Fibocom Wireless Inc. — Interim / Quarterly Report 2009

Dec 29, 2008

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(Incorporated in Bermuda with limited liability)

(Stock Code: 346)

ANNOUNCEMENT OF INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2008

The board of directors (the “Board”) of Sino Union Petroleum & Chemical International Limited (the “Company”) is pleased to announce the unaudited condensed consolidated interim results of the Company and its subsidiaries (hereinafter collectively referred to as the “Group”) for the six months ended 30 September 2008 together with the unaudited comparative figures for the corresponding six months ended 30 September 2007 as follows:

CONDENSED CONSOLIDATED INCOME STATEMENT

For the six months ended 30 September 2008

		Six months	ended
		30 September
		2008	2007
		(Unaudited)	(Unaudited)
	Notes	HK$’000	HK$’000
Turnover	3	741,119	829,225
Cost of sales		(707,219 )	(794,378 )
Gross profit		33,900	34,847
Other revenue	4	274	371
Other income	4	761	–
Excess of acquirer’s interest in fair value of
acquiree’s identifiable net assets over cost	14	2,103,419	1,904,858
Impairment loss recognised in respect of
exploration and evaluation assets	9	(190,212 )	–
Impairment loss recognised in respect of
intangible asset		(1,339 )	–
Selling and distribution costs		(7,165 )	(2,400 )
Administrative expenses		(19,713 )	(15,329 )
Profit from operating activities	4	1,919,925	1,922,347
Finance costs	5	–	(1,921 )
Profit before taxation		1,919,925	1,920,426
Taxation	6	(3,198 )	(4,935 )
Profit for theperiod		1,916,727	1,915,491
Net profit from ordinary activities
attributable to
– shareholders of the Company		1,917,060	1,915,491
– minority interests		(333)	–
		1,916,727	1,915,491
Dividends	7	–	–
Earnings per share
– Basic, HK cents	8	34.94	115.44
– Diluted, HK cents	8	34.68	112.26

* For identification purpose only

– 1 –

CONDENSED CONSOLIDATED BALANCE SHEET

At 30 September 2008

		As at	As at
		30 September	31 March
		2008	2008
		(Unaudited)	(Audited)
	Notes	HK$’000	HK$’000
ASSETS
Non-Current Assets
Property, plant and equipment		2,234	1,175
Investment property		12,285	12,285
Intangible asset		248,503	249,842
Prepaid lease payment		965	–
Exploration and evaluation assets	9	12,026,686	5,615,126
Goodwill		2,364	2,364
		12,293,037	5,880,792
Current Assets
Trade receivables	10	124,311	144,121
Prepayments, deposits and other receivables		27,030	162,767
Cash and bank balances		244,184	228,457
		395,525	535,345
Total Assets		12,688,562	6,416,137
EQUITY
Capital and reserves attributable to
the Company’s equity holders
Share capital		114,049	92,835
Reserves		11,699,939	6,084,199
		11,813,988	6,177,034
Minority interests		657,403	–
Total Equity		12,471,391	6,177,034
LIABILITIES
Current Liabilities
Trade payables	11	107,933	145,573
Tax payable		40,817	37,619
Other payables and accruals		43,774	28,036
Amount due to the holding company		2,911	2,911
Amounts due to related parties		18,231	22,314
Bank overdraft		855	–
		214,521	236,453
Non-Current Liability
Deferred taxation		2,650	2,650
Total Liabilities		217,171	239,103
Total Equity and Liabilities		12,688,562	6,416,137
Net Current Assets		181,004	298,892
Total Assets Less Current Liabilities		12,474,041	6,179,684

– 2 –

Notes:

1. BASIS OF PREPARATION

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

2. SIGNIFICANT ACCOUNTING POLICIES

The unaudited condensed consolidated financial statements have been prepared under the historical cost convention except for certain investment property, financial assets and liabilities, exploration and evaluation assets, intangible assets have been carried at fair value. The principal accounting policies and methods of computation used in the preparation of the unaudited condensed consolidated interim financial statements are consistent with those applied in the Group’s annual financial statements for the year ended 31 March 2008 except that the current period the Group has applied for the first time an accounting policy for acquisition of additional interests in a subsidiary.

Acquisition of additional interests in a subsidiary

Changes in the Company’s ownership interests in a subsidiary that do not result in loss of control are accounted for as equity transactions (i.e. transactions with the Company in the capacity as owners).

In such circumstances the carrying amounts of the controlling interest and minority interests shall be adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which minority interests are adjusted and the fair value of the consideration paid or received shall be recognized directly in equity and attributed to the owners of the Company.

In the current six-month period, the Group has applied, for the first time, a number of new standards, amendments and interpretations (the “new HKFRSs”) issued by the HKICPA, which are effective for the Group’s accounting periods beginning on 1 April 2008. The new HKFRSs adopted by the Group in the financial statements are set out as follows:

HKAS 39 and HKFRS 7 Reclassification of Financial Assets (Amendments) HK(IFRIC) – Int 12 Service Concession Arrangements HK(IFRIC) – Int 14 HKAS 19 – The Limited on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

The adoption of the above new standard and interpretations did not results in substantial changes to the Group’s accounting policies.

– 3 –

The Group has not early applied the following new standards, amendments or interpretations that have been issued but are not yet effective. The Group is not yet in a position to determine whether these standards and interpretations will have significant impact on how the results and financial position are prepared and presented.

HKFRSs (Amendment)	Improvements to HKFRSs1
HKAS 1 (Revised)	Presentation of Financial Statements1
HKAS 23 (Revised)	Borrowing Costs1
HKAS 27 (Revised)	Consolidated and Separate Financial Statements2
HKAS 32 and 1 (Amendments)	Puttable Financial Instruments and Obligations
	Arising on Liquidation1
HKAS 39 (Amendment)	Financial Instruments: Recognition and
	Measurement – Eligible Hedged Items2
HKFRS 2 (Amendment)	Share-based Payment Vesting Conditions and
	Cancellations1
HKFRS 3 (Revised)	Business Combination2
HKFRS 8	Operating Segments1
HK(IFRIC) – Int 13	Customer Loyalty Programmes3
HK(IFRIC) – Int 15	Agreements for Construction of Real Estate1
HK(IFRIC) – Int 16	Hedges of a Net Investment in a Foreign Operation4
HK(IFRIC) – Int 17	Distribution of Non-Cash Assets to Owners2

• 1 Effective for annual periods beginning on or after 1 January 2009

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

• 3 Effective for annual periods beginning on or after 1 July 2008

• 4 Effective for annual periods beginning on or after 1 October 2008

3. SEGMENT INFORMATION

Segment information is presented by way of two segment formats: (i) on a primary segment reporting basis, by business segment; and (ii) on a secondary segment reporting basis, by geographical segment.

The Group’s operating businesses are structured and managed separately, according to the nature of their operations and the products and services they provide. Each of the Group’s business segments represents a strategic business unit that offers products and services which are subject to risks and returns that are different from those of other business segments.

Summary details of the business segments are as follows:

• (a) the polyurethane (“PU”) materials segment involves the trading of PU materials, such as isocyanate, polyols and various kinds of PU catalysts;

• (b) the fuel oil segment involves trading of fuel products with model no. 180CST; and

• (c) oil, gas exploration and exploitation and operation segment involves oil, gas exploration and exploitation and operation in Madagascar. During the six-month period, this segment did not generate any revenue or profit to the Group.

– 4 –

Business Segments

The following table presents revenue and results for the Group’s business segments.

				Six months ended 30 September	Six months ended 30 September	Six months ended 30 September
					Oil, gas exploration,
	PU materials		Fuel products		exploration and operation		Consolidation
	2008	2007	2008	2007	2008	2007	2008	2007
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Segment revenue:
Sales to external customers	50,005	285,730	691,114	543,495	–	–	741,119	829,225
Total revenue	50,005	285,730	691,114	543,495	–	–	741,119	829,225
Segment results	1,243	17,387	32,657	17,460	–	–	33,900	34,847
Interest income							267	371
Unallocated income							7	–
Excess of acquirer’s in fair value
of acquiree’s identifiable net
assets over costs	–	–	–	–	2,103,419	1,904,858	2,103,419	1,904,858
Impairment loss recognised in respect of
exploration and evaluation assets	–	–	–	–	(190,212 )	–	(190,212 )	–
Impairment loss recognised in respect of
intangible asset	–	–	–	–	(1,339 )	–	(1,339 )	–
Unallocated expenses							(26,117 )	(17,729 )
Profit from operating activities							1,919,925	1,922,347
Finance costs							–	(1,921 )
Profit before taxation							1,919,925	1,920,426
Taxation							(3,198 )	(4,935 )
Profit for the period							1,916,727	1,915,491

– 5 –

4. PROFIT FROM OPERATING ACTIVITIES

	Six months	ended
	30 September
	2008	2007
	(Unaudited)	(Unaudited)
	HK$’000	HK$’000
Profit from operating activities has
been arrived at after charging:
Amortisation of prepaid lease payments	10	–
Depreciation	311	134
and after crediting:
Other revenue:
Interest income	267	371
Others	7	–
Other income:
Exchange difference	761	–

5. FINANCE COSTS

	Six months	ended
	30 September
	2008	2007
	(Unaudited)	(Unaudited)
	HK$’000	HK$’000
Interest on:
Bond wholly repayable within five years	–	1,921

– 6 –

6. TAXATION

Current Taxation

Hong Kong Profits Tax is calculated at 16.5% (2007: 17.5%) of the estimated assessable profits for the six-month period. Taxation on assessable profits elsewhere have been calculated at the rates of tax prevailing in the countries in which the Group operates, based on existing legislation, interpretations and practices in respect thereof.

	Six months	ended
	30 September
	2008	2007
	(Unaudited)	(Unaudited)
	HK$’000	HK$’000
Current period provision:
Hong Kong	–	–
Elsewhere	3,198	4,935
	3,198	4,935

Deferred Taxation

	Convertible		Investment
	notes		property	Total
	HK$’000		HK$’000	HK$’000
At 1 April 2007	–		–	–
Charged to equity for the year	18,284		–	18,284
Credited from equity for the year	(18,284	)	–	(18,284 )
Acquisition of subsidiaries	–		2,650	2,650
At 31 March 2008 and 1 April 2008	–		2,650	2,650
Charged to equity for the period	8,140		–	8,140
Credited from equity for the period	(8,140	)	–	(8,140 )
At 30 September 2008		–	2,650	2,650

The Group and the Company did not have any significant unprovided deferred tax liabilities at 30 September 2008 (2007: Nil).

7.

INTERIM DIVIDEND

The directors do not recommend the payment of any interim dividend in respect of the six months ended 30 September 2008 (2007: Nil).

– 7 –

8. EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share attributable to the equity holders of the Company is based on the following data:

	Six months ended	Six months ended
	30 September
	2008	2007
	(Unaudited)	(Unaudited)
	HK$’000	HK$’000
Earnings
Earnings attributable to the equity holders of
the Company for the purpose of
basic and diluted earnings per share	1,917,060	1,915,491
	Number of shares
	Six months ended
	30 September
	2008	2007
	’000	’000
Weighted average number of ordinary shares for
the purpose of basic earnings per share	5,486,250	1,659,230
Effect of dilutive potential ordinary shares:
Share Options	41,081	47,094
Weighted average number of ordinary shares for
the purpose of diluted earnings per share	5,527,331	1,706,324

– 8 –

9. EXPLORATION AND EVALUATION ASSETS

	Exploration	Evaluation
	rights	costs	Total
	HK$’000	HK$’000	HK$’000
	(note i)	(note ii)
Cost
At 1 April 2008	5,507,575	107,551	5,615,126
Acquisition of subsidiaries (Note 14)	6,589,484	12,105	6,601,589
Additions	–	183	183
At 30 September 2008	12,097,059	119,839	12,216,898
Accumulated impairment
At 1 April 2008	–	–	–
Provided for the period	190,212	–	190,212
At 30 September 2008	190,212	–	190,212
Carrying amount
At 30 September 2008	11,906,847	119,839	12,026,686
At 31 March 2008	5,507,575	107,551	5,615,126

Notes:

• i. The exploration rights represent the oil, gas exploration, exploitation and operations rights and profit sharing rights at Madagascar Oilfield Block 2104 and Madagascar Oilfield Block 3113, onshore sites for oil and gas exploration, exploitation and operation in Madagascar (“Oilfield Block 2104” and “Oilfield Block 3113”).

• ii. The evaluation costs represents expenditure paid for provision of services on activities relating to evaluation of the technical feasibility and commercial viability of extracting oil and gas in Oilfield Block 2104 and Oilfield Block 3113.

iii. The recoverable amounts of the exploration and evaluation assets have been determined on the basis of their fair value less costs to sell. The fair value less costs to sell of the exploration and evaluation assets has been arrived at on the basis of a valuation carried out on that date by Messers. Ascent Partners Group Limited, an independent valuer not connected to the Group. Ascent Partners Group Limited has appropriate qualifications and recent experiences to valuation of similar assets. The valuation which confirms to International Valuation Standards, was arrived at by reference to market evidence of transaction prices for similar assets.

– 9 –

10. TRADE RECEIVABLES

Trade receivables, which generally have credit terms of 90 days, are recognised and carried at the original invoiced amount less provision for accumulated impairment loss. It is the Group’s policy to provide full impairment loss for all receivables over 1 year because historical experience is such that receivables that are past due beyond 1 year are generally not recoverable.

An aged analysis of the trade receivables at the balance sheet date, based on invoiced date, is as follows:

	As at	As at
	30 September	31 March
	2008	2008
	(Unaudited)	(Audited)
	HK$’000	HK$’000
Current to 30 days	102,632	120,139
31 days to 90 days	21,679	23,982
	124,311	144,121

11. SHARE CAPITAL

	Number of
	ordmany shares	HK$’000
	’000
Authorised:
Ordinary shares of HK$0.02 each
At 1 April 2008 and 30 September 2008	10,000,000	200,000
Issued and fully paid:
Ordinary shares of HK$0.02 each
At 1 April 2008	4,641,756	92,835
Issue of subscription shares (Note i)	35,720	714
Consideration shares (Note ii)	680,655	13,613
Conversion of convertible note (Note iii)	333,333	6,667
Exercise of share option (Note iv)	11,000	220
At 30 September 2008	5,702,464	114,049

– 10 –

Notes:

• (i) On 17 April 2008, the Company entered into a subscription agreement with an independent third party, pursuant to which the independent third party has conditionally agreed to subscribe for and the Company has conditionally agreed to allot and issue 35,720,000 shares in cash at the subscription price of HK$2.8 per share. For details, please refer to the Company’s announcement dated 22 April 2008.

• (ii) (a) On 3 November 2007, the Company entered into a sale and purchase agreement to acquire from Sukapeak Holdings Limited (“Sukapeak”) the entire issued share capital of Better Step Group Limited (“Better Step”) for a total consideration of HK$1,215 million. The conditional sale and purchase agreement was completed on 8 April 2008. The consideration for the acquisition was satisfied by (i) HK$120 million in cash; (ii) HK$615 million by issue of 427,083,333 new shares at HK$1.44 per share; and (iii) HK$480 million by issue of convertible note (the “Convertible Note”) at a conversion price of HK$1.44 per conversion. For further details, please refer to the Company’s circular dated 12 March 2008.

• (b) On 17 April 2008, the Group entered into a sale and purchase agreement with Smart Rich Energy Finance (Holdings) Limited and Dorson Group Limited (“Dorson”) pursuant to which the Group has conditionally agreed to acquire, and Smart Rich Energy has conditionally agreed to procure Dorson, and Dorson has agreed to sell 36% equity interest in MPIL at a total consideration of HK$810 million. The acquisition was completed on 7 August 2008. The consideration for the acquisition was satisfied by (i) HK$100 million in cash; (ii) HK$710 million by issue of 253,571,428 new shares at HK$2.8 per share. For further details, please refer to the Company’s circular dated 16 May 2008.

• (iii) On 8 April 2008, Sukapeak, the holder of the Convertible Note as mentioned in Note 1(a)(iii) above, has converted HK$480 million of the principal of the Convertible Note, representing the whole principal amount of the Convertible Note, at conversion price of HK$1.44 per share. As a result of the conversion, a total of 333,333,333 ordinary shares have been allotted and duly issued and the aggregate outstanding principal of the Convertible Note has been reduced to HK$Nil. For further details, please refer to Note 13 and the Company’s circular dated 12 March 2008.

• (iv) During the six months ended 30 September 2008, the Company issued 11,000,000 shares of HK$0.02 each at an issue price of HK$0.1324 per share on exercise of share options which were granted on 8 November 2004. These shares issued rank pari passu in all respects with the existing shares.

12.

TRADE PAYABLES

An aging analysis of the trade payables at the balance sheet date, based on invoice date, is as follows:

is as follows:
	As at	As at
	30 September	31 March
	2008	2008
	(Unaudited)	(Audited)
	HK$’000	HK$’000
Current to 30 days	99,022	100,889
31 days to 90 days	8,911	44,684
	107,933	145,573

– 11 –

The average credit period on purchases is three months. The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe.

13. CONVERTIBLE NOTES

Pursuant to the conditional sale and purchase agreement entered between the Company and Sukapeak Holdings Limited (“Sukapeak”) in respect of acquisition of the entire equity interest in Better Step Group Limited (“Better Step”), the Company issued a Convertible Note in the principal of HK$480,000,000 (the “Convertible Note”) to Sukapeak, the controlling shareholder of the Company. Sukapeak has the right to convert the whole or part of the principal amount of the Convertible Note into shares of HK$0.02 each in the share capital of the Company, at the conversion price of HK$1.44 per share. Sukapeak may at any time from the date of issue of the Convertible Note to the maturity date of the Convertible Note to redeem the principal amount outstanding under the Convertible Note. The Convertible Note may be assigned or transferred in whole or in part to third parties, subject to written approval of the Company and the conditions, approvals, requirements and any other provisions under the Listing Rules and all applicable laws and regulations.

On 8 April 2008, Sukapeak has converted the Convertible Note into ordinary shares of the Company.

The Convertible Note contains two components, liability and equity elements. The equity element is presented in equity heading “convertible note reserve”. The effective interest rate of the liability component is 3.68%.

The movement of the liability component of the Convertible Note for the period is set out below:

	As at	As at
	30 September	31 March
	2008	2008
	(Unaudited)	(Audited)
	HK$’000	HK$’000
Proceeds of issue	–	–
Fair value of Convertible Note issued
on 8 April 2008/4 June 2007	708,255	289,186
Equity component	(277,587 )	(3,598,748 )
Derivative financial instruments	–	3,598,748
Liability component on initial recognition
on 8 April 2008/4 June 2007	430,668	289,186
Conversion of Convertible Note	(430,668 )	(289,186 )
Amortised cost at 30 September/31 March	–	–

The fair value of the liability component was calculated using a market interest rate for an equivalent non-convertible note. The residual amount, representing the value of the equity conversion component, was included in shareholders’ equity in convertible note reserve. The fair value of the liability component and the equity conversion component were determined at issuance of the Convertible Note.

– 12 –

14. ACQUISITION OF SUBSIDIARIES Acquisition of Better Step Group Limited (“Better Step”)

On 3 November 2007, the Company entered into a sale and purchase agreement to acquire from Sukapeak the entire issued share capital of Better Step, which holds 54% equity interest in Madagascar Petroleum International Limited (“MPIL”) (collectively referred to “Better Step Group”), at a total consideration of HK$1,215 million. The acquisition was completed on 8 April 2008. As at the date of completion of the acquisition, the fair value of the cost of the acquisition was approximately HK$1,465,625,000.

The net assets acquired in the transaction and excess of acquirer’s interest in fair value of acquiree’s identifiable net assets over cost arising are as follows:

Acquiree’s Fair value carrying amount adjustments HK$’000 HK$’000	Fair value HK$’000 748 415 2 97 4,113 (14 ) (13,294 ) 6,601,589 6,593,656 (3,024,612 ) (2,103,419 ) 1,465,625 120,000 636,354 708,255 1,016 1,465,625 HK$’000 97 (120,000 ) (1,016 ) (120,919 )
Net assets acquired: Property, plant and equipment 748 – Prepayment 415 – Other deposits 2 – Cash and bank balances 97 – Amount due from related companies 4,113 – Amount due to related companies (14 ) – Accruals (13,294 ) – Exploration and evaluation assets 5,012,105 1,589,484
5,004,172 1,589,484	6,593,656 (3,024,612 (2,103,419
Minority interest Excess of acquirer’s interest in fair value of acquiree’s identifiable net assets over cost (note i)
Total consideration satisfied by: Cash consideration Issue of shares (note iii) Issue of Convertible Note (note iv) Acquisition-related costs Total consideration Net cash outflow arising on acquisition: Cash and bank balances acquired Cash consideration Acquisition-related costs

– 13 –

Notes:

• (i) In the opinion of the directors of the Company, the excess of acquirer’s interest in fair value of acquiree’s identifiable net assets over cost arose in the business combination is mainly attributable to the increase in the fair value of the right in exploration, exploitation and operation in the oilfield block 2104 in Madagascar as a result of increase in the international crude oil price subsequent to entering into the sales and purchases agreement. The excess were recognised in the consolidated income statement immediately.

• (ii) Better Step Group acquired during the period ended 30 September 2008 attributed loss of approximately HK$1,211,000 to the Group’s profit after taxation respectively. None of these subsidiaries acquired during the period contribute any revenue to the Group.

• (iii) The share considerations for acquisition of Better Step Group were settled through issue of 427,083,333 shares. The fair values of the share consideration was determined in accordance with the quoted market price of the Company’s share as at the completion date of the acquisition.

• (iv) The fair value of the convertible notes issued has been arrived at on the basis of a valuation carried out on the completion date of the acquisition by Ascent Partners Group Limited, an independent qualified professional valuers not connected with the Group. The valuation was arrived at by reference to discounted cash flow method and Black-Scholes method.

15. ACQUISITION OF ADDITIONAL INTERESTS IN A SUBSIDIARY

On 17 April 2008, the Group entered into a sale and purchase agreement with Smart Rich Energy Finance (Holdings) Limited (“Smart Rich”) and Dorson Group Limited (“Dorson”) pursuant to which the Group has conditionally agreed to acquire, and Smart Rich has conditionally agreed to procure Dorson, and Dorson has agreed to sell 36% equity interest in MPIL at a total consideration of HK$810 million. The acquisition was completed on 7 August 2008. As at the date of completion of the acquisition, the fair value of the cost of the acquisition was approximately HK$389,071,000. The carrying amount of the underlying assets and liabilities attributable to the additional interest was approximately HK$2,366,876. The difference of approximately HK$1,977,805 between the amount by which the minority interests are adjusted and their fair value of the consideration paid was recognised in the equity.

16. COMMITMENTS

On 5 September 2008, the Company entered into a sale and purchase agreement (“Proposed Acquisition”) to acquire from Right Up Holdings Limited the entire equity interest in Double High Group Limited (“Double High”) at a total consideration of HK$600 million. Upon signing of the agreement, HK$100 million was paid in cash as refundable deposit.

At 30 September 2008, the Group and the Company had a commitment in respect of the Proposed Acquisition, which will be financed by the Group’s issues of Convertible Note and the Company’s new shares.

– 14 –

17. SUBSEQUENT EVENT

(i) On 5 September 2008, the Company entered into a sale and purchase agreement to acquire from Right Up Holdings Limited (“Right Up”) the entire equity interest in Double High at a total consideration of HK$600 million. The consideration will be satisfied by (i) HK$100 million in cash, payable upon signing of the agreement; (ii) HK$100 million in cash upon completion of the acquisition; and (iii) HK$400 million by the issue of 320,000,000 new shares at HK$1.25 per consideration share. The acquisition was completed on 5 December 2008, for which the fair value of the share consideration as mentioned in (iii) above at that day is approximately HK$150,400,000, which was determined in accordance with the quoted market price of the Company’s share as at 5 December 2008.

The fair value of the net assets of Double High is still under progress of valuation by independent qualified professional valuers. It is therefore considered not practicable to disclose the fair value of net asset of Double High for recognition in the unaudited condensed consolidated financial statements and also any charge or credit to the equity.

For further details, please refer to the Company’s announcement and circular dated on 18 September 2008 and 7 November 2008 respectively.

(ii) Subsequent to the balance sheet date, there was a significant decline in international crude oil price due to economic recession. The directors of the Company considered that such decline may have a material impact in relation to the valuation of the exploration and evaluation assets in the next financial period. Subject to the amount fluctuation of market crude oil price, the Group is not yet in a position to determine the extent of the financial effect of such decline. The Group will engage independent valuer to estimate the value of the exploration and evaluation assets in subsequent financial periods.

– 15 –

MANAGEMENT DISSCUSSION AND ANALYSIS

FINANCIAL REVIEW

The Group’s unaudited condensed consolidated turnover and net profit from ordinary activities attributable to shareholders for the six months ended 30 September 2008 were approximately HK$741 million and approximately HK$1,917 million respectively, representing decrease/ increase of approximately 10.63% and 0.08% respectively as compared to the same period last year. The Group’s gross profit margin decreased by approximately 2.72% as compared to the corresponding period last year. The principal market of the Group remained in the PRC which accounted for 100% of the Group’s turnover.

BUSINESS REVIEW

Distribution business of PU Materials

During the period under review, revenue from the distribution of PU materials was approximately HK$50 million, decrease from approximately HK$286 million of the same period last year. The distribution business of PU materials contributed approximately HK$0.5 million to the Group’s net profit from operating activities for the period, representing a decrease of approximately 96.33% in comparison to the corresponding period in 2007. The competition on the market of PU material is continued rigorous. The Group has still adopted a selective approach in accepting PU trading orders by ensuring that these transactions will meet the minimum profit criteria in order to reduce the risk exposure in the competitive environment.

Distribution business of Fuel Products

During the period under review, revenue from the distribution of fuel products was approximately HK$691 million, increased from approximately HK$543 million of the same period last year. The distribution business of fuel products contributed approximately HK$23 million to the Group’s net profit from operating activities for the period, representing an increase of approximately 83.52% in comparison to the corresponding period in 2007.

LIQUIDITY AND FINANCIAL RESOURCES

At 30 September 2008, the Group held cash and bank balances of approximately HK$244 million and bank overdraft of approximately HK$0.1 million. With the available resources and the proceeds from the sale of the Group’s subsidiaries during the period, the Group has adequate working capital to finance its business operation.

As at 30 September 2008, the Group had a current ratio of approximately 1.84 (at 31 March 2008: 2.26). As the Group’s transactions are mostly settled by Hong Kong dollars, Renminbi or Hong Kong dollars pegged currencies, the exposure to foreign exchange fluctuation is minimal, therefore no use of financial instruments for hedging purposes is considered necessary.

MATERIAL ACQUISITION OR DISPOSAL OF SUBSIDIARIES

There was no material disposal of subsidiaries during the six months ended 30 September 2008. Details of the acquisition of subsidiaries of the Company during the period are set in Note 14 above.

CHARGES ON THE GROUP’S ASSETS

At 30 September 2008, none of the Group’s assets was pledged.

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COMMITMENT AND CONTINGENT LIABILITIES

At 30 September 2008, the Group did not have any commitment and contingent liabilities.

INTERIM DIVIDEND

The Directors resolved not to declare any interim dividend for the six months ended 30 September 2008.

EMPLOYEES

At 30 September 2008, the total number of staff was 40 (At 31 March 2008: 48). Salaries of employees were maintained at competitive level. The Group has encountered no problem with the recruitment of its employees. None of the companies in the Group has experienced any labour disputes during the period and the Directors of the Company consider that the Group has excellent employment relationship.

OUTLOOK

During the period under review, the Group had acquired the interest in 90% shareholding in Madagascar Petroleum International Limited (“MPIL”) and at 5 December 2008, the Group completed the acquisition of the remaining 10% shareholding of MPIL. MPIL entered into the Production Sharing Contract with Office Des Mines Nationales Et Des Industries Strategiques in respect of oilfield block 2104, an onshore site with total area of 20,100 square kilometers in Madagascar, for oil and gas exploitation and operation and certain transactions pertaining thereto. Pursuant to the Production Sharing Contract, MPIL is vested with all the relevant rights to engage in oil and gas exploration for 8 years, oilfield development for 5 years, and exploitation and operation for oil for 25 years (with 5 years possible extension) and gas for 35 years (with 10 years possible extension) at oilfield block 2104. Depending on the rate of crude oil production of oilfield block 2104, MPIL will share the remaining profit oil after government royalty according to the sharing ratios in the range of 45% to 73% as set out in the Production Sharing Contract. MPIL is responsible for the arrangement of the required capital commitment, human resources and equipment for the project development of oil and gas in oilfield block 2104. As at the date of this announcement, five wells with depth in the range of 67.5 meters to 2,153 meters have been drilled in oilfield block 2104, and oil and gas were discovered in three wells with depth in the range of 450 meters to 2,153 meters. According to the oil and gas reserve assessment performed by China University of Petroleum and China National Petroleum Corporation BGP, oilfield block 2104 has a prospective resources (遠景資源量) of 496.8 million tons of oil, 66.24 billion m[3] of gas and 556 million tons of total prospective oil and gas resources. China National Petroleum Corporation BGP and China University of Petroleum (the “Reserve Assessors”), independent professional oil exploration and reserve assessors, estimated that oilfield block 2104 would have an estimated unrisked prospective resources play volumes of 3.65 billion barrels of oil and 66.24 billion cubic meters of natural gas.

During the period, the Company had entered into cooperation agreements with ECO Energy (International) Investment Limited (“ECO”), a wholly-owned subsidiary of The Hong Kong and China Gas Company Limited and Shaanxi Yanchang Petroleum (Group) Limited (“Yanchang Petroleum”) respectively. Pursuant to the cooperation agreements, the Group, Yanchang Petroleum and ECO shall jointly invest and manage the exploration, exploitation and operations of oilfield block 3113 and shall contribute 31%, 40% and 29% of the required capital investment for the development of the oilfield block 3113 respectively and shall be entitled to 43.42%, 32.80% and 23.78% of the Attributable Oil and Gas. The definition of the Attributable Oil and Gas and details of the Cooperation Agreement are set out in the Company’s circular dated 28 May 2008 and 28 July 2008. The oilfield block 3113 at Madagascar has rich oil reserves with developable

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area of over 8,320 square kilometers at its petroleum plays. In the assessment performed by Netherland Sewell & Associates, Inc., an international reserve consultant, oilfield block 3113 has an unrisked estimated gross original oil-in-place of no less than 2 billion barrels. The Group has already completed drilling of eight wells with depth ranging from 715m to 4,670m. All of them showed the existence of oil and gas.

The Company created favorable conditions for the commencement of well drilling and oil exploration projects by building roads, laying pipes and carrying out a series of preliminary construction within the construction zone of oilfield block 3113. In addition, Sino Union has commissioned Yunnan Kaiyuan Petroleum and Natural Gas Exploration Engineering Company Ltd (雲南開元石油天然氣鑽探工程有限公司) (“Kaiyuan Petroleum”/“開元石油”) as the chief contractor responsible for the well drilling project for oil exploitation in oilfield block 3113. In the first quarter of 2009, the Group expects to drill three oil wells which are expected to produce oil very soon.

The Directors consider that the completion of the abovementioned acquisitions and cooperation agreements will further strengthen the Group’s foundation in developing the oil and gas exploration and exploitation business in Madagascar. In consideration of the limited supply and continuous strong demand of oil and gas in the world market, the Directors are optimistic about the further development of oil and gas exploration and exploitation business.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

During the period and up to the date of this announcement, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities.

CORPORATE GOVERNANCE

Compliance with Code Provisions

The Company has complied with the code provisions (the “Code Provisions”) set out in the code on Corporate Governance Practices (the “CCG”) contained in Appendix 14 to the Rules Governing the Listing of Securities (the “Listing Rules”) on the Stock Exchange of Hong Kong Limited (the “Stock Exchange”) throughout the six months ended 30 September 2008, except for the following deviations:

Code Provision A.4.1

Code Provision A.4.1 stipulates that non-executive directors should be appointed for a specific term, subject to re-election.

All non-executive directors (including executive directors) of the Company do not have a specific term of appointment. However, they are subject to retirement by rotation in accordance with the Company’s bye-laws. The Company considers that sufficient measures have been taken to ensure that the Company’s corporate governance practices are no less exacting than those in the Code Provision A.4.1.

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Subsequent Events

• (i) On 5 September 2008, the Company entered into a sale and purchase agreement to acquire from Right Up Holdings Limited the entire equity interest in Double High at a total consideration of HK$600 million. The consideration will be satisfied by (i) HK$100 million in cash, payable upon signing of the agreement; (ii) HK$100 million in cash upon completion of the acquisition; and (iii) HK$400 million by the issue of 320,000,000 new shares at HK$1.25 per consideration share. The acquisition was completed on 5 December 2008, for which the fair value of the share consideration as mentioned in (iii) above at that day is approximately HK$150,400,000, which was determined in accordance with the quoted market price of the Company’s share as at 5 December 2008.

• (ii) Subsequent to the balance sheet date, there was a significant decline in international crude oil price due to economic recession. The directors of the Company considered that such a decline may have a material impact to the valuation of the exploration and evaluation assets in the next financial period. Subject to the amount fluctuation of market crude oil price, the Group currently is not yet in a position to quantify the financial effect reliably. The Group will engage independent valuer to estimate the value of the exploration and evaluation assets in subsequent financial period.

Audit Committee

The unaudited condensed consolidated interim financial statements of the Group for the six months ended 30 September 2008 have been reviewed by the Company’s audit committee.

Model Code for Securities Transaction by Directors

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix 10 to the Listing Rules as its Code of Ethics and Securities Transactions by directors of the Company.

Having made specific enquiry of all directors of the Company, they have complied with the required standards set out in the Model Code for the six months ended 30 September 2008.

By Order of the Board Sino Union Petroleum & Chemical International Limited Dr. Chui Say Hoe Executive Director

Hong Kong, 29 December 2008

As at the date hereof, the board of directors of the Company comprises six executive Directors, namely Dr. Wang Tao, Dr. Hui Chi Ming, Mr. Cheung Shing, Dr. Chui Say Hoe, Dr. Ching Men Ky, Carl and Mr. Cui Yeng Xu; two non-executive Directors, namely Dr. Fok Chun Wan, Ian and Mr. Chow Charn Ki, Kenneth; and three independent non-executive Directors, namely Dr. Yu Sun Say, Mr. Ng Wing Ka and Mr. Edmund Siu.

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