Concord New Energy Group Ltd. - Proxy Solicitation & Information Statement 2009

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

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

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 disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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(Incorporated in Bermuda with limited liability)

(Stock code: 111)

(1) MAJOR AND CONNECTED TRANSACTION IN RELATION TO

THE ACQUISITION OF 40% ISSUED SHARE CAPITAL OF SINO-ROCK INVESTMENT MANAGEMENT COMPANY LIMITED INVOLVING THE ISSUE OF CONSIDERATION SHARES TO CONNECTED PERSON AND

(2) REFRESHMENT OF THE GENERAL MANDATE TO ISSUE SHARES

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

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A letter from the Board is set out on pages 5 to 17 of this circular. A letter from the Independent Board Committee containing its recommendations to the Independent Shareholders is set out on page 18 of this circular.

A letter from the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 19 to 31 of this circular.

A notice convening a special general meeting of Cinda International Holdings Limited to be held at 8: 30 a.m. on 11 December 2009 at 45th Floor, COSCO Tower, 183 Queen’s Road Central, Hong Kong is set out on pages 216 to 218 of this circular. Form of proxy for use at the special general meeting is enclosed. Whether or not you intend 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 of the meeting or any adjourned meeting thereof. Completion and return of the form of proxy will not preclude you from attending and voting at the special general meeting or any adjourned meeting in person should you so wish.

26 November 2009

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Letter from the Independent Financial Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Appendix I — Financial Information on the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	32
Appendix II — Financial Information on the Target Group . . . . . . . . . . . . . . . . . . . . . . .	151
Appendix III — Pro Forma Financial Information of the Enlarged Group . . . . . . . . . .	204
Appendix IV — General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	208
Notice of SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	216

– i –

DEFINITIONS

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

‘‘Acquisition’’ the acquisition of the Sale Shares by the Purchaser from the Vendor pursuant to the Sale and Purchase Agreement
‘‘Ample Capital’’ or Ample Capital Limited, a corporation licensed to carry out type ‘‘Independent 4 (advising on securities), type 6 (advising on corporate finance) Financial Adviser’’ and type 9 (asset management) regulated activities under the SFO and the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Acquisition and the grant of the New General Mandate
‘‘Announcement’’ the announcement of the Company dated 11 November 2009 in relation to, inter alia, the Acquisition and proposed refreshment of general mandate
‘‘associate(s)’’ has the meaning ascribed to it under the Listing Rules ‘‘Board’’ the board of Directors
‘‘Business Day’’ a day (excluding Saturday and Sunday) on which licensed banks in Hong Kong are open for business
‘‘Bye-laws’’ the bye-laws of the Company ‘‘CCBIAM’’ CCB International Asset Management Limited ‘‘China Cinda’’ China Cinda Asset Management Corporation, a wholly stateowned financial enterprise and the ultimate beneficial owner of the Vendor and Sinoday
‘‘Company’’ Cinda International Holdings Limited, a company incorporated in Bermuda with limited liability and the Shares of which are listed on the main board of the Stock Exchange
‘‘Completion’’ completion of the Acquisition ‘‘connected person’’ has the meaning ascribed to it under the Listing Rules ‘‘Consideration’’ HK$110,300,000, being the consideration payable by the Purchaser to the Vendor under the Sale and Purchase Agreement
‘‘Consideration Shares’’ 27,575,000 new Shares to be issued by the Company to the Vendor for settlement of part the Consideration pursuant to the Sale and Purchase Agreement
‘‘Director(s)’’ director(s) of the Company

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DEFINITIONS

‘‘Enlarged Group’’ the Group after the Completion ‘‘Existing Supplemental the 2 supplemental agreements to the Shareholders’ Agreement Agreements’’ entered into on 5 September 2007 and 6 November 2009 respectively, among the then existing shareholders of SinoRock and Sino-Rock to revise and supplement the Shareholders’ Agreement
‘‘General Mandate’’ the general and unconditional mandate granted to the Directors by the Shareholders pursuant to ordinary resolution passed at the Last AGM to exercise the power of the Company to allot, issue and deal with Shares not exceeding 20% of the issued share capital of the Company as at the date of the Last AGM
‘‘Group’’ the Company and its subsidiaries ‘‘Hong Kong’’ the Hong Kong Special Administrative Region of the PRC ‘‘Independent Board the independent board committee of the Company comprising all Committee’’ the independent non-executive Directors established for the purpose of advising the Independent Shareholders in relation to the Acquisition and the grant of the New General Mandate
‘‘Independent Shareholders other than Sinoday and its associates Shareholders’’
‘‘Issue Price’’ HK$2.00 per Consideration Share
‘‘Last AGM’’ the annual general meeting of the Company held on 2 June 2009
‘‘Latest Practicable 24 November 2009, being the latest practicable date prior to the Date’’ printing of this circular for ascertaining certain information for inclusion in this circular
‘‘Listing Rules’’ the Rules Governing the Listing of Securities on the Stock Exchange
‘‘New General the general mandate proposed to be sought at the SGM to Mandate’’ authorise the Directors to allot, issue and deal with Shares not exceeding 20% of the issued share capital of the Company as at the date of the SGM
‘‘New Subscription’’ the conditional subscription by CCBIAM of up to 8,866,000 new Shares pursuant to the New Subscription Agreement
‘‘New Subscription the subscription agreement dated 4 August 2009 between Agreement’’ CCBIAM and the Company

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DEFINITIONS

‘‘PRC’’ the People’s Republic of China which, for the purpose of this circular, excludes Hong Kong, Macau Special Administrative Region and Taiwan

‘‘Purchaser’’ Cinda International Direct Investment Limited, a wholly-owned subsidiary of the Company
‘‘Sale and Purchase the conditional agreement dated 9 November 2009 entered into Agreement’’ between the Purchaser and the Vendor in relation to the Acquisition
‘‘Sale Shares’’ 18,000,000 existing ordinary shares of Sino-Rock, representing 40% of the issued share capital of Sino-Rock
‘‘SGM’’ a special general meeting of the Company to be held on 11 December 2009 at 8: 30 a.m. to consider and approve (i) the Sale and Purchase Agreement and the transactions contemplated thereunder; (ii) the grant of the specific mandate for the issue of the Consideration Shares; and (iii) the New General Mandate
‘‘Share(s)’’ ordinary share(s) of HK$0.10 each in the share capital of the Company
‘‘Shareholder(s)’’ holder(s) of Shares
‘‘Shareholders’ the subscription and shareholders’ agreement in relation to SinoAgreement’’ Rock dated 8 December 2005 entered into between, among others, the Vendor and Sino-Rock
‘‘SFO’’ the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
‘‘Sinoday’’ Sinoday Limited, the controlling shareholder of the Company
‘‘Sino-Rock’’ Sino-Rock Investment Management Company Limited, a company incorporated in Hong Kong with limited liability
‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited
‘‘Supplemental the supplemental agreement to the Shareholders’ Agreement to Agreement’’ be entered into among the Purchaser, Sino-Rock and the existing shareholders of Sino-Rock (other than the Vendor)
‘‘Target Group’’ Sino-Rock, its subsidiaries and associate companies
‘‘Top-Up Subscription’’ the conditional subscription by Sinoday of up to 75,594,000 new Shares pursuant to the Top-Up Subscription Agreement

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DEFINITIONS

‘‘Top-Up Subscription the subscription agreement dated 4 August 2009 between Agreement’’ Sinoday and the Company ‘‘Vendor’’ Well Kent International Holdings Company Limited, a company incorporated in Hong Kong with limited liability ‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong ‘‘%’’ per cent.

If there is any inconsistency between the Chinese names of PRC entities, departments, facilities or titles mentioned in this circular and their English translations, the Chinese version shall prevail.

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LETTER FROM THE BOARD

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(Incorporated in Bermuda with limited liability)

(Stock code: 111)

Executive Directors:

Mr. Chen Xiaozhou (Chairman)
Mr. Gao Guanjiang (Deputy Chairman) Mr. Gu Jianguo
Mr. Zhao Hongwei (Managing Director)
Mr. Gong Zhijian Mr. Lau Mun Chung

Non-executive Director: Mr. Chow Kwok Wai

Independent Non-executive Directors:

Registered Office: Clarendon House 2 Church Street Hamilton, HM11 Bermuda

Head Office and Principal Place of Business in Hong Kong:

45th Floor COSCO Tower 183 Queen’s Road Central Hong Kong

Mr. Wang Tongsan

Mr. Chen Gongmeng
Mr. Hung Muk Ming

26 November 2009

To the Shareholders

Dear Sirs or Madams,

(1) MAJOR AND CONNECTED TRANSACTION IN RELATION TO

THE ACQUISITION OF 40% ISSUED SHARE CAPITAL OF SINO-ROCK INVESTMENT MANAGEMENT COMPANY LIMITED INVOLVING THE ISSUE OF CONSIDERATION SHARES TO CONNECTED PERSON

AND

(2) REFRESHMENT OF THE GENERAL MANDATE TO ISSUE SHARES INTRODUCTION

Reference is made to the Announcement, in which the Board announced that on 9 November 2009, the Purchaser entered into the Sale and Purchase Agreement with the Vendor, pursuant to which the Purchaser has conditionally agreed to acquire the Sale Shares at the Consideration of HK$110,300,000. To satisfy part of the Consideration, the Company will issue and allot 27,575,000 Shares as Consideration Shares to the Vendor at the Issue Price of HK$2.00 per Consideration Share upon Completion.

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LETTER FROM THE BOARD

The Acquisition constitutes a connected transaction and major transaction of the Company under the Listing Rules and will be subject to the approval of the Independent Shareholders by way of poll in general meeting.

The Directors would also put forward to the Independent Shareholders for approval at the SGM the grant of the New General Mandate.

The purpose of this circular is to provide you with information regarding (i) the Acquisition; (ii) the proposed grant of the New General Mandate; (iii) the recommendation from the Independent Board Committee; (iv) the recommendation from Ample Capital to the Independent Board Committee and the Independent Shareholders in respect of the Acquisition and the grant of the New General Mandate; and (v) the notice of the SGM.

THE SALE AND PURCHASE AGREEMENT

Date

9 November 2009

Parties

Purchaser: Cinda International Direct Investment Limited, a wholly-owned subsidiary of the Company

Vendor: Well Kent International Holdings Company Limited, being a holder of 40% of the issued share capital of Sino-Rock. It is principally engaged in securities investment

Assets to be acquired

The Sale Shares represent 40% of the issued share capital of Sino-Rock after Completion.

Consideration

The Consideration of HK$110,300,000 under the Sale and Purchase Agreement was arrived at after arm’s length negotiations between the Vendor and the Purchaser with reference to the unaudited consolidated net asset value of Sino-Rock as at 30 June 2009 being approximately HK$221,900,000 and the earning potential of the Target Group in its pre-IPO investments and private equity fund management business in the PRC. The Consideration represents a price to book ratio (‘‘P/B’’) of approximately 1.2 times, which the Directors consider is comparable to the current P/Bs of the investment companies listed on the Stock Exchange.

In determining the fairness and reasonableness of the Consideration, the Directors have taken into account of the amount due from related companies of the Target Group as well as amount due to/loan from/interest free loan from related companies of the Target Group amounting to approximately HK$180 million as of 30 June 2009. Besides, the

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LETTER FROM THE BOARD

Directors are well aware that the amount due from related companies of the Target Group is repayable on demand. As such, the Directors consider that the Consideration is fair and reasonable.

The Consideration shall be satisfied by the Purchaser in the following manner:

(i) as to HK$55,150,000 shall be satisfied in cash upon Completion; and
(ii) as to HK$55,150,000 shall be satisfied by procuring the Company to allot and issue 27,575,000 Consideration Shares to the Vendor at the Issue Price of HK$2.00 per Consideration Share upon Completion.

The Consideration Shares, when issued and allotted, shall rank pari passu in all respects with the Shares in issue on the date of issue and allotment of the Consideration Shares including the right to receive all dividends, distributions and other payments declared to be made on or after the date of such issue and allotment.

Based on the Issue Price, an aggregate of 27,575,000 new Shares would fall to be issued upon Completion representing:

(i) approximately 5.44% of the issued share capital of the Company as at the Latest Practicable Date; and
(ii) approximately 5.16% of the total issued share capital of the Company as enlarged by the issue and allotment of the Consideration Shares.

The Issue Price of HK$2.00 per Consideration Share represents:

(i) a discount of approximately 2.44% to the closing price of HK$2.05 per Share as quoted on the Stock Exchange on 9 November 2009, being the date of the Sale and Purchase Agreement;
(ii) a discount of approximately 0.30% to the average closing price of HK$2.006 per Share as quoted on the Stock Exchange for the five consecutive trading days up to and including 9 November 2009; and
(iii) a premium of approximately 308.16% over the unaudited net asset value per Share of approximately HK$0.49 based on the unaudited consolidated net asset value of the Group of HK$205,005,000 as at 30 June 2009 and a total of 422,303,000 Shares as at that date.

The Issue Price was determined after arm’s length negotiation between the Purchaser and the Vendor with reference to the recent trading prices of the Shares. The Directors (including the independent non-executive Directors) consider that the Issue Price is fair and reasonable.

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LETTER FROM THE BOARD

Application for listing

Application will be made by the Company to the Stock Exchange for the listing of, and permission to deal in, the Consideration Shares on the Stock Exchange. The Board will seek approval from the Independent Shareholders at the SGM for the grant of a specific mandate for the issue of the Consideration Shares.

Conditions precedent

Completion of the Acquisition is, among other things, conditional upon fulfillment or waiver, as the case may be, of the following conditions:

the Purchaser being satisfied in its absolute discretion with the results of the due diligence review of operations, legal status and financial position of the Target Group;
obtaining all the necessary or appropriate consents, authorisations and other approvals in relation to the Company as a company listed on the Stock Exchange, including but not limited to Independent Shareholders’ approval and the approval by the Listing Committee of the Stock Exchange of the listing of, and permission to deal in, the Consideration Shares on the Stock Exchange;
obtaining all approvals for the consummation of the Acquisition by all other shareholders of Sino-Rock;
obtaining all other necessary agreements, consents, authorisations and other approvals of any kind which may be required under any existing contractual arrangements of any members of the Target Group or the Vendor for the consummation of the Acquisition;
obtaining all necessary consents, authorisations or other approvals of any kind which may be required by any of the members of the Target Group or the Vendor from any governmental or regulatory authority for the consummation of the Acquisition and the satisfaction of all legislative and regulatory requirements to which any of the members of the Target Group or the Vendor is subject to;
obtaining a legal opinion issued by a firm of PRC lawyers appointed by the Purchaser confirming the legal status of the members of the Target Group which are incorporated in the PRC, the substance of which shall be satisfactory to the Purchaser at its absolute discretion; and
all warranties given by the Vendor remaining true and accurate in all respects and not misleading up to Completion.

If any of the conditions as set out in the Sale and Purchase Agreement is not fulfilled or waived on or before 31 December 2009 (or such later date as the Vendor and the Purchaser may agree), the Sale and Purchase Agreement shall cease to have any effect.

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LETTER FROM THE BOARD

Completion

Completion of the Acquisition is expected to take place on the fifth Business Day (or such other date as the Vendor and the Purchaser may agree) after all the conditions precedent set out in the Sale and Purchase Agreement have been fulfilled or waived.

Shareholders’ Agreement and Supplemental Agreement

Upon Completion, the Purchaser will enter into the Supplemental Agreement with the existing shareholders of Sino-Rock (other than the Vendor) and Sino-Rock, pursuant to which the Purchaser will take the benefits and obligations under the Shareholders’ Agreement in place of the Vendor as from Completion.

The Shareholders’ Agreement was entered into on 8 December 2005 between, among others, the Vendor and Sino-Rock, which governs the affairs of Sino-Rock and the respective rights and obligations of the shareholders of Sino-Rock. Following changes in the shareholding of Sino-Rock in 2007 and September 2009, the Existing Supplemental Agreements were entered into between, inter alia, the then existing shareholders of SinoRock to supplement and revise the Shareholders’ Agreement.

Certain substantial terms to the Shareholders’ Agreement (as supplemented and revised by the Existing Supplemental Agreements), which terms and conditions will be binding on the Purchaser pursuant to the Supplemental Agreement, are as follows:

(1) Board composition

The board of directors of Sino-Rock shall consist of 7 directors. The Purchaser shall be entitled to nominate 3 representatives to the board of directors of Sino-Rock upon Completion, and each of the other 2 existing shareholders of Sino-Rock has the right to nominate 2 representatives to the board of directors of Sino-Rock. Where the relative shareholdings of Sino-Rock may be altered in future, the entitlement of each shareholder to nominate representatives to the board of directors of Sino-Rock shall be proportionate to their respective shareholdings in Sino-Rock.

(2) Transfer of shares

Shareholder proposing to sell or otherwise dispose of its shares in Sino-Rock is subject to the right of first refusal of the other shareholders to purchase such shares. However, such right is not applicable where the transfer is made to a subsidiary, holding company or any subsidiary of the holding company of the outgoing shareholder. The outgoing shareholder shall procure its transferee to execute a supplemental agreement to the Shareholders’ Agreement with Sino-Rock and other existing shareholders of Sino-Rock in terms and conditions substantially the same with the Shareholders’ Agreement.

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LETTER FROM THE BOARD

(3) Non-competition

Except for the existing business of that shareholder, each shareholder shall use all reasonable endeavours to prevent itself and its affiliates from engaging in any businesses or activities which are in competition with the business of Sino-Rock.

(4) Unanimous consent

Unanimous consent of the shareholders is required, inter alia, for any change in the shareholding structure of Sino-Rock, for the issue of further shares or the creation of any options or other rights to subscribe for or acquire shares of Sino-Rock.

(5) Amendments to the Shareholders’ Agreement

The Shareholders’ Agreement may be amended if such amendment is in writing and is duly signed by all parties to the Shareholders’ Agreement (as supplemented and revised by the Existing Supplemental Agreements and any other supplemental agreement which may be executed).

INFORMATION ON THE GROUP

The Group is principally engaged in the provision of financial services in Hong Kong including the provision of leveraged foreign exchange trading and brokering services, securities brokering and margin financing services, commodities and futures brokering, financial planning, asset management and corporate financial advisory services in Hong Kong.

INFORMATION ON THE TARGET GROUP

Sino-Rock is a company incorporated in Hong Kong with limited liability on 4 June 1992. Since February 2006, Sino-Rock became an associate company of the Vendor. As at the Latest Practicable Date, Sino-Rock is owned as to 40% by the Vendor and 30% each by two independent third parties. Upon Completion, Sino-Rock will be owned as to 40% by the Company through the Purchaser and will become an associate company of the Company. The original purchase cost of the Sale Shares by the Vendor was approximately HK$27.3 million.

The Target Group is currently principally engaged in pre-IPO investment and investment in distressed assets. The principal investment policies of the Target Group include (i) the industry of the potential investment involved in sees a good potential growth; (ii) the potential investment is in a leading position in the industry; and (iii) the investment cost is below the market level. Currently, majority pre-IPO investments held by the Target Group, which were all unlisted when the Target Group made the relevant investments, are now listed and/or in the process of application for listing on relevant stock exchanges. The investments cover the industries of electrical equipment, transportation, financials, building materials etc. In light of the industry prospects, the operation scale and the investment cost, the Target Group is confident with the profitability of its investments. The investment in distressed assets held by the Target Group is also expected with reasonable investment

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LETTER FROM THE BOARD

return as it is made with reasonable investment cost and the Target Group believes a reasonable return could be achievable upon disposal of the relevant distressed assets. As at 30 June 2009, the audited available-for-sale investments carried by the Target Group was approximately HK$295.6 million. On top of making its own investment, the Target Group has been pursuing private equity fund management business in the PRC. The Target Group has set up a joint venture in the PRC to develop such business.

Set out below is a summary of the audited consolidated financial results of Sino-Rock for the two financial years ended 31 December 2008 and the six months ended 30 June 2009, which are extracted from the accountants’ report on the Target Group as set out in Appendix II to this circular and are prepared in accordance with Hong Kong Financial Reporting Standards:

			Six months
	Year ended 31 December		ended 30 June
	2007	2008	2009
	HK$’000	HK$’000	HK$’000
Turnover	390	15,096	1,013
Gain/(loss) on disposal of available-
for-sale investments	186,593	32,670	(7,691)
Profit before tax	145,011	6,234	3,613
Profit attributable to shareholders	128,728	6,234	2,896

As at 30 June 2009, the audited consolidated net asset value of Sino-Rock was approximately HK$221.9 million.

REASONS FOR AND BENEFIT OF THE ACQUISITION

Since the change of controlling Shareholder of the Group took place in November 2008, the Group has been endeavoring to expand its business in both Hong Kong and the PRC and to build up a well-known brand in the financial industry. The Directors consider that the investments currently held by the Target Group are with good growth potential, strong future profitability and good prospects, which would provide great value to the Shareholders.

Being one of its business objectives, the Group has been exploring and analysing new business opportunities in the asset management business. As mentioned in the 2009 interim report of the Company, the Group was actively considering resuming the asset management business, as it is an area of promising profitability. As set out above, the Target Group has been pursuing private equity fund management services in the PRC. The Acquisition accordingly provides a stepping stone for the Group to expand its range of financial services to fund management services. The Acquisition represents a good opportunity for the Group to participate in private equity fund management business in the PRC and provides a diversified revenue base. By leveraging on the existing platform of the Target Group, the Group would establish its reputation in private equity fund management business in the PRC, which would help to its further development in private equity fund management

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LETTER FROM THE BOARD

business either in local or overseas market. Upon Completion, the Group will develop its private equity fund management business in the PRC through Sino-Rock. The Directors are of the view that the non-competition clause in the Shareholders’ Agreement will not affect the Group’s ability to pursue other equity fund management businesses either in local or overseas market.

In view of the track record of the Target Group, the Directors expect that the Target Group will contribute positively to the results of the Group.

The Directors (including the independent non-executive Directors) considered that the Sale and Purchase Agreement was entered into on normal commercial terms in the ordinary and usual course of business of the Company after arm’s length negotiation, and the terms are fair and reasonable, and in the interests of the Company and Shareholders as a whole.

SHAREHOLDING STRUCTURE OF THE COMPANY

The issued share capital of the Company (i) as at the Latest Practicable Date and (ii) immediately after issue and allotment of the Consideration Shares comprise:

Sinoday Vendor Public Shareholders: — CCBIAM — Silver Grant International Securities Investment Limited — Atlantis Investment Management Limited — Other Shareholders Total	No. of Shares held as at the Latest Practicable Date 304,721,500 — 304,721,500 50,676,000 40,022,000 30,740,000 80,603,500 202,041,500 506,763,000	Approximate percentage of shareholding 60.13% — 60.13% 9.99% 7.90% 6.07% 15.91% 39.87% 100.00%	No. of Shares held immediately after issue and allotment of the Consideration Shares 304,721,500 27,575,000 332,296,500 50,676,000 40,022,000 30,740,000 80,603,500 202,041,500 534,338,000	Approximate percentage of shareholding 57.03% 5.16%
				62.19% 9.48% 7.49% 5.75% 15.09%
				37.81%
				100.00%

FINANCIAL EFFECT OF THE ACQUISITION

After the Acquisition, Sino-Rock will be accounted for as an associate company of the Group by using equity method of accounting. The shareholding interest in Sino-Rock will be recorded as ‘‘interests in associate’’ on the balance sheet, and any profit and loss of Sino-

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LETTER FROM THE BOARD

Rock will be disclosed as ‘‘share of profits and losses of associates’’ in the income statement of the Company. It is expected that the investments in Sino-Rock will contribute positively to the results of the Group.

Assets

With reference to the unaudited total assets and net asset value of the Group of approximately HK$280,165,000 and HK$205,005,000 as at 30 June 2009 and based on the unaudited pro forma consolidated asset and liabilities of the Enlarged Group as set out in Appendix III to this circular, the Acquisition will increase the unaudited consolidated total assets of the Enlarged Group to approximately HK$335,315,000, where the unaudited pro forma net asset value of the Enlarged Group would be increased to approximately HK$260,155,000.

Liabilities

The Group recorded unaudited total liabilities of approximately HK$75,160,000 as at 30 June 2009. As set out in the pro forma consolidated asset and liabilities of the Enlarged Group as set out in Appendix III to this circular, the unaudited pro forma total liabilities of the Enlarged Group would be approximately HK$75,160,000, which is the same amount prior to the Acquisition.

PROPOSED REFRESHMENT OF GENERAL MANDATE

Background of the General Mandate

At the Last AGM, the Shareholders passed, among others, an ordinary resolution to grant to the Directors the General Mandate to allot, issue and deal with a maximum of 84,460,600 Shares, representing 20% of the aggregate nominal amount of the share capital of the Company in issue as at the date of the Last AGM.

As announced by the Company on 14 August 2009, completion of the Top-Up Subscription and the New Subscription have been taken place on 14 August 2009. An aggregate of 75,594,000 new Shares have been issued and allotted by the Company to Sinoday and an aggregate of 8,866,000 new Shares have been issued and allotted by the Company to CCBIAM. Accordingly, the General Mandate has been substantially utilised with only 600 Shares can be further issued under the General Mandate as at the Latest Practicable Date.

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LETTER FROM THE BOARD

Refreshment of the General Mandate since the Last AGM

The Company has not refreshed the General Mandate since the date of the Last AGM and up to the Latest Practicable Date.

Reasons for and benefits of the refreshment of the General Mandate

The Group is principally engaged in the provision of financial services in Hong Kong, including the provision of leveraged foreign exchange trading and brokering services, securities brokering and margin financing services, commodities and futures brokering, financial planning, asset management and corporate financial advisory services in Hong Kong.

As the General Mandate has been substantially utilised, the Directors consider it is in the interests of the Company and the Shareholders as a whole to grant the New General Mandate by maintaining the financial flexibility necessary for the Company to raise funds through the issue of new Shares for its future business development.

The Directors consider that equity financing through the use of the New General Mandate is an important avenue of resources to the Group, as it (i) does not incur any interest paying obligations on the Group as in bank financing; (ii) is less costly and timeconsuming than raising funds by way of rights issue or open offer; and (iii) provides the Company with the capability to capture any capital raising or prospective investment opportunity as and when it arises. For these reasons, the Directors therefore proposed to seek the approval from the Independent Shareholders at the SGM on the grant of the New General Mandate.

The Company had an aggregate of 506,763,000 Shares in issue as at the Latest Practicable Date. Assuming that no Shares will be issued or repurchased by the Company between the Latest Practicable Date and the date of the SGM and subject to the passing of the ordinary resolution for the approval of the grant of the New General Mandate, the New General Mandate (if granted) will empower the Directors to allot, issue or otherwise deal with up to a maximum of 101,352,600 new Shares. At the SGM, upon the ordinary resolution relating to the grant of the New General Mandate is approved by the Independent Shareholders, the General Mandate will be revoked.

Period during which the New General Mandate will remain effective

The New General Mandate will, if granted, remain effective until the earliest of (i) the date of the next annual general meeting of the Company; (ii) the expiration of the period within which the next annual general meeting of the Company is required by the memorandum of association and Bye-laws of the Company or any other applicable laws to be held; and (iii) the date upon which such authority is revoked or varied by an ordinary resolution of the Shareholders in a general meeting of the Company.

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LETTER FROM THE BOARD

Capital raising activities of the Company in the preceding 12 months

Date of	Capital raising		Intended use of
announcement	activity	Net proceeds	proceeds	Actual use of proceeds
4 August 2009	Subscription of	Approximately	General working	All proceeds have
	84,460,000 new	HK$164	capital	been used as
	Shares	million		general working
				capital

Save for the above, the Company has not carried out other capital raising activities in the twelve months immediately preceding the date of this circular.

IMPLICATIONS UNDER THE LISTING RULES

The Vendor is wholly-owned by China Cinda, which is the ultimate beneficial owner of Sinoday, the controlling shareholder (as defined in the Listing Rules) of the Company. Accordingly, the Vendor is regarded as a connected person of the Company pursuant to Rule 14A.11(4) of the Listing Rules. Pursuant to Rule 14A.13(1), the Acquisition constitutes a connected transaction of the Company and will be subject to the reporting, announcement and Independent Shareholders’ approval requirements as set out in Rules 14A.45 to 14A.48 of the Listing Rules.

In addition, as some of the applicable percentage ratios (as defined in the Listing Rules) exceed 25% but are less than 100%, the Acquisition also constitutes a major transaction of the Company under Rule 14.06(3) of the Listing Rules.

Pursuant to Rule 13.36(4)(a) of the Listing Rules, any controlling shareholders (within the meaning of the Listing Rules) and their associates, or where there are no controlling shareholders, the Directors (excluding independent non-executive Directors) and the chief executive of the Company and their respective associates shall abstain from voting in favour of the resolution to approve the grant of the New General Mandate. Any vote of Shareholders at SGM shall be taken by way of poll. As at the Latest Practicable Date, Sinoday and its associates beneficially held 304,721,500 Shares, representing approximately 60.13% of the issued share capital of the Company.

A SGM will be convened and held to consider and, if thought fit, to approve (i) the Sale and Purchase Agreement and the transactions contemplated thereunder; (ii) the grant of the specific mandate for the issue of the Consideration Shares; and (iii) the New General Mandate. Sinoday and its associates, being the controlling Shareholders of the Company, will abstain from voting in the SGM.

INDEPENDENT BOARD COMMITTEE

The Independent Board Committee comprises Mr. Wang Tongsan, Mr. Chen Gongmeng and Mr. Hung Muk Ming, all being independent non-executive Directors. It has been established to advise the Independent Shareholders (a) as to whether (i) the terms of the Sale and Purchase Agreement and the transactions contemplated thereunder (including but not limited to the issue and allotment of the Consideration Shares); and (ii) the proposed grant of New General Mandate, are on normal commercial terms, fair and

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LETTER FROM THE BOARD

reasonable and in the interests of the Company and the Shareholders as a whole and (b) whether to vote in favour of the ordinary resolutions for approving (i) the Sale and Purchase Agreement and the transactions contemplated thereunder; (ii) the grant of the specific mandate for the issue of the Consideration Shares; and (iii) the grant of New General Mandate. Ample Capital has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of (i) the Sale and Purchase Agreements and the transactions contemplated thereunder (including but not limited to the issue and allotment of the Consideration Shares); and (ii) the proposed grant of the New General Mandate.

SGM

Set out on pages 216 to 218 of this circular is a notice convening the SGM which will be held on Friday, 11 December 2009 at 8: 30 a.m. at 45th Floor, COSCO Tower, 183 Queen’s Road Central, Hong Kong. At the SGM, ordinary resolutions will be proposed to approve (i) the Sale and Purchase Agreement and the transactions contemplated thereunder; (ii) the grant of the specific mandate for the issue of the Consideration Shares; and (iii) the grant of New General Mandate. Any vote exercised by the Independent Shareholders at the SGM shall be taken by way of poll.

A form of proxy of the SGM is enclosed with this circular. Whether or not you are able to attend and vote at the SGM, you are requested to complete and deposited the same to the Company’s Hong Kong branch share registrar, Tricor Secretaries Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong 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 the holding of SGM. Completion and delivery of the form of proxy will not preclude you from attending and voting at SGM or any adjournment thereof if you so wish.

RECOMMENDATIONS

Your attention is drawn to the letter of advice from the Independent Financial Adviser set out on pages 19 to 31 of this circular which contains its advice to the Independent Board Committee and the Independent Shareholders in connection with (i) the Sale and Purchase Agreement and transactions contemplated thereunder (including but not limited to the issue and allotment of the Consideration Shares); and (ii) the grant of the New General Mandate and the letter from the Independent Board Committee set out on page 18 of this circular which contains its recommendation to the Independent Shareholders in relation to the same matters.

The Board (including the Independent Board Committee) having taken into account the advice of the Independent Financial Adviser in relation to the (i) the Sale and Purchase Agreement and transactions contemplated thereunder (including but not limited to the issue and allotment of the Consideration Shares); and (ii) the grant of the New General Mandate, is of the opinion that (i) the Sale and Purchase Agreement and transactions contemplated thereunder (including but not limited to the issue and allotment of the Consideration Shares); and (ii) the grant of the New General Mandate, are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole as well as the Sale and Purchase Agreement is on normal

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LETTER FROM THE BOARD

commercial terms. Therefore, the Directors (including the independent non-executive Directors) after taking into account the recommendation of the Independent Financial Adviser and the Independent Board Committee, recommend the Independent Shareholders to vote in favour of the ordinary resolutions in relation to (i) the Sale and Purchase Agreement and the transactions contemplated thereunder (including but not limited to the issue and allotment of the Consideration Shares); and (ii) the grant of the New General Mandate.

ADDITIONAL INFORMATION

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

By order of the Board Cinda International Holdings Limited Lau Mun Chung Executive Director

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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(Incorporated in Bermuda with limited liability)

(Stock code: 111)

26 November 2009

To the Independent Shareholders

Dear Sir/Madam,

(1) MAJOR AND CONNECTED TRANSACTION IN RELATION TO

THE ACQUISITION OF 40% ISSUED SHARE CAPITAL OF SINO-ROCK INVESTMENT MANAGEMENT COMPANY LIMITED INVOLVING THE ISSUE OF CONSIDERATION SHARES TO CONNECTED PERSON AND

(2) REFRESHMENT OF THE GENERAL MANDATE TO ISSUE SHARES

We refer to the circular issued by the Company to the Shareholders and dated 26 November 2009 (‘‘Circular’’) of which this letter form part.

We have been appointed as the Independent Board Committee to advise the Independent Shareholders in connection with the Acquisition and the grant of the New General Mandate, details of which are set out in the Circular. Ample Capital has been appointed as the independent financial adviser to advise us in this respect. Terms defined in this Circular have the same meanings when used herein unless the context otherwise requires.

Having considered the advice of the Independent Financial Adviser in relation thereto as set out in the Circular, we are of the opinion that the terms of the Acquisition and the proposed grant of New General Mandate are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the relevant ordinary resolutions to be proposed at the SGM to approve the Acquisition and the proposed grant of the New General Mandate by way of poll.

Yours faithfully,

For and on behalf of the

Mr. Wang Tongsan

Independent Board Committee Mr. Chen Gongmeng Independent non-executive Directors

Mr. Hung Muk Ming

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

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Ample Capital Limited Unit A, 14th Floor Two Chinachem Plaza 135 Des Voeux Road Central Hong Kong

26 November 2009

To the Independent Board Committee
and the Independent Shareholders

Dear Sirs,

(1) MAJOR AND CONNECTED TRANSACTION IN RELATION TO

THE ACQUISITION OF 40% ISSUED SHARE CAPITAL OF SINO-ROCK INVESTMENT MANAGEMENT COMPANY LIMITED INVOLVING THE ISSUE OF CONSIDERATION SHARES TO CONNECTED PERSON AND

(2) REFRESHMENT OF THE GENERAL MANDATE TO ISSUE SHARES

INTRODUCTION

We refer to our engagement as the independent financial adviser to the Independent Board Committee and the Independent Shareholders on the Acquisition and refreshment of general mandate to allot and issue Shares, details of which are contained in the Letter from the Board (the ‘‘Letter from the Board’’) contained in the circular (the ‘‘Circular’’) of the Company to the Shareholders dated 26 November 2009, of which this letter forms part. Terms used in this letter have the same meanings as defined in the Circular unless the context otherwise requires.

On 9 November 2009, the Purchaser entered into the Sale and Purchase Agreement with the Vendor, pursuant to which the Purchaser has conditionally agreed to acquire the Sale Shares at the Consideration of HK$110,300,000. To satisfy part of the Consideration, the Company will issue and allot 27,575,000 Shares as Consideration Shares to the Vendor or its nominee(s) at the Issue Price of HK$2 per Consideration Share upon Completion.

The Vendor is wholly owned by China Cinda, which is the ultimate beneficial owner of Sinoday, the controlling shareholder (as defined in the Listing Rules) of the Company. Accordingly, the Vendor is regarded as a connected person of the Company pursuant to Rules 14A.11(4) of the Listing Rules. Pursuant to Rule 14A.13(1), the Acquisition constitutes a connected transaction of the Company and will be subject to the reporting, announcement and Independent Shareholders’ approval requirements as set out in Rules 14A.45 to 14A.48 of the Listing Rules.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Pursuant to Rule 13.36(4)(a) of the Listing Rules, the refreshment of general mandate requires the approval of the Independent Shareholders at the SGM at which the controlling Shareholders and their associates or if there are no controlling Shareholders, the Directors (excluding the independent non-executive Directors) and their associates shall abstain from voting in favour of the resolution to be proposed in respect of the refreshment of the general mandate.

Sinoday and its associates, being the controlling Shareholders of the Company, will abstain from voting in the SGM. As at the Latest Practicable Date, Sinoday and its associates beneficially held 304,721,500 Shares, representing approximately 60.13% of the issued share capital of the Company.

The Independent Board Committee has been established to advise whether the terms of the Acquisition and the New General Mandate are fair and reasonable and whether the Acquisition and the New General Mandate are in the interests of the Company and its Independent Shareholders as a whole and to advise the Independent Shareholders on how to vote. The Independent Board Committee comprising Mr. Wang Tongsan, Mr. Chen Gongmeng and Mr. Hung Muk Ming, all being independent non-executive Directors, has been formed to advise the Independent Shareholders in this respect.

BASIS OF OUR ADVICE

In arriving at our recommendation, we have relied on the information and facts provided by the Company and have assumed that any representations made to us are true, accurate and complete. We have also relied on the statements, information, opinions and representations contained in the Circular and the information and representations provided to us by the Directors and management of the Company. We have assumed that all information, representations and opinions contained or referred to in the Circular and all information, representations and opinions which have been provided by the Directors and management of the Company for which they are solely responsible, are true and accurate at the time they were made and will continue to be accurate at the date of the despatch of the Circular.

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 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 fact or circumstance which would render the information provided and representations and opinions made to us untrue, inaccurate or misleading. Having made all reasonable enquiries, the Directors have further confirmed that, to the best of their knowledge, they believe there are no other facts or representations the omission of which would make any statement in the Circular, including this letter, misleading. We have not, however, carried out any independent

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

verification of the information provided by the Directors and management of the Company, nor have we conducted an independent investigation into the business and affairs of the Group.

(I) THE ACQUISITION

Principal Factors taken into Account

The principal factors and reasons that we have taken into consideration in assessing the terms of the Acquisition and arriving at our opinion are set out as follows:

1. Background and reason for the Acquisition

(i) Background of the Target Group

Sino-Rock is a company incorporated on 4 June 1992. Since February 2006, Sino-Rock became an associate company of the Vendor. As at the Latest Practicable Date, Sino-Rock is owned as to 40% by the Vendor and 30% each by two independent third parties. Upon Completion, Sino-Rock will be owned as to 40% by the Company through the Purchaser and will become an associate company of the Company.

The Target Group is currently principally engaged in pre-IPO investment and investment in distressed assets. As at 30 June 2009, the available-for-sale investments carried by the Target Group was approximately HK$295.6 million. On top of making its own investment, the Target Group has been pursuing private equity fund management business in the PRC. The Target Group has set up a joint venture in the PRC to develop such business. We understand from the Company that the private equity fund management business of the Target Group is in its initial stage of development.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Set out below is a summary of the audited consolidated financial results of Sino-Rock for the two financial years ended 31 December 2008 and the six months ended 30 June 2009, which was prepared in accordance with Hong Kong Financial Reporting Standards and extracted from the accountants’ report of Sino-Rock set out in Appendix II to the Circular:

			Six months
			ended
	Year ended 31 December		30 June
	2007	2008	2009
	HK$’000	HK$’000	HK$’000
Turnover	390	15,096	1,013
Gain/(loss) on disposal of
available-for-sale
investments	186,593	32,670	(7,691)
Profit before tax	145,011	6,234	3,613
Profit attributable to
shareholders	128,728	6,234	2,896

As at 30 June 2009, the audited consolidated net asset value of SinoRock was approximately HK$221.9 million.

(ii) Reasons for the Acquisition

Sinoday, which is ultimately owned by China Cinda, became the controlling shareholder of the Company in late 2008. China Cinda is a wholly state-owned financial enterprise with the status of an independent legal entity established on 20 April 1999, with capital of RMB10 billion fully contributed by the Ministry of Finance of the PRC and is the first financial institution in management and disposal of non-performing assets in the PRC with the book value of non-performing assets acquired and under custody by it being over RMB1,000 billion. We understand from the Company that since the change of controlling shareholder of the Group, the Group has been endeavoring to expand its business in both Hong Kong and the PRC and to build up a wellknown brand in the financial industry.

We also understand from the Company that the Group has been exploring and analysing new business opportunities in the asset management business. According to the interim report of the Company for the six months ended 30 June 2009 (‘‘2009 Interim Report’’), the Group was actively

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

considering resuming the asset management business. As set out above, the Target Group has been pursuing private equity fund management services in the PRC. The Acquisition accordingly provides a stepping stone for the Group to expand its range of financial services to fund management services. Upon Completion, the Group will develop its private equity fund management business in the PRC through Sino-Rock. We understand from the Company that although Sino-Rock will only be an associate company of the Company, the Group is going to make use of the fund management platform of Sino-Rock in order to develop the Group’s experience, market knowledge and reputation in operating such business, which will be beneficial to the Group’s further development of the fund management business on its own in the future. Accordingly, the Acquisition is in line with the business plan of the Group.

As set out in the Interim Report, the Group’s turnover for the 1st half of 2009 declined to HK$31.3 million from HK$57 million for the same period in 2008 while the Group moved from a profit of HK$4.8 million for the 1st half of 2008 to a loss of HK$22.4 million for the 1st half of 2009. Such a deteriorating results were mainly attributable to the poor market sentiment as well as the disposal of certain profitable operations by the Group during the change in controlling shareholder mentioned above. We are of the view that it is in the interest of the Group and its Shareholders to diversify the Group’s business in order to bring into profitable business operation to the Group and to offer a wider range of financial services to clients. In view of the track record of the Target Group, we are of the view that the Acquisition can provide a new source of income to the Group and contribute positively to its results.

In view of the above, we are of the view that the Acquisition is in the interest of the Group and the Shareholders as a whole.

2. Terms of the Acquisition

(a) Consideration

The Consideration is HK$110.3 million which was arrived at after arm’s length negotiations between the Vendor and the Purchaser with reference to the unaudited consolidated net asset value of Sino-Rock as at 30 June 2009 being HK$221.9 million and the earning potential of the Target Group in its pre-IPO investments and private equity fund management business in the PRC.

In assessing the fairness and reasonableness of the Consideration, we have identified 19 comparable companies (the ‘‘Comparable Companies’’) being an exhaustive list of investment companies listed on the Stock Exchange identified by us to our best knowledge. We noticed that all of the Comparable Companies except one recorded a loss in their latest published annual accounts. Accordingly, it is not applicable to use the price-

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

to-earnings ratio to justify the Consideration. In view of that, we resort to use the price-to-net asset value ratio (‘‘P/B ratio’’) for our analysis. Although we have not compared the investment portfolio of the Target Company with that of the Comparable Companies due to the fact that the details of the investment portfolio held by the Comparable Companies as disclosed in the published information are limited and it is not possible to compare different types of portfolio as they are specific in nature, we consider that our analysis, which includes an exhaustive list of investment companies listed on the Stock Exchange, provides a reasonable yardstick, to justify the Consideration. Based on the 40% interest in Sino-Rock to be acquired by the Company and the audited net assets of the Target Group of approximately HK$221.9 million as at 30 June 2009, the Consideration of HK$110.3 million would therefore represent a P/B ratio of approximately 1.24 times.

		P/B ratio
Company name	Stock code	(times)(Note 1)
China Merchants China Direct
Investments Ltd.	133	0.60
Temujin International Investments Ltd.	204	3.27
Prosperity Investment Holdings Ltd.	310	0.80
Earnest Investments Holdings Ltd.	339	0.94
Incutech Investments Ltd.	356	N/A(Note 2)
Harmony Asset Ltd.	428	0.68
China Investment Fund Co. Ltd.	612	1.06
Prime Investments Holdings Ltd.	721	0.96
UBA Investments Ltd.	768	0.70
Shanghai International Shanghai
Growth Investment Ltd.	770	0.09
Opes Asia Development Ltd.	810	4.02
Radford Capital Investment Ltd.	901	0.44
Mastermind Capital Ltd.	905	6.00
Unity Investments Holdings Ltd.	913	0.22
OP Financial Investments Ltd.	1140	0.78
Grand Investment International Ltd.	1160	1.18
Garron International Ltd.	1226	N/A(Note 2)
National Investments Fund Ltd.	1227	1.86
Sino Katalytics Investment Corporation	2324	0.28
	Average	1.40
	Average
	(taking out the
	highest and
	lowest P/B)	1.19
	Median	0.79

Source: www.hkex.com.hk, and the relevant published announcements of the Comparable Companies.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Notes:

P/B is calculated based on (i) market price of the Comparable Companies as at 9 November 2009, the date of the Sale and Purchase Agreement; and (ii) net asset value of the Comparable Companies extracted from their latest published announcement.
The company recorded net liabilities in its latest published announcement.

As illustrated above, the P/Bs of the Comparable Companies range from 0.09 time to 6.00 times, with an average of 1.19 times (if taking out the highest and lowest P/B). The P/B of Sino-Rock implied by the Consideration, being 1.24 times, is therefore within the above range and very closed to the above average. Although the P/B implied by Sino-Rock is higher than the median P/B of the Comparable Companies, we consider that a higher P/B is deserved having taken into consideration that all of the Comparable Companies (except one) recorded a loss in their latest published accounts but Sino-Rock recorded a profit of approximately HK$6.2 million in the year ended 31 December 2008. In view of the above analysis, we consider that the Consideration is fair and reasonable so far as the Group and the Independent Shareholders are concerned.

(b) Consideration Shares

The Consideration shall be satisfied as follows:

(i) as to HK$55,150,000 shall be satisfied in cash upon Completion; and
(ii) as to HK$55,150,000 shall be satisfied by procuring the Company to allot and issue 27,575,000 Consideration Shares to the Vendor at the Issue Price of HK$2 per Consideration Share upon Completion.

Based on the Issue Price, an aggregate of 27,575,000 new Shares would fall to be issued upon Completion representing approximately 5.44% of the issued share capital of the Company as at the Latest Practicable Date and approximately 5.16% of the total issued share capital of the Company as enlarged by the issue and allotment of the Consideration Shares.

The Issue Price of HK$2 per Consideration Share represents:

(i) a discount of approximately 2.44% to the closing price of HK$2.05 per Share as quoted on the Stock Exchange on 9 November 2009, being the date of the Sale and Purchase Agreement;
(ii) a discount of approximately 0.30% to the average closing price of approximately HK$2.006 per Share as quoted on the Stock Exchange for the five consecutive trading days up to and including 9 November 2009; and

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(iii) a premium of approximately 308.16% over the unaudited net asset value per Share of approximately HK$0.49 based on the unaudited consolidated net asset value of the Group of HK$205,005,000 as at 30 June 2009 and a total of 422,303,000 Shares as at that date.

In order to evaluate the fairness and reasonableness of the Issue Price, we have identified, to our best knowledge and as far as we are aware of, the following connected transactions involving the issue of shares by companies listed on the Stock Exchange during the three-month period ended 9 November 2009 (the ‘‘Consideration Share Comparables’’). Shareholders should note that the businesses, operations and prospects of the Company are not the same as the Consideration Share Comparables and therefore, the Consideration Share Comparables are only used to provide a general reference for the common market practice of companies listed on the Stock Exchange in transactions which involved the issue of consideration shares.

		Premium/(discount) of
		issue price per
		consideration share to
		the closing price as at
		the last trading day
	Date of	prior to the release of
Name of company (stock code)	announcement	the announcement
		%
Tianjin Tianlian Public Utilities	5 November 2009	(15.00)
Company Limited (8290)
Hopson Development Holdings	2 November 2009	3.10
Limited (754)
PetroAsian Energy Holdings	1 November 2009	7.95
Limited (850)
Berjaya Holdings (HK) Limited (288)	30 October 2009	(72.97)
China Digital Licensing (Group	15 October 2009	(27.69)
Limited (8175)
Fushan International Energy Group	23 September 2009	1.20
Limited (639)
AMVIG Holdings Limited (2300)	17 September 2009	29.60
China Sciences Conservational	3 September 2009	(66.37)
Power Limited (351)
China Digital Licensing (Group)	18 August 2009	(5.05)
Limited (8175)
Sino Union Petroleum &	14 August 2009	3.4
Chemical International Limited (346)
	Minimum	(72.97)
	Maximum	29.60
	Average	(14.18)

We note from the above table that the issue prices of the Consideration Share Comparables ranged from a discount of approximately 72.97% to a premium of approximately 29.60% to/over the respective closing prices of their shares as at the last trading days prior to the release of the relevant

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

announcements. Out of the 10 Consideration Share Comparables, five of them represented discounts to the closing prices of their shares at the last trading days prior to the release of the relevant announcements. The Issue Price, which represented a discount of approximately 2.44% to the closing price of HK$2.05 per Share as quoted on the Stock Exchange on 9 November 2009, falls within the above market range. Accordingly, we are of the view that the Issue Price is fair and reasonable so far as the Independent Shareholders are concerned.

3. Dilution of the shareholding interests in the Company

The table below demonstrates the shareholding structure of the Company immediately before and after the issue and allotment of the Consideration Shares assuming that there is no change in the shareholding structure of the Company from the Latest Practicable Date:

Sinoday Vendor Public Shareholders Total	No. of Shares held as at the Latest Practicable Date 304,721,500 — 202,041,500 506,763,000	Approximate percentage of shareholding (%) 60.13% — 39.87% 100.00%	No. of Shares held immediately after issue and allotment of the Consideration Shares 304,721,500 27,575,000 202,041,500 534,338,000	Approximate percentage of shareholding (%) 57.03% 5.16% 37.81%
				100.00%

As shown in the above table, the shareholding interests of the existing public Shareholders will be decreased from approximately 39.87% to 37.81% immediately after the issue and allotment of the Consideration Shares, representing a dilution of approximately 5.17%. After taking into account that (i) the terms of the Sale and Purchase Agreement were fairly and reasonably set; (ii) the reasons and benefits of the Acquisition; and (iii) the shareholding interests of the existing public Shareholders will be diluted in proportion to their respective shareholdings in the Company, we are of the view that the dilution effect to the public Shareholders is acceptable.

4. Shareholders’ Agreement and Supplemental Agreement

Upon Completion, the Purchaser will enter into the Supplemental Agreement with the existing shareholders of Sino-Rock (other than the Vendor) and SinoRock, pursuant to which the Purchaser will take the benefits and obligations under the Shareholders’ Agreement in place of the Vendor as from Completion.

The Shareholders’ Agreement was entered into on 8 December 2005 between, inter alia, the then existing shareholders of Sino-Rock, including the Vendor, which governs the affairs of Sino-Rock and the respective rights and obligations

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

of the shareholders of Sino-Rock. Following changes in the shareholding of SinoRock in 2007 and September 2009, the Existing Supplemental Agreements were entered into between, inter alia, the then existing shareholders of Sino-Rock to supplement and revise the Shareholders’ Agreement.

The key terms to the Shareholders’ Agreement (as supplemented and revised by the Existing Supplemental Agreements) are disclosed in the Letter from the Board.

We have reviewed the terms of the Shareholders’ Agreement and noted that the Shareholders’ Agreement includes the usual terms of a normal agreement in relation to ownership, management and operations of a company and we are not aware of any terms which are unusual. Based on the above, we are of the view that the terms of the Shareholders’ Agreement are fair and reasonable so far as the Independent Shareholders are concerned.

5. Financial effect of the Acquisition on the Group

(i) Earnings and net asset value

Upon Completion, Sino-Rock will be owned as to 40% by the Company and will become an associate company of the Company. Accordingly, the results of Sino-Rock will be equity accounted for in the Company’s accounts. In view of the track record profitability of the Target Group, the Directors expect that Sino-Rock will contribute positively to the Group’s results in the future.

(ii) Net asset value

According to the 2009 Interim Report, the consolidated net assets of Group were approximately RMB205.0 million as at 30 June 2009. As noted from the section headed ‘‘Pro Forma financial Information of the Enlarged Group’’ set out in Appendix III to the Circular, the net asset value of the Group would increase to approximately HK$260.2 million upon Completion. Such an increase in net asset value was resulted from the fact that part of the Consideration will be settled by the issue of the Consideration Shares.

(iii) Liquidity and cash position

Based on the 2009 Interim Report, as at 30 June 2009, the Group’s cash and cash equivalents was approximately HK$102.3 million. Moreover, the net proceeds from the New Subscription and the Top-Up Subscription completed in August 2009 amounted to approximately HK$164 million. The cash portion of the Consideration of approximately HK$55.2 million represents approximately 24.4% of the sum of the above cash balance of the Group. In this regard, we concur with the view of the management of the Company that the Acquisition has no immediate material adverse impact on the Group’s working capital position.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Recommendation on the Acquisition

Having taken into account the principal factors and reasons referred to the above, we are of the opinion that the terms of the Acquisition are normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned and the Acquisition is entered into in the ordinary course of business of the Group and in the interests of the Company and the Shareholders as a whole. Accordingly, we advise the Independent Board Committee to recommend the Independent Shareholders, as well as the Independent Shareholders, to vote in favour of the ordinary resolution(s) in respect of approving the Acquisition.

(II) REFRESHMENT OF GENERAL MANDATE

Principal Factors taken into Account

The principal factors and reasons that we have taken into consideration in assessing the terms of the New General Mandate and arriving at our opinion are set out as follows: 1. Background and reason for the proposed refreshment of the General Mandate

At the Last AGM, the Shareholders passed an ordinary resolution to grant to the Directors the General Mandate to allot, issue and deal with a maximum of 84,460,600 Shares, representing 20% of the aggregate nominal amount of the share capital of the Company in issue as at the date of the Last AGM.

As set out in the announcement of the Company dated 4 August 2009, Sinoday and the Company entered into the Top-Up Subscription Agreement pursuant to which Sinoday has conditionally agreed to subscribe for up to 75,594,000 new Shares. Moreover, CCBIAM and the Company also entered into the New Subscription Agreement pursuant to which CCBIAM has conditionally agreed to subscribe for up to 8,866,000 new Shares. Completion of the Top-Up Subscription and the New Subscription have been taken place on 14 August 2009. An aggregate of 75,594,000 new Shares have been issued and allotted by the Company to Sinoday and an aggregate of 8,866,000 new Shares have been issued and allotted by the Company to CCBIAM. Accordingly, the General Mandate has been substantially utilised with only 600 Shares remaining outstanding under the General Mandate as at the Latest Practicable Date.

Based on 506,763,000 Shares in issue as at the Latest Practicable Date and assuming that no further Shares are repurchased and issued prior to the SGM, subject to the passing of the relevant ordinary resolution to approve the grant of

– 29 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

the New General Mandate at the SGM, the Directors will be authorized to allot and issue up to a limit of 101,352,600 new Shares under the New General Mandate.

The Directors consider that equity financing through the use of the New General Mandate is an important avenue of resources to the Group, as it (i) does not incur any interest paying obligations on the Group as in bank financing; (ii) is less costly and time-consuming than raising funds by way of rights issue or open offer; and (iii) provides the Company with the capability to capture any capital raising or prospective investment opportunity as and when it arises. For these reasons, the Directors therefore proposed to seek the approval from the Independent Shareholders at the SGM on the grant of the New General Mandate.

We consider that the granting of the New General Mandate could enhance the financial flexibility of the Company to raise capital and to strengthen the capital base of the Group, if and when required, through placing of Shares for further development of the Group. In addition, the increase in the amount of capital which may be raised under the New General Mandate would improve the overall financial position of the Group which in turn could provide more options for financing to the Group when assessing and negotiating potential investments and/or acquisitions in a timely manner without increasing the liabilities under the debt financing methods. Accordingly, we are of the view that the granting of the New General Mandate is in the interest of the Company and the Independent Shareholders as a whole.

2. Potential dilution to shareholding to the Independent Shareholders

Set out below is a table showing the shareholding structure of the Company (i) as at the Latest Practicable Date; and (ii) upon full utilization of the New General Mandate.

Sinoday Shares to be issued under the New General Mandate Existing public Shareholders: Total	No. of Shares held as at the Latest Practicable Date 304,721,500 — 202,041,500 506,763,000	Approximate percentage of shareholding (%) 60.13% — 39.87% 100.00%	Upon fully utilization of the New General Mandate 304,721,500 101,352,600 202,041,500 608,115,600	Approximate percentage of shareholding (%) 50.11% 16.67% 33.22%
				100.00%

As demonstrated in the above table, there are possible dilution effects arising from the possible placing of new shares under the New General Mandate. The aggregate shareholding of the existing public Shareholders will decrease from approximately 39.87% as at the Latest Practicable Date to 33.22% upon fully

– 30 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

utilization of the New General Mandate. Taking into account that the New General Mandate (i) allows the Company to raise capital by allotment and issue of new Shares before the next annual general meeting; (ii) provides more flexibility and options of financing to the Group for further business development as well as for other potential future investments and/or acquisitions as and when such opportunities arise; and (iii) the shareholding interests of all the Shareholders will be decreased in proportion to their respective shareholdings upon any utilization of the New General Mandate, we consider that such potential decrease in shareholding of the public Shareholders is acceptable.

Recommendation on the Refreshment of General Mandate

Having taking into the consideration of the above factors and reasons, we are of the view that the New General Mandate is in the interests of the Company and the Independent Shareholders as a whole and the terms of the New General Mandate are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we advise the Independent Board Committee to recommend the Independent Shareholders, as well as the Independent Shareholders, to vote in favour of the ordinary resolution(s) in respect of approving the New General Mandate.

Yours faithfully, For and on behalf of Ample Capital Limited H. W. Tang President

– 31 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

1. SUMMARY OF FINANCIAL INFORMATION OF THE GROUP

The following is a summary of the consolidated results of the Group for the three years ended 31 December 2008 as extracted from the relevant annual reports of the Company for the years presented.

	Year ended 31 December	Year ended 31 December
	2008	2007	2006
	HK$’000	HK$’000	HK$’000
	Continuing operations
Results
Turnover	100,395	465,761	355,420
Operating (loss)/profit	(17,356)	59,855	62,166
(Loss)/profit before taxation	(18,872)	53,430	64,108
(Loss)/profit for the year	(19,768)	40,359	52,269
	As at 31 December
	2008	2007	2006
	HK$’000	HK$’000	HK$’000
Assets and liabilities
Total assets	292,656	911,687	779,401
Total liabilities	65,274	519,246	423,634
Total equity	227,382	392,441	355,767

– 32 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

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

The followings are the audited financial statements of the Group for the year ended 31 December 2008 and the comparative figures for the year ended 31 December 2007, together with the notes thereto as extracted from the annual report of the Company for the year ended 31 December 2008.

Consolidated Income Statement

For the year ended 31 December 2008

Note Continuing operations Turnover 5 Other revenue 5 Other net income 5 Staff costs 6 Commission expenses Operating leases for land and buildings Other operating expenses 7 Total operating expenses Operating (loss)/profit Finance costs 8 (Loss)/profit before taxation Income tax 9 (Loss)/profit for the year from continuing operations	2008 HK$’000 100,395 1,357 (2,023) 99,729 31,838 37,562 10,455 37,230 117,085 (17,356) (1,516) (18,872) (896) (19,768)	2007 HK$’000 (restated) 170,769 1,041 1,987 173,797 38,434 69,992 9,283 34,847 152,556 21,241 (8,417) 12,824 (2,682) 10,142

– 33 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Note Discontinued operations Profit for the period/year from discontinued operations 10 (Loss)/profit for the year Attributable to: Equity holders of the Company Minority interests Dividends attributable to the year: Interim dividend declared during the year 12 Final dividend proposed after the balance sheet date 12 Final dividend paid in respect of previous year 12 Distribution in specie 12	2008 HK$’000 8,834 (10,934) (11,023) 89 (10,934) — — 22 133,379 133,401	2007 HK$’000 (restated) 30,217
		40,359
		40,357 2
		40,359
		6,213 10,393 — —
		16,606

(Loss)/earnings per share Basic — From continuing and discontinued operations 13(a) — From continuing operations 13(a) — From discontinued operations 13(a)	(HK2.64 cents) (HK4.74 cents) HK2.10 cents	HK9.74 cents HK2.45 cents HK7.29 cents

– 34 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Consolidated Balance Sheet

As at 31 December 2008

Note Non-current assets Intangible assets 14 Fixed assets 15 Interests in associates 17 Other assets 18 Available-for-sale financial assets 19 Deferred income tax assets 20 Current assets Financial assets at fair value through profit or loss 21 Taxation recoverable Trade and other receivables 22 Bank balances and cash 23 Current liabilities Trade and other payables 27 Short-term loans and bank overdrafts 28 Current portion of obligations under finance lease 26 Taxation payable Net current assets Total assets less current liabilities	2008 HK$’000 1,319 7,752 — 3,600 — — 12,671 1,397 177 90,281 188,130 279,985 64,768 — 506 — 65,274 214,711 227,382	2007 HK$’000 6,871 19,980 15,288 3,890 12,293 1,549
		59,871
		5,602 514 471,516 374,184
		851,816
		454,810 16,692 537 4,006
		476,045
		375,771
		435,642

– 35 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Note Non-current liabilities Obligations under finance lease 26 Deferred income tax liabilities 20 Loan notes 29 NET ASSETS Capital and reserves Share capital 24 Other reserves 25 Retained earnings Proposed final dividend 25 Others 25 Total equity attributable to the equity holders of the Company Minority interests TOTAL EQUITY	2008 HK$’000 — — — — 227,382 42,230 136,204 — 48,948 227,382 — 227,382	2007 HK$’000 506 170 42,525
		43,201
		392,441
		41,443 216,639 10,393 123,631
		392,106 335
		392,441

– 36 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Balance Sheet

As at 31 December 2008

Note Non-current assets Fixed assets 15 Investment in subsidiaries 3,16 Current assets Financial assets at fair value through profit or loss 21 Other receivables 22 Amounts due from subsidiaries 16(a) Bank balances and cash 23 Current liabilities Other payables 27 Amounts due to subsidiaries 16(a) Net current assets Total assets less current liabilities Non-current liabilities Loan notes 29 NET ASSETS Capital and reserves Share capital 24 Other reserves 25 Retained earnings Proposed final dividend 25 Others 25 TOTAL EQUITY	2008 HK$’000 — 220,009 220,009 570 513 57,656 10,706 69,445 2,237 31,186 33,423 36,022 256,031 — 256,031 42,230 169,116 — 44,685 256,031	2007 HK$’000 (restated) 221 220,615
		220,836
		1,379 8,889 152,236 19,193
		181,697
		10,354 28,772
		39,126
		142,571
		363,407
		42,525
		320,882
		41,443 240,000 10,393 29,046
		320,882

– 37 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Consolidated Statement of Changes in Equity For the year ended 31 December 2008

Note Balance at 1 January 2007 Capital contribution from minority shareholders Acquisition of a subsidiary 33(b) Shares issued under share option scheme 24, 25 Share-based payments 25 Surplus on revaluation of available-for-sale financial assets 19 Exchange difference Profit for the year 2006 final dividend paid 12 2007 interim dividend paid 12 Balance at 31 December 2007 Balance at 1 January 2008 Shares issued under share option scheme 24, 25 Share-based payments 25 Capital contribution from immediate holding company 32(b) Capital contribution from former ultimate holding company 6 Deficit on revaluation of available-for-sale financial assets 19 Recognised revaluation reserve as gain on disposal of available-for-sale financial assets Exchange difference (Loss)/profit for the year 2007 final dividend paid 12 Distribution in specie 12 Balance at 31 December 2008	Attributable to equity holders of the Company Share capital Other reserves Retained earnings HK$’000 HK$’000 HK$’000 41,413 208,262 106,092 — — — — — — 30 234 — — 1,802 — — 2,057 — — 4,284 — — — 40,357 — — (6,212) — — (6,213) 41,443 216,639 134,024 41,443 216,639 134,024 787 6,141 — — (739) — — 2,372 — — 1,420 — — (133) — — (2,558) — — (17,621) — — — (11,023) — — (10,415) — (69,317) (63,638) 42,230 136,204 48,948	Attributable to equity holders of the Company Share capital Other reserves Retained earnings HK$’000 HK$’000 HK$’000 41,413 208,262 106,092 — — — — — — 30 234 — — 1,802 — — 2,057 — — 4,284 — — — 40,357 — — (6,212) — — (6,213) 41,443 216,639 134,024 41,443 216,639 134,024 787 6,141 — — (739) — — 2,372 — — 1,420 — — (133) — — (2,558) — — (17,621) — — — (11,023) — — (10,415) — (69,317) (63,638) 42,230 136,204 48,948	Minority interests HK$’000 — 310 23 — — — — 2 — — 335 335 — — — — — — — 89 — (424) —	Total HK$’000 355,767 310 23 264 1,802 2,057 4,284 40,359 (6,212) (6,213) 392,441 392,441 6,928 (739) 2,372 1,420 (133) (2,558) (17,621) (10,934) (10,415) (133,379) 227,382
	Share capital HK$’000 41,413 — — 30 — — — — — — 41,443 41,443 787 — — — — — — — — — 42,230	Other reserves HK$’000 208,262 — — 234 1,802 2,057 4,284 — — — 216,639 216,639 6,141 (739) 2,372 1,420 (133) (2,558) (17,621) — — (69,317) 136,204

Included in the consolidated retained earnings at 31 December 2007 are statutory reserves of HK$203,506 which are required to be held in respect of certain overseas subsidiaries of the Group.

– 38 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Consolidated Cash Flow Statement

For the year ended 31 December 2008

Note Net cash (outflow)/inflow from operating activities 33(a) Investing activities Purchase of fixed assets Sale of fixed assets Sale of financial assets at fair value through profit or loss Sale of available-for-sale financial assets Dividends received from listed securities Dividends received from available-for-sale financial assets Dividends received from an associate 17 Purchase of financial assets at fair value through profit or loss Purchase of associates 17 Loan to an associate 17 Purchase of subsidiaries, net of cash and cash equivalents acquired 33(b) Net cash outflow from investing activities Financing activities Dividend paid 12 Distribution in specie 33(c) Interest paid Proceeds from capital contribution by minority shareholders Proceeds from shares issued under share option scheme 24 Issue of loan notes Repayment of loan notes Advance from finance lease Repayments under finance leases Advance from mortgage loan Repayment of mortgage loan Net cash (outflow)/inflow from financing activities	2008 HK$’000 (11,407) (26,387) 169 1,206 12,670 197 — 1,719 (3,940) — (5,000) (51) (19,417) (10,415) (78,381) (1,763) — 6,928 — (42,525) — (537) 12,798 (1,517) (115,412)	2007 HK$’000 62,044 (7,279) 8 13,364 — 479 138 1,637 (2,769) (1,171) (5,000) (322) (915) (12,425) — (8,472) 310 264 44,865 (2,340) 1,365 (581) — — 22,986

– 39 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Note (Decrease)/increase in cash and cash equivalents Cash and cash equivalents at 1 January Effect of foreign exchange rate changes Cash and cash equivalents at 31 December 23 Analysis of balances of cash and cash equivalents Bank balances — general accounts and cash 23 Bank overdrafts 23 Bank loans — unsecured 23	2008 HK$’000 (146,236) 334,572 (16,541) 171,795 171,795 — — 171,795	2007 HK$’000 84,115 246,879 3,578 334,572 351,264 (4,692) (12,000) 334,572

– 40 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Notes to the Financial Statements

1 GENERAL INFORMATION

The principal activity of the Company is investment holding. The principal activities and other particulars of the subsidiaries are set out in note 16 to the financial statements.

The Company is a limited liability company incorporated in Bermuda. The address of its registered office is Clarendon House, 2 Church Street, Hamilton, HM 11, Bermuda.

The Company has its primary listing on The Stock Exchange of Hong Kong Limited.

These consolidated financial statements are presented in thousands of units of Hong Kong dollars (HK$’000) unless otherwise stated. These consolidated financial statements have been approved for issue by the Board of Directors on 14 April 2009.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 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’’), accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. These financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

The HKICPA has issued certain new and revised HKFRSs, that are first effective or available for early adoption for the current accounting period of the Group. Note 3 provides information on any changes in accounting policies resulting from initial application of these developments to the extent that they are relevant to the Group for the current and prior accounting periods reflected in these financial statements.

2.2 Basis of preparation

The measurement basis used in the preparation of the financial statements is the historical cost basis except that the following assets are stated at their fair value as explained in the accounting policies set out below:

financial instruments classified as available-for-sale or as financial assets at fair value through profit or loss (see note 2.9)

The preparation of financial statements in conformity with HKFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

– 41 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

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.

2.3 Consolidation

The consolidated financial statements include the financial statements of the Company and all its subsidiaries made up to 31 December.

(a) Subsidiaries and minority interests

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

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

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

– 42 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

In the Company’s balance sheet, the investments in subsidiaries are stated at cost less provision for impairment losses. The results of subsidiaries are accounted by the Company on the basis of dividends received and receivable.

(b) Associates

Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for by the equity method of accounting and are initially recognised at cost. The Group’s investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition (see note 2.7(a)).

The Group’s share of its associates’ post-acquisition profits or losses is recognised in the consolidated income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

In the Company’s balance sheet the investments in associates are stated at cost less provision for impairment losses. The results of associates are accounted for by the Company on the basis of dividends received and receivable.

2.4 Segment reporting

A business segment is a group of assets and operations engaged in providing services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments.

In accordance with the Group’s internal financial reporting, the Group has determined that business segments are presented as the primary reporting format and geographical segments as the secondary reporting format.

In respect of geographical segment reporting, analysis on consolidated turnover is based on the country in which the customer is located. Total assets and capital expenditure are where the assets are located.

2.5 Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘‘the functional currency’’). The consolidated financial statements are presented in Hong Kong Dollars (‘‘HK Dollars’’), which is the Company’s functional and presentation currency.

– 43 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

(b) Transactions and balances

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

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

(c) Group companies

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

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

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

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

2.6 Fixed assets

Fixed assets are stated at historical cost less accumulated depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are expensed in the income statement during the financial period in which they are incurred.

– 44 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Depreciation of fixed assets is calculated using the straight-line method to allocate cost or revalued amounts to their residual values over their estimated useful lives, as follows:

Freehold land	not depreciated
Buildings	over the unexpired term of lease or estimated useful life
Leasehold improvements	over the lease periods
Furniture and fixtures	20%
Office and computer equipment	20%
Motor vehicles	25%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (see note 2.8).

2.7 Intangible assets

(a) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiaries or associates at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisition of associates is included in investments in associates. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash generating units for the purpose of impairment testing.

(b) Trading rights

Trading rights held in The Stock Exchange of Hong Kong Limited and Hong Kong Futures Exchange Limited (the ‘‘Stock Exchange trading rights’’ and ‘‘Futures Exchange trading right’’ respectively) are classified as intangible assets. Trading rights have an indefinite useful life and are carried at cost less accumulated impairment losses.

(c) Membership

The membership of The Chinese Gold & Silver Exchange Society is recognised as an intangible asset on the balance sheet. The membership has an indefinite useful life and is carried at cost less accumulated impairment losses.

2.8 Impairment of assets

Assets that have an indefinite useful life are not subject to amortisation, are at least tested annually for impairment and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Assets that are subject to amortisation are reviewed for impairment wherever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s 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 time value of money and the risks specific to the asset. Where

– 45 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

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).

2.9 Investments

The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets. The classification depends on the purpose for which the investments are acquired. Management determines the classification of its investments at initial recognition and re-evaluates this designation at every reporting date.

(a) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss represents financial assets held for trading. A financial asset is classified as held for trading if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets held for trading are classified as current assets.

(b) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the receivable. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. Loans and receivables are included in trade and other receivables in the balance sheet (see note 2.10).

(c) Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group’s management has the positive intention and ability to hold to maturity. During the year, the Group did not hold any investments in this category.

(d) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date.

Purchases and sales of investments are recognised on the trade-date — the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Investments are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables and heldto-maturity investments are carried at amortised cost using the effective interest method. Realised and unrealised gains and losses arising from changes in the fair value of the ‘‘financial assets at fair value through profit or loss’’ category are included in the income statement in the period in which they arise. Unrealised gains and losses arising from changes in the fair value of

– 46 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

non-monetary securities classified as available-for-sale are recognised in equity. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments are included in the income statement as gains or losses from investment securities.

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active and for unlisted securities, the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models refined to reflect the issuer’s specific circumstances.

The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss — measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the income statement — is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement.

2.10 Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment, except where the receivables are interest-free loans made to group companies without any fixed repayment terms or the effect of discounting would be immaterial. A provision for impairment of trade and other receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the income statement.

2.11 Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks, other shortterm highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

2.12 Trade and other payables

Trade and other payables are initially recognised at fair value. Except for financial guarantee liabilities measured in accordance with note 2.17, trade and other payables are subsequently stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

2.13 Share capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Where any Group company purchases the Company’s equity share capital, the consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted from equity attributable to the Company’s equity holders until the shares are cancelled, reissued or

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders.

2.14 Income tax

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

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

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

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

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

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

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

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

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

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

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

2.15 Employee benefits

(a) Employee leave entitlements

Employee entitlement to annual leave is recognised when it accrues to employees. An accrual is made for the estimated liability for annual leave as a result of services rendered by employees up to the balance sheet date.

Employee entitlements to sick leave and maternity or paternity leave are not recognised until the time of leave.

(b) Profit sharing and bonus plan

The expected cost of profit sharing and bonus payments are recognised as a liability when the Group has a present legal or constructive obligation as a result of services rendered by employees and a reliable estimate of the obligation can be made.

Liabilities for profit sharing and bonus plans are expected to be settled within 12 months and are measured at the amounts expected to be paid when they are settled.

(c) Pension obligations

The Group contributes to the mandatory provident fund (‘‘MPF Scheme’’), a defined contribution plan in Hong Kong, which is available to all employees. The assets of the MPF Scheme are held separately from the Group in an independently administered fund.

The Group’s contribution to the MPF Scheme is based on 5% of the monthly relevant income of each employee up to a maximum monthly relevant income of HK$20,000 in accordance with the Mandatory Provident Fund Schemes Ordinance. The contributions are recognised as employee benefit expenses when they are due and are reduced by contributions forfeited by those employees who leave the scheme prior to vesting fully in the contributions.

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

(d) Share-based payments

The fair value of share options granted to employees and directors is recognised as an employee cost with a corresponding increase in a capital reserve within equity. The fair value is measured at grant date using the Black-Scholes model, taking into account the terms and conditions upon which the options were granted. Where the grantees have to meet vesting conditions before becoming unconditionally entitled to the options, the total estimated fair value of the options is spread over the vesting period, taking into account the probability that the options will vest.

During the vesting period, the number of share options that is expected to vest is reviewed. Any adjustment to the cumulative fair value recognised in prior years is charged/ credited to the profit or loss for the year of the review, unless the original employee expenses qualify for recognition as an asset, with a corresponding adjustment to the capital reserve. On vesting date, the amount recognised as an expense is adjusted to reflect the actual number of options that vest (with a corresponding adjustment to the capital reserve) except where forfeiture is only due to not achieving vesting conditions that relate to the market price of the Company’s shares. The equity amount is recognised in the capital reserve until either the option is exercised (when it is transferred to the share premium account) or the option expires (when it is released directly to retained earnings).

If the Company cancels or settles a grant of equity instruments during the vesting period (other than a grant cancelled by forfeiture when the vesting conditions are not satisfied), the Company shall account for the cancellation or settlement as an acceleration of vesting, and shall therefore recognise immediately the amount that otherwise would have been recognised for services received over the remainder of the vesting period. Any payment made to the employees on the cancellation or settlement of the grant shall be accounted for as the repurchase of an equity interest, as a deduction from equity, except to the extent that the payment exceeds the fair value of the equity instruments granted, measured at the repurchase date. Any such excess shall be recognised as an expense.

2.16 Provisions, contingent liabilities and contingent assets

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. It can also be a present obligation arising from past events that is not recognised because it is not probable that outflow of economic resources will be required or the amount of obligation cannot be measured reliably.

A contingent liability is not recognised but is disclosed in the notes to the financial statements. When a change in the probability of an outflow occurs so that outflow is probable, it will then be recognised as a provision.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain events not wholly within the control of the Group.

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

A contingent asset is not recognised but is disclosed in the notes to the financial statements when an inflow of economic benefits is probable. When inflow is virtually certain, an asset is recognised.

2.17 Financial guarantees issued

Financial guarantees are contracts that require the issuer (i.e. the guarantor) to make specified payments to reimburse the beneficiary of the guarantee (the ‘‘holder’’) for a loss the holder incurs because a specified debtor fails to make payment 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 trade and other payables. 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 (see note 34.2).

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 2.16 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 trade and other payables in respect of that guarantee i.e. the amount initially recognised, less accumulated amortisation.

2.18 Revenue recognition

Brokerage commission income arising from leveraged foreign exchange transactions, securities broking, precious metal contracts and commodities and futures broking are recognised and accounted for on a trade date basis.

Brokerage commission income arising from the brokerage of mutual funds and insurance products is recognised when services are rendered. An amount, based on a certain percentage of the commission income and expenses and based on the historical statistics on the occurrence of the clawback of the brokerage commission income, has been provided for the possible clawback that may be claimed against the Group.

Net revenue from foreign exchange options trading and broking includes both realised and unrealised gains less losses from the foreign currency option contracts. Open option contracts are carried at fair value, with related unrealised gains or losses recognised in the income statement. The open option contracts are valued using pricing models that consider, among other factors, contractual and market prices, time value and volatility factors.

All transactions related to precious metal contracts dealings are recorded in the financial statements based on trade dates. Accordingly, only those transactions which trade dates fall within the accounting year have been taken into account.

Swap interest and foreign exchange trading revenue include both realised and unrealised gains less losses. The swap interest and foreign exchange spread in relation to open positions arising from leveraged foreign exchange transactions are recognised on an accrual basis. The net residual positions of each foreign currency resulting from broking and trading foreign currencies are carried at fair value, with related unrealised gains or losses recognised in the income statement.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Underwriting commissions are recognised when the relevant work or service has been rendered.

Revenue from corporate finance services is recognised in accordance with the terms of agreement for the underlying transactions.

Management fee and subscription fee on asset management are recognised on an accrual basis.

Interest income is recognised as it accrues using the effective interest method.

Dividend income is recognised when the right to receive payment is established.

2.19 Leases

An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Group determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease.

(a) Operating lease

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are expensed in the income statement on a straight-line basis over the period of the lease.

(b) Finance lease

Leases of assets where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in current and noncurrent borrowings. The interest element of the finance cost is recognised in the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

2.20 Dividend distribution

Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends are approved by the Company’s shareholders.

2.21 Related parties

For the purposes of these accounts, a party is considered to be related to the Group if:

(i) The party has the ability, directly or indirectly through one or more intermediaries, to control the Group or exercise significant influence over the Group in making financial and operating policy decisions, or has joint control over the Group;
(ii) The Group and the party are subject to common control;
(iii) The party is an associate of the Group;

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

(iv) The party is a member of key management personnel of the Group, or a close family member of such an individual, or is an entity under the control, joint control or significant influence of such individuals;
(v) The party is a close family member of a party referred to in (i) or is an entity under the control, joint control or significant influence of such individuals; or
(vi) The party is a post-employment benefit plan which is for the benefit of employees of the Group or of any entity that is a related party of the Group.

Close family members of an individual are those family members who may be expected to influence, or be influenced by, that individual in their dealings with the entity.

2.22 Finance costs

Finance costs are charged to the income statement in the year in which they are incurred.

2.23 Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or financial liability, including fees and commissions paid to agents, advisors, brokers and dealers, levies by regulatory agencies and securities exchanges, and transfer taxes and duties. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

2.24 Off-balance sheet financial instruments

Off-balance sheet financial instruments arising from the leveraged foreign exchange trading and option transactions are marked to market and the gain or loss thereof is recognised in the income statement as foreign exchange trading revenue or net premium income from foreign currency option.

2.25 Fiduciary activities

The Group commonly acts as trustees and in other fiduciary capacities that result in the holding or placing of assets on behalf of individuals, trusts, retirement benefit plans and other institutions. These assets and income arising thereon are excluded from these financial statements, as they are not assets of the Group.

2.26 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 coordinated 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 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:

the post-tax profit or loss of the discontinued operation; and

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

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(s) constituting the discontinued operation.

3 CHANGES IN ACCOUNTING POLICIES

The HKICPA has issued the following new Interpretations and an amendment to HKFRSs that are first effective for the current accounting period of the Group:

. HK(IFRIC) 11, HKFRS 2 — Group and treasury share transactions
. HK(IFRIC) 12, Service concession arrangements
. HK(IFRIC) 14, HKAS 19 — The limit on a defined benefit asset, minimum funding requirements and their interaction
. Amendment to HKAS39, Financial instruments: Recognition and measurement, and HKFRS 7, Financial instruments: Disclosures — Reclassification of financial assets

On 1 January 2008, the Group adopted HK(IFRIC) 11 ‘‘Group and Treasury Share Transactions’’ (‘‘HK(IFRIC) 11’’). As a result of the adoption of HK(IFRIC) 11, in the separate financial statements of the Company, the fair value of share options granted to employees and directors of the Company’s subsidiaries is recognised as an increase in ‘‘investment in subsidiaries’’ with a corresponding increase in ‘‘capital reserves’’. This change in accounting policy has been applied retrospectively with comparable amounts restated. Accordingly, ‘‘investment in subsidiaries’’ as at 31 December 2008, 31 December 2007 and 1 January 2007 have been increased by HK$1,879,000, HK$2,329,000 and HK$588,000 respectively and ‘‘capital reserves’’ as at 31 December 2008, 31 December 2007 and 1 January 2007 have been increased by HK$nil, HK$2,329,000 and HK$588,000 respectively.

Except for the above, other HKFRS developments have no material impact on the Group’s financial statements as either they were consistent with accounting policies already adopted by the Group or they were not relevant to the Group’s operations.

The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period (see note 41).

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.

4.1 Litigation

The Group considers each case involving litigation individually to assess the probability of any outflow of resources. If in the opinion of the directors, an outflow of resources embodying economic benefits will be required to settle the litigation, a provision will be made to the extent of the probable outflow. In other cases, unless the possibility of an outflow of resources embodying economic benefits is remote, a contingent liability will be disclosed.

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

5 TURNOVER, OTHER REVENUE, OTHER NET INCOME AND SEGMENT INFORMATION

The Company is an investment holding company. The Group is principally engaged in the provision of leveraged foreign exchange trading and broking services, securities broking, commodities and futures broking, provision of corporate financial advisory services, fund management, financial planning and insurance broking, and trading and broking of precious metal contracts.

Due to the Group Reorganisation, as disclosed in note 10, which constituted discontinued operations under HKFRS 5 ‘‘Non-current Assets Held for Sale and Discontinued Operations’’, certain comparative figures were restated so as to reflect the results for the continuing operations and discontinued operations. Total revenue recognised during the year is as follows:

From continuing operations Turnover Fees and commission Net revenue/(loss) from foreign currency option trading Net premium income from insurance broking Swap interest and foreign exchange trading revenue Interest income Underwriting commission Management, subscription and advisory fee income Other revenue Dividend income from listed securities Other income Other net income Net exchange (losses)/gains Net realised gains on financial assets at fair value through profit or loss Net unrealised (losses)/gains on financial assets at fair value through profit or loss	2008 HK$’000 68,706 6,358 528 16,698 7,990 78 37 100,395 81 1,276 1,357 (239) 183 (1,967) (2,023) 99,729	2007 HK$’000 (restated) 118,934 (570) 626 28,965 20,751 1,598 465 170,769 59 982 1,041 808 700 479 1,987 173,797

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

From discontinued operations Turnover Fees and commission Net revenue from — foreign currency option trading — bullion trading Swap interest and foreign exchange trading revenue Interest income Management, subscription and advisory fee income Other revenue Dividend income from listed securities Dividend income from available-for-sale financial assets Other income Other net income Net exchange (losses)/gains Net realised gains on financial assets at fair value through profit or loss Net unrealised losses on financial assets at fair value through profit or loss Profit on disposal of available-for-sale financial assets	Period from 1 January 2008 to 27 November 2008 HK$’000 57,282 3,666 83,329 79,613 24,028 1,827 249,745 116 — 62 178 (6,317) 7 (1,099) 3,072 (4,337) 245,586	2007 HK$’000 (restated) 80,014 7,070 102,804 65,824 37,372 1,908 294,992 420 138 250 808 6,001 1,645 (3,908) — 3,738 299,538

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Primary reporting format — Business segments

The business of the Group was organised into the following segments during the year:

Continuing operations:

Leveraged foreign exchange trading/broking in Hong Kong — provision of dealing and broking in leveraged forex trading services on the world’s major currencies.
Securities broking — provision of broking services in securities, equity linked products, unit trusts and stock options traded in Hong Kong and selected overseas markets and margin financing services to those broking clients.
Commodities and futures broking — provision of broking services in commodities and futures contracts traded in Hong Kong and selected overseas markets.
Corporate finance — provision of corporate finance and advisory services to companies listed in Hong Kong.
Asset management — managing private funds.
Financial planning and insurance broking in Hong Kong — acting as an agent for the sale of savings plans, unit trusts, general and life insurance and providing advisory services on securities investment and discretionary fund management.

Discontinued operations:

Leveraged foreign exchange trading/broking outside Hong Kong — provision of dealing and broking in leveraged forex trading services on the world’s major currencies.
Financial planning outside Hong Kong — providing advisory services on securities investment and discretionary fund management.
Precious metal contracts trading/broking — provision of dealing and broking trading services on selected precious metals contracts.

Secondary reporting format — Geographical segments

Based on the geographical location of the clients, the Group’s business is divided into seven main geographical areas, including Hong Kong, Greater China (excluding Hong Kong), Oceania, Switzerland, the United States, United Kingdom and other countries.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Primary reporting format — Business segments

Year ended 31 December 2008

	Continuing operations		Discontinue	d operations	Consolidated 2008 HK$’000 350,140 —
Leveraged foreign exchange trading/ broking in Hong Kong Securities broking 2008 2008 HK$’000 HK$’000 26,380 34,549 — 23 26,380 34,572 (2,917) 651 (5) (597) — — 84,423 123,672 — — 970 43,856 191 275 1,793 479 — 282 (277) 5	Commodities and futures broking Corporate finance Asset Management Financial planning/ insurance broking in Hong Kong Unallocated Inter- segment elimination Sub-total 2008 2008 2008 2008 2008 2008 2008 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 10,260 6,766 53 22,321 66 — 100,395 — 600 — — 15,206 (15,829) — 10,260 7,366 53 22,321 15,272 (15,829) 100,395 (193) (2,491) (946) (766) (10,694) — (17,356) (17,356) (3) (1) — (2) (908) — (1,516) (18,872) — — — — — — — (18,872) (896) (19,768) — (19,768) 32,369 9,936 4,612 13,857 23,610 — 292,479 — — — — — — — 177 292,656 9,876 300 65 6,175 4,032 — 65,274 — 65,274 144 53 105 64 1,174 — 2,006 94 224 38 209 597 — 3,434 — 255 — 103 — — 640 — — — 3 (2) — (271)	Leveraged foreign exchange trading/ broking outside Hong Kong Financial planning outside Hong Kong Period f HK$’000 HK$’000 92,021 1,984 1,014 — 93,035 1,984 18,124 (7,034) — — — — — — — — — — 128 — 591 493 104 — — —	Precious metal contracts trading/ broking rom 1 January 2 HK$’000 153,088 148	Unallocated Inter- segment elimination Sub-total 008 to 27 November 2008 HK$’000 HK$’000 HK$’000 2,652 — 249,745 7,586 (8,748) — 10,238 (8,748) 249,745 (4,789) — 15,056 15,056 (214) — (247) 14,809 2,105 — 2,105 16,914 (8,080) 8,834 (89) 8,745 — — — — — — — — — — — — — 22,467 — 25,181 607 — 3,534 399 — 1,035 (68) — 936
			153,236		350,140
			8,755		(2,300)
			(33)		(2,300) (1,763)
			—		(4,063) 2,105
					(1,958) (8,976)
					(10,934) (89)
					(11,023)
			— —		292,479 — 177
					292,656
			—		65,274 —
					65,274
			2,586 1,843 532 1,004		27,187 6,968 1,675 665

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Year ended 31 December 2007

		Discontinued	operations	Consolidated 2007 HK$’000 465,761 —
Leveraged foreign exchange trading/ broking in Hong Kong Securities broking 2007 2007 HK$’000 HK$’000 (restated) (restated) 39,464 82,761 14 311 39,478 83,072 2,073 21,289 (4) (4,849) — — 95,240 210,721 — — 1,591 110,301 1,635 735 1,661 395 — — 57 —	Leveraged foreign exchange trading/ broking outside Hong Kong Financial planning outside Hong Kong 2007 2007 HK$’000 HK$’000 (restated) (restated) 102,915 1,906 — — 102,915 1,906 7,697 (7,596) — — — — 197,482 14,487 — — 260,143 991 65 54 671 892 765 — 1 —	Precious metal contracts trading/ broking 2007 HK$’000 (restated) 189,923 (4)	Unallocated Inter- segment elimination Sub-total 2007 2007 2007 HK$’000 HK$’000 HK$’000 (restated) (restated) (restated) 248 — 294,992 3,929 (3,925) — 4,177 (3,925) 294,992 (2,516) — 38,614 38,614 — — (55) 38,559 2,047 — 2,047 40,606 (10,389) 30,217 (2) 30,215 20,765 — 474,281 15,288 — 15,288 564 490,133 1,159 — 330,526 3,999 334,525 846 — 2,046 248 — 3,700 — — 911 247 — 526
		189,919		465,761
		41,029		59,855
		(55)		59,855 (8,472)
		—		51,383 2,047
				53,430 (13,071)
				40,359 (2)
				40,357
		241,547 —		894,336 15,288 2,063
				911,687
		68,233		515,070 4,176
				519,246
		1,081 1,889 146 278		7,477 6,927 911 894

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Secondary reporting format — Geographical segments

From continuing operations Hong Kong Greater China (excluding Hong Kong) Oceania Switzerland United States United Kingdom Other countries From discontinued operations Hong Kong Greater China (excluding Hong Kong) Oceania Switzerland United States United Kingdom Other countries From continuing operations Unallocated assets From discontinued operations Interests in associates Unallocated assets Total assets	Turnover 2008 2007 HK$’000 HK$’000 (restated) 92,748 85,288 3,483 3,807 3,344 77,576 (850) 4,744 — 3 1,042 70 628 (719) 100,395 170,769 98,925 87,226 156,387 278,018 (680) (76,690) 3,882 (3,464) 103 1,086 94 1,729 (8,966) 7,087 249,745 294,992 350,140 465,761	Total assets 2008 2007 HK$’000 HK$’000 (restated) 283,770 387,791 284 17,312 — 140 — — — — 8,425 13,903 — 909 292,479 420,055 — 164,995 — 41,879 — 13,112 — 89,314 — 55,084 — 73,296 — 36,601 — 474,281 292,479 894,336 177 1,499 — 15,288 — 564 — 15,852 292,656 911,687	Capital expenditure 2008 2007 HK$’000 HK$’000 (restated) 2,006 5,305 — 126 — — — — — — — — — — 2,006 5,431 3,963 1,060 21,050 873 168 48 — 38 — — — — — 27 25,181 2,046 27,187 7,477	Capital expenditure 2008 2007 HK$’000 HK$’000 (restated) 2,006 5,305 — 126 — — — — — — — — — — 2,006 5,431 3,963 1,060 21,050 873 168 48 — 38 — — — — — 27 25,181 2,046 27,187 7,477
				5,431
				1,060 873 48 38 — — 27
				2,046
				7,477

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets and capital expenditures are based on the geographical location of the assets.

The total assets in other countries mainly represent margin and other deposits placed with overseas brokers and financial institutions.

6 STAFF COSTS

Salaries and allowances (note (a)) Equity-settled share-based payments (note (b)) Defined contribution plans	Continuing 2008 HK$’000 29,709 1,239 890 31,838	operations 2007 HK$’000 (restated) 36,398 914 1,122 38,434	Discontinued operations Period from 1 January 2008 to 27 November 2008 2007 HK$’000 HK$’000 (restated) 46,330 48,177 394 888 1,217 987 47,941 50,052	Total 2008 2007 HK$’000 HK$’000 76,039 84,575 1,633 1,802 2,107 2,109 79,779 88,486	Total 2008 2007 HK$’000 HK$’000 76,039 84,575 1,633 1,802 2,107 2,109 79,779 88,486
					88,486

Note:

(a) During the year, the Company accrued a staff bonus of HK$1,420,050. The former ultimate holding company, Hantec Holdings Limited, settled this amount in the form of a capital contribution that was credited to capital reserves of the Company.
(b) Included in equity-settled share-based payment expense were (1) an amount of HK$154,000 being accelerated vesting expense and (2) an amount of HK$1,056,000 being the payment to option holders in excess of fair value of share options granted resulting from the cancellation of all outstanding share options, details of which are disclosed in note 32(b).
(c) Staff costs include directors’ emoluments as set out in note 31.

– 61 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

7 OTHER OPERATING EXPENSES

From continuing operations Advertising and promotion Auditors’ remuneration Bad debts written off Bank charges Communication expenses Consultancy fee Depreciation Entertainment Equipment rental expenses Insurance Legal and professional fee (Profit)/loss on disposal of fixed assets Miscellaneous expenses Printing and stationery Repairs and maintenance Staff welfare Traveling expenses Computer expenses Exhibition and seminars Postage Water and electricity	2008 HK$’000 1,722 5,122 640 289 1,346 525 3,434 767 5,948 646 6,879 (271) 2,517 1,641 2,070 550 1,412 713 253 526 501 37,230	2007 HK$’000 (restated) 1,665 2,192 — 371 1,362 2,117 3,227 946 5,187 994 5,265 264 3,625 1,082 606 1,024 2,240 434 924 782 540
		34,847

The auditors’ remuneration for the Group in the year was HK$8.02 million (2007: HK$4.88 million). Loss on disposal of fixed assets for the Group in the year was HK$666,000 (2007: HK$793,000).

8 FINANCE COSTS

From continuing operations Interest on bank overdrafts Interest on bank loans Interest on other loans Interest on obligation under finance leases	2008 HK$’000 94 497 908 17 1,516	2007 HK$’000 (restated) 724 4,102 3,558 33
		8,417

– 62 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

9 INCOME TAX

Hong Kong profits tax has been provided at the rate of 16.5% (2007: 17.5%) on the estimated assessable profits for the year. Taxation on overseas profits has been calculated on the estimated assessable profits for the year at the rates of taxation prevailing in the countries in which the Group operates.

The amount of taxation charged to the consolidated income statement:

Current taxation: — Hong Kong profits tax — Overseas taxation — One-off tax reduction in respect of prior year — Under provision in respect of prior year Deferred taxation: — Origination and reversal of temporary differences — Write-down of deferred tax assets recognised in prior years — Effect of decrease in tax rate on deferred tax balances at 1 January Taxation expenses	Continuing 2008 HK$’000 — — (56) 43 (72) 929 52 896	operations 2007 HK$’000 (restated) 242 — — 4 2,436 — — 2,682	Discontinued operations Period from 1 January 2008 to 27 November 2008 2007 HK$’000 HK$’000 (restated) 599 7,001 7,135 2,646 (27) — 132 357 245 385 — — (4) — 8,080 10,389	Total 2008 2007 HK$’000 HK$’000 599 7,243 7,135 2,646 (83) — 175 361 173 2,821 929 — 48 — 8,976 13,071	Total 2008 2007 HK$’000 HK$’000 599 7,243 7,135 2,646 (83) — 175 361 173 2,821 929 — 48 — 8,976 13,071
					13,071

In February 2008, the Hong Kong Government announced a decrease in the profits tax rate from 17.5% to 16.5% applicable to the Group’s operations in Hong Kong as from the year ended 31 December 2008. This decrease is taken into account in the preparation of the Group’s and the Company’s 2008 financial statements. Accordingly, the provision for Hong Kong profits tax for 2008 is calculated at 16.5% (2007: 17.5%) of the estimated assessable profits for the year and the opening balance of deferred tax has been re-estimated accordingly.

– 63 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Reconciliation between tax expense and accounting (loss)/profit at applicable tax rates:

(Loss)/profit before taxation (excluding share of profits of associates) Notional tax on (loss)/profit before taxation, calculated at the rate applicable to profits in the countries concerned Tax effect of income not subject to taxation purposes Tax effect of expenses not deductible for taxation purposes Utilisation of previously unrecognised tax losses Write-down of deferred tax assets recognised in prior years Effect on opening deferred tax balances resulting from a decrease in tax rate during the period Tax effect of tax losses not recognised One-off tax reduction in respect of prior year Under-provision in respect of prior year Taxation expenses	Continuing 2008 HK$’000 (18,872) (3,114) (1,287) 515 (108) 929 52 3,922 (56) 43 896	operations 2007 HK$’000 (restated) 12,824 2,244 (1,247) 209 (63) — — 1,535 — 4 2,682	Discontinued operations Period from 1 January 2008 to 27 November 2008 2007 HK$’000 HK$’000 (restated) 14,809 38,559 4,644 7,212 (482) (698) 642 822 — (10) — — (4) — 3,175 2,706 (27) — 132 357 8,080 10,389	Total 2008 2007 HK$’000 HK$’000 (4,063) 51,383 1,530 9,456 (1,769) (1,945) 1,157 1,031 (108) (73) 929 — 48 — 7,097 4,241 (83) — 175 361 8,976 13,071

10 GROUP REORGANISATION AND DISCONTINUED OPERATIONS

On 13 August 2008, the Company’s then ultimate holding company, Hantec Holdings Limited (‘‘HHL’’) entered into a share sale agreement (‘‘Agreement’’) with Sinoday Limited (‘‘Sinoday’’) and Silver Grant International Securities Investment Limited (‘‘Silver Grant’’), pursuant to which Sinoday and Silver Grant agreed to acquire 218,650,000 shares and 40,022,000 shares of the Company respectively from HHL, representing approximately 52.32% and 9.58% of the issued share capital of the Company as at the date of the Agreement. Completion of the Agreement was subject to, inter alia, approval by independent shareholders of the Company of a proposal to reorganise the Group (the ‘‘Group Reorganisation’’).

– 64 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Pursuant to the resolution passed by the independent shareholders in the special general meeting held on 17 November 2008, a Group Reorganisation was approved. On 27 November 2008, the Group Reorganisation and the Agreement were completed. As a result, Sinoday acquired 218,650,000 shares of the Company from HHL and became the holding company of the Company.

Upon completion of the Group Reorganisation, (i) the Company continues to be a public listed company with its subsidiaries concentrating on carrying on the business of regulated activities under the SFO in Hong Kong, which include leveraged foreign exchange trading, securities broking and margin financing services, commodities and futures broking, financial planning, asset management and corporate finance services in Hong Kong (the ‘‘Retained Business’’); (ii) Hantec Pacific Limited (‘‘HPL’’) and its subsidiaries (the ‘‘HPL Group’’) continues to carry on the business of trading and broking of precious metal contracts, provision of financial related services outside of Hong Kong and investment in water plant business (the ‘‘Distributed Business’’); and (iii) the shareholders of the Company received by way of a distribution in specie the shares of HPL on the basis of one share of HPL for one share of the Company held.

Details of the Group Reorganisation are set out in a circular of the Company dated 31 October 2008.

The results of the discontinued operations during the period/year are set out below.

Note Turnover 5 Other revenue 5 Other net income 5 Staff costs 6 Commission expenses Operating leases for land and buildings Other operating expenses Total operating expenses Operating profit Finance costs Share of profits of associates 17 Profit before taxation Income tax — Current taxation — Deferred taxation 20 Profit for the period/year	Period from 1 January 2008 to 27 November 2008 HK$’000 249,745 178 (4,337) 245,586 47,941 121,252 9,755 51,582 230,530 15,056 (247) 14,809 2,105 16,914 (7,839) (241) 8,834	2007 HK$’000 294,992 808 3,738 299,538 50,052 156,517 7,349 47,006 260,924 38,614 (55) 38,559 2,047 40,606 (10,004) (385) 30,217

– 65 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The net cash flows from the discontinued operations are as follows:

Operating activities Investing activities Financing activities Net cash (outflow)/inflow	2008 HK$’000 (156,315) (20,489) 66,034 (110,770)	2007 HK$’000 80,583 3,677 1,341
		85,601

11 PROFIT/(LOSS) ATTRIBUTABLE TO SHAREHOLDERS

The profit attributable to shareholders is dealt with in the financial statements of the Company to the extent of HK$15,661,000 (2007: loss of HK$22,196,000).

12 DIVIDENDS

Dividends payable to equity shareholders of the Company attributable to the year:

Interim dividend paid: Nil cents (2007: HK1.5 cents) per share Final dividend proposed: Nil cents (2007: HK2.5 cents) per share Final dividend paid in respect of the previous financial year on shares issued under share option schemes subsequent to the balance sheet date and before the close of the Register of Members of the Company, of HK2.5 cents (2007: nil cents) per share Distribution in specie (note (a))	2008 HK$’000 — — 22 133,379 133,401	2007 HK$’000 6,213 10,393 — —
		16,606

Notes:

(a) Details of the net assets of HPL Group distributed by the Group in the form of a distribution in specie are set out in note 33(c) to the financial statements.

– 66 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

13 (LOSS)/EARNINGS PER SHARE

(a) Basic (loss)/earnings per share

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

(Loss)/earnings (Loss)/earnings for the year from continuing operations Earnings for the year from discontinued operations (Loss)/earnings for the year attributable to equity holders of the Company Number of shares Weighted average number of ordinary shares	2008 HK$’000 (19,768) 8,745 (11,023) 2008 417,335,626	2007 HK$’000 10,142 30,215
		40,357
		2007 414,173,835

Basic earnings per share from the discontinued operations is HK2.10 cents (2007: earnings per share of HK7.29 cents), which is calculated based on the earnings for the year from discontinued operations attributable to equity holders of the Company of HK$8,745,000 (2007: earnings of HK$30,215,000) and the weighted average number of ordinary shares detailed above.

(b) Diluted earnings per share

Diluted earnings per share — From continuing and discontinued operations — From continuing operations — From discontinued operations	2008 N/A N/A HK2.08 cents	2007 N/A N/A N/A

Diluted earnings per share for the current year and diluted earnings per share from continuing operations for the current year have not been disclosed as both the Group and the continuing operations of the Group sustained a loss for the current year. The diluted earnings per share from discontinued operations for the current year is calculated based on the adjusted weighted average number of 419,947,100 ordinary shares which is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares in respect of share options. The calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company’s shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.

Diluted earnings per share for the previous year has not been disclosed as the outstanding share options have no dilutive effects on the basic earnings per share, as their exercise prices were above the average market price of the shares during the year.

– 67 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

14 INTANGIBLE ASSETS

Note Cost At 1 January 2007 Acquisition of a subsidiary 33(b) At 31 December 2007 and 1 January 2008 Acquisition of a subsidiary 33(b) Additions Distribution in specie 33(c) At 31 December 2008 Accumulated impairment losses At 1 January 2007, 31 December 2007 and 1 January 2008 Charge for the year Distribution in specie 33(c) At 31 December 2008 Carrying amount At 31 December 2008 At 31 December 2007			Group	Group		Total HK$’000 6,472 399 6,871 45 600 (6,197) 1,319 — 399 (399) — 1,319 6,871
	Stock Exchange trading rights HK$’000 913 — 913 — — — 913 — — — — 913 913	Futures Exchange trading right HK$’000 406 — 406 — — — 406 — — — — 406 406	Membership of The Chinese Gold & Silver Exchange Society HK$’000 180 — 180 — — (180) — — — — — — 180	Computer System HK$’000 — — — — 600 (600) — — — — — — —	Goodwill on acquisition of subsidiaries HK$’000 4,973 399 5,372 45 — (5,417) — — 399 (399) — — 5,372

– 68 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

15 FIXED ASSETS

Cost At 1 January 2007 Additions through acquisition of a subsidiary Additions Disposals Exchange difference At 31 December 2007 and 1 January 2008 Additions Disposals Distribution in specie Exchange difference At 31 December 2008 Accumulated depreciation At 1 January 2007 Additions through acquisition of a subsidiary Charge for the year Disposals Reclassification Exchange difference At 31 December 2007 and 1 January 2008 Charge for the year Disposals Distribution in specie Exchange difference At 31 December 2008 Net book value At 31 December 2008 At 31 December 2007			Group	Group		Total HK$’000 34,485 103 7,279 (2,320) 672 40,219 26,387 (7,372) (37,504) (3,508) 18,222 14,470 58 6,927 (1,520) — 304 20,239 6,968 (5,937) (9,603) (1,197) 10,470 7,752 19,980
	Freehold land and building HK$’000 2,325 — — — 200 2,525 20,515 — (21,020) (2,020) — 133 — 37 — — 12 182 166 — (281) (67) — — 2,343	Leasehold improvements HK$’000 6,091 — 3,631 (1,219) 20 8,523 777 (1,903) (3,196) (51) 4,150 1,981 — 2,412 (907) — 16 3,502 2,221 (972) (2,439) (66) 2,246 1,904 5,021	Furniture & fixtures HK$’000 4,221 103 2,300 (594) 157 6,187 377 (844) (3,138) (437) 2,145 1,734 58 973 (309) 1 66 2,523 1,068 (701) (1,645) (296) 949 1,196 3,664	Office & computer equipment HK$’000 17,938 — 1,348 (507) 266 19,045 2,528 (4,165) (6,382) (948) 10,078 8,639 — 2,888 (304) (1) 198 11,420 2,875 (3,804) (3,688) (722) 6,081 3,997 7,625	Motor vehicles HK$’000 3,910 — — — 29 3,939 2,190 (460) (3,768) (52) 1,849 1,983 — 617 — — 12 2,612 638 (460) (1,550) (46) 1,194 655 1,327

The Group’s freehold land and building is located outside Hong Kong.

– 69 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

	Company	Company
Leasehold Improvements HK$’000 1,226 48 (1,124) 150 — (150) — 494 400 (812) 82 39 (121) — — 68	Furniture & fixtures HK$’000 293 — (58) 235 — (235) — 138 55 (32) 161 14 (175) — — 74	Office & computer equipments HK$’000 246 78 (175) 149 — (149) — 80 53 (63) 70 15 (85) — — 79	Total HK$’000 1,765 126 (1,357)
			534 — (534)
			—
			712 508 (907)
			313 68 (381)
			—
			—
			221

(a) During the year, there were no additions to office and computer equipment of the Group financed by finance lease (2007: HK$205,200). At the balance sheet date, the net book value of office and computer equipment held under finance leases of the Group was HK$861,465 (2007: HK$1,312,710).

16 INVESTMENT IN SUBSIDIARIES

Investment at cost, unlisted shares	Company 2008 2007 HK$’000 HK$’000 (restated) 220,009 220,615

(a) The amounts due from/(to) subsidiaries are unsecured, interest free and repayable on demand.

– 70 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(b) The following is a list of subsidiaries at 31 December 2008:

		Principal	Particulars of	Interest	Interest
	Place of	activities and	issued share	held	held
Name	incorporation	place of operation	capital	directly	indirectly
Cinda International	Hong Kong	Leveraged	100 ordinary	—	100%
FX Limited		foreign	shares of
(‘‘CIFX’’) (formerly		exchange	HK$1 each,
named Hantec		trading in	and
International		Hong Kong	100,000,000
Limited)			non-voting
			deferred shares
			of HK$1 each
Cinda International	Hong Kong	Securities	20,000,100	—	100%
Securities Limited		broking and	ordinary
(‘‘CISL’’) (formerly		margin	shares of
named Hantec		financing	HK$1 each,
International		services in	and 50,000,000
Finance Group		Hong Kong	non-voting
Limited)			deferred shares
			of HK$1 each
Cinda International	Hong Kong	Commodities and	40,000,100	—	100%
Futures Limited		futures	ordinary
(‘‘CIFL’’) (formerly		broking in	shares of
named HT Futures		Hong Kong	HK$1 each,
Limited)			and 10,000,000
			non-voting
			deferred shares
			of HK$1 each
Cinda International	Hong Kong	Financial	3,000,100	—	100%
Investment		planning in	ordinary
Consultant Limited		Hong Kong	shares of
(‘‘CIIC’’) (formerly			HK$1 each,
named Hantec			and 5,500,000
Investment			non-voting
Consultant Limited)			deferred shares
			of HK$1 each
Cinda International	Hong Kong	Asset	7,000,100	—	100%
Asset Management		management in	ordinary
Limited (‘‘CIAM’’)		Hong Kong	shares of
(formerly named			HK$1 each,
Hantec Asset			and 2,000,000
Management			non-voting
Limited)			deferred shares
			of HK$1 each

– 71 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

		Principal	Particulars of	Interest	Interest
	Place of	activities and	issued share	held	held
Name	incorporation	place of operation	capital	directly	indirectly
Cinda Asset	Cayman Islands	Asset	1 ordinary share	—	100%
Management		management in	of US$1 each
(Cayman) Limited		Hong Kong
(‘‘CAMCL’’)
(formerly named
Hantec Asset
Management
(Cayman) Limited)
Cinda International	Hong Kong	Corporate	100 ordinary	—	100%
Capital Limited		finance	shares of
(‘‘CICL’’) (formerly		services in	HK$1 each,
named Hantec		Hong Kong	and 21,000,000
Capital Limited)			non-voting
			deferred shares
			of HK$1 each
Chinacorp Nominees	Hong Kong	Provide	100 ordinary	—	100%
Limited (‘‘CNL’’)		administrative	shares of
		support	HK$1 each
		services in	and 10,000
		Hong Kong	non-voting
			deferred shares
			of HK$1 each
Cinda International	Hong Kong	Financial	500,000 ordinary	—	100%
Wealth Management		planning and	shares of
Advisor Limited		insurance	HK$1 each
(‘‘CIWM’’)		broking in
(formerly named		Hong Kong
Hantec Wealth
Management
Advisor Limited)
Cinda Strategic (BVI)	British Virgin	Investment	50,000 ordinary	100%	—
Limited (‘‘CSBVIL’’)	Islands	holding in	shares of US$1
(formerly named		Hong Kong	each
Hantec Strategic
(BVI) Holdings
Limited)
Cinda (BVI) Limited	British Virgin	Investment	7 ordinary shares	100%	—
(‘‘CBVIL’’)	Islands	holding in	of US$1 each
(formerly named HT		Hong Kong
(BVI) Limited)

– 72 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

(c) Acquisition of subsidiaries

On 21 December 2007, the Company entered into a sale and purchase agreement with the shareholders of 俊森實業有限公司 (‘‘俊森實業’’), all of whom were independent third parties of the Company and its connected persons, to acquire 100% of the total issued share capital of 俊森實業 for a consideration of HK$1,304,700. The acquisition was completed in February 2008.

The key business of 俊森實業 is property holding. 俊森實業 contributed HK$688 turnover and a loss of HK$500,487 to the Group for the period from acquisition date to 27 November 2008.

Management considered the carrying value of net assets acquired from 俊森實業 to be a close approximation to their fair value and no fair value adjustment is required. The net assets acquired in the above acquisition and the goodwill arising are stated in note 33(b).

The carrying value of the 100% equity interest in 俊森實業 immediately before the date of completion was as follows:

Carrying value of 100% equity interest in 俊森實業 Goodwill arising from the acquisition (note 14, 33(b)) Satisfied by: Cash	HK$’000 1,260 45
	1,305
	1,305

If the above acquisitions had occurred on 1 January 2008, total Group turnover would have been HK$350,139,813 and loss for the year attributable to shareholders of the Company would have been HK$11,023,456 for the year ended 31 December 2008.

On 27 November 2008, 俊森實業 was distributed upon the completion of the Group Reorganisation disclosed in note 10.

– 73 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

17 INTERESTS IN ASSOCIATES

Share of net assets at 1 January
Share of associates’ results for the year (note 10)
— profit before taxation
— taxation
Acquisition of associates
Transfer to available-for-sale financial assets (note 19)
Dividend income from an associate
Exchange difference
Share of net assets at 27 November/31 December
Loan to an associate
Goodwill
Distribution in specie (note 33(c))
Share of net assets
Loan to an associate
Goodwill

Group
2008
2007
HK$’000
HK$’000
9,740
8,401
3,044
2,947
(939)
(900)
2,105
2,047
11,845
10,448
—
1,171
(849)
—
(1,719)
(1,637)
(353)
(242)
8,924
9,740
10,000
5,000
548
548
(19,472)
—
—
15,288
—
9,740
—
5,000
—
548
—
15,288

The amount of loan to an associate is unsecured, interest free and without any fixed repayment terms.

– 74 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The Group’s interests in its principal associates, all of which are unlisted, are as follows:

Name Particulars of issued shares held Country of incorporation 2008 Hantec Jiangdu Riverside Developing Zone Water Industry Limited (‘‘HJRDZWIL’’)# 2,000 ordinary shares of HK$1 each Hong Kong 元太外匯經紀股份有限公司 (‘‘元太’’)# 2,400,000 ordinary shares of NT$10 each Taiwan # From 1 January 2008 to 27 November 2008. 2007 HS Hantec Holdings Limited (‘‘HSH’’) 1,500,000 common shares of CAD 0.1 each Canada Hantec Jiangdu Riverside Developing Zone Water Industry Limited (‘‘HJRDZWIL’’) 2,000 ordinary shares of HK$1 each Hong Kong 元太外匯經紀股份有限公司 (‘‘元太’’) 2,400,000 ordinary shares of NT$10 each Taiwan	Assets HK$’000 — — — 848 8,753 10,357 19,958	Liabilities HK$’000 — — — — 8,635 1,583 10,218	Revenue HK$’000 703 8,999 9,702 — 222 9,004 9,226	Profit/ (loss) % of interest held indirectly HK$’000 (1) 20% 2,106 20% 2,105 (309) 25% 3 20% 2,353 20% 2,047

– 75 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

18 OTHER ASSETS

Stock Exchange stamp duty deposit Stock Exchange Fidelity Fund deposit Stock Exchange Compensation Fund deposit Guarantee Fund deposits with the Hong Kong Securities Clearing Company Limited Statutory deposits and deposits with the Hong Kong Futures Exchange Limited (‘‘HKFE’’) Statutory deposits with the Hong Kong Securities and Futures Commission (‘‘SFC’’) Reserve fund deposit with the SEHK Options Clearing House Limited 19 AVAILABLE-FOR-SALE FINANCIAL ASSETS Fair value of listed and unlisted securities held for non-trading purposes At 1 January Transfer from interest in an associate (note 17) Disposal Revaluation (deficit)/surplus transferred to equity (note 25) Distribution in specie (note 33(c)) At 31 December Available-for-sale financial assets include the following: Unlisted securities Equity securities of private issuers	Group 2008 2007 HK$’000 HK$’000 150 250 100 100 100 100 100 100 1,500 1,500 150 200 1,500 1,640 3,600 3,890 2008 2007 HK$’000 HK$’000 12,293 10,236 849 — (12,158) — (133) 2,057 (851) — — 12,293 2008 2007 HK$’000 HK$’000 — 12,293	Group 2008 2007 HK$’000 HK$’000 150 250 100 100 100 100 100 100 1,500 1,500 150 200 1,500 1,640 3,600 3,890 2008 2007 HK$’000 HK$’000 12,293 10,236 849 — (12,158) — (133) 2,057 (851) — — 12,293 2008 2007 HK$’000 HK$’000 — 12,293
		3,890
		2007 HK$’000 10,236 — — 2,057 —
		12,293
		2007 HK$’000 12,293

– 76 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

20 DEFERRED INCOME TAX

Deferred taxation is calculated in full on temporary differences under the liability method using a principal taxation rate of 16.5% (2007: 17.5%).

Deferred tax assets Deferred tax liabilities	Group 2008 2007 HK$’000 HK$’000 — (1,549) — 170 — (1,379)	Company 2008 2007 HK$’000 HK$’000 — — — — — —	Company 2008 2007 HK$’000 HK$’000 — — — — — —
			—

The gross movement on the deferred income tax account is as follows:

Beginning of the year Deferred taxation charged to income statement — from continuing operations (note 9) — from discontinued operations (note 10) Distribution in specie End of the year	Group 2008 2007 HK$’000 HK$’000 (1,379) (4,200) 909 2,436 241 385 229 — — (1,379)	Company 2008 2007 HK$’000 HK$’000 — — — — — — — — — —	Company 2008 2007 HK$’000 HK$’000 — — — — — — — — — —
			—

The movement in deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:

At 1 January 2007 Charged to income statement At 31 December 2007 (Credited)/charged to income statement Distribution in specie (note 33(c)) At 31 December 2008	Accelerated tax depreciation HK$’000 1,374 5 1,379 (566) (233) 580	Group Tax losses HK$’000 (5,574) 2,816 (2,758) 1,716 462 (580)	Total HK$’000 (4,200) 2,821
			(1,379) 1,150 229
			—

– 77 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

At 1 January 2007 and 2008 (Credited)/charged to income statement At 31 December 2008	Accelerated tax depreciation HK$’000 6 (6) —	Company Tax losses HK$’000 (6) 6 —	Total HK$’000 — —
			—

During 2008, the Group de-recognised deferred tax assets in respect of cumulative tax losses as it is no longer probable that future taxable profits against which the losses can be utilised will be available. Unrecognised tax losses as at 31 December 2008 are HK$56,100,685 (2007: HK$47,943,375). The tax losses do not expire under current tax legislation. Tax losses of the subsidiaries which have been distributed in specie under the Group Reorganisation are not included.

21 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Listed securities: Equity securities — Hong Kong Market value of listed securities	Group 2008 2007 HK$’000 HK$’000 1,397 5,602 1,397 5,602	Company 2008 2007 HK$’000 HK$’000 570 1,379 570 1,379	Company 2008 2007 HK$’000 HK$’000 570 1,379 570 1,379
			1,379

Changes in fair values of financial assets at fair value through profit or loss are recorded in the income statement.

– 78 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

22 TRADE AND OTHER RECEIVABLES

Trade receivables from clients Less: impairment allowance of trade receivables (note (b)) Margin and other trade related deposits with brokers and financial institutions (note (c)) Margin finance loans (note (d)) Trade receivables from clearing houses Total trade receivables, net Rental and utilities deposits Prepayments and other receivables Total trade and other receivables	Group 2008 2007 HK$’000 HK$’000 35,126 105,741 (283) (394) 30,797 247,022 8,757 101,248 11,018 109 85,415 453,726 3,523 6,076 1,343 11,714 90,281 471,516	Company 2008 2007 HK$’000 HK$’000 — — — — — — — — — — — — — 529 513 8,360 513 8,889	Company 2008 2007 HK$’000 HK$’000 — — — — — — — — — — — — — 529 513 8,360 513 8,889
			— 529 8,360
			8,889

The carrying amounts of trade and other receivables approximate their fair value.

(a) As at 31 December 2008, the aging analysis of the trade receivables was as follows:

Current 30–60 days Over 60 days	2008 HK$’000 85,091 183 141 85,415	2007 HK$’000 447,349 121 6,256
		453,726

(b) The movement in the impairment allowance during the year was as follows:

At 1 January Impairment loss charged Uncollectible amounts written off Exchange difference Distribution in specie At 31 December	Group 2008 2007 HK$’000 HK$’000 394 1,327 1,276 911 (357) (1,924) (141) 80 (889) — 283 394	Group 2008 2007 HK$’000 HK$’000 394 1,327 1,276 911 (357) (1,924) (141) 80 (889) — 283 394
		394

(c) The Group undertakes foreign exchange transactions and executes client trades on overseas commodities and futures contracts with recognised counterparties, local or overseas brokers as appropriate. A recognised counterparty is a counterparty of a licensed leveraged foreign exchange trader recognised under the Securities and Futures Ordinance which includes authorised institutions under the Hong Kong Banking Ordinance. Trade receivables at 31 December 2008 and 2007 include margin deposits and floating profits in respect of

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

transactions and open positions in leveraged foreign exchange and commodities and futures trading with recognised counterparties and brokers and are considered current. For those cash securities trading clients, it normally takes two to three days to settle after trade execution. These outstanding unsettled trades due from clients are reported as trade receivables.

(d) The margin clients of the securities broking business are required to pledge their shares to the Group for credit facilities for securities trading. The amount of credit facilities granted to them is determined by the discounted value of shares acceptable by the Group. The fair value of shares accepted as collateral amounted to HK$69,595,740 (2007: HK$332,775,826) and the fair value of collaterals that have been repledged to secure for bank facilities is HK$nil (2007: HK$12,160,000).
(e) Credits are extended to other clients on a case-by-case basis in accordance with the financial status of clients such as their financial conditions, trading records, business profile and collateral available to the Group. Clients trading in leveraged foreign exchange contracts, commodities and futures contracts and obtaining securities margin financing from the Group are required to observe the Group’s margin policies. For leveraged foreign exchange contracts and commodities and futures contracts, initial margins are normally required before trading and thereafter clients are normally required to keep the equity position at a prescribed maintenance margin level.
(f) The Group maintains designated accounts with the SEHK Options Clearing House Limited (‘‘SEOCH’’) and HKFE Clearing Corporation Limited (‘‘HKFECC’’) as a result of its normal business transactions. At 31 December 2008, the designated accounts with SEOCH and HKFECC not otherwise dealt with in these accounts amounted to HK$2,079,030 (2007: HK$277,912) and HK$20,780,880 (2007: HK$30,482,157) respectively.
(g) The Group has no concentration of credit risk with respect to trade receivables and margin loans, as the Group has a large number of customers, widely dispersed. In addition, margin and trade related deposits are deposited with high-credit-quality financial institutions.
(h) The effective interest rate charged on trade receivables and margin loans as at the balance sheet date ranged from 5% to 13% per annum (2007: 6.75% to 14.75%). The effective interest rate for margins and other trade related deposits is 0.01% per annum (2007: 1.20% to 4.18%).

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

23 BANK BALANCES AND CASH

Cash in hand Bank balances — pledged — general accounts By maturity: Bank balances — current and savings accounts — fixed deposits (maturing within three months) — fixed deposits (maturing over three months)	Group 2008 2007 HK$’000 HK$’000 12 422 16,335 15,706 171,783 358,056 188,118 373,762 188,130 374,184 171,783 266,755 16,335 99,793 — 7,214 188,118 373,762	Company 2008 2007 HK$’000 HK$’000 — 30 — — 10,706 19,163 10,706 19,163 10,706 19,193 10,706 19,163 — — — — 10,706 19,163	Company 2008 2007 HK$’000 HK$’000 — 30 — — 10,706 19,163 10,706 19,163 10,706 19,193 10,706 19,163 — — — — 10,706 19,163
			— 19,163
			19,163
			19,193
			19,163 — —
			19,163

As at 31 December 2008, bank deposits amounting to HK$11,707,315 (2007: HK$11,546,863) have been pledged to a bank as security for the provision of a HK$22 million (2007: HK$22 million) securities broking facility. In addition, bank deposits amounting to HK$4,627,544 (2007: HK$1,673,659) have been pledged to financial institutions as security for the provision of leveraged foreign exchange broking.

The subsidiaries of the Group maintained segregated trust accounts with authorised institutions as a result of their respective business activities. As at 31 December 2008, segregated trust accounts not otherwise dealt with in these financial statements amounted to HK$100,817,093 (2007: HK$255,679,278).

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Cash and cash equivalents

Cash in hand Bank balances — pledged — general accounts Cash and cash equivalents in the consolidated balance sheet Bank balances — pledged — fixed deposits (maturing over three months) Secured bank overdrafts Unsecured bank overdrafts Unsecured short-term bank loans Cash and cash equivalents in the consolidated cash flow statement	Group 2008 2007 HK$’000 HK$’000 12 422 16,335 15,706 171,783 358,056 188,130 374,184 (16,335) (15,706) — (7,214) 171,795 351,264 — (4,674) — (18) — (12,000) 171,795 334,572	Group 2008 2007 HK$’000 HK$’000 12 422 16,335 15,706 171,783 358,056 188,130 374,184 (16,335) (15,706) — (7,214) 171,795 351,264 — (4,674) — (18) — (12,000) 171,795 334,572
		374,184 (15,706) (7,214)
		351,264 (4,674) (18) (12,000)
		334,572

24 SHARE CAPITAL

Authorised Ordinary shares of HK$0.10 each Issued and fully paid Ordinary shares of HK$0.10 each At 1 January Shares issued At 31 December	2008 No. of shares Nominal value ’000 HK$’000 1,000,000 100,000 414,430 41,443 7,873 787 422,303 42,230	2007 No. of shares Nominal value ’000 HK$’000 1,000,000 100,000 414,130 41,413 300 30 414,430 41,443	2007 No. of shares Nominal value ’000 HK$’000 1,000,000 100,000 414,130 41,413 300 30 414,430 41,443
			41,413 30
			41,443

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All ordinary shares rank equally with regard to the Company’s residual assets.

During the year, the subscription rights attached to 7,873,000 share options were exercised at the subscription price of HK$0.88, resulting in the issue of 7,873,000 shares of HK$0.10 each for a total consideration, before expenses, of HK$6,928,240. HK$1,590,346 was transferred from capital reserves to the share premium account.

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Capital management

The Group’s primary objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, by pricing products and services commensurately with the level of risk and by securing access to finance at a reasonable cost. In addition, certain subsidiaries of the Group licensed by the SFC are obliged to meet the regulatory liquid capital requirements under the Securities and Futures (Financial Resources) Rules (‘‘SF(FR)R’’) at all times.

The Group actively and regularly reviews and manages its capital structure to maintain a balance between the higher shareholder returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position, and make adjustments to the capital structure in light of changes in economic conditions. For the licensed subsidiaries, the Group ensures each of them maintains liquid capital level adequate to support the activities level with sufficient buffer to accommodate the increase in liquidity requirements arising from potential increases in business activities. SF(FR)R returns are filed to the SFC by the licensed subsidiaries on monthly or semi-annually basis as required. During the current and prior financial years, all the licensed subsidiaries complied with the liquid capital requirements under the SF(FR)R. A subsidiary of the Company is authorized by the China Securities Regulatory Commission (the ‘‘CSRC’’) to deal in ‘B’ shares. The CSRC stipulated a minimum amount of net assets to be maintained. During the year, the subsidiary maintained net assets over such requirement.

Consistent with industry practice, the Group monitors its capital structure on the basis of a net debt-to-adjusted capital ratio. For this purpose, the Group defines net debt as total debt (which includes interest-bearing loans and borrowings, trade and other payables and obligations under finance leases) plus unaccrued proposed dividends, less cash and cash equivalents. Adjusted capital comprises all components of equity, less unaccrued proposed dividends.

The net assets of the Group were reduced after the Group Reorganisation. The fixed rate loan notes have all been redeemed from internal resources in order to save on interest costs. The Group did not have any loan outstanding as at 31 December 2008, while the net debt-to-adjusted capital ratio as at 31 December 2007 stood at 49.9%. The Group also strived to maintain highly liquid assets to prepare for any unexpected sudden changes in the market. As at the balance sheet date, the current ratio was 428.9% (2007: 178.9%).

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The net debt-to-adjusted capital ratios at 31 December 2008 and 2007 are as follows:

Note Current liabilities: Trade and other payables 27 Short-term loans and bank overdrafts 28 Obligations under finance leases 26 Non-current liabilities: Obligations under finance leases 26 Loan notes 29 Total debt Add: Proposed dividends 12 Less: Cash and cash equivalents 23 (Excess cash and cash equivalents)/net debt Total equity Less: Proposed dividends 12 Adjusted capital Net debt-to-adjusted capital ratio	2008 HK$’000 64,768 — 506 65,274 — — 65,274 — (171,795) (106,521) 227,382 — 227,382 N/A	2007 HK$’000 454,810 16,692 537 472,039 506 42,525 515,070 10,393 (334,572) 190,891 392,441 (10,393) 382,048 49.9%

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

25 RESERVES

Note Balance at 1 January 2007 Profit for the year 2006 final dividend paid 2007 interim dividend paid 12 Shares issued under share option scheme Equity-settled share-based transactions Surplus on revaluation of available-for-sale financial assets 19 Exchange difference At 31 December 2007 Balance at 1 January 2008, as per above Loss for the year 2007 final dividend paid 12 Shares issued under share option scheme 24 Equity-settled share-based transactions 6, 32(b) — share options vested in the year — eliminated on cancellation Capital contribution from immediate holding company 32(b) Capital contribution from former ultimate holding company 6 Deficit on revaluation of available-for-sale financial assets 19 Transfer to profit or loss on disposal of available-for- sale financial assets Exchange difference Distribution in specie At 31 December 2008 At 31 December 2008 Company and subsidiaries Associates At 31 December 2007 Company and subsidiaries Associates			Group	Group		Total HK$’000 314,354 40,357 (6,212) (6,213) 234 1,802 2,057 4,284 350,663 350,663 (11,023) (10,415) 6,141 577 (1,316) 2,372 1,420 (133) (2,558) (17,621) (132,955) 185,152 185,152 — 185,152 347,546 3,117 350,663
	Share premium HK$’000 104,275 — — — 295 — — — 104,570 104,570 — — 7,731 — — — — — — — — 112,301 112,301 — 112,301 104,570 — 104,570	Capital reserves HK$’000 100,777 — — — (61) 1,802 — — 102,518 102,518 — — (1,590) 577 (1,316) 2,372 1,420 — — — (80,078) 23,903 23,903 — 23,903 102,518 — 102,518	Investment revaluation reserve HK$’000 502 — — — — — 2,057 — 2,559 2,559 — — — — — — — (133) (2,558) — 132 — — — — 2,559 — 2,559	Exchange reserve HK$’000 2,708 — — — — — — 4,284 6,992 6,992 — — — — — — — — — (17,621) 10,629 — — — — 7,593 (601) 6,992	Retained earnings HK$’000 106,092 40,357 (6,212) (6,213) — — — — 134,024 134,024 (11,023) (10,415) — — — — — — — — (63,638) 48,948 48,948 — 48,948 130,306 3,718 134,024

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

		Company
Share premium HK$’000 104,275 — 104,275 295 — — — — 104,570 7,731 — — — — — — — 112,301	Capital reserves HK$’000 — 588 588 (61) 1,802 — — — 2,329 (1,590) 577 (1,316) 2,372 1,420 — — — 3,792	Contributed surplus HK$’000 133,101 — 133,101 — — — — — 133,101 — — — — — — — (80,078) 53,023	Retained earnings HK$’000 74,060 — 74,060 — — (22,196) (6,212) (6,213) 39,439 — — — — — 15,661 (10,415) — 44,685	Total HK$’000 311,436 588
				312,024 234 1,802 (22,196) (6,212) (6,213)
				279,439 6,141 577 (1,316) 2,372 1,420 15,661 (10,415) (80,078)
				213,801

(a) Retained earnings are represented as follows:

Representing: Final dividend proposed Others Retained earnings as at 31 December	Group 2008 2007 HK$’000 HK$’000 — 10,393 48,948 123,631 48,948 134,024	Company 2008 2007 HK$’000 HK$’000 — 10,393 44,685 29,046 44,685 39,439	Company 2008 2007 HK$’000 HK$’000 — 10,393 44,685 29,046 44,685 39,439
			39,439

No retained earnings are required as statutory reserves as overseas subsidiaries have been disposed of during the year. Included in the consolidated retained earnings at 31 December 2007 are retained earnings of HK$203,506 which were required as statutory reserves in certain overseas subsidiaries of the Group.

(b) Capital reserves

The capital reserves of the Group represents (i) capital contribution from the company’s shareholders, (ii) the difference between the nominal value of the shares issued by the Company in exchange for the nominal value of the deferred share capital of a subsidiary acquired in 2000 and (iii) the fair value of the actual or estimated number of unexercised share options granted to employees of the Company recognised in accordance with the accounting policy adopted for sharebased payments in note 2.15(d).

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

(c) Contributed surplus

Contributed surplus arose as a result of the Group’s reorganisation in 2000 and represents the difference between the aggregate net asset value of subsidiaries acquired and the nominal amount of the Company’s shares issued for the acquisition.

(d) Investment revaluation reserve

The investment revaluation reserve of the Group represents the changes in the fair value of available-for-sale financial assets.

(e) Distributable reserves

Under the Company Act 1981 of Bermuda (as amended), the contributed surplus account of the Company is available for distribution. However, the Company cannot declare or pay a dividend, or make a distribution out of the contributed surplus account if:

(i) it is, or would after the payment be, unable to meet its liabilities as they become due; or
(ii) the realisable value of its assets would thereby be less than the aggregate of its liabilities and its issued share capital and share premium accounts.

26 OBLIGATIONS UNDER FINANCE LEASE

At 31 December 2008, the Group’s finance lease liabilities are repayable as follows:

Within one year After one year but within five years Future finance charges on finance leases Present value of finance lease liabilities	2008 HK$’000 523 — 523 (17) 506	2007 HK$’000 586 523
		1,109 (66)
		1,043

The present value of finance lease liabilities is as follows:

Within one year After one year but within five years	2008 HK$’000 506 — 506	2007 HK$’000 537 506
		1,043

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

27 TRADE AND OTHER PAYABLES

Trade payable to securities trading clients Margin and other deposits payable to clients Trade payable to brokers and clearing houses arising from the ordinary course of business of broking in securities, commodities and futures contracts and leveraged foreign exchange trading Total trade payables Accruals and other payables Total trade and other payables	Group 2008 2007 HK$’000 HK$’000 41,563 83,357 9,736 295,318 321 35,595 51,620 414,270 13,148 40,540 64,768 454,810	Company 2008 2007 HK$’000 HK$’000 — — — — — — — — 2,237 10,354 2,237 10,354	Company 2008 2007 HK$’000 HK$’000 — — — — — — — — 2,237 10,354 2,237 10,354
			— 10,354
			10,354

The carrying amounts of trade and other payables approximate their fair value.

The settlement terms of payable to clearing houses and securities trading clients from the ordinary course of business of broking in securities range from two to three days after the trade date of those transactions. Margin deposits received from clients for their trading of leveraged foreign exchange, commodities and futures contracts, and the balances were payable within one month.

The effective interest rate paid on trade payables as at the balance sheet date is 0.01% per annum (2007: 1.20% to 4.90%).

28 SHORT-TERM LOANS AND BANK OVERDRAFTS

Secured bank overdrafts Unsecured bank overdrafts Unsecured short-term bank loans Total borrowings	Group 2008 2007 HK$’000 HK$’000 — 4,674 — 18 — 12,000 — 16,692	Group 2008 2007 HK$’000 HK$’000 — 4,674 — 18 — 12,000 — 16,692
		16,692

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

The exposure of the Group’s borrowings to interest-rate changes and the contractual repricing dates are as follows:

At 31 December 2008 Total borrowings At 31 December 2007 Total borrowings	Group 6 months or less Total HK$’000 HK$’000 — — 16,692 16,692	Group 6 months or less Total HK$’000 HK$’000 — — 16,692 16,692
		16,692

The effective interest rates at the balance sheet date are as follows:

	Group	Group
	2008	2007
Secured bank overdrafts	—	5.93%–6.50%
Unsecured bank overdrafts	—	7.00%
Unsecured short-term bank loans	—	5.63%–6.52%

29 LOAN NOTES

In the prior year, the Company issued loan notes to certain overseas and professional investors. The loan notes were unsecured, mature on the day falling three years after the issue date of the relevant notes and bore interest of 8.5% per annum on the principal amount. All loan notes have been redeemed during the year.

At 1 January Add: Issued Less: Redeemed At 31 December	2008 HK$’000 42,525 — (42,525) —	2007 HK$’000 — 44,865 (2,340)
		42,525

30 DEFINED CONTRIBUTION PLANS — MPF SCHEME

The aggregate employer’s contributions, net of forfeited contributions, which have been dealt with in the income statement for the year amounted to:

Gross employer’s contributions Less: Forfeited contributions utilised to offset employer’s contribution for the year Net employer’s contributions charged to income statement	2008 HK$’000 2,121 (14) 2,107	2007 HK$’000 2,121 (12)
		2,109

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

31 DIRECTORS’ AND SENIOR MANAGEMENT’S EMOLUMENTS

(a) Directors’ and senior management’s emoluments

The remuneration of the directors for the year ended 31 December 2008 is set out below:

Name of Director Chan Xiaozhou (note 1) Gao Guanjiang (note 1) Gu Jianguo (note 1) Zhao Hongwei (note 1) Gong Zhijian (note 1) Lau Mun Chung Chow Kwok Wai (note 1) Hung Muk Ming (note 1) Chen Gongmeng (note 1) Wang Tongsan (note 1) Tang Yu Lap (note 2) Lam Ngok Fung (note 2) Ng Chiu Mui (note 2) Law Kai Yee (note 2) Hwang Wei Ming, Ellen (note 2) Fong Wo, Felix (note 2) Yu Man Woon (note 2) Cheng Wing Chi (note 2) Nyaw Mee Kau (note 2) Yu Hon To, David (note 2)	Fee HK$’000 24 24 20 24 20 20 20 20 20 20 532 76 — — — 130 150 130 130 220 1,580	Salary HK$’000 — — — — — 1,094 — — — — 1,676 1,404 964 906 1,343 — — — — — 7,387	Discretionary bonuses HK$’000 — — — — — — — — — — — — — — — — — — — — —	Other benefits HK$’000 — — — — — — — — — — — — — — — — — — — — —	Share- based Payment HK$’000 — — — — — 211 — — — — — 357 37 200 134 — — — — — 939	Employer’s contribution to pension scheme HK$’000 — — — — — 12 — — — — 11 11 11 11 11 — — — — — 67	Total HK$’000 24 24 20 24 20 1,337 20 20 20 20 2,219 1,848 1,012 1,117 1,488 130 150 130 130 220
							9,973

Notes:

Appointed on 2 December 2008.
Resigned on 23 December 2008.

– 90 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The remuneration of the directors for the year ended 31 December 2007 is set out below:

Name of Director Tang Yu Lap Chung Shui Ming, Timpson (note 1) Lam Ngok Fung Ng Chiu Mui Law Kai Yee Hwang Wei Ming, Ellen (note 2) Lau Mun Chung (note 2) Fong Wo, Felix Yu Man Woon Cheng Wing Chi Nyaw Mee Kau Yu Hon To, David	Fee HK$’000 — — — 58 58 — — 123 143 123 123 213 841	Salary HK$’000 1,581 880 1,285 903 913 1,037 759 — — — — — 7,358	Discretionary bonuses HK$’000 840 — 334 178 140 275 154 — — — — — 1,921	Other benefits HK$’000 — — — — — 42 — — — — — — 42	Share- based Payment HK$’000 — (106) 262 49 262 175 175 — — — — — 817	Employer’s contribution to pension scheme HK$’000 12 5 12 12 12 10 10 — — — — — 73	Total HK$’000 2,433 779 1,893 1,200 1,385 1,539 1,098 123 143 123 123 213
							11,052

Notes:

Resigned on 1 June 2007.
Appointed on 3 March 2007.

(b) Five highest paid individuals

The five individuals whose emoluments were the highest in the Group for the year included four directors (2007: five) whose emoluments are reflected in the analysis presented above. The emoluments payable to the remaining individual during the year are as follows:

Basic salaries, other allowances and benefits in kind Bonus Defined contribution plans	2008 HK$’000 1,116 50 12
	1,178

The emoluments fell within the following bands:

Number of individuals 2008

Emolument bands HK$1,000,001 — HK$1,500,000	1

– 91 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

32 EQUITY-SETTLED SHARE-BASED TRANSACTIONS

The Company has adopted a share option scheme whereby the Board of the Company may at its discretion grant to any employees, including executive directors, of the Group options to subscribe for shares of the Company.

(a) The terms and conditions of the grants that existed during the years are as follows:

Options granted to directors — on 13 November 2006 Options granted to employees — on 13 November 2006 Total share options	Number of instruments Vesting conditions Contractual life of options 2008 2007 — 7,190,000 40% to be vested on 1 May 2007, 30% to be vested on 1 May 2008, 30% to be vested on 1 May 2009 5 years after vesting — 7,900,000 40% to be vested on 1 May 2007, 30% to be vested on 1 May 2008, 30% to be vested on 1 May 2009 5 years after vesting — 15,090,000

(b) The number and weighted average exercise prices of share options are as follows:

Outstanding at the beginning of the period Cancelled due to resignation Cancelled due to general offer Exercised during the period Outstanding at the end of the period Exercisable at the end of the period	2008 Weighted average exercise price Number of options HK$ 0.88 15,090,000 0.88 (700,000) 0.88 (6,517,000) 0.88 (7,873,000) — — — —	2007 Weighted average exercise price Number of options HK$ 0.88 19,390,000 0.88 (4,000,000) — — 0.88 (300,000) 0.88 15,090,000 0.88 5,856,000

The weighted average share price at the date of exercise for share options exercised during the year was HK$0.88 (2007: HK$0.88).

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

All options have been cancelled on 23 December 2008 upon acceptance by the option holders of a cash offer at HK$0.364 per option by the immediate holding company. Upon cancellation of these options, an amount of HK$154,000 that would have been recognised over the remainder of the vesting period was immediately expensed (see note 6). Payment made to the option holders on cancellation was accounted for as a deduction from capital reserves of HK$1,316,000, except to the extent that payment exceeded the fair value of share options granted being recognised as an expense of HK$1,056,000 (see note 6). The aggregate payment made by the immediate holding company to the option holders of HK$2,372,000 was accounted for as a capital contribution from the immediate holding company (see note 25). The options outstanding at 31 December 2007 had an exercise price of HK$0.88 and a weighted average remaining contractual life of 5.25 years.

(c) Fair value of share options and assumptions

The fair value of services received in return for share options granted is measured by reference to the fair value of the share options granted. The estimate of the fair value of the options granted is measured based on the Black Scholes model. The contractual life of the option is used as an input into this model.

Fair value of share options and assumptions on grant date Fair value Share price Exercise price Expected volatility Option life Expected dividends Risk-free interest rate (based on Exchange Fund Notes)	13 November 2006 HK$0.202 HK$0.88 HK$0.88 30.01% 5 years 3.0% 3.754%

The expected volatility is based on the daily stock price return over one year preceding the grant date, adjusted for any expected changes to future volatility based on publicly available information. Expected dividends are based on historical dividends. Changes in the subjective input assumptions could materially affect the fair value estimate.

Share options were granted under a service condition. This condition has not been taken into account in the grant date fair value measurement of the services received. There were no market conditions associated with the share option grants.

During the year ended 31 December 2008, no share options were granted.

– 93 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

33 NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT

(a) Reconciliation of operating (loss)/profit to net cash (outflow)/inflow from operating activities:

(Loss)/profit before taxation from continuing operations Profit before taxation from discontinued operations Operating (loss)/profit before taxation Depreciation Impairment of goodwill Diminution in value of financial assets at fair value through profit or loss Profit on disposal of financial assets at fair value through profit or loss Profit on disposal of available-for-sale financial assets Interest expenses Dividend income from listed securities Dividend income from available-for-sale financial assets Share of profits of associates Loss on disposal of fixed assets Write back of provision for doubtful debt and clawback Provision for clawback Impairment loss for bad and doubtful debts Equity-settled share-based payment expenses Capital contribution from former ultimate holding company Decrease/(increase) in fixed deposits with maturity over three months Increase in pledged deposits Operating profit before working capital changes Decrease in other assets Decrease/(increase) in trade and other receivables (Decrease)/increase in trade and other payables Cash (outflow)/inflow from operations Hong Kong profits tax paid Overseas tax paid Net cash (outflow)/inflow from operating activities	2008 HK$’000 (18,872) 16,914 (1,958) 6,968 399 3,066 (190) (3,072) 1,763 (197) — (2,105) 666 (2) — 1,276 1,633 1,420 4,885 (629) 13,923 90 272,435 (290,994) (4,546) (3,982) (2,879) (11,407)	2007 HK$’000 12,824 40,606 53,430 6,927 — 3,429 (2,346) — 8,472 (479) (138) (2,047) 793 (2) 104 911 1,802 — (7,214) (3,017) 60,625 1,312 (46,057) 62,205 78,085 (10,373) (5,668) 62,044

– 94 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

(b) Purchase of subsidiaries:

Net assets acquired Fixed assets Trade and other receivables Bank balances and cash — general accounts Trade and other payables Share of minority interests Goodwill arising on acquisition (note 14, 16(c)) Total purchase price Satisfied by: Cash	2008 HK$’000 — 6 1,254 — 1,260 — 45 1,305 1,305	2007 HK$’000 45 74 309 (173) 255 (23) 399 631 631

Analysis of the cash outflow on acquisition in respect of the purchase of subsidiaries:

Cash consideration Cash and bank balances acquired Cash outflow	2008 HK$’000 (1,305) 1,254 (51)	2007 HK$’000 (631) 309 (322)

– 95 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

As disclosed in note 10 to the financial statements, the Group distributed the equity interest in HPL Group it held in form of a distribution in specie. The net assets and attributable goodwill of HPL Group at the date of distribution of 27 November 2008 were as follows:

Net assets distributed Intangible assets Fixed assets Interests in associates Other assets Available-for-sale financial assets Deferred income tax assets Financial assets at fair value through profit or loss Taxation recoverable Trade and other receivables Bank balances and cash Trade and other payables Taxation Payable Deferred income tax liabilities Secured Mortgage loans	At the date of distribution HK$’000 5,798 27,901 19,472 200 851 462 3,723 3,475 107,530 80,710 (99,046) (6,184) (233) (11,280) 133,379

Analysis of the cash outflow in respect of the distribution in specie:

Cash and bank balances Fixed deposit (maturing over three months)	At the date of distribution HK$’000 (80,710) 2,329 (78,381)

34 CONTINGENT LIABILITIES

34.1 Outstanding litigation cases

The following litigation cases are outstanding up to the date of this report. Under the Agreement, HHL and the then chairman of the Company undertakes to indemnify and keep indemnified the Company on a fully indemnity basis of any loss or liability suffered by the Group as a result of or in connection with the outstanding litigation cases. Therefore no provision has been made.

(a) A company named Hantec Investment Limited which is unrelated to the Group filed a writ to the Company on 28 July 2000 seeking for injunction to restrain the Company from using the plaintiff’s alleged trade name and damages. The plaintiff has not taken further action after the Company filed a defence.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(b) An indirect wholly owned subsidiary of the Company received a writ of summons dated 25 March 2006 from two clients jointly as plaintiffs claiming for damages against it and two of its licensed representatives for an amount of HK$20,600,000 together with costs relating to a number of leverage exchange trading transactions. Defence action has been commenced and no further development has been made up to the date of this report.
(c) A writ of summons dated 11 July 2006 was served to two indirect wholly owned subsidiaries and one then subsidiary of the Company by a former account executive claiming for a total of HK$700,000 as his rightful overriding commissions together with interest and/or alternatively, damages to be assessed. The plaintiff has been requested to state clearly his claim. Up to the date of this report, there has been no further development.
(d) After the year end date, a writ of summons dated 22 January 2009 has been served to the Company, the then chairman and the then executive director of the Company claiming for HK$30,000,000 together with all costs, interest and expenses being loss suffered by the plaintiff as a result of misrepresentation of the defendants. The Company and the other defendants have applied to the court to strike out the writ on the basis that the plaintiff is groundless in her claim. Up to the date of this report, the result of the application is not yet known.

34.2 Financial guarantees issued

(a) As at the balance sheet date, a subsidiary of the Company engaging in securities broking and providing securities margin financing has secured banking facilities from certain authorized institutions for a total amount of HK$257 million (2007: HK$334 million). The Company has issued corporate guarantees for a total principal amount of HK$255 million (2007: HK$322 million) for these facilities. As at 31 December 2008, the subsidiary utilized HK$nil (2007: HK$16,678,805) of these aggregate banking facilities.
(b) The Company also issued corporate guarantees to certain financial institutions for foreign exchange trading facilities granted to subsidiaries engaging in leveraged foreign exchange trading. The maximum liability is the trading loss and related incidental costs, in some cases, subject to an overall cap on the amount of the guarantee.
(c) As at the balance sheet date, the directors do not consider it probable that a claim will be made against the Company under any of the guarantees. The Company has not recognised any deferred income in respect of the guarantees as their fair value cannot be reliably measured and the transaction price was nil.

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

35 LEASE COMMITMENTS

At 31 December 2008, the Group had future aggregate minimum lease payments under noncancellable operating leases as follows:

Within one year After one year but within five years	Land and buildings 2008 2007 HK$’000 HK$’000 9,300 14,231 4,490 17,110 13,790 31,341	Others 2008 2007 HK$’000 HK$’000 134 447 — 183 134 630	Others 2008 2007 HK$’000 HK$’000 134 447 — 183 134 630
			630

36 FINANCIAL RISK MANAGEMENT

36.1 Financial risk factors

The Group’s activities expose it to a variety of financial risks: foreign exchange risk, price risk, credit risk, liquidity risk and interest-rate 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.

Risk management is carried out by a Risk Management Committee (the ‘‘RMC’’) under policies approved by the Executive Management Committee (the ‘‘EMC’’). The RMC identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. The RMC also recommends overall risk management policy for the approval of the EMC, covering specific areas, such as foreign exchange risk, interest-rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investing excess liquidity.

(a) Foreign exchange risk

The Group carries out business in foreign exchange trading and therefore is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Hong Kong Dollars. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities.

The Group’s net trading positions are denominated in currencies other than its functional currency or presentation currency and are subject to fluctuation in foreign exchange among the different currencies. The treasury function of the Group is responsible for managing the foreign exchange risk under prudent guidelines on position limits and floating loss limits. The RMC reviews the limits from time to time to cope with changes in volatility in the market.

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

The following table details the Group’s exposure at the balance sheet date to currency risk arising from forecast transactions or recognised assets or liabilities denominated in a currency other than the functional currency of the entity to which they relate.

At 31 December 2008 Trade and other receivables Cash and cash equivalents Trade and other payables Net exposure arising from recognised assets and liabilities Notional amounts of leveraged foreign exchange contracts sales Notional amounts of leveraged foreign exchange contracts purchases Notional amounts of foreign exchange option contracts sales Notional amounts of foreign exchange option contracts purchases Net notional amounts of precious metal trading contracts Net exposure arising from forecast transactions Overall net exposure At 31 December 2007 Trade and other receivables Cash and cash equivalents Trade and other payables Net exposure arising from recognised assets and liabilities Notional amounts of leveraged foreign exchange contracts sales Notional amounts of leveraged foreign exchange contracts purchases Notional amounts of foreign exchange option contracts sales Notional amounts of foreign exchange option contracts purchases Net notional amounts of precious metal trading contracts Net exposure arising from forecast transactions Overall net exposure	Japanese Yen HK$’000 2,751 2 — 2,753 (24,695) 26,287 — — — 1,592 4,345 2,041 1,529 (24,719) (21,149) (695,314) 607,675 — — — (87,639) (108,788)	United States Dollars HK$’000 28,052 16,910 (227) 44,735 — — — — — — 44,735 164,353 204,224 (304,979) 63,598 — — — — 27,945 27,945 91,543	Euro HK$’000 1 9,484 (4) 9,481 (40,223) 40,114 — — — (109) 9,372 34 7,986 (854) 7,166 (88,160) 178,368 (56,878) 56,878 — 90,208 97,374	Pound Sterling HK$’000 — — — — (26,660) 25,392 — — — (1,268) (1,268) 284 34 (1,034) (716) (684,315) 550,039 (154,619) 309,239 — 20,344 19,628	Swiss Franc HK$’000 — — — — (13,051) 13,381 — — — 330 330 784 2,384 (4,661) (1,493) (41,605) 73,203 — — — 31,598 30,105	Others HK$’000 — — (13) (13) (29,243) 26,761 — — — (2,482) (2,495) 21,141 12,148 (4,872) 28,417 (40,287) 38,455 — — — (1,832) 26,585

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Sensitivity analysis

The following table indicates the approximate change in the Group’s profit before tax in response to possible changes in the foreign exchange rates to which the Group has significant exposure at the balance sheet date.

	2008		2007
	Appreciation/		Appreciation/
	depreciation	Effect on	depreciation	Effect on
	of foreign	profit before	of foreign	profit before
	currencies	tax	currencies	tax
		HK$’000		HK$’000
Japanese Yen	+10%	434	+5%	(5,439)
	–10%	(434)	–5%	5,439
Euro	+10%	937	+5%	4,869
	–10%	(937)	–5%	(4,869)
Pound Sterling	+10%	(127)	+5%	981
	–10%	127	–5%	(981)
Swiss Franc	+10%	33	+5%	1,505
	–10%	(33)	–5%	(1,505)

The sensitivity analysis has been determined assuming that the change in foreign exchange rates had occurred at the balance sheet date and had been applied to each of the Group entities’ exposure to currency risk for both derivative and non-derivative financial instruments in existence at that date, and that all other variables, in particular interest rates, remain constant.

The stated changes represent management’s assessment of reasonably possible changes in foreign exchange rates over the period until the next annual balance sheet date. In this respect, it is assumed that the pegged rate between the Hong Kong Dollars and the United States Dollars would be materially unaffected by any changes in movement in value of the United States Dollars against other currencies. Results of the analysis as presented in the above table represent an aggregation of the effects on each of the Group entities’ profit before tax and equity measured in the respective functional currencies, translated into Hong Kong Dollars at the exchange rate ruling at the balance sheet date for presentation purposes. The analysis is performed on the same basis for 2007.

The Company is not subject to significant foreign exchange risk as most of the Company’s assets and liabilities are denominated in Hong Kong Dollar or United States Dollar.

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

(b) Price risk

The Group discontinued the trading and broking of precious metal contracts upon completion of the Group Reorganisation as disclosed in note 10. Therefore the Group is no longer exposed to price risk on bullion trading.

The following table indicates the approximate change in the Group’s profit before tax in response to possible changes in bullion price to which the Group have the net positions on bullion trading at the balance sheet date.

	2007
	Increase/	Effect on
	decrease in	profit before
	bullion price	tax
		HK$’000
Net notional amounts of precious metal trading
contracts	+30%	8,384
	–30%	(8,384)

(c) Credit risk

The Group’s credit risk is primarily attributable to trade and other receivables. It has policies in place to ensure that credits are granted to customers with an appropriate credit history and/or collateral deposited with the Group. For leveraged foreign exchange trading and futures trading, normally an initial margin will be collected before opening of trading positions. Moreover, the Group has no significant concentration of credit risk as credits are granted to a large population of clients. Derivative counterparties and cash transactions are limited to high-credit-quality financial institutions and only brokers having sound credit ratings will be accepted. The Group has maintained relationship with various financial institutions, and has policies that limit the amount of credit exposure to any financial institution. Further quantitative disclosures in respect of the Group’s exposure to credit risk arising from trade receivables are set out in note 22(a).

The Company’s credit risk is primarily attributable to amounts due from subsidiaries. The Company manages this risk by assessing the financial positions of subsidiaries on a regular basis.

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

(d) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, the Group employs a prudent liquidity policy.

The maturity profile of the Group’s financial liabilities as at the balance sheet date, based on the contracted undiscounted payments, is as follows:

At 31 December 2008 Trade and other payables Obligations under finance leases At 31 December 2007 Trade and other payables Short-term loan and bank overdrafts Obligations under finance leases Loan notes	Carrying amount HK$’000 64,768 506 65,274 455,289 16,692 1,043 42,525 515,549	Total contractual undiscounted cash flow HK$’000 64,768 523 65,291 455,289 16,867 1,109 52,156 525,421	Within 1 year or on demand HK$’000 64,768 523 65,291 455,289 16,867 586 3,675 476,417	After 1 year but within 5 years HK$’000 — —
				—
				— — 523 48,481
				49,004

The Company’s policy is to regularly monitor its liquidity requirements including borrowings from subsidiaries, dividend payments to shareholders and accrued payments to ensure that it maintains sufficient reserves of cash to satisfy its contractual and foreseeable obligations as they fall due.

(e) Interest rate risk

The Group charged interest on its clients on the basis of its cost of funding plus a markup and paid interest to clients on the basis of the interest the Group earned from financial institutions less a charge. Financial assets such as trade and other receivables, bank balances and cash-deposits with regulatory bodies are primarily at floating rates. Financial liabilities subject to floating interest rates are trade and other payables, bank overdrafts and loans. Obligations under finance lease are subject to fixed interest rate determined by the inception of the relevant lease. The Group’s income and operating cash flows are not subject to significant interest rate risk.

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

The Interest rate profile of the Group at the balance sheet date.

2008 Effective interest rate Assets Bank balances 0.01% Margin finance loans 5.00%–13.00% Liabilities Net fixed rate borrowing: Obligations under finance leases 6.23%–7.32% Loan notes — Variable rate borrowings: Short-term loans — Bank overdrafts — Total borrowings Net fixed rate borrowings as a percentage of total net borrowings Sensitivity analysis Assume interest rate decreased by Profit before tax decreased by	2007 HK$’000 Effective interest rate 131,988 2.30% 8,757 6.75%–14.75% 140,745 506 6.23%–7.32% — 8.50% 506 — 5.63%–6.52% — 5.93%–7.00% — 506 100% 0.01% 14	HK$’000 221,808 101,248
		323,056
		1,043 42,525
		43,568
		12,000 4,692
		16,692
		60,260
		72.3%
		0.5% 1,532

The sensitivity analysis above has been determined assuming that the change in interest rates had occurred at the balance sheet date and had been applied to the exposure to interest rate risk for both derivative and non-derivative financial instruments in existence at that date. The 1 basis point decrease (2007: 50 basis points decrease) represents management’s assessment of a reasonably possible change in interest rates over the period until the next annual balance sheet date.

36.2 Fair value estimation

The fair value of financial instruments traded in active markets (such as publicly traded derivatives and trading securities) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Group is the current bid price; the appropriate quoted market price for financial liabilities is the current ask price.

– 103 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives and available-for-sale securities) is determined by using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt.

The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The carrying values of other financial assets and liabilities approximate their fair values.

37 RELATED PARTY AND CONNECTED PARTY TRANSACTIONS

37.1 Related party and connected party transactions

The following is a summary of significant related party and connected party (as defined in the Listing Rules) transactions which were carried out in the normal course of the Group’s business:

Miscellaneous expenses (note (a)) Sale of intellectual property (note (b)) License fee for software programs (note (c)) Maintenance services expenses (note (d))	2008 HK$’000 (213) 600 (80) (47)	2007 HK$’000 (225) — — —

(a) During the year, the Group incurred HK$213,000 (2007: HK$224,738) to purchase Chinese paintings as souvenirs from a company in which the former Chairman of the Company held a 70% equity interest. The amount was charged at normal commercial terms.
(b) Pursuant to a Software Assignment Agreement, Cinda International FX Limited (‘‘CIFX’’), a wholly-owned subsidiary of the Company agreed to sell and Ringus Solution Enterprise Limited (‘‘Ringus’’) agreed to purchase certain computer systems owned, co-owned, developed or co-developed by CIFX together with the entire copyright and all other intellectual property rights attached thereto at a consideration of HK$600,000.
(c) Pursuant to a Software License Agreement, Ringus agreed to grant a non-exclusive license to CIFX to use certain computer software programs for its business operation purposes at its principal place of business and other branch offices in Hong Kong at a monthly license fee of HK$80,000.
(d) Pursuant to a Software Service and Maintenance Agreement, Ringus agreed to provide software maintenance services as set out therein and all other computer and IT systems provided or being maintained by Ringus and from time to time used by the Group to Chinacorp Nominees Limited, a wholly-owned subsidiary of the Company for a monthly fee of HK$43,000.

The above transactions of note (b), (c) and (d) constituted connected party transactions as the then Chairman of the Company was interested in Ringus. The terms of the Software Assignment Agreement, the Software License Agreement and the Software Service and Maintenance Agreement are on normal commercial terms.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

37.2 Compensation of key management personnel

The remuneration of directors and other members of key management during the year are as follows:

Salaries and other short-term employee benefits Share-based payments	Group 2008 2007 HK$’000 HK$’000 14,637 17,696 1,414 1,515 16,051 19,211	Group 2008 2007 HK$’000 HK$’000 14,637 17,696 1,414 1,515 16,051 19,211
		19,211

The remuneration of directors and key executives are reviewed by the Remuneration Committee having regard to the performance of individuals and market trends.

38 CAPITAL COMMITMENTS

Capital commitments outstanding and not provided for in the financial statements are as follows:

Contracted but not provided for	Group 2008 2007 HK$’000 HK$’000 — 14,807

39 COMPARATIVE FIGURES

Due to the Group Reorganisation, as disclosed in note 10, which constituted discontinued operations under HKFRS 5 ‘‘Non-current Assets Held for Sale and Discontinued Operations’’, certain comparative figures were restated so as to present the results for the continuing operations and discontinued operations.

40 IMMEDIATE AND ULTIMATE HOLDING COMPANY

At 31 December 2008, the directors consider the immediate parent and ultimate controlling party of the Group to be Sinoday Limited and China Cinda Asset Management Corporation, which are incorporated in the British Virgin Islands and the People’s Republic of China respectively. These entities do not produce financial statements available for public use.

41 POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE FOR THE YEAR ENDED 31 DECEMBER 2008

Up to the date of issue of these financial statements, the HKICPA has issued a number of amendments, new standards and interpretations which are not yet effective for the year ended 31 December 2008 and which have not been adopted in these financial statements.

The Group is in the process of making an assessment of what the impact of these amendments, new standards and new interpretations is expected to be in the period of initial application. So far it has concluded that the adoption of them is unlikely to have a significant impact on the Group’s results of operations and financial position.

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

In addition, the following developments are expected to result in amended disclosures in the financial statements, including restatement of comparative amounts in the first period of adoption:

	Effective for
	accounting
	periods beginning
	on or after
HKFRS 8, Operating segments	1 January 2009
HKAS 1 (Revised), Presentation of financial statements	1 January 2009

– 106 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

3. INTERIM FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2009

The followings are the unaudited financial statements of the Group for the six months ended 30 June 2009 together with accompanying notes extracted from the interim report of the Company.

Consolidated Income Statement

For the six months ended 30 June 2009

Note
Continuing operations
Turnover
4
Other revenue
4
Other net income
4
Staff costs
5(a)
Commission expenses
Operating leases for land and buildings
Other operating expenses
Total operating expenses
Operating loss
Finance costs
5(c)
Loss before taxation
Income tax
6
Loss for the period from continuing
operations
Discontinued operations
Profit for the period from discontinued
operations
3
(Loss)/profit for the period
Attributable to:
Equity holders of the Company
Minority interests

Unaudited
Six months ended 30 June
2009
2008
HK$’000
HK$’000
(restated)
31,255
56,964
99
548
91
319
31,445
57,831
(19,771)
(15,695)
(15,760)
(21,981)
(6,022)
(7,122)
(12,238)
(14,477)
(53,791)
(59,275)
(22,346)
(1,444)
(31)
(1,363)
(22,377)
(2,807)
—
(74)
(22,377)
(2,881)
—
7,733
(22,377)
4,852
(22,377)
4,768
—
84
(22,377)
4,852

– 107 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Unaudited Six months ended 30 June 2009 2008 Note HK$’000 HK$’000 (restated)

(Loss)/earnings per share

Basic

From continuing and discontinued operations
— From continuing operations — From discontinued operations
Diluted
From continuing and discontinued operations
— From continuing operations
From discontinued operations

8(a) 8(a) 8(a) 8(b) 8(b) 8(b)	N/A (HK5.30 cents) N/A N/A N/A N/A	HK1.15 cents (HK0.69 cents) HK1.84 cents HK1.14 cents N/A HK1.82 cents

– 108 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Consolidated Statement of Comprehensive Income For the six months ended 30 June 2009

(Loss)/profit for the period
Other comprehensive income for the period:
Available-for-sale financial assets
Change in fair value during the period
Transfer to profit or loss on disposal
Net movement in investment revaluation reserve
Exchange differences on translation of financial
statements of overseas subsidiaries
Total comprehensive (expense)/income
for the period
Total comprehensive (expense)/income
attributable to:
Equity holders of the Company
Minority interests
Total comprehensive (expense)/income
for the period

Unaudited
Six months ended 30 June
2009
2008
HK$’000
HK$’000
(22,377)
4,852
—
(1)
—
(2,558)
—
(2,559)
—
3,219
—
660
(22,377)
5,512
(22,377)
5,428
—
84
(22,377)
5,512

– 109 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Consolidated Statement of Financial Position

As at 30 June 2009 and 31 December 2008

Note Non-current assets Intangible assets 9 Fixed assets 9 Other assets Current assets Financial assets at fair value through profit or loss Taxation recoverable Trade and other receivables 10 Bank balances and cash 11 Current liabilities Trade and other payables 12 Current portion of obligations under finance lease Net current assets Total assets less current liabilities NET ASSETS Capital and reserves Share capital 13 Other reserves Retained earnings TOTAL EQUITY	Unaudited 30 June 2009 HK$’000 1,319 6,123 3,553 10,995 1,924 224 164,686 102,336 269,170 74,914 246 75,160 194,010 205,005 205,005 42,230 136,204 26,571 205,005	Audited 31 December 2008 HK$’000 1,319 7,752 3,600
		12,671
		1,397 177 90,281 188,130
		279,985
		64,768 506
		65,274
		214,711
		227,382
		227,382
		42,230 136,204 48,948
		227,382

– 110 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Consolidated Statement of Changes in Equity For the six months ended 30 June 2009

Note At 1 January 2009 Total comprehensive expense for the period At 30 June 2009 Note At 1 January 2008 Total comprehensive income for the period Shares issued under share option scheme Equity-settled share- based payment Dividends paid 2007 final 7 At 30 June 2008	Share capital HK$’000 42,230 — 42,230 Share capital HK$’000 41,443 — 346 — — 41,789	Other reserves HK$’000 136,204 — 136,204 Other reserves HK$’000 216,639 660 3,397 (332) — 220,364	Unaudited Retained earnings HK$’000 48,948 (22,377) 26,571 Unaudited Retained earnings HK$’000 134,024 4,768 — — (10,415) 128,377	Minority interests HK$’000 — — — Minority interests HK$’000 335 84 — — — 419	Total HK$’000 227,382 (22,377) 205,005 Total HK$’000 392,441 5,512 3,743 (332) (10,415) 390,949

Included in the consolidated retained earnings at 30 June 2008 are statutory reserves of HK$433,048 which are required to be held in respect of certain overseas subsidiaries of the Group.

– 111 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Condensed Consolidated Statement of Cash Flows For the six months ended 30 June 2009

Note
Net cash outflow from operating
activities
Net cash outflow from investing
activities
Net cash outflow from financing
activities
Net decrease in cash and cash
equivalents
Cash and cash equivalents at 1 January
Effect of foreign exchange rate changes
Cash and cash equivalents at 30 June
11
Analysis of balances of cash and cash
equivalents:
Bank balances — general accounts
and cash
11
Bank overdrafts
11
Bank loans — unsecured
11

Unaudited
Six months ended 30 June
2009
2008
HK$’000
HK$’000
(80,586)
(48,844)
(290)
(13,538)
(291)
(21,720)
(81,167)
(84,102)
171,795
334,572
—
2,582
90,628
253,052
90,628
255,055
—
(3)
—
(2,000)
90,628
253,052

– 112 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Notes to the Unaudited Interim Financial Report

1. BASIS OF PREPARATION

This unaudited interim financial report has been prepared in accordance with the applicable disclosure provisions of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited, including compliance with Hong Kong Accounting Standard (‘‘HKAS’’) 34, ‘‘Interim Financial Reporting’’, issued by the Hong Kong Institute of Certified Public Accountants (‘‘HKICPA’’). The unaudited interim financial report has been approved for issue by the Board of Directors on 16 September 2009.

The interim financial report contains condensed consolidated financial statements and selected explanatory notes. The notes include an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the 2008 annual financial statements. The condensed consolidated interim financial statements and notes thereon do not include all of the information required for a full set of financial statements prepared in accordance with the Hong Kong Financial Reporting Standards (‘‘HKFRSs’’).

The interim financial report is unaudited, but has been reviewed by KPMG in accordance with Hong Kong Standard on Review Engagements 2410, ‘‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’’ issued by the HKICPA. KPMG’s review report to the Board of Directors is included on page 40.

2. ACCOUNTING POLICIES

The accounting policies and methods of computation used in the preparation of this interim financial report are consistent with those used in the annual financial statements for the year ended 31 December 2008 except the following changes in accounting policies resulting from initial application of certain new and revised HKFRSs that are relevant to the Group’s financial statements and first effective for the current accounting period of the Group:

. HKFRS 8, Operating segments
. HKAS 1 (revised), Presentation of financial statements
. Amendments to HKFRS 7, Financial instruments: Disclosures — improving disclosures about financial instruments

The amendments to HKFRS 7 do not contain any additional disclosure requirements specifically applicable to the interim financial report. The impact of the remainder of these developments on the interim financial report is as follows:

HKFRS 8 requires segment disclosure to be based on the way that the Group’s chief operating decision maker regards and manages the Group, with the amounts reported for each reportable segment being the measures reported to the Group’s chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters. This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Group’s financial statements into segments based on related products and services and on geographical areas. The adoption of HKFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Group’s most senior executive management. As this is the first period in which the Group has presented segment information in accordance with HKFRS 8, additional explanation has been included in the interim financial report which explains the basis of preparation of the information. Corresponding amounts have also been provided on a basis consistent with the revised segment information.

– 113 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

As a result of the adoption of HKAS 1 (revised), details of changes in equity during the period arising from transactions with equity shareholders in their capacity as such have been presented separately from all other income and expenses in a revised consolidated statement of changes in equity. All other items of income and expenses are presented in the consolidated income statement, if they are recognised as part of profit or loss for the period, or otherwise in a new primary statement, the consolidated statement of comprehensive income. The new format for the consolidated statement of comprehensive income and the consolidated statement of changes in equity has been adopted in this interim financial report and corresponding amounts have been restated to conform to the new presentation. This change in presentation has no effect on reported profit or loss, total income and expense or net assets for any period presented.

3. GROUP REORGANISATION AND DISCONTINUED OPERATIONS

Pursuant to the resolution passed by the independent shareholders in the special general meeting held on 17 November 2008, the Group Reorganisation was approved. On 27 November 2008, the Group Reorganisation and the Agreement were completed. As a result, Sinoday acquired 218,650,000 shares of the Company from HHL and became the holding company of the Company.

Details of the Group Reorganisation are set out in a circular of the Company dated 31 October 2008.

The results of the discontinued operations during the period ended 30 June 2008 are set out below. The discontinued operations ceased before 1 January 2009 and so there is no result presented for this current period.

– 114 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Note Turnover 4 Other revenue 4 Other net income 4 Staff costs Commission expenses Operating leases for land and buildings Other operating expenses Total operating expenses Operating profit Finance costs Share of profits of associates Profit before taxation Income tax — Current taxation 6 — Deferred taxation 6 Profit for the period	Six months ended 30 June 2008 HK$’000 125,664 73 943 126,680 (25,432) (62,606) (3,272) (26,249) (117,559) 9,121 (84) 9,037 1,407 10,444 (2,547) (164) 7,733

4. TURNOVER, OTHER REVENUE, OTHER NET INCOME AND SEGMENT INFORMATION

Under the Group Reorganisation, as disclosed in note 3, the Distributed Business constituted discontinued operations under HKFRS 5 ‘‘Non-current Assets Held for Sale and Discontinued Operations’’. As a result, certain comparative figures were restated so as to present the results for the continuing operations and discontinued operations.

– 115 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Total revenue recognised during the period is as follows:

From continuing operations
Turnover
Fees and commission
Net revenue from foreign currency option trading
Net premium income from insurance broking
Swap interest and foreign exchange trading revenue
Interest income
Underwriting commission
Management, subscription and advisory fee income
Other revenue
Dividend income from listed securities
Other income
Other net income
Net exchange (losses)/gains
Net realised gains on financial assets at
fair value through profit or loss
Net unrealised gains/(losses) on financial assets at fair value
through profit or loss

Six months ended 30 June
2009
2008
HK$’000
HK$’000
(restated)
24,747
39,822
—
5,208
159
203
4,047
5,942
1,206
5,698
1,096
54
—
37
31,255
56,964
21
48
78
500
99
548
(436)
891
—
48
527
(620)
91
319
31,445
57,831

– 116 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

From discontinued operations
Turnover
Fees and commission
Net revenue from
— foreign currency option trading
— bullion trading
Swap interest and foreign exchange trading revenue
Interest income
Management, subscription and advisory fee income
Other revenue
Dividend income from listed securities
Other income
Other net income
Net exchange losses
Net realised gains on financial assets at
fair value through profit or loss
Net unrealised losses on financial assets at
fair value through profit or loss
Profit on disposal of available-for-sale financial assets

Six months ended 30 June
2009
2008
HK$’000
HK$’000
(restated)
—
28,672
—
747
—
48,969
—
31,561
—
14,840
—
875
—
125,664
—
48
—
25
—
73
—
(1,533)
—
7
—
(603)
—
3,072
—
943
—
126,680

Segment information

The Group manages its businesses by divisions. On first-time adoption of HKFRS 8, Operating segments, and in a manner consistent with the way in which information is reported internally to the Group’s most senior executive management for the purposes of resource allocation and performance assessment, the Group has identified the following reportable segments. No operating segments have been aggregated to form the following reportable segments.

Continuing operations:

Securities broking — provision of broking services in securities, equity linked products, unit trusts and stock options traded in Hong Kong and selected overseas markets and margin financing services to those broking clients.
Corporate finance — provision of corporate finance and advisory services to companies listed in Hong Kong.
Leveraged foreign exchange trading/broking in Hong Kong — provision of dealing and broking in leveraged forex trading services on the world’s major currencies.

– 117 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Commodities and futures broking — provision of broking services in commodities and futures contracts traded in Hong Kong and selected overseas markets.
Financial planning and insurance broking in Hong Kong — acting as an agent for the sale of savings plans, unit trusts, general and life insurance and providing advisory services on securities investment and discretionary fund management.
Asset management — managing private funds.

Discontinued operations:

Leveraged foreign exchange trading/broking outside Hong Kong — provision of dealing and broking in leveraged forex trading services on the world’s major currencies.
Financial planning outside Hong Kong — providing advisory services on securities investment and discretionary fund management.
Precious metal contracts trading/broking — provision of dealing and broking trading services on selected precious metals contracts.

In accordance with HKFRS 8, segment information has been prepared in a manner consistent with the information used by the Group’s most senior executive management for the purposes of assessing segment performance and allocating resources between segments. In this regard, the Group’s senior executive management monitors the assets and liabilities attributable to each reportable segment on the following bases:

Segment assets include all tangible, intangible assets and current assets with the exception of current and deferred tax assets and other corporate assets. Segment liabilities include trade creditors and accruals attributable to the operating activities of the individual segments.

The measure used for reporting segment results is earnings before finance costs and taxes (‘‘EBIT’’). To arrive at EBIT the Group’s earnings are further adjusted for finance costs and items not specifically attributed to individual segments, such as share of profits less losses of associates and other head office or corporate administration costs.

Six months ended 30 June 2009

		Continuing operations	Continuing operations	Continuing operations				Discontinued	operations		Total HK$’000 31,254
Securities broking HK$’000 14,707	Corporate finance HK$’000 2,782	Leveraged foreign exchange trading/ broking in Hong Kong HK$’000 7,724	Commodities and futures broking HK$’000 2,589	Financial planning/ insurance broking in Hong Kong HK$’000 3,452	Asset Management HK$’000 —	Sub-total HK$’000 31,254	Leveraged foreign exchange trading/ broking outside Hong Kong HK$’000 —	Financial planning outside Hong Kong HK$’000 —	Precious metal contracts trading/ broking HK$’000 —	Sub-total HK$’000 —
(5,977)	(4,140)	(6,182)	(1,929)	(1,568)	(103)	(19,899)	—	—	—	—	(19,899)
159,684	5,957	57,115	27,369	11,866	4,486	266,477	—	—	—	—	266,477
67,846	830	1,393	6,959	3,979	20	81,027	—	—	—	—	81,027

– 118 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Six months ended 30 June 2008

		Continuing operations	Continuing operations	Continuing operations				Discontinued	operations		Total HK$’000 182,414 1,225
Securities broking HK$’000 (restated) 21,615 21	Corporate finance HK$’000 (restated) 2,657 300	Leveraged foreign exchange trading/ broking in Hong Kong HK$’000 (restated) 12,974 —	Commodities and futures broking HK$’000 (restated) 6,473 —	Financial planning/ insurance broking in Hong Kong HK$’000 (restated) 13,130 —	Asset Management HK$’000 (restated) 52 —	Sub-total HK$’000 (restated) 56,901 321	Leveraged foreign exchange trading/ broking outside Hong Kong HK$’000 (restated) 37,129 794	Financial planning outside Hong Kong HK$’000 (restated) 869 —	Precious metal contracts trading/ broking HK$’000 (restated) 87,515 110	Sub-total HK$’000 (restated) 125,513 904 126,417 7,696 — —
21,636	2,957	12,974	6,473	13,130	52	57,222	37,923	869	87,625		183,639
3,919	(1,054)	(294)	487	603	(618)	3,043	2,856	(4,010)	8,850		10,739
123,672	10,236	84,423	32,369	13,857	4,714	269,271	—	—	—		269,271
45,332	966	3,016	10,030	7,353	145	66,842	—	—	—		66,842

Reconciliations of reportable turnover

Turnover From continuing operations Reportable segment turnover Elimination of inter-segment turnover Unallocated head office and corporate turnover From discontinued operations Reportable segment turnover Elimination of inter-segment turnover Unallocated head office and corporate turnover Consolidated turnover	Six months ended 30 June 2009 2008 HK$’000 HK$’000 (restated) 31,254 57,222 — (321 1 63 31,255 56,964 — 126,417 — (904 — 151 — 125,664 31,255 182,628	Six months ended 30 June 2009 2008 HK$’000 HK$’000 (restated) 31,254 57,222 — (321 1 63 31,255 56,964 — 126,417 — (904 — 151 — 125,664 31,255 182,628
		56,964
		126,417 (904 151
		125,664
		182,628

– 119 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Reconciliations of reportable results

Results
From continuing operations
Reportable segment (loss)/profit
Elimination of inter-segment profits
Reportable segment (loss)/profit derived from
group’s external customers
Finance costs
Unallocated head office and corporate expenses
From discontinued operations
Reportable segment profit
Elimination of inter-segment profits
Reportable segment profit derived from group’s external customers
Share of profits less losses of associates
Finance costs
Unallocated head office and corporate revenues
Consolidated (loss)/profit before taxation

Six months ended 30 June
2009
2008
HK$’000
HK$’000
(restated)
(19,899)
3,043
—
(2,993)
(19,899)
50
(31)
(1,363)
(2,447)
(1,494)
(22,377)
(2,807)
—
7,696
—
(800)
—
6,896
—
1,407
—
(84)
—
2,225
—
10,444
(22,377)
7,637

– 120 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Reconciliations of reportable assets and liabilities

Assets Reportable segment assets Elimination of inter-segment receivables Tax recoverable Unallocated head office and corporate assets Consolidated total assets Liabilities Reportable segment liabilities Elimination of inter-segment payables Unallocated head office and corporate liabilities Consolidated total liabilities	At 30 June 2009 HK$’000 266,477 (9,323) 257,154 224 22,787 280,165 81,027 (9,323) 71,704 3,456 75,160	At 31 December 2008 HK$’000 269,271 (6,082)
		263,189 177 29,290
		292,656
		66,842 (6,082)
		60,760 4,514
		65,274

5. (LOSS)/PROFIT BEFORE TAXATION

(Loss)/profit before taxation is arrived after charging:

(a) Staff costs

Salaries and allowances Equity-settled share- based payments Defined contribution plans	Continuing operations Six months ended 30 June 2009 2008 HK$’000 HK$’000 (restated) 19,335 14,815 — 403 436 477 19,771 15,695	Discontinued operations Six months ended 30 June 2009 2008 HK$’000 HK$’000 (restated) — 24,837 — (36) — 631 — 25,432	Total Six months ended 30 June 2009 2008 HK$’000 HK$’000 19,335 39,652 — 367 436 1,108 19,771 41,127	Total Six months ended 30 June 2009 2008 HK$’000 HK$’000 19,335 39,652 — 367 436 1,108 19,771 41,127
				41,127

– 121 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

(b) Other operating expenses

From continuing operations Auditors’ remuneration Bad debts written off Depreciation of fixed assets (Reversal)/charge for impairment loss on trade receivables Legal and professional fee Loss on disposal of fixed assets	Six months ended 30 June 2009 2008 HK$’000 HK$’000 (restated) 1,228 1,356 — 10 1,938 2,268 (201) 132 702 1,795 2 53

(c) Finance costs

From continuing operations Interest on bank overdrafts Interest on bank loans Interest on loan notes Interest on obligation under finance lease	Six months ended 30 June 2009 2008 HK$’000 HK$’000 (restated) 6 94 13 466 — 793 12 10 31 1,363	Six months ended 30 June 2009 2008 HK$’000 HK$’000 (restated) 6 94 13 466 — 793 12 10 31 1,363
		1,363

6. INCOME TAX

No provision for Hong Kong profits tax has been made for the current period as the Group sustained a loss for taxation purposes.

Hong Kong profits tax has been provided at the rate of 16.5% on the estimated assessable profits for the prior period. Taxation on overseas profits has been calculated on the estimated assessable profits at the rates of taxation prevailing in the countries in which the Group operates.

– 122 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The amount of taxation charged to the consolidated income statement:

Continuing operations Six months ended 30 June 2009 2008 HK$’000 HK$’000 (restated) Current taxation: — Hong Kong profits tax — 116 — Overseas taxation — — — Under-provision for taxation — 40 Deferred taxation: — Origination and reversal of temporary differences — (134) — Effect of decrease in tax rate on deferred tax balances at 1 January — 52 — 74	Discontinued operations Six months ended 30 June 2009 2008 HK$’000 HK$’000 (restated) — 1,510 — 850 — 187 — 169 — (5) — 2,711	Total Six months ended 30 June 2009 2008 HK$’000 HK$’000 — 1,626 — 850 — 227 — 35 — 47 — 2,785	Total Six months ended 30 June 2009 2008 HK$’000 HK$’000 — 1,626 — 850 — 227 — 35 — 47 — 2,785
			2,785

Reconciliation between tax expense and accounting profit at applicable tax rates:

(Loss)/profit before taxation (excluding share of profit of associates) Notional tax on (loss)/profit before taxation, calculated at the rate applicable to profits in the countries concerned Tax effect of income not subject to taxation Tax effect of expenses not deductible for taxation purposes Utilisation of previously unrecognised tax losses Effect on opening deferred tax balances resulting from a decrease in tax rate during the period Tax effect of tax losses not recognised Under-provision in respect of prior year Taxation expense	Continuing operations Six months ended 30 June 2009 2008 HK$’000 HK$’000 (restated) (22,377) (2,807) (3,692) (463) (101) (127) 37 115 (10) (598) — 52 3,766 1,055 — 40 — 74	Discontinued operations Six months ended 30 June 2009 2008 HK$’000 HK$’000 (restated) — 9,037 — 1,297 — (715) — 120 — 167 — (5) — 1,660 — 187 — 2,711	Total Six months ended 30 June 2009 2008 HK$’000 HK$’000 (22,377) 6,230 (3,692) 834 (101) (842) 37 235 (10) (431) — 47 3,766 2,715 — 227 — 2,785	Total Six months ended 30 June 2009 2008 HK$’000 HK$’000 (22,377) 6,230 (3,692) 834 (101) (842) 37 235 (10) (431) — 47 3,766 2,715 — 227 — 2,785
				834 (842) 235 (431) 47 2,715 227
				2,785

– 123 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

7. DIVIDENDS

The directors do not recommend the payment of an interim dividend for the six months ended 30 June 2009 (2008: nil).

Final dividend in respect of the previous financial year, approved and paid during the period, of nil cents (2008: HK2.5 cents) per ordinary share	Six months ended 30 June 2009 2008 HK$’000 HK$’000 — 10,415

8. (LOSS)/EARNINGS PER SHARE

(a) Basic (loss)/earnings per share

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

(Loss)/earnings Loss for the period from continuing operations Earnings for the period from discontinued operations (Loss)/earnings for the period attributable to equity holders of the Company Number of shares Weighted average number of ordinary shares	Six months ended 30 June 2009 2008 HK$’000 HK$’000 (22,377) (2,881) — 7,649 (22,377) 4,768 2009 2008 422,303,000 415,490,054	Six months ended 30 June 2009 2008 HK$’000 HK$’000 (22,377) (2,881) — 7,649 (22,377) 4,768 2009 2008 422,303,000 415,490,054
		4,768
		2008 415,490,054

Basic (loss)/earnings per share is calculated based on the (loss)/earnings attributable to equity holders of the Company and the weighted average number of ordinary shares detailed above.

(b) Diluted earnings per share

Diluted earnings per share — From continuing and discontinued operations — From continuing operations — From discontinued operations	Six months ended 30 June 2009 2008 N/A HK1.14 cents N/A N/A N/A HK1.82 cents

Diluted earnings per share for the current period have not been disclosed as the Group did not have dilutive potential ordinary shares outstanding during the period.

Diluted earnings per share for the previous period and diluted earning per share from discontinued operations for the previous period is calculated based on the adjusted weighted average number of 419,212,105 ordinary shares which is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary

– 124 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

shares in respect of share options. The calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company’s shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.

Diluted earnings per share from continuing operations for the previous period has not been disclosed as the continuing operations of the Group sustained a loss for the previous period and the potential ordinary shares were anti-dilutive.

9. INTANGIBLE AND FIXED ASSETS

Six months ended 30 June 2009 Net book amount at 1 January 2009 Additions Write-off Depreciation charge Depreciation written back Net book amount at 30 June 2009 Six months ended 30 June 2008 Net book amount at 1 January 2008 Additions Write-off Exchange difference Depreciation charge Depreciation written back Net book amount at 30 June 2008	Stock Exchange trading rights HK$’000 913 — — — — 913 913 — — — — — 913	Futures Exchange trading right HK$’000 406 — — — — 406 406 — — — — — 406	Membership of The Chinese Gold & Silver Society HK$’000 — — — — — — 180 — — — — — 180	Goodwill on acquisition of subsidiaries HK$’000 — — — — — — 5,372 45 (399) — — — 5,018	Total intangible assets HK$’000 1,319 — — — — 1,319 6,871 45 (399) — — — 6,517	Fixed assets HK$’000 7,752 311 (3) (1,938) 1
						6,123
						19,980 22,213 (738) 239 (3,746) 676
						38,624

– 125 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

10. TRADE AND OTHER RECEIVABLES

Trade receivables from clients Less: impairment allowance on trade receivables Margin and other trade related deposits with brokers and financial institutions Margin finance loans Trade receivables from clearing houses Total trade receivables Rental and utilities deposits Prepayments and other receivables Total trade and other receivables	Unaudited 30 June 2009 HK$’000 49,502 (82) 37,041 51,307 22,343 160,111 3,535 1,040 164,686	Audited 31 December 2008 HK$’000 35,126 (283) 30,797 8,757 11,018
		85,415 3,523 1,343
		90,281

The carrying amounts of trade and other receivables approximate their fair value.

The Group maintains designated accounts with The SEHK Options Clearing House Limited (‘‘SEOCH’’) and HKFE Clearing Corporation Limited (‘‘HKFECC’’) as a result of its normal business transactions. At 30 June 2009, the designated accounts with SEOCH and HKFECC not otherwise dealt with in these accounts amounted to HK$1,117,288 (31 December 2008: HK$2,079,030) and HK$14,744,028 (31 December 2008: HK$20,780,880) respectively.

As at 30 June 2009, the aging analysis of the trade receivables was as follows:

Current 30–60 days Over 60 days	Unaudited 30 June 2009 HK$’000 159,702 92 317 160,111	Audited 31 December 2008 HK$’000 85,091 183 141
		85,415

– 126 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

11. BANK BALANCES AND CASH

Cash in hand Bank balances — pledged — general accounts By maturity Bank balances — Current and savings accounts — Fixed deposits (maturing within three months)	Unaudited 30 June 2009 HK$’000 14 11,708 90,614 102,322 102,336 90,614 11,708 102,322	Audited 31 December 2008 HK$’000 12
		16,335 171,783
		188,118
		188,130
		171,783 16,335
		188,118

As at 30 June 2009, bank deposits amounting to HK$11,708,105 (31 December 2008: HK$11,707,315) have been pledged to a bank as security for the provision of a HK$22 million (31 December 2008: HK$22 million) securities broking facility.

The subsidiaries of the Group maintained segregated trust accounts with authorised institutions as a result of their respective business activities. As at 30 June 2009, segregated trust accounts not otherwise dealt with in these accounts amounted to HK$162,548,847 (31 December 2008: HK$100,817,093).

Cash and cash equivalents

Cash in hand Bank balances — pledged — general accounts Cash and cash equivalents in the consolidated statement of financial position Bank balances — pledged — fixed deposits (maturing over three months) Unsecured bank overdrafts Unsecured short-term bank loan Cash and cash equivalents in the consolidated statement of cash flows	Unaudited 30 June 2009 HK$’000 14 11,708 90,614 102,336 (11,708) — — — 90,628	Unaudited 30 June 2008 HK$’000 150 19,084 267,967
		287,201 (19,084) (13,062) (3) (2,000)
		253,052

– 127 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

12. TRADE AND OTHER PAYABLES

Trade payable to securities trading clients Margin and other deposits payable to clients Trade payable to brokers and clearing houses arising from the ordinary course of business of broking in securities, commodities and futures contracts and leveraged foreign exchange trading Total trade payables Accruals and other payables Total trade and other payables	Unaudited 30 June 2009 HK$’000 57,733 5,365 1,038 64,136 10,778 74,914	Audited 31 December 2008 HK$’000 41,563 9,736 321
		51,620 13,148
		64,768

The carrying amounts of trade and other payables approximate their fair value.

13. SHARE CAPITAL

At 1 January 2008, 2009 and 30 June 2009 At 1 January 2008 Shares issued At 31 December 2008, 1 January 2009 and 30 June 2009	Authorised Ordinary shares of HK$0.10 each No. of shares Nominal value ’000 HK$’000 1,000,000 100,000 Issued and fully paid Ordinary shares of HK$0.10 each No. of shares Nominal value ’000 HK$’000 414,430 41,443 7,873 787 422,303 42,230	Authorised Ordinary shares of HK$0.10 each No. of shares Nominal value ’000 HK$’000 1,000,000 100,000 Issued and fully paid Ordinary shares of HK$0.10 each No. of shares Nominal value ’000 HK$’000 414,430 41,443 7,873 787 422,303 42,230
		42,230

– 128 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

14. CONTINGENT LIABILITIES

14.1 Outstanding litigation cases

The following litigation cases are outstanding up to the date of this report. Under the Agreement, HHL and the previous chairman of the Company undertakes to indemnify and keep indemnified the Company on a full indemnity basis of any loss or liability suffered by the Group as a result of or in connection with the outstanding litigation cases. Therefore no provision has been made.

(a) A company named Hantec Investment Limited which is unrelated to the Group filed a writ to the Company on 28 July 2000 seeking for injunction to restrain the Company from using the plaintiff’s alleged trade name and damages. The plaintiff has not taken further action after the Company filed a defence.
(b) An indirect wholly owned subsidiary of the Company received a writ of summons dated 25 March 2006 from two clients jointly as plaintiffs claiming for damages against it and two of its licensed representatives for an amount of HK$20,600,000 together with costs relating to a number of leverage exchange trading transactions. Defence action has been commenced and no further development has been made up to the date of this report.
(c) A writ of summons dated 11 July 2006 was served to two indirect wholly owned subsidiaries and one then subsidiary of the Company by a former account executive claiming for a total of HK$700,000 as his rightful overriding commissions together with interest and/or alternatively, damages to be assessed. The plaintiff has been requested to state clearly his claim. Up to the date of this report, there has been no further development.

14.2 Financial guarantees issued

(a) As at the end of the reporting period, a subsidiary of the Company engaging in securities broking and providing securities margin financing has secured banking facilities from certain authorized institutions for a total amount of HK$257 million (31 December 2008: HK$257 million). The Company has issued corporate guarantees for a total principal amount of HK$255 million (31 December 2008: HK$255 million) for these facilities. As at 30 June 2009, the subsidiary utilized HK$nil (31 December 2008: HK$nil) of these aggregate banking facilities.
(b) The Company also issued corporate guarantees to certain financial institutions for foreign exchange trading facilities granted to subsidiaries engaging in leveraged foreign exchange trading. The maximum liability is the trading loss and related incidental costs, in some cases, subject to an overall cap on the amount of the guarantee.
(c) As at the end of the reporting period, the directors do not consider it probable that a claim will be made against the Company under any of the guarantees. The Company has not recognised any deferred income in respect of the guarantees as their fair value cannot be reliably measured and the transaction price was nil.

– 129 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

15. LEASE COMMITMENTS

At 30 June 2009, the Group had total future aggregate minimum lease payments under noncancellable operating leases as follows:

Within one year After one year but within five years	Land and Unaudited 30 June 2009 HK$’000 9,140 — 9,140	buildings Audited 31 December 2008 HK$’000 9,300 4,490 13,790	Others Unaudited Audited 30 June 2009 31 December 2008 HK$’000 HK$’000 36 134 — — 36 134	Others Unaudited Audited 30 June 2009 31 December 2008 HK$’000 HK$’000 36 134 — — 36 134
				134

16. MATERIAL RELATED PARTY TRANSACTIONS

The following is a summary of significant related party transactions which were carried out in the normal course of the Group’s business:

Placing commission income (note (a)) Broking commission for securities dealing (note (b))	Six months ended 30 June 2009 2008 HK$’000 HK$’000 976 — 51 —	Six months ended 30 June 2009 2008 HK$’000 HK$’000 976 — 51 —
		—

(a) During the period, the Group charged placing commission to the immediate holding company for providing corporate finance services.
(b) An related company, commonly owned by the ultimate holding company, paid commission to the Group for securities broking service.

17. CAPITAL COMMITMENTS

The Group did not have any capital commitment at 30 June 2009 and 31 December 2008.

18. SUBSEQUENT EVENT

On 4 August 2009, the Company entered into a top-up placing agreement with CCB International Capital Limited and Cinda International Capital Limited, a wholly owned subsidiary of the Company (collectively the ‘‘Placing Agents’’). Under the agreement, the Placing Agents would procure purchasers to acquire up to 75,594,000 existing shares at HK$2.00 per share from Sinoday Limited, the controlling shareholder, who entered into another top-up subscription agreement to subscribe for the same amount of new shares at the same price. On the same date, the Company entered into a subscription agreement with CCBI International Asset Management Limited (‘‘CCBIAM’’) in which CCBIAM agreed to subscribe for 8,866,000 shares of the Company at an issue price of HK$2.00 per share. Both the top-up subscription agreement and the subscription agreement were completed on 14 August 2009. The net proceeds totalled approximately HK$164 million, which will be used to enhance the working capital of the Group.

– 130 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

19. COMPARATIVE FIGURES

As a result of the application of HKAS 1 (revised), Presentation of financial statements, and HKFRS 8, Operating segments, certain comparative figures have been adjusted to conform to current period’s presentation and to provide comparative amounts in respect of items disclosed for the first time in 2009. Further details of these developments are disclosed in note 2.

– 131 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

4. MANAGEMENT DISCUSSION AND ANALYSIS ON THE GROUP

For the year ended 31 December 2006

Liquidity, capital structure and financial resources

All the licensed corporations complied with the requirements under the Securities and Futures (Financial Resources) Rules promulgated by the Securities and Futures Commission (the ‘‘SFC’’) throughout the year. The Group did not have any long-term borrowings. Trade and other payables were trade payable to securities trading clients, brokers and clearing houses, deposits or margins payable to clients and accrued expenses. Bank overdrafts and short-term bank loans were solely utilized for financing securities trading clients from whom collaterals had been secured. As at 31 December 2006, the Group had cash and bank balances amounted approximately HK$280.6 million while the total assets and net asset were approximately HK$779.4 million and HK$355.8 million respectively. As at 31 December 2006, the current ratio was 171.1%. The Group resolved to issue a three-year unsecured fixed rate loan note up to an aggregate amount of US$10 million, enabling the Group to raise long-term capital for its future business expansion.

Significant investments held

The Group did not hold any significant investments for the year ended 31 December 2006.

Acquisitions and disposals

During the year, the Group completed the acquisition of the remaining 70% interest in Cosmos Hantec Investment (NZ) Limited (‘‘CHI’’), an associated company of the Company, to turn CHI into a wholly-owned subsidiary. The results of CHI has been consolidated as from October 2006. CHI contributed substantially to the turnover and profit of the Group with its strong asset backing and profitability.

Segmental information

Leveraged foreign exchange trading

Leveraged foreign exchange trading remained the major contributor to the revenue of the Group. In view of the buoyant foreign exchange market and additional revenue resulting from increased shareholding of CHI, turnover has risen from HK$114.4 million in 2005 to HK$135.7 million, representing approximately one third of our aggregate turnover. In addition, profit from this segment increased from HK$18.1 million in 2005 to HK$26.6 million, an increase of 46.9%. Share of leveraged foreign exchange trading by our subsidiaries in Switzerland and New Zealand was 14.8% and 23%, respectively; representing 12.8% and 10.2% of profit of that segment respectively.

– 132 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Bullion Trading

With gold prices remaining high within the range of between US$520.75 and US$725.75 per ounce, trading volume of bullion achieved satisfactory growth in 2006, due to the upgraded bullion internet platform and enhanced marketing efforts. More customers were converted to internet trading after the Group launched a new internet trading platform in the second half of 2006. Turnover of bullion trading surged from HK$28.3 million in 2005 to HK$130.2 million, an uplift of 3.6 times. Also, profit before taxation increased from HK$5.6 million to HK$32 million, an increase of 4.71 times.

Securities Dealing

Increased trading volume of the securities market boosted the growth of our securities segment, whose turnover increased from HK$24.6 million to HK$38 million, an increase of 54.5%. Commission income grew from HK$16.9 million last year to HK$27.9 million. As a result of the increase in margin finance loans by investors, margin interest income increased from HK$5.6 million to HK$8.5 million.

Trading in futures

Trading in futures remained steady in 2006; turnover was up from HK$16 million to HK$17 million, an increase of approximately 6.3%. During the year, the on-going improvement of the existing internet trading platform and the rising general operating costs explained a slight drop in profit of this segment, from HK$1.2 million to HK$1.1 million. In 2006, Hang Seng Index Futures contracts executed at the Hong Kong Futures Exchange accounted for approximately one third of the segment’s turnover, while the remaining two-thirds represented futures contracts on overseas futures exchanges. The futures contracts executed on overseas exchanges were mainly on crude oil and metals given relatively volatile prices of both during the year.

Corporate Finance

During the year, Hong Kong’s IPO market was dominated by large-scale H-share companies with an issue size typically approaching the benchmark of US$1 billion. The corporate finance business and sponsorships relating to such listing projects were largely monopolized by international investment banks, while small- to medium-sized local firms found it difficult to win any share in this market. Meanwhile, growth of the financial advisory business was curbed by increasing competition from other mediumscale investment banks. Under such unfavourable business environment, revenue from the segment of corporate finance decreased from HK$7.7 million to HK$4.8 million, and this segment turned into a slight loss due to high staff cost. In 2006, 25 corporate financial advisory service assignments were undertaken.

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FINANCIAL INFORMATION ON THE GROUP

Asset Management

Performance of the Hantec Balanced Growth Fund, which invests in the traditional equity market, remained steady. Aggregate revenue of asset management division (net of commission paid) decreased from HK$3.2 million to HK$1.9 million, profit before taxation dropped from HK$1 million to HK$0.2 million. Hantec Balanced Growth Fund delivered a return of 12.8% (2005: 11.53%), annual return of Hantec SuperFX Fund was 6.11% (return from 13th July 2005 to 31 December 2005 was 7.02%).

Investment consultancy and wealth management

In view of the increasing loss in the Taiwan business, although the division’s turnover in the year increased from HK$21 million to HK$24.9 million, the loss increased from HK$ 4.8 million to HK$ 5.8 million.

Remuneration and human resources development

In order to maintain its competitiveness, the Group had adjusted the salary of its staff.

As the operational scale expanded, there was a substantial increase in staff expense. Furthermore, in order to retain staff and executive management, the Group issued share options to 24 staff members including executive directors enabling them to subscribe for a total of 19,390,000 shares in the Company within a period of five years starting from May 2007. During the year, the Group recruited high calibre graduates from local and overseas universities who became the third group of management trainees, as well as sponsored two management personnel to enroll in master’s degree programs.

Fluctuation in foreign exchange

The Group’s assets and liabilities are mainly denominated in Hong Kong Dollars and United States Dollars to which Hong Kong Dollars is pegged. Other currencies to which the Group’s assets and liabilities denominated consists of a variety of different currencies, none of which has a significant impact on the Group.

Charges on assets

As at 31 December 2006, the Group’s bank deposits amounting to HK$11,143,076 have been pledged to a bank as security for the provision of a HK$26 million securities broking facility. In addition, bank deposits amounting to HK$1,546,202 have been pledged to a financial institution as security for the provision of leveraged foreign exchange broking facilities.

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FINANCIAL INFORMATION ON THE GROUP

Gearing ratio

As at 31 December 2006, the Group’s net debt-to-adjusted capital ratio was 49.5%.

Contingent liabilities

Outstanding litigation cases

The Company received a writ of summons on 28 July 2000, filed by a company named Hantec Investment Limited which is unrelated to the Group. The plaintiff sought for injunction to restrain the Company from using the plaintiff’s alleged trade name and damages. The directors have commenced a defence action and will continue to defend it. Potential damages, losses, fees, expenses, proceedings and claims which have been and may be incurred by the Group as a result of the action have been covered by a joint and several indemnities, given by the ultimate controlling shareholders and accordingly no provision has been made by the Group as at 31 December 2006.

An indirect wholly owned subsidiary of the Company, Hantec International Limited (‘‘HIL’’) received a writ of summons dated 25 March 2006 from two clients jointly as plaintiffs claiming for damages against HIL and two of its licensed representatives for an amount of HK$20,600,000 together with costs as a result of a number of transactions of leveraged foreign exchange trading. The directors of HIL have commenced defence action and filed a defence. The directors, after considering the fact and the information available, and after assessing the opinion provided by the Group’s legal advisors, are of the opinion that no provision is required to be made at this stage. The directors will closely monitor the development of the case and consider appropriate treatment in the financial statements should the circumstances became unfavourable to HIL.

A writ of summons dated 11 July 2006 was served to three subsidiaries of the Company as defendants by a former account executive claiming (being the plaintiff) against the three subsidiaries for a total amount of HK$700,000 as his rightful overriding commissions together with interest and/or alternatively, damages to be assessed. The subsidiaries have instructed their legal advisors to commence defence on the claim. The legal advisors have requested the plaintiff to state clearly his claim but the plaintiff has indicated to the court that he would not answer the same and as such the legal advisors opine that it is not clear whether the plaintiff will aggressively press ahead with his claim or he will keep the case in abeyance. Up to the date of this report, there was no further development.

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FINANCIAL INFORMATION ON THE GROUP

Financial guarantees issued

As at the balance sheet date, the Company has issued corporate guarantees to certain banks for credit facilities up to an amount of HK$120,000,000 (2005: HK$118,000,000) granted to a subsidiary which engages in securities broking. The maximum liability is the outstanding amount utilised by the subsidiary plus all incidental costs.

Prospects

Analysts have suggested that the current account deficit of the U.S. would continue to increase given high government expenditure necessitated by prolonged U.S. involvement in Iraq. Trade deficit remains a very serious concern. According to a former Federal Reserve officer, there would be strong downward pressures on the US exchange price in the long run if both trade and current account deficits continue to increase and the reserve of Americans grossly underutilised. In recent years, Europe has continued to pursue integration proactively and adopt a more open cooperative economic policy in recent years. It is expected that Europe would achieve steady growth. The year 2007 marks the tenth anniversary of the return of Hong Kong’s sovereignty to China. As the Mainland financial sector continues towards convergence with its world counterparts in accordance with WTO agreements, China remains the focus of the global economy in the coming years. Given its expertise and experience, Hong Kong’s financial sector should go a long way contributing to the economic progress of China and reaping benefits in the process.

For the year ended 31 December 2007

Liquidity, capital structure and financial resources

The financial position of the Group remains strong throughout the year. Group members licensed by the SFC have not only fully complied with the financial resources requirement but also kept a safe buffer to face sudden changes in the market. Fixed rate loan notes denominated in the United States Dollars have been issued to certain overseas investors at their request, in order to provide a medium of financing to the Group and a stable return to the investors. However, after the year end date the Group has redeemed a major portion of such loan notes from its internal resources in order to save on interest cost. Banking facilities are secured mainly to finance the securities margin financing business of the Group. As at 31 December 2007, the Group had cash and bank balances amounted approximately HK$374.2 million (2006: HK$280.6 million) while the total assets and net asset were approximately HK$911.7 million (2006: HK$779.4 million) and HK$392.4 million (2006: HK$355.8 million) respectively. Net debt-to-adjusted capital ratio as at 31 December 2007 was 49.9% (2006: 49.5%) and the current ratio was 178.9% (2006: 171.1%).

Significant investments held

The Group did not hold any significant investments for the year ended 31 December 2007.

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FINANCIAL INFORMATION ON THE GROUP

Acquisitions and disposals

On 31 March 2007, the Company has entered into a memorandum of co-operation with 江蘇宏信商貿股份有限公司 (Jiangsu Horizon Trade Co., Ltd) to set up Hantec Jiangdu Riverside Developing Zone Water Industry Limited and subscribed 20% and 80% of its share capital for HK$5 million and HK$20 million, respectively.

On 12 September 2007, the Company entered into a sale and purchase agreement with the shareholders of 北京國際經濟技術有限責任公司 (‘‘經濟公司’’), all of whom were independent third parties of the Company and its connected persons, to acquire 91% of the total issued share capital of 經濟公司 for a consideration of HK$631,476. The key business of 經濟公司 is to provide business consultancy service.

Segmental information

Leveraged foreign exchange

Leveraged foreign exchange was once our major focus and our largest contributor to revenue in the early years following the listing of our Group. However, the market has become extremely competitive, and is no longer as lucrative as has been in the past. Advanced information technology has made internet trading popular; international foreign exchange traders and financial institutions are offering clients narrow price and interest spreads through their internet trading platforms. To survive in such a market condition, the Group has adopted a low price strategy and provides higher quality services. Profit contribution has thereby deteriorated. Turnover remained at a similar level as the previous year at HK$142.4 million (2006: HK$135.7 million); swap interest and foreign exchange trading revenue recorded a slight drop from HK$99.1 million to HK$94.8 million. Segment result dropped from HK$26.6 million to HK$8.7 million as a result of keen competition.

Securities dealing

Performance of the securities dealing segment has been remarkable. As a broker, the Group has a tiny equity position of its own. Earnings are a result of an increase in clients’ trading activities. Major portion of revenue comes from commission and interest. Turnover was HK$82.8 million (2006: HK$38.0 million) and profit was HK$21.3 million (2006: HK$9.9 million).

Commodities and futures dealing

The booming bullion and equity markets have driven out clients’ appetite in trading commodities and futures. Acting as a broker, this segment relies solely on clients’ trading activities. With a lower business volume recorded, revenue and hence profit decreased sharply. Turnover slipped to HK$10.9 million (2006: HK$17.0 million) and profit fell to HK$0.4 million (2006: HK$1.1 million). To improve this situation, the Group has launched new measures to attract larger sized customers to replenish the business volume and improve profitability.

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Corporate Finance

The Group successfully sponsored a new issuer to list its shares on the Main Board of the Hong Kong Stock Exchange in the third quarter of the year. Apart from the IPO, other financial advisory business contributed a major portion of the revenue. Due to the activity of investment market during the year, performance of this segment improved. Turnover was HK$8.4 million (2006: HK$4.8 million), representing an increase of 75.0% and profit was HK$1.0 million (2006: loss of HK$0.4 million). The segment was able to turn around despite the cost of operating the business surged significantly.

Asset Management

Asset management is another business where the Group is facing difficulties. The foreign exchange fund managed was liquidated during the year. The equity fund is the only fund managed by the Group but it posted a less than satisfactory result. As the fund size decreased, so did management fee income. Turnover was only HK$0.6 million (2006: HK$1.9 million) and a loss of HK$1.0 million (2006: profit of HK$0.2 million) was recorded. The Group is currently exploring and analyzing new business opportunities and hopes to launch new products.

Financial Planning/Insurance Broking

The personal financial advisory and financial planning business has become the battle field where banks and non-banking financial institutions compete for a limited number of clients. As a non-banking financial institution, we understand that we must provide high quality services to our clients. The cost of operation has unavoidably increased. The economic climate in Taiwan was still on the low side, and our Taiwan subsidiary could hardly contribute to the Group. Consequently, although turnover increased to HK$30.1 million from HK$24.9 million, loss slightly increased to HK$6.1 million (2006: loss of HK$5.8 million). However, this segment plays an important role in attracting new customers for the Group. Moreover, it is believed that Taiwan’s economy has the potential to turn around after the presidential election. We hope the performance of the Taiwan subsidiary can improve in the forthcoming year.

Bullion and precious metal contract trading

The price of gold surged to its historic high and moved within a wide range from a low of approximately US$608 per ounce to a high of approximately US$841 per ounce with high volatility during the year. It is believed that the weak United States Dollar will further boost up the price of gold. High volatility also stimulates investors to actively participate in the market and as a result bullion trading has been well received by investors. Business volume has substantially increased. This segment has become the main contributor to our Group, in both our Hong Kong based subsidiary and our subsidiaries in Switzerland and New Zealand. Turnover recorded was HK$189.9 million (2006: HK$130.2 million). Profit was HK$41.0 million (2006: HK$32.1

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million). After the year-end, the Group launched a new user-friendly electronic trading platform to facilitate clients to obtain market news and place orders. It is expected that business volume in this segment could be further increased.

Remuneration and human resources development

The Group has laid down human resources policies to retain staff and attract new recruits. Share options are granted to management staff and directors to encourage them to grow with the Group. Fringe benefits include medical subsidies, education allowance, life insurance, free CPT courses are offered to different level of staff. During the year, the Group regularly reviews the various benefit packages for different levels of staff. The Remuneration Committee provides valuable recommendations to the management in this regard. Well-performed staff are rewarded with bonus and other incentives. The management trainee program has come to its fourth anniversary. It aims to identify potential incumbents who can pace their way up to the management. Account executives are rewarded with competitive commission packages. Bonus and incentives are provided for out performing pre-determined targets. Introducing brokers are provided with appropriate support together with competitive terms.

Fluctuation in foreign exchange

Charges on assets

As at 31 December 2007, bank deposits amounting to HK$11,546,863 (2006: HK$11,143,076) have been pledged to a bank as security for the provision of a HK$22 million (2006: HK$26 million) securities broking facility. In addition, bank deposits amounting to HK$1,673,659 (2006: HK$1,546,202) and HK$2,485,952 (2006: nil) have been pledged to financial institutions as security for the provision of leveraged foreign exchange broking and bullion trading facilities respectively.

Gearing ratio

As at 31 December 2007, the Group’s net debt-to-adjusted capital ratio was 49.9%.

Contingent liabilities

Outstanding litigation cases

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to defend it. Potential damages, losses, fees, expenses, proceedings and claims which have been and may be incurred by the Group as a result of the action have been covered by a joint and several indemnity, given by the ultimate controlling shareholders and accordingly no provision has been made by the Group as at 31 December 2007.

A writ of summons dated 11 July 2006 was served to three subsidiaries of the Company as defendants by a former account executive claiming (being the plaintiff) against the three subsidiaries for a total amount of HK$700,000 as his rightful overriding commissions together with interest and/or alternatively, damages to be assessed. The subsidiaries have instructed their legal advisors to commence defence on the claim. The legal advisors have requested the plaintiff to state clearly his claim but up to the date of this report the plaintiff has still failed to give an answer. As such the legal advisors opine that it is not clear whether the plaintiff will aggressively press ahead with his claim or he will keep the case in abeyance. The directors are of opinion that it is too early to consider a provision as the case is still in early stage.

Financial guarantees issued

As at the balance sheet date, a subsidiary of the Company engaging in securities broking and providing securities margin financing has secured banking facilities from certain authorized institutions for a total amount of HK$334 million (2006: HK$132 million). The Company has issued corporate guarantees for a total principal amount of HK$322 million (2006: HK$120 million) for these facilities. As at 31 December 2007, the subsidiary utilized HK$16,678,805 (2006: HK$21,048,188) of these aggregate banking facilities.

The Company also issued corporate guarantees to certain financial institutions for foreign exchange trading and precious metal contracts trading facilities granted to subsidiaries engaging in leveraged foreign exchange trading and precious metal trading. The maximum liability is the trading loss and related incidental costs, in some cases, subject to an overall cap on the amount of the guarantee.

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FINANCIAL INFORMATION ON THE GROUP

As at the balance sheet date, the directors do not consider it probable that a claim will be made against the Company under any of the guarantees. The Company has not recognized any deferred income in respect of the guarantees as their fair value cannot be reliably measured and the transaction price was nil.

Prospects

The world’s economy is at a crossroad. The economy of the United States shows blatant sign of slowing down with severe problems in sub-prime mortgages and structured products. It is believed that the United States Dollar will continue to weaken. As a result, China’s export to the United States will unavoidably decrease. The economy in the Mainland has been over-heated for some time and the government will further implement cool down policies. Under such an unstable situation, the Group plans to strengthen its business base by exploring new overseas markets. Expansion, if considered feasible, will be undertaken in a more conservative manner. Effort will be concentrated on upgrading certain overseas operations of the Group.

For the year ended 31 December 2008

Group reorganisation

On 13 August 2008, the Company’s then controlling shareholder, Hantec Holdings Limited (‘‘HHL’’) entered into a share sale agreement (the ‘‘Agreement’’) with Sinoday and Silver Grant International Securities Investment Limited (‘‘Silver Grant’’). Under the agreement, Sinoday and Silver Grant would acquire 218,650,000 and 40,022,000 shares of the Company from HHL respectively, representing approximately 52.32% and 9.58% of the issued share capital of the Company at the time of signing the Agreement. Completion of the Agreement was subject to, inter alia, approval by the independent shareholders of the Company of a proposal to reorganise the Group (‘‘the Group Reorganisation’’). Upon approval and implementation, the results of the Group Reorganisation would be as follows:

(i) The Company would continue to be a listed company, together with its subsidiaries (the ‘‘Retained Group’’), and concentrate on the business of carrying out regulated activities under the SFO (‘‘the Retained Business’’);
(ii) Hantec Pacific Limited (‘‘HPL’’) and its subsidiaries (collectively ‘‘the HPL Group’’) would carry on the businesses of trading and broking of precious metal contracts, the provision of financial related services outside of Hong Kong, and investment in water plant business; and
(iii) The shareholders would receive by way of a distribution in specie the shares of HPL on the basis of one share of HPL for each share of the Company held.

The Group Reorganisation was completed on 27 November 2008. After the change of the controlling shareholder, the Company changed its name to Cinda International Holdings Limited and adopted a secondary name 信達國際控股有限公司 on 31 December 2008.

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Liquidity, capital structure and financial resources

The fixed rate loan notes have all been redeemed from internal resources in order to save on interest costs. The Group did not have any loan outstanding as at 31 December 2008, while the net debt-to-adjusted capital ratio as at 31 December 2007 stood at 49.9%. As at 31 December 2008, the Group had cash and bank balances amounted approximately HK$188.1 million (2007: HK$374.2 million) while the total assets and net asset were approximately HK$292.7 million (2007: HK$911.7 million) and HK$227.4 million (2007: HK$392.4 million) respectively. The Group also strived to maintain highly liquid assets to prepare for any unexpected sudden changes in the market. As at 31 December 2008, the current ratio was 428.9% (2007: 178.9%).

Significant investments held

The Group did not hold any significant investments for the year ended 31 December 2008.

Acquisitions and disposals

On 6 March 2008, Macro Jess Ltd., a wholly-owned subsidiary of the Company has entered into an agreement with Mr. Yozo Hasegawa or his nominees(s) to purchase of 2,160 ordinary shares of Foreland Forex Co., Ltd for a cash consideration of Japanese Yen 162 million.

Segmental information

Leveraged Foreign Exchange Trading

The leveraged foreign exchange trading in the Retained Group produced a turnover of HK$26.4 million (2007: HK$39.5 million). However, it also resulted in a segment loss of HK$2.9 million (2007: profit of HK$2.1 million). Swap interest and foreign exchange trading revenue dropped significantly from HK$29.0 million in 2007 to HK$16.7 million, representing a 42% decrease as a result of the low business volume. Because of the financial tsunami, some currencies like the Australian Dollar and Pound Sterling experienced a very sudden decline against the US Dollar. As a result, investors who suffered losses became more conservative in the market. In addition, the widespread news on the loss resulted from foreign exchange accumulators further weakened investors’ confidence.

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Securities Dealing

The enthusiasm in the stock market in Hong Kong in 2008 cooled down compared to the atmosphere in 2007, particularly after the breakout of the financial tsunami in the second half of the year. Initial public offerings in the third and final quarter of the year are sparse. Investors turned away from the equity market following the mini-bond scandal, drop in accumulators and significant fluctuation in the equity market. The Hang Seng Index hit its lowest at 11,016 points on 27 October 2008. Compared to the historic high of 31,638 points recorded on 30 October 2007, it dropped more than 65.2%. More importantly, market turnover decreased from an average daily turnover of 87,781 million in the year of 2007 to 51,557 million in the last quarter of 2008. During such a hard time, we strived to achieve a turnover of HK$34.6 million (2007: HK$82.8 million). The segment recorded a profit before finance cost of HK$0.7 million (2007: HK$21.3 million). Taking into account the finance cost, the segment was in a break-even situation.

Commodities and Futures Dealing

Business in commodities and futures dealing in the second half of the year saw a significant decrease. Turnover recorded in the year was HK$10.3 million (2007: HK$10.9 million), but out of this figure, HK$6.5 million (2007: HK$5.7 million) was recorded in the first half of the year. During the first half, there were signs that the market in 2008 would be prosperous. But the economy turned sour in the second half of the year after the fall in the price of most commodities, especially the heated items as crude oil, minerals and crops. As a result, the segment suffered a loss of HK$0.2 million (2007: profit of HK$0.4 million).

Corporate Finance

The wave of IPOs in 2007 has not been repeated this year. The number of IPOs plunged in the year, especially from the third quarter, and business nearly came to a halt. However, our corporate finance team has successfully sponsored one IPO on the Main Board. Revenue had been heavily reliant on consultancy fees from financial advisory jobs. This segment managed to record a turnover of HK$6.8 million (2007: HK$8.4 million). Due to the rise in operational costs, a loss of HK$2.5 million was recorded (2007: profit of HK$0.97 million). Although the current sluggish market situation may last for some time, we are confident that the business in this segment will improve in the medium term. Driving force in the corporate finance market will come from the PRC. As the controlling shareholder has strong ties in the PRC, the Group is optimistic that new business opportunities exist ahead.

Asset Management

Currently the Group’s asset management business is inactive. The equity fund managed was liquidated during the year because investors holding a significant number of units redeemed their investment. Subsequent to the redemption, the fund size became too small to be run efficiently. The Group had no alternative but to liquidate the remaining units. Turnover was only HK$0.1 million (2007: HK$0.6 million) and a

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FINANCIAL INFORMATION ON THE GROUP

loss of HK$1.0 million (2007: loss HK$1.0 million) was recorded. The Group is currently exploring and analyzing new business opportunities and hopes to bring the business back on track.

Financial Planing/Insurance Broking

Competition in the personal financial advisory and financial planning business remained keen in the first half year of 2008. However, due to the mini-bonds and accumulators crisis, retail investors totally lost interest in personal financial products. It is believed that it would take considerable time to rebuild their confidence. Consequently, turnover in the second half of the year dropped. Turnover of the whole year was HK$22.3 million (2007: 28.2 million), while a loss of HK$0.8 million was recorded (2007: profit of HK$1.5 million).

Remuneration and human resources development

The human resource market has been slowing down in line with the downturn of the economy. It provides a good opportunity for the Group to equip its team at a more efficient cost. Nevertheless, the Group continues to offer terms which are competitive in the market to appropriate personnel. Fringe benefits include medical subsidies, education allowance, life insurance, and free CPT courses which are offered to different levels of staff. Motivation schemes are in place for staff who perform well. Account executives are rewarded with commission packages that are commensurate with their performance.

Fluctuation in foreign exchange

As an active player in the foreign exchange market, the Group has laid down policies and maintained position limits and loss limits on its foreign currencies exposures as a result of its business transactions. The treasury function of the Group is responsible for implementing such policies. The risk management committee regularly reviews such policies and its implementation status in order to cope with the market conditions and the business volume. The Group’s assets and liabilities are mainly denominated in Hong Kong Dollars and US Dollars to which the Hong Kong Dollars is pegged.

Charges on assets

Gearing ratio

As at 31 December 2008, the Group had no outstanding borrowings.

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FINANCIAL INFORMATION ON THE GROUP

Contingent liabilities

Outstanding litigation cases

A few litigation cases are outstanding up to the date of this report. Under the Agreement, HHL and the then chairman of the Company undertakes to indemnify and keep indemnified the Company on a fully indemnity basis of any loss or liability suffered by the Group as a result of or in connection with the outstanding litigation cases.

Financial guarantees issued

As at the balance sheet date, a subsidiary utilized HK$nil (2007: HK$16,678,805) of the aggregate banking facilities. The Company has issued corporate guarantees for a total principal amount of HK$255 million (2007: HK$322 million) for these facilities. The Company also issued corporate guarantees to certain financial institutions for foreign exchange trading facilities granted to a subsidiary engaging in leveraged foreign exchange trading. The maximum liability is the trading loss and related incidental costs, in some cases, subject to an overall cap on the amount of the guarantee.

As at the balance sheet date, the directors do not consider it probable that a claim will be made against the Company under any of the guarantees.

Prospects

The collapse of certain prominent financial institutions in the United States caused a far reaching effect which deteriorated the confidence of investors in the major economies. Market activity reduced significantly, and we saw major setbacks in the retail, corporate and institutional market. Certain major economies expect to record negative economic growth in the forthcoming year. China is the only leading nation that could post a good economic growth in 2008. As mentioned by the Prime Minister, the central government aims to maintain an annual economic growth of 8% in 2009. After the Group Reorganisation, the controlling shareholders changed to China Cinda, the shareholder of which is the Ministry of Finance of the PRC. China Cinda provides a vast variety of financial services to its clients through its subsidiaries and affiliates in different sectors of the financial industry. The management will leverage on its relationship with China Cinda with a hope to provide appropriate financial services to meet the needs of their clients. New business opportunities in the Mainland are also being explored by the management. On the cost side, the management has adopted a conservative approach in order to minimize its operating expenses. The Group has confidence that it can enhance its stakeholders’ value in the medium term despite the current difficult economic situation.

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

For the six months ended 30 June 2009

Liquidity, capital structure and financial resources

In spite of the loss recorded in the first half of 2009, the Group’s financial position remains healthy. The Group did not borrow any funds as at 30 June 2009. The subsidiaries licensed by the SFC have complied with the financial resources requirements. The Company has issued 84,460,000 new ordinary shares to certain institutional, professional and individual investors to raise approximately HK$164 million for the general working capital of the Group. As at 30 June 2009, the Group had cash and bank balances amounted approximately HK$102.3 million (31 December 2008: HK$188.1 million) while the total assets and net asset were approximately HK$280.2 million (31 December 2008: HK$292.7 million) and HK$205 million (31 December 2008: HK$227.4 million) respectively. The current ratio was 358.1% (31 December 2008: 428.9%).

Significant investments held

The Group did not hold any significant investments for the six months ended 30 June 2009.

Acquisitions and disposals

The Group had not made any acquisition or disposal during the period.

Segmental information

Securities broking

The Hang Seng Index hit 11,344 points on 9 March 2009 which was not much of an improvement over the low of 10,676 recorded on 27 October 2008 after the financial crisis intensified. Average daily turnover dropped from 86,979 million to 58,118 million. Despite the decline in both index and turnover, the Group strived to maintain its share of the market. During an unclear market situation, commission income as well as interest income slid as the margin loan contracted. Turnover decreased to HK$14.7 million from HK$21.6 million. A loss of HK$6.0 million was recorded (2008: profit HK$3.9 million).

Corporate Finance

There were very few business opportunities in corporate finance in the market due to the financial crisis. There were very few initial public offerings (‘‘IPO’’) and merger and acquisitions transactions in the period under review. However, the corporate finance division succeeded in acting as placing agent for both the Company and another listed company. Acting as compliance advisor and financial advisor for listed companies remain the usual business, but profitability has deteriorated. Costs

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increased as the Group hired new personnel to plan for expansion. Consequently, turnover was HK$2.8 million (2008: HK$3.0 million), with losses increasing from HK$1.1 million to HK$4.1 million.

Leveraged foreign exchange trading

The market was still competitive. During the period under review, the Group continued its prudent policy in foreign exchange trading as a means to avoid market risk. Most of the positions held by Group were hedged with financial institutions. In addition, as interest rate was low during the period, profit on the interest spread narrowed significantly. As a result, turnover declined to HK$7.7 million (2008: HK$13.0 million) and a loss of HK$6.2 million was recorded (2008: loss HK$0.3 million).

Commodities and futures broking

In the past fluctuations in the market created business volume in this division. This was not the case in the first half of 2009. Clients could not endure the losses resulting from the unfavourable positions they held, and instead opted to refrain from the market. Transaction volume dropped by more than half compared to the corresponding period last year. Turnover recorded was HK$2.6 million, representing a decrease of 60% over the HK$6.5 million recorded in the same period last year, which led to a loss of HK$1.9 million (2008: profit HK$0.5 million). As competition in the local futures market is keen, efforts have been made to recruit new customers to trade in overseas commodities markets.

Financial planning

The default of mini-bonds issued by a leading investment bank in 2008 dampened investor confidence in financial products. Clients not only stopped putting new money into these products but also redeemed the funds they already held. Hence, business in this industry dropped significantly in the first half of the year. In addition, the more complicated procedures in selling financial products to retail customers as recommended by the regulatory bodies created more difficulties in the industry. As a result, turnover dropped over 73% from HK$13.1 million to HK$3.5 million, and a loss of HK$1.6 million was incurred compared to a profit of HK$0.6 million in the corresponding period last year.

Remuneration and human resources development

The Group has laid down human resources policies to retain staff and attract new recruits. Fringe benefits include medical subsidies, education allowance, life insurance, free CPT courses are offered to different level of staff.

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FINANCIAL INFORMATION ON THE GROUP

Fluctuation in foreign exchange

The assets and liabilities of the Group are mostly denominated in Hong Kong Dollars and United States Dollars to which the Hong Kong Dollar is pegged. Only certain foreign exchange positions are denominated in other currencies to which the Group is exposed to fluctuation in foreign exchange rates. The treasury function of the Group will manage the risk exposure under the guidelines laid down by management.

Charges on assets

Gearing ratio

As at 30 June 2009, the Group had no outstanding borrowings.

Contingent liabilities

Except for the guarantees issued by the Company against facilities provided by certain financial institutions to the subsidiaries of the Group and outstanding litigation cases which have been indemnified by previous controlling shareholders, the Group is not exposed to any contingent liabilities.

Prospects

Although the Group suffered considerable losses during the first half of 2009, it is still optimistic in the medium term. Management has formulated certain business strategies aimed at improving the present situation. On the brokerage business, the Group will strengthen the existing client base by satisfying both the needs of clients and marketing personnel. The Group will further develop into the retail market and penetrate into the corporate and institutional market. The Group will also seek for more participation in distribution of shares through cooperation with peers in the industry. Corporate finance is another business to expand and offers strategic positions as it can bring opportunities to both the brokerage and asset management business. On the asset management side, the Group is actively considering resuming the business, as it is another area of promising profitability. The Group will leverage on the strong background of its ultimate controlling shareholder in Mainland China to introduce business opportunities to the corporate finance division. With the recovery of the market, the Group has managed to participate in the underwriting of an IPO after the period under review. The Group anticipates that this IPO is one of the hottest of 2009, and will contribute well to the profit of the corporate finance division. The Group envisages business opportunities ahead due to the growing economy of Mainland China. The success in raising funds through placing of new shares after the interim period end provides an important financial support for the Group to strengthen and further develop its business. With the new funding, the Group is capable of looking to other new investments and merger and acquisition opportunities

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to expand its business scale. Last but not the least, to develop into a leading financial institution remains the long term objective of the Group, and management will work diligently towards achieving this goal.

5. STATEMENT OF INDEBTEDNESS

As at the close of business on 30 September 2009, being the Latest Practicable Date for the purpose of this indebtedness statement prior to the printing of this circular, the Group had borrowings amounting to approximately HK$103,650,000 and contingent liabilities, details of which are as follows:

Borrowings

The following table illustrates the Group’s bank and other borrowings as at 30 September 2009:

Bank borrowing (unsecured) Obligations under finance leases	HK$’000 103,526 124
	103,650

The bank borrowing of HK$103,526,000 was fully repaid subsequent to 30 September 2009.

Legal contingencies

As at 30 September 2009, the Group was involved in certain lawsuits. While the outcome of such lawsuits cannot be determined at present, the Directors are of the opinion that no liabilities resulting from these proceedings will have a material adverse effect on the Group’s financial position, liquidity or operating results.

Representation

Save as disclosed above and apart from intra-group liabilities, the Group did not have any loan capital issued and outstanding or agreed to be issued, any loan capital, bank overdrafts and liabilities under acceptances or other similar indebtedness, debentures, mortgages, charges or loans or acceptance credits or hire purchase commitments, guarantees or other material contingent liabilities as at the close of business on 30 September 2009.

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6. WORKING CAPITAL

The Directors are of opinion that, following the completion of the Acquisition, taking into account the financial resources available to the Group, including the internally generated funds and the present available banking facilities, the Group will have sufficient working capital for its present requirements for the next twelve months from the date of this circular in the absence of unforeseen circumstances.

7. MATERIAL ADVERSE CHANGES

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

8. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

The success in raising funds through placing of new shares pursuant to the Top-UP Subscription Agreement and the New Subscription Agreement in August 2009 provides an important financial support for the Group to strengthen and further develop its business. With the new funding, the Group is capable of looking to other new investments and merger and acquisition opportunities to expand its business scale. Last but not the least, to develop into a leading financial institution remains the long term objective of the Group, and management will work diligently towards achieving this goal.

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1. ACCOUNTANTS’ REPORT ON THE TARGET GROUP

The following is the text of an accountants’ report on Sino-Rock and its subsidiaries, prepared for the sole purpose of inclusion in this circular, received from the reporting accountants, Chan & Wat, Certified Public Accountants, Hong Kong.

==> picture [298 x 93] intentionally omitted <==

26 November 2009

The Directors Cinda International Holdings Limited 45th Floor, COSCO Tower, 183 Queen’s Road Central, Hong Kong

Dear Sirs,

We set out below our report on the financial information (the ‘‘Financial Information’’) regarding Sino-Rock Investment Management Company Limited (the ‘‘Company’’) and its subsidiaries (hereinafter collectively referred to as the ‘‘Group’’), including the consolidated income statements, the consolidated statements of comprehensive income, the consolidated statements of changes in equity and the consolidated cash flow statements for each of the three years ended 31 December 2006, 2007, 2008 and the six months ended 30 June 2009 (the ‘‘Relevant Periods’’) and the consolidated balance sheets of the Group as at 31 December 2006, 2007, 2008 and 30 June 2009 and the balance sheets of the Company as at 31 December 2006, 2007, 2008 and 30 June 2009 and the notes thereto for inclusion in the circular (the ‘‘Circular’’) of Cinda International Holdings Limited (‘‘Cinda’’) dated 26 November 2009 in connection with the proposed acquisition of the 40% equity interest in the Company by a wholly-owned subsidiary of Cinda.

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The Company was incorporated in Hong Kong with limited liability. The Company is principally engaged in investment holding and provision of capital management and consultancy services. Particulars of the Company’s subsidiaries, all of which were directly held by the Company during the Relevant Periods, are as follows:

		Registered/		Attributable equity	Attributable equity
		issued and fully	interest held the Group as at
	Place of establishment/	paid share	31	December		30	June
Name of subsidiaries	incorporation	capital	2006	2007	2008		2009	Principal activities
Sino-Rock (Guangzhou) Asset	The People’s Republic	HK$10,000,000	100%	100%	100%	100%		Investment holding
Management Company	of China							and provision of
Limited (‘‘Sino-Rock	(the ‘‘PRC’’)							capital
Guangzhou’’)								management and
								consultancy
								services
Sino-Rock International Limited	The British Virgin	US$5,000	—	100%	100%		—	Investment holding
(‘‘Sino-Rock International’’)	Islands (‘‘BVI’’)

We have audited the consolidated financial statements of the Company for each of the three years ended 31 December 2006, 2007 and 2008 and the six months ended 30 June 2009 and the financial statements of Sino-Rock International for the period from 5 January 2007 (date of incorporation) to 31 December 2007 and the year ended 31 December 2008 in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’).

The financial statements of Sino-Rock Guangzhou for the period from 19 May 2006 (date of establishment) to 31 December 2006, each of the two years ended 31 December 2007 and 2008 and the six months ended 30 June 2009 were prepared in accordance with the PRC accounting principles and were audited by 北京京都天華會計師事務所有限責任公司, a firm of certified public accountants registered in the PRC.

No audited financial statements of the companies in the Group have been prepared for the period subsequent to 30 June 2009.

The Financial Information of the Group and the Company for the Relevant Periods has been prepared based on the consolidated financial statements of the Company for each of the three years ended 31 December 2006, 2007 and 2008 and the six months ended 30 June 2009 (the ‘‘Underlying Financial Statements’’) in accordance with Hong Kong Financial Reporting Standards (‘‘HKFRSs’’) issued by the HKICPA, after making such adjustments as we consider appropriate for the purpose of preparing our report for inclusion in the Circular.

We have undertaken an audit of the Underlying Financial Statements in accordance with Hong Kong Standards on Auditing. We have examined the Underlying Financial Statements in accordance with Auditing Guideline 3.340 ‘‘Prospectuses and the Reporting Accountant’’ issued by the HKICPA.

The Underlying Financial Statements are the responsibility of the directors of the Company who approved their issue. The directors of Cinda are responsible for the contents of the Circular in which this report is included. It is our responsibility to compile the

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Financial Information set out in this report from the Underlying Financial Statements, to form an independent opinion, based on our examination and review, on the Financial Information, and to report our opinion to you.

In our opinion, the Financial Information together with the notes thereto gives, for the purpose of this report, a true and fair view of the state of affairs of the Group and the Company as at 31 December 2006, 2007, 2008 and 30 June 2009, and of the consolidated results and cash flows of the Group for the Relevant Periods.

The comparative consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated cash flow statement of the Group for the six months ended 30 June 2008 together with the notes thereon (the ‘‘30 June 2008 Financial Information’’) have been extracted from the Group’s unaudited consolidated financial information for the same period which were prepared by the directors of the Company solely for the purpose of this report. We have reviewed the 30 June 2008 Financial Information in accordance with Hong Kong Standard on Review Engagements 2410 ‘‘Review of Interim Financial Information Performed by the Independent Auditor of The Entity’’ issued by the HKICPA. Our review of the 30 June 2008 Financial Information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the 30 June 2008 Financial Information. Based on our review, for the purpose of this report, nothing has come to our attention that causes us to believe that the 30 June 2008 Financial Information is not prepared, in all material respects, in accordance with the accounting policies consistent with those used in the preparation of the Financial Information, which conform with HKFRSs.

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(I) FINANCIAL INFORMATION

Consolidated Income Statements

Notes Turnover 7 Cost of main operation Gross profit (loss) Gain (loss) on disposal of available-for-sale investments Gain arising from change in fair value of investments held for trading Realised gain on investments held for trading Gain on disposal of a subsidiary 36 Gain on disposal of an associate 17 Other income Selling and distribution expenses Administrative expenses Share of losses of associates Finance costs 9 (Loss) profit before taxation Taxation 10 (Loss) profit for the year/period 11 Dividend paid 13	Year ended 31 December 2006 2007 HK$’000 HK$’000 3,976 390 (1,658) (1,128) 2,318 (738) — 186,593 — — — — — — — — 977 1,325 (2,936) (7,560) (16,212) (26,897) — — (1,954) (7,712) (17,807) 145,011 — (16,283) (17,807) 128,728 — —	2008 HK$’000 15,096 (1,232) 13,864 32,670 — — — — 1,737 (8,819) (23,992) — (9,226) 6,234 — 6,234 30,000	Six months ended 30 June 2008 2009 HK$’000 HK$’000 (unaudited) 13,496 1,013 (931) — 12,565 1,013 32,831 (7,691) — 4,029 — 2,893 — 16,283 — 2,323 1,163 39 (1,213) (1,718) (14,911) (8,060) — (327) (4,530) (5,171) 25,905 3,613 (1,394) (717) 24,511 2,896 — —

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Consolidated Statements of Comprehensive Income

(Loss) profit for the year/period Other comprehensive income for the year/period Gain (loss) on change in fair value of available-for-sale investments, less attributable deferred tax Reversal of deferred tax liabilities on change in fair value of available- for-sale investments upon a change in tax rate Investment revaluation reserve transferred to consolidated income statement on disposal of available- for-sale investments Exchange differences on translation of financial statements of foreign operations Total comprehensive income for the year/period Total comprehensive income attributable to equity holders of the Company	Year ended 31 December 2006 2007 HK$’000 HK$’000 (17,807) 128,728 45,343 214,220 — — — (45,343) 180 286 27,716 297,891 27,716 297,891	2008 HK$’000 6,234 (149,044) 13,956 (69,676) 8,058 (190,472) (190,472)	Six months ended 30 June 2008 2009 HK$’000 HK$’000 (unaudited) 24,511 2,896 (121,594) 61,355 13,956 — (58,820) 7,486 8,367 (2) (133,580) 71,735 (133,580) 71,735

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Consolidated Balance Sheets

Notes Non-current assets Investment properties 14 Property, plant and equipment 15 Interests in associates 17 Available-for-sale investments 18 Club membership 19 Intangible assets 20 Current assets Investments held for trading 21 Trade and other receivables 22 Deposits and prepayments Amounts due from associates 24 Amounts due from related companies 25 Bank balances and cash 26 Current liabilities Trade and other payables 27 Amount due to an associate 29 Amounts due to related companies 30 Bank loans 31 Other loans 32 Taxation payable Net current (liabilities) assets Capital and reserves Share capital 33 Reserves Equity attributable to equity holders of the Company Non-current liabilities Bank loans 31 Other loans 32 Deferred tax liabilities 35	At 31 December 2006 2007 2008 HK$’000 HK$’000 HK$’000 — — — 3,664 2,867 1,600 — — 333,692 164,387 437,144 250,972 — 544 544 126 46 — 168,177 440,601 586,808 — — — 2,626 121,298 12,578 2,993 928 1,184 — — 210 — 741 140,071 35,604 32,009 7,727 41,223 154,976 161,770 12,074 16,459 15,453 — — 257,390 2,540 — 119,165 — 34,680 — 73,737 48,000 92,992 — 16,283 16,283 88,351 115,422 501,283 (47,128) 39,554 (339,513) 121,049 480,155 247,295 45,000 45,000 45,000 27,708 325,599 105,127 72,708 370,599 150,127 — — 33,738 48,341 51,989 55,105 — 57,567 8,325 48,341 109,556 97,168 121,049 480,155 247,295	At 30 June 2009 HK$’000 — 1,287 22,162 295,642 544 —
		319,635
		7,797 1,451 1,129 8 196,200 30,041
		236,626
		14,791 — 119,012 — 82,989 —
		216,792
		19,834
		339,469
		45,000 176,862
		221,862
		33,734 55,098 28,775
		117,607
		339,469

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Company Balance Sheets

Notes Non-current assets Investment properties 14 Property, plant and equipment 15 Investments in subsidiaries 16 Interests in associates 17 Available-for-sale investments 18 Club membership 19 Intangible assets 20 Current assets Investments held for trading 21 Trade and other receivables Deposits and prepayments Amounts due from subsidiaries 23 Amounts due from associates 24 Amounts due from related companies 25 Bank balances and cash 26 Current liabilities Trade and other payables Amounts due to subsidiaries 28 Amount due to an associate 29 Amounts due to related companies 30 Other loans 32 Net current (liabilities) assets Capital and reserves Share capital 33 Reserves 34	At 31 December 2006 2007 2008 HK$’000 HK$’000 HK$’000 — — — 2,206 1,638 1,125 10,000 10,039 10,039 — — 311,200 116,046 — — — 544 544 126 46 — 128,378 12,267 322,908 — — — 2,112 302 243 733 824 1,047 1,056 127,844 8,181 — — 91 — 691 91,492 29,273 12,064 6,970 33,174 141,725 108,024 10,797 14,917 13,768 60 1,507 55,748 — — 257,390 2,273 — — 73,737 48,000 70,500 86,867 64,424 397,406 (53,693) 77,301 (289,382) 74,685 89,568 33,526 45,000 45,000 45,000 29,685 44,568 (11,474) 74,685 89,568 33,526	At 30 June 2009 HK$’000 — 908 10,000 — — 544 —
		11,452
		7,797 260 1,071 6,442 — 173,712 10,071
		199,353
		2,282 1,764 — — 60,500
		64,546
		134,807
		146,259
		45,000 101,259
		146,259

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Consolidated Statements of Changes in Equity

At 1 January 2006 Total comprehensive income for the year Issue of shares At 31 December 2006 At 1 January 2007 Total comprehensive income for the year At 31 December 2007 At 1 January 2008 Total comprehensive income for the year Dividend paid At 31 December 2008 At 1 January 2009 Total comprehensive income for the period At 30 June 2009 (Unaudited) At 1 January 2008 Total comprehensive income for the period At 30 June 2008	Share capital HK$’000 1 — 44,999 45,000 45,000 — 45,000 45,000 — — 45,000 45,000 — 45,000 45,000 — 45,000	Share premium HK$’000 — — 9,305 9,305 9,305 — 9,305 9,305 — — 9,305 9,305 — 9,305 9,305 — 9,305	Investment revaluation reserve HK$’000 — 45,343 — 45,343 45,343 168,877 214,220 214,220 (204,764) — 9,456 9,456 68,841 78,297 214,220 (166,458) 47,762	Exchange reserve HK$’000 — 180 — 180 180 286 466 466 8,058 — 8,524 8,524 (2) 8,522 466 8,367 8,833	(Accumulated losses) retained profits HK$’000 (9,313) (17,807) — (27,120) (27,120) 128,728 101,608 101,608 6,234 (30,000) 77,842 77,842 2,896 80,738 101,608 24,511 126,119	Total HK$’000 (9,312) 27,716 54,304 72,708 72,708 297,891 370,599 370,599 (190,472) (30,000) 150,127 150,127 71,735 221,862 370,599 (133,580) 237,019

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Consolidated Cash Flow Statements

Note Operating activities (Loss) profit before taxation Adjustments for: Share of losses of associates Amortisation of intangible assets Depreciation of property, plant and equipment Interest income Interest expenses (Gain) loss on disposal of available-for-sale investments Gain on disposal of a subsidiary 36 Gain on disposal of an associate Loss on disposal of property, plant and equipment Unrealised exchange losses (gains) Operating cash flows before movements in working capital Increase in investments held for trading (Increase) decrease in trade and other receivables (Increase) decrease in deposits and prepayments (Increase) decrease in amounts due from associates Increase in amounts due from related companies Increase (decrease) in trade and other payables (Decrease) increase in amounts due to related companies Decrease in rental deposits received Cash (used in) from operations PRC income tax paid Net cash (used in) from operating activities	Year ended 31 December 2006 2007 2008 HK$’000 HK$’000 HK$’000 (17,807) 145,011 6,234 — — — 33 80 46 343 895 801 (965) (1,325) (1,201) 1,954 7,712 9,226 — (186,593) (32,670) — — — — — — — — 203 179 53 (1,493) (16,263) (34,167) (18,854) — — — (2,626) (118,637) 108,758 (2,993) 2,150 (250) — — (209) — (741) (139,027) 12,067 4,289 (1,085) (25,028) (2,803) 119,165 (198) — — (35,041) (149,909) 68,498 — — — (35,041) (149,909) 68,498	Six months ended 30 June 2008 2009 HK$’000 HK$’000 (unaudited) 25,905 3,613 — 327 40 — 462 313 (787) (34) 4,530 5,171 (32,831) 7,691 — (16,283) — (2,323) 51 — (2,537) — (5,167) (1,525) — (7,797) 120,180 11,128 — 55 — 202 (90,711) — (4,491) (1,124) 93,271 (136) — — 113,082 803 — (252) 113,082 551

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Investing activities Acquisition of property, plant and equipment Proceeds from disposal of investment properties Proceeds from disposal of property, plant and equipment Acquisition of intangible assets Acquisition of club membership Investments in associates Acquisition of available-for-sale investments Proceeds from disposal of available-for-sale investments Interest received Net cash (used in) from investing activities Financing activities Proceeds from issue of shares New bank and other loans raised Repayments of bank and other loans Dividend paid Interest paid Net cash from (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents brought forward Effect of foreign exchange rate changes Cash and cash equivalents carried forward Analysis of the balances of cash and cash equivalents Bank balances and cash	Year ended 31 December 2006 2007 2008 HK$’000 HK$’000 HK$’000 (4,007) — (26) 18,000 — — — — 355 (159) — — — (544) — — — (76,302) (119,044) (251,231) (158,360) — 395,159 135,859 965 1,325 1,201 (104,245) 144,709 (97,273) 54,304 — — 122,078 34,680 78,195 — (25,737) (34,680) — — (30,000) (1,954) (7,712) (9,226) 174,428 1,231 4,289 35,142 (3,969) (24,486) 462 35,604 32,009 — 374 204 35,604 32,009 7,727 35,604 32,009 7,727	Six months ended 30 June 2008 2009 HK$’000 HK$’000 (unaudited) (25) — — — 64 — — — — — (5,180) — (134,702) — 125,789 36,906 787 34 (13,267) 36,940 — — 33,026 — (34,680) (10,000) — — (4,530) (5,171) (6,184) (15,171) 93,631 22,320 32,009 7,727 793 (6) 126,433 30,041 126,433 30,041

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Notes to the Financial Information

1. GENERAL

The Company was incorporated in Hong Kong as a limited liability company. The Group is principally engaged in investment holding and the provision of capital management and consultancy services.

The address of the registered office and principal place of business of the Company is Rooms 3001–03, 30th Floor, Office Tower, Convention Plaza, No. 1 Harbour Road, Wanchai, Hong Kong.

The Financial Information is presented in Hong Kong dollar, which is the same as the functional currency of the Company.

2. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS

The Group has adopted all the new and revised Hong Kong Financial Reporting Standards issued by the HKICPA that are effective for the Group’s financial period beginning on or prior to 1 January 2009 in the preparation of the Financial Information throughout the Relevant Periods.

At the date of this report, the HKICPA has issued the following new and revised standards, amendments and interpretations that are not yet effective in respect of the Relevant Periods. The Group has not yet early applied these standards, amendments and interpretations in the preparation of the Financial Information.

HKFRSs (Amendments) Amendment to HKFRS 5 as part of improvements to HKFRSs issued in 2008[1] HKFRSs (Amendments) Improvements to HKFRSs 2009[2] HKAS 27 (Revised) Consolidated and Separate Financial Statements[1] HKAS 39 (Amendment) Eligible Hedged Items[1] HKFRS 1 (Amendment) Additional Exemptions for First-time Adopters[3] HKFRS 2 (Amendment) Group Cash-settled Share-based Payment Transactions[3] HKFRS 3 (Revised) Business Combinations[1] HK(IFRIC) — Int 17 Distribution of Non-cash Assets to Owners[1] HK(IFRIC) — Int 18 Transfers of Assets from Customers[4]

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

The application of HKFRS 3 (Revised) may affect the Group’s accounting for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on 1 July 2009. HKAS 27 (Revised) will affect the accounting treatment for changes in the Group’s ownership interest in a subsidiary.

The directors of the Company are in the process of assessing the potential impact and, so far, anticipate that the application of the other new and revised standards, amendments or interpretations will have no material impact on the results and the financial position of the Group.

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3. SIGNIFICANT ACCOUNTING POLICIES

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

The Financial Information has been prepared in accordance with the applicable HKFRSs issued by the HKICPA. In addition, the Financial Information includes applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and by the Hong Kong Companies Ordinance.

The principal accounting policies adopted are as follows:

Basis of consolidation

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

The results of subsidiaries acquired or disposed of during the period 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 information 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.

Business combinations

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

Investments in subsidiaries

Investments in subsidiaries are stated at cost less any identified impairment loss in the Company’s balance sheet.

Interests in associates

An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a jointly controlled entity. Significant influence is the power to participate in the financial and operating decision of the investee but is neither control nor joint control over those policies.

The results and assets and liabilities of associates are incorporated in the Financial Information using the equity method of accounting. Under the equity method, interests in associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the associate, 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

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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.

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 associate, except to the extent that unrealised losses provided evidence of an impairment of the asset transferred, in which case, the full amount of losses is recognised.

Investments in associates are included in the Company’s balance sheet at cost less any identified impairment loss.

Investment properties

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

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

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

Property, plant and equipment

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

Depreciation is calculated on the straight-line basis to write off the cost of each item of property, plant and equipment to its residual value over its estimated useful life. The principal annual rates used for this purpose are as follows:

Leasehold improvement	20%
Furniture and fixtures	20%
Office equipment	20%
Computer equipment	50%
Motor vehicles	20%

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the consolidated income statement in the period in which the item is derecognised.

Intangible assets

Intangible assets represent acquired computer software licences which are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives of two years.

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Financial instruments

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

Financial assets

The Group’s financial assets are classified into three categories, including ‘‘loans and receivables’’, ‘‘financial assets at fair value through profit or loss’’ and ‘‘available-for-sale investments’’. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Effective interest method

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

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. At each balance sheet date subsequent to initial recognition, loans and receivables (including trade and receivables, amounts due from subsidiaries, associates and related companies, and bank balances) are carried at amortised cost using the effective interest method, less any identified impairment losses.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss represent investments held for trading.

At each balance sheet date subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value, with changes in fair value recognised directly in profit or loss in the period in which they arise.

Available-for-sale financial assets

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

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APPENDIX II

For available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity instruments, they are measured at cost less any identified impairment losses at each balance sheet date subsequent to initial recognition.

Impairment of financial assets

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

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

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

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

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

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 estimated future cash flows discounted at the original effective interest rate.

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

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

For financial assets measured at amortised cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment 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.

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FINANCIAL INFORMATION ON THE TARGET GROUP

In respect of available-for-sale equity investments carried at fair value, impairment losses previously recognised through profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised directly in equity.

Financial liabilities and equity

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

Financial liabilities (including trade and other payables, amounts due to subsidiaries, an associate and related companies, and bank and other loans) are subsequently measured at amortised cost, using the effective interest method.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

Interest expense is recognised on an effective interest basis.

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the assets expire or, the financial assets are transferred and the Group has transferred substantially all the risks and rewards of ownership of the financial assets. On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and cumulative gain or loss that had been recognised directly in equity is recognised in profit or loss.

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

Impairment on assets

At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Impairment loss is recognised as an expense immediately.

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

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FINANCIAL INFORMATION ON THE TARGET GROUP

Revenue recognition

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

Dividend income

Dividend from investments is recognised when the Group’s right to receive payment has been established.

Consultancy fee income

Consultancy fee income is recognised when the relevant services are rendered.

Interest income

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

Rental income

Rental income is recognised on a straight line basis over the terms of the lease.

Operating leases

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases.

Rentals payable under the operating leases are charged to the consolidated income statement on the straight-line basis over the lease term.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, are capitalised as part of the cost of those assets. Capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowing pending their expenditure on qualifying assets is deducted from the borrowing cost eligible for capitalisation.

All other borrowing costs are recognised as an expense in the period in which they are incurred.

Retirement benefits schemes

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

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recorded in its functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the

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FINANCIAL INFORMATION ON THE TARGET GROUP

balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in profit or loss in the period in which they arise.

For the purposes of presenting the Financial Information, the assets and liabilities of the Group’s foreign operations are translated into the presentation currency of the Company (i.e. Hong Kong dollar) at the rates of exchange prevailing at the balance sheet date, and their income and expenses are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during the period, in which case, the exchange rates prevailing at the dates of transactions are used. Exchange differences arising, if any, are recognised as a separate component of equity (the exchange reserve). Such exchange differences are recognised in profit or loss in the period in which the foreign operation is disposed of.

Taxation

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

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated income statement because it excludes items of income 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 the tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the consolidated balance sheet and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from 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 arising on investments in subsidiaries and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the consolidated income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

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FINANCIAL INFORMATION ON THE TARGET GROUP

4. KEY SOURCES OF ESTIMATION UNCERTAINTY

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

Impairment of assets

In determining whether an asset is impaired or whether the event previously causing the impairment no longer exists, the Group has to exercise judgement in the area of asset impairment, particularly in assessing: (1) whether an event has occurred that may affect the asset value, or such event affecting the asset value has not been in existence; (2) whether the carrying value of an asset can be supported by the net present value of future cash flows, which are estimated based upon the continued use of the asset or derecognition; and (3) the appropriate key assumptions to be applied in preparing cash flow projections including whether these cash flow projections are discounted using an appropriate rate. Changing the assumptions selected by management to determine the level of impairment, including the discount rates or the growth rate assumptions in the cash flow projections, could have a material effect on the net present value used in the impairment test.

Deferred tax assets

Deferred tax assets are recognised for unused tax losses carried forward to the extent it is probable (i.e. more likely than not) that future taxable profits will be available against which the unused tax losses can be utilised, based on all available evidence. Recognition primarily involves judgement regarding the future performance of the particular legal entity or tax group in which the deferred tax asset has been recognised. A variety of other factors are also evaluated in considering whether there is convincing evidence that is probable that some portion or all of the deferred tax assets will ultimately be realised, such as the existence of taxable temporary differences, group relief, tax planning strategies and the periods in which estimated tax losses can be utilised. No deferred tax assets have been recognised at each of the balance sheet dates.

5. CAPITAL RISK MANAGEMENT

The objectives of the Group when managing capital are to safeguard the Group’s ability to continue as a going concern, so that it can continue to maximise its return to shareholders. The Group’s overall strategy remains unchanged from that of prior years.

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

The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, issue new shares and debt, and repay its existing debt.

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FINANCIAL INFORMATION ON THE TARGET GROUP

6. FINANCIAL INSTRUMENTS

Categories of financial instruments

The Group

Financial assets Available-for-sale investments Investments held for trading Loans and receivables (including cash and cash equivalents) Financial liabilities Financial liabilities at amortised cost The Company Financial assets Available-for-sale investments Investments held for trading Loans and receivables (including cash and cash equivalents) Financial liabilities Financial liabilities at amortised cost	At 31 December 2006 2007 HK$’000 HK$’000 164,387 437,144 — — 38,230 154,048 136,692 151,128 At 31 December 2006 2007 HK$’000 HK$’000 116,046 — — — 32,441 140,901 86,867 64,424	2008 HK$’000 250,972 — 160,586 573,843 2008 HK$’000 — — 106,977 397,406	At 30 June 2009 HK$’000 295,642 7,797 227,700
			305,624
			At 30 June 2009 HK$’000 — 7,797 190,485
			64,546

Financial risk management objectives and policies

The Group’s major financial instruments include available-for-sale investments, investments held for trading, trade and other receivables, amounts due from related companies and associates, deposits with banks, trade and other payables, amounts due to related companies and an associate, and bank and other loans. Details of these financial instruments are disclosed in the respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure that appropriate measures are implemented on a timely and effective manner.

(i) Market risk

Interest rate risk

The Group is exposed to cash flow interest rate risk primarily to the Group’s floating rate borrowings. The Group does not have an interest rate hedging policy. However, the management monitors the related cash flow interest rate risk exposure closely and will consider hedging significant cash flow interest rate risk exposure should the need arise.

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FINANCIAL INFORMATION ON THE TARGET GROUP

Interest rate sensitivity analysis

The sensitivity analyses below have been determined based on the exposure to interest rates for its variable-rate bank balances and bank and other loans at the balance sheet date. For variable-rate borrowings, the analysis is prepared assuming the amount of liability outstanding at the balance sheet date was outstanding for the whole period. A 100 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

At the respective balance sheet dates, if interest rates had been increased/decreased by 100 basis points and all other variables were held constant, the Group’s loss for the year would increase/decrease by HK$870,000 for the year ended 31 December 2006, and the Group’s profit for the year/period would decrease/increase by approximately HK$680,000, HK$699,000 and HK$475,000 for the years ended 31 December 2007 and 2008 and the six months ended 30 June 2009 respectively.

Foreign currency risk

The Group is exposed to currency risk primarily through transactions that are denominated in a currency other than the functional currency of the operations to which they relate.

The Group’s exposure to currency risk arising from financial assets and financial liabilities are insignificant as main transactions of the group entities are in their functional currency either in Hong Kong dollar or Renminbi.

Other price risk

The Group is exposed to equity securities price risk because the Group’s listed availablefor-sale investments and investments held for trading are carried at fair value. Details of these financial assets are set out in the respective notes.

The following tables show the sensitivity to equity price risk on the listed available-forsale investments and investments held for trading at each balance sheet date while all other variables were held constant. 10% is the sensitivity rate used when reporting equity price risk internally to key management personnel and represents management’s assessment of the reasonably possible change in equity price. The sensitivity analyses below have been determined based on the exposure to equity price risks at the reporting date. If the equity prices of the respective listed securities had been 10% higher, the results of the Group for the Relevant Periods and the Group’s other reserves at the respective balance sheet dates would have been affected as follows:

Increase in profit for the year/period	For the year ended 31 December 2006 2007 2008 HK$’000 HK$’000 HK$’000 — — —	Six months ended 30 June 2009 HK$’000 780

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FINANCIAL INFORMATION ON THE TARGET GROUP

Increase in investment revaluation reserve	At 31 December 2006 2007 HK$’000 HK$’000 11,605 36,242	2008 HK$’000 9,216	At 30 June 2009 HK$’000 12,765

There would be an equal and opposite impact on the results and the investment revaluation reserve of the Group if the equity prices of the listed securities had been 10% lower.

(ii) Credit risk

At each balance sheet date, the Group’s and the Company’s maximum exposure to credit risk which will cause a financial loss to the Group and the Company due to failure to discharge an obligation by the counterparties are arising from the respective recognised financial assets as stated in the consolidated balance sheet and the Company’s balance sheet. In order to minimise the credit risk, management of the Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual debt at each balance sheet date to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group’s credit risk is significantly reduced.

Other than the amounts due from related companies, the Group has no significant concentration of credit risk. The Group closely reviews the financial position of these related companies to ensure that adequate impairment losses are made for any irrecoverable amounts.

The credit risk for bank balances is limited because the counterparties are banks or financial institutions with high credit ratings.

(iii) Liquidity risk

The companies in 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 directors of the relevant entities. The Group’s policy is to regularly monitor its 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 authorised financial institutions to meet its liquidity requirements in the short and longer term.

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APPENDIX II

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

The Group

At 31 December 2006 Trade and other payables Amount due to an associate Amounts due to related companies Bank and other loans At 31 December 2007 Trade and other payables Amount due to an associate Amounts due to related companies Bank and other loans At 31 December 2008 Trade and other payables Amount due to an associate Amounts due to related companies Bank and other loans At 30 June 2009 Trade and other payables Amount due to an associate Amounts due to related companies Bank and other loans	Within one year HK$’000 12,074 — 2,540 80,271 94,885 16,459 — — 89,029 105,488 15,453 257,390 119,165 104,339 496,347 14,791 — 119,012 92,819 226,622	One to three years HK$’000 — — — 9,298 9,298 — — — 61,720 61,720 — — — 96,447 96,447 — — — 90,912 90,912	Over three years HK$’000 — — — 52,130 52,130 — — — — — — — — — — — — — — —	Total HK$’000 12,074 — 2,540 141,699 156,313 16,459 — — 150,749 167,208 15,453 257,390 119,165 200,786 592,794 14,791 — 119,012 183,731 317,534	Carrying amount HK$’000 12,074 — 2,540 122,078
					136,692
					16,459 — — 134,669
					151,128
					15,453 257,390 119,165 181,835
					573,843
					14,791 — 119,012 171,821
					305,624

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APPENDIX II

The Company

At 31 December 2006 Trade and other payables Amounts due to subsidiaries Amount due to an associate Amounts due to related companies Other loans At 31 December 2007 Trade and other payables Amounts due to subsidiaries Amount due to an associate Amounts due to related companies Other loans At 31 December 2008 Trade and other payables Amounts due to subsidiaries Amount due to an associate Amounts due to related companies Other loans At 30 June 2009 Trade and other payables Amounts due to subsidiaries Amount due to an associate Amounts due to related companies Other loans	Within one year HK$’000 10,797 60 — 2,273 76,458 89,588 14,917 1,507 — — 49,928 66,352 13,768 55,748 257,390 — 72,618 399,524 2,282 1,764 — — 61,127 65,173	One to three years HK$’000 — — — — — — — — — — — — — — — — — — — — — — — —	Over three years HK$’000 — — — — — — — — — — — — — — — — — — — — — — — —	Total HK$’000 10,797 60 — 2,273 76,458 89,588 14,917 1,507 — — 49,928 66,352 13,768 55,748 257,390 — 72,618 399,524 2,282 1,764 — — 61,127 65,173	Carrying amount HK$’000 10,797 60 — 2,273 73,737
					86,867
					14,917 1,507 — — 48,000
					64,424
					13,768 55,748 257,390 — 70,500
					397,406
					2,282 1,764 — — 60,500
					64,546

Fair value of financial instruments

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

the fair value of listed available-for-sale investments and investments held for trading with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market bid prices.
the fair value of other financial assets and financial liabilities are determined (i) in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions or (ii) with reference to quoted market bid prices of comparable financial assets.

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

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FINANCIAL INFORMATION ON THE TARGET GROUP

7. TURNOVER

Turnover of the Group is analysed as follows:

Dividend from listed investments Consultancy fee income Rental income	Year ended 31 December 2006 2007 HK$’000 HK$’000 — 390 3,947 — 29 — 3,976 390	2008 HK$’000 782 14,314 — 15,096	Six months ended 30 June 2008 2009 HK$’000 HK$’000 (unaudited) — 1,013 13,496 — — — 13,496 1,013	Six months ended 30 June 2008 2009 HK$’000 HK$’000 (unaudited) — 1,013 13,496 — — — 13,496 1,013
				1,013

8. BUSINESS AND GEOGRAPHICAL SEGMENTS

Business segments

No business segment information is presented as the directors consider that the Group has one business segment during the Relevant Periods.

Geographical segments

A geographical analysis of the Group’s turnover by location of the customers and listing of investments is as follows:

Hong Kong Other regions in the People’s Republic of China (‘‘PRC’’)	Year ended 31 December 2006 2007 HK$’000 HK$’000 29 390 3,947 — 3,976 390	2008 HK$’000 1,036 14,060 15,096	Six months ended 30 June 2008 2009 HK$’000 HK$’000 (unaudited) 880 — 12,616 1,013 13,496 1,013	Six months ended 30 June 2008 2009 HK$’000 HK$’000 (unaudited) 880 — 12,616 1,013 13,496 1,013
				1,013

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FINANCIAL INFORMATION ON THE TARGET GROUP

The following is an analysis of the carrying amount of the Group’s total assets by geographical area in which the assets are located:

Non-current assets (excluding financial instruments) Hong Kong Other regions in the PRC Other assets Hong Kong Other regions in the PRC	At 31 December 2006 2007 HK$’000 HK$’000 2,331 1,684 1,459 1,773 3,790 3,457 148,164 361,671 57,446 230,449 205,610 592,120 209,400 595,577	2008 HK$’000 1,125 334,711 335,836 163,347 249,395 412,742 748,578	At 30 June 2009 HK$’000 908 23,085
			23,993
			193,455 338,813
			532,268
			556,261

9. FINANCE COSTS

Interests on loans wholly repayable within five years: Bank loans and overdrafts Loans from related companies (Note 32) Other short-term loan (Note 32) TAXATION The taxation charge comprises: Current year Hong Kong Profits Tax PRC income tax	Year ended 31 December 2006 2007 HK$’000 HK$’000 — 107 1,954 7,605 — — 1,954 7,712 Year ended 31 December 2006 2007 HK$’000 HK$’000 — 16,283 — — — 16,283	2008 HK$’000 1,824 7,402 — 9,226 2008 HK$’000 — — —	Six months ended 30 June 2008 2009 HK$’000 HK$’000 (unaudited) 941 1,265 3,589 3,222 — 684 4,530 5,171 Six months ended 30 June 2008 2009 HK$’000 HK$’000 (unaudited) — — 1,394 717 1,394 717	Six months ended 30 June 2008 2009 HK$’000 HK$’000 (unaudited) 941 1,265 3,589 3,222 — 684 4,530 5,171 Six months ended 30 June 2008 2009 HK$’000 HK$’000 (unaudited) — — 1,394 717 1,394 717
				717

10. TAXATION

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FINANCIAL INFORMATION ON THE TARGET GROUP

Hong Kong Profits Tax for the year ended 31 December 2007 is calculated at 17.5% on the estimated assessable profit for that year. PRC income tax for the six months ended 30 June 2008 and 30 June 2009 is calculated at 25% on the estimated assessable profits for those periods. No provision for Hong Kong Profits Tax has been made for the other periods in the Relevant Periods as the Group has no assessable profits for these periods.

Details of the deferred taxation are set out in note 35.

The taxation charge for the Relevant Periods can be reconciled to (loss) profit before taxation per the consolidated income statements as follows:

(Loss) profit before taxation Tax at the applicable tax rates Tax effect of expenses not deductible for tax purpose Tax effect of income not taxable for tax purpose Tax effect of tax losses not recognised Utilisation of tax losses previously not recognised Effect of different tax rates applicable to subsidiaries operating in the PRC Tax effect of share of results of associates Others	Year ended 31 December 2006 2007 HK$’000 HK$’000 (17,807) 145,011 (3,116) 25,377 418 1,402 (161) (15,562) 2,896 4,970 — — — — — — (37) 96 — 16,283	2008 HK$’000 6,234 1,029 1,636 (5,500) 3,817 (888) — — (94) —	Six months ended 30 June 2008 2009 HK$’000 HK$’000 (unaudited) 25,905 3,613 4,274 596 1,321 1,941 (5,468) (3,070) 1,484 452 (877) — 283 — — 54 377 744 1,394 717

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FINANCIAL INFORMATION ON THE TARGET GROUP

APPENDIX II

11. (LOSS) PROFIT FOR THE YEAR/PERIOD

(Loss) profit for the year/period has been arrived at after charging: Amortisation of intangible assets Depreciation of property, plant and equipment Auditors’ remuneration Directors’ remuneration and other staff costs Loss on disposal of property, plant and equipment Rentals in respect of properties under operating leases and after crediting: Bank interest income	Year ended 31 December 2006 2007 HK$’000 HK$’000 33 80 343 895 67 100 13,239 23,407 — — 1,271 2,009 965 1,325	2008 HK$’000 46 801 154 19,042 203 2,551 1,201	Six months ended 30 June 2008 2009 HK$’000 HK$’000 (unaudited) 40 — 462 313 65 71 9,537 4,323 51 — 1,146 1,327 787 34	Six months ended 30 June 2008 2009 HK$’000 HK$’000 (unaudited) 40 — 462 313 65 71 9,537 4,323 51 — 1,146 1,327 787 34
				34

DIRECTORS’ AND FIVE HIGHEST PAID EMPLOYEES’ REMUNERATION

Directors’ remuneration

Directors’ fees Salaries and other benefits Contribution to retirement benefits scheme	Year ended 31 December 2006 2007 HK$’000 HK$’000 — — 3,286 5,935 18 19 3,304 5,954	2008 HK$’000 — 9,144 28 9,172	Six months ended 30 June 2008 2009 HK$’000 HK$’000 (unaudited) — — 2,674 1,111 6 18 2,680 1,129	Six months ended 30 June 2008 2009 HK$’000 HK$’000 (unaudited) — — 2,674 1,111 6 18 2,680 1,129
				1,129

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FINANCIAL INFORMATION ON THE TARGET GROUP

Five highest paid employees’ remuneration

Of the five individuals with the highest emoluments in the Group, one, one, two, one and two were directors in respect of each of the years ended 31 December 2006, 2007 and 2008 and each of the six months ended 30 June 2008 and 2009 respectively whose emoluments for the Relevant Periods are disclosed above. The emoluments of the remaining individuals were as follows:

Salaries and other benefits Contributions to retirement benefits scheme	Year ended 31 December 2006 2007 HK$’000 HK$’000 7,170 12,654 110 133 7,280 12,787	2008 HK$’000 6,435 89 6,524	Six months ended 30 June 2008 2009 HK$’000 HK$’000 (unaudited) 5,349 1,823 49 26 5,398 1,849	Six months ended 30 June 2008 2009 HK$’000 HK$’000 (unaudited) 5,349 1,823 49 26 5,398 1,849
				1,849

Their emoluments were within the following bands:

HK$Nil to HK$1,000,000 HK$1,000,001 to HK$1,500,000 HK$1,500,001 to HK$2,000,000 HK$2,000,001 to HK$2,500,000 HK$2,500,001 to HK$3,000,000 HK$3,000,001 to HK$3,500,000 HK$4,500,001 to HK$5,000,000	Year ended 31 December 2006 2007 Number of employees Number of employees — — 1 — 2 1 — — 1 — — 2 — 1 4 4	2008 Number of employees — — 1 1 1 — — 3	Six months ended 30 June 2008 2009 Number of employees Number of employees (unaudited) 1 3 2 — 1 — — — — — — — — — 4 3	Six months ended 30 June 2008 2009 Number of employees Number of employees (unaudited) 1 3 2 — 1 — — — — — — — — — 4 3
				3

No emolument was paid to the directors and the above highest paid individuals as an inducement to join or upon joining the Group or as compensation for loss of office for the Relevant Periods.

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FINANCIAL INFORMATION ON THE TARGET GROUP

13. DIVIDEND PAID

Final dividend for the year ended 31 December 2007 of HK$0.67 per share paid	Year ended 31 December 2006 2007 HK$’000 HK$’000 — —	2008 HK$’000 30,000	Six months ended 30 June 2008 2009 HK$’000 HK$’000 (unaudited) — —

14. INVESTMENT PROPERTIES

The Group and the Company

FAIR VALUE At beginning of the year/period Disposals At end of the year/period	At 31 December 2006 2007 HK$’000 HK$’000 18,000 — (18,000) — — —	2008 HK$’000 — — —	At 30 June 2009 HK$’000 — —
			—

– 180 –

APPENDIX II

FINANCIAL INFORMATION ON THE TARGET GROUP

15. PROPERTY, PLANT AND EQUIPMENT

The Group

COST At 1 January 2006 Additions Disposals At 31 December 2006 Exchange adjustments Reclassification At 31 December 2007 Exchange adjustments Additions Disposals At 31 December 2008 and at 30 June 2009 DEPRECIATION At 1 January 2006 Provided for the year Eliminated on disposals At 31 December 2006 Exchange adjustments Provided for the year At 31 December 2007 Exchange adjustments Provided for the year Eliminated on disposals At 31 December 2008 Provided for the period At 30 June 2009 CARRYING VALUES At 31 December 2006 At 31 December 2007 At 31 December 2008 At 30 June 2009	Leasehold improvement HK$’000 91 1,812 (91) 1,812 26 29 1,867 23 — — 1,890 91 159 (91) 159 5 372 536 8 377 — 921 189 1,110 1,653 1,331 969 780	Furniture and fixtures HK$’000 — 395 — 395 13 — 408 11 — — 419 — 36 — 36 3 80 119 4 84 — 207 42 249 359 289 212 170	Office equipment HK$’000 — 482 — 482 1 — 483 1 2 — 486 — 40 — 40 — 96 136 — 97 — 233 48 281 442 347 253 205	Computer equipment HK$’000 — 302 — 302 1 (29) 274 1 24 — 299 — 56 — 56 — 137 193 — 89 — 282 6 288 246 81 17 11	Motor vehicles HK$’000 — 1,016 — 1,016 77 — 1,093 57 — (872) 278 — 52 — 52 12 210 274 15 154 (314) 129 28 157 964 819 149 121	Total HK$’000 91 4,007 (91) 4,007 118 — 4,125 93 26 (872) 3,372 91 343 (91) 343 20 895 1,258 27 801 (314) 1,772 313 2,085 3,664 2,867 1,600 1,287

– 181 –

FINANCIAL INFORMATION ON THE TARGET GROUP

APPENDIX II

The Company

COST At 1 January 2006 Additions Disposals At 31 December 2006, 31 December 2007, 31 December 2008 and 30 June 2009 DEPRECIATION At 1 January 2006 Provided for the year Eliminated on disposals At 31 December 2006 Provided for the year At 31 December 2007 Provided for the year At 31 December 2008 Provided for the period At 30 June 2009 CARRYING VALUES At 31 December 2006 At 31 December 2007 At 31 December 2008 At 30 June 2009 16. INVESTMENTS IN SUBSIDIARIES The Company Unlisted investments, at cost	Leasehold improvement Furniture and fixtures Office equipment Computer equipment Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 91 — — — 91 1,485 223 471 264 2,443 (91) — — — (91) 1,485 223 471 264 2,443 91 — — — 91 124 19 39 55 237 (91) — — — (91) 124 19 39 55 237 297 45 94 132 568 421 64 133 187 805 297 45 94 77 513 718 109 227 264 1,318 148 22 47 — 217 866 131 274 264 1,535 1,361 204 432 209 2,206 1,064 159 338 77 1,638 767 114 244 — 1,125 619 92 197 — 908 At 31 December At 30 June 2006 2007 2008 2009 HK$’000 HK$’000 HK$’000 HK$’000 10,000 10,039 10,039 10,000

– 182 –

APPENDIX II

FINANCIAL INFORMATION ON THE TARGET GROUP

17. INTERESTS IN ASSOCIATES

The Group

Unlisted investments, at cost Share of post-acquisition reserves	At 31 December 2006 2007 HK$’000 HK$’000 — — — — — —	2008 HK$’000 333,692 — 333,692	At 30 June 2009 HK$’000 22,492 (330)
			22,162

Particulars regarding the associates are as follows:

	Country of
	establishment/			Attributable	equity
	incorporation		interest held the		Group as at
	and	Registered/issued		31 December		30 June
Name of associates	operations	share capital	2006	2007	2008	2009	Principal activities
Sino-Rock Strategic	BVI	US$100,000,000	—	—	40%	—	Investment holding
Investments Limited
(‘‘Sino-Rock
Strategic’’)
Sino-Rock Strategic	Hong Kong	HK$50,000,000	—	—	40%	—	Investment holding
Investment (Hong
Kong) Limited
(‘‘Sino-Rock Hong
Kong’’)
信達資本管理	PRC	RMB	—	—	40%	40%	Investment holding
有限公司		100,000,000					and provision of
							capital and fund
							management
							and consultancy
							services

The sole asset of Sino-Rock Strategic, through its subsidiary, Sino-Rock Hong Kong, is investment in a jointly controlled entity namely 連雲港鑫聯散貨碼頭有限公司 which was established in the PRC on 24 November 2005. The operating period of the jointly controlled entity is 50 years which can be extended subject to the approval by the relevant authorities. The principal activities of the jointly controlled entity are the development and operation of a port and the related facilities in Lianyungang, the PRC.

During the six months ended 30 June 2009, the Group disposed of its interest in Sino-Rock Strategic to a related company, which is the other shareholder of Sino-Rock Strategic, for an aggregate consideration of HK$313,523,000, which gave rise to a gain on disposal of HK$2,323,000 recognised in the consolidated income statement for that period. The consideration receivable, after deducting the amount due by the Group to such associate of approximately HK$257,390,000, has been included in amounts due from related companies in the consolidated balance sheet as at 30 June 2009.

– 183 –

APPENDIX II

FINANCIAL INFORMATION ON THE TARGET GROUP

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

Total assets Total liabilities Net assets Group’s share of net assets Revenue Loss for the year/period Group’s share of losses of associates for the year/period The Company Unlisted investments, at cost	At 31 December 2006 2007 2008 HK$’000 HK$’000 HK$’000 — — 834,351 — — (121) — — 834,230 — — 333,692 Year ended 31 December 2006 2007 2008 HK$’000 HK$’000 HK$’000 — — — — — — — — — At 31 December 2006 2007 2008 HK$’000 HK$’000 HK$’000 — — 311,200	At 30 June 2009 HK$’000 55,481 (76)
		55,405
		22,162
		At 30 June 2009 HK$’000 110
		(818)
		(327)
		At 30 June 2009 HK$’000 —

18. AVAILABLE-FOR-SALE INVESTMENTS

The Group

Equity securities listed: In Hong Kong The PRC Unlisted equity investments Other unlisted investment	At 31 December 2006 2007 HK$’000 HK$’000 116,046 210,710 — 226,434 116,046 437,144 48,341 — — — 164,387 437,144	2008 HK$’000 25,862 88,403 114,265 114,215 22,492 250,972	At 30 June 2009 HK$’000 — 170,198
			170,198 102,955 22,489
			295,642

– 184 –

APPENDIX II

FINANCIAL INFORMATION ON THE TARGET GROUP

The Company

Equity securities listed in Hong Kong	At 31 December 2006 2007 HK$’000 HK$’000 116,046 —	2008 HK$’000 —	At 30 June 2009 HK$’000 —

Note:

The available-for-sale investments are stated at fair value, except for the unlisted equity investments and other unlisted investment where their fair values cannot be measured reliably are stated at cost less impairment loss.

The fair values of equity securities listed in Hong Kong are determined by reference to bid prices quoted on The Stock Exchange of Hong Kong Limited.

The equity securities listed in the PRC represent the Group’s 4.19% interest in the issued capital of 江蘇連雲港港口股份有限公司 (‘‘江蘇連雲港’’) at 31 December 2007, 31 December 2008 and 30 June 2009. 江蘇連雲港 is a company established in the PRC with its shares listed on the Shanghai Stock Exchange. The sale of these equity securities is subject to restriction for a period of three years up to 25 September 2009. The Group’s investment in the equity securities is carried at their fair value by reference to the valuations using the discounted market price approach. The valuations are arrived at based on the market price of the freely tradable shares of 江蘇連雲港 as at 31 December 2007, 31 December 2008 and 30 June 2009 discounted by 18.08%, 15.50% and 7.82% respectively to take account of the effect of the restriction on sale at those dates.

Other than the Group’s investment in 江蘇連雲港 as detailed above, set out below are the Group’s investments in equity securities with an individual carrying amount exceeding 10% of that of the Group’s total assets at the respective reporting dates:

	Attributable
	equity interest held	Country of
Name of investee	by the Group	establishment
As at 31 December 2006
江蘇連雲港	6.30%	the PRC
China BlueChemical Ltd.	0.799%	the PRC
As at 31 December 2007
China Railway Group Limited	0.35%	the PRC
China National Materials Company Limited	0.033%	the PRC
As at 31 December 2008
中國西電電氣股份有限公司	0.765%	the PRC
As at 30 June 2009
中國西電電氣股份有限公司	0.765%	the PRC

– 185 –

APPENDIX II

FINANCIAL INFORMATION ON THE TARGET GROUP

19. CLUB MEMBERSHIP

The Group and the Company

Club membership, at cost	At 31 December 2006 2007 HK$’000 HK$’000 — 544	2008 HK$’000 544	At 30 June 2009 HK$’000 544

20. INTANGIBLE ASSETS

The Group and the Company

COST At 1 January 2006 Additions At 31 December 2006, 31 December 2007 31 December 2008 and 30 June 2009 AMORTISATION At 1 January 2006 Provided for the year At 31 December 2006 Provided for the year At 31 December 2007 Provided for the year At 31 December 2008 and at 30 June 2009 CARRYING AMOUNT At 31 December 2006 At 31 December 2007 At 31 December 2008 At 30 June 2009	Acquired computer software HK$’000 — 159
	159
	— 33
	33 80
	113 46
	159
	126
	46
	—
	—

– 186 –

FINANCIAL INFORMATION ON THE TARGET GROUP

APPENDIX II

21. INVESTMENTS HELD FOR TRADING

The Group and the Company

Equity securities listed in Hong Kong, at market value	At 31 December 2006 2007 HK$’000 HK$’000 — —	2008 HK$’000 —	At 30 June 2009 HK$’000 7,797

22. TRADE AND OTHER RECEIVABLES

The following is analysis of trade and other receivables at the balance sheet dates:

The Group

Trade receivables, aged 0–60 days Other receivables	At 31 December 2006 2007 HK$’000 HK$’000 — 120,409 2,626 889 2,626 121,298	2008 HK$’000 10,015 2,563 12,578	At 30 June 2009 HK$’000 — 1,451
			1,451

The Group has insignificant trade receivable balances which are past due at each reporting date.

23. AMOUNTS DUE FROM SUBSIDIARIES

The Company

The amounts due from subsidiaries are unsecured, interest free and repayable on demand.

24. AMOUNTS DUE FROM ASSOCIATES

The Group and the Company

The amounts due from associates are unsecured, interest free and repayable on demand.

25. AMOUNTS DUE FROM RELATED COMPANIES

The Group and the Company

The amounts due from related companies, which are companies affiliated with the shareholders of the Company, are unsecured, interest free and repayable on demand.

– 187 –

APPENDIX II

FINANCIAL INFORMATION ON THE TARGET GROUP

26. BANK BALANCES AND CASH

The Group and the Company

Bank balances and cash of the companies in the Group mainly represent deposits with banks denominated in the functional currencies of the respective group companies other than a bank deposit of US$3,353,000 made by the Company as at 31 December 2006.

27. TRADE AND OTHER PAYABLES

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

The Group

Trade payables, aged 0–60 days 61–90 days Over 90 days Other payables	At 31 December 2006 2007 HK$’000 HK$’000 2,066 1,604 87 34 9,701 14,703 11,854 16,341 220 118 12,074 16,459	2008 HK$’000 641 1,899 12,279 14,819 634 15,453	At 30 June 2009 HK$’000 13,224 74 832
			14,130 661
			14,791

28. AMOUNTS DUE TO SUBSIDIARIES

The Company

The amounts due to subsidiaries are unsecured, interest free and repayable on demand.

29. AMOUNT DUE TO AN ASSOCIATE

The Group and the Company

The amount due to an associate represents capital contribution payable to the associate. Such amount was unsecured, interest free and repayable on demand.

30. AMOUNTS DUE TO RELATED COMPANIES

The Group and the Company

The amounts due to related companies, which are companies affiliated with the shareholders of the Company, are unsecured, interest free and repayable on demand.

– 188 –

APPENDIX II

FINANCIAL INFORMATION ON THE TARGET GROUP

31. BANK LOANS

The Group

Bank loans Unsecured Secured The bank loans are repayable as follows: Within one year More than one year but not exceeding two years More than two years but not exceeding three years Less: Amount due within one year included in current liabilities Amount due after one year	At 31 December 2006 2007 HK$’000 HK$’000 — — — 34,680 — 34,680 — 34,680 — — — — — 34,680 — (34,680) — —	2008 HK$’000 33,738 — 33,738 — — 33,738 33,738 — 33,738	At 30 June 2009 HK$’000 33,734 —
			33,734
			— 33,734 —
			33,734 —
			33,734

The Group’s bank loans carried interests at fixed rates. The effective interest rates on the Group’s bank borrowings are 5.21%, 7.56% and 7.56% for the year ended 31 December 2007, 2008 and the six months ended 30 June 2009 respectively.

– 189 –

APPENDIX II

FINANCIAL INFORMATION ON THE TARGET GROUP

32. OTHER LOANS

The Group

Loans from related companies Unsecured Secured Other short-term loan Analysed as: Loans from related companies Interest free Interest bearing at: Hong Kong Prime Rate Interest rate which is the same as that for bank loans with similar terms as quoted by the People’s Bank of China, plus a margin of 10% per annum Fixed rate of 7% per annum Other short-term loan Interest bearing at the interest rate which is the same as that for bank loans with similar terms as quoted by the People’s Bank of China The other loans are repayable as follows: Loans from related companies Within one year More than one year but not exceeding two years More than two years but not exceeding three years More than three years but not exceeding four years Other short term loan repayable within one year Less: Amount due within one year included in current liabilities Amount due after one year	At 31 December 2006 2007 HK$’000 HK$’000 25,737 48,000 96,341 51,989 122,078 99,989 — — 122,078 99,989 25,737 — 48,000 48,000 48,341 51,989 — — 122,078 99,989 — — 122,078 99,989 73,737 48,000 — — — 51,989 48,341 — 122,078 99,989 — — 122,078 99,989 (73,737) (48,000) 48,341 51,989	2008 HK$’000 70,500 55,105 125,605 22,492 148,097 22,500 — 55,105 48,000 125,605 22,492 148,097 70,500 55,105 — — 125,605 22,492 148,097 (92,992) 55,105	At 30 June 2009 HK$’000 60,500 55,098 115,598 22,489 138,087 22,500 — 55,098 38,000 115,598 22,489 138,087 60,500 55,098 — — 115,598 22,489 138,087 (82,989) 55,098

– 190 –

APPENDIX II

FINANCIAL INFORMATION ON THE TARGET GROUP

The Company

Loans from related companies, repayable within one year: Secured and interest bearing at Hong Kong Prime Rate Unsecured and interest free Unsecured and interest bearing at: — Hong Kong Prime Rate — fixed rate of 7% per annum	At 31 December 2006 2007 HK$’000 HK$’000 48,000 — 25,737 — — 48,000 — — 73,737 48,000	2008 HK$’000 — 22,500 — 48,000 70,500	At 30 June 2009 HK$’000 — 22,500 — 38,000
			60,500

The related companies represent companies affiliated with the shareholders of the Company.

33. SHARE CAPITAL

The Group and the Company

Ordinary shares of HK$1 each: Authorised: At 31 December 2006, 31 December 2007, 31 December 2008 and 30 June 2009 Issued and fully paid: At 1 January 2006 Issue of new shares At 31 December 2006, 31 December 2007, 31 December 2008 and 30 June 2009	Number of shares ’000 200,000 1 44,999 45,000	Nominal amount HK$’000 200,000
		1 44,999
		45,000

Changes in the issued share capital of the Company during the Relevant Periods are as follows:

(a) On 18 January 2006, the Company issued 17,999,000 ordinary shares of HK$1 each for a cash consideration of HK$27,304,000.
(b) On 17 February 2006, the Company issued 27,000,000 ordinary shares of HK$1 each for a cash consideration of HK$27,000,000.

All the shares issued rank pari passu in all respects with the existing shares.

– 191 –

APPENDIX II

FINANCIAL INFORMATION ON THE TARGET GROUP

34. RESERVES OF THE COMPANY

At 1 January 2006 Issue of shares at premium Gain on change in fair value of available-for-sale investments Loss for the year At 31 December 2006 At 1 January 2007 Transferred to income statement on disposal of available-for-sale investment Profit for the year At 31 December 2007 At 1 January 2008 Loss for the year Dividend paid At 31 December 2008 At 1 January 2009 Profit for the period At 30 June 2009	Share premium HK$’000 — 9,305 — — 9,305 9,305 — — 9,305 9,305 — — 9,305 9,305 — 9,305	Investment revaluation reserve HK$’000 — — 45,343 — 45,343 45,343 (45,343) — — — — — — — — —	(Accumulated losses) retained profits HK$’000 (9,313) — — (15,650) (24,963) (24,963) — 60,226 35,263 35,263 (26,042) (30,000) (20,779) (20,779) 112,733 91,954	Total HK$’000 (9,313) 9,305 45,343 (15,650) 29,685 29,685 (45,343) 60,226 44,568 44,568 (26,042) (30,000) (11,474) (11,474) 112,733 101,259

– 192 –

APPENDIX II

FINANCIAL INFORMATION ON THE TARGET GROUP

35. DEFERRED TAX LIABILITIES

The deferred tax liabilities recognised by the Group are attributable to the gain on change in fair value of available-for-sale investments. Movements of the deferred tax liabilities during the Relevant Periods are as follows:

At 1 January 2006 and 31 December 2006
Charged to equity
Arising on gain on changes in fair value of available-for-sale investments
At 31 December 2007
Exchange adjustments
Reversed during the year
Effect of a change in tax rate
Arising on loss on changes in fair value of available-for-sale investments
At 31 December 2008
Exchange adjustments
Charged to equity
Arising on gain on changes in fair value of available-for-sale investments
At 30 June 2009

HK$’000
—
57,567
57,567
2,677
(13,956)
(37,963)
8,325
(1)
20,451
28,775

At 31 December 2006, 2007, 2008 and 30 June 2009, the Group has unused tax losses of HK$26,457,000, HK$56,200,000, HK$71,113,000 and HK$73,850,000 available to offset against future profits respectively and the Company has unused tax losses of HK$26,457,000, HK$50,819,000, HK$71,113,000 and HK$71,196,000 available to offset against future profits respectively. No deferred tax asset has been recognised in respect of the unused tax losses due to unpredictability of future profits stream. Substantially all of the tax losses, which have not yet been agreed by the Inland Revenue Department, may be carried forward indefinitely.

– 193 –

APPENDIX II

FINANCIAL INFORMATION ON THE TARGET GROUP

36. DISPOSAL OF A SUBSIDIARY

On 15 April 2009, the Company disposed of its entire interest in a subsidiary, Sino-Rock International Limited (‘‘Sino-Rock International’’). The principal activity of Sino- Rock International was investment holding. The net assets of the subsidiary disposed at the date of disposal are as follows:

Net assets disposed of:
Amount due from a related company
Amount due from the Company
Taxation payable
Gain on disposal of a subsidiary
Satisfied by:
Sale consideration
Net cash inflow arising on disposal:
Sale consideration receivable
Less:
Portion set off against the amount due by the Company to
Sino-Rock International
Amount taken up by a related company
Net cash inflow arising on disposal of the subsidiary

HK$’000
26,088
86,111
(16,283)
95,916
16,283
112,199
112,199
112,199
(86,111)
(26,088)
—

37. ASSETS SECURED

The Group

Certain available-for-sale investments of the Group with an aggregate carrying amount of approximately HK$48 million, HK$226 million, HK$88 million and HK$170 million at 31 December 2006, 31 December 2007, 31 December 2008 and 30 June 2009 respectively have been applied as security for the guarantee given by the Group in respect of the repayment of a loan granted by a related company (Note 32).

In addition, certain available-for-sale investments of the Group with carrying amounts of approximately HK$116 million and HK$129 million at 31 December 2006 and 31 December 2007 respectively were pledged to secure bank and other loans granted to the Group. No such pledge of investments were outstanding at 31 December 2008 and 30 June 2009.

The Company

Certain available-for-sale investments of the Company with an aggregate carrying amount of approximately HK$116 million at 31 December 2006 were pledged to secure a loan granted by a related company to the Company. No such pledge of investments were outstanding at 31 December 2007, 31 December 2008 and 30 June 2009.

– 194 –

FINANCIAL INFORMATION ON THE TARGET GROUP

APPENDIX II

38. CAPITAL COMMITMENTS

The Group

Capital contribution contracted but not provided for in the Financial Information in respect of investment in an associate	2006 HK$’000 —	At 31 December 2007 HK$’000 —	2008 HK$’000 22,492	At 30 June 2009 HK$’000 22,489

39. OPERATING LEASE ARRANGEMENTS

The Group as lessee:

The Group had commitments for minimum lease payments in respect of properties under noncancellable operating leases which fall due as follows:

Within one year In the second to fifth years inclusive	2006 HK$’000 1,936 523 2,459	At 31 December 2007 HK$’000 532 — 532	2008 HK$’000 2,622 3,051 5,673	At 30 June 2009 HK$’000 2,554 1,763
				4,317

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

40. RELATED PARTY TRANSACTIONS

The Group’s available-for-sale investments are held under the names of companies affiliated with a shareholder of the Company on behalf of the Group.

Apart from those disclosed above and other notes to this report, during the Relevant Periods, the Group entered into the following transactions with related parties:

Related party Nature of transactions A company affiliated with a shareholder of the Company Disposal of investment properties A company affiliated with a shareholder of the Company Payment for service fees	Year ended 31 December 2006 2007 2008 HK$’000 HK$’000 HK$’000 18,000 — — — — 202	Six months ended 30 June 2008 2009 HK$’000 HK$’000 (unaudited) — — — 337

– 195 –

APPENDIX II

FINANCIAL INFORMATION ON THE TARGET GROUP

Compensation of key management personnel

The remuneration of directors and other members of key management during the Relevant Periods was as follows:

Short-term benefits	Year ended 31 December 2006 2007 2008 HK$’000 HK$’000 HK$’000 12,274 21,495 16,519	Six months ended 30 June 2008 2009 HK$’000 HK$’000 (unaudited) 8,477 2,951

The remuneration of directors and key executives is determined having regard to the performance of individuals and market trends.

41. RETIREMENT BENEFITS SCHEMES

The Group operates a Mandatory Provident Fund Scheme (‘‘the MPF Scheme’’) for all qualifying employees in Hong Kong under the rules and regulations of the Mandatory Provident Fund Authority. The assets of the MPF Scheme are held separately from those of the Group, in funds under the control of trustees. Contributions are made based on a percentage of the participating employees’ relevant income from the Group and are charged to the consolidated income statement as they become payable in accordance with the rules of the MPF Scheme. When an employee leaves the MPF Scheme, the mandatory contributions are fully vested with the employee. The retirement benefits scheme contributions charged to consolidated income statement amounted to HK$125,000, HK$142,000, HK$91,000, HK$49,000 and HK$42,000 for the year ended 31 December 2006, 2007, 2008 and the six months ended 30 June 2008 and 2009 respectively.

According to the relevant laws and regulations in the PRC, the PRC subsidiary is required to contribute a certain percentage of the salaries of their employees to the state-managed retirement benefit scheme. The only obligation of the Group with respect to the retirement benefit scheme is to make the required contributions under the scheme. The retirement benefits scheme contributions charged to consolidated income statement amounted to HK$43,000, HK$65,000, HK$78,000, HK$39,000 and HK$20,000 for the year ended 31 December 2006, 2007, 2008 and the six months ended 30 June 2008 and 2009 respectively.

– 196 –

APPENDIX II FINANCIAL INFORMATION ON THE TARGET GROUP

(II) SUBSEQUENT EVENT

No significant events took place subsequent to 30 June 2009.

(III) SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Company and its subsidiaries in respect of any period subsequent to 30 June 2009.

Yours faithfully, Chan & Wat

Certified Public Accountants Hong Kong

– 197 –

APPENDIX II

FINANCIAL INFORMATION ON THE TARGET GROUP

2. MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

Sino-Rock is a company incorporated in Hong Kong with limited liability on 4 June 1992. The Target Group is currently principally engaged in pre-IPO investment and investment in distressed assets. On top of making its own investment, the Target Group has been pursuing private equity fund management business in the PRC.

Set out below is the management discussion and analysis of financial position of the Target Group for the three years ended 31 December 2006, 2007 and 2008 and the six months ended 30 June 2009.

Financial Performance

(i) For the year ended 31 December 2006

For the year ended 31 December 2006, the Target Group recorded a turnover of approximately HK$4.0 million and a net loss of approximately HK$17.8 million.

(ii) For the year ended 31 December 2007

For the year ended 31 December 2007, the Target Group recorded a turnover of approximately HK$390,000, representing a decrease of approximately 90.2% compared with the turnover recorded in the previous year. The decrease in turnover was mainly due to nil consultancy fee income reported during the year 2007. Nevertheless, the Target Group recorded a net profit of approximately HK$128.7 million mainly due to gain on disposal of available-for-sale investments of approximately HK$186.6 million.

(iii) For the year ended 31 December 2008

For the year ended 31 December 2008, the Target Group recorded a turnover of approximately HK$15.1 million, representing a substantial increase of approximately 37.7 times as compared with the turnover recorded in the previous year. The substantial increase in turnover was mainly due to consultancy fee income of approximately HK$14.3 million reported during the year 2008. Net profit decreased by 95.2%, compared with net profit recorded in the previous year, to approximately HK$6.2 million. The decrease in net profit was mainly due to decrease in gain on disposal of available-for-sale investments to approximately HK$32.7 million.

(iv) For the six months ended 30 June 2009

For the six months ended 30 June 2009, the Target Group recorded a turnover of approximately HK$1.0 million. The decrease in turnover as compared with the same period of last year was mainly due to decrease in consultancy fee income to nil. Net profit decreased by 88.2%, compared with net profit recorded during the same period of the previous year, to approximately HK$2.9 million. The decrease in net profit was mainly due to decrease in turnover of approximately HK$12.5 million and loss reported on disposal of available-for-sale investments.

– 198 –

APPENDIX II

FINANCIAL INFORMATION ON THE TARGET GROUP

Liquidity, Financial Resources and Capital Structure

As at 31 December 2006, 31 December 2007, 31 December 2008 and 30 June 2009, the net assets of the Target Group were approximately HK$72.7 million, HK$370.6 million, HK$150.1 million and HK$221.9 million, respectively.

The Target Group’s daily operations have been funded by cash generated from its operations and bank and other borrowings. As at 31 December 2006, 31 December 2007, 31 December 2008 and 30 June 2009, the Target Group had bank balances and cash of approximately HK$35.6 million, HK$32.0 million, HK$7.7 million and HK$30.0 million, respectively, which are mainly denominated in Hong Kong dollar and Renminbi except that the bank balances at 31 December 2006 include a bank deposit of US$3,353,000. As at 31 December 2006, 31 December 2007, 31 December 2008 and 30 June 2009, the Target Group had bank loans of nil, approximately HK$34.7 million, HK$33.7 million and HK$33.7 million, respectively and other loans of approximately HK$122.1 million, HK$100.0 million, HK$148.1 million and HK$138.1 million, respectively.

The currency and interest rate structure of the total borrowings of the Target Group as at 31 December 2006, 31 December 2007, 31 December 2008 and 30 June 2009 were as follows:

Bank loans HKD loans at fixed rate of 5.207% per annum RMB loans at fixed rate of 7.56% per annum Other loans HKD loans at interest free Interest bearing loans at: HKD loans at Hong Kong Prime Rate RMB loans at the interest rate quoted by the People’s Bank of China, plus a margin of 10% per annum HKD loans at fixed rate of 7% per annum RMB loans at the interest rate quoted by the People’s Bank of China	At 31 December 2006 2007 2008 HK$’000 HK$’000 HK$’000 — 34,680 — — — 33,738 — 34,680 33,738 25,737 — 22,500 48,000 48,000 — 48,341 51,989 55,105 — — 48,000 — — 22,492 122,078 99,989 148,097 122,078 134,669 181,835	At 30 June 2009 HK$’000 — 33,734
		33,734
		22,500 — 55,098 38,000 22,489
		138,087
		171,821

– 199 –

APPENDIX II

FINANCIAL INFORMATION ON THE TARGET GROUP

The maturity profile of the total borrowings of the Target Group as at each of the dates indicated below was as follows:

Bank loans Within one year More than one year but not exceeding two years More than two years but not exceeding three years Other loans Within one year More than one year but not exceeding two years More than two years but not exceeding three years More than three years but not exceeding four years	At 2006 HK$’000 — — — — 73,737 — — 48,341 122,078 122,078	31 December 2007 2008 HK$’000 HK$’000 34,680 — — — — 33,738 34,680 33,738 48,000 92,992 — 55,105 51,989 — — — 99,989 148,097 134,669 181,835	At 30 June 2009 HK$’000 — 33,734 —
			33,734
			82,989 55,098 — —
			138,087
			171,821

As at 31 December 2006, 31 December 2007, 31 December 2008 and 30 June 2009, the Target Group’s current ratio (calculated by total current assets divided by total current liabilities) was 46.7%, 134.3%, 32.3% and 109.1% respectively.

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APPENDIX II

FINANCIAL INFORMATION ON THE TARGET GROUP

Significant Investment

Set out below are the Target Group’s available-for-sale investments in equity securities with an individual carrying amount exceeding 10% of that of the Target Group’s total assets at the respective reporting dates:

	Attributable
	equity interest
	held by the	Country of
Name of investee	Target Group	establishment	Industry
As at 31 December 2006
江蘇連雲港港口股份有限公司	6.30%	the PRC	Transportation
China BlueChemical Ltd.	0.799%	the PRC	Basic Materials
As at 31 December 2007
江蘇連雲港港口股份有限公司	4.19%	the PRC	Transportation
China Railway Group Limited	0.35%	the PRC	Construction
China National Materials	0.033%	the PRC	Industrial
Company Limited			Goods
As at 31 December 2008
江蘇連雲港港口股份有限公司	4.19%	the PRC	Transportation
中國西電電氣股份有限公司	0.765%	the PRC	Industrial
			Goods
As at 30 June 2009
江蘇連雲港港口股份有限公司	4.19%	the PRC	Transportation
中國西電電氣股份有限公司	0.765%	the PRC	Industrial
			Goods

Save as disclosed above, the Target Group did not have any significant investment for the three years ended 31 December 2006, 2007 and 2008 and the six months ended 30 June 2009.

Material Acquisitions and Disposals

On 15 April 2009, Sino-Rock disposed of its entire interest in a subsidiary, SinoRock International Limited (‘‘Sino-Rock International’’), for a consideration of approximately HK$112.2 million.

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APPENDIX II

FINANCIAL INFORMATION ON THE TARGET GROUP

On 18 June 2009, Sino-Rock disposed of its entire interest in an associated company, Sino-Rock Strategic Investments Limited (‘‘Sino-Rock Strategic’’), to another shareholder of Sino-Rock Strategic for an aggregate consideration of approximately HK$313.5 million. After deducting the amount due by Sino-Rock to Sino-Rock Strategic of approximately HK$257.4 million, the consideration receivable was approximately HK$56.1 million.

Save as disclosed above, the Target Group did not engage in material acquisitions and disposals of subsidiaries and associated companies for the three years ended 31 December 2008 and the six months ended 30 June 2009.

Segmental Information

The Target Group has operated in the sole segment of pre-IPO investment, investment in distressed assets and private equity fund management business in the PRC. As equity investment is the principal business activity of the Target Group, the Directors consider a segmental discussion of its business is not necessary.

Employees and Remuneration Policies

The total number of employees of the Target Group remained around 10 as at each of 31 December 2006, 31 December 2007, 31 December 2008 and 30 June 2009. The directors’ remuneration and other staff costs of the Target Group was approximately HK$13.2 million, HK$23.4 million, HK$19.0 million and HK$4.3 million, respectively, for each of the three years ended 31 December 2006, 2007 and 2008 and the six months ended 30 June 2009. Employees of the Target Group were remunerated on the basis of the Target Group’s operating results and the performance of the individual employees after taking into account the prevailing market levels.

Charges on Assets

As at 31 December 2006, 31 December 2007, 31 December 2008 and 30 June 2009, certain available-for-sale investments with an aggregate carrying value of approximately HK$48 million, HK$226 million, HK$88 million and HK$170 million respectively have been applied as security for the guarantee given by the Target Group in respect of the repayment of a loan granted by a related company of the Target Group.

In addition, certain available-for-sale investments of the Target Group with carrying amounts of approximately HK$116 million and HK$129 million at 31 December 2006 and 31 December 2007 respectively were pledged to secure bank and other loans granted to the Target Group.

Future Plans for Material Investment

The Target Group has set up a joint venture in the PRC in 2008 to pursue private equity fund management business in the PRC. Currently, the Target Group is exploring business opportunity in such business.

– 202 –

APPENDIX II

FINANCIAL INFORMATION ON THE TARGET GROUP

Gearing Ratio

As at 31 December 2006, 31 December 2007, 31 December 2008 and 30 June 2009, the gearing ratios (calculated by net borrowings divided by net assets) of Target Group were approximately 118.9%, 27.7%, 116.0% and 63.9% respectively.

Foreign Exchange Exposure

For the three years ended 31 December 2006, 2007 and 2008 and the six months ended 30 June 2009, the Target Group’s exposure to currency risk arising from financial assets are insignificant as main transactions of the Target Group are in its functional currency either in Hong Kong Dollars or Renminbi. Since the impact of foreign exchange exposure is not material, no hedging against foreign currency exposure has been carried out by the Target Group.

Capital Commitments

The Target Group had capital commitments of approximately HK$22.5 million and HK$22.5 million for capital contribution contracted but not provided for in respect of investment in an associate as at 31 December 2008 and 30 June 2009 respectively.

Contingent Liabilities

The Target Group did not have any material contingent liabilities as at 31 December 2006, 31 December 2007, 31 December 2008 and 30 June 2009 respectively.

– 203 –

APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

1. INTRODUCTION TO THE UNAUDITED PRO FORMA NET ASSETS STATEMENT OF THE ENLARGED GROUP

The following is the unaudited pro forma net assets statement of of the Enlarged Group prepared in accordance with the Listing Rules for the purpose of illustrating the effect of the Acquisition on the financial position of the Enlarged Group.

The unaudited pro forma net assets statement of the Enlarged Group is prepared based on the unaudited consolidated statement of financial position of the Group as at 30 June 2009 extracted from the published interim financial report of the Group as set out in section 3 of Appendix I to this circular, after making pro forma adjustments that are (i) directly attributable to the transactions; and (ii) factually supportable as if the Acquisition had been completed on 30 June 2009.

The unaudited pro forma net assets statement of the Enlarged Group is prepared by the Directors to provide information on the Enlarged Group as a result of the Acquisition. As it is prepared for illustrative purpose only, and because of its nature, it does not purport to give a true picture of the financial position of the Enlarged Group as at 30 June 2009 or any other future date.

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APPENDIX III

PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Unaudited Pro Forma Net Assets Statement of the Enlarged Group as at 30 June 2009

Non-current assets Intangible assets Fixed assets Interests in associates Other assets Current assets Financial assets at fair value through profit or loss Tax recoverable Trade and other receivables Bank balances and cash Current liabilities Trade and other payables Current portion of obligations under finance lease Net current assets Total assets less current liabilities Net assets	The Group Pro forma adjustments HK$’000 HK$’000 (Unaudited) (Unaudited) 1,319 6,123 — 110,300(Note) 3,553 10,995 1,924 224 164,686 102,336 (55,150)(Note) 269,170 74,914 246 75,160 194,010 205,005 205,005	Pro forma Enlarged Group HK$’000 (Unaudited) 1,319 6,123 110,300 3,553
		121,295
		1,924 224 164,686 47,186
		214,020
		74,914 246
		75,160
		138,860
		260,155
		260,155

Note: Being the adjustments for the acquisition of 40% equity interest in Sino-Rock for a consideration of HK$110,300,000, which is to be satisfied by (i) payment of HK$55,150,000 in cash and (ii) issue of 27,575,000 Consideration Shares at the Issue Price of HK$2 per Consideration Share.

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APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

ACCOUNTANTS’ REPORT ON UNAUDITED PRO FORMA NET ASSETS STATEMENT OF THE ENLARGED GROUP

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ACCOUNTANTS’ REPORT ON UNAUDITED PRO FORMA NET ASSETS STATEMENT OF THE GROUP

TO THE DIRECTORS OF CINDA INTERNATIONAL HOLDINGS LIMITED

We report on the unaudited pro forma net assets statement of Cinda International Holdings Limited (the ‘‘Company’’) and its subsidiaries (hereinafter collectively referred to as the ‘‘Group’’), which has been prepared by the directors of the Company for illustrative purposes only, to provide information about how the acquisition of 40% equity interest in Sino-Rock Investment Management Company Limited (the ‘‘Acquisition’’) might have affected the financial information presented, for inclusion in Appendix III of the circular dated 26 November 2009 (the ‘‘Circular’’). The basis of preparation of the unaudited pro forma net assets statement is set out on page 204 to the Circular.

Respective responsibilities of directors of the Company and reporting accountants

It is the responsibility solely of the directors of the Company to prepare the unaudited pro forma net assets statement in accordance with paragraph 29 of Chapter 4 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’) and with reference to Accounting Guideline 7 ‘‘Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars’’ issued by the Hong Kong Institute of Certified Public Accountants.

It is our responsibility to form an opinion, as required by paragraph 29(7) of Chapter 4 of the Listing Rules, on the unaudited pro forma net assets statement and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited pro forma net assets statement beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

Basis of opinion

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 300 ‘‘Accountants’ Reports on Pro Forma Financial Information in Investment Circulars’’ issued by the Hong Kong Institute of Certified Public Accountants. Our work consisted primarily of comparing the unadjusted

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APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

financial information with source documents, considering the evidence supporting the adjustments and discussing the unaudited pro forma net assets statement with the directors of the Company. This engagement did not involve independent examination of any of the underlying financial information.

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

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

Opinion

In our opinion:

(a) the unaudited pro forma net assets statement has been properly compiled by the directors of the Company on the basis stated;
(b) such basis is consistent with the accounting policies of the Group so far as such policies relate to the Acquisition; and
(c) the adjustments are appropriate for the purposes of the unaudited pro forma net assets statement disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

Chan & Wat

Certified Public Accountants Hong Kong

26 November 2009

– 207 –

APPENDIX IV

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

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

2. SHARE CAPITAL

The authorised and issued capital of the Company as at the Latest Practicable Date were as follows:

Authorised capital: HK$ 1,000,000,000 ordinary shares of HK$0.10 each 100,000,000

Issued and fully paid or credited as fully paid:

As at the Latest Practicable Date:

506,763,000 ordinary shares of HK$0.10 each 50,676,300

All Shares (when issued) rank pari passu in respect of capital, dividends and voting.

3. DISCLOSURE OF INTERESTS

(a) Interests and short positions of the Directors and chief executive of the Company

As at the Latest Practicable Date, none of the Directors or chief executive of the Company and/or any of their respective associates had or was deemed to have any interests or short position in the Shares, underlying Shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) (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 taken 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 required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules.

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APPENDIX IV

GENERAL INFORMATION

(b) Interests and short positions of substantial shareholders under the SFO

As at the Latest Practicable Date, so far as was known to the Directors and the chief executive of the Company, the following are details of the persons (other than Directors or chief executive of the Company) who had, or were deemed to have, directly or indirectly 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 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
			the Company’s
Name of substantial		Number of	issued share
Shareholder	Capacity	Shares held	capital
Sinoday Limited	Beneficial owner	304,721,500	60.13%
(‘‘Sinoday’’)
Well Kent International	Interest through	304,721,500	60.13%
Investment Company	a controlled	(Note 1)
Limited (‘‘WKII’’)	corporation
China Cinda Asset	Interest through	332,296,500	65.57%
Management Corporation	a controlled	(Note 1 & 5)
(‘‘China Cinda’’)	corporation
Silver Grant International	Beneficial owner	40,022,000	7.9%
Securities Investment
Limited (‘‘Silver Grant’’)
Silver Grant Securities	Interest through	40,022,000	7.9%
Investment (BVI) Limited	a controlled	(Note 2)
(‘‘Silver Grant BVI’’)	corporation
Silver Grant International	Interest through	40,022,000	7.9%
Industries Limited	a controlled	(Note 2)
(‘‘Silver Grant	corporation
International’’)
CCB International Asset	Beneficial owner	50,676,000	9.99%
Management Limited
(‘‘CCBIAM’’)

– 209 –

APPENDIX IV

GENERAL INFORMATION

			Approximate
			percentage of
			the Company’s
Name of substantial		Number of	issued share
Shareholder	Capacity	Shares held	capital
CCB International Assets	Interest through	50,676,000	9.99%
Management	a controlled	(Note 3)
(Cayman) Limited	corporation
CCB International	Interest through	50,676,000	9.99%
(Holdings) Limited	a controlled	(Note 3)
	corporation
CCB Financial Holdings	Interest through	50,676,000	9.99%
Limited	a controlled	(Note 3)
	corporation
CCB International Group	Interest through	50,676,000	9.99%
Holdings Limited	a controlled	(Note 3)
	corporation
China Construction Bank	Interest through	50,676,000	9.99%
Corporation	a controlled	(Note 3)
	corporation
Central Huijin Investment	Interest through	50,676,000	9.99%
Limited	a controlled	(Note 3)
	corporation
Atlantis Investment	Beneficial owner	30,740,000	6.07%
Management Limited
Well Kent International	Beneficial owner	27,575,000	5.44%
Holdings Company	(Note 4)
Limited (‘‘the Vendor’’)

Notes:

(1) These Shares were held by Sinoday. The issued share capital of Sinoday was wholly-owned by WKII, a wholly-owned subsidiary of China Cinda. By virtue of the provisions of the SFO, WKII and China Cinda were deemed to be interested in all the Shares in which Sinoday was interested.
(2) These Shares were held by Silver Grant. The issued share capital of Silver Grant was whollyowned by Silver Grant BVI, a wholly-owned subsidiary of Silver Grant International. By virtue of the provisions of the SFO, Silver Grant BVI and Silver Grant International were deemed to be interested in all the Shares in which Silver Grant was interested.

– 210 –

GENERAL INFORMATION

APPENDIX IV

(3) These Shares were held by CCBIAM. CCBIAM is controlled by CCB International Assets Management (Cayman) Limited, CCB International (Holdings) Limited, CCB Financial Holdings Limited, CCB International Group Holdings Limited, China Construction Bank Corporation and Central Huijin Investment Limited and by virtue of the provisions of the SFO, they were deemed to be interested in all the Shares in which CCBIAM was interested.
(4) These Shares represent the Consideration Shares. The Vendor was interested in these Shares as a result of the entering into the Sale and Purchase Agreement.
(5) These Shares were held by Sinoday and the Vendor as to 304,721,500 Shares and 27,575,000 Shares respectively. As China Cinda is the indirectly holding company of Sinoday and the holding company of the Vendor, by virtue of the provisions of the SFO, China Cinda was deemed to be interested in all the Shares in which Sinoday and the Vendor held.

Save as disclosed above, the Directors and the chief executive of the Company are not aware of any person (other than a Director or chief executive of the Company) who, as at the Latest Practicable Date, had any interest or short position in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or, who was, directly or indirectly, interested in 10% or more of the nominal value of the issued share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group.

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation)).

5. LITIGATION

The following litigation cases are outstanding as at the Latest Practicable Date. Under the agreement entered into between the Company’s then ultimate holding company, Hantec Holdings Limited (‘‘HHL’’), Sinoday and Silver Grant International Securities Investment Limited on 13 August 2008, HHL and the previous chairman of the Company undertakes to indemnify and keep indemnified the Company on a full indemnity basis of any loss or liability suffered by the Group as a result of or in connection with the outstanding litigation cases.

(a) A company named Hantec Investment Limited which is unrelated to the Group filed a writ to the Company on 28 July 2000 seeking for an injunction to restrain the Company from using the plaintiff’s alleged trade name and damages. The plaintiff has not taken any further action after the Company filed a defence.
(b) An indirect wholly-owned subsidiary of the Company received a writ of summons dated 25 March 2006 from two clients jointly as plaintiffs claiming for damages against it and two of its licensed representatives for an amount of HK$20,600,000

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APPENDIX IV

GENERAL INFORMATION

together with costs relating to a number of leverage exchange trading transactions. Defence action has been commenced and no further development has been made up to the date of this circular.

(c) A writ of summons dated 11 July 2006 was served to two indirect wholly-owned subsidiaries and one then subsidiary of the Company by a former account executive claiming for a total of HK$700,000 as his rightful overriding commissions together with interest and/or alternatively, damages to be assessed. The plaintiff has been requested to state clearly his claim. Up to the date of this circular, there has been no further development.

Save as disclosed above, neither the Company nor any of its subsidiaries is engaged in any litigation or arbitration of material importance and no litigation or claim of material importance is known to the Directors to be pending or threatened against the Company or any of its subsidiaries.

6. COMPETING INTERESTS OF DIRECTORS AND ASSOCIATES

As at the Latest Practicable Date, none of the Directors and their respective associates was considered to have interests in any business which competes or may compete, either directly or indirectly, with the businesses of the Group or have or may have any other conflicts of interest with the Group pursuant to the Listing Rules.

7. DIRECTORS’ INTERESTS IN ASSETS/CONTRACTS

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which had been acquired or disposed of by or leased to any member of the Group or were proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2008, being the date to which the latest published audited consolidated financial statements of the Company were made up.

None of the Directors was materially interested in any contract or arrangement entered into by any member of the Group subsisting at the Latest Practicable Date which was significant in relation to the business of the Group.

8. MATERIAL CONTRACTS

The following contracts, not being contracts entered into in ordinary course of business of the Group, have been entered into by members of the Group within the two years preceding the date of this circular and are or may be material:

(a) an agreement dated 21 December 2007 between (i) 吳俊良 (Wu Chun-Liang) and 陳淑燕 (Chen Shu-Yen) (as vendors); and (ii) Hantec Taiwan Investments Limited, a then wholly-owned subsidiary of the Company, (as purchaser), relating to the sale and purchase of all equity capital in 俊森實業有限公司 for a total cash consideration of NT$5,400,000;

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GENERAL INFORMATION

APPENDIX IV

(b) an agreement dated 6 March 2008 between (i) Macro Jess Ltd., a then whollyowned subsidiary of the Company (as vendor); and (ii) Mr. Yozo Hasegawa or his nominee(s) (as purchaser) relating to the sale and purchase of 2,160 ordinary shares of Foreland Forex Co., Ltd for a cash consideration of Japanese Yen 162 million;
(c) an agreement dated 9 July 2009 between the Company, Well Kent International Investment Company Limited (‘‘WKII’’) and the Vendor in relation to the provision by the Group of certain financial services to the WKII and the Vendor and the companies in which each of WKII or the Vendor is directly or indirectly interested so as to exercise or control the exercise of 30% or more of the voting power at general meetings, or to control the composition of a majority of the board of directors and vice versa;
(d) a placing agreement dated 4 August 2009 between Sinoday, CCB International Capital Limited, Cinda International Capital Limited and the Company pursuant to which CCB International Capital Limited and Cinda International Capital Limited have agreed to, as agent of Sinoday and on a best effort basis, procure purchasers to acquire, and Sinoday has agreed to sell up to 75,594,000 existing Shares at a placing price of HK$2.00 per Share;
(e) the Top-Up Subscription Agreement, dated 4 August 2009 between Sinoday and the Company pursuant to which Sinoday has conditionally agreed to subscribe for up to 75,594,000 new Shares;
(f) the New Subscription Agreement, dated 4 August 2009 between CCBIAM and the Company pursuant to which CCBIAM has conditionally agreed to subscribe for up to 8,866,000 new Shares; and
(g) the Sale and Purchase Agreement dated 9 November 2009 entered into between the Purchaser and the Vendor in relation to the acquisition of 40% of the issued share capital of Sino-Rock for a total consideration of HK$110,300,000.

9. QUALIFICATION AND CONSENT OF EXPERTS

The following are the experts, and their qualifications, who have given opinion contained in this circular:

Name Qualification

Ample Capital A corporation licensed to carry out types 4, 6 and 9 (advising on securities, advising on corporate finance and asset management) regulated activities under the SFO

Chan & Wat, Certified Public Certified Public Accountants Accountants (‘‘Chan & Wat’’)

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GENERAL INFORMATION

APPENDIX IV

Each of Ample Capital and Chan & Wat has given and has not withdrawn its written consent to the inclusion of its report or opinion as set out in this circular and references to its name in the form and context in which they respectively appear and issue of this circular.

As at the Latest Practicable Date, each of Ample Capital and Chan & Wat was not beneficially interested in the share capital of any member of the Group, nor did it have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group, nor did it have any direct or indirect interest in any assets which were, since 31 December 2008 (being the date to which the latest published audited consolidated financial statements of the Group were made up), acquired or disposed of by or leased to any member of the Group, or proposed to be acquired or disposed of by or leased to, any member of the Group.

10. MISCELLANEOUS

(a) The registered office of the Company is situated at Clarendon House, 2 Church Street, Hamilton, HM 11, Bermuda.
(b) The principal place of business of the Company in Hong Kong is 45th Floor, COSCO Tower, 183 Queen’s Road Central, Hong Kong.
(c) The company secretary of the Company is Mr. Lau Mun Chung. He graduated from the University of Hong Kong with a degree of Bachelor of Social Science and is a fellow member of the Association of Chartered Certified Accountants, an associate member of the Hong Kong Institute of Certified Public Accountants and a graduate of The Hong Kong Institute of Chartered Secretaries.
(d) The Hong Kong branch share registrar and transfer office of the Company is Tricor Secretaries Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong.
(e) The English text of this circular and the accompanying form of proxy shall prevail over the Chinese text in the case of any inconsistency.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the principal place of business in Hong Kong at 45th Floor, COSCO Tower, 183 Queen’s Road Central, Hong Kong during normal business hours.

(a) the memorandum of association and the bye-laws of the Company;
(b) the annual reports of the Company for each of the two financial years ended 31 December 2007 and 2008;
(c) the letter from the Independent Board Committee as set out on page 18 of this circular;

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APPENDIX IV

GENERAL INFORMATION

(d) the letter from the Independent Financial Adviser, the text of which is set out on pages 19 to 31 of this circular;
(e) the accountants’ report on the Target Group, the text of which is set out in Appendix II to this circular;
(f) the report on the unaudited pro forma net assets statement on the Enlarged Group from Chan & Wat, the text of which is set out in Appendix III to this circular;
(g) the written consents referred to the paragraph headed ‘‘Qualifications and consent of experts’’ in this appendix;
(h) the material contracts entered into by the Group, as referred to in the paragraph headed ‘‘Material Contracts’’ in this appendix; and
(i) a copy of this circular.

– 215 –

NOTICE OF SGM

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==> picture [225 x 41] intentionally omitted <==

(Incorporated in Bermuda with limited liability)

(Stock code: 111)

NOTICE OF SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that a special general meeting (the ‘‘SGM’’) of the shareholders of Cinda International Holdings Limited (the ‘‘Company’’) will be held at 45th Floor, COSCO Tower, 183 Queen’s Road Central, Hong Kong on 11 December 2009 at 8: 30 a.m. for the purpose of considering and, if thought fit, passing, with or without amendments, the following ordinary resolutions:

AS ORDINARY RESOLUTIONS

‘‘THAT:
(i) the sale and purchase agreement dated 9 November 2009 (the ‘‘Sale and Purchase Agreement’’) (a copy of which is produced to the SGM marked ‘‘A’’ and initialed by the chairman of the SGM for the purpose of identification) entered into between Well Kent International Holdings Company Limited (the ‘‘Vendor’’) and Cinda International Direct Investment Limited (the ‘‘Purchaser’’), a wholly-owned subsidiary of the Company, in relation to an acquisition by the Purchaser of 18,000,000 ordinary shares in the share capital of Sino-Rock Investment Management Company Limited (‘‘SinoRock’’), representing 40% of the issued share capital of Sino-Rock at a consideration of HK$110,300,000, which will be satisfied by (a) a cash consideration of HK$55,150,000 and (b) the allotment and issue of 27,575,000 ordinary shares in the Company (the ‘‘Consideration Shares’’) to the Vendor at an issue price of HK$2.00 per Consideration Share, and the transaction contemplated thereunder, be and are hereby approved, confirmed and ratified;
(ii) subject to completion of the Sale and Purchase Agreement and conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited granting the listing of, and the permission to deal in, the Consideration Shares, the directors of the Company (the ‘‘Directors’’) be and are hereby specifically authorised to allot and issue the Consideration Shares, credited as fully paid, to the Vendor in accordance with the terms and conditions of the Sale and Purchase Agreement; and
(iii) any one of the Directors be and is hereby authorised to execute all such other documents, instruments under hand (and, where required, under the common seal of the Company together with such other Director or person authorised by the board of Directors) and to do such acts and things or take such steps as he or they may consider necessary, appropriate, desirable or expedient to implement or give effect to the Sale and Purchase Agreement and all transactions contemplated thereunder and all other matters incidental thereto or in connection therewith.’’

– 216 –

NOTICE OF SGM

‘‘THAT:
(i) the general mandate granted to the Directors to exercise the powers of the Company to allot, issue and deal with the additional shares in the capital of the Company as approved by the shareholders of the Company at the annual general meeting held on 2 June 2009 (to the extent not already exercised by the Directors), be and is hereby revoked (but without prejudice to any valid exercise of such general mandate prior to the passing of this resolution);
(ii) subject to paragraph (iv) below and pursuant to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (‘‘Listing Rules’’), the exercise by the Directors during the Relevant Period (as defined in paragraph (v) of this resolution) of all the powers of the Company to allot, issue and deal with additional shares in the capital of the Company and to make or grant offers, agreements and options and issue other securities convertible into shares which would or might require the exercise of such power be and is hereby generally and unconditionally approved;
(iii) the approval in paragraph (ii) of this resolution shall authorise the Directors during the Relevant Period (as defined in paragraph (v) of this resolution) to make or grant offers, agreements and options and issue other securities convertible into shares which would or might require the exercise of such power during or after the end of the Relevant Period;
(iv) the aggregate nominal amount of share capital allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) and issued by the Directors pursuant to the approval in paragraphs (ii) and (iii) of this resolution, otherwise than pursuant to (a) a Rights Issue (as defined in paragraph (v) of this resolution), or (b) the exercise of rights of subscription or conversion under the terms of any warrants issued by the Company or any securities which are convertible into shares of the Company, or (c) an issue of shares under any option scheme or similar arrangement for the time being adopted for the grant or issue to officers and/or employees of the Company and/or any of its subsidiaries of shares or rights to acquire shares of the Company, or (d) any scrip dividend or similar arrangement providing for the allotment of shares in lieu of the whole or part of a dividend on shares of the Company, shall not exceed the aggregate of (1) 20% of the total nominal amount of the share capital of the Company in issue on the date of the passing of this resolution and (2) (if the Directors are so authorised by a separate ordinary resolution of the shareholders of the Company) the aggregate nominal amount of the share capital of the Company repurchased by the Company subsequent to the passing of such resolution (up to a maximum amount equivalent to 10% of the aggregate nominal amount of the share capital of the Company in issue on the date of the passing of this resolution) and the said approval to the Directors in paragraphs (ii) and (iii) above shall be limited accordingly; and

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NOTICE OF SGM

(v) for the purpose of this resolution:

‘‘Relevant Period’’ means the period from the passing of this resolution until whichever is the earliest of:

(a) the conclusion of the next annual general meeting of the Company;
(b) the expiration of the period within which the next annual general meeting of the Company is required by the bye-laws of the Company or any applicable law of Bermuda to be held; or
(c) the date on which the authority set out in this resolution is revoked or varied by an ordinary resolution of the Company in general meeting; and

‘‘Rights Issue’’ means an offer of shares open for a period fixed by the directors of the Company to the holders of shares on the register on a fixed record date in proportion to their then holdings of such shares (subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements or having regard to any restrictions or obligations under the laws of, or the requirement of any recognised regulatory body or any stock exchange in any territory outside Hong Kong).’’

By order of the Board Cinda International Holdings Limited Lau Mun Chung Executive Director

Hong Kong, 26 November 2009

Notes:

(1) A 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 stead. A proxy need not be a member of the Company. If more than one proxy is so appointed, the appointment shall specify the number of shares in respect of which each such proxy is so appointed.
(2) A form of proxy for the SGM is enclosed. In order to be valid, the form of proxy must be duly completed and deposited at the Company’s branch share registrar in Hong Kong, Tricor Secretaries Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong, together with a power of attorney or other authority, if any, under which it is signed or a certified copy of that power of attorney or authority, no later than 48 hours before the time for holding the meeting or adjourned meeting.
(3) Completion and delivery of the form of proxy shall not preclude a member of the Company from attending and voting in person at the meeting convened by the above notice or at any adjourned meeting thereof (as the case may be) should they so wish, and in such event, the form of proxy shall be deemed to be revoked.

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AI assistant

Concord New Energy Group Ltd. — Proxy Solicitation & Information Statement 2009

35804_rns_2009-11-26_e9b82825-7c2e-4ff9-a818-e3bd0fce4c65.pdf

(Stock code: 111)

(1) MAJOR AND CONNECTED TRANSACTION IN RELATION TO

THE ACQUISITION OF 40% ISSUED SHARE CAPITAL OF SINO-ROCK INVESTMENT MANAGEMENT COMPANY LIMITED INVOLVING THE ISSUE OF CONSIDERATION SHARES TO CONNECTED PERSON AND

(2) REFRESHMENT OF THE GENERAL MANDATE TO ISSUE SHARES

DEFINITIONS

DEFINITIONS

(Stock code: 111)

To the Shareholders

(1) MAJOR AND CONNECTED TRANSACTION IN RELATION TO

THE ACQUISITION OF 40% ISSUED SHARE CAPITAL OF SINO-ROCK INVESTMENT MANAGEMENT COMPANY LIMITED INVOLVING THE ISSUE OF CONSIDERATION SHARES TO CONNECTED PERSON

AND

(2) REFRESHMENT OF THE GENERAL MANDATE TO ISSUE SHARES INTRODUCTION

THE SALE AND PURCHASE AGREEMENT

Date

Parties

Assets to be acquired

Consideration

Application for listing

Conditions precedent

Completion

Shareholders’ Agreement and Supplemental Agreement

(1) Board composition

(2) Transfer of shares

INFORMATION ON THE GROUP

INFORMATION ON THE TARGET GROUP

LETTER FROM THE BOARD

REASONS FOR AND BENEFIT OF THE ACQUISITION

LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE OF THE COMPANY

FINANCIAL EFFECT OF THE ACQUISITION

LETTER FROM THE BOARD

Assets

Liabilities

PROPOSED REFRESHMENT OF GENERAL MANDATE

Background of the General Mandate

Refreshment of the General Mandate since the Last AGM

Reasons for and benefits of the refreshment of the General Mandate

Period during which the New General Mandate will remain effective

IMPLICATIONS UNDER THE LISTING RULES

INDEPENDENT BOARD COMMITTEE

LETTER FROM THE BOARD

SGM

RECOMMENDATIONS

LETTER FROM THE BOARD

ADDITIONAL INFORMATION

(Stock code: 111)

(1) MAJOR AND CONNECTED TRANSACTION IN RELATION TO

THE ACQUISITION OF 40% ISSUED SHARE CAPITAL OF SINO-ROCK INVESTMENT MANAGEMENT COMPANY LIMITED INVOLVING THE ISSUE OF CONSIDERATION SHARES TO CONNECTED PERSON AND

(2) REFRESHMENT OF THE GENERAL MANDATE TO ISSUE SHARES

(1) MAJOR AND CONNECTED TRANSACTION IN RELATION TO

THE ACQUISITION OF 40% ISSUED SHARE CAPITAL OF SINO-ROCK INVESTMENT MANAGEMENT COMPANY LIMITED INVOLVING THE ISSUE OF CONSIDERATION SHARES TO CONNECTED PERSON AND

(2) REFRESHMENT OF THE GENERAL MANDATE TO ISSUE SHARES

INTRODUCTION

BASIS OF OUR ADVICE

(I) THE ACQUISITION

Principal Factors taken into Account

1. Background and reason for the Acquisition

(i) Background of the Target Group

(ii) Reasons for the Acquisition

2. Terms of the Acquisition

(a) Consideration

(b) Consideration Shares

3. Dilution of the shareholding interests in the Company

4. Shareholders’ Agreement and Supplemental Agreement

5. Financial effect of the Acquisition on the Group

(i) Earnings and net asset value

(ii) Net asset value

(iii) Liquidity and cash position

Recommendation on the Acquisition

(II) REFRESHMENT OF GENERAL MANDATE

Principal Factors taken into Account

2. Potential dilution to shareholding to the Independent Shareholders

Recommendation on the Refreshment of General Mandate

1. SUMMARY OF FINANCIAL INFORMATION OF THE GROUP

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

Consolidated Income Statement

Consolidated Balance Sheet

Concord New Energy Group Ltd. Proxy Solicitation & Information Statement 2009