaries, allowances and other benefits 1,235 Share-based payment 121,797 123,032 (b) connected party transactions name of connected persons nature of transactions 2011 HK$’000 Ngai Wah Associates Limited Transferring all profits (Note 1) generated from intellectual – property rights in relation to the production of the animation film Entrance Gate Limited Royalty fee in relation to (Note 2) the royalty income generated 87 from sub-licensing of intellectual property right	2010 HK$’000 1,348 979
	2,327

	2010 HK$’000 – –

Note 1: Ngai Wah is beneficially owned by Kelly Chow, a sister of Mr. Chiau Sing Chi, director of the Company and it is defined as connected person under Gem Listing Rules.

Note 2: Entrance Gate is an independent third party of the Company. However, the Licence Agreement between Entrance Gate and High Amuse are inter-conditional with the following connected transaction/continuing connected transaction including (i) Service agreement for the appointment of Mr. Chiau Sing Chi, director of the Company, (ii) the Profit Transfer Deed between Ngai Wah and High Amuse and (iii) acquisition agreement between High Amuse and the shareholders of Raxco assets corp. before the effective of the acquisition agreement. Royalty fee payable to Entrance Gate in relation to the licence agreement is disclosed as continuing connected transaction.

I-71 -

finAnciAl informAtion of the group

Appendix i

During the Year, High Amuse Limited (“High Amuse”), a wholly-owned subsidiary of the Company, has entered into acquisition agreement to acquire (i) Sales Shares of Raxco Assets Corp. (“Raxco”) (representing 100% equity interest of Raxco); and (ii) the shareholder’s loan in the sum of HK$56,638,000 (the “Sale Loan”) (representing the entire shareholder’s loan due from Raxco) from Teamgreat Investments Limited (“Teamgreat”). Teamgreat is pontifically owned by the discretionary trust founded by Mr. Chiau Sing Chi, a director of the Company, thus a connected person of the Company.

45. ShAre-BASed pAYmentS

The Company has the convertible bonds and share option scheme for a director, an employee and advisers of the Group. Details of the convertible bonds and share options are as follows:

convertible bonds
Issuer:	The Company
Principal amount:	HK$45 million in aggregate. The Convertible Bonds in the amount of
	HK$25 million issued on 1 June 2010 (“commencement date”) and the
	remaining four tranches (each worth HK$5 million, and HK$20 million
	in aggregate) of the Convertible Bonds issued on the date being the
	first, second, third and fourth anniversary of the date of commencement
	date.
Issue date:	1 June 2010
Maturity date:	Ten years from the date of issue
Interest:	Zero coupon
Conversion price:	HK$0.10 per share
Share option Scheme
(i) Grant date:	1 June 2010
Maturity date:	the date falling on the expiry of the fortieth month from the date of grant
	of the Options
Number of Options granted:	250,000,000
Exercise price:	HK$0.10 per share
Exercisable period:	Any time during the period commencing from the date of expiry of the
	eighteenth months from the date of grant of Options to the date falling on
	the expiry of the fortieth month from the date of grant of the Options.
(ii) Grant Date:	20 August 2010
Maturity Date:	19 August 2016
Number of Options Granted:	42,000,000
Exercise Price:	HK$0.246 per share

The fair values of the HK$45 million convertible bonds and 250,000,000 share options determined on 1 June 2010 using binomial option pricing model were HK$124,360,000 and HK$51,691,000 respectively.

The fair value of the 42,000,000 share options determined on 20 August 2010 using binomial option pricing model was HK$5,324,000.

I-72 -

finAnciAl informAtion of the group

Appendix i

The followings assumptions were used to calculate the fair value of HK$45 million convertible bonds:

Principle amount:	HK$45 million
Expected life:	10 years
Interest:	Nil
Redemption price:	100% of the principal amount
Conversion price:	HK$0.10
Risk-free rate:	2.47%
Effective interest rate:	16.73%
Share price:	HK$0.27
Expected dividend yield:	0%
Expected volatility:	84.09%

The followings assumptions were used to calculate the fair value of 250,000,000 share options:

Share price:	HK$0.27
Exercise price:	HK$0.10
Nature of the options:	Call
Risk-free rate:	1.08%
Expected life of the options:	40 months
Expected volatility:	94.74%
Expected dividend yield:	0%
Early exercise behavior:	280%

The following assumptions were used to calculate the fair value of 42,000,000 share option:

Share price:	HK$0.240
Exercise price:	HK$0.246
Nature of the option:	Call
Risk-free rate:	1.28%
Expected life of the option:	6 years
Expected volatility:	91.85%
Expected dividend yield:	0%
Early exercise behavior:	220%

In the current period, HK$25 million convertible bonds, 250,000,000 and 42,000,000 share options were granted/ issued and the Company recognized the total expense of HK$124,202,000 as share-based payments for year ended 31 March 2011.

46. eVentS After the reporting period

(i) On 13 April 2011, the Company entered into the Memorandum of Understanding (“MOU”) with CineChina Limited (“CineChina”) in relation to formation of the Joint Venture (“JV”) for investment in and management of high- end digital cinemas in the PRC. CineChina undertakes to the Company that it shall introduce not less than 36 cinemas with not less than 260 screens and 30,000 seats in aggregate within 3 years after the formation of the JV.
(ii) On 17 May 2011, pursuant to the MOU dated 13 April 2011, Shine Wisdom Limited (“Shine Wisdom”), a wholly-owned subsidiary of the Company, entered into (i) the First Acquisition Agreement with 重慶越界影院投資有限公司 (transliterated as Chongqing Yuejie Media Investment Company Limited) (“the First Vendor”) for the proposed acquisition of 51% interest in the tangible assets of Cinema Project A1 at a cash consideration of RMB6,611,000 (equivalent to approximately HK$7,900,000) and the proposed
I-73 -

finAnciAl informAtion of the group

Appendix i

acquisition of 51% interest in the tangible assets of Cinema Project A2 at a cash consideration of RMB6,316,000 (equivalent to approximately HK$7,548,000), (ii) the Second Acquisition Agreement with 重慶嘉裕影院管理有限公司 (transliterated as Chongqing Jiayu Cinema Management Company Limited) (“the Second Vendor”) for the proposed acquisition of 51% interest in the tangible assets of Cinema Project B at a cash consideration of RMB6,093,000 (equivalent to approximately HK$7,281,000); and (iii) the Third Acquisition Agreement with Mr. Yingang (“the Third Vendor”) for the proposed acquisition of 75% equity interest in a Target Company at a cash consideration of RMB10,903,000 (equivalent to approximately HK$13,029,000).

(iii) On 9 June 2011, Lofty Shine Limited, a wholly-owned subsidiary of the Company, entered into the JV Agreement with CineChina in connection with the cooperation between the Group and CineChina pursuant to the MOU dated 13 April 2011.
(iv) On 9 June 2011, Shine Wisdom and 上海龍影投資諮詢服務有限公司 (“Shanghai Longying”) entered into the Transfer Agreement for the transfer of the Leasing Agreements at nil consideration in relation to the leasing of premises for development into 4 cinemas with an initial planning of 29 screens with 4,719 seats in total in Linan, Hangzhou, Zhongshan and Tianjin respectively in the PRC.
(v) Mr. Fok Wai Ming Jackie has been appointed as a Executive Director with effect from 9 May 2011.

47. compArAtiVe figureS

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

I-74 -

finAnciAl informAtion of the group

Appendix i

3. unAudited conSolidAted interim finAnciAl StAtementS

The following is the full text of the unaudited financial statements of the Group for the six months ended 30 September 2011 as extracted from the interim report of the Company for the six months ended 30 September 2011:

“ condensed consolidated statement of comprehensive income

Notes
Revenue
2
Cost of sales
Gross Profit
Reimbursement from licensor
Other revenue and other net income
Gain on disposal of subsidiaries
3(a)
Administrative and operating expenses
Share-based payments
4
Share of results of jointly-controlled
entities
Share of results of associates
Finance cost
5
Loss before taxation
3
Taxation credit
Loss for the period
Loss attributable to:
Equity holders of the Company
Non-controlling interests

for the six months
ended 30 September
2011
2010
HK$’000
HK$’000
(Unaudited)
(Unaudited)
120,972
439,489
(112,072 )
(437,716)
8,900
1,773
–
3,828
133
39
714
3,535
(20,084 )
(35,574 )
(27,293 )
(90,173 )
(373 )
–
–
(13 )
(1,218 )
(2,000)
(39,221 )
(118,585 )
–
9,061
(39,221 )
(109,524 )
(38,608 )
(109,524 )
(613 )
–
(39,221 )
(109,524)

I-75 -

finAnciAl informAtion of the group

Appendix i

Notes Dividend 6 Loss per share (cents per share) Basic 7 Diluted 7 other comprehensive loss Exchange differences on translating foreign operations – Exchange differences arising during the period – Adjustment relating to foreign operations disposed during the period Other comprehensive loss for the period, net of tax Loss for the period total comprehensive loss for the period	for the six months ended 30 September 2011 2010 HK$’000 HK$’000 (Unaudited) (Unaudited) – – (1.27 ) (3.57 ) N/A N/A (286 ) (58 ) – (32 ) (286 ) (90 ) (39,221 ) (109,524 ) (39,507 ) (109,614 )

I-76 -

finAnciAl informAtion of the group

Appendix i

condensed consolidated statement of financial position

Notes non-current ASSetS Property, plant and equipment Interest in the jointly controlled entities 8 Goodwill Deferred tax assets current ASSetS Inventories Trade receivables 9 Other receivables, deposits and prepayments Film in progress Bank balance and cash current liABilitieS Trade payables 10 Deposits received, other payables and accruals Tax payables Convertible bonds net current ASSetS net ASSetS leSS current liABilitieS non-current liABilitieS Convertible bonds net ASSetS	As at 30 September 2011 HK$’000 (Unaudited) 313 27,886 15,060 803 44,062 – 45,033 19,300 67,032 46,649 178,014 44,497 51,085 734 51,155 147,471 30,543 74,605 8,156 66,449	As at 31 march 2011 HK$’000 (Audited) 578 – 15,060 803
		16,441
		24,710 322 4,262 8,389 116,765
		154,448
		– 34,090 736 49,182
		84,008
		70,440
		86,881
		8,156
		78,725

I-77 -

finAnciAl informAtion of the group

Appendix i

condensed consolidated statement of financial position

Notes cApitAl And reSerVeS Share capital 11 Reserves Non-controlling interests totAl equitY	As at 30 September 2011 HK$’000 (Unaudited) 61,751 5,303 67,054 (605 ) 66,449	As at 31 march 2011 HK$’000 (Audited) 61,431 17,294
		78,725 –
		78,725

I-78 -

finAnciAl informAtion of the group

Appendix i

condensed consolidated statement of changes in equity

At 1 April 2010 Issue of ordinary shares under Convertible bonds Issue of new shares of HK$0.02 each under share option scheme Share-based payments Disposal of foreign operations Exchange different arising from translation of financial Statements Loss for the period At 30 September 2010	Share capital HK$’000 54,231 6,500 680 – – – –	Share premium HK$’000 221,512 23,817 4,401 – – – –	contributed surplus HK$’000 3,930 – – – – – –	equity component of Share non convertible option exchange Accumulated controlling bonds reserve reserve loss total interests HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 8,202 4,925 58 (205,646 ) 87,212 (242 ) (3,076 ) – – – 27,241 – – (1,728 ) – – 3,353 – 72,625 11,487 – – 84,112 – – – (58 ) – (58 ) 242 – – (32 ) – (32 ) – – – – (109,524 ) (109,524 ) – 77,751 14,684 (32 ) (315,170 ) 92,304 –	equity component of Share non convertible option exchange Accumulated controlling bonds reserve reserve loss total interests HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 8,202 4,925 58 (205,646 ) 87,212 (242 ) (3,076 ) – – – 27,241 – – (1,728 ) – – 3,353 – 72,625 11,487 – – 84,112 – – – (58 ) – (58 ) 242 – – (32 ) – (32 ) – – – – (109,524 ) (109,524 ) – 77,751 14,684 (32 ) (315,170 ) 92,304 –	equity component of Share non convertible option exchange Accumulated controlling bonds reserve reserve loss total interests HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 8,202 4,925 58 (205,646 ) 87,212 (242 ) (3,076 ) – – – 27,241 – – (1,728 ) – – 3,353 – 72,625 11,487 – – 84,112 – – – (58 ) – (58 ) 242 – – (32 ) – (32 ) – – – – (109,524 ) (109,524 ) – 77,751 14,684 (32 ) (315,170 ) 92,304 –	total HK$’000 86,970 27,241 3,353 84,112 184 (32 ) (109,524 )
	61,411	249,730	3,930	77,751	14,684	–	92,304

I-79 -

Appendix i

finAnciAl informAtion of the group

At 1 April 2011 Issue of ordinary shares under convertible bonds Issue of new shares of HK$0.02 each under share option scheme Non-controlling interest Exchange difference arising from translation of financial statements Equity settled share option arrangement Loss for the period At 30 September 2011	Share capital HK$’000 61,431 – 320 – – – –	Share premium HK$’000 250,641 – 1,399 – – – –	contributed surplus HK$’000 3,930 – – – – – –	equity component of convertible bonds HK$’000 91,036 9,034 – – – – –	Share non option exchange Accumulated controlling reserve reserve loss total interests HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 34,307 (53 ) (362,567 ) 78,725 – – – – 9,034 – (422 ) – – 1,297 – – – – – (605 ) – (286 ) – (286 ) – 17,505 – – 17,505 – – – (39,221 ) (39,221 ) – 51,390 (339 ) (401,788 ) 67,054 (605 )	Share non option exchange Accumulated controlling reserve reserve loss total interests HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 34,307 (53 ) (362,567 ) 78,725 – – – – 9,034 – (422 ) – – 1,297 – – – – – (605 ) – (286 ) – (286 ) – 17,505 – – 17,505 – – – (39,221 ) (39,221 ) – 51,390 (339 ) (401,788 ) 67,054 (605 )	total HK$’000 78,725 9,034 1,297 (605 ) (286 ) 17,505 (39,221 )
	61,751	252,040	3,930	100,070	51,390	(605 )	66,449

I-80 -

finAnciAl informAtion of the group

Appendix i

condensed consolidated statement of cash flows

Net cash used in operating activities Net cash used in investing activities Net cash used in financing activities NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD EFFECT OF FOREIGN RATE EXCHANGES CASH AND CASH EQUIVALENTS AT END OF PERIOD ANALYSIS OF BALANCE OF CASH AND CASH EQUIVALENTS Cash at bank and on hand	for the six months ended 30 September 2011 2010 HK$’000 HK$’000 (Unaudited) (Unaudited) (38,614 ) (28,363 ) (18,088 ) 320,709 (13,128 ) (153,647 ) (69,830 ) 138,699 116,765 9,796 (286 ) (90 ) 46,649 148,405 46,649 148,405

Notes:

1. BASiS of prepArAtion

The Group’s unaudited consolidated results have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) (which include all Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants, accounting principles generally accepted in Hong Kong and the disclosures requirements of the GEM Listing Rules and the Hong Kong Companies Ordinance. They have been prepared under the historical cost convention, except for an investment property, derivative financial instruments and equity investments, which have been measured at fair value. The unaudited consolidated results are presented in Hong Kong dollars (“HK$”) and all values are rounded to the nearest thousand except when otherwise indicated.

The principal accounting policies applied in the preparation of the unaudited consolidated results are consistent with those adopted in the preparation of the annual consolidated financial statements of the Group for the year ended 31 March 2011.

I-81 -

finAnciAl informAtion of the group

Appendix i

In the current period, the Group has adopted a number of new and revised HKFRSs, which are effective for accounting periods beginning on or after 1 April 2011. The adoption of these new and revised HKFRSs had no material effect on the results or financial position of the Group for the current and/or prior accounting periods. Accordingly, no prior period adjustment has been required.

The Group has not applied the new and revised HKFRSs, which have been issued but are not yet effective, in the unaudited consolidated results. The Group is in the process of making an assessment of the impact of these new and revised HKFRSs upon initial application. So far, it has anticipated that these new and revised HKFRSs are unlikely to have a significant impact on the Group’s results of operations and financial position.

The interim results are unaudited but have been reviewed by the audit committee of the Company.

2. turnoVer And Segment informAtion

Turnover represents amount receivable for goods sold and services provided and royalty income generated in the normal course of business, net of sales related taxes.

Share of jointly controlled entity represents the net amount receivable shared from jointly controlled entity for cinema investment and management business.

turnover and results

For the six months ended 30 September 2011

Turnover External Share of results of jointly controlled entities Segment result Interest income Gain from disposal of subsidiary Share-based payments Unallocated corporate expenses Loss from operation Finance cost Loss before taxation Taxation Loss for the period	filmed entertainment, online games and licensing trading business HK$’000 HK$’000 112,162 8,810 – – (686 ) 1,406	cinema business consolidation HK$’000 HK$’000 – 120,972 (373 ) (373 ) (373 ) 347 133 714 (27,293 ) (11,904 ) (38,003 ) (1,218 ) (39,221 ) – (39,221 )

I-82 -

finAnciAl informAtion of the group

Appendix i

For the six months ended 30 September 2010

Turnover External Segment result Interest income Gain from disposal of subsidiary Unallocated corporate expenses Loss from operation Finance cost Share of loss of an associate Loss before taxation Taxation Credit Loss for the period	trading HK$’000 432,578 (6,033 )	filmed entertainment, online games and property licensing management business consolidation HK$’000 HK$’000 HK$’000 5,464 1,447 439,489 (13,806 ) (267 ) (20,106 ) 13 3,535 (100,014 ) (116,572 ) (2,000 ) (13 ) (118,585 ) 9,061 (109,524 )

I-83 -

finAnciAl informAtion of the group

Appendix i

consolidated Assets and liabilities

At 30 September 2011

		filmed
		entertainment,
		online games
		and licensing	cinema
	trading	business	business	consolidation
	HK$’000	HK$’000	HK$’000	HK$’000
ASSETS
Segment assets	45,651	90,886	42,926	179,463
Unallocated corporate assets				42,613
				222,076
Consolidated total assets
LIABILITIES
Segment liabilities	45,162	37,399	10,171	92,732
Unallocated corporate liabilities				62,895
Consolidated total liabilities				155,627
OTHER INFORMATION
Segment depreciation and amortization		24	39	63
Unallocated corporate depreciation				29

I-84 -

finAnciAl informAtion of the group

Appendix i

At 30 September 2010

ASSETS Segment assets Unallocated corporate assets Consolidated total assets LIABILITIES Segment liabilities Unallocated corporate liabilities Consolidated total liabilities OTHER INFORMATION Segment depreciation and amortization Gain on disposal of subsidiary	trading HK$’000 193 993 – –	filmed entertainment, online games property and licensing management business HK$’000 HK$’000 149,159 2,399 16,364 8,968 670 46 – –	other consolidation HK$’000 HK$’000 – 151,751 22,209 173,960 – 26,325 55,331 81,656 – 716 (3,535 ) (3,535 )

3. loSS Before tAxAtion

Loss before taxation is stated after charging/(crediting) the following:

Depreciation and amortization Operating leases rental in respect of rented premises Staff costs (including directors’ remuneration) Gain on disposal of subsidiary_(Note a)_	for the six months ended 30 September 2011 2010 HK$’000 HK$’000 (Unaudited) (Unaudited) 92 716 270 270 7,105 7,357 (714 ) (3,535 )

(a) gain on disposal of Subsidiaries

On 30 September 2011, the Board of Directors agreed to dispose the entire 100% shareholding interest in Shanghai Bingo Interactive Information Technology Co. Ltd. (Beijing Branch), at a gain on disposal of HK$714,000.

I-85 -

finAnciAl informAtion of the group

Appendix i

4. ShAre-BASed pAYmentS

(i) The Company has the convertible bonds and share option scheme for Mr. Chiau Sing Chi as his remuneration package to the services provided by him. Details of the convertible bonds and share options are as follows:

convertible bonds

Issuer: The Company Principal amount: HK$45 million in aggregate. The Convertible Bonds in the amount of HK$25 million issued on 1 June 2010 (“commencement date”) and the remaining four tranches (each worth HK$5 million, and HK$20 million in aggregate) of the Convertible Bonds issued on the date being the first, second, third and fourth anniversary of the date of commencement date. Issue date: 1 June 2010 Maturity date: Ten years from the date of issue Interest: Zero coupon Conversion price: HK$0.10 per share Share option Scheme Grant date: 1 June 2010 Maturity date: the date falling on the expiry of the fortieth month from the date of grant of the Options Number of Options granted: 250,000,000 Exercise price: HK$0.10 per share Exercisable period: Any time during the period commencing from the date of expiry of the eighteenth months from the date of grant of Options to the date falling on the expiry of the fortieth month from the date of grant of the Options.

The fair values of the HK$45 million convertible bonds and 250,000,000 share options determined on 1 June 2010 using binomial option pricing model were HK$124,360,048 and HK$51,691,784 respectively.

The followings assumptions were made by DTZ Debenham Tie Leung Limited, independent qualified professional valuers are not connected with the Group and have appropriate qualification, to calculate the fair value of HK$45 million convertible bonds:

I-86 -

finAnciAl informAtion of the group

Appendix i

Principle amount:	HK$45 million
Expected life:	10 years
Interest:	Nil
Redemption price:	100% of the principal amount
Conversion price:	HK$0.10
Risk-free rate:	2.47%
Effective interest rate:	16.73%
Share price:	HK$0.27
Expected dividend yield:	0%
Expected volatility:	84.09%

Share price:	HK$0.27
Exercise price:	HK$0.10
Nature of the options:	Call
Risk-free rate:	1.08%
Expected life of the options:	40 months
Expected volatility:	94.74%
Expected dividend yield:	0%
Early exercise behavior:	280%

(ii) The Company has share option scheme for employees and advisors of the Group. 42,000,000 share options were granted to an employee and advisors on 20 August 2010 with fair value of HK$5,324,000 using binomial option pricing model. 7,500,000 share options were granted to another employee on 14 April 2011 with fair value of HK$947,185 using binomial option pricing model.

During the period, 24,000,000 share options out of 42, 000,000 share options were lapsed and the outstanding balance is 18,000,000 share options.

Regarding of HK$30 million convertible bonds, 250,000,000, 18,000,000 and 7,500,000 share options disclosed above, the Company recognised the total share-based payments of HK$27,293,000 during the period.

I-87 -

finAnciAl informAtion of the group

Appendix i

5. finAnce coSt

finance cost continuing operations Interest on Bank loan Effective interest on convertible bonds Finance lease charge	for the six months ended 30 September 2011 2010 HK$’000 HK$’000 (Unaudited) (Unaudited) – 1,996 1,218 – – 4 1,218 2,000	for the six months ended 30 September 2011 2010 HK$’000 HK$’000 (Unaudited) (Unaudited) – 1,996 1,218 – – 4 1,218 2,000
		2,000

6. diVidend

The Directors do not recommend the payment of any dividend for the six months ended 30 September 2011 (six months ended 30 September 2010: Nil).

7. loSS per ShAre

(a) Basic

Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period.

Basic loss per share is calculated as follows:

	for the six	months
	ended 30 September
	2011	2010
	HK Cent	HK Cent
	(Unaudited)	(Unaudited)
Basic loss per share from operation	(1.27 )	(3.57 )

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

	for the six	months
	ended 30 September
	2011	2010
	HK$’000	HK$’000
	(Unaudited)	(Unaudited)
Loss for the period attributable to equity
holders of the Company	(39,221 )	(109,524)

I-88 -

finAnciAl informAtion of the group

Appendix i

	2011	2010
Weighted average number of ordinary
shares for the purpose of basic
loss per share	3,087,559,126	3,070,559,126

(b) diluted

No diluted loss per share has been presented by the Company for the six months ended 30 September 2011 as the exercise of the share options and convertible bonds will give rise to an anti-dilutive effect.

8. intereSt in the JointlY controlled entitieS

Cost of investment, unlisted Share of post-acquisition loss and reserves	As at 30 September 2011 HK$’000 (Unaudited) 28,259 (373 ) 27,886	As at 31 march 2011 HK$’000 (Audited) – –
		–

9. trAde receiVABleS

The credit period granted by the Group to its customers is normally 60-90 days.

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

Within 30 days 31-60 days 61-90 days Over 90 days	As at 30 September 2011 HK$’000 (Unaudited) 406 44,627 – – 45,033	As at 31 march 2011 HK$’000 (Audited) 127 – 147 48
		322

I-89 -

finAnciAl informAtion of the group

Appendix i

10. trAde pAYABleS

The aging of the Group’s trade payables in analysed as follows:

Within 30 days 31-60 days 61-90 days Over 90 days	As at 30 September 2011 HK$’000 (Unaudited) 62 44,435 – – 44,497	As at 31 march 2011 HK$’000 (Audited) – – – –
		–

11. ShAre cApitAl

Authorised: Beginning of the period/year Shares of HK$0.02 each End of the period/year Shares of HK$0.02 each Issued and fully paid: At the beginning of the period/year Issue of ordinary shares under convertible bonds Share allotment under share option scheme After share consolidation At the end of the period/year	As at 30 September 2011 (unaudited) no of shares Amount ’000 HK$’000 5,000,000 100,000 5,000,000 100,000 3,071,559 61,431 – – 16,000 320 3,087,559 61,751	As at 31 march 2011 (Audited) no of shares Amount ’000 HK$’000 5,000,000 100,000 5,000,000 100,000 2,711,559 54,231 325,000 6,500 35,000 700 3,071,559 61,431	As at 31 march 2011 (Audited) no of shares Amount ’000 HK$’000 5,000,000 100,000 5,000,000 100,000 2,711,559 54,231 325,000 6,500 35,000 700 3,071,559 61,431
			100,000

			54,231 6,500 700
			61,431

I-90 -

finAnciAl informAtion of the group

Appendix i

12. operAting leASe commitmentS

Within one year In the second to fifth year, inclusive 13. cApitAl commitmentS Contracted but not provided for – Additional cost to be incurred for animation under production	As at 30 September 2011 HK$’000 (Unaudited) 495 – 495 As at 30 September 2011 HK$’000 (Unaudited) 3,116	As at 31 march 2011 HK$’000 (Audited) 702 225
		927

		As at 31 march 2011 HK$’000 (Audited) 11,462

14. eVentS After the reporting period

The convertible bonds issued on 7 October 2009, with outstanding principal amount of HK$48,750,000 has been expired on 6 October 2011. The Company is currently negotiating with the bondholders for possible extension of the convertible bonds and other possible alteration of terms of the convertible bonds. During the negotiations between the Company and the bondholders, the bondholders have agreed not to redeem the convertible bonds until the possible alteration is confirmed. And the interest on the convertible bonds will continue to be payable by the Company until the date of redemption pursuant to the terms of the convertible bonds.”

I-91 -

finAnciAl informAtion of the group

Appendix i

4. unAudited conSolidAted finAnciAl StAtementS for the nine monthS ended 31 decemBer 2011

The following is the full text of the unaudited financial statements of the Group for the nine months ended 31 December 2011 as extracted from the quarterly report of the Company for the nine months ended 31 December 2011:

“condensed consolidated statement of comprehensive income

Notes Turnover 2 Cost of sales Gross profit Reimbursement from licensor Other income Gain on disposal of a subsidiary 3 Selling and marketing expenses Administrative and operating expenses Share-based payments 4 Share of results of jointly controlled entities Share of loss of associate Finance cost 5 Loss before taxation Taxation credit Loss for the period Loss attributable to: Equity holders of the Company Non-controlling interests Loss for the period	for the three months ended 31 december 2011 2010 *HK$’000* HK$’000 (unaudited)(Unaudited) 56,688 47,430 (55,903 ) (45,738 ) 785 1,692 – 271 17 72 – 12,717 – (3,645 ) (9,868 ) (10,461 ) (9,623 ) (15,812 ) (573 ) – – – (152 ) (613 ) (19,414 ) (15,779 ) – – (19,414 ) (15,779 ) (19,036 ) (15,779 ) (378 ) – (19,414 ) (15,779 )	for the nine months ended 31 december 2011 2010 *HK$’000* HK$’000 (unaudited)(Unaudited) 177,660 486,919 (167,975 ) (483,454) 9,685 3,465 – 4,099 150 111 714 16,252 – (3,667 ) (29,952 ) (46,013 ) (36,916 ) (105,985 ) (946 ) – – (13 ) (1,457 ) (4,415) (58,722 ) (136,166 ) – 9,061 (58,722 ) (127,105) (57,731 ) (127,105 ) (991 ) – (58,722 ) (127,105)

I-92 -

finAnciAl informAtion of the group

Appendix i

Notes Dividend 6 Loss for the period (cents per share): Basic 7 Diluted 7 Other comprehensive profit/(loss): Exchange differences on translating foreign operations – Exchange difference arising during the period – Adjustment relating to foreign operations disposed during the period Other comprehensive profit/(loss) for the period, net of tax Loss for the period Total comprehensive loss for the period	for the three months ended 31 december 2011 2010 *HK$’000* HK$’000 (unaudited)(Unaudited) – – (0.62 ) (0.51 ) n/A N/A (59 ) 10 – – (59 ) 10 (19,414 ) (15,779 ) (19,473 ) (15,769 )	for the nine months ended 31 december 2011 2010 *HK$’000* HK$’000 (unaudited)(Unaudited) – – (1.9 ) (4.14 ) n/A N/A (345 ) (22 ) – (58) (345 ) (80 ) (58,722 ) (127,105) (59,067 ) (127,185)

I-93 -

finAnciAl informAtion of the group

Appendix i

Notes:

1. BASiS of prepArAtion

In the current period, the Group has adopted a number of new and revised HKFRSs, which are effective for accounting periods beginning on or after 1 January 2011. The adoption of these new and revised HKFRSs had no material effect on the results of financial position of the Group for the current and/or prior accounting periods. Accordingly, no prior period adjustment has been required.

The third quarterly results are unaudited but have been reviewed by the audit committee of the Company.

2. turnoVer

Turnover represents amount receivable for goods sold, services provided and royalty income generated in the normal course of business, net of sales related taxes.

turnover Trading Property management Filmed entertainment, online games and licensing business Cinema	three months ended 31 december 2011 2010 *HK$’000* HK$’000 (unaudited) (Unaudited) 54,713 45,617 – 1,501 – 312 1,975 – 56,688 47,430	nine months ended 31 december 2011 2010 *HK$’000* HK$’000 (unaudited) (Unaudited) 166,875 478,195 – 6,965 8,810 1,759 1,975 – 177,660 486,919	nine months ended 31 december 2011 2010 *HK$’000* HK$’000 (unaudited) (Unaudited) 166,875 478,195 – 6,965 8,810 1,759 1,975 – 177,660 486,919
			486,919

I-94 -

finAnciAl informAtion of the group

Appendix i

3. gAin on diSpoSAl of SuBSidiArY

In September 2011, the Group closed and disposed of the entire 100% shareholding interest in Shanghai Bingo Interactive Information Technology Co. Ltd. (Beijing Branch), which was in dormant nature, at a gain on disposal of HK$714,000.

4. ShAre-BASed pAYmentS

(i) The Company has the convertible bonds and share option scheme for Mr. Chiau Sing Chi as his remuneration package to the services provided by him. Details of the convertible bonds and share options are as follows:

convertible bonds

The fair values of the HK$45 million convertible bonds and 250,000,000 share options determined on 1 June 2010 using binomial option pricing model were HK$124,360,048 and HK$51,691,784 respectively.

I-95 -

finAnciAl informAtion of the group

Appendix i

The following assumptions were made by DTZ Debenham Tie Leung Limited, independent qualified professional valuers not connected with the Group and have appropriate qualification, to calculate the fair value of HK$45 million convertible bonds:

Principle amount:	HK$45 million
Expected life:	10 years
Interest:	Nil
Redemption price:	100% of the principal amount
Conversion price:	HK$0.10
Risk-free rate:	2.47%
Effective interest rate:	16.73%
Share price:	HK$0.27
Expected dividend yield:	0%
Expected volatility:	84.09%

Share price:	HK$0.27
Exercise price:	HK$0.10
Nature of the options:	Call
Risk-free rate:	1.08%
Expected life of the options:	40 months
Expected volatility:	94.74%
Expected dividend yield:	0%
Early exercise behavior:	280%

During the Period, 24,000,000 share options out of 42,000,000 share options were lapsed and the outstanding balance is 18,000,000 share options.

During the Period, 1,000 share options granted to an ex-employee on 30 December 2008 were lapsed.

I-96 -

finAnciAl informAtion of the group

Appendix i

During the Period, the Company recognised the total share-base payment of HK$36,916,000. in relation to the HK$30 million convertible bonds, 250,000,000, 18,000,000 and 7,500,000 share options disclosed in items (i) and (ii) above.

5. finAnce coSt

finance cost Interest on convertible notes Interest on bank loan Finance lease charge	three months ended 31 december 2011 2010 *HK$’000* HK$’000 (unaudited) (Unaudited) 152 613 – – – – 152 613	nine months ended 31 december 2011 2010 *HK$’000* HK$’000 (unaudited) (Unaudited) 1,370 2,415 – 1,996 – 4 1,370 4,415	nine months ended 31 december 2011 2010 *HK$’000* HK$’000 (unaudited) (Unaudited) 1,370 2,415 – 1,996 – 4 1,370 4,415
			4,415

6. diVidend

The Directors do not recommend the payment of any dividend for the nine months ended 31 December 2011 (2010: Nil).

7. loSS per ShAre

(a) Basic

Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period.

Basic loss per share is calculated as follows:

Basic loss per share	three months ended 31 december 2011 2010 *HK Cent* HK Cent (unaudited) (Unaudited) (0.62 ) (0.51 )	nine months ended 31 december 2011 2010 *HK Cent* HK Cent (unaudited) (Unaudited) (1.9 ) (4.14 )

I-97 -

finAnciAl informAtion of the group

Appendix i

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

follows:

Loss for the period attributable to equity Holders of the Company Weighted average number of ordinary shares for the purpose of basic loss per share	three months ended 31 december 2011 2010 *HK$’000* HK$’000 (unaudited) (Unaudited) (19,036 ) (15,779 ) 2011 2010 3,087,559,1263,070,559,126	three months ended 31 december 2011 2010 *HK$’000* HK$’000 (unaudited) (Unaudited) (19,036 ) (15,779 ) 2011 2010 3,087,559,1263,070,559,126	nine months ended 31 december 2011 2010 *HK$’000* HK$’000 (unaudited) (Unaudited) (57,731 ) (127,105 ) 2011 2010 3,087,559,1263,070,559,126
	2011 3,087,559,126	2010 3,070,559,126

(b) diluted

No diluted loss per share has been presented by the Company for the nine months ended 31 December 2011 as the exercise of the share options and convertible bonds will give rise to an anti-dilutive effect.

8. condenSed conSolidAted StAtement of chAngeS in equitY

At 1 April 2010 Issue of ordinary shares under convertible bonds Issue of new share of HK$0.02 under share option scheme Share-based payments Disposal of foreign operations Exchange difference arising from translation of financial statement Loss for the period At 31 December 2010			Attributable to the equity holders of	Attributable to the equity holders of	Attributable to the equity holders of	the company			non controlling interests HK$’000 (242 ) – – – 242 – – –	total HK$’000 86,970 27,241 3,353 99,369 184 (22 ) (124,690 ) 92,405
	Share capital HK$’000 54,231 6,500 680 – – – –	Share premium HK$’000 221,512 23,817 4,401 – – – –	contributed surplus HK$’000 3,930 – – – – – –	equity component capital of convertible bonds HK$’000 8,202 (3,076 ) – 79,267 – – –	Share option reserve HK$’000 4,925 – (1,728 ) 20,102 – – –	exchange reserve HK$’000 58 – – – (58 ) (22 ) –	Accumulated loss before mi HK$’000 (205,646 ) – – – – – (124,690 )	total HK$’000 87,212 27,241 3,353 99,369 (58 ) (22 ) (124,690 )
	61,411	249,730	3,930	84,393	23,299	(22 )	(330,336 )	92,405

I-98 -

finAnciAl informAtion of the group

Appendix i

At 1 April 2011 Issue of ordinary shares under convertible bonds Issue of new share of HK$0.02 under share option scheme Non-controlling interest Exchange difference arising from translation of financial statement Equity settled share option arrangement Loss for the period At 31 December 2011			Attributable to the equity holders of the company	Attributable to the equity holders of the company	Attributable to the equity holders of the company	Attributable to the equity holders of the company	total HK$’000 78,725 12,487 1,297 – (345 ) 23,386 (57,731 ) 57,819	non controlling interests HK$’000 – – – (991 ) – – – (991 )	total HK$’000 78,725 12,487 1,297 (991 ) (345 ) 23,386 (57,731 ) 56,828 ”
	Share capital HK$’000 61,431 – 320 – – – – 61,751	Share premium HK$’000 250,641 – 1,399 – – – – 252,040	contributed surplus HK$’000 3,930 – – – – – – 3,930	equity component capital of convertible bonds HK$’000 91,036 12,487 – – – – – 103,523	Share option reserve HK$’000 34,307 – (422 ) – – 23,386 – 57,271	Accumulated exchange loss reserve before mi HK$’000 HK$’000 (53 ) (362,567 ) – – – – – – (345 ) – – – – (57,731 ) (398 ) (420,298 )

5. StAtement of indeBtedneSS

indebtedness

At the close of business on 31 December 2011, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group had outstanding indebtedness comprising the unsecured and unguaranteed Service CBs with total outstanding principal amount of approximately HK$30,000,000 and the secured and unguaranteed Loans in the aggregate amount of HK$51,875,000.

mortgages and charges

As at close of business on 31 December 2011, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Loans in the aggregate amount of HK$51,875,000 are secured by first charges over the entire issued share capital in Harvest Yield Investments Limited and Power Alliance Investment Limited, whollyowned subsidiaries of the Group.

contingent liabilities

As at close of business on 31 December 2011, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group had no other material contingent liabilities outstanding.

I-99 -

finAnciAl informAtion of the group

Appendix i

disclaimer

Save as disclosed above 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 December 2011, the 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.

Save as disclosed above and the bridging loan obtained from Beglobal of HK$5,000,000 as disclosed in the section headed “Reasons for the Subscription” in the letter from the Board in this circular, the Directors were not aware of any material changes in the Group’s indebtedness and contingent liabilities since 31 December 2011 up to and including the Latest Practicable Date.

6. mAteriAl chAnge

(i) As disclosed in the announcement of the Company dated 13 April 2010, the Company entered into a memorandum of understanding with CineChina Limited (“CineChina”) on 13 April 2011 in relation to the formation of a joint venture company for the investment in and management of high-end digital cinemas in the PRC. As announced by the Company on 9 June 2011, Lofty Shine Limited (“Lofty Shine”), a wholly-owned subsidiary of the Company, entered into a joint venture agreement with CineChina in relation to the establishment of two wholly foreign-owned enterprises in the PRC owned as to 70% by Lofty Shine and 30% by CineChina. The joint venture companies are principally engaged in the investment of high-end digital cinemas in the PRC and operation and management of high-end digital cinemas in the PRC respectively;
(ii) as disclosed in the announcement of the Company dated 17 May 2011, the Group entered into three agreements in relation to the acquisition of four cinemas in Chongqing, Chengdu and Shanghai, the PRC at an aggregate consideration of approximately RMB29.9 million. The aforesaid cinemas have an aggregate operating area of 11,537 square meters and 25 movie screens with nearly 4,000 seats. The acquisition of one of the cinema projects in Chongqing and the cinema project in Shanghai were completed in December 2011 and the Directors expect that the acquisition of the remaining two cinema projects in Chongqing and Chengdu will be completed by February 2012;
(iii) as disclosed in the announcement of the Company dated 9 June 2011, Bingo Cinema Investment Company Limited (“BCIC”) (formerly known as Shine Wisdom Limited), a wholly-owned subsidiary of the Company, entered into a transfer agreement dated 9 June 2011 with 上海龍影投資咨詢服務有限公司 (Shanghai Longying Investment Consulting Services Company Limited*) in relation to the transfer of four leasing agreements to BCIC at nil consideration for the development of premises into four cinemas with an initial planning of 29 screens with 4,719 seats in total in Linan, Hangzhou, Zhongshan and Tianjin respectively in the PRC. Transfer of the leasing agreements in respect of the premises in Linan and Hangzhou was completed in January 2012. Completion of the transfer of the leasing agreements in respect of the premises in Zhongshan and Tianjin is still subject to the due diligence review being conducted by the Group;
I-100 -

finAnciAl informAtion of the group

Appendix i

(iv) as disclosed in the announcement of the Company dated 6 October 2011, the 2011 CBs issued by the Company on 7 October 2009 matured on 7 October 2011 as disclosed in the section headed “Reasons for the Capitalisation” in the letter from the Board in this circular. Taking into account the financial position of the Group, the capital expenditures for the Group’s cinema projects and administrative and overhead costs of the Group, the Group was not able to redeem the 2011 CBs and pay the accrued interest thereon at the maturity date of 7 October 2011;
(v) as disclosed in the third quarterly results announcement of the Group dated 13 February 2012 (the “Results Announcement”), the Group recorded unaudited revenue of approximately HK$177.7 million for the nine months ended 31 December 2011, representing a decrease of approximately 63.5% as compared to the unaudited turnover of approximately HK$486.9 recorded for the corresponding period in 2010. Such decrease was primarily attributable to the shift of business focus from sales and trading of coal and palm oil business onto movie production, licensing and derivatives, crossover marketing and provision of interactive contents and cinema investment and management business with a view to capitalising on the highly promising prospects of the cinema industry in the PRC;
(vi) as disclosed in the Results Announcement, the Group recorded unaudited loss attributable to the Shareholders of approximately HK$57.7 million for the nine months ended 31 December 2011, representing a decrease of approximately 54.6% as compared to that of approximately HK$127.1 million for the corresponding period in 2010. Such improvement was primarily attributable to a decrease in administrative and operating expenses and share-based payment;
(vii) as the Group has allocated most of its financial resources to its movie production and cinema investment and development business as described in (i) to (iii) above, based on the unaudited management accounts of the Group for the nine months ended 31 December 2011, there was a decrease in current assets and increase in current liabilities and the Group had a net current liability position. The Directors expect that upon completion of the Subscription and the Capitalisation, the net current liability position would be restored to a net current asset position;
(viii) as disclosed in the section headed “Reasons for the Subscription” in the letter from the Board in this circular, the Group obtained a bridging loan of HK$5,000,000 from Beglobal pursuant to a letter dated 12 January 2012 entered into between the Company and Beglobal. Such bridging loan is unsecured, carries interest at the rate of 5% per annum and shall be repayable on or before 31 March 2012; and
(ix) the Subscription and the Capitalisation.

Save for the information disclosed in paragraph (vii) above, details of the other paragraphs have been disclosed by the Company by way of issue of announcements at the respective material time. Save and except for the above, the Directors confirm that there has been no material change in the financial or trading position or outlook of the Group since 31 March 2011, being the date to which the latest published audited consolidated financial statements of the Group were made up, up to and including the Latest Practicable Date.

I-101 -

GenerAl informAtion

Appendix ii

1. reSponSiBilitY StAtement

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

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 the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. SHAre CApitAl, SHAre optionS And ConVertiBle SeCUritieS

(i) Share capital

Set out below are the authorised and issued share capital of the Company (i) as at the Latest Practicable Date; and (ii) immediately after the proposed increase in the share capital of the Company becoming effective and upon completion of the Subscription and the Capitalisation:

Authorised	Authorised		HK$
	5,000,000,000	Shares as at the Latest Practicable Date	100,000,000
		Increase in the authorised share capital
	5,000,000,000	of the Company	100,000,000
	10,000,000,000		200,000,000

Issued and fully paid or credited as fully paid			HK$
	3,090,559,126	Shares in issue as at the Latest Practicable Date	61,811,182.52
	1,300,000,000	Allotment and issue of the Subscription Shares	26,000,000.00
	1,706,249,999	Allotment and issue of the Capitalisation Shares	34,124,999.98
		Upon completion of the Subscription and
	6,096,809,125	the Capitalisation	121,936,182.50

All the issued Shares rank pari passu with each other in all respects including the rights in respect of capital, dividends and voting.

Save for the issue of an aggregate of 19,000,000 new Shares pursuant to the exercise of 19,000,000 Share Options under the share option scheme of the Company, the Company had not issued any Shares since 31 March 2011, being the end of the last financial year of the Company.

II-1 -

GenerAl informAtion

Appendix ii

(ii) Share options

As at the Latest Practicable Date, the Company had 250,000,000 Service Options outstanding which entitle Mr. Chiau to subscribe for 250,000,000 new Shares at the exercise price of HK$0.10 per Share and 71,000,000 Share Options outstanding which entitle the holders thereof to subscribe for an aggregate of 71,000,000 new Shares at exercise prices of HK$0.1012 per Share (for 45,500,000 Shares) and HK$0.246 per Share (for 25,500,000 Shares).

(iii) Convertible securities

As at the Latest Practicable Date, the Company had the Service CBs in the aggregate principal amount of HK$30 million which are convertible into 300,000,000 new Shares at the prevailing conversion price of HK$0.10 per Share.

Save as disclosed above, the Company had no other outstanding options, warrants or conversion rights affecting the Shares as at the Latest Practicable Date.

3. mArKet priCeS

The table below shows the closing prices of the Share on the Stock Exchange on (i) the Latest Practicable Date; (ii) 12 January 2012, being the Last Trading Day; and (iii) the last trading day of each of the calendar months during the Relevant Period:

date	Closing price per Share
	HK$
29 July 2011	0.18
31 August 2011	0.14
30 September 2011	0.07
31 October 2011	0.099
30 November 2011	0.091
30 December 2011	0.069
12 January 2012, being the Last Trading Day	0.074
31 January 2012	0.081
22 February 2012, being the Latest Practicable Date	0.105

The highest and lowest closing price per Share as quoted on the Stock Exchange during the Relevant Period were HK$0.194 per Share on 19 July 2011 and HK$0.061 per Share on 3 October 2011 respectively.

II-2 -

GenerAl informAtion

Appendix ii

4. 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(s) had or was/were 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
	nature of	number of	capital of
name of director	interest	Shares held	the Company
Mr. Chan Cheong Yee	Beneficial owner	10,000	0.00%
Mr. Yik Chok Man	Beneficial owner	564,000	0.02%
Mr. Chong Lee Chang_(Note 1)_	Beneficial owner	90,631,999	2.93%
Mrs. Chen Chou Mei Mei, Vivien	Beneficial owner	5,500,000	0.18%
Mr. Chiau_(Note 2)_	Held by trust	905,000,000	29.28%

Notes:

Mr. Chong Lee Chang, a non-executive Director, personally owned 16,131,952 Shares and is deemed to be interested in 74,500,047 Shares through his beneficial interest in 100% of the entire issued share capital of Shieldman Limited.
Beglobal, a company indirectly owned by the Trust the discretionary objects of which are Mr. Chiau and his family, is beneficially interested in 905,000,000 Shares, of which 325,000,000 Shares are held by Beglobal and 580,000,000 Shares are held by Golden Treasure, a wholly-owned subsidiary of Beglobal. Beglobal is also interested in 1,300,000,000 Subscription Shares and 1,011,969,926 Capitalisation Shares to be allotted and issued under the Subscription Agreement and the Capitalisation Agreement respectively.
II-3 -

GenerAl informAtion

Appendix ii

(ii) Long positions in the underlying Shares

Share Options

		number of Share	exercise
name of director	date of grant	options held	price
			HK$
Mr. Chan Cheong Yee	26 Aug 2009	10,000,000	0.1012

The Company adopted the share option scheme on 19 October 2002, pursuant to which the Board may, at their discretion, offer employees, non-executive Directors, independent non-executive Directors or any other persons who have contributed to the Group to take up Share Options to subscribe for new Shares subject to the terms and conditions stipulated in the share option scheme.

Service Options

		number of
		Service	exercise
name of director	date of grant	options held	price
			HK$
Mr. Chiau	1 June 2010	250,000,000	0.1

The Company issued the Service Options to Mr. Chiau which entitle him to subscribe for 250,000,000 new Shares at the exercise price of HK$0.10 per Share during the exercise period. For details of the Service Options, please refer to the service agreement mentioned in the circular of the Company dated 3 May 2010.

Convertible bonds

The Service CBs in the principal amounts of HK$25 million and $5 million were issued to Mr. Chiau on 1 June 2010 and 1 June 2011 respectively. The remaining three tranches (each worth HK$5 million, and HK$15 million in aggregate) of the convertible bonds will be issued on the date being the second, third and fourth anniversary of the date of 1 June 2010. For details of the Service CBs, please refer to the service agreement mentioned in the circular of the Company dated on 3 May 2010.

II-4 -

GenerAl informAtion

Appendix ii

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 Division 2 and 3 of Part XV of the SFO and substantial Shareholders

So far as are 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:

		Approximate
		percentage of
		issued share
	number of	capital of
name of Shareholder	Shares held	the Company
Beglobal_(Note)_	905,000,000	29.28%

Note:

Beglobal, a company indirectly owned by the Trust the discretionary objects of which are Mr. Chiau and his family, is beneficially interested in 905,000,000 Shares, of which 325,000,000 Shares are held by Beglobal and 580,000,000 Shares are held by Golden Treasure, a wholly-owned subsidiary of Beglobal. Beglobal is also interested in 1,300,000,000 Subscription Shares and 1,011,969,926 Capitalisation Shares to be allotted and issued under the Subscription Agreement and the Capitalisation Agreement respectively.

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.

II-5 -

GenerAl informAtion

Appendix ii

5. AdditionAl diSCloSUre of intereStS

(i) As at the Latest Practicable Date, save for Beglobal’s beneficial interest in 905,000,000 Shares, neither Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure nor any parties acting in concert with any of them owns or has control or direction over any Shares or voting rights of the Company.
(ii) As at the Latest Practicable Date, save for the Loan in the amount of HK$30,359,097.78 owed by the Company to Beglobal, Mr. Chiau’s holding of the Service CBs with an aggregate principal amount of HK$30,000,000 and the Service Options, neither Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure nor any parties acting in concert with any of them holds any convertible securities, warrants or options of the Company nor has entered into any outstanding derivative in respect of the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company.
(iii) As at the Latest Practicable Date, there is no arrangement (whether by way of option, indemnity or otherwise) in relation to the Shares or the shares of Beglobal and which might be material to the Subscription, the Capitalisation or the Whitewash Waiver.
(iv) As at the Latest Practicable Date, save for the Subscription Agreement and the Capitalisation Agreement, there is no other agreement or arrangement to which Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure or any of the parties acting in concert with any of them is a party which relates to the circumstances in which it may or may not invoke or seek to invoke a pre-condition or a condition to the Subscription, the Capitalisation or the Whitewash Waiver.
(v) As at the Latest Practicable Date, neither Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure nor any parties acting in concert with any of them has borrowed or lent any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company.
(vi) As at the Latest Practicable Date, there was no agreement, arrangement or understanding pursuant to which the Subscription Shares will be transferred, charged or pledged to any other persons.
(vii) As at the Latest Practicable Date, the director of Beglobal does not hold any Share or any convertible securities, warrants, options and derivatives in respect thereof.
(viii) As at the Latest Practicable Date, no person had irrevocably committed themselves to vote in favour of or against the resolutions approving the Subscription Agreement and the transactions contemplated thereunder and the Whitewash Waiver at the EGM.
(ix) As at the Latest Practicable Date, Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure and parties acting in concert with any of them had not entered into any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with any person.
II-6 -

GenerAl informAtion

Appendix ii

(x) As at the Latest Practicable Date, Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure and parties acting in concert with any of them had not borrowed or lent any Shares or any convertible securities, warrants, options and derivatives in respect thereof.
(xi) None of Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure and parties acting in concert with any of them and the Directors had dealt for value in any Shares or any convertible securities, warrants, options and derivatives in respect thereof during the Relevant Period.
(xii) As at the Latest Practicable Date, no agreement, arrangement or understanding (including any compensation arrangement) existed between Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure and parties acting in concert with any of them and any of the Directors, recent Directors, Shareholders or recent Shareholders having any connection with or dependence upon the Whitewash Waiver.
(xiii) As at the Latest Practicable Date, save for Mr. Chiau and his family being the discretionary objects of the Trust which ultimately owned the entire issued share capital of Beglobal, the Company and the Directors did not hold any shares of Beglobal or any convertible securities, warrants, options and derivatives in respect thereof.
(xiv) As at the Latest Practicable Date, no subsidiary of the Company, pension fund of the Company or any subsidiary of the Company, or any adviser to the Company as specified in class (2) of the definition of “associate” under the Takeovers Code owned or controlled any Shares or any convertible securities, warrants, options and derivatives in respect thereof.
(xv) As at the Latest Practicable Date, no arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code existed between any person and the Company or any person who is an associate of the Company by virtue of classes (1), (2), (3) and (4) of the definition of “associate” under the Takeovers Code.
(xvi) As at the Latest Practicable Date, no fund which was managed on a discretionary basis by fund managers connected with the Company had any interest in any Shares or any convertible securities, warrants, options and derivatives in respect thereof.
(xvii) As at the Latest Practicable Date, Mr. Chong Lee Chang and Mrs. Chen Chou Mei Mei, Vivien intended to vote in favour of the resolutions approving the Subscription Agreement and transactions contemplated thereunder and the Whitewash Waiver at the EGM in respect of their shareholdings in the Company. Mr. Chiau, Mr. Chan Cheong Yee and Mr. Yik Chok Man shall abstain from voting on the resolutions approving the Subscription and the Whitewash Waiver at the EGM pursuant to the Takeovers Code. The other Directors (being Mr. Fok Wai Ming, Jackie, Mrs. Chin Chow Chung Hang, Roberta, Mr. Wong Chak Keung and Mr. Chum Kwan Yue, Desmond) did not hold any Shares as at the Latest Practicable Date.
II-7 -

GenerAl informAtion

Appendix ii

(xviii) As at the Latest Practicable Date, the Company and the Directors had not borrowed or lent any Shares or any convertible securities, warrants, options and derivatives in respect thereof.
(xix) As at the Latest Practicable Date, no benefit has been or would be given to any Director as compensation for loss of office or otherwise in connection with the Whitewash Waiver (other than statutory compensation).
(xx) As at the Latest Practicable Date, no agreement or arrangement existed between any Director and any other person which is conditional on or dependent upon the outcome of the Whitewash Waiver or otherwise connected therewith.
(xxi) As at the Latest Practicable Date, save as disclosed in the paragraphs headed “Directors’ Service Contracts” and “Interests in Contracts and Assets” below, no material contract had been entered into by Mr. Chiau and his family, the Trust, SMP Trustees, Beglobal, Golden Treasure and parties acting in concert with any of them in which any Director has a material personal interest.

6. direCtorS’ SerViCe ContrACtS

Mr. Chiau entered into a service agreement with the Company on 22 February 2010, pursuant to which Mr. Chiau shall accept the appointment as a Director with prescribed duties for an initial term of five years commencing from 1 June 2010 (the “Commencement Date”) to 31 May 2015, for a remuneration package comprising the Service CBs in the principal amount of HK$45 million and the Service Options which entitle him to subscribe for 250,000,000 new Shares at the exercise price of HK$0.10 per Share. The Service CBs shall be issued by the Company to Mr. Chiau in five tranches, as to HK$25 million of which has been issued on the Commencement Date and HK$5 million annually on the anniversary of the Commencement Date in the next four years during the term of the said service agreement. The Services Options has been granted to Mr. Chiau on the Commencement Date.

There is no fixed monthly payment under the service agreement although Mr. Chiau may be entitled to a cash bonus in respect of each financial year of the Company in an amount to be determined by the Board. The Board will take into account of the performance of the Group for that financial year in determining the bonus, if any. Mr. Chiau may also at the discretion of the Board be granted Share Options under the Company’s share option scheme entitling him to subscribe for Shares.

For further details of the service agreement, please refer to the circular of the Company dated 3 May 2010.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors had entered into any existing or proposed service contract with the Company, or any of its subsidiaries or associated companies which:

(i) (including both continuous and fixed term contracts) had been entered into or amended within 6 months before the date of the Announcement;
(ii) was a continuous contract with a notice period of 12 months or more;
II-8 -

GenerAl informAtion

Appendix ii

(iii) was a fixed term contract with more than 12 months to run irrespective of the notice period; or
(iv) was not expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation).

7. CompetinG intereStS

As at the Latest Practicable Date, none of the Directors or the substantial Shareholders (as defined in the GEM Listing Rules) or any of their respective associates had any interest in business which competes or may compete with the business of the Group or had any other conflict of interests which has or may have with the Group.

8. litiGAtion

As at the Latest Practicable Date, no member of the Group was engaged in any litigation, arbitration or claim 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 Group.

9. intereStS in ContrACtS And ASSetS

On 22 February 2010, Ngai Wah Associates Limited (“Ngai Wah”) entered into a profit transfer deed (the “Transfer Deed”) with High Amuse Limited (“High Amuse”), a wholly-owned subsidiary of the Company. Ngai Wah is beneficially owned by Ms. Kelly Chow, a sister of Mr. Chiau. Pursuant to the Transfer Deed, Ngai Wah agreed to transfer all profits generated from the intellectual property rights in relation to the production of the film entitled “CJ 7” to High Amuse at nil consideration.

On the same day, by a sub-licence agreement (the “Sub-Licence Agreement”) entered into between Entrance Gate Limited (“Entrance Gate”) as licensor and High Amuse as sub-licensee, High Amuse agreed to pay 10% royalty to Entrance Gate on the use, application or exploitation of the intellectual property rights in relation to the animation figure in “CJ 7”. Entrance Gate is an independent third party and the licensee under a licence agreement entered into with Ngai Wah, the head licensor. For the financial year ended 31 March 2011, royalty payable to Entrance Gate amounted to approximately HK$87,000.

Details of the Transfer Deed and the Sub-Licence Agreement have been disclosed in the circular of the Company dated 3 May 2010.

On 12 January 2012, a loan letter has been entered into between the Company and Beglobal, pursuant to which Beglobal advanced an unsecured loan of HK$5,000,000 in cash to the Company which bears interest at the rate of 5% per annum and shall be repayable on or before 31 March 2012.

Save as disclosed above, no contract or arrangement in which any of the Directors had a material interest and is significant in relation to the business of the Group subsisted as at the Latest Practicable Date.

II-9 -

GenerAl informAtion

Appendix ii

As at the Latest Practicable Date, none of the Directors has any direct or indirect interests in any assets which had been acquired or disposed of by or leased to, or were proposed to be acquired or disposed of by or leased to, any member of the Group since 31 March 2011, being the date to which the latest published audited financial statements of the Group were made up.

10. mAteriAl ContrACtS

Set out below are the material contracts entered into after the date falling two years before the date of the Announcement, not being a contract entered into in the ordinary course of business carried on or intended to be carried on by the Group:

(i) a sale and purchase agreement dated 22 February 2010 and entered into between Teamgreat Investments Limited as vendor and High Amuse as purchaser pursuant to which High Amuse has agreed to purchase the entire equity interests in Raxco Assets Corp for a consideration of HK$10;
(ii) a sub-licence agreement dated 22 February 2010 entered into between Entrance Gate as licensor and High Amuse as licensee for the consideration of royalty of 10% of the sales revenue on the use of the intellectual property rights licensed;
(iii) a service agreement dated 22 February 2010 entered into between Mr. Chiau and the Company, pursuant to which Mr. Chiau shall accept the appointment as a Director with prescribed duties for an initial term of five year, for a remuneration package comprising the Service CBs in the principal amount of HK$45 million and the Service Options which entitle him to subscribe for 250,000,000 new Shares;
(iv) a profit transfer deed dated 22 February 2010 entered into between Ngai Wah as transferor and High Amuse as transferee at nil consideration;
(v) a provisional sale and purchase agreement dated 9 March 2010 entered into between Power Alliance Investment Limited (a wholly-owned subsidiary of the Company) as vendor and Success Build Limited as purchaser in relation to the disposal (the “Disposal”) of a property comprising the whole of ground floor, upper ground floor, first and second floors of Lising Court situated at Nos. 34 & 36 Granville Road, Kowloon, Hong Kong at a consideration of HK$320,000,000;
(vi) the formal sale and purchase agreement dated 23 April 2010 in respect of the Disposal;
(vii) the memorandum of understanding dated 13 April 2011 entered into between the Company and CineChina Limited in relation to the cooperation in the investment and management of high-end digital cinema projects and related business in the PRC;
II-10 -

GenerAl informAtion

Appendix ii

(viii) the placing agreement (the “Placing Agreement”) dated 18 April 2011 entered into between Golden Treasure as vendor, the Company and China Everbright Securities (HK) Limited (the “Placing Agent”) as placing agent in relation to the placing of up to 548,900,000 Shares (the “Placing Shares”) at a placing price to be finalized by the Company and the Placing Agent on or before 29 April 2011;
(ix) the subscription agreement (the “Top-up Subscription Agreement”) entered into between the Company and Golden Treasure dated 18 April 2011 in relation to the subscription by Golden Treasure for new Shares equivalent to the number of the Placing Shares at the subscription price to be finalized by the Company and the Placing Agent on or before 29 April 2011;
(x) the deed of termination dated 25 April 2011 entered into between the Company, Golden Treasure and the Placing Agent for termination of the Placing Agreement with effect from 25 April 2011;
(xi) the deed of termination dated 25 April 2011 entered into between the Company and Golden Treasure for termination of the Top-up Subscription Agreement with effect from 25 April 2011;
(xii) the acquisition agreement dated 17 May 2011 entered into between Shine Wisdom Limited (“Shine Wisdom”) as purchaser and 重慶越界影院投資有限公司 (Chongqing Yuejie Media Investment Company Limited) as vendor in relation to the acquisition of 51% interest in the tangible assets of each of 重慶雄風百貨電影城 (Chongqing Xiongfeng Department Store Movie City) and 重慶中央大街電影城 (Chongqing Central Avenue Movie City) in Chongqing, the PRC, at an aggregate consideration of RMB12,927,000 (equivalent to approximately HK$15,448,000);
(xiii) the acquisition agreement dated 17 May 2011 entered into between Shine Wisdom as purchaser and 重慶嘉裕影院管理有限公司 (Chongqing Jiayu Cinema Management Company Limited) as vendor in relation to the acquisition of 51% interest in the tangible assets of 成都郫縣電影城 (Chengdu Pixian Movie City) in Chengdu, the PRC, at the consideration of RMB6,093,000 (equivalent to approximately HK$7,281,000);
(xiv) the acquisition agreement dated 17 May 2011 entered into between Shine Wisdom as purchaser and Mr. Yingang as vendor in relation to the acquisition of 75% equity interest in the tangible assets of 比高電影院（上海）有限公司 (Bingo Cinema (Shanghai) Company Limited) which includes 南翔智地廣場電影城 (Nanxiang Zhidi Plaza Movie City) in Shanghai, the PRC, at the consideration of RMB10,903,000 (equivalent to approximately HK$13,029,000);
(xv) the joint venture agreement dated 9 June 2011 (the “JV Agreement”) relating to the formation of Shine Wisdom and another joint venture company (“JV”) (both are to be owned as to 70% by Lofty Shine Limited, a wholly-owned subsidiary of the Company and as to 30% by CineChina Limited respectively), pursuant to which US$420,000 (approximately HK$3,276,000), being 70% of the total registered capital of the two wholly-
II-11 -

GenerAl informAtion

Appendix ii

owned foreign enterprises which are intended to be established in the PRC according to the JV Agreement, shall be contributed by Lofty Shine Limited in accordance with its shareholding in Shine Wisdom and JV;

(xvi) the transfer agreement dated 9 June 2011 and entered into between Shine Wisdom and 上海龍影投資咨詢服務有限公司 (Shanghai Longying Investment Consulting Services Company Limited) in relation to the transfer of the four leasing agreements to Shine Wisdom in respect of certain premises located in Linan, Hangzhou, Zhongshan, Tianjin in the PRC respectively for development and use as cinemas;
(xvii) the loan letter dated 12 January 2012 entered into between the Company and Beglobal pursuant to which Beglobal advanced an unsecured loan of HK$5,000,000 in cash to the Company at the interest rate of 5% per annum;

(xviii) the Subscription Agreement; and

(xix) the Capitalisation Agreements.

11. expert And ConSent

The following is the qualification of the expert who has given opinion or advice which is contained in this circular.

name Qualification Messis Capital a licensed corporation under the SFO to carry on Type 6 regulated activity (advising on corporate finance)

Messis Capital has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and the reference to its name in the form and context in which they appear.

As at the Latest Practicable Date, Messis Capital did not have any shareholding in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, Messis Capital did not have any direct or indirect interests in any assets which had been acquired or disposed of by or leased to, or were proposed to be acquired or disposed of by or leased to, any member of the Group since 31 March 2011, being the date to which the latest published audited financial statements of the Group were made up.

12. miSCellAneoUS

(i) The registered office of the Company is at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands.
II-12 -

GenerAl informAtion

Appendix ii

(ii) The head office and principal place of business of the Company in Hong Kong is at Room 1201-1204, 12th Floor, Sea Bird House, 22-28 Wyndham Street, Central, Hong Kong.
(iii) The Hong Kong branch share registrar and transfer office of the Company is Tricor Tengis Limited at 26/F., Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.
(iv) The company secretary of the Company is Mr. Yik Chok Man, who is a fellow member of the Association of Chartered Certified Accountants and the Hong Kong Institute of Certified Public Accountants and also an executive Director.
(v) The compliance officer of the Company is Mr. Chan Cheong Yee, who is also an executive Director.
(vi) The correspondence address of Mr. Chiau, the Trust, SMP Trustees, Beglobal and Golden Treasure is at Units 4-5A, 4/F, Wing Tuck Commercial Centre, 177-183 Wing Lok Street, Sheung Wan, Hong Kong. The director of Beglobal is Hurste Limited.
(vii) The principal place of business of Messis Capital is at Room 2002, 20th Floor, Tower One, Lippo Centre, 89 Queensway, Hong Kong.
(viii) The English text of this circular and the accompanying form of proxy shall prevail over the Chinese text in case of any inconsistency.

13. doCUmentS for inSpeCtion

Copies of the following documents are available for inspection during normal business hours on any Business Day from the date of this circular up to and including the date of the EGM (i) at the head office and principal place of business of the Company in Hong Kong at Room 1201-1204, 12th Floor, Sea Bird House, 22-28 Wyndham Street, Central, Hong Kong; (ii) on the website of the Securities and Futures Commission of Hong Kong at www.sfc.hk; and (iii) on the website of the Company at www.bingogroup.com.hk:

(i) the memorandum and articles of association of the Company;
(ii) the memorandum and articles of association of Beglobal;
(iii) the letter referred to in the section headed “Letter from the Board” in this circular;
(iv) the letter referred to in the section headed “Letter from the Whitewash IBC” in this circular;
(v) the letter referred to in the section headed “Letter from the GEM Listing Rules IBC” in this circular;
(vi) the letter referred to in the section headed “Letter from Messis Capital” in this circular;
II-13 -

GenerAl informAtion

Appendix ii

(vii) the annual reports of the Company each of the two financial years ended 31 March 2010 and 2011;
(viii) the interim report of the Company for the six months ended 30 September 2011;
(ix) the quarterly report of the Company for the nine months ended 31 December 2011;
(x) the service contract referred to under the paragraph headed “Directors’ service contracts” in this appendix;
(xi) the material contracts referred to under the paragraph headed “Material contracts” in this appendix; and
(xii) the written consent referred to under the paragraph headed “Expert and consent” in this appendix.
II-14 -

Notice of eGM

BiNGo GRoUP HoLDiNGS LiMiteD 比高集團控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8220)

Notice iS HeReBY GiVeN that an extraordinary general meeting (the “ Meeting ”) of Bingo Group Holdings Limited (the “ company ”) will be held at City Garden Hotel, 1st Floor, Yue – Function Room II, 9 City Garden Road, Hong Kong on 12 March 2012 at 10:00 a.m. for the purpose of considering and, if thought fit, passing the following resolutions with or without amendments as ordinary resolutions:

oRDiNARY ReSoLUtioNS

“ tHAt
(i) the increase in the authorised share capital of the Company from HK$100,000,000 divided into 5,000,000,000 shares of HK$0.02 each (each a “ Share ”) to HK$200,000,000 divided into 10,000,000,000 Shares by creating an additional 5,000,000,000 unissued Shares (the “ Proposed increase in Authorised Share capital ”) be and is hereby approved; and
(ii) any one or more of the directors of the Company (the “ Directors ”) be and is/are hereby authorised for and on behalf of the Company to execute all such documents, instruments and agreements and to do all such acts or things deemed by him/her/them to be incidental to, ancillary to or in connection with the matters contemplated in and for completion of the Proposed Increase in Authorised Share Capital.”
“ tHAt
(a) the conditional subscription agreement (the “ Subscription Agreement ”) dated 12 January 2012 and entered into between the Company as issuer and Beglobal Investments Limited (“ Beglobal ”) as subscriber in relation to the subscription of the 1,300,000,000 new Shares (the “ Subscription Shares ”) at the subscription price of HK$0.03 per Subscription Share (a copy of which is produced to the Meeting marked “A” and signed by the Chairman of the Meeting for the purpose of identification), and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;
EGM-1 -

Notice of eGM

(b) conditional upon, among others, the Listing Committee of The Stock Exchange of Hong Kong Limited granting the listing of, and permission to deal in, the Subscription Shares to be issued and allotted to Beglobal under the Subscription Agreement, the allotment and issue of the Subscription Shares to Beglobal be and is hereby approved; and
(c) any one Director be and is hereby authorised to do all such things and acts as he/ she may in his/her discretion consider as necessary, expedient or desirable for the purpose of or in connection with the implementation of the Subscription Agreement and the transactions contemplated thereunder, including but not limited to the execution all such documents under seal where applicable, as he/she considers necessary or expedient in his/her opinion to implement and/or give effect to the allotment and issue of Subscription Shares.”
“ tHAt
(a) the conditional capitalisation agreements (the “ capitalisation Agreements ”) dated 12 January 2012 and entered into between the Company and each of Beglobal, Ms. Fung See Mun Catherine, Ms. Wong Ching Kuen, Mr. Sherman Lee and Mr. Bhanusak Asvaintra (together as the “ creditors ”) respectively in relation to the capitalisation of the outstanding principal amount of loans, together with unpaid interest accrued thereon up to and including 6 October 2011, in the aggregate amount of HK$51,187,500 owed by the Company to the Creditors by way of allotment and issue of 1,706,249,999 new Shares (the “ capitalisation Shares ”) to the Creditors at the capitalisation price of HK$0.03 per Capitalisation Share (copies of which are produced to the Meeting marked “B” and signed by the Chairman of the Meeting for the purpose of identification), and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;
(b) conditional upon, among others, the Listing Committee of The Stock Exchange of Hong Kong Limited granting the listing of, and permission to deal in, the Capitalisation Shares to be issued and allotted to each of the Creditors under the Capitalisation Agreements, the allotment and issue of the Capitalisation Shares to the Creditors be and is hereby approved; and
(c) any one Director be and is hereby authorised to do all such things and acts as he/she may in his/her discretion consider as necessary, expedient or desirable for the purpose of or in connection with the implementation of the Capitalisation Agreements and the transactions contemplated thereunder, including but not limited to the execution all such documents under seal where applicable, as he/she considers necessary or expedient in his/her opinion to implement and/or give effect to the allotment and issue of Capitalisation Shares.”
EGM-2 -

Notice of eGM

“ tHAt , subject to the granting of the Whitewash Waiver (as defined below) by the Executive Director of the Corporate Finance Division of the Securities and Futures Commission of Hong Kong (or any delegate of the Executive Director) and any conditions that may be imposed thereon, the waiver of the obligation on the part of Beglobal and parties acting in concert with it to make a mandatory general offer to shareholders of the Company for all the issued securities of the Company not already owned or agreed to be acquired by Mr. Chiau Sing Chi, his family, The Sino Star Trust, SMP Trustees Limited, Beglobal, Golden Treasure Global Investment Limited and parties acting in concert with any of them which might otherwise arise as a result of Beglobal subscribing for the Subscription Shares under the Subscription Agreement pursuant to Note 1 on Dispensations from Rule 26 of the Hong Kong Code on Takeovers and Mergers (the “ Whitewash Waiver ”) be and is hereby approved, and that any one or more of the Directors be and is/are hereby authorised to do all such acts and things and execute all such documents as he/she/they consider necessary, desirable or expedient for the purpose of, or in connection with, the implementation of and giving effect to any of the matters relating to, or incidental to, the Whitewash Waiver.”

By order of the Board Bingo Group Holdings Limited chan cheong Yee Executive Director

Hong Kong, 24 February 2012

Registered office: Head office and principal place of Cricket Square business in Hong Kong: Hutchins Drive Room 1201 – 1204 P.O. Box 2681 12th Floor, Sea Bird House Grand Cayman KY1-1111 22 – 28 Wyndham Street, Central 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 share registrar and transfer office in Hong Kong, Tricor Tengis Limited at 26th Floor, Tesbury Centre, 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.
EGM-3 -

AI assistant

Bingo Group Holdings Limited — Proxy Solicitation & Information Statement 2012

51336_rns_2012-02-23_f8910a32-e890-49b4-93aa-9698c6407691.pdf

BINGO GROUP HOLDINGS LIMITED 比高集團控股有限公司

contents

Definitions

Definitions

Definitions

Definitions

BINGO GROUP HOLDINGS LIMITED 比高集團控股有限公司

(i) CONNECTED TRANSACTION IN RELATION TO SUBSCRIPTION OF NEW SHARES BY A SUBSTANTIAL SHAREHOLDER;

(iii) APPLICATION FOR WHITEWASH WAIVER;

AND

(iv) PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL

INTRODUCTION

LETTER FROM THE BOARD

THE SUBSCRIPTION AGREEMENT

Date

Parties

The Subscription

Conditions precedent

Completion

THE CAPITALISATION AGREEMENTS

Date

Parties

The Capitalisation

Conditions precedent

LETTER FROM THE BOARD

Completion

COMPARISON OF VALUES

SHAREHOLDING STRUCTURE OF THE COMPANY

FUND RAISING ACTIVITIES OVER THE PAST 12 MONTHS

REASONS FOR THE SUBSCRIPTION

LETTER FROM THE BOARD

REASONS FOR THE CAPITALISATION

TAKEOVERS CODE IMPLICATIONS

Whitewash Waiver

INTENTION OF BEGLOBAL

PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL

LETTER FROM THE BOARD

GEM LISTING RULES IMPLICATIONS

ADJUSTMENTS TO THE SERVICE CBs, THE SERVICE OPTIONS AND THE SHARE OPTIONS

GENERAL

EGM

RECOMMENDATIONS

ADDITIONAL INFORMATION

BiNGo GroUP hoLDiNGs LimiteD 比高集團控股有限公司

(i) CoNNeCteD traNsaCtioN iN reLatioN to sUBsCriPtioN of NeW shares BY a sUBstaNtiaL sharehoLDer aND

(ii) aPPLiCatioN for WhiteWash WaiVer

Letter from the WhiteWash iBC

mr. Chum Kwan Yue, Desmond

BinGo GrouP hoLDinGs LimiteD 比高集團控股有限公司

(i) ConneCteD trAnsACtion in reLAtion to suBsCriPtion of neW shAres BY A suBstAntiAL shArehoLDer AnD

(ii) ConneCteD trAnsACtion in reLAtion to CAPitALisAtion of LoAns

Yours faithfully,

(i) CoNNeCteD traNsaCtioN iN reLatioN to sUBsCriptioN of NeW sHares BY a sUBstaNtiaL sHareHoLDer; (ii) CoNNeCteD traNsaCtioN iN reLatioN to CapitaLisatioN of LoaNs; aND (iii) appLiCatioN for WHiteWasH WaiVer

iNtroDUCtioN

Letter from messis CapitaL

Basis of oUr opiNioN aND reCommeNDatioN

priNCipaL faCtors aND reasoNs CoNsiDereD

1. review of historical performance of the Group

Letter from messis CapitaL

Letter from messis CapitaL

table B – Consolidated statement of financial position of the Group

Letter from messis CapitaL

2. Background and reasons for the subscription and the Capitalisation and use of proceeds

3. other alternative methods of financing

4. principal terms of the subscription and the Capitalisation

Historical performance of Share price

Trading liquidity of the Shares

Chart B – trading volume of the shares

table C – trading volume of the shares

Letter from messis CapitaL

Comparison with the Comparable Companies

table D – the Comparable Companies

5. financial effects of the subscription and the Capitalisation

Working capital

Net asset value

Earnings

Gearing and current ratio

Bingo Group Holdings Limited Proxy Solicitation & Information Statement 2012