Du Du Holdings Limited - Proxy Solicitation & Information Statement 2010

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 China Natural Investment Company Limited (the “ Company ”), you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

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

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China Natural Investment Company Limited 中國天然投資有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8250)

(I) VERY SUBSTANTIAL ACQUISITION;

(II) PLACING OF NEW SHARES UNDER SPECIFIC MANDATE;

(III) INCREASE IN AUTHORISED SHARE CAPITAL;

AND

(IV) NOTICE OF EXTRAORDINARY GENERAL MEETING

A notice convening the extraordinary general meeting of the Company to be held at 9:00 a.m. on Monday, 17 January 2011 at Chairman Room II, Level 2, Royal Park Hotel, 8 Pak Hok Ting Street, Shatin, New Territories, Hong Kong is set out on pages 109 to 111 of this circular. Whether or not you are able to attend the meeting, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof to the office of the Company’s branch share registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting or any adjournment thereof should you so wish.

This circular will remain on the “Latest Company Announcements” page of the GEM website at http://www.hkgem.com for at least seven (7) days from the date of publication and on the website of the Company at http://www.chinanatural.com.hk.

31 December 2010

	Page
Characteristics of GeM ii
Definitions	1
Letter from the Board 5
Introduction 5
Very substantial acquisition 6
Placing of new shares under specific mandate 14
Increase in authorised share capital 21
EGM	21
Recommendation 22
Additional information	22
Appendix I – Financial information on the Group	23
Appendix II – Financial information on the target Company 34
Appendix III – Unaudited pro forma financial information of the enlarged Group 74
Appendix IV – General information	102
notice of eGM 109

CHARACTERISTICS OF GEM

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

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

ii -

DEFINITIONS

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

“Acquisition”

the acquisition of the First Sale Shares and the Second Sale Shares by the Purchaser as contemplated under the Sale and Purchase Agreements

“associates”
has the meaning ascribed thereto under the GEM Listing Rules
“Board” the board of Directors

“Company” China Natural Investment Company Limited, a company incorporated in the Cayman Islands with limited liability and the issued Shares of which are listed on GEM

“connected person(s)” has the meaning ascribed thereto under the GEM Listing Rules
“Directors” the directors of the Company
“EGM”
an extraordinary general meeting of the Company to be convened to approve, among other things, the Sale and Purchase Agreements and the transactions contemplated thereunder, the SM Placing Agreement and the transactions contemplated thereunder and the increase in authorised share capital of the Company

“Enlarged Group” the Group immediately after completion of the Acquisition

“First Sale and Purchase Agreement”

the conditional sale and purchase agreement dated 24 November 2010 and entered into among the Purchaser, the First Vendor and the Guarantor in relation to the acquisition of the First Sale Shares by the Purchaser

“First Sale Shares”
70 ordinary shares of HK$1.00 each in the issued share capital of the Target Company, representing 70% of the entire issued share capital of the Target Company
“First Vendor”
Kindness Spirit Company Limited, a company incorporated in the British Virgin Islands with limited liability and principally engaged in investment holding
“GEM”

the Growth Enterprise Market of the Stock Exchange

DEFINITIONS

“GEM Listing Rules” the Rules Governing the Listing of Securities on GEM “General Mandate” the general mandate to allot, issue and deal with not more than 20% of the issued share capital of the Company as at the date of grant of such mandate by the Shareholders to the Directors on 1 November 2010 (i.e. the date of the most recent annual general meeting of the Company), pursuant to which 100,446,978 Shares can be issued by the Directors “GM Placee(s)” any professional, institutional or other investors or any of their respective subsidiaries or associates procured by the Placing Agent to subscribe for any of the GM Placing Shares pursuant to the GM Placing Agreement “GM Placing” the placing of the GM Placing Shares at the price of HK$0.165 each pursuant to the terms of the GM Placing Agreement

“GM Placing Agreement” the conditional placing agreement entered into between the Company and the Placing Agent dated 24 November 2010 in relation to the GM Placing

“GM Placing Share(s)” a maximum of 100,400,000 new Share(s) to be placed under the GM Placing Agreement and to be issued under the General Mandate

“Group” the Company and its subsidiaries
“Guarantor” Mr. Ling Koon Wah, an Independent Third Party, being the guarantor of the First Vendor’s obligations under the First Sale and Purchase Agreement

“Hong Kong” the Hong Kong Special Administrative Region of the PRC “Independent Shareholders” Shareholders other than Mr. Chow and his associates “Independent Third Party(ies)” the independent third party(ies) who is/are, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, independent of the Company and connected persons (as defined under the GEM Listing Rules) of the Company

DEFINITIONS

“Last Trading Day” 23 November 2010, being the last trading day for the Shares on the Stock Exchange prior to the date of the announcement of the Company dated 3 December 2010
“Latest Practicable Date” 28 December 2010, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein
“Mr. Chow” Mr. Chow Kai Wah, Gary, an executive Director “Placing Agent” Fordjoy Securities and Futures Limited, a licensed corporation to carry on business in type 1 (dealing in securities) regulated activity under the SFO
“Placings” the SM Placing and the GM Placing
“PRC” the People’s Republic of China, which for the purpose of this circular shall exclude Hong Kong, the Macau Special Administrative Region and Taiwan
“Purchaser” Kenson Assets Limited, an indirect wholly-owned subsidiary of the Company incorporated in the British Virgin Islands with limited liability and whose principal business is investment holding
“Sale and Purchase Agreements” collectively, the First Sale and Purchase Agreement and the Second Sale and Purchase Agreement, and each a “Sale and Purchase Agreement”
“Second Sale and Purchase Agreement” the conditional sale and purchase agreement dated 24 November 2010 and entered into between the Purchaser and the Second Vendor in relation to the acquisition of the Second Sale Shares by the Purchaser

“Second Sale Shares” 30 ordinary shares of HK$1.00 each in the issued share capital of the Target Company, representing 30% of the entire issued share capital of the Target Company

“Second Vendor” King Fuk Holdings Limited, a company incorporated in the British Virgin Islands with limited liability and principally engaged in investment holding “SFO” Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

DEFINITIONS

“Share(s)”
ordinary share(s) of HK$0.05 each in the share capital of the Company
“Shareholder(s)” holder(s) of the Share(s)
“SM Placee(s)”

any professional, institutional or other investors or any of their respective subsidiaries or associates procured by the Placing Agent to subscribe for any of the SM Placing Shares pursuant to the SM Placing Agreement

“SM Placing”

the placing of the SM Placing Shares at the price of HK$0.165 each pursuant to the terms of the SM Placing Agreement

“SM Placing Agreement”

the conditional placing agreement entered into between the Company and the Placing Agent dated 24 November 2010 in relation to the SM Placing

“SM Placing Price”
HK$0.165 per SM Placing Share
“SM Placing Share(s)”

a maximum of 505,700,000 new Share(s) to be placed under the SM Placing Agreement and to be issued by way of a specific mandate to be sought at the EGM

“Stock Exchange”

The Stock Exchange of Hong Kong Limited

“Target Company” or “PR ASIA”
PR ASIA Consultants Limited, a company incorporated in Hong Kong with limited liability which is principally engaged in advertising and public relations business and whose entire issued shares were held by the Vendors as at the Latest Practicable Date

“Vendors”

collectively, the First Vendor and the Second Vendor, and each a “Vendor”

“HK$”

Hong Kong dollars, the lawful currency of Hong Kong

“%”

per cent.

Letter from the board

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China Natural Investment Company Limited 中國天然投資有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8250)

Executive Directors: Mr. U Man Iong (Chairman) Mr. Li Wai Hung Mr. Chow Kai Wah, Gary

Independent non-executive Directors: Mr. Chan Yip Man, Norman Mr. Hui Sin Kwong Mr. Leung Chi Kin

Registered office: PO Box 309 Ugland House Grand Cayman KY1-1104 Cayman Islands

Head office and principal place of business in Hong Kong: Unit 1210A, 12th Floor Champion Building 301-309 Nathan Road Kowloon Hong Kong

31 December 2010

To the Shareholders

Dear Sir or Madam,

(I) VerY SUbStaNtIaL aCQUISItIoN;

(II) PLaCING of NeW ShareS UNder SPeCIfIC maNdate;

(III) INCreaSe IN aUthorISed Share CaPItaL; aNd

(IV) NotICe of eXtraordINarY GeNeraL meetING

INtrodUCtIoN

Reference is made to the announcement of the Company dated 3 December 2010 in which the Board announced that on 24 November 2010, the Purchaser entered into the First Sale and Purchase Agreement with the First Vendor and the Guarantor whereby the Purchaser has conditionally agreed to purchase and the First Vendor has conditionally agreed to sell the First Sale Shares for a consideration

Letter from the board

of HK$23.52 million, which will be satisfied by the Group in cash upon completion of the First Sale and Purchase Agreement. On the same day, the Purchaser entered into the Second Sale and Purchase Agreement with the Second Vendor whereby the Purchaser has conditionally agreed to purchase and the Second Vendor has conditionally agreed to sell the Second Sale Shares for a consideration of HK$10.08 million, which will be satisfied by the Group in cash upon completion of the Second Sale and Purchase Agreement.

On the other hand, the Company entered into the SM Placing Agreement with the Placing Agent on 24 November 2010 pursuant to which the Company has conditionally agreed to place, through the Placing Agent on a best effort basis, a maximum of 505,700,000 SM Placing Shares, to not fewer than six SM Placees at a price of HK$0.165 per SM Placing Share. On the same day, the Company entered into the GM Placing Agreement with the Placing Agent pursuant to which the Company has conditionally agreed to place, through the Placing Agent on a best effort basis, a maximum of 100,400,000 GM Placing Shares, to not fewer than six GM Placees at a price of HK$0.165 per GM Placing Share. The SM Placing and the GM Placing are not inter-conditional upon each other. Completion of the GM Placing took place on 16 December 2010, details of which are set out in the Company’s announcement dated 16 December 2010.

Reference is also made to the announcement of the Company dated 24 December 2010 in relation to the increase in the authorised share capital of the Company.

The purpose of this circular is to provide you with, among other things, further details of (i) the Sale and Purchase Agreements; (ii) the SM Placing; (iii) the increase in authorised share capital; (iv) other information required under the GEM Listing Rules; and (v) a notice to convene the EGM.

VerY SUbStaNtIaL aCQUISItIoN

The Board is pleased to announce that on 24 November 2010, each of the Sale and Purchase Agreements in relation to the Acquisition was entered, details of which are set out below:

date and parties of the first Sale and Purchase agreement

Date : 24 November 2010 Parties : (a) Purchaser: Kenson Assets Limited, an indirect wholly-owned subsidiary of the Company. (b) First Vendor: Kindness Spirit Company Limited, holding 70 issued ordinary shares of the Target Company, representing 70% of the entire issued share capital of the Target Company. (c) Guarantor: Mr. Ling Koon Wah.

Letter from the board

date and parties of the Second Sale and Purchase agreement

Date : 24 November 2010

Parties : (a) Purchaser: Kenson Assets Limited, an indirect wholly-owned subsidiary of the Company.

(b) Second Vendor : King Fuk Holdings Limited, holding 30 issued ordinary shares of the Target Company, representing 30% of the entire issued share capital of the Target Company.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, (i) each of the Vendors is principally engaged in investment holding; and (ii) each of the Guarantor, the Vendors and their respective ultimate beneficial owners is an Independent Third Party.

assets to be acquired

Under the First Sale and Purchase Agreement, the First Sale Shares, comprising 70% of the entire issued share capital of the Target Company, will be acquired by the Purchaser.

Under the Second Sale and Purchase Agreement, the Second Sale Shares, comprising 30% of the entire issued share capital of the Target Company, will be acquired by the Purchaser.

In aggregate, 100% of the issued share capital of the Target Company will be acquired under the Acquisition, if both of the Sale and Purchase Agreements are completed.

Consideration

The aggregate consideration of HK$33.60 million (comprising (i) HK$23.52 million payable to the First Vendor; and (ii) HK$10.08 million payable to the Second Vendor) will be satisfied by the Group in cash upon the respective completion of each of the Sale and Purchase Agreements, both of which will be satisfied by internal resources of the Group and funds to be raised in the SM Placing. If the SM Placing cannot be completed, the Acquisition will be solely financed by the internal resources of the Group.

The aggregate consideration payable by the Group to the Vendors under the Sale and Purchase Agreements is negotiated between the Purchaser and the Vendors on an arm’s length basis after taking into account the financial performance of the Target Company for the past financial year/period, the profit guarantee given by the First Vendor under the First Sale and Purchase Agreement and the synergy to be created for the Group’s current advertising business after completion of the Acquisition. Apart from the past financial performance of the Target Company, the Company also looks at the future prospects of the advertising and public relations business and its potential long term growth upon the Acquisition. As at the Latest Practicable

Letter from the board

Date, the audited profit before taxation of the Target Company for the nine months ended 30 September 2010 is approximately HK$7,190,000, which is more than double of the audited profit before taxation of the Target Company for the nine months ended 31 December 2009. Further, it is anticipated that with more corporate finance activities in Hong Kong in the coming years, there will be more demand on the advertising and public relations services. As the Target Company has been established for about 9 years and has a reasonable size of clientele, the Company is of the view that the Acquisition is a good opportunity for the Group to expand its advertising and public relations business. The Directors are confident that with solid experience of the management team of the Target Company and the support from the Group for development and expansion after completion of the Acquisition, the Target Company would generate profits for the Group in the future. Based on the above, the Board is of the view that the aggregate consideration of HK$33.60 million for the Acquisition is fair and reasonable.

Consideration adjustment

Under the First Sale and Purchase Agreement, the First Vendor has irrevocably warranted and guaranteed to the Purchaser that the audited net profit after tax and extraordinary or exceptional items of the Target Company will be not less than HK$5,000,000 for the financial year ending 31 December 2010 (the “ Guaranteed Period ”).

If the actual audited net profit after tax and any extraordinary or exceptional items of the Target Company for the Guaranteed Period (the “ actual Profit ”) is less than HK$5,000,000, then the consideration payable to the First Vendor shall be adjusted by the First Vendor paying to the Purchaser the shortfall in an amount in HK$ calculated as follows:

A = (HK$5,000,000 – Actual Profit) x 6.72 (being the price/earning ratio of the Target Company in the Acquisition)

where A is the amount in HK$ the First Vendor shall pay to the Purchaser when there is a shortfall in the Actual Profit.

The total amount payable by the First Vendor calculated in the above shall not exceed HK$33.60 million (being the aggregate consideration for the First Sale Shares and the Second Sale Shares). For the avoidance of doubt, should the Target Company record a loss in its audited financial statements for the Guaranteed Period, the Actual Profit shall be deemed as zero.

Conditions precedent

Completion of the transactions under each of the Sale and Purchase Agreements shall be conditional upon and subject to:

(a) the passing by the Shareholders at the EGM to be convened and held of an ordinary resolution to approve the relevant Sale and Purchase Agreement and the transactions contemplated thereunder; and
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Letter from the board

(b) the warranties given by the relevant Vendor under the relevant Sale and Purchase Agreement remaining true and accurate in all respects.

In addition to the above conditions, completion of the First Sale and Purchase Agreement is also conditional upon the Purchaser being satisfied with the results of a due diligence review of the Target Company.

Each of the relevant Vendors and the Purchaser shall use its best endeavours to procure fulfillment of all the conditions above under the respective Sale and Purchase Agreements. The Purchaser may at any time by notice in writing to any of the Vendors waive condition (b) under the relevant Sale and Purchase Agreement. If the conditions set out above have not been satisfied (or as the case may be, waived by the Purchaser) on or before 4:00 p.m. on 31 March 2011, or such later date as the relevant Vendor and the Purchaser may agree in writing, the relevant Sale and Purchase Agreement shall cease and determine and thereafter neither party shall have any obligations and liabilities towards each other thereunder save for any antecedent breaches of the terms thereof.

For the avoidance of doubt, completion of the acquisition of the First Sale Shares is not conditional upon completion of the acquisition of the Second Sale Shares, and vice versa.

Completion

Subject to the fulfillment (or waiver as the case may be) of all the conditions precedent mentioned above, the respective completion under the relevant Sale and Purchase Agreement shall take place on any date falling within three business days thereafter.

The Company has no intention to change its board composition nor its existing business upon completion of the Acquisition. In the event that the acquisition of the First Sale Shares is completed but the acquisition of the Second Sale Shares cannot be completed, the Group will hold 70% of the entire issued share capital of the Target Company. The Target Company will become a subsidiary of the Company and its financial results will be consolidated into the Group’s financial statements. In the event the acquisition of the Second Sale Shares is completed but the acquisition of the First Sale Shares cannot be completed, the Group will hold 30% of the entire issued share capital of the Target Company. The Target Company will then become an associated company of the Group and equity accounting will be applied for such investment.

Guarantee under the first Sale and Purchase agreement

In consideration of the Purchaser entering into the First Sale and Purchase Agreement, the Guarantor has agreed to guarantee the due and punctual performance of the obligations of the First Vendor pursuant to the terms and conditions of the First Sale and Purchase Agreement.

Letter from the board

financial impact of the acquisition on the Group

Immediately after completion of the Acquisition, the Target Company will become an indirect wholly-owned subsidiary of the Company and the financial results of the Target Company will be consolidated into the consolidated financial statements of the Company. The Group had an audited net loss of approximately HK$1,456,000 for the year ended 30 June 2010. Based on the unaudited pro forma consolidated statement of comprehensive income of the Enlarged Group contained in Appendix III to this circular, the Enlarged Group would have a net profit of approximately HK$454,000 for the year ended 30 June 2010 assuming that completion of the Acquisition had taken place on 1 July 2009.

The Group had audited total assets and total liabilities of approximately HK$147.50 million and HK$1.60 million respectively as at 30 June 2010. Based on the unaudited pro forma total assets and total liabilities as set out in the unaudited pro forma consolidated statement of financial position of the Enlarged Group contained in Appendix III to this circular, the total assets and the total liabilities of the Enlarged Group would have been increased to approximately HK$149.60 million and HK$4.50 million as at 30 June 2010 respectively assuming that completion of the Acquisition had taken place on 30 June 2010.

Information on the target Company

The Target Company is a company incorporated in Hong Kong with limited liability on 4 May 2001. It is principally engaged in advertising and public relations business in Hong Kong.

The Target Company is a Hong Kong-based public relations consultancy company focusing on financial communications. Since its establishment, the Target Company has been providing strategic counselling services in corporate communications, media relations, investor relations, issue/crisis management, media training and event management to different clients including the companies listed in Hong Kong, private banks, quasi-government bodies and multi-national corporations with headquarters in Asia, Europe and America respectively.

The Target Company devises and implements effective business and marketing strategies from a communication perspective for its clients, with a view to enabling them to successfully achieve brand-building and establish an appropriate image to the targeted customer base. It also provides training, through simulating different scenarios of TV and print media interviews, to its clients for different kinds of interviews, media conferences and promotion events to ensure that the key messages are communicated from its clients to the public.

In addition, the Target Company could render assistance to its client in reputation crisis management. The goal of the Target Company is to help its clients to manage crisis, balance the interests of different stakeholders and ensure corporate statements and undertakings are announced appropriately. The Target Company’s income source is mainly divided into two major segments, namely retainer fees for services provided for a fixed period and project-based income.

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Letter from the board

With the senior management team’s extensive experience (as described below) in communications and extensive network in the financial media industry over the years, the Target Company has been establishing the desired positioning for its clients, helping them to solidify the foundation of their business and achieve long-term goals. At present, the Target Company has 40 major customers, most of which are companies listed on the Stock Exchange.

The Target Company is under the leadership of its managing director, Mr. Ling Koon Wah who is also the Guarantor. He has worked in the financial media industry for over 30 years and has in-depth experience and extensive network in the financial media industry. Upon completion of the Acquisition, the management team of the Target Company will remain with the Group and will continue to be responsible for providing quality services in corporate communications, media relations, investor relations, issue/crisis management, media training and events management to its clients.

For the avoidance of doubt, the management team of the Target Company will not become Directors upon completion of the Acquisition.

The qualifications, experiences and expertise of the senior management of the Target Company who will be retained by the Enlarged Group after the completion of the Acquisition are as follows:

(a) Tony Wong (黃有傑), General Manager, received a bachelor degree in business administration from the Chinese University of Hong Kong. Mr. Wong joined the Target Company in February 2010, overseeing the account servicing team and providing strategic counsel to clients.

Before joining the Target Company, Mr. Wong worked at ING Asia/Pacific as the senior manager for over three years. He specialized in formulating targeted communications campaign and advising ING’s CEOs and senior management in the banking, asset management and insurance businesses in the Asia Pacific region.

Prior to joining ING Asia/Pacific, Mr. Wong served as an associate director at Gavin Anderson, an international financial communications consultancy based in Hong Kong. There, he provided strategic counsel and created media relations campaigns in Hong Kong and PRC for prominent financial institutions including Societe Generale, Lehman Brothers, Warburg Pincus, AXA Investment Managers, Standard Life Investments and Cantor Fitzgerald. He also provided media counsel for a number of high-profile transactions, including Anheuser-Busch’s successful takeover of Harbin Brewery, Fast Retailing’s takeover bid for Giordano and the listing of SJM, Stanley Ho’s gaming flagship.

(b) Lorraine Lam (林彬), Account Director, obtained a Master’s degree in New Media from the Chinese University of Hong Kong and a Bachelor’s degree in Arts from the University of Hong Kong. She also earned a Diploma in Marketing from the University of Hong Kong.
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Letter from the board

Ms. Lam joined the Target Company Consultant Ltd in 2008. At present, she is responsible for daily account management and supervision, formulating strategies and providing professional advice to clients in information technology, telecommunications, pharmaceutical, skin care, properties and professional organizations such as Hong Kong Health Food Association.

Prior to joining the Target Company, she was an in-house public relations practitioner at Hong Kong Housing Authority, Midland Realty (SEHK: 1200), China South City Holdings Ltd (SEHK: 1668), PYI Corporation Ltd (SEHK: 498) and Paul Y. Engineering Group Ltd (SEHK: 577). She has held increasingly responsible positions and capacities in corporate affairs, marketing communications, public relations, media relations and event management.

(c) Danny Cheng (鄭堅楚), Senior Account Manager, graduated from the Chinese University of Hong Kong, with a major in History and minor in Anthropology. Mr. Cheng joined the Target Company in October 2003.

Mr. Cheng has over five years’ experience in communications consultancy and is responsible for planning and implementing public relations strategies for Hong Konglisted corporations. Mr. Cheng is responsible for furnishing new business proposals and overseeing progress of clients’ corporate communication plan.

(d) Alice Li (李嘉棣), Senior Account Manager, received her bachelor degree in Media and Cultural Studies from Middlesex University, U.K. Ms. Li is responsible for professional counselling and developing strategic communications programs for a wide array of clients.

Ms. Li joined the Target Company in October 2003 to head both corporate accounts and finance practices. Key areas of her work include corporate affairs, media relations, internal communications and crisis management. She has advised over 30 listed companies over the years.

Ms. Li has a background in marketing communications and financial media. Prior to joining the Target Company, she worked in a large-scale marketing communications agency. She assisted in planning and organizing PR and marketing campaigns for many multinational corporations.

As at the Latest Practicable Date, the Target Company is one of the member firms under Council of Public Relations Firms of Hong Kong which now has around 25 members.

It is the intention of the Target Company to expand its current client base and keep abreast of rapid market changes and tailor the best public relations strategies for its clients, to engage in a long-lasting relationship with its clients, help its clients realize their corporate mission and propel businesses to become market leaders.

12 -

Letter from the board

Set out below is the audited financial information of the Target Company for the financial years ended 31 March 2009, 31 December 2009 and the nine months ended 30 September 2010 respectively as prepared under the generally accepted accounting principles in Hong Kong:

	for the financial for the financial	for the financial for the financial	for the nine
	year ended	year ended	months ended
	31 march	31 december	30 September
	2009	2009(Note)	2010
	(Audited)	(Audited)	(Audited)
	HK$’000	HK$’000	HK$’000
Turnover	13,819	15,279	18,930
Profit before taxation	1,464	3,510	7,190
Profit after taxation	1,164	2,710	6,048

Note: The Target Company has changed its financial year end date from 31 March to 31 December.

The audited net asset value of the Target Company as at 30 September 2010 was approximately HK$8,816,000.

reasons for and benefits of the acquisition

The Group is principally engaged in the provision of diagnostic testing and healthcare services, and sale of pharmaceutical products, provision of related research and development, advertising and public relationship services, property investment and investment holding.

The Board considers that the Acquisition represents a strategic opportunity to the Group to strengthen its advertising and public relationship services business. With a view to occupying a greater market share in the public relations industry, the Group is dedicated to providing financial backup to the Target Company for development and expansion after completion of the Acquisition to strengthen its marketing force. Given that the economic conditions in Hong Kong and the PRC are growing steadily, the Company is optimistic about the prospect of the advertising and public relations business of the Target Company. Further, the profit guarantee on the Target Company’s results in 2010 given by the First Vendor demonstrates that it is confident on the prospects of the Target Company, which view is shared by the Group. This also provides an effective means to eliminate uncertainty as to the results of the Target Company for the year ending 31 December 2010 from the perspective of the Group.

13 -

Letter from the board

services, in particular in the area of design and publication of promotional materials. Upon completion of the Acquisition, the Group can assist the Target Company to produce high quality promotional materials to its clients and add values to the services of the Target Company so that the competitiveness of the services of the Enlarged Group can be enhanced.

Having considered the above, the Directors (including the independent non-executive Directors) consider that the terms of each of the Sale and Purchase Agreements are fair and reasonable and the Acquisition is in the interest of the Company and the Shareholders as a whole.

After completion of the acquisition of the First Sale Shares and the Second Sale Shares (which is not inter-conditional upon each other), the Target Company will become an indirect wholly-owned subsidiary of the Company whose assets and liabilities and results will be fully consolidated into the accounts of the Group.

Due to the same nature of the subject matter to be acquired under each of the Sale and Purchase Agreements, the transactions contemplated under the Sale and Purchase Agreements shall be aggregated under Rule 19.22 of the GEM Listing Rules. Hence, the Acquisition constitutes a very substantial acquisition on the part of the Company under Chapter 19 of the GEM Listing Rules. As such, each of the Sale and Purchase Agreements and the transactions contemplated thereunder shall be subject to the Shareholders’ approval at the EGM. Since Mr. Chow, an executive Director holding 18,000 Shares as at the Latest Practicable Date, is also one of the directors of the Target Company, he is regarded as having a material interest in the Acquisition and will abstain from voting at the EGM on the relevant resolution(s) approving the Acquisition. Other than Mr. Chow, no Shareholders have a material interest in the Acquisition and are required to abstain from voting at the EGM on the relevant resolution(s) approving the Acquisition.

PLaCING of NeW ShareS UNder SPeCIfIC maNdate

On 24 November 2010, the Company entered into the SM Placing Agreement with the Placing Agent pursuant to which, the Company has conditionally agreed to place, through the Placing Agent on a best effort basis, a maximum of 505,700,000 SM Placing Shares, to not fewer than six SM Placees at a price of HK$0.165 per SM Placing Share. Details of the SM Placing Agreement are as follows:

date

24 November 2010

Issuer

The Company

Placing agent

The Placing Agent, Fordjoy Securities and Futures Limited, has conditionally agreed to place a maximum of 505,700,000 SM Placing Shares on a best effort basis.

14 -

Letter from the board

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, each of the Placing Agent and its ultimate beneficial owners is an Independent Third Party.

Placing commission

The Placing Agent will receive a placing commission of 3.5% of the aggregate SM Placing Price received for the SM Placing. The placing commission was determined by reference to the range of market norms for commissions for this type of transactions. The Directors are of the view that the placing commission is fair and reasonable.

Sm Placees

The Placing Agent agreed to place the SM Placing Shares on a best effort basis, to not fewer than six SM Placees, who and whose ultimate beneficial owners are Independent Third Parties and who are independent to each of the First Vendor, the Guarantor, the Second Vendor and their respective ultimate beneficial owners. It is expected that none of the SM Placees will become a substantial shareholder (as defined in the GEM Listing Rules) of the Company immediately after completion of the SM Placing. If any of the SM Placees will become a substantial shareholder of the Company after completion of the SM Placing, further announcement will be made by the Company.

Sm Placing Shares

As at the Latest Practicable Date, the Company has 602,634,892 Shares in issue. The maximum of 505,700,000 SM Placing Shares under the SM Placing represent (i) approximately 83.91% of the existing issued share capital of the Company as at the Latest Practicable Date; and (ii) approximately 45.63% of the issued share capital of the Company as enlarged by the SM Placing. The aggregate nominal value of the maximum number of 505,700,000 SM Placing Shares under the SM Placing is HK$25,285,000.

ranking of Sm Placing Shares

The SM Placing Shares under the SM Placing will rank, upon issue, pari passu in all respects among themselves and with the Shares in issue on the date of allotment and issue of the SM Placing Shares.

Sm Placing Price

The SM Placing Price of HK$0.165 represents:

(i) a discount of approximately 3.51% to the closing price of HK$0.171 per Share as quoted on the Stock Exchange on the Last Trading Day;
(ii) a discount of approximately 10.03% to the average of closing prices of approximately HK$0.1834 per Share as quoted on the Stock Exchange for the five consecutive trading days up to and including the Last Trading Day; and
15 -

Letter from the board

(iii) a discount of approximately 15.82% to the closing price of HK$0.196 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

The SM Placing Price was determined with reference to the prevailing market price of the Shares and was negotiated on an arm’s length basis between the Company and the Placing Agent but without particular reference to the Acquisition. The Directors consider that the terms of the SM Placing (including the SM Placing Price) are on normal commercial terms and are fair and reasonable based on the current market conditions and in the interests of the Company and the Shareholders as a whole.

Conditions of the Sm Placing

Completion of the SM Placing is conditional upon:–

(a) the Stock Exchange having granted or agreeing to grant the listing of, and permission to deal in, the SM Placing Shares;
(b) the passing of the necessary resolution(s) by the Shareholders who are not required to abstain from voting on the relevant resolution (s) under the GEM Listing Rules and other applicable codes and regulations to approve the grant of the specific mandate to issue the SM Placing Shares at the EGM; and
(c) the SM Placing Agreement not having been terminated in accordance with its terms.

If the above conditions are not fulfilled on the last day of the three-month period commencing on the date of the EGM or such later time or date as the Company and the Placing Agent may agree in writing, the SM Placing Agreement will be terminated and the SM Placing will not be proceeded and all obligations and liabilities of the parties to the SM Placing Agreement will forthwith cease and determine and no party will have any claim against the other (save for any antecedent breaches thereof).

For the avoidance of doubt, completion of the SM Placing is not conditional upon completion of the Acquisition nor the GM Placing, and vice versa.

termination

The Placing Agent may terminate the SM Placing Agreement by notice in writing at any time prior to 12:00 noon (Hong Kong time) on the completion date of the SM Placing if any of the following develops, occurs or comes into force:

(a) there shall have come to the notice of the Placing Agent any material breach of, or any event rendering untrue or incorrect in any material respect, any of the representations and warranties of the Company contained in the SM Placing Agreement or any failure to perform any of the Company’s undertakings in the SM Placing Agreement;
16 -

Letter from the board

(b) any new law, rule or regulation or any change in existing laws (including common law), rules or regulations (or the juridical interpretation thereof) or other occurrence of any nature whatsoever which, in the reasonable opinion of the Placing Agent, are or may be materially adverse to the business or financial position of the Company or any other member of the Group taken as a whole or otherwise makes it inexpedient or inadvisable to proceed with the SM Placing;
(c) any event or circumstance (whether or not forming part of a series of events or circumstances occurring or continuing before, on and/or after the date of the SM Placing Agreement) or material change or deterioration in local, national, international, political, military, financial, economic, market or trading conditions or any other conditions in any part of the world in which the Company or any other member of the Group carries on business which, in the reasonable opinion of the Placing Agent, is or may be materially adverse to the business or financial position of the Company or any other member of the Group taken as a whole or otherwise makes it inexpedient or inadvisable to proceed with the SM Placing;
(d) any suspension of dealings in the Shares for any period of twenty consecutive trading days or more (other than relating to the SM Placing); and
(e) any moratorium, suspension or material restriction on trading in shares or securities generally on the Stock Exchange.

In the event that the Placing Agent terminates the SM Placing Agreement, all obligations of each of the parties under the SM Placing Agreement shall cease and determine and no party shall have any claim against the other party in respect of any matter arising out of or in connection with the SM Placing Agreement except for any antecedent breach of any obligation under the SM Placing Agreement.

Completion of the Sm Placing

Completion of the SM Placing will take place within four business days after fulfilment of the conditions as set out in the SM Placing Agreement but not later than the last day of the three-month period commencing on the date of the EGM or such other date and time as the Company and the Placing Agent may agree in writing.

The Company has no intention to change its board composition upon completion of the SM Placing.

Specific mandate to issue new Shares

The SM Placing Shares will be issued under the specific mandate to allot, issue and deal with the Shares granted to the Directors by resolution of the Shareholders to be passed at the EGM. Since Mr. Chow is interested in the Acquisition and the proceeds from the SM Placing will be used in relation to the Acquisition, Mr. Chow will also abstain from voting at the EGM

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Letter from the board

on the relevant resolution(s) approving the SM Placing. Other than Mr. Chow, no Shareholders have a material interest in the SM Placing and are required to abstain from voting at the EGM on the relevant resolution(s) approving the SM Placing.

application for listing

Application will be made by the Company to the GEM Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the SM Placing Shares.

reasons for the Sm Placing and use of proceeds

The Board considers that the SM Placing will strengthen the Group’s financial position, and enlarge the shareholders’ base of the Company which may, in turn, enhance the liquidity of the Shares.

The maximum gross proceeds from the SM Placing will be approximately HK$83.44 million. The maximum net proceeds (after deducting the placing commission, professional fees and other expenses incidental to the SM Placing) are estimated to be approximately HK$80.30 million, representing a net issue price of approximately HK$0.159 per SM Placing Share. The Board intends to use the net proceeds from the SM Placing as listed in the business plan below:

Uses Approximate amount (1) to finance the aggregate consideration of the Acquisition HK$33.60 million (2) to expand the Group’s property investments business including HK$40.00 million but not limited to potential purchases of three to four commercial and retail units for leasing purpose in commercial buildings and plazas in order to generate a stable source of income, but the Company has no specific target at this moment
(3) to expand the business of the Target Company and the existing HK$6.70 million healthcare and pharmaceutical related business of the Group

Total:

HK$80.30 million

As the net proceeds from the SM Placing can finance the aggregate consideration of the Acquisition and strengthen the various business areas of the Group as well as the Target Company, the Directors consider that the SM Placing is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

In the event that either one or both of the Sale and Purchase Agreements cannot proceed to completion, the Company will use the relevant proceeds of up to HK$33.60 million from the SM Placing for investment opportunities in other businesses including but not limited to the property investments business that is beneficial to the future developments and long term growth of the business of the Group.

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Letter from the board

the Placings

The SM Placing and the GM Placing are not inter-conditional upon each other.

Completion of the GM Placing took place on 16 December 2010, details of which are set out in the announcement dated 16 December 2010.

Since the completion of the Sm Placing is subject to the fulfillment of the conditions precedent as set out in the Sm Placing agreement, the Sm Placing may or may not proceed. Shareholders and potential investors are reminded to exercise caution when dealing in the Shares.

fund raising activities by the Company in the past twelve months

Save as disclosed below, the Company has not conducted any equity fund raising activity in the past twelve months before the Latest Practicable Date.

date of
announcement	event	Net proceeds	Intended use of proceeds	actual use of proceeds
20 April 2010	Placing of	Approximately	(i) investments (including	Used as intended
	37,000,000	HK$15.20	property investments	(approximately 80% of
	new Shares	million	and investments in	the proceeds was used
	at the placing		other projects/business	in the purchase of office
	price of		as the Board may	premises and the rest
	HK$0.43 each		consider appropriate);	was used as general
			and (ii) general	working capital)
			working capital of the
			Group
20 April 2010	Placing of	Approximately	(i) investments (including	Partially used as intended
and 7 July	243,000,000	HK$51.30	property investments	(approximately 70%
2010	new Shares	million	and investments in	of the proceeds was
	at the placing		other projects/business	used in the purchase of
	price of		as the Board may	investment properties
	HK$0.22 each		consider appropriate);	and the remaining 30%
			and (ii) general	is currently kept in the
			working capital of the	Company’s bank account
			Group	and will be largely
				utilized for purchase of
				commercial and retail
				units)
3 December	GM Placing	Approximately	(i) expansion of the	All the net proceeds, are
2010		HK$16	Group’s property	not utilized yet but are
		million	investments business;	kept in Company’s bank
			and (ii) general	account. All the net
			working capital	proceeds will be used as
				intended

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Letter from the board

effects on shareholding structure

The changes of the shareholding structure of the Company immediately before and after the SM Placing and the GM Placing (assuming that there are no other changes in the issued share capital of the Company) are set out below:

director Mr. Chow Public The GM Placees The SM Placees Other public Shareholders total director Mr. Chow Public The GM Placees The SM Placees Other public Shareholders total	as at the Latest Practicable date Number of Approximate Shares % 18,000 0.00 100,400,000 16.66 – – 502,216,892 83.34 602,634,892 100.00 Immediately after completion of the Sm Placing Number of Approximate Shares % 18,000 0.00 100,400,000 9.06 505,700,000 45.63 502,216,892 45.31 1,108,334,892 100.00	as at the Latest Practicable date Number of Approximate Shares % 18,000 0.00 100,400,000 16.66 – – 502,216,892 83.34 602,634,892 100.00 Immediately after completion of the Sm Placing Number of Approximate Shares % 18,000 0.00 100,400,000 9.06 505,700,000 45.63 502,216,892 45.31 1,108,334,892 100.00
		100.00

other agreements, arrangements, understanding or negotiation

As at the Latest Practicable Date, the Company has not entered into and has no intention to enter into any agreements, arrangements, understanding or negotiation to dispose of or discontinue, its existing business (i.e. diagnostic testing and healthcare services, sale of pharmaceutical products, provision of related research and development, advertising and public relationship services, property investment and investment holding) or relevant assets (whether concluded or not).

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Letter from the board

INCreaSe IN aUthorISed Share CaPItaL

In order to facilitate the issue of the SM Placing Shares, as well as to enable the Group for future expansion and development, the Company proposes an increase in authorised share capital of the Company from HK$50,000,000 divided into 1,000,000,000 Shares to HK$500,000,000 divided into 10,000,000,000 Shares. The increase in authorised share capital of the Company is subject to the passing of an ordinary resolution by the Shareholders by way of a poll at the EGM.

As at the Latest Practicable Date, save for the issue of the SM Placing Shares, the Company does not have any immediate plan to further issue new Shares.

eGm

Set out on pages 109 to 111 of this circular is a notice convening the EGM to be held at Chairman Room II, Level 2, Royal Park Hotel, 8 Pak Hok Ting Street, Shatin, New Territories, Hong Kong at which the relevant resolution(s) will be proposed to the Independent Shareholders to consider and, if thought fit, approve (i) the Sale and Purchase Agreements and the transactions contemplated thereunder; (ii) the SM Placing Agreement and the transactions contemplated thereunder; and (iii) the increase in authorised share capital of the Company.

Since Mr. Chow, an executive Director, holding 18,000 Shares as at the Latest Practicable Date, is also one of the directors of the Target Company, he is regarded as having a material interest in the Acquisition and will abstain from voting at the EGM on the relevant resolution(s) approving the Acquisition. On the other hand, since Mr. Chow is interested in the Acquisition and the proceeds from the SM Placing may be used in relation to the Acquisition, Mr. Chow will also abstain from voting at the EGM on the relevant resolution(s) approving the SM Placing and the increase in authorised share capital of the Company. Other than Mr. Chow, no Shareholders are required to abstain from voting at the EGM on the relevant resolution(s) approving the Acquisition, the SM Placing and the increase in authorised share capital of the Company.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, there was (i) no voting trust or other agreement or arrangement or understanding entered into by or binding upon any of Mr. Chow and his associates; and (ii) no obligation or entitlement of any of Mr. Chow and his associates as at the Latest Practicable Date whereby he or it has or may have temporarily or permanently passed control over the exercise of the voting right in respect of its Shares to a third party, either generally or on a case-by-case basis.

A form of proxy for use at the EGM is enclosed with this circular. Whether or not you are able to attend the EGM, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

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Letter from the board

reCommeNdatIoN

The Board considers that (i) the First Sale and Purchase Agreement and the transactions contemplated thereunder; (ii) the Second Sale and Purchase Agreement and the transactions contemplated thereunder; (iii) the SM Placing Agreement and the transactions contemplated thereunder; and (iv) the increase in authorised share capital of the Company are on normal commercial terms which 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. Accordingly, the Board recommends the Independent Shareholders to vote in favour of the ordinary resolutions which will be proposed at the EGM for approving (i) the First Sale and Purchase Agreement and the transactions contemplated thereunder; (ii) the Second Sale and Purchase Agreement and the transactions contemplated thereunder; (iii) the SM Placing Agreement and the transactions contemplated thereunder; and (iv) the increase in authorised share capital of the Company.

addItIoNaL INformatIoN

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

By order of the Board China Natural Investment Company Limited Chow Kai Wah, Gary Executive Director

22 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

1. THREE-YEAR FINANCIAL INFORMATION

Financial information of the Group for each of the three years ended 30 June 2008, 2009 and 2010 are disclosed in the annual reports of the Company for the years ended 30 June 2008, 2009 and 2010 dated 23 September 2008, 24 September 2009 and 21 September 2010 respectively, which are published on the GEM website at http://www.hkgem.com and the Company’s website at http://www. chinanatural.com.hk.

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

Set out below is the management discussion and analysis of the Group, most of which are extracted from the respective annual reports of the Company for the three years ended 30 June 2010.

For the year ended 30 June 2008

Financial review

For the year ended 30 June 2008, the Group recorded a turnover of approximately HK$1,597,000, representing an increase of 23.05% compared with that of last financial year. The increase in turnover was mainly attributable to the increased provision of diagnostic testing services and sales of health food and pharmaceutical products.

Gross profit for the year ended 30 June 2008 was approximately HK$629,000, representing an increase of 198.93% compared with that of last financial year.

Basic loss per share was approximately HK5.356 cents, compared with the basic earnings per share of approximately HK0.223 cents in the last financial year. The reason was mainly attributable to losses in the valuation of convertible bonds issued by the Company in January 2008 and in the Group’s securities investment caused by the downturn in the Hong Kong’s stock market.

A net loss of approximately HK$360,925,000 was recorded for the year (2007: a net profit of approximately HK$8,396,000). In view of the Group’s active development of its core businesses and potential acquisitions and expansion, the Board did not recommend the payment of dividend for the year ended 30 June 2008.

Business review

The Group recorded a 22.71% increase in turnover for carcinoma diagnosis and testing service during the year under review. Sales of healthcare products jumped to approximately HK$188,000, representing an increase of 25.60% compared with the same period last year. Gross profit increased 198.93% to approximately HK$629,000.

In February 2008, the Company entered into a co-operation agreement with Xizang Rhodiola Pharmaceutical Co., Limited (“Xizang Medicine”) involving the development of new drugs. The Company agreed to invest approximately RMB200 million (equivalent to approximately HK$217.40 million) by way of capital injection for a 51% interest in the joint venture.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Despite the growth of the Group’s core medical and healthcare businesses, a downturn in Hong Kong’s stock market since the last quarter of 2007 led to a net loss recorded for the year under review. Loss related to securities investment accounted for approximately HK$15,256,000. However, we managed to minimize the loss by taking a more conservative investment strategy and reducing our exposure in the second half of the financial year under review.

Since 9 September 2008 which was the final closing date of a voluntary conditional securities exchange offer made by Hong Kong Health Check and Laboratory Holdings Company Limited (“HK Health Check”, now known as “China Gogreen Assets Investment Limited”) to acquire all issued shares of the Company (other than those already held by HK Health Check and parties acting in concert with it), HK Health Check has become the holding company of the Company. As at 23 September 2008, HK Health Check and parties acting in concert with it together held about 64.57% of the issued share capital of the Company.

Liquidity and financial resources

As at 30 June 2008, the Group held cash and bank balances of approximately HK$179,460,000 (2007: approximately HK$4,122,000). Net current liabilities amounted to approximately HK$265,488,000 (2007: net current assets approximately HK$34,799,000).

As at 30 June 2008, Current ratio (defined as total current assets divided by total current liabilities) was approximately 0.46 times (2007: approximately 13.71 times). Gearing ratio, expressed as a percentage of total liabilities over total assets was approximately 2.14 (2007: approximately 0.07).

The Group had no bank borrowing as at 30 June 2008 (2007: Nil).

Capital structure

As at 30 June 2008, capital deficiency attributable to Shareholders was approximately HK$262,958,000 (2007: total equity approximately HK$38,055,000).

Exchange Exposure

Most of the trading transactions, assets and liabilities of the Group were denominated in Hong Kong dollars.

It is the Group’s policy for its operating entities to operate in their corresponding local currencies to minimize currency risks. The Group had an insignificant exchange risk exposure since the principal businesses was conducted and recorded in Hong Kong dollars during the year under review.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Capital commitment

On 18 February 2008, the Company entered into a co-operation agreement with Xizang Medicine whereby the Company agreed in principle to co-operate with Xizang Medicine to undertake the Class 1 New Drug Business (as defined in the announcement of the Company dated 21 February 2008), through a joint venture to be established and owned as to 51% and 49% by the Company and Xizang Medicine respectively. The Company agreed to invest an aggregate of RMB200 million approximately (equivalent to approximately HK$217.40 million), in the form of registered capital, into the joint venture. Details of the above were set out in the Company’s circular dated 13 March 2008 (2007: Nil).

The Directors have reviewed the status of this transaction and considered the date of completion is uncertain as the set up procedures are still under negotiation.

As at 30 June 2008, pursuant to the terms of the co-operation agreement, the Company has paid a deposit of RMB20,000,000 (equivalent to approximately HK$21,900,000).

Significant investment, material acquisitions and disposals

Save for the major transaction in respect of the co-operation agreement with Xizang Medicine disclosed under the paragraph headed “Capital commitment” above, no significant investment, material acquisition or disposal was entered during the year under review.

Future plans for material investments or capital assets

The Group will not only continue to focus on its business in the provision of diagnostic testing services and securities investment but also to develop the healthcare and pharmaceutical market in China.

Employee information

As at 30 June 2008, there were 8 staff members (2007: 10) employed by the Group.

An employee’s remuneration includes basic salary, year-end bonus and other allowances. Employees are remunerated based on their respective educational background, position and working experience. There are annual performance appraisal for promotion and salary increase. In addition, each employee enjoys mandatory provident fund, medical allowance and other fringe benefit.

During the year ended 30 June 2008, the Group did not grant any share option to its employees or Directors.

Contingent liabilities

As at 30 June 2008, the Group had no significant contingent liabilities.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Charges

As at 30 June 2008, none of the assets of the Group were pledged as security for any banking facilities and borrowings.

For the year ended 30 June 2009

Financial review

For the year ended 30 June 2009, the Group recorded a turnover of approximately HK$4,890,000, representing an increase of 206.16% compared with that of the corresponding period in 2008.

Gross profit for the year under review was approximately HK$1,742,000, representing an increase of 177.05% compared with that of last financial year.

Basic earnings per share was approximately HK$0.414, compared with the basic loss per share of approximately HK$0.536 (restated) in the last financial year. The reason was mainly attributable to a gain on early redemption of convertible bonds during the year ended 30 June 2009.

Net profit attributable to the equity holders of the Company for the year ended 30 June 2009 was approximately HK$312,419,000 (2008: Loss of approximately HK$360,925,000).

In view of the Group’s active development of its core businesses and seeking for potential acquisitions or expansion, the Board did not recommend the payment of final dividend for the year ended 30 June 2009.

Review of operations

For the year ended 30 June 2009, the Group’s provision of its core diagnostic testing and healthcare services achieved sound results. Turnover increased by 56.87% to approximately HK$2,210,000.

As the recessionary pressure of Hong Kong’s economy ran deeper in 2008, the Group closed down our health products retail outlet in March 2009 and redirect our liquidity and human resources into the healthcare and pharmaceutical businesses.

Despite the growth of the Group’s core healthcare business, the investments held for trading recorded a loss of approximately HK$10,211,000 during the year under review, representing a decrease of 33.07% compared with a loss of approximately HK$15,256,000 in the last financial year.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Liquidity and financial resources

As at 30 June 2009, the Group held cash and bank balances of approximately HK$52,926,000 (2008: HK$179,460,000). Net current assets amounted to approximately HK$87,947,000 (2008: net current liabilities of approximately HK$265,488,000).

As at 30 June 2009, Current ratio (defined as total current assets divided by total current liabilities) was approximately 47.69 times (2008: 0.46 times). Gearing ratio, expressed as a percentage of total liabilities over total assets was approximately 0.02 (2008: approximately 2.14).

The Group had no bank borrowing as at 30 June 2009 (2008: Nil).

Capital structure

As at 30 June 2009, total equity attributable to Shareholders was approximately HK$89,855,000 (2008: capital deficiency of approximately HK$262,958,000).

Exchange Exposure

Most of the trading transactions, assets and liabilities of the Group were denominated in Hong Kong dollars.

Capital commitment

As at 30 June 2009, the Group and the Company had no significant capital commitment.

Significant investment, material acquisitions and disposals

Save for a termination agreement entered into between the Company and Xizang Medicine in November 2008, no significant investment, material acquisition or disposal was entered or proposed during the year under review. Details of the information were contained in the Company’s announcement dated 7 November 2008.

Future plans for material investments or capital assets

The Group will continue to focus on its business of operating the provision of diagnostic testing services and securities investment. The source of funding of the Group in the coming year is expected to be financed from internal resources of the Group.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Employee information

As at 30 June 2009, there were 13 staff members (2008: 8) employed by the Group.

The Group remunerates its employees mainly based on industry practices and their respective educational background, experience and performance. On top of the regular remuneration and discretionary bonus, share options may be granted to selected employee by reference to the Group’s performance as well as individual’s performance. In addition, each employee enjoys mandatory provident fund, medical allowance and other fringe benefits.

Contingent liabilities

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

Charges

As at 30 June 2009, none of the assets of the Group were pledged as security for any banking facilities and borrowings.

For the year ended 30 June 2010

Financial review

For the year ended 30 June 2010, the Group recorded revenue of approximately HK$4,704,000, representing a decrease of 3.8% compared with that of the corresponding period in 2009.

Gross profit for the year ended 30 June 2010 was approximately HK$2,424,000, representing an increase of 39.2% compared with that of the corresponding period in 2009.

Basic loss per share was approximately HK0.7 cents compared with the basic earnings per share of approximately HK206.7 cents in the financial year ended 30 June 2009. The turnaround was mainly attributable to the absence of an one-off gain on early redemption of convertible bonds for the year ended 30 June 2010.

Net loss of approximately HK$1,456,000 was recorded for the year ended 30 June 2010 (2009: net profit of approximately HK$312,419,000).

In view of the Group’s active development of its core business and seeking for potential acquisitions or expansion, the Board did not recommend the payment of final dividend for the year ended 30 June 2010.

Review of operations

For the year ended 30 June 2010, the Group’s provision of its core diagnostic testing and sale of pharmaceutical products achieved satisfactory results. Revenue from this segment increased by 44.1% to approximately HK$3,326,000.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The Group is undergoing business consolidation during the year ended 30 June 2010 which it has restructured its resources in the healthcare and pharmaceutical businesses, diversifying its core business into three segments – pharmaceuticals, property investment and assets investment related business. We believe that the new strategy will further optimize returns to our shareholders.

During the year ended 30 June 2010, the property and asset investments markets enjoyed strong growth. The investments held for trading a gain of approximately HK$22,239,000 (2009: a loss of approximately HK$10,211,000).

Liquidity and financial resources

As at 30 June 2010, the Group held cash and bank balances of approximately HK$42,973,000 (2009: HK$52,926,000). Net current assets amounted to approximately HK$84,745,000 (2009: HK$87,947,000).

As at 30 June 2010, Current ratio (defined as total current assets divided by total current liabilities) was approximately 71.78 times (2009: 47.69 times). Gearing ratio, expressed as a percentage of total liabilities over total assets was approximately 0.01 (2009: approximately 0.02).

The Group had no bank borrowing as at 30 June 2010 (2009: Nil).

Capital structure

As at 30 June 2010, total equity attributable to owners of the Company was approximately HK$145,943,000 (2009: HK$89,855,000).

Exchange Exposure

Most of the trading transactions, assets and liabilities of the Group were denominated in Hong Kong dollars.

Capital commitment

As at 30 June 2010, the Group had no significant capital commitment.

Significant investment, material acquisitions and disposals

Save for the acquisition of several properties for investment purpose, no significant investment, material acquisition or disposal was entered or proposed during the year under

29 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

review. Details of the information were contained in the Company’s announcements dated 2 October 2009, 7 May 2010 and 13 May 2010.

Future plans for material investments or capital assets

The Group will not only continue to focus on its business of operating the provision of diagnostic testing services and securities investment but also to diversify its business into property investment. The source of funding of the Group in the coming year is expected to be financed from internal resources of the Group.

Employee information

As at 30 June 2010, there were 8 staff members (2009: 13) employed by the Group.

Contingent liabilities

As at 30 June 2010, the Group had no significant contingent liabilities.

Charges

As at 30 June 2010, none of the assets of the Group were pledged as security for any banking facilities and borrowings.

3. WORKING CAPITAL

The Directors are of the opinion that, taking into account the existing cash and bank balances, the Enlarged Group has sufficient working capital for its present requirements, that is for at least the next 12 months from the date of publication of this circular, in the absence of unforeseeable circumstances.

4. INDEBTEDNESS OF THE ENLARGED GROUP

Borrowings

As at the close of the business on 30 November 2010, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Enlarged Group had no outstanding borrowings.

30 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Contingent liabilities

As at 30 November 2010, the Enlarged Group had no material contingent liabilities.

Disclaimer

Save as referred to above and apart from intra-group liabilities and normal trade payables, the Enlarged Group did not have, as at 30 November 2010, any mortgages, charges, debentures or other loan capital or bank overdrafts, loan or other similar indebtedness or liabilities under acceptances (other than normal trade bills) or acceptance credit or hire purchase commitments or any guarantees or any material contingent liabilities.

5. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 30 June 2010, the date to which the latest published audited consolidated financial statements of the Group were made up.

6. FINANCIAL AND TRADING PROSPECTS OF THE ENLARGED GROUP

The Group is principally engaged in the provision of diagnostic testing and healthcare services and sale of pharmaceutical products, provision of related research and development, advertising and public relationship services, property investment and investment holdings.

Advertising and public relationship services

As mentioned in the section headed “Reasons for and benefits of the Acquisition” of the Letter from the Board of this circular, the Board considers that the Acquisition represents a strategic opportunity to the Group to strengthen its advertising and public relationship services business. With a view to occupying a greater market share in the public relations industry, the Group is dedicated to providing financial backup to the Target Company for development and expansion after completion of the Acquisition to strengthen its marketing force. Given that the economic conditions in Hong Kong and the PRC are growing steadily, the Company is optimistic about the prospect of the advertising and public relations business of the Target Company.

Moreover, the Board considers that the Target Company can complement the Group’s existing operations. As the Company is listed on GEM, it can benefit from the advertising and public relations service for corporate planning and communications to the public provided by the Target Company on a regular basis. The Acquisition will enable the experienced management team of the Target Company to work closely with the Company and to offer tailor-made, targetintegrated communication strategies to the Company in a timely and professional manner and thus to enhance the corporate image of the Group. Meanwhile, one of the businesses of the Group is to provide advertising and public relations services, in particular in the area of design and publication of promotional materials. Upon completion of the Acquisition, the Group can assist the Target Company to produce high quality promotional materials to its clients and add values to the services of the Target Company so that the competitiveness of the services of the Enlarged Group can be enhanced.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Pharmaceutical business

The pharmaceutical industry in Hong Kong and PRC has been flourishing amidst the recovery of the macro-economy. The Group has grasped the opportunity to further sustain its foothold in the pharmaceutical market.

The Group will continue to maintain and consolidate its position as one of the providers of specialized diagnostic testing and professional healthcare services for private and public medical institutions. The management of the Group has been actively exploring and identifying potential acquisition opportunities to speed up its business expansion in the pharmaceutical market.

The Directors considered that the completion (which took place on 3 November 2010) of acquisition of the Island Kingdom Company Limited, which has a good market reputation and broad client base, represents a good opportunity for the Group to re-enter into the healthcare and pharmaceutical markets in Hong Kong. Further, the Directors believe that the business currently engaged in by the Island Kingdom Company Limited and its subsidiaries (“ Island Kingdom Group ”) can complement the Group’s existing business, which will enable the Group to tap the market potential of pharmaceutical products and health supplements through the established distribution channels of the Island Kingdom Group. The Directors are confident that with the experience of the management of the Island Kingdom Group and the financial support from the Group, the financial performance of the Island Kingdom Group is expected to turnaround and would generate profits to the Group in the near future.

After such completion, the Group has been actively identifying ways to diversify the products range of the Island Kingdom Group to include different kinds of pharmaceutical products, health food and healthcare products with the aim to enhance client base in Hong Kong.

Assets investment

As the global economy and investment climate has recovered and stabilized, the property investment segment has brought tremendous returns to the Shareholders for the year ended 30 June 2010. The Group holds a positive view towards the property market and assets investment for the coming years. As disclosed in the Company’s announcement dated 27 September 2010 and 11 November 2010, the Group has purchased certain car parks in Shatin, New Territories, Hong Kong and a commercial property in Argyle Street, Kowloon, Hong Kong respectively to enlarge its investment property portfolio. The Group will continue to pursue acquisition for quality properties and seek new business opportunities with good potential to further strengthen and diversify its current investment portfolio. The Group will capitalize on any opportunities arising from an economic recovery.

32 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

7. COMPANIES ACQUIRED BY THE GROUP SINCE THE LATEST PUBLISHED AUDITED ACCOUNTS

On 9 September 2010, the Group entered into an agreement for the acquisition of the entire issued share capital of Island Kingdom Company Limited, and all the shareholder’s loans to the Island Kingdom Group (amounting to approximately HK$37.60 million at the time of completion) at an aggregate consideration of HK$21.50 million, all of which was settled in cash to the vendor.

Island Kingdom Company Limited is a company incorporated in the British Virgin Islands, which together with its subsidiaries are principally engaged in manufacturing and sale of generic western medicines, as well as marketing and selling of health supplements, such as cordyceps, ganoderma lucidum spores, fish oil omega-3, probiotics, squalene and green tea extract.

There was no variation to the aggregate remuneration payable to and benefits in kind receivable by the directors of Island Kingdom Group after completion of such acquisition by the Group.

Details of the audited financial information of Island Kingdom Group prepared in accordance with Chapter 7 of the Listing Rules and the relevant notes thereof, the management and discussion and analysis of Island Kingdom Group, and the pro forma financial information of the Group as enlarged by the acquisition of Island Kingdom Group are set out in the circular of the Company dated 15 October 2010. Your attention is drawn to that circular for reference of the above information.

33 -

APPENDIX II FINANCIAL INFORMATION ON THE TARGET COMPANY

1. ACCOUNTANTS’ REPORT

The following is the text of a report, prepared for the sole purpose of inclusion in this circular, received from the reporting accountants, HLB Hodgson Impey Cheng, Chartered Accountants, Certified Public Accountants, Hong Kong.

==> picture [227 x 84] intentionally omitted <==

31/F, Gloucester Tower The Landmark 11 Pedder Street Central Hong Kong

31 December 2010

The Board of Directors China Natural Investment Company Limited

Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) regarding PR ASIA Consultants Limited (the “Target Company”) for the financial years ended 31 March 2008, 31 March 2009 and 31 December 2009 and the nine months ended 30 September 2010 (the “Relevant Periods”), for inclusion in the circular (the “Circular”) dated 31 December 2010 issued by China Natural Investment Company Limited (the “Company”) in connection with the proposed acquisition (the “Acquisition”) by Kenson Assets Limited, an indirect wholly-owned subsidiary of the Company, of the entire issued share capital of the Target Company.

The Target Company is a limited liability company incorporated in Hong Kong on 4 May 2001 with an authorized share capital of HK$10,000 divided into 10,000 ordinary shares of HK$1 each. As at the date of this report, the entire issued share capital of HK$100 is owned as to 70% and 30% by Kindness Spirit Company Limited (the “First Vendor”), a limited liability company incorporated in the British Virgin Islands (the “BVI”) and King Fuk Holdings Limited (the “Second Vendor”), a limited liability company incorporated in the BVI respectively. The principal activity of the Target Company is provision of advertising and public relation services in Hong Kong. The addresses of the Target Company’s registered office and principal place of business are 13/F., Kailey Tower, 16 Stanley Street, Central, Hong Kong.

The statutory financial statements of the Target Company for the financial years ended 31 March 2008, 31 March 2009 and 31 December 2009 were prepared in accordance with Small and Medium-sized Entity Financial Reporting Standard (“SME-FRS”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), and were audited by Chu and Chu, Certified Public Accountants, Hong Kong.

34 -

FINANCIAL INFORMATION ON THE TARGET COMPANY

APPENDIX II

For the purpose of this report, the directors of the Target Company have prepared financial statements of the Target Company for the Relevant Periods in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the HKICPA (the “Underlying Financial Statements”). We have for the purpose of this report, carried out appropriate audit procedures in respect of the Underlying Financial Statements in accordance with Hong Kong Standards on Auditing issued by the HKICPA.

We have examined the Underlying Financial Statements in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA.

The Financial Information of the Target Company for the Relevant Periods set out in this report has been prepared based on the Underlying Financial Statements for the purpose of preparing our report for inclusion in the Circular. No adjustments were considered necessary to adjust the Underlying Financial Statements in preparing our report for inclusion in the Circular.

The Underlying Financial Statements are the responsibility of the directors of the Target Company who approved their issue. The directors of the Company are responsible for the contents of the Circular in which this report is included. It is our responsibility to compile the Financial Information from the Underlying Financial Statements, to form an independent opinion 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 Target Company as at 31 March 2008, 31 March 2009, 31 December 2009 and 30 September 2010 and of its results and cash flows for each of the Relevant Periods.

The comparative statement of comprehensive income, statement of changes in equity and statement of cash flows of the Target Company for the nine months ended 30 September 2009 together with the notes thereon have been extracted from the Target Company’s unaudited financial information for the same period (the “30 September 2009 Financial Information”) which was prepared by the directors of the Target Company solely for the purpose of this report. We have reviewed the 30 September 2009 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 September 2009 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 could become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the 30 September 2009 Financial Information.

On the basis of our review which does not constitute an audit, we are not aware of any material modifications should be made to the 30 September 2009 Financial Information.

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FINANCIAL INFORMATION ON THE TARGET COMPANY

APPENDIX II

I. FINANCIAL INFORMATION

Statement of comprehensive income

Notes Revenue 8 Cost of services Gross profit Other income 9 Other gains/(losses) 10 Administrative expenses Other operating expenses Profit/(Loss) before tax Income tax expense 11 Profit/(Loss) and total comprehensive income/ (expense) for the year/period 12 Dividends 13	Year ended 31 March 2008 HK$ 15,213,231 (5,928,419 ) 9,284,812 17,000 – (7,136,643 ) (420,547 ) 1,744,622 (187,422 ) 1,557,200 1,000,000	Year ended 31 March 2009 HK$ 13,818,598 (2,125,116 ) 11,693,482 94,898 94 (9,671,247 ) (653,189 ) 1,464,038 (300,000 ) 1,164,038 1,900,000	Nine months Nine months Nine months ended ended ended 31 December 30 September 30 September 2009 2009 2010 HK$ HK$ HK$ (Unaudited) 15,278,753 10,475,814 18,930,124 (5,187,904 ) (2,773,225 ) (6,154,548 ) 10,090,849 7,702,589 12,775,576 33,263 113,206 59 (498,385 ) – 450 (6,077,888 ) (7,770,196 ) (5,534,756 ) (38,060 ) (627,774 ) (51,078 ) 3,509,779 (582,175 ) 7,190,251 (799,476 ) – (1,142,549 ) 2,710,303 (582,175 ) 6,047,702 – – –	Nine months Nine months Nine months ended ended ended 31 December 30 September 30 September 2009 2009 2010 HK$ HK$ HK$ (Unaudited) 15,278,753 10,475,814 18,930,124 (5,187,904 ) (2,773,225 ) (6,154,548 ) 10,090,849 7,702,589 12,775,576 33,263 113,206 59 (498,385 ) – 450 (6,077,888 ) (7,770,196 ) (5,534,756 ) (38,060 ) (627,774 ) (51,078 ) 3,509,779 (582,175 ) 7,190,251 (799,476 ) – (1,142,549 ) 2,710,303 (582,175 ) 6,047,702 – – –
				12,775,576 59 450 (5,534,756 ) (51,078 )
				7,190,251 (1,142,549 )
				6,047,702

				–

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FINANCIAL INFORMATION ON THE TARGET COMPANY

APPENDIX II

Statement of financial position

Notes Non-current assets Property, plant and equipment 17 Current assets Trade and other receivables 18 Amount due from a related company 19 Cash and bank balances 20 Current liabilities Trade and other payables 21 Amount due to a director 22 Tax payable Net current assets Net assets Capital and reserves Equity attributable to owners of the Target Company Share capital 23 Retained profits Total equity	As at 31 March 2008 HK$ 296,504 2,530,864 – 716,205 3,247,069 1,618,064 12,463 119,287 1,749,814 1,497,255 1,793,759 100 1,793,659 1,793,759	As at As at As at 31 March 31 December 30 September 2009 2009 2010 HK$ HK$ HK$ 1,296,099 378,964 239,463 2,073,170 1,964,534 1,908,006 6,580 – – 271,311 4,513,610 9,597,053 2,351,061 6,478,144 11,505,059 1,428,107 1,151,344 1,287,765 168,104 2,045,036 9,882 93,152 892,628 1,631,073 1,689,363 4,089,008 2,928,720 661,698 2,389,136 8,576,339 1,957,797 2,768,100 8,815,802 100 100 100 1,957,697 2,768,000 8,815,702 1,957,797 2,768,100 8,815,802	As at As at As at 31 March 31 December 30 September 2009 2009 2010 HK$ HK$ HK$ 1,296,099 378,964 239,463 2,073,170 1,964,534 1,908,006 6,580 – – 271,311 4,513,610 9,597,053 2,351,061 6,478,144 11,505,059 1,428,107 1,151,344 1,287,765 168,104 2,045,036 9,882 93,152 892,628 1,631,073 1,689,363 4,089,008 2,928,720 661,698 2,389,136 8,576,339 1,957,797 2,768,100 8,815,802 100 100 100 1,957,697 2,768,000 8,815,702 1,957,797 2,768,100 8,815,802
			1,908,006 – 9,597,053
			11,505,059
			1,287,765 9,882 1,631,073
			2,928,720
			8,576,339
			8,815,802

			100 8,815,702
			8,815,802

37 -

FINANCIAL INFORMATION ON THE TARGET COMPANY

APPENDIX II

Statement of changes in equity

Balance at 1 April 2007
Profit and total comprehensive
income for the year
Balance at 31 March 2008
Profit and total comprehensive
income for the year
Dividends paid_(Note 13)
Balance at 31 March 2009
Profit and total comprehensive
income for the year
Dividends paid(Note 13)_
Balance at 31 December 2009
Profit and total comprehensive
income for the period
Balance at 30 September 2010
(Unaudited)
Balance at 1 January 2009
Loss and total comprehensive
expense for the period
Balance at 30 September 2009
Representing:
Proposed final dividends
Others
Balance at 31 March 2008
Proposed final dividends
Others
Balance at 31 March 2009
Proposed final dividends
Others
Balance at 31 December 2009
Proposed final dividends
Others
Balance at 30 September 2010

Attributable to owners of
the Target Company
Share
Retained
Total
capital
profits
equity
HK$
HK$
HK$
100
236,459
236,559
–
1,557,200
1,557,200
100
1,793,659
1,793,759
–
1,164,038
1,164,038
–
(1,000,000 )
(1,000,000 )
100
1,957,697
1,957,797
–
2,710,303
2,710,303
–
(1,900,000 )
(1,900,000 )
100
2,768,000
2,768,100
–
6,047,702
6,047,702
100
8,815,702
8,815,802
100
3,934,777
3,934,877
–
(582,175 )
(582,175 )
100
3,352,602
3,352,702
1,000,000
793,659
1,793,659
1,900,000
57,697
1,957,697
–
2,768,000
2,768,000
–
8,815,702
8,815,702

38 -

FINANCIAL INFORMATION ON THE TARGET COMPANY

APPENDIX II

Statement of cash flows

Cash flows from operating activities Profit/(Loss) before tax Adjustments for: Depreciation of property, plant and equipment Impairment loss of trade receivables Loss on disposal of property, plant and equipment Write-off of property, plant and equipment Interest income Movements in working capital: (Increase)/Decrease in trade and other receivables (Increase)/Decrease in amount due from a related company Decrease in amount due from a director (Decrease)/Increase in trade and other payables Increase/(Decrease) in amount due to a director Cash generated from operating activities Income tax paid Net cash generated from operating activities	Year ended 31 March 2008 HK$ 1,744,622 133,522 420,547 – – (15,400 ) 2,283,291 (722,725 ) – 507,749 (476,726 ) 12,463 1,604,052 (159,097 ) 1,444,955	Nine months Nine months Nine months Year ended ended ended ended 31 March 31 December 30 September 30 September 2009 2009 2009 2010 HK$ HK$ HK$ HK$ (Unaudited) 1,464,038 3,509,779 (582,175 ) 7,190,251 590,264 446,029 433,139 160,701 589,714 38,060 627,774 51,078 – 498,385 – – 63,475 – – – (158 ) (40 ) (37 ) (9 ) 2,707,333 4,492,213 478,701 7,402,021 (898,767 ) 70,576 557,286 5,450 (6,580 ) 6,580 (4,580 ) – – – 150,045 – (189,957 ) (276,763 ) (146,417 ) 136,421 155,641 1,876,932 54,872 (2,035,154 ) 1,767,670 6,169,538 1,089,907 5,508,738 (326,135 ) – (301,102 ) (404,104 ) 1,441,535 6,169,538 788,805 5,104,634	Nine months Nine months Nine months Year ended ended ended ended 31 March 31 December 30 September 30 September 2009 2009 2009 2010 HK$ HK$ HK$ HK$ (Unaudited) 1,464,038 3,509,779 (582,175 ) 7,190,251 590,264 446,029 433,139 160,701 589,714 38,060 627,774 51,078 – 498,385 – – 63,475 – – – (158 ) (40 ) (37 ) (9 ) 2,707,333 4,492,213 478,701 7,402,021 (898,767 ) 70,576 557,286 5,450 (6,580 ) 6,580 (4,580 ) – – – 150,045 – (189,957 ) (276,763 ) (146,417 ) 136,421 155,641 1,876,932 54,872 (2,035,154 ) 1,767,670 6,169,538 1,089,907 5,508,738 (326,135 ) – (301,102 ) (404,104 ) 1,441,535 6,169,538 788,805 5,104,634
			7,402,021 5,450 – – 136,421 (2,035,154 )
			5,508,738 (404,104 )
			5,104,634

39 -

APPENDIX II

FINANCIAL INFORMATION ON THE TARGET COMPANY

Note Cash flows from investing activities Proceeds from disposal of property, plant and equipment Purchase of property, plant and equipment Deposit paid for acquisition of property, plant and equipment Interest received Net cash used in investing activities Cash flows from financing activities Dividends paid Net cash used in financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year/period Cash and cash equivalents at end of year/period Analysis of the balances of cash and cash equivalents Cash and bank balances 20	Year ended 31 March 2008 HK$ – (71,623 ) (766,747 ) 15,400 (822,970 ) – – 621,985 94,220 716,205 716,205	Year ended 31 March 2009 HK$ 185,997 (1,072,584 ) – 158 (886,429 ) (1,000,000 ) (1,000,000 ) (444,894 ) 716,205 271,311 271,311	Nine months Nine months Nine months ended ended ended 31 December 30 September 30 September 2009 2009 2010 HK$ HK$ HK$ (Unaudited) 1 – – (27,280 ) (116,321 ) (21,200 ) – – – 40 37 9 (27,239 ) (116,284 ) (21,191 ) (1,900,000 ) – – (1,900,000 ) – – 4,242,299 672,521 5,083,443 271,311 716,616 4,513,610 4,513,610 1,389,137 9,597,053 4,513,610 1,389,137 9,597,053	Nine months Nine months Nine months ended ended ended 31 December 30 September 30 September 2009 2009 2010 HK$ HK$ HK$ (Unaudited) 1 – – (27,280 ) (116,321 ) (21,200 ) – – – 40 37 9 (27,239 ) (116,284 ) (21,191 ) (1,900,000 ) – – (1,900,000 ) – – 4,242,299 672,521 5,083,443 271,311 716,616 4,513,610 4,513,610 1,389,137 9,597,053 4,513,610 1,389,137 9,597,053
				(21,191 )
				–
				–
				5,083,443 4,513,610
				9,597,053

				9,597,053

40 -

FINANCIAL INFORMATION ON THE TARGET COMPANY

APPENDIX II

Notes to the financial information

1. BASIS OF PREPARATION OF THE FINANCIAL INFORMATION

The Financial Information has been prepared on the historical cost convention except as otherwise stated in the accounting policies set out below.

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

The Financial Information of the Target Company is presented in Hong Kong dollars (“HK$”), which is the same as the functional currency of the Target Company.

2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

For the purpose of preparing and presenting the Financial Information for the Relevant Periods, the Target Company has consistently applied HKFRSs, Hong Kong Accounting Standards (“HKASs”), amendments and interpretations (“INT”) issued by the HKICPA that are effective for annual accounting years beginning on or after 1 January 2010.

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

HKFRSs (Amendments) Improvements to HKFRSs 2010[1] HKAS 24 (Revised) Related Party Disclosures[2] HKAS 32 (Amendment) Classification of Rights Issues[3] HKFRS 1 (Amendment) Limited Exemption from Comparative HKFRS 7 Disclosures for First-time Adopters[4] HKFRS 7 (Amendment) Disclosures – Transfers of Financial Assets[5] HKFRS 9 Financial Instruments[6] HK(IFRIC)–Int 14 (Amendment) Prepayments of a Minimum Funding Requirement[2] HK(IFRIC)–Int 19 Extinguishing Financial Liabilities with Equity Instruments[4]

1 Effective for annual periods beginning on or after 1 July 2010 and 1 January 2011, as appropriate.

2 Effective for annual periods beginning on or after 1 January 2011.

3 Effective for annual periods beginning on or after 1 February 2010.

4 Effective for annual periods beginning on or after 1 July 2010.

5 Effective for annual periods beginning on or after 1 July 2011.

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

HKFRS 9 Financial Instruments introduces new requirements for the classification and measurement of financial assets and will be effective from 1 January 2013, with earlier application permitted. The standard requires all recognized financial assets that are within the scope of HKAS 39 Financial Instruments: Recognition and Measurement to be measured at either amortized cost or fair value. Specifically, debt investments that (i) are held within a business model whose objective is to collect the contractual cash flows and (ii) have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost. All other debt investments and equity investments are measured at fair value. The application of HKFRS 9 might affect the classification and measurement of the Target Company’s financial assets.

The directors of the Target Company anticipate that the application of the other new and revised HKFRSs will have no material impact on the financial performance and financial position of the Target Company.

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FINANCIAL INFORMATION ON THE TARGET COMPANY

APPENDIX II

3. SIGNIFICANT ACCOUNTING POLICIES

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the course of the ordinary activities and net of discounts.

Service income is recognized when the services are provided.

Interest income from a financial asset is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

Operating lease

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

Property, plant and equipment

Property, plant and equipment including buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the statement of financial position at cost, less subsequent accumulated depreciation and subsequent accumulated impairment losses, if any.

Depreciation is recognized so as to write off the cost of assets less their residual values over their useful lives, using the straight-line method.

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

Foreign currencies

In preparing the financial statements of the Target Company, transactions in currencies other than the functional currency of the Target Company are recorded in the respective functional currency (i.e. the currency of the primary economic environment in which the Target Company operates) at the exchange rates prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at 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 recognized in profit or loss in the period in which they arise, except for exchange differences arising on a monetary item that forms part of the Target Company’s net investment in a foreign operation, in which case, such exchange differences are recognized in other comprehensive income in the Financial Information and will be reclassified from equity to profit or loss on disposal of the foreign operation. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which cases, the exchange differences are recognized directly in other comprehensive income.

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FINANCIAL INFORMATION ON THE TARGET COMPANY

APPENDIX II

Retirement benefit costs

Payments to defined contribution retirement benefit scheme are charged as expenses when employees have rendered services entitling them to the contributions.

Taxation

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

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

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the Financial Information and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized 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.

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

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Target Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is recognized in profit or loss, except when it relates to items that are recognized in other comprehensive income or directly in equity, in which case, the deferred tax is also recognized in other comprehensive income or directly in equity respectively.

Impairment of tangible assets

At the end of the reporting period, the Target Company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any.

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognized as an expense immediately, unless the relevant asset is carried at a revalued amount under another standard, in which case the impairment loss is treated as a revaluation decrease under that standard.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years. A reversal of an impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount under another standard, in which case the reversal of the impairment loss is treated as a revaluation increase under that standard.

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FINANCIAL INFORMATION ON THE TARGET COMPANY

APPENDIX II

Provisions

Provisions are recognized when the Target Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Target Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect is material).

Financial instruments

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

Financial assets

The Target Company’s financial assets are classified into one of the three categories, including financial assets at fair value through profit or loss (FVTPL), available-for-sale (AFS) financial assets and loans and receivables. All regular way purchases or sales of financial assets are recognized and derecognized 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 amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

Income is recognized on an effective interest basis for debt instruments other than financial assets classified as at FVTPL, of which interest income is included in net gains and losses.

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Financial assets at FVTPL

Financial assets are classified as at FVTPL when the financial asset is either held for trading or it is designated as at FVTPL.

A financial asset is classified as held for trading if:

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

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

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

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on the financial asset.

AFS financial assets

Available-for-sale financial assets are non-derivatives that are either designated or not classified as financial assets at FVTPL, loans and receivables or held-to-maturity investments.

Available-for-sale financial assets are measured at fair value at the end of the reporting period. Changes in fair value are recognized in other comprehensive income and accumulated under the heading of investments revaluation reserve until the financial asset is disposed of or determined to be impaired, at which time, the cumulative gain or loss previously accumulated in the investments revaluation reserve is reclassified to profit or loss (see the accounting policy in respect of impairment loss on financial assets below).

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 investments, they are measured at cost less any identified impairment losses at the end of the reporting period (see the accounting policy in respect of impairment loss on financial assets below).

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Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables (including trade and other receivables, amount due from a related company and cash and bank balances) are measured at amortized cost using the effective interest method, less any impairment (see the accounting policy in respect of impairment loss on financial assets below).

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of the reporting period. Financial assets are 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 investment have been affected.

For an AFS equity investment, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

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

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

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

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

For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the assets 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 recognized in profit or loss.

For financial assets measured at amortized 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 recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

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In respect of AFS equity securities, impairment losses previously recognized in profit or loss are not reversed through profit or loss in subsequent periods. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income and accumulated under the heading of investments revaluation reserve. In respect of AFS debt securities, impairment losses are subsequently reversed if an increase in the fair value of investment can be objectively related to an event occurring after the recognition of the impairment loss.

Financial liabilities and equity

Debt and equity instruments issued by the Target Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements 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 an entity after deducting all of its liabilities. The Target Company’s financial liabilities are generally classified into financial liabilities at FVTPL and other financial liabilities.

Effective interest method

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

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

Financial liabilities at FVTPL

Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at FVTPL on initial recognition.

A financial liability is classified as held for trading if:

it has been acquired principally for the purpose of repurchasing it in the near term; or
on initial recognition it is part of a portfolio of identified financial instruments that the Target Company manages together and has a recent actual pattern of short-term profittaking; or
it is a derivative that is not designated and effective as a hedging instrument.

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

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

Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss includes any interest paid on the financial liabilities.

Other financial liabilities

Other financial liabilities (including trade and other payables and amount due to a director) are subsequently measured at amortized cost using the effective interest method.

Equity instruments

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

Derecognition

The Target Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when a financial asset is transferred, the Target Company has transferred substantially all the risks and rewards of ownership of the asset to another entity. If the Target Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset the Target Company recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Target Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Target Company continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.

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

The Target Company derecognizes financial liabilities when, and only when, the Target Company’s obligations are discharged, canceled or they expire. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

Related parties

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

(a) the party, directly or indirectly through one or more intermediaries, (i) controls, is controlled by, or is under common control with, the Target Company; (ii) has an interest in the Target Company that gives it significant influence over the Target Company; or (iii) has joint control over the Target Company;
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(b) the party is an associate;
(c) the party is a jointly-controlled entity;
(d) the party is a member of the key management personnel of the Target Company or its parent;
(e) the party is a close member of the family of any individual referred to in (a) or (d);
(f) the party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (d) or (e); or
(g) the party is a post-employment benefit plan for the benefit of the employees of the Target Company, or of any entity that is a related party of the Target Company.

4. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Target Company’s accounting policies, which are described in Note 3, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and underlying assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the Relevant Periods in which the estimates are revised if the revisions affect only that period, or in the period of the revisions and future periods if the revisions affect both current and future periods.

Key sources of estimation uncertainty

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

Estimated impairment loss of trade and other receivables

The Target Company’s policy for doubtful receivables is based on the on-going evaluation of the collectability and aging analysis of the trade and other receivables and on management’s judgments. Considerable judgment is required in assessing the ultimate realization of these receivables, including the current creditworthiness and the past collection history of each debtor, and the present values of the estimated future cash flows discounted at the effective interest rates. If the financial conditions of the Target Company’s debtors were to deteriorate, resulting in an impairment of their ability to make payments, additional impairment loss of trade and other receivables may be required.

5. CAPITAL RISK MANAGEMENT

The Target Company manages its capital to ensure that the Target Company will be able to continue as a going concern while maximizing the return to stakeholders through the optimization of the debt and equity balance. The Target Company’s overall strategy remains unchanged during the Relevant Periods.

The capital structure of the Target Company consists of cash and cash equivalents and equity attributable to owners of the Target Company, comprising issued share capital and retained profits.

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The management reviews the capital structure regularly. As part of this review, the management considers the cost of capital and the risks associated with each class of capital. Based on recommendations of the management, the Target Company will balance its overall capital structure through the payment of dividends and the issue of new shares.

6. FINANCIAL INSTRUMENTS

(a) Categories of financial instruments

Financial assets Loans and receivables: – Trade and other receivables – Amount due from a related company – Cash and bank balances Financial liabilities Amortized cost: – Trade and other payables – Amount due to a director	As at 31 March 2008 HK$ 2,505,998 – 716,205 1,618,064 12,463	As at 31 March 2009 HK$ 2,058,627 6,580 271,311 1,428,107 168,104	As at As at 31 December 30 September 2009 2010 HK$ HK$ 1,964,534 1,908,006 – – 4,513,610 9,597,053 1,151,344 1,287,765 2,045,036 9,882	As at As at 31 December 30 September 2009 2010 HK$ HK$ 1,964,534 1,908,006 – – 4,513,610 9,597,053 1,151,344 1,287,765 2,045,036 9,882

				1,287,765 9,882

(b) Financial risk management objectives and policies

The Target Company’s activities expose it to a variety of financial risks: market risks (including foreign currency risk, interest rate risk and other price risk), credit risk and liquidity risk. The management has been monitoring these risk exposures to ensure appropriate measures are implemented on a timely and effective manner so as to mitigate or reduce such risks.

The Target Company’s major financial instruments include trade and other receivables, amount due from a related company, cash and bank balances, trade and other payables and amount due to a director. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Foreign currency risk management

The Target Company has minimal exposure to foreign currency risk as most of its business transactions, assets and liabilities are denominated in Hong Kong dollars. The Target Company currently does not have a formal foreign currency hedging policy. However, the management monitors foreign exchange exposure closely and will consider hedging significant foreign currency exposure should the need arise.

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Interest rate risk management

The Target Company has minimal exposure to interest rate risk as the Target Company did not have any interest-bearing liabilities during the Relevant Periods. The management of the Target Company considers that the Target Company’s exposure to interest rate risk was minimal during the Relevant Periods. The Target Company currently does not have a formal interest rate hedging policy. However, the management monitors interest rate exposure and will consider hedging the interest rate risk should the need arise.

Other price risks

As the Target Company has no significant investments in financial instruments at fair values, the Target Company is not exposed to significant price risk.

Credit risk management

At the end of each reporting period, the Target Company’s maximum exposure to credit risk which will cause a financial loss to the Target Company due to failure to discharge an obligation by the counterparties is arising from the carrying amount of the respective recognized financial assets as stated in the statement of financial position.

In order to minimize the credit risk, the management of the Target Company has delegated a team responsible for monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Target Company reviews the recoverable amount of each individual trade debt and debt investment at the end of each reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Target Company consider that the Target Company’s credit risk is significantly reduced.

The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies.

Other than concentration of credit risk on liquid funds which are deposited with several banks with high credit ratings, the Target Company does not have any other significant concentration of credit risk.

Liquidity risk management

The Target Company’s policy is to regularly monitor current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the short and long term.

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Liquidity tables

The following tables detail the Target Company’s remaining contractual maturity for its non-derivative financial liabilities based on the agreed repayment terms. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Target Company can be required to pay. The tables include both interest and principal cash flows.

As at 31 March 2008 Non-derivative financial liabilities – Trade and other payables – Amount due to a director As at 31 March 2009 Non-derivative financial liabilities – Trade and other payables – Amount due to a director As at 31 December 2009 Non-derivative financial liabilities – Trade and other payables – Amount due to a director As at 30 September 2010 Non-derivative financial liabilities – Trade and other payables – Amount due to a director	On demand or within one year HK$ 1,618,064 12,463 1,428,107 168,104 1,151,344 2,045,036 1,287,765 9,882	More than one year HK$ – – – – – – – –	Total undiscounted cash flows HK$ 1,618,064 12,463 1,428,107 168,104 1,151,344 2,045,036 1,287,765 9,882	Total carrying amount HK$ 1,618,064 12,463

				1,428,107 168,104

				1,151,344 2,045,036

				1,287,765 9,882

(c) Fair value of financial instruments

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

The fair values of financial assets and financial liabilities with standard terms and conditions and traded in active markets are determined with reference to quoted market bid and ask prices respectively.
The fair values of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models (e.g. discounted cash flow analysis using observable and/or unobservable inputs).
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The fair values of derivative instruments are calculated using quoted prices. Where such prices are not available, a discounted cash flow analysis is performed using the applicable yield curve for the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives.

The directors of the Target Company consider that the carrying amounts of financial assets and financial liabilities recorded in the Financial Information approximate to their fair values.

Fair value measurements recognized in the statement of financial position

Financial instruments that are measured subsequent to initial recognition at fair value, are grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

At the end of each reporting period, the Target Company did not have any assets and liabilities that were measured at the above fair value measurements hierarchy.

7. SEGMENT INFORMATION

The directors of the Target Company review the Target Company’s internal financial reporting and other information and also obtain other relevant external information in order to assess performance and allocate resources and operating segment is identified with reference to these.

The directors of the Target Company consider that the business of the Target Company is organized in one operating segment as provision of advertising and public relation services in Hong Kong. Additional disclosure in relation to segment information is not presented as the directors of the Target Company assess the performance of the only operating segment identified based on the consistent information as disclosed in the Financial Information.

The total net segment income/expense is equivalent to total comprehensive income/expense for the year/period as shown in the statement of comprehensive income and the total segment assets and total segment liabilities are equivalent to total assets and total liabilities as shown in the statement of financial position.

Details of interest income and depreciation in relation to the operating segment are disclosed in Notes 9 and 12 below respectively.

The Target Company is domiciled in Hong Kong with the Target Company’s major operations in Hong Kong. Total revenue, which is also the Target Company’s turnover, as disclosed in Note 8 below represented the revenue from external customers arising from provision of advertising and public relation services in Hong Kong. The directors of the Target Company consider that all the assets of the Target Company are located in Hong Kong.

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8. REVENUE

Income from provision of advertising and public relation services 9. OTHER INCOME Interest income from bank deposits Sundry income 10. OTHER GAINS/(LOSSES)	Year ended 31 March 2008 HK$ 15,213,231 Year ended 31 March 2008 HK$ 15,400 1,600 17,000	Nine months Nine months Nine months Year ended ended ended ended 31 March 31 December 30 September 30 September 2009 2009 2009 2010 HK$ HK$ HK$ HK$ (Unaudited) 13,818,598 15,278,753 10,475,814 18,930,124 Nine months Nine months Nine months Year ended ended ended ended 31 March 31 December 30 September 30 September 2009 2009 2009 2010 HK$ HK$ HK$ HK$ (Unaudited) 158 40 37 9 94,740 33,223 113,169 50 94,898 33,263 113,206 59	Nine months Nine months Nine months Year ended ended ended ended 31 March 31 December 30 September 30 September 2009 2009 2009 2010 HK$ HK$ HK$ HK$ (Unaudited) 13,818,598 15,278,753 10,475,814 18,930,124 Nine months Nine months Nine months Year ended ended ended ended 31 March 31 December 30 September 30 September 2009 2009 2009 2010 HK$ HK$ HK$ HK$ (Unaudited) 158 40 37 9 94,740 33,223 113,169 50 94,898 33,263 113,206 59
			59

Net foreign exchange gains Loss on disposal of property, plant and equipment	Year ended 31 March 2008 HK$ – – –	Nine months Nine months Nine months Year ended ended ended ended 31 March 31 December 30 September 30 September 2009 2009 2009 2010 HK$ HK$ HK$ HK$ (Unaudited) 94 – – 450 – (498,385 ) – – 94 (498,385 ) – 450	Nine months Nine months Nine months Year ended ended ended ended 31 March 31 December 30 September 30 September 2009 2009 2009 2010 HK$ HK$ HK$ HK$ (Unaudited) 94 – – 450 – (498,385 ) – – 94 (498,385 ) – 450
			450

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11. INCOME TAX EXPENSE

Current tax – Hong Kong Provision for current year/period (Over)/Under provision in prior years/periods	Year ended 31 March 2008 HK$ 194,385 (6,963 ) 187,422	Nine months Nine months Nine months Year ended ended ended ended 31 March 31 December 30 September 30 September 2009 2009 2009 2010 HK$ HK$ HK$ HK$ (Unaudited) 300,000 794,000 – 1,203,818 – 5,476 – (61,269 ) 300,000 799,476 – 1,142,549	Nine months Nine months Nine months Year ended ended ended ended 31 March 31 December 30 September 30 September 2009 2009 2009 2010 HK$ HK$ HK$ HK$ (Unaudited) 300,000 794,000 – 1,203,818 – 5,476 – (61,269 ) 300,000 799,476 – 1,142,549
			1,142,549

On 26 June 2008, the Hong Kong Legislative Council passed the Revenue Bill 2008 and reduced corporate profit tax rate from 17.5% to 16.5%, which is effective from the year of assessment 2008/2009. Hong Kong Profits Tax is calculated at 17.5% of the estimated assessable profit for the year ended 31 March 2008 and at 16.5% of the estimated assessable profit for the years ended 31 March 2009, 31 December 2009 and for the nine months ended 30 September 2009 and 30 September 2010.

The tax charge for the Relevant Periods can be reconciled to the profit/(loss) per the statement of comprehensive income as follows:

Profit/(Loss) before tax Tax at Hong Kong Profits Tax rate Tax effect of expenses not deductible for tax purpose Tax effect of income not taxable for tax purpose Tax effect of temporary differences not recognized Effect of tax exemption Tax effect of tax losses not recognized (Over)/Under provision in prior years/periods Income tax expense for the year/period	Year ended 31 March 2008 HK$ 1,744,622 305,309 56 (2,695 ) (83,285 ) (25,000 ) – (6,963 ) 187,422	Nine months Nine months Nine months Year ended ended ended ended 31 March 31 December 30 September 30 September 2009 2009 2009 2010 HK$ HK$ HK$ HK$ (Unaudited) 1,464,038 3,509,779 (582,175 ) 7,190,251 241,566 579,114 (96,059 ) 1,186,391 31,730 163,013 990 – (26 ) (7 ) (6 ) (1 ) 26,730 51,880 48,081 17,428 – – – – – – 46,994 – – 5,476 – (61,269 ) 300,000 799,476 – 1,142,549	Nine months Nine months Nine months Year ended ended ended ended 31 March 31 December 30 September 30 September 2009 2009 2009 2010 HK$ HK$ HK$ HK$ (Unaudited) 1,464,038 3,509,779 (582,175 ) 7,190,251 241,566 579,114 (96,059 ) 1,186,391 31,730 163,013 990 – (26 ) (7 ) (6 ) (1 ) 26,730 51,880 48,081 17,428 – – – – – – 46,994 – – 5,476 – (61,269 ) 300,000 799,476 – 1,142,549

			1,186,391 – (1 ) 17,428 – – (61,269 )
			1,142,549

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12. PROFIT/(LOSS) FOR THE YEAR/PERIOD

Profit/(Loss) for the year/period has been arrived at after charging:

Employee benefits expense: Directors’ emoluments_(Note 14) Other staff’s salaries and allowances Other staff’s retirement scheme contributions Total employee benefits expense Auditors’ remuneration Depreciation of property, plant and equipment Operating lease rentals in respect of rented premises(Note)_ Impairment loss of trade receivables (included in other operating expenses) Write-off of property, plant and equipment (included in other operating expenses) Loss on disposal of property, plant and equipment	Year ended 31 March 2008 HK$ 1,970,004 2,692,249 82,157 4,744,410 25,000 133,522 629,846 420,547 – –	Nine months Nine months Nine months Year ended ended ended ended 31 March 31 December 30 September 30 September 2009 2009 2009 2010 HK$ HK$ HK$ HK$ (Unaudited) 2,436,338 1,077,128 1,812,292 369,000 3,443,085 2,384,227 2,773,111 2,890,705 106,284 79,394 81,707 89,719 5,985,707 3,540,749 4,667,110 3,349,424 25,000 25,000 – – 590,264 446,029 433,139 160,701 625,871 636,957 636,957 636,957 589,714 38,060 627,774 51,078 63,475 – – – – 498,385 – –	Nine months Nine months Nine months Year ended ended ended ended 31 March 31 December 30 September 30 September 2009 2009 2009 2010 HK$ HK$ HK$ HK$ (Unaudited) 2,436,338 1,077,128 1,812,292 369,000 3,443,085 2,384,227 2,773,111 2,890,705 106,284 79,394 81,707 89,719 5,985,707 3,540,749 4,667,110 3,349,424 25,000 25,000 – – 590,264 446,029 433,139 160,701 625,871 636,957 636,957 636,957 589,714 38,060 627,774 51,078 63,475 – – – – 498,385 – –
			3,349,424

			– 160,701 636,957 51,078 – –

Note: Operating lease rental expenses of HK$905,000, HK$1,376,500, HK$546,000, HK$846,000 and HK$Nil were included in directors’ emoluments for the years ended 31 March 2008, 31 March 2009 and 31 December 2009, the nine months ended 30 September 2009 and 30 September 2010 respectively. The remaining operating lease rental expenses were included in administrative expenses for each of the Relevant Periods.

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13. DIVIDENDS

Proposed final dividends: – HK$10,000 each per ordinary share – HK$19,000 each per ordinary share	Year ended 31 March 2008 HK$ 1,000,000 – 1,000,000	Nine months Nine months Nine months Year ended ended ended ended 31 March 31 December 30 September 30 September 2009 2009 2009 2010 HK$ HK$ HK$ HK$ (Unaudited) – – – – 1,900,000 – – – 1,900,000 – – –	Nine months Nine months Nine months Year ended ended ended ended 31 March 31 December 30 September 30 September 2009 2009 2009 2010 HK$ HK$ HK$ HK$ (Unaudited) – – – – 1,900,000 – – – 1,900,000 – – –
			–

Subsequent to the end of the Relevant Periods, the directors of the Target Company declared and paid an interim dividend of HK$50,000 per share amounting in aggregate to HK$5,000,000.

14. DIRECTORS’ EMOLUMENTS

The emoluments paid or payable to each of the Target Company’s directors were as follows:

Year ended 31 March 2008 Ms. Leung Cheuk Chi, Maria Mr. Leung Chi Wing Mr. Ho Mo Ching Year ended 31 March 2009 Ms. Leung Cheuk Chi, Maria Mr. Leung Chi Wing Mr. Ho Mo Ching Nine months ended 31 December 2009 Mr. Ling Koon Wah_(Note (i)) Mr. Chow Kai Wah, Gary(Note (i)) Ms. Leung Cheuk Chi, Maria(Note (ii)) Mr. Leung Chi Wing(Note (ii)) Mr. Ho Mo Ching(Note (ii))_	Other emoluments Contributions Salaries and to retirement Fees other benefits benefit scheme HK$ HK$ HK$ – 825,000 6,000 156,000 727,004 – 256,000 – – 412,000 1,552,004 6,000 – 796,500 6,000 156,000 1,321,838 – 156,000 – – 312,000 2,118,338 6,000 – 120,000 3,000 – – – – 60,000 3,000 156,000 579,128 – 156,000 – – 312,000 759,128 6,000	Total HK$ 831,000 883,004 256,000
		1,970,004

		802,500 1,477,838 156,000
		2,436,338

		123,000 – 63,000 735,128 156,000
		1,077,128

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Nine months ended 30 September 2010 Mr. Ling Koon Wah Mr. Chow Kai Wah, Gary (Unaudited) Nine months ended 30 September 2009 Ms. Leung Cheuk Chi, Maria Mr. Leung Chi Wing Mr. Ho Mo Ching Notes:	Other emoluments Contributions Salaries and to retirement Fees other benefits benefit scheme HK$ HK$ HK$ – 360,000 9,000 – – – – 360,000 9,000 – 590,000 4,500 156,000 905,792 – 156,000 – – 312,000 1,495,792 4,500	Total HK$ 369,000 –
		369,000

		594,500 1,061,792 156,000
		1,812,292

(i) Appointed on 2 November 2009.
(ii) Resigned on 2 November 2009, reappointed on 3 November 2009 and resigned on 31 December 2009.

15. EMPLOYEES’ EMOLUMENTS

Of the five individuals with the highest emoluments in the Target Company for the years ended 31 March 2008, 31 March 2009 and 31 December 2009 and the nine months ended 30 September 2009 and 30 September 2010, two, two, one, two and one of directors of the Target Company whose emoluments are included in the disclosures in Note 14 above. The emoluments of the remaining three, three, four, three and four individuals were as follows:

Salaries and other benefits Contribution to retirement benefits scheme	Year ended 31 March 2008 HK$ 1,367,500 32,000 1,399,500	Nine months Nine months Nine months Year ended ended ended ended 31 March 31 December 30 September 30 September 2009 2009 2009 2010 HK$ HK$ HK$ HK$ (Unaudited) 1,634,535 1,653,838 1,397,758 1,518,729 36,000 36,000 27,000 36,000 1,670,535 1,689,838 1,424,758 1,554,729	Nine months Nine months Nine months Year ended ended ended ended 31 March 31 December 30 September 30 September 2009 2009 2009 2010 HK$ HK$ HK$ HK$ (Unaudited) 1,634,535 1,653,838 1,397,758 1,518,729 36,000 36,000 27,000 36,000 1,670,535 1,689,838 1,424,758 1,554,729
			1,554,729

Their emoluments were all within HK$1,000,000.

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FINANCIAL INFORMATION ON THE TARGET COMPANY

APPENDIX II

During the Relevant Periods, no emoluments were paid by the Target Company to any of the directors or the five highest paid individuals (including directors and employees) as an inducement to join or upon joining the Target Company or as compensation for loss of office. None of the directors waived any emoluments during the Relevant Periods.

16. EARNINGS/LOSS PER SHARE

No earnings/loss per share information is presented as its inclusion, for the purpose of this report, is not considered meaningful.

17. PROPERTY, PLANT AND EQUIPMENT

Office equipment, Leasehold furniture and improvements fixtures HK$ HK$ COST Balance at 1 April 2007 285,392 296,669 Additions – 71,623 Balance at 31 March 2008 285,392 368,292 Additions 694,668 377,916 Disposals (285,392 ) (298,304 ) Balance at 31 March 2009 694,668 447,904 Additions – 27,280 Disposals – – Balance at 31 December 2009 694,668 475,184 Additions – 21,200 Disposals (694,668 ) – Balance at 30 September 2010 – 496,384 ACCUMULATED DEPRECIATION AND IMPAIRMENT Balance at 1 April 2007 285,392 217,261 Charge for the year – 40,524 Balance at 31 March 2008 285,392 257,785 Charge for the year 347,334 89,581 Eliminated on disposals (285,392 ) (234,829 ) Balance at 31 March 2009 347,334 112,537 Charge for the year 260,500 70,517 Eliminated on disposals – – Balance at 31 December 2009 607,834 183,054 Charge for the period 86,834 73,867 Eliminated on disposals (694,668 ) – Balance at 30 September 2010 – 256,921	Motor vehicles HK$ 464,991 – 464,991 766,747 (464,991 ) 766,747 – (766,747 ) – – – – 185,996 92,998 278,994 153,349 (278,994 ) 153,349 115,012 (268,361 ) – – – –	Total HK$ 1,047,052 71,623
		1,118,675 1,839,331 (1,048,687 )
		1,909,319 27,280 (766,747 )
		1,169,852 21,200 (694,668 )
		496,384
		688,649 133,522
		822,171 590,264 (799,215 )
		613,220 446,029 (268,361 )
		790,888 160,701 (694,668 )
		256,921

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FINANCIAL INFORMATION ON THE TARGET COMPANY

APPENDIX II

Office equipment, Leasehold furniture and improvements fixtures HK$ HK$ CARRYING AMOUNTS Balance at 30 September 2010 – 239,463 Balance at 31 December 2009 86,834 292,130 Balance at 31 March 2009 347,334 335,367 Balance at 31 March 2008 – 110,507	Motor vehicles HK$ – – 613,398 185,997	Total HK$ 239,463

		378,964

		1,296,099

		296,504

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

Leasehold improvements	: 50%
Office equipment, furniture and fixtures	: 20%
Motor vehicles	: 20%

18. TRADE AND OTHER RECEIVABLES

Trade receivables Deposits and prepayment	As at 31 March 2008 HK$ 1,305,793 1,225,071 2,530,864	As at 31 March 2009 HK$ 1,605,587 467,583 2,073,170	As at As at 31 December 30 September 2009 2010 HK$ HK$ 1,714,094 1,657,566 250,440 250,440 1,964,534 1,908,006	As at As at 31 December 30 September 2009 2010 HK$ HK$ 1,714,094 1,657,566 250,440 250,440 1,964,534 1,908,006
				1,908,006

Included in the balances of deposits and prepayment at 31 March 2008 and 31 March 2009 was a rental deposit of HK$200,000 paid to a related company, Fordbest Limited.

The following is an aged analysis of trade receivables, presented based on the invoice date, net of allowance for doubtful debts:

Within 30 days 31 – 60 days 61 – 90 days 91 – 120 days More than 120 days	As at 31 March 2008 HK$ 657,019 185,163 352,378 111,233 – 1,305,793	As at 31 March 2009 HK$ 1,041,924 242,730 162,765 30,026 128,142 1,605,587	As at As at 31 December 30 September 2009 2010 HK$ HK$ 1,104,078 1,187,400 514,183 220,290 70,833 – 25,000 84,876 – 165,000 1,714,094 1,657,566	As at As at 31 December 30 September 2009 2010 HK$ HK$ 1,104,078 1,187,400 514,183 220,290 70,833 – 25,000 84,876 – 165,000 1,714,094 1,657,566
				1,657,566

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FINANCIAL INFORMATION ON THE TARGET COMPANY

APPENDIX II

The Target Company grants an average credit period of 30 days to its customers. No interest is charged on overdue trade receivables.

Trade receivables disclosed above include amounts (see below for aged analysis) which are past due at the end of each of the reporting period but against which the Target Company has not recognized an allowance for doubtful receivables because there has not been a significant change in credit quality and the amounts are still considered recoverable. The Target Company does not hold any collateral or other credit enhancements over these balances.

Ageing of past due but not impaired

Overdue by: 1 – 30 days 31 – 60 days 61 – 90 days More than 90 days	As at 31 March 2008 HK$ 185,163 352,378 111,233 – 648,774	As at 31 March 2009 HK$ 242,730 162,765 30,026 128,142 563,663	As at As at 31 December 30 September 2009 2010 HK$ HK$ 514,183 220,290 70,833 – 25,000 84,876 – 165,000 610,016 470,166	As at As at 31 December 30 September 2009 2010 HK$ HK$ 514,183 220,290 70,833 – 25,000 84,876 – 165,000 610,016 470,166
				470,166

19. AMOUNT DUE FROM A RELATED COMPANY

Fordbest Limited Maximum amount outstanding during the year/period:	As at 31 March 2008 HK$ – –	As at 31 March 2009 HK$ 6,580 6,580	As at As at 31 December 30 September 2009 2010 HK$ HK$ – – – –	As at As at 31 December 30 September 2009 2010 HK$ HK$ – – – –

				–

The Target Company’s former director, Ms. Leung Cheuk Chi, Maria has controlling interest in Fordbest Limited. The balance was unsecured, interest-free and had no fixed terms of repayment.

20. CASH AND BANK BALANCES

Cash at banks and on hand	As at 31 March 2008 HK$ 716,205	As at 31 March 2009 HK$ 271,311	As at As at 31 December 30 September 2009 2010 HK$ HK$ 4,513,610 9,597,053

The bank balances carried interest at floating rates based on daily bank deposit rates.

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FINANCIAL INFORMATION ON THE TARGET COMPANY

APPENDIX II

21. TRADE AND OTHER PAYABLES

Trade payables Provision for staff bonus Other payables and accruals	As at 31 March 2008 HK$ 305,062 1,081,895 231,107 1,618,064	As at 31 March 2009 HK$ 317,074 902,463 208,570 1,428,107	As at As at 31 December 30 September 2009 2010 HK$ HK$ 819,918 1,133,622 254,038 84,680 77,388 69,463 1,151,344 1,287,765	As at As at 31 December 30 September 2009 2010 HK$ HK$ 819,918 1,133,622 254,038 84,680 77,388 69,463 1,151,344 1,287,765
				1,287,765

The following is an aged analysis of trade payables based on the invoice date:

0 – 30 days 31 – 60 days 61 – 90 days 91 – 120 days More than 120 days	As at 31 March 2008 HK$ 6,300 210,794 4,000 – 83,968 305,062	As at 31 March 2009 HK$ 32,110 206,170 12,000 – 66,794 317,074	As at As at 31 December 30 September 2009 2010 HK$ HK$ 564,502 1,113,500 226,570 9,500 27,676 – 1,170 10,022 – 600 819,918 1,133,622	As at As at 31 December 30 September 2009 2010 HK$ HK$ 564,502 1,113,500 226,570 9,500 27,676 – 1,170 10,022 – 600 819,918 1,133,622
				1,133,622

22. AMOUNT DUE TO A DIRECTOR

The amount due was unsecured, interest-free and had no fixed terms of repayment.

23. SHARE CAPITAL

*Authorized* 10,000 ordinary shares of HK$1 each *Issued and fully paid* 100 ordinary shares of HK$1 each	As at 31 March 2008 HK$ 10,000 100	As at 31 March 2009 HK$ 10,000 100	As at As at 31 December 30 September 2009 2010 HK$ HK$ 10,000 10,000 100 100	As at As at 31 December 30 September 2009 2010 HK$ HK$ 10,000 10,000 100 100

				100

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FINANCIAL INFORMATION ON THE TARGET COMPANY

APPENDIX II

24. DEFERRED TAXATION

At the end of each reporting period, the major items of deferred taxation which have not been recognized are as follows:

	As at	As at	As at	As at
	31 March	31 March	31 December	30 September
	2008	2009	2009	2010
	HK$	HK$	HK$	HK$
Unrecognized deferred tax
assets/(liabilities) arising from
decelerated/(accelerated) tax depreciation	35,816	(55,540 )	57,264	74,692

No deferred tax asset has been recognized in respect of the decelerated tax depreciation due to the unpredictability of future profit streams.

Deferred tax liabilities arising from accelerated tax depreciation have not been recognized in the Financial Information as the amount was considered to be immaterial.

25. RETIREMENT BENEFIT SCHEME

The Target Company operates a Mandatory Provident Fund Scheme for all qualifying employees in Hong Kong. The assets of the plans are held separately from those of the Target Company in funds under the control of trustees.

For each of the years ended 31 March 2008, 31 March 2009 and 31 December 2009 and the nine months ended 30 September 2009 and 30 September 2010, the total expense recognized in the statement of comprehensive income of HK$88,157, HK$112,284, HK$85,394, HK$86,207 and HK$98,719 represents contributions payable to the plan by the Target Company at rates specified in the rules of the plan.

26. OPERATING LEASES

The Target Company as lessee

At the end of each reporting period, the Target Company had commitments for future minimum lease payments under non-cancelable operating leases which fall due as follows:

Within one year In the second to fifth years inclusive	As at 31 March 2008 HK$ 536,000 – 536,000	As at 31 March 2009 HK$ 1,149,276 1,061,595 2,210,871	As at As at 31 December 30 September 2009 2010 HK$ HK$ 849,276 643,806 424,638 – 1,273,914 643,806	As at As at 31 December 30 September 2009 2010 HK$ HK$ 849,276 643,806 424,638 – 1,273,914 643,806
				643,806

Operating leases relate to office premises and directors’ quarters with lease terms of between 1 to 3

years.

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FINANCIAL INFORMATION ON THE TARGET COMPANY

APPENDIX II

27. RELATED PARTY TRANSACTIONS

In addition to those related party transactions and balances disclosed elsewhere in the Financial Information, the Target Company had the following significant transactions with its related parties during the Relevant Periods:

				Nine months	Nine months	Nine months	Nine months	Nine months
		Year ended	Year ended	ended		ended		ended
		31 March	31 March	31 December	30	September	30	September
		2008	2009	2009		2009		2010
		HK$	HK$	HK$		HK$		HK$
						(Unaudited)
(i)	Rent paid to a related
	company	700,000	1,200,000	546,000		846,000		–

The related company is controlled by a former director, Ms. Leung Cheuk Chi, Maria.
(ii) During the years ended 31 March 2008, 31 March 2009 and 31 December 2009, a former director had executed a personal guarantee to the extent of HK$150,000 to a bank to secure general banking facilities granted to the Target Company.
(iii) During the years ended 31 March 2009 and 31 December 2009, the Target Company advanced loans to a former director, Ms. Leung Cheuk Chi, Maria, with the maximum outstanding of HK$1,157,778 and HK$1,543,445 respectively. The loans were unsecured, interest-free and had no fixed terms of repayment. The loans did not have any outstanding balances as at 31 March 2009 and 31 December 2009.
(iv) During the year ended 31 March 2009, the Target Company disposed of a motor vehicle at its carrying amount of HK$185,997 to a former director, Ms. Leung Cheuk Chi, Maria.
(v) The remuneration of key management personnel during the Relevant Periods was as follows:

Compensation of key management personnel Short-term employee benefits Post-employment benefits	Year ended 31 March 2008 HK$ 1,964,004 6,000 1,970,004	Nine months Nine months Nine months Year ended ended ended ended 31 March 31 December 30 September 30 September 2009 2009 2009 2010 HK$ HK$ HK$ HK$ (Unaudited) 2,430,338 1,071,128 1,807,792 360,000 6,000 6,000 4,500 9,000 2,436,338 1,077,128 1,812,292 369,000	Nine months Nine months Nine months Year ended ended ended ended 31 March 31 December 30 September 30 September 2009 2009 2009 2010 HK$ HK$ HK$ HK$ (Unaudited) 2,430,338 1,071,128 1,807,792 360,000 6,000 6,000 4,500 9,000 2,436,338 1,077,128 1,812,292 369,000
			369,000

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APPENDIX II FINANCIAL INFORMATION ON THE TARGET COMPANY

II. EVENTS AFTER THE REPORTING PERIOD

Save as disclosed elsewhere in the Financial Information, no significant event took place subsequent to 30 September 2010.

III. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of the Target Company have been prepared in respect of any period subsequent to 30 September 2010.

Yours faithfully,

HLB Hodgson Impey Cheng Chartered Accountants Certified Public Accountants Hong Kong

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FINANCIAL INFORMATION ON THE TARGET COMPANY

APPENDIX II

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS OF THE TARGET COMPANY

For the financial year ended 31 March 2008

(a) Turnover

For the year ended 31 March 2008, PR ASIA recorded a turnover of approximately HK$15,213,000 representing an increase of approximately 47.11% compared with that of last financial year.

(b) Gross profit margin

For the year ended 31 March 2008, PR ASIA recorded a gross profit of approximately HK$9,285,000. Gross profit margin was approximately 61%.

(c) Administrative and other operating expenses

For the year ended 31 March 2008, administrative and other operating expenses was approximately HK$7,557,000. This mainly represented employee benefits expense, including directors’ emoluments, of approximately HK$4,744,000, rental expenses of approximately HK$630,000, impairment loss of trade receivables of approximately HK$421,000 and depreciation of approximately HK$134,000.

(d) Net Profit

For the year ended 31 March 2008, PR ASIA recorded a net profit of approximately HK$1,557,000.

(e) Liquidity and financial resources

As at 31 March 2008, PR ASIA had current assets and total assets of approximately HK$3,247,000 and HK$3,544,000 respectively. The PR ASIA’s current ratio, calculated based on current assets over current liabilities was 1.86.

PR ASIA financed its operation primarily from internally generated resources. As at 31 March 2008, the PR ASIA had cash and bank balances of approximately HK$716,000. The gearing ratio of PR ASIA, calculated on the basis of total liabilities divided by total assets was 0.49.

(f) Capital structure

As at 31 March 2008, issued share capital was HK$100 and there was no other issued or outstanding loan capital, preference shares or convertible securities.

(g) Trade receivables and trade payables

As at 31 March 2008, approximately 64.50% of trade receivables had an ageing within 60 days and approximately 71.16% of trade payables had an ageing within 60 days.

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FINANCIAL INFORMATION ON THE TARGET COMPANY

APPENDIX II

(h) Foreign exchange risk

Foreign exchange risk was minimal as majority of transactions were denominated in Hong Kong dollars. PR ASIA did not have a foreign currency hedging policy.

(i) Capital commitment

As at 31 March 2008, PR ASIA did not have any capital commitment.

(j) Contingent liability

As at 31 March 2008, PR ASIA did not have any contingent liability.

(k) Significant investment and material acquisitions and disposals

No significant investment, material acquisition or disposal was entered during the period under review.

(l) Future plans for material investments

PR ASIA will continue to focus on its core business in the provision of advertising and public relation services in Hong Kong.

(m) Employee information

As at 31 March 2008, PR ASIA employed approximately 11 employees. PR ASIA continues to maintain and upgrade the capabilities of its workforce by providing them with adequate and regular training. PR ASIA remunerates its employees mainly based on industry practices and individual’s performance and experience. Total staff cost, including directors’ emoluments, for the year ended 31 March 2008 was approximately HK$4,744,000.

(n) Charges

As at 31 March 2008, PR ASIA did not have any charges.

For the financial year ended 31 March 2009

(a) Turnover

For the year ended 31 March 2009, PR ASIA recorded a turnover of approximately HK$13,819,000, representing a decrease of 9.17% compared with that last financial year.

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FINANCIAL INFORMATION ON THE TARGET COMPANY

APPENDIX II

(b) Gross profit margin

For the year ended 31 March 2009, PR ASIA recorded a gross profit of approximately HK$11,693,000 (31 March 2008: approximately HK$9,285,000). Gross profit margin was approximately 85% (31 March 2008: approximately 61%).

(c) Administrative and other operating expenses

For the year ended 31 March 2009, administrative and other operating expenses was approximately HK$10,324,000 (31 March 2008: approximately HK$7,557,000). This mainly represented employee benefits expense, including directors’ emoluments, of approximately HK$5,986,000, rental expenses of approximately HK$626,000, impairment loss of trade receivables of approximately HK$590,000 and depreciation of approximately HK$590,000.

(d) Net Profit

For the year ended 31 March 2009, PR ASIA recorded a net profit of approximately HK$1,164,000 (31 March 2008: approximately HK$1,557,000).

(e) Liquidity and financial resources

As at 31 March 2009, PR ASIA had current assets and total assets of approximately HK$2,351,000 and HK$3,647,000 respectively. The PR ASIA’s current ratio, calculated based on current assets over current liabilities was 1.39 (31 March 2008: 1.86), reflecting a healthy liquidity position even the cash and bank balance have decreased from approximately HK$716,000 to approximately HK$271,000 due to PR ASIA have used approximately HK$1,073,000 to purchase property plant and equipment for the year ended 31 March 2009.

The PR ASIA financed its operation primarily from internally generated resources. As at 31 March 2009, the PR ASIA had cash and bank balances of approximately HK$271,000. The gearing ratio of PR ASIA, calculated on the basis of total liabilities divided by total assets was 0.46 (31 March 2008: 0.49).

(f) Capital structure

As at 31 March 2009, issued share capital was HK$100 and there was no other issued or outstanding loan capital, preference shares or convertible securities.

(g) Trade receivables and trade payables

As at 31 March 2009, approximately 80.01% of trade receivables had an ageing within 60 days and approximately 75.15% of trade payables had an ageing within 60 days.

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FINANCIAL INFORMATION ON THE TARGET COMPANY

APPENDIX II

(h) Foreign exchange risk

Foreign exchange risk was minimal as majority of transactions were denominated in Hong Kong dollars. PR ASIA did not have a foreign currency hedging policy.

(i) Capital commitment

As at 31 March 2009, PR ASIA did not have any capital commitment.

(j) Contingent liability

As at 31 March 2009, PR ASIA did not have any contingent liability.

(k) Significant investment and material acquisitions and disposals

No significant investment, material acquisition or disposal was entered during the period under review.

(l) Future plans for material investments

PR ASIA will continue to focus on its core business in the provision of advertising and public relation services in Hong Kong.

(m) Employee information

As at 31 March 2009, PR ASIA employed approximately 12 employees (31 March 2008: approximately 11). PR ASIA continues to maintain and upgrade the capabilities of its workforce by providing them with adequate and regular training. PR ASIA remunerates its employees mainly based on industry practices and individual’s performance and experience. Total staff cost, including directors’ emoluments, for year ended 31 March 2009 was approximately HK$5,986,000.

(n) Charges

As at 31 March 2009, PR ASIA did not have any charges.

For the financial year ended 31 December 2009

(a) Turnover

For the nine months ended 31 December 2009, PR ASIA recorded a turnover of approximately HK$15,279,000 representing an increase of approximately 10.57% as compared with that of financial year ended 31 March 2009.

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FINANCIAL INFORMATION ON THE TARGET COMPANY

APPENDIX II

(b) Gross profit margin

For the nine months ended 31 December 2009, PR ASIA recorded a gross profit of approximately HK$10,091,000 (31 March 2009: approximately HK$11,693,000). Gross profit margin was approximately 66% (31 March 2009: approximately 85%).

(c) Administrative and other operating expenses

For the nine months ended 31 December 2009, administrative and other operating expenses was approximately HK$6,116,000 (31 March 2009: approximately HK$10,324,000). This mainly represented employee benefits expense, including directors’ emoluments, of approximately HK$3,541,000, rental expenses of approximately HK$637,000, impairment loss of trade receivables of approximately HK$38,000, depreciation of approximately HK$446,000 and loss on disposal of property, plant and equipment of approximately HK$498,000.

(d) Net Profit

For the nine months ended 31 December 2009, PR ASIA recorded a net profit of approximately HK$2,710,000 (31 March 2009: approximately HK$1,164,000).

(e) Liquidity and financial resources

As at 31 December 2009, PR ASIA had current assets and total assets of approximately HK$6,478,000 and HK$6,857,000 respectively. The PR ASIA’s current ratio, calculated based on current assets over current liabilities was 1.58 (31 March 2009: 1.39). The strong liquid position was attributable to the effective financial management of PR ASIA.

The PR ASIA financed its operation primarily from internally generated resources. As at 31 December 2009, the PR ASIA had cash and bank balances of approximately HK$4,514,000. The gearing ratio of PR ASIA, calculated on the basis of total liabilities divided by total assets was 0.60 (31 March 2009: 0.46).

(f) Capital structure

As at 31 December 2009, issued share capital was HK$100 and there was no other issued or outstanding loan capital, preference shares or convertible securities.

(g) Trade receivables and trade payables

As at 31 December 2009, approximately 94.41% of trade receivables had an ageing within 60 days and approximately 96.48% of trade payables had an ageing within 60 days.

(h) Foreign exchange risk

Foreign exchange risk was minimal as majority of transactions were denominated in Hong Kong dollars. PR ASIA did not have a foreign currency hedging policy.

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FINANCIAL INFORMATION ON THE TARGET COMPANY

APPENDIX II

(i) Capital commitment

As at 31 December 2009, PR ASIA did not have any capital commitment.

(j) Contingent liability

As at 31 December 2009, PR ASIA did not have any contingent liability.

(k) Significant investment and material acquisitions and disposals

No significant investment, material acquisition or disposal was entered during the period under review.

(l) Future plans for material investments

PR ASIA will continue to focus on its core business in the provision of advertising and public relation services in Hong Kong.

(m) Employee information

As at 31 December 2009, PR ASIA employed approximately 14 employees (31 March 2009: approximately 12). PR ASIA continues to maintain and upgrade the capabilities of its workforce by providing them with adequate and regular training. PR ASIA remunerates its employees mainly based on industry practices and individual’s performance and experience. Total staff cost, including directors’ emoluments, for the year ended 31 December 2009 was approximately HK$3,541,000.

(n) Charges

As at 31 December 2009, PR ASIA did not have any charges.

For the nine months ended 30 September 2010

(a) Turnover

For the nine months ended 30 September 2010, PR ASIA recorded a turnover of approximately HK$18,930,000, representing an increase of 80.70% as compared with that of the corresponding period in 2009.

(b) Gross profit margin

For the nine months ended 30 September 2010, PR ASIA recorded a gross profit of approximately HK$12,776,000 (for the nine months ended 30 September 2009: approximately HK$7,703,000). Gross profit margin was approximately 67% (for the nine months ended 30 September 2009: approximately 74%).

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FINANCIAL INFORMATION ON THE TARGET COMPANY

APPENDIX II

(c) Administrative and other operating expenses

For the nine months ended 30 September 2010, administrative and other operating expenses was approximately HK$5,586,000 (for the nine months ended 30 September 2009: approximately HK$8,398,000). This mainly represented employee benefits expense , including directors’ emoluments, of approximately HK$3,349,000, rental expenses of approximately HK$637,000, impairment loss of trade receivables of approximately HK$51,000 and depreciation of approximately HK$161,000.

(d) Net Profit

For the nine months ended 30 September 2010, PR ASIA recorded a net profit of approximately HK$6,048,000 (for the nine months ended 30 September 2009: a net loss of approximately HK$582,000).

(e) Liquidity and financial resources

As at 30 September 2010, PR ASIA had current assets and total assets of approximately HK$11,505,000 and HK$11,745,000 respectively. The PR ASIA’s current ratio, calculated based on current assets over current liabilities was 3.93 (31 December 2009: 1.58). The current ratio improved significantly, mainly due to the increase in cash and bank balances during the period. The strong liquid position was attributable to the effective financial management of PR ASIA.

The PR ASIA financed its operation primarily from internally generated resources. As at 30 September 2010, the PR ASIA had cash and bank balances of approximately HK$9,597,000. The gearing ratio of PR ASIA, calculated on the basis of total liabilities divided by total assets was 0.25 (31 December 2009: 0.60).

(f) Capital structure

As at 30 September 2010, issued share capital was HK$100 and there was no other issued or outstanding loan capital, preference shares or convertible securities.

(g) Trade receivables and trade payables

As at 30 September 2010, approximately 84.93% of trade receivables had an ageing within 60 days and approximately 99.06% of trade payables had an ageing within 60 days.

(h) Foreign exchange risk

Foreign exchange risk was minimal as majority of transactions were denominated in Hong Kong dollars.

(i) Capital commitment

As at 30 September 2010, PR ASIA did not have any capital commitment.

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FINANCIAL INFORMATION ON THE TARGET COMPANY

APPENDIX II

(j) Contingent liability

As at 30 September 2010, PR ASIA did not have any contingent liability.

(k) Significant investment and material acquisitions and disposals

No significant investment, material acquisition or disposal was entered during the period under review.

(l) Future plans for material investments

PR ASIA will continue to focus on its core business in the provision of advertising and public relation services in Hong Kong.

(m) Employee information

As at 30 September 2010, PR ASIA employed approximately 15 employees (31 December 2009: approximately 14). PR ASIA continues to maintain and upgrade the capabilities of its workforce by providing them with adequate and regular training. PR ASIA remunerates its employees mainly based on industry practices and individual’s performance and experience. Total staff cost, including directors’ emoluments, for the nine months ended 30 September 2010 was approximately HK$3,349,000.

(n) Charges

As at 30 September 2010, PR ASIA did not have any charges.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

A. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

1. Introduction

The unaudited pro forma financial information of the Enlarged Group, comprising the unaudited pro forma consolidated statement of comprehensive income, the unaudited pro forma consolidated statement of financial position and the unaudited pro forma consolidated statement of cash flows of the Enlarged Group (the “Unaudited Pro Forma Financial Information”), has been prepared by the Directors to illustrate the effect of (i) the Acquisition; (ii) the acquisition of the First Sale Shares and (iii) the acquisition of the Second Sale Shares.

The Unaudited Pro Forma Financial Information should be read in conjunction with the financial information of the Group as set out in Appendix I, the financial information on the Target Company as set out in Appendix II and other financial information included elsewhere in this circular. The Unaudited Pro Forma Financial Information does not take account of any trading or other transactions subsequent to the date of the financial statements included in the Unaudited Pro Forma Financial Information.

Scenario A assuming that the Acquisition had been completed (“Scenario A”)

2. Unaudited pro forma consolidated statement of comprehensive income of the Enlarged Group under Scenario A

The following is the unaudited pro forma consolidated statement of comprehensive income of the Enlarged Group under Scenario A, as if the Acquisition had been completed at the commencement of the period being reported on (i.e. 1 July 2009). The unaudited pro forma consolidated statement of comprehensive income of the Enlarged Group under Scenario A has been prepared based on the audited consolidated statement of comprehensive income of the Group for the year ended 30 June 2010 as extracted from the Company’s published annual report for the financial year ended 30 June 2010 and the audited statement of comprehensive income of the Target Company for the financial year ended 31 December 2009 as extracted from the accountants’ report on the Target Company (set out in Appendix II to this circular), after incorporating the pro forma adjustment as described in the accompanying note to illustrate the effect of the Acquisition.

The unaudited pro forma consolidated statement of comprehensive income of the Enlarged Group under Scenario A has been prepared for illustrative purposes only, based on the judgments and assumptions of the Directors, and, because of its hypothetical nature, it may not give a true picture of the results of the Enlarged Group for the year ended 30 June 2010 or any future periods.

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APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Revenue Cost of sales and services Gross profit Other income Other losses Administrative expenses Finance costs Other operating expenses Acquisition-related costs Gain arising on change in fair value of financial assets classified as held for trading Gain on disposal of subsidiaries Gain arising on change in fair value of investment properties (Loss)/Profit before tax Income tax expense (Loss)/Profit and total comprehensive (expense)/income for the year	The Group Financial year ended 30 June 2010 (Audited) HK$ 4,704,192 (2,280,095 ) 2,424,097 435,624 – (12,135,193 ) (331,041 ) (16,752,288 ) – 22,238,798 3,010,697 16,950 (1,092,356 ) (363,649 ) (1,456,005 )	The Target Company Financial year ended 31 December Pro forma 2009 adjustment (Audited) (Unaudited) HK$ HK$ Note 15,278,753 (5,187,904 ) 10,090,849 33,263 (498,385 ) (6,077,888 ) – (38,060 ) – (800,000 ) 2.1 – – – 3,509,779 (799,476 ) 2,710,303	Pro forma Enlarged Group under Scenario A (Unaudited) HK$ 19,982,945 (7,467,999 ) 12,514,946 468,887 (498,385 ) (18,213,081 ) (331,041 ) (16,790,348 ) (800,000 ) 22,238,798 3,010,697 16,950 1,617,423 (1,163,125 ) 454,298

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Note to the unaudited pro forma consolidated statement of comprehensive income of the Enlarged Group under Scenario A:

2.1 The adjustment reflects the estimated costs related to the Acquisition amounting to HK$800,000 expensed in profit or loss, as if the Acquisition had been completed at the commencement of the period being reported on. In accordance with Hong Kong Financial Reporting Standard 3 (Revised) “Business Combinations” (applicable for annual periods beginning on or after 1 July 2009), acquisition-related costs are costs the acquirer incurs to effect a business combination, and the acquirer shall account for acquisition-related costs as expenses in the periods in which the costs are incurred and the services are received. This adjustment is not expected to have a continuing effect on the Enlarged Group.

3. Unaudited pro forma consolidated statement of financial position of the Enlarged Group under Scenario A

The following is the unaudited pro forma consolidated statement of financial position of the Enlarged Group under Scenario A, as if the Acquisition had been completed at the date reported on (i.e. 30 June 2010). The unaudited pro forma consolidated statement of financial position of the Enlarged Group under Scenario A has been prepared based on the audited consolidated statement of financial position of the Group as at 30 June 2010 as extracted from the Company’s published annual report for the year ended 30 June 2010 and the audited statement of financial position of the Target Company as at 30 September 2010 as extracted from the accountants’ report on the Target Company (set out in Appendix II to this circular), after incorporating the pro forma adjustments as described in the accompanying notes to illustrate the effect of the Acquisition.

The unaudited pro forma consolidated statement of financial position of the Enlarged Group under Scenario A has been prepared for illustrative purposes only, based on the judgments and assumptions of the Directors, and, because of its hypothetical nature, it may not give a true picture of the financial position of the Enlarged Group as at 30 June 2010 or any future date.

Non-current assets Property, plant and equipment Prepaid lease payments Investment properties Goodwill	The Target Company The Group As at As at 30 September Pro forma 30 June 2010 2010 adjustments (Audited) (Audited) (Unaudited) HK$ HK$ HK$ Notes 833,504 239,463 4,928,583 – 55,800,000 – – – 33,600,000 3.1 (8,815,802 ) 3.2 61,562,087 239,463	Pro forma Enlarged Group under Scenario A (Unaudited) HK$ 1,072,967 4,928,583 55,800,000 24,784,198
		86,585,748

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Current assets Trade and other receivables Held-for-trading investments Cash and bank balances Current liabilities Trade and other payables Amount due to a director Tax payable Net current assets Total assets less current liabilities Non-current liabilities Deferred tax liabilities Net assets Capital and reserves Share capital Reserves Total equity attributable to owners of the Company	The Target Company The Group As at As at 30 September Pro forma 30 June 2010 2010 adjustments (Audited) (Audited) (Unaudited) HK$ HK$ HK$ Notes 4,425,542 1,908,006 38,543,793 – 42,972,539 9,597,053 (33,600,000 ) 3.1 (800,000 ) 3.3 85,941,874 11,505,059 1,197,353 1,287,765 – 9,882 – 1,631,073 1,197,353 2,928,720 84,744,521 8,576,339 146,306,608 8,815,802 363,649 – 145,942,959 8,815,802 12,961,745 100 (100 ) 3.2 132,981,214 8,815,702 (8,815,702 ) 3.2 (800,000 ) 3.3 145,942,959 8,815,802	Pro forma Enlarged Group under Scenario A (Unaudited) HK$ 6,333,548 38,543,793 18,169,592 63,046,933 2,485,118 9,882 1,631,073 4,126,073 58,920,860 145,506,608 363,649 145,142,959 12,961,745 132,181,214 145,142,959

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APPENDIX III

Notes to the unaudited pro forma consolidated statement of financial position of the Enlarged Group under Scenario A:

3.1 The adjustment reflects the settlement of the aggregated cash consideration of HK$33,600,000 by the Group, based on (i) cash consideration of HK$23,520,000 for the acquisition of 70% equity interests in the Target Company under the First Sale and Purchase Agreement and (ii) cash consideration of HK$10,080,000 for the acquisition of 30% equity interests in the Target Company under the Second Sale and Purchase Agreement, as if the Acquisition had been completed at the date reported on. This adjustment is not expected to have a continuing effect on the Enlarged Group.
3.2 The adjustment reflects the elimination of the share capital of HK$100 and the pre-acquisition reserve of HK$8,815,702 of the Target Company, as if the Acquisition had been completed at the date reported on. For the purpose of the preparation of the unaudited pro forma consolidated statement of financial position of the Enlarged Group under Scenario A, the pre-acquisition reserve of the Target Company of HK$8,815,702 represents the retained profits of the Target Company (based on the audited statement of financial position of the Target Company as at 30 September 2010 as set out in Appendix II to this circular).

For the purpose of the preparation of the unaudited pro forma consolidated statement of financial position of the Enlarged Group under Scenario A, the net assets of the Target Company of HK$8,815,802 (represented by the share capital of HK$100 and the pre-acquisition reserve of HK$8,815,702 of the Target Company) have been assumed to approximate the fair values of the assets, liabilities and contingent liabilities of the Target Company on completion of the Acquisition. The excess of the aggregated cash consideration of HK$33,600,000 over the net assets of the Target Company of HK$8,815,802 amount to HK$24,784,198. As the Acquisition will be accounted for by applying the acquisition method, this excess is recognized as goodwill arising from the Acquisition on the unaudited pro forma consolidated statement of financial position of the Enlarged Group under Scenario A. Since the actual fair values of the assets, liabilities and contingent liabilities of the Target Company on completion of the Acquisition would be different from their estimated fair values used in the preparation of the unaudited pro forma consolidated statement of financial position of the Enlarged Group under Scenario A presented above, the actual amount of goodwill arising from the Acquisition might be materially different from the estimated amount as shown in this Appendix.

For the purpose of the preparation of the unaudited pro forma consolidated statement of financial position of the Enlarged Group under Scenario A, the Directors consider that no impairment is required in respect of the goodwill arising from the Acquisition taking into account the business potential of the Target Company and other factors as disclosed in the paragraph headed “Reasons for and benefits of the Acquisition” in the “Letter from the Board” in this circular. After completion of the Acquisition, the Group will perform annual impairment test for the cash-generating unit to which the goodwill has been allocated in accordance with the Company’s accounting policies and the requirements of Hong Kong Accounting Standard 36 “Impairment of Assets”.

3.3 The adjustment reflects the estimated costs related to the Acquisition amounting to HK$800,000 expensed in profit or loss, as if the Acquisition had been completed at the date reported on. This adjustment is not expected to have a continuing effect on the Enlarged Group.

4. Unaudited pro forma consolidated statement of cash flows of the Enlarged Group under Scenario A

The following is the unaudited pro forma consolidated statement of cash flows of the Enlarged Group under Scenario A, as if the Acquisition had been completed at the commencement of the period being reported on (i.e. 1 July 2009). The unaudited pro forma consolidated statement of cash flows of the Enlarged Group under Scenario A has been prepared based on the audited

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APPENDIX III

consolidated statement of cash flows of the Group for the year ended 30 June 2010 as extracted from the Company’s published annual report for the year ended 30 June 2010 (set out in Appendix I to this circular) and the audited statement of cash flows of the Target Company for the financial year ended 31 December 2009 as extracted from the accountants’ report on the Target Company (set out in Appendix II to this circular), after incorporating the pro forma adjustments as described in the accompanying notes to illustrate the effect of the Acquisition.

The unaudited pro forma consolidated statement of cash flows of the Enlarged Group under Scenario A has been prepared for illustrative purposes only, based on the judgments and assumptions of the Directors, and, because of its hypothetical nature, it may not give a true picture of the cash flows of the Enlarged Group for the year ended 30 June 2010 or any future periods.

The Group Financial year ended 30 June 2010 (Audited) HK$ Cash flows from operating activities (Loss)/Profit before tax (1,092,356 ) Adjustments for: Acquisition-related costs – Interest income (270,486 ) Dividend income (28,400 ) Interest expense 331,041 Depreciation of property, plant and equipment 719,638 Impairment loss of trade receivables – Loss on disposal of property, plant and equipment – Expense recognized in respect of equity-settled share-based payments 9,098,393 Gain on disposal of subsidiaries (3,010,697 ) Gain arising on change in fair value of investment properties (16,950 ) Amortization of prepaid lease payments 41,417 Write-off of property, plant and equipment 740,372 6,511,972	The Target Company Financial year ended 31 December Pro forma 2009 adjustments (Audited) (Unaudited) HK$ HK$ Notes 3,509,779 (800,000 ) 2.1 – 800,000 2.1 (40 ) – – 446,029 38,060 498,385 – – – – – 4,492,213	Pro forma Enlarged Group under Scenario A (Unaudited) HK$ 1,617,423 800,000 (270,526 ) (28,400 ) 331,041 1,165,667 38,060 498,385 9,098,393 (3,010,697 ) (16,950 ) 41,417 740,372 11,004,185

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APPENDIX III

Movements in working capital Decrease in trade and other receivables Increase in held-for-trading investments Decrease in amount due from a related company Increase/(Decrease) in trade and other payables Increase in amount due to a director Net cash (used in)/generated from operating activities Cash flows from investing activities Payment for the Acquisition, net of cash and cash equivalents of the Target Company acquired Payment for acquisition-related costs Payments for investment properties Payments for property, plant and equipment Payments for prepaid lease payments Proceeds from disposal of property, plant and equipment Net cash inflow on disposal of subsidiaries	The Group Financial year ended 30 June 2010 (Audited) HK$ 4,542,229 (13,106,906 ) – 1,980,544 – (72,161 ) – – (55,783,050 ) (428,443 ) (4,970,000 ) 42,659 2,843,720	The Target Company Financial year ended 31 December Pro forma 2009 adjustments (Audited) (Unaudited) HK$ HK$ Notes 70,576 – 6,580 (276,763 ) 1,876,932 6,169,538 (33,600,000 ) 4.1 – 271,311 4.1 – (800,000 ) 4.2 – (27,280 ) – 1 –	Pro forma Enlarged Group under Scenario A (Unaudited) HK$ 4,612,805 (13,106,906 ) 6,580 1,703,781 1,876,932 6,097,377 (33,328,689 ) (800,000 ) (55,783,050 ) (455,723 ) (4,970,000 ) 42,660 2,843,720

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Decrease in time deposits with original maturity of more than three months when acquired Dividends received Interest received Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares upon placements Proceeds from issue of shares upon exercise of share options Dividends paid Interest paid Net cash generated from/ (used in) financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year	The Group Financial year ended 30 June 2010 (Audited) HK$ 13,700,000 28,400 270,486 (44,296,228 ) 38,670,918 9,775,000 – (331,041 ) 48,114,877 3,746,488 39,226,051 42,972,539	The Target Company Financial year ended 31 December Pro forma 2009 adjustments (Audited) (Unaudited) HK$ HK$ Notes – – 40 (27,239 ) – – (1,900,000 ) – (1,900,000 ) 4,242,299 271,311 (271,311 ) 4.1 4,513,610	Pro forma Enlarged Group under Scenario A (Unaudited) HK$ 13,700,000 28,400 270,526 (78,452,156 ) 38,670,918 9,775,000 (1,900,000 ) (331,041 ) 46,214,877 (26,139,902 ) 39,226,051 13,086,149

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APPENDIX III

Notes to the unaudited pro forma consolidated statement of cash flows of the Enlarged Group under Scenario A:

4.1 The adjustment reflects the settlement of the aggregated cash consideration of HK$33,600,000 by the Group, net of cash and cash equivalents of the Target Company acquired of HK$271,311, as if the Acquisition had been completed at the commencement of the period being reported on. This adjustment is not expected to have a continuing effect on the Enlarged Group.
4.2 The adjustment reflects the payment of the estimated costs related to the Acquisition amounting to HK$800,000, as if the Acquisition had been completed at the commencement of the period being reported on. This adjustment is not expected to have a continuing effect on the Enlarged Group.

Scenario B assuming the acquisition of the First Sale Shares had been completed and the acquisition of the Second Sale Shares had not been completed (“Scenario B”)

5. Unaudited pro forma consolidated statement of comprehensive income of the Enlarged Group under Scenario B

The following is the unaudited pro forma consolidated statement of comprehensive income of the Enlarged Group under Scenario B, as if the acquisition of the First Sale Shares had been completed at the commencement of the period being reported on (i.e. 1 July 2009). The unaudited pro forma consolidated statement of comprehensive income of the Enlarged Group under Scenario B has been prepared based on the audited consolidated statement of comprehensive income of the Group for the year ended 30 June 2010 as extracted from the Company’s published annual report for the financial year ended 30 June 2010 and the audited statement of comprehensive income of the Target Company for the financial year ended 31 December 2009 as extracted from the accountants’ report on the Target Company (set out in Appendix II to this circular), after incorporating the pro forma adjustment as described in the accompanying note to illustrate the effect of the acquisition of the First Sale Shares.

The unaudited pro forma consolidated statement of comprehensive income of the Enlarged Group under Scenario B has been prepared for illustrative purposes only, based on the judgments and assumptions of the Directors, and, because of its hypothetical nature, it may not give a true picture of the results of the Enlarged Group for the year ended 30 June 2010 or any future periods.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Revenue Cost of sales and services Gross profit Other income Other losses Administrative expenses Finance costs Other operating expenses Acquisition-related costs Gain arising on change in fair value of financial assets classified as held for trading Gain on disposal of subsidiaries Gain arising on change in fair value of investment properties (Loss)/Profit before tax Income tax expense (Loss)/Profit and total comprehensive (expense)/ income for the year	The Group Financial year ended 30 June 2010 (Audited) HK$ 4,704,192 (2,280,095 ) 2,424,097 435,624 – (12,135,193 ) (331,041 ) (16,752,288 ) – 22,238,798 3,010,697 16,950 (1,092,356 ) (363,649 ) (1,456,005 )	The Target Company Financial year ended 31 December Pro forma 2009 adjustment (Audited) (Unaudited) HK$ HK$ Note 15,278,753 (5,187,904 ) 10,090,849 33,263 (498,385 ) (6,077,888 ) – (38,060 ) – (800,000 ) 5.1 – – – 3,509,779 (799,476 ) 2,710,303	Pro forma Enlarged Group under Scenario B (Unaudited) HK$ 19,982,945 (7,467,999 ) 12,514,946 468,887 (498,385 ) (18,213,081 ) (331,041 ) (16,790,348 ) (800,000 ) 22,238,798 3,010,697 16,950 1,617,423 (1,163,125 ) 454,298

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Note to the unaudited pro forma consolidated statement of comprehensive income of the Enlarged Group under Scenario B:

5.1 The adjustment reflects the estimated costs related to the acquisition of the First Sale Shares amounting to HK$800,000 expensed in profit or loss, as if the acquisition of the First Sale Shares had been completed at the commencement of the period being reported on. In accordance with Hong Kong Financial Reporting Standard 3 (Revised) “Business Combinations” (applicable for annual periods beginning on or after 1 July 2009), acquisition-related costs are costs the acquirer incurs to effect a business combination, and the acquirer shall account for acquisition-related costs as expenses in the periods in which the costs are incurred and the services are received. This adjustment is not expected to have a continuing effect on the Enlarged Group.

6. Unaudited pro forma consolidated statement of financial position of the Enlarged Group under Scenario B

The following is the unaudited pro forma consolidated statement of financial position of the Enlarged Group under Scenario B, as if the acquisition of the First Sale Shares had been completed at the date reported on (i.e. 30 June 2010). The unaudited pro forma consolidated statement of financial position of the Enlarged Group under Scenario B has been prepared based on the audited consolidated statement of financial position of the Group as at 30 June 2010 as extracted from the Company’s published annual report for the year ended 30 June 2010 and the audited statement of financial position of the Target Company as at 30 September 2010 as extracted from the accountants’ report on the Target Company (set out in Appendix II to this circular), after incorporating the pro forma adjustments as described in the accompanying notes to illustrate the effect of the acquisition of the First Sale Shares.

The unaudited pro forma consolidated statement of financial position of the Enlarged Group under Scenario B has been prepared for illustrative purposes only, based on the judgments and assumptions of the Directors, and, because of its hypothetical nature, it may not give a true picture of the financial position of the Enlarged Group as at 30 June 2010 or any future date.

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Non-current assets Property, plant and equipment Prepaid lease payments Investment properties Goodwill Current assets Trade and other receivables Held-for-trading investments Cash and bank balances Current liabilities Trade and other payables Amount due to a director Tax payable Net current assets Total assets less current liabilities Non-current liabilities Deferred tax liabilities Net assets Capital and reserves Share capital Reserves Total equity attributable to owners of the Company Non-controlling interests Total equity	The Group As at 30 June 2010 (Audited) HK$ 833,504 4,928,583 55,800,000 – 61,562,087 4,425,542 38,543,793 42,972,539 85,941,874 1,197,353 – – 1,197,353 84,744,521 146,306,608 363,649 145,942,959 12,961,745 132,981,214 145,942,959 – 145,942,959	The Target Company As at 30 September Pro forma 2010 adjustments (Audited) (Unaudited) HK$ HK$ Notes 239,463 – – – 23,520,000 6.1 (6,171,061 ) 6.2 239,463 1,908,006 – 9,597,053 (23,520,000 ) 6.1 (800,000 ) 6.3 11,505,059 1,287,765 9,882 1,631,073 2,928,720 8,576,339 8,815,802 – 8,815,802 100 (100 ) 6.2 8,815,702 (8,815,702 ) 6.2 (800,000 ) 6._3 8,815,802 – 2,644,741 _6.2 8,815,802	Pro forma Enlarged Group under Scenario B (Unaudited) HK$ 1,072,967 4,928,583 55,800,000 17,348,939
			79,150,489
			6,333,548 38,543,793 28,249,592
			73,126,933
			2,485,118 9,882 1,631,073
			4,126,073
			69,000,860
			148,151,349
			363,649
			147,787,700

			12,961,745 132,181,214
			145,142,959 2,644,741
			147,787,700

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APPENDIX III

Notes to the unaudited pro forma consolidated statement of financial position of the Enlarged Group under Scenario B:

6.1 The adjustment reflects the settlement of the cash consideration of HK$23,520,000 by the Group for the acquisition of 70% equity interests in the Target Company under the First Sale and Purchase Agreement, as if the acquisition of the First Sale Shares had been completed at the date reported on. This adjustment is not expected to have a continuing effect on the Enlarged Group.
6.2 The adjustment reflects (i) the elimination of the share capital of HK$100, (ii) the elimination of the pre-acquisition reserve of HK$8,815,702 of the Target Company and (iii) the recognition of the noncontrolling interests of the Target Company of HK$2,644,741 relating to King Fuk Holdings Limited’s holding of approximately 30% of the issued share capital of the Target Company, as if the acquisition of the First Sale Shares had been completed at the date reported on. For the purpose of the preparation of the unaudited pro forma consolidated statement of financial position of the Enlarged Group under Scenario B, the pre-acquisition reserve of the Target Company of HK$8,815,702 represents the retained profits of the Target Company (based on the audited statement of financial position of the Target Company as at 30 September 2010 as set out in Appendix II to this circular).

For the purpose of the preparation of the unaudited pro forma consolidated statement of financial position of the Enlarged Group under Scenario B, the net assets of the Target Company of HK$8,815,802 (represented by the share capital of HK$100 and the pre-acquisition reserve of HK$8,815,702 of the Target Company) have been assumed to approximate the fair values of the assets, liabilities and contingent liabilities of the Target Company on completion of the acquisition of the First Sale Shares. The excess of the cash consideration of HK$23,520,000 over 70% of the net assets of the Target Company of HK$6,171,061 amount to HK$17,348,939. As the acquisition of the First Sale Shares will be accounted for by applying the acquisition method, this excess is recognized as goodwill arising from the acquisition of the First Sale Shares on the unaudited pro forma consolidated statement of financial position of the Enlarged Group under Scenario B. Since the actual fair values of the assets, liabilities and contingent liabilities of the Target Company on completion of the acquisition of the First Sale Shares would be different from their estimated fair values used in the preparation of the unaudited pro forma consolidated statement of financial position of the Enlarged Group under Scenario B presented above, the actual amount of goodwill arising from the acquisition of the First Sale Shares might be materially different from the estimated amount as shown in this Appendix.

For the purpose of the preparation of the unaudited pro forma consolidated statement of financial position of the Enlarged Group under Scenario B, the Directors consider that no impairment is required in respect of the goodwill arising from the acquisition of the First Sale Shares taking into account the business potential of the Target Company and other factors as disclosed in the paragraph headed “Reasons for and benefits of the Acquisition” in the “Letter from the Board” in this circular. After completion of the acquisition of the First Sale Shares, the Group will perform annual impairment test for the cash-generating unit to which the goodwill has been allocated in accordance with the Company’s accounting policies and the requirements of Hong Kong Accounting Standard 36 “Impairment of Assets”.

6.3 The adjustment reflects the estimated costs related to the acquisition of the First Sale Shares amounting to HK$800,000 expensed in profit or loss, as if the acquisition of the First Sale Shares had been completed at the date reported on. This adjustment is not expected to have a continuing effect on the Enlarged Group.
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APPENDIX III

7. Unaudited pro forma consolidated statement of cash flows of the Enlarged Group under Scenario B

The following is the unaudited pro forma consolidated statement of cash flows of the Enlarged Group under Scenario B, as if the acquisition of the First Sale Shares had been completed at the commencement of the period being reported on (i.e. 1 July 2009). The unaudited pro forma consolidated statement of cash flows of the Enlarged Group under Scenario B has been prepared based on the audited consolidated statement of cash flows of the Group for the year ended 30 June 2010 as extracted from the Company’s published annual report for the year ended 30 June 2010 and the audited statement of cash flows of the Target Company for the financial year ended 31 December 2009 as extracted from the accountants’ report on the Target Company (set out in Appendix II to this circular), after incorporating the pro forma adjustments as described in the accompanying notes to illustrate the effect of the acquisition of the First Sale Shares.

The unaudited pro forma consolidated statement of cash flows of the Enlarged Group under Scenario B has been prepared for illustrative purposes only, based on the judgments and assumptions of the Directors, and, because of its hypothetical nature, it may not give a true picture of the cash flows of the Enlarged Group for the year ended 30 June 2010 or any future periods.

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Cash flows from operating activities (Loss)/Profit before tax Adjustments for: Acquisition-related costs Interest income Dividend income Interest expense Depreciation of property, plant and equipment Impairment loss of trade receivables Loss on disposal of property, plant and equipment Expense recognized in respect of equity-settled share-based payments Gain on disposal of subsidiaries Gain arising on change in fair value of investment properties Amortization of prepaid lease payments Write-off of property, plant and equipment Movements in working capital Decrease in trade and other receivables Increase in held-for-trading investments Decrease in amount due from a related company Increase/(Decrease) in trade and other payables Increase in amount due to a director Net cash (used in)/generated from operating activities	The Group Financial year ended 30 June 2010 (Audited) HK$ (1,092,356 ) – (270,486 ) (28,400 ) 331,041 719,638 – – 9,098,393 (3,010,697 ) (16,950 ) 41,417 740,372 6,511,972 4,542,229 (13,106,906 ) – 1,980,544 – (72,161 )	The Target Company Financial year ended 31 December Pro forma 2009 adjustments (Audited) (Unaudited) HK$ HK$ Notes 3,509,779 (800,000 ) 5.1 – 800,000 5.1 (40 ) – – 446,029 38,060 498,385 – – – – – 4,492,213 70,576 – 6,580 (276,763 ) 1,876,932 6,169,538	Pro forma Enlarged Group under Scenario B (Unaudited) HK$ 1,617,423 800,000 (270,526 ) (28,400 ) 331,041 1,165,667 38,060 498,385 9,098,393 (3,010,697 ) (16,950 ) 41,417 740,372 11,004,185 4,612,805 (13,106,906 ) 6,580 1,703,781 1,876,932 6,097,377

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APPENDIX III

Cash flows from investing activities Payment for the acquisition of the First Sale Shares, net of cash and cash equivalents of the Target Company acquired Payment for acquisition-related costs Payments for investment properties Payments for property, plant and equipment Payments for prepaid lease payments Proceeds from disposal of property, plant and equipment Net cash inflow on disposal of subsidiaries Decrease in time deposits with original maturity of more than three months when acquired Dividends received Interest received Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares upon placements Proceeds from issue of shares upon exercise of share options Dividends paid Interest paid Net cash generated from/ (used in) financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year	The Group Financial year ended 30 June 2010 (Audited) HK$ – – (55,783,050 ) (428,443 ) (4,970,000 ) 42,659 2,843,720 13,700,000 28,400 270,486 (44,296,228 ) 38,670,918 9,775,000 – (331,041 ) 48,114,877 3,746,488 39,226,051 42,972,539	The Target Company Financial year ended 31 December Pro forma 2009 adjustments (Audited) (Unaudited) HK$ HK$ Notes (23,520,000 ) 7.1 – 271,311 7.1 – (800,000 ) 7.2 – (27,280 ) – 1 – – – 40 (27,239 ) – – (1,900,000 ) – (1,900,000 ) 4,242,299 271,311 (271,311 ) 7.1 4,513,610	Pro forma Enlarged Group under Scenario B (Unaudited) HK$ (23,248,689 ) (800,000 ) (55,783,050 ) (455,723 ) (4,970,000 ) 42,660 2,843,720 13,700,000 28,400 270,526 (68,372,156 ) 38,670,918 9,775,000 (1,900,000 ) (331,041 ) 46,214,877 (16,059,902 ) 39,226,051 23,166,149

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APPENDIX III

Notes to the unaudited pro forma consolidated statement of cash flows of the Enlarged Group under Scenario B:

7.1 The adjustment reflects the settlement of the cash consideration of HK$23,520,000 by the Group, net of cash and cash equivalents of the Target Company acquired of HK$271,311, as if the acquisition of the First Sale Shares had been completed at the commencement of the period being reported on. This adjustment is not expected to have a continuing effect on the Enlarged Group.
7.2 The adjustment reflects the payment of the estimated costs related to the acquisition of the First Sale Shares amounting to HK$800,000, as if the acquisition of the First Sale Shares had been completed at the commencement of the period being reported on. This adjustment is not expected to have a continuing effect on the Enlarged Group.

Scenario C assuming the acquisition of the Second Sale Shares had been completed and the acquisition of the First Sale Shares had not been completed (“Scenario C”)

8. Unaudited pro forma consolidated statement of comprehensive income of the Enlarged Group under Scenario C

The following is the unaudited pro forma consolidated statement of comprehensive income of the Enlarged Group under Scenario C, as if the acquisition of the Second Sale Shares had been completed at the commencement of the period being reported on (i.e. 1 July 2009). The unaudited pro forma consolidated statement of comprehensive income of the Enlarged Group under Scenario C has been prepared based on the audited consolidated statement of comprehensive income of the Group for the year ended 30 June 2010 as extracted from the Company’s published annual report for the financial year ended 30 June 2010 and the audited statement of comprehensive income of the Target Company for the financial year ended 31 December 2009 as extracted from the accountants’ report on the Target Company (set out in Appendix II to this circular), after incorporating the pro forma adjustment as described in the accompanying note to illustrate the effect of the acquisition of the Second Sale Shares.

The unaudited pro forma consolidated statement of comprehensive income of the Enlarged Group under Scenario C has been prepared for illustrative purposes only, based on the judgments and assumptions of the Directors, and, because of its hypothetical nature, it may not give a true picture of the results of the Enlarged Group for the year ended 30 June 2010 or any future periods.

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APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Revenue
Cost of sales and services
Gross profit
Other income
Administrative expenses
Finance costs
Other operating expenses
Share of results of an associate
Gain arising on change in
fair value of financial
assets classified as
held for trading
Gain on disposal of subsidiaries
Gain arising on change
in fair value of investment
properties
Loss before tax
Income tax expense
Loss and total comprehensive
expense for the year

The Group
Financial
Pro forma
year ended
Enlarged
30 June
Pro forma
Group under
2010
adjustment
Scenario C
(Audited)
(Unaudited)
(Unaudited)
HK$
HK$
Note
HK$
4,704,192
4,704,192
(2,280,095 )
(2,280,095)
2,424,097
2,424,097
435,624
435,624
(12,135,193 )
(12,135,193 )
(331,041 )
(331,041 )
(16,752,288 )
(16,752,288 )
813,091
8.1
813,091
22,238,798
22,238,798
3,010,697
3,010,697
16,950
16,950
(1,092,356 )
(279,265 )
(363,649 )
(363,649)
(1,456,005 )
(642,914 )

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APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Note to the unaudited pro forma consolidated statement of comprehensive income of the Enlarged Group under Scenario C:

8.1 The adjustment reflects the recognition of share of results of an associate representing share of profit of HK$813,091, which was determined based on 30% of the profit for the financial year ended 31 December 2009 attributable to the owners of the Target Company amounting to HK$2,710,303, as if the acquisition of the Second Sale Shares had been completed at the commencement of the period being reported on.

9. Unaudited pro forma consolidated statement of financial position of the Enlarged Group under Scenario C

The following is the unaudited pro forma consolidated statement of financial position of the Enlarged Group under Scenario C, as if the acquisition of the Second Sale Shares had been completed at the date reported on (i.e. 30 June 2010). The unaudited pro forma consolidated statement of financial position of the Enlarged Group under Scenario C has been prepared based on the audited consolidated statement of financial position of the Group as at 30 June 2010 as extracted from the Company’s published annual report for the year ended 30 June 2010 and the audited statement of financial position of the Target Company as at 30 September 2010 as extracted from the accountants’ report on the Target Company (set out in Appendix II to this circular), after incorporating the pro forma adjustments as described in the accompanying notes to illustrate the effect of the acquisition of the Second Sale Shares.

The unaudited pro forma consolidated statement of financial position of the Enlarged Group under Scenario C has been prepared for illustrative purposes only, based on the judgments and assumptions of the Directors, and, because of its hypothetical nature, it may not give a true picture of the financial position of the Enlarged Group as at 30 June 2010 or any future date.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

				Pro forma
	The Group			Enlarged
	As at	Pro forma		Group under
	30 June 2010	adjustments		Scenario C
	(Audited)	(Unaudited)		(Unaudited)
	HK$	HK$	Notes	HK$
Non-current assets
Property, plant and equipment	833,504			833,504
Prepaid lease payments	4,928,583			4,928,583
Investment properties	55,800,000			55,800,000
Interest in an associate	–	10,080,000	9.1	10,880,000
		800,000	9.1
	61,562,087			72,442,087
Current assets
Trade and other receivables	4,425,542			4,425,542
Held-for-trading investments	38,543,793			38,543,793
Cash and bank balances	42,972,539	(10,080,000 )	9.2	32,092,539
		(800,000 )	9.3
	85,941,874			75,061,874
Current liabilities
Trade and other payables	1,197,353			1,197,353
Net current assets	84,744,521			73,864,521
Total assets less current
liabilities	146,306,608			146,306,608
Non-current liabilities
Deferred tax liabilities	363,649			363,649
Net assets	145,942,959			145,942,959
Capital and reserves
Share capital	12,961,745			12,961,745
Reserves	132,981,214			132,981,214
Total equity attributable to
owners of the Company	145,942,959			145,942,959

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Notes to the unaudited pro forma consolidated statement of financial position of the Enlarged Group under Scenario C:

9.1 The adjustment represents the recognition of interest in an associate in relation to the acquisition of 30% of equity interest in the Target Company, which was determined based on the cash consideration of HK$10,080,000 for the acquisition of the Second Sale Shares and the estimated related acquisition costs of HK$800,000, as if the acquisition of the Second Sale Shares had been completed at the date reported on.

The excess of the aggregate of the cash consideration for the acquisition of the Second Sale Shares of HK$10,080,000 and the estimated related acquisition costs of HK$800,000 over the Group’s share of 30% of the net assets of the Target Company as at 30 September 2010 of HK$2,644,741 (based on the audited statement of financial position of the Target Company as at 30 September 2010 as set out in Appendix II to this circular) amounting to HK$8,235,259 is recognized as goodwill arising from the acquisition of the Second Sale Shares and is included within the carrying amount of interest in an associate on the unaudited pro forma consolidated statement of financial position of the Enlarged Group under Scenario C. For the purpose of preparing the unaudited pro forma consolidated statement of financial position of the Enlarged Group under Scenario C, it has been assumed that the consolidated net assets of the Target Company as at 30 September 2010 approximate the fair values of the identifiable assets and liabilities of the Target Company.

For the purpose of the preparation of the unaudited pro forma consolidated statement of financial position of the Enlarged Group under Scenario C, the Directors consider that no impairment is required in respect of the interest in an associate taking into account the business potential of the Target Company and other factors as disclosed in the paragraph headed “Reasons for and benefits of the Acquisition” in the “Letter from the Board” in this circular. After completion of the acquisition of the Second Sale Shares, the carrying amount of the investment including goodwill will be tested for impairment as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount in accordance with the Company’s accounting policies and the requirements of Hong Kong Accounting Standard 36 “Impairment of Assets”.

9.2 The adjustment reflects the settlement of the cash consideration of HK$10,080,000 by the Group for the acquisition of the Second Sale Shares, as if the acquisition of the Second Sale Shares had been completed at the date reported on. This adjustment is not expected to have a continuing effect on the Enlarged Group.
9.3 The adjustment reflects the estimated costs related to the acquisition of the Second Sale Shares amounting to HK$800,000, as if the acquisition of the Second Sale Shares had been completed at the date reported on. This adjustment is not expected to have a continuing effect on the Enlarged Group.
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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

10. Unaudited pro forma consolidated statement of cash flows of the Enlarged Group under Scenario C

The following is the unaudited pro forma consolidated statement of cash flows of the Enlarged Group under Scenario C, as if the acquisition of the Second Sale Shares had been completed at the commencement of the period being reported on (i.e. 1 July 2009). The unaudited pro forma consolidated statement of cash flows of the Enlarged Group under Scenario C has been prepared based on the audited consolidated statement of cash flows of the Group for the year ended 30 June 2010 as extracted from the Company’s published annual report for the year ended 30 June 2010 and the audited statement of cash flows of the Target Company for the financial year ended 31 December 2009 as extracted from the accountants’ report on the Target Company (set out in Appendix II to this circular), after incorporating the pro forma adjustments as described in the accompanying notes to illustrate the effect of the acquisition of the Second Sale Shares.

The unaudited pro forma consolidated statement of cash flows of the Enlarged Group under Scenario C has been prepared for illustrative purposes only, based on the judgments and assumptions of the Directors, and, because of its hypothetical nature, it may not give a true picture of the cash flows of the Enlarged Group for the year ended 30 June 2010 or any future periods.

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APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

		The Group
		Financial			Pro forma
		year ended			Enlarged
		30 June	Pro forma		Group under
		2010	adjustments		Scenario C
		(Audited)	(Unaudited)		(Unaudited)
		HK$	HK$	Notes	HK$
Cash flows from operating
activities
Loss before tax		(1,092,356 )	813,091	8.1	(279,265 )
Adjustments for:
Interest income		(270,486 )			(270,486 )
Dividend income		(28,400 )			(28,400 )
Interest expense		331,041			331,041
Depreciation of property,
plant and equipment		719,638			719,638
Expense recognized in respect
of equity-settled share-based
payments		9,098,393			9,098,393
Share of results of an associate			(813,091 )	8.1	(813,091 )
Gain on disposal of subsidiaries		(3,010,697 )			(3,010,697 )
Gain arising on change in fair
value of investment properties		(16,950 )			(16,950 )
Amortization of prepaid lease payments		41,417			41,417
Write-off of property, plant
and equipment		740,372			740,372
		6,511,972			6,511,972
Movements in working capital
Decrease in trade and other
receivables		4,542,229			4,542,229
Increase in held-for-trading
investments	(13,106,906 )				(13,106,906 )
Increase in trade and other payables		1,980,544			1,980,544
Net cash used in operating activities		(72,161 )			(72,161)

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APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Cash flows from investing
activities
Payment for the acquisition of
the Second Sale Shares
Payment for acquisition-related costs
Payments for investment properties
Payments for property, plant and
equipment
Payments for prepaid lease payments
Proceeds from disposal of property,
plant and equipment
Net cash inflow on disposal
of subsidiaries
Decrease in time deposits with
original maturity of more than
three months when acquired
Dividends received
Interest received
Net cash used in investing
activities
Cash flows from financing
activities
Proceeds from issue of shares
upon placements
Proceeds from issue of shares
upon exercise of share options
Interest paid
Net cash generated from
financing activities
Net increase/(decrease) in
cash and cash equivalents
Cash and cash equivalents
at beginning of year
Cash and cash equivalents
at end of year

The Group
Financial
Pro forma
year ended
Enlarged
30 June
Pro forma
Group under
2010
adjustments
Scenario C
(Audited)
(Unaudited)
(Unaudited)
HK$
HK$
Notes
HK$
–
(10,080,000 )
10.1
(10,080,000 )
–
(800,000 )
10.2
(800,000 )
(55,783,050 )
(55,783,050 )
(428,443 )
(428,443 )
(4,970,000 )
(4,970,000 )
42,659
42,659
2,843,720
2,843,720
13,700,000
13,700,000
28,400
28,400
270,486
270,486
(44,296,228 )
(55,176,228)
38,670,918
38,670,918
9,775,000
9,775,000
(331,041 )
(331,041)
48,114,877
48,114,877
3,746,488
(7,133,512 )
39,226,051
39,226,051
42,972,539
32,092,539

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Notes to the unaudited pro forma consolidated statement of cash flows of the Enlarged Group under Scenario C:

10.1 The adjustment reflects the settlement of the cash consideration of HK$10,080,000 by the Group, as if the acquisition of the Second Sale Shares had been completed at the commencement of the period being reported on. This adjustment is not expected to have a continuing effect on the Enlarged Group.
10.2 The adjustment reflects the payment of the estimated costs related to the acquisition of the Second Sale Shares amounting to HK$800,000, as if the acquisition of the Second Sale Shares had been completed at the commencement of the period being reported on. This adjustment is not expected to have a continuing effect on the Enlarged Group.
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APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

B. REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is the text of a report received from the reporting accountants of the Company, HLB Hodgson Impey Cheng, Chartered Accountants, Certified Public Accountants, Hong Kong, addressed to the directors of the Company and prepared for the sole purpose of inclusion in this circular.

==> picture [227 x 84] intentionally omitted <==

31/F, Gloucester Tower The Landmark 11 Pedder Street Central Hong Kong

31 December 2010

The Directors

China Natural Investment Company Limited

Dear Sirs,

REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Introduction

We report on the unaudited pro forma financial information of China Natural Investment Company Limited (the “Company”) and its subsidiaries (collectively, the “Group”), as enlarged by the acquisition of PR Asia Consultants Limited (the “Target Company”) (hereinafter collectively referred to as the “Enlarged Group”), comprising the unaudited pro forma consolidated statement of comprehensive income, the unaudited pro forma consolidated statement of financial position and the unaudited pro forma consolidated statement of cash flows of the Enlarged Group (the “Unaudited Pro Forma Financial Information”), as set out in Section A entitled “Unaudited Pro Forma Financial Information of the Enlarged Group” in Appendix III of the Company’s circular dated 31 December 2010 (the “Circular”). The Unaudited Pro Forma Financial Information has been prepared by the directors of the Company for illustrative purposes only, to provide information about how the Acquisition (as defined in the Circular) might have affected the financial information presented in the Circular. The basis of preparation of the Unaudited Pro Forma Financial Information is set out in Section A of Appendix III of the Circular.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Respective responsibilities of the directors of the Company and the reporting accountants

It is the responsibility solely of the directors of the Company to prepare the Unaudited Pro Forma Financial Information in accordance with paragraph 7.31 of the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the “GEM Listing Rules”) and 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 7.31(7) of the GEM Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

Basis of opinion

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

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 7.31(1) of the GEM Listing Rules.

The Unaudited Pro Forma Financial Information has been prepared for illustrative purposes only, based on the judgments and assumptions of the directors of the Company, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in the future and may not be indicative of:

the financial position of the Enlarged Group as at 30 June 2010 or any future date; or
the results or cash flows of the Enlarged Group for the year ended 30 June 2010 or any future periods.
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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Opinion

In our opinion:

a. the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated;
b. such basis is consistent with the accounting policies of the Group; and
c. the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 7.31(1) of the GEM Listing Rules.

Yours faithfully,

HLB Hodgson Impey Cheng Chartered Accountants Certified Public Accountants Hong Kong

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GENERAL INFORMATION

APPENDIX IV

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS OF DIRECTORS

As at the Latest Practicable Date, save as mentioned below, none of the Directors and chief executive has any interest or short position in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which are required to be (i) 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 he is taken or deemed to have taken under such provisions of the SFO); or (ii) entered in the register kept by the Company pursuant to section 352 of the SFO; or (iii) notified to the Company and the Stock Exchange pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules:

Long positions in the Shares:

			Approximate % of
			the Company’s
		Number of	issued share
		issued/	capital as at
		underlying	the Latest
Name of Director	Capacity	Shares held	Practicable Date
U Man Iong	Beneficial owner	60,000,000	9.96%
		(Note)
Mr. Chow	Beneficial owner	18,000	0.00%

Note: These Shares represent the underlying Shares to be allotted and issued pursuant to the referral agreement as disclosed in the circular of the Company dated 13 March 2008.

3. SUBSTANTIAL SHAREHOLDERS

So far as is known to the Directors, as at the Latest Practicable Date, the Company has not been notified by any person (other than the Directors as set out in the section headed “Disclosure of interests of Directors” above) who had interests or short positions in the shares or underlying shares of the Company which are required to be recorded in the register maintained by the Company pursuant to section 336 of the SFO.

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GENERAL INFORMATION

APPENDIX IV

4. MATERIAL CONTRACTS

The following contracts, not being contracts entered into in the ordinary course of business, have been entered into by members of the Enlarged Group within the two years preceding the issue of this circular and which are or may be material:

(a) the conditional sale and purchase agreement dated 10 February 2009 entered into between the Group as purchaser and Wei Wen Ya as vendor for the sale and purchase of the entire issued share capital of, and all the shareholder’s loan to, China Natural Pharmaceutical Holdings Company Limited at an aggregate consideration of HK$3,000,000;
(b) the supplemental deed executed by the Company on 18 February 2009 in relation to the modifications to the conditions of the HK$150,000,000 1% convertible bonds due in 2012 created and issued by the Company on 31 January 2008 to allow early redemption of the convertible bonds;
(c) the conditional top-up placing and subscription agreement dated 29 April 2009 entered into between HK Health Check, the Company and Kingston Securities Limited (“ KSL ”) in relation to the (i) top-up placing of 1,200,000,000 existing shares of the Company of HK$0.001 each by KSL at HK$0.025 per top-up placing share; and (ii) top-up subscription of 1,200,000,000 shares of the Company of HK$0.001 each by HK Health Check at HK$0.025 per top-up subscription share;
(d) the provisional sale and purchase agreement dated 2 October 2009 entered into between China Universal Limited (a company incorporated in Hong Kong with limited liability and an indirect wholly-owned subsidiary of the Company) as purchaser and The First Development Limited as vendor for the sale and purchase of the properties located at Shop Nos. 4, 53, 54, 56 and 57 on Ground Floor of Commercial Centre, Fullview Garden, No. 18 Siu Sai Wan Road, Hong Kong at a consideration of HK$17,200,000;
(e) the conditional placing agreement dated 23 October 2009 entered into between the Company and KSL in relation to the placing of a maximum of 185,000,000 new shares of the Company of HK$0.01 each by KSL at HK$0.13 per placing share;
(f) the conditional sale and purchase agreement dated 8 April 2010 entered into between the Group as vendor and Good Pace International Limited as purchaser for the sale and purchase of the entire issued share capital of, and all the shareholder’s loan to, China Natural Pharmaceutical Holdings Company Limited at an aggregate consideration of HK$5,500,000;
(g) the conditional placing agreement dated 20 April 2010 entered into between the Company and Fordjoy Securities and Futures Limited (“ Fordjoy ”) in relation to the placing of a maximum of 37,000,000 new shares of the Company of HK$0.05 each by Fordjoy at HK$0.43 per placing share;
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GENERAL INFORMATION

APPENDIX IV

(h) the conditional placing agreement dated 20 April 2010 entered into between the Company and Fordjoy in relation to the placing of a maximum of 243,000,000 new shares of the Company of HK$0.05 each by Fordjoy at HK$0.43 per placing share (which is supplemented by the supplemental agreement dated 7 July 2010 entered into between the Company and Fordjoy to reduce the placing price to HK$0.22 per placing share);
(i) the memorandum dated 7 May 2010 entered into between Core Medical Technology Limited (a company incorporated in Hong Kong with limited liability and an indirect wholly-owned subsidiary of the Company) as purchaser and Town Health Food and Beverage Culture Company Limited as vendor for the sale and purchase of the property located at Unit 1210A, 12th Floor, Champion Building, 301-309 Nathan Road, Kowloon, Hong Kong at a consideration of HK$11,500,000;
(j) the provisional sale and purchase agreement dated 13 May 2010 entered into between Talent Vision Limited (a company incorporated in Hong Kong with limited liability and an indirect wholly-owned subsidiary of the Company) as purchaser and On Champion Investment Limited as vendor for the sale and purchase of the properties located at Shop Nos. G27 and G28, Ground Floor, Commercial Podium, Sincere House, No. 83 Argyle Street, Kowloon, Hong Kong at a consideration of HK$30,000,000;
(k) the conditional sale and purchase agreement dated 9 September 2010 entered into between Chemosino International Limited as purchaser and Mr. Ling Wai Hoi as vendor (“ Mr. Ling ”) in respect of the acquisition of one ordinary share of nominal value of US$1.00 in the issued share capital of Island Kingdom Company Limited (“ Island Kingdom ”, and together with its subsidiaries, the “ Island Kingdom Group ”) which represented its entire issued share capital and all the outstanding loans due from the Island Kingdom Group to Mr. Ling at an aggregate consideration of HK$21,500,000;
(l) the provisional sale and purchase agreement dated 24 September 2010 entered into between Talent Vision Limited (a company incorporated in Hong Kong with limited liability and an indirect wholly-owned subsidiary of the Company) as purchaser and Well Ascent Properties Limited as vendor for the sale and purchase of the properties, being public carpark nos. P101-P150 together with shroff’s office on 1st Floor, Citimark, No.28 Yuen Shun Circuit, Shatin, New Territories, Hong Kong at a consideration of HK$17,300,000;
(m) the provisional sale and purchase agreement dated 11 November 2010 entered into between China Universal Limited (a company incorporated in Hong Kong with limited liability and an indirect wholly-owned subsidiary of the Company) as purchaser and Chaw Ming Fu Company Limited as vendor for the sale and purchase of the properties located at Shop No. G12, Ground Floor, Commercial Podium, Sincere House, No.83 Argyle Street, Kowloon, Hong Kong at a consideration of HK$17,460,000;
(n) the First Sale and Purchase Agreement;
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GENERAL INFORMATION

APPENDIX IV

(o) the Second Sale and Purchase Agreement;
(p) the SM Placing Agreement; and
(q) the GM Placing Agreement.

5. 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).

6. EXPERT AND CONSENT

The following is the qualification of the expert who has been named in this circular or has given opinions or letter or advice contained in this circular:

Name Qualification HLB Hodgson Impey Cheng Chartered Accountants Certified Public Accountants

HLB Hodgson Impey Cheng has given and has not withdrawn its written consent to the issue of this circular with the inclusion therein of its reports and/or reference to its name, in the form and context in which they appear.

As at the Latest Practicable Date, HLB Hodgson Impey Cheng was not beneficially interested in the share capital of any member of the Group nor had 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 interest, either directly or indirectly, in the assets which have been acquired or disposed of by or leased to any member of the Group since 30 June 2010, being the date to which the latest published audited consolidated financial statements of the Group were made up.

7. LITIGATION

As at the Latest Practicable Date, no member of the Enlarged Group was engaged in any litigation or arbitration of material importance and there was no litigation or claim of material importance known to the Directors to be pending or threatened against any member of the Enlarged Group.

8. DIRECTORS’ COMPETING INTERESTS

To the best knowledge of the Directors, as at the Latest Practicable Date, none of the Directors or their respective associates had any interests in a business, which competes or is likely to compete either directly or indirectly with the business of the Group which would be required to be disclosed under Rule 11.04 of the GEM Listing Rules.

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GENERAL INFORMATION

APPENDIX IV

9. DIRECTORS’ INTERESTS IN CONTRACTS

Save as disclosed herein, the Directors confirm that there was no contract or arrangement subsisting as at the Latest Practicable Date in which a Director was materially interested which was significant in relation to the business of the Enlarged Group.

10. DIRECTORS’ INTERESTS IN ASSETS

As at the Latest Practicable Date, none of the Directors had any interest, direct or indirect, in any assets which had been, since 30 June 2010, being 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 Enlarged Group, or are proposed to be acquired or disposed of by or leased to any member of the Enlarged Group.

11. SHARE CAPITAL

The authorised and issued share capital of the Company as at the Latest Practicable Date and immediately after completion of the increase of the authorised share capital, and the SM Placing are set out as follows:

As at the Latest Practicable Date

Authorised share capital: 1,000,000,000 Shares

HK$50,000,000.00

Issued and paid-up share capital: 602,634,892 Shares HK$30,131,744.60

Immediately after the increase of authorised share capital

Authorised share capital: 10,000,000,000 Shares

HK$500,000,000.00

Issued and paid-up share capital: 602,634,892 Shares

HK$30,131,744.60

Immediately after the increase of the authorised share capital and SM Placing

Authorised share capital: 10,000,000,000 Shares HK$500,000,000.00

Issued and paid-up share capital: 602,634,892 Shares HK$30,131,744.60 505,700,000 SM Placing Shares HK$25,285,000.00

HK$55,416,744.60

1,108,334,892 Shares

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GENERAL INFORMATION

APPENDIX IV

12. GENERAL

(a) The registered office of the Company is at PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.
(b) The head office and principal place of business of the Company in Hong Kong is at Unit 1210A, 12th Floor, Champion Building, 301-309 Nathan Road, Kowloon, Hong Kong.
(c) The company secretary of the Company is Ms. Chan Lai Yee. Ms. Chan is a fellow member of the Association of Chartered Certified Accountants and a Certified Public Accountant of the Hong Kong Institute of Certified Public Accountants.
(d) The compliance officer of the Company is Mr. Chow Kai Wah, Gary.
(e) As at the Latest Practicable Date, the audit committee of the Company consisted of the following members: (i) Mr. Chan Yip Man, Norman (as chairman); (ii) Mr. Hui Sin Kwong; and (iii) Mr. Leung Chi Kin.

Mr. Chan Yip Man, Norman is a fellow member of the Association of Chartered Certified Accountants and a Certified Public Accountant of the Hong Kong Institute of Certified Public Accountants. Mr. Chan has extensive experience in accounting, auditing and financial management in a number of listed and unlisted companies. He is currently the sole proprietor of a firm of Certified Public Accountants and is an appointed member of the Shatin District Council. Mr. Chan has not held any other directorship in other companies listed on the Stock Exchange in the past three years.

Mr. Hui Sin Kwong has almost 20 years of experience in the building and construction industry in Hong Kong. Mr. Hui has not held any other directorship in other companies listed on the Stock Exchange in the past three years.

Mr. Leung Chi Kin is currently an elected district council member of Shatin. He is devoted to community welfare work and has been the committee member or chairman of various social groups. Mr. Leung was also awarded a Medal of Honour by the Hong Kong Special Administrative Region. He was an independent non-executive director of RBI Holdings Limited (now known as Apollo Solar Energy Technology Holdings Limited) (stock code: 566) during the period from 1 May 2008 to 25 November 2009. Save as above, Mr. Leung has not held any other directorship in other companies listed on the Stock Exchange in the past three years.

The audit committee of the Company reviews the Company’s annual report and accounts, interim reports and quarterly reports and to provide advice and comments thereon to the Board. The audit committee is also responsible for reviewing and supervising the Group’s financial reporting and internal control procedures.

107 -

GENERAL INFORMATION

APPENDIX IV

(f) The Company’s branch share registrar and transfer office in Hong Kong is Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.
(g) The English text of this circular shall prevail over the Chinese text in the event of inconsistency.

13. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours from 10:00 a.m. to 1:00 p.m. and from 2:00 p.m. to 5:00 p.m. on any weekday (except Saturdays and public holidays) at the head office and principal place of business of the Company in Hong Kong at Unit 1210A, 12th Floor, Champion Building, 301-309 Nathan Road, Kowloon, Hong Kong from the date of this circular up to and including the date of the EGM:

(a) the memorandum and articles of association of the Company;
(b) the letter from the Board, the text of which is set out on pages 5 to 22 of this circular;
(c) the material contracts referred to in the section headed “Material contracts” in this Appendix;
(d) the written consent of the expert referred to in the section headed “Expert and consent” in this Appendix;
(e) the accountants’ report on the Target Company for the financial years ended 31 March 2008, 31 March 2009 and 31 December 2009 and the nine months ended 30 September 2010, the text of which is set out in Appendix II to this circular;
(f) the report from HLB Hodgson Impey Cheng in respect of the unaudited pro forma financial information of the Enlarged Group, the text of which is set out in Appendix III to this circular;
(g) the annual reports of the Company for the two years ended 30 June 2010; and
(h) this circular and the circular of the Company dated 15 October 2010.
108 -

NOTICE OF EGM

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China Natural Investment Company Limited 中國天然投資有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8250)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that the extraordinary general meeting of China Natural Investment Company Limited (the “ Company ”, and together with its subsidiaries, the “ Group ”) will be held at 9:00 a.m. on Monday, 17 January 2011 at Chairman Room II, Level 2, Royal Park Hotel, 8 Pak Hok Ting Street, Shatin, New Territories, Hong Kong to consider and, if thought fit, pass the following resolutions of the Company:

ORDINARY RESOLUTIONS

“ THAT
(a) the sale and purchase agreement (the “ First Sale and Purchase Agreement ”) dated 24 November 2010 and entered into among Kenson Assets Limited (the “ Purchaser ”) as purchaser, Kindness Spirit Company Limited as vendor and Mr. Ling Koon Wah as guarantor in relation to the acquisition by the Group of 70 ordinary shares of HK$1.00 each in the issued share capital of PR ASIA Consultants Limited (the “ Target Company ”) representing 70% of the entire issued share capital of the Target Company at a total consideration of HK$23.52 million (a copy of which has been produced to the EGM marked “A” and signed by the Chairman of the EGM for the purpose of identification) and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified; and
(b) any one of the directors (the “ Directors ”) of the Company be and is hereby authorised to do all such acts and things and execute all such documents which he may consider necessary, desirable or expedient for the purpose of, or in connection with, the implementation of and giving effect to the First Sale and Purchase Agreement and the transactions contemplated thereunder.”
109 -

NOTICE OF EGM

“ THAT
(a) the sale and purchase agreement (the “ Second Sale and Purchase Agreement ”) dated 24 November 2010 and entered into between the Purchaser as purchaser and King Fuk Holdings Limited as vendor in relation to the acquisition by the Group of 30 ordinary shares of HK$1.00 each in the issued share capital of the Target Company representing 30% of the entire issued share capital of the Target Company at a total consideration of HK$10.08 million (a copy of which has been produced to the EGM marked “B” and signed by the Chairman of the EGM for the purpose of identification) and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified; and
(b) any one of the Directors be and is hereby authorised to do all such acts and things and execute all such documents which he may consider necessary, desirable or expedient for the purpose of, or in connection with, the implementation of and giving effect to the Second Sale and Purchase Agreement and the transactions contemplated thereunder.”
“ THAT
(a) the placing agreement (the “ SM Placing Agreement ”) dated 24 November 2010 and entered into between the Company and Fordjoy Securities and Futures Limited (the “ Placing Agent ”) in connection with the private placement through the Placing Agent, on a best effort basis, of a maximum of 505,700,000 new ordinary shares (the “ SM Placing Shares ”) of HK$0.05 each in the share capital of the Company at the placing price of HK$0.165 each (a copy of which has been produced to the EGM marked “C” and signed by the Chairman of the EGM for the purpose of identification) and the transactions contemplated thereunder and all other matters of and incidental thereto or in connection therewith be and are hereby approved, confirmed and ratified in all respects;
(b) any one of the Directors be and is hereby authorised to do all such acts and things and execute all such documents which he may consider necessary, desirable or expedient for the purpose of, or in connection with, the implementation of and giving effect to the SM Placing Agreement and the transactions contemplated thereunder; and
(c) the board of Directors be and is hereby authorised to allot and issue the SM Placing Shares upon and subject to the terms and conditions of the SM Placing Agreement.”
110 -

NOTICE OF EGM

“ THAT the authorised share capital of the Company be increased from HK$50,000,000 divided into 1,000,000,000 shares of HK$0.05 each (the “ Shares ”) in the share capital of the Company to HK$500,000,000 divided into 10,000,000,000 Shares by the creation of an additional 9,000,000,000 Shares each ranking pari passu in all respects with the existing Shares, and any one of the Directors be and is hereby authorised to do all such acts and things and execute all such documents which he may consider necessary, desirable or expedient for the implementation of and giving effect to the increase in authorised share capital of the Company.”

By order of the Board China Natural Investment Company Limited Chow Kai Wah, Gary Executive Director

Hong Kong, 31 December 2010

Registered office: Head office and principal place PO Box 309 of business in Hong Kong: Ugland House Unit 1210A, 12th Floor Grand Cayman Champion Building KY1-1104 301-309 Nathan Road Cayman Islands Kowloon Hong Kong

Notes:

(1) A member of the Company entitled to attend and vote at the extraordinary general meeting convened by the above notice is entitled to appoint one or more proxy to attend and, subject to the provisions of the articles of association of the Company, to vote on his/her behalf. A proxy need not be a member of the Company but must be present in person at the extraordinary general meeting to represent the member. If more than one proxy is so appointed, the appointment shall specify the number and class of shares in respect of which each such proxy is so appointed.
(2) In order to be valid, the form of proxy must be deposited together with a power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority, at the office of the Company’s branch share registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof.
(3) Completion and return of an instrument appointing a proxy should not preclude a member of the Company from attending and voting in person at the meeting and/or any adjournment thereof and in such event, the instrument appointing a proxy shall be deemed to be revoked.
(4) As required under the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited, the above resolutions will be decided by way of poll.
111 -

AI assistant

Du Du Holdings Limited — Proxy Solicitation & Information Statement 2010

51353_rns_2010-12-30_31bebdba-58b5-4e42-afe6-1f9d35a83ede.pdf

China Natural Investment Company Limited 中國天然投資有限公司

(I) VERY SUBSTANTIAL ACQUISITION;

(II) PLACING OF NEW SHARES UNDER SPECIFIC MANDATE;

(III) INCREASE IN AUTHORISED SHARE CAPITAL;

AND

(IV) NOTICE OF EXTRAORDINARY GENERAL MEETING

Contents

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

China Natural Investment Company Limited 中國天然投資有限公司

(I) VerY SUbStaNtIaL aCQUISItIoN;

(II) PLaCING of NeW ShareS UNder SPeCIfIC maNdate;

(III) INCreaSe IN aUthorISed Share CaPItaL; aNd

(IV) NotICe of eXtraordINarY GeNeraL meetING

INtrodUCtIoN

Letter from the board

VerY SUbStaNtIaL aCQUISItIoN

date and parties of the first Sale and Purchase agreement

assets to be acquired

Consideration

Consideration adjustment

Conditions precedent

Completion

Guarantee under the first Sale and Purchase agreement

financial impact of the acquisition on the Group

Information on the target Company

Letter from the board

reasons for and benefits of the acquisition

PLaCING of NeW ShareS UNder SPeCIfIC maNdate

date

Issuer

Placing agent

Placing commission

Sm Placees

Sm Placing Shares

ranking of Sm Placing Shares

Sm Placing Price

Conditions of the Sm Placing

termination

Completion of the Sm Placing

Specific mandate to issue new Shares

application for listing

reasons for the Sm Placing and use of proceeds

the Placings

fund raising activities by the Company in the past twelve months

Letter from the board

effects on shareholding structure

other agreements, arrangements, understanding or negotiation

INCreaSe IN aUthorISed Share CaPItaL

eGm

reCommeNdatIoN

addItIoNaL INformatIoN

1. THREE-YEAR FINANCIAL INFORMATION

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

For the year ended 30 June 2008

Financial review

Business review

Liquidity and financial resources

Capital structure

Exchange Exposure

Capital commitment

Significant investment, material acquisitions and disposals

Future plans for material investments or capital assets

Employee information

Contingent liabilities

Charges

For the year ended 30 June 2009

Financial review

Review of operations

Liquidity and financial resources

Capital structure

Exchange Exposure

Capital commitment

Significant investment, material acquisitions and disposals

Future plans for material investments or capital assets

Du Du Holdings Limited Proxy Solicitation & Information Statement 2010