G-Resources Group Limited - Annual Report 2012

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, 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 announcement.

PALADIN LIMITED

(Incorporated in Bermuda with limited liability)

(Stock code: 495 and 642 (Preference Shares))

ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 30 JUNE 2012

The board of directors (the “Board”) of Paladin Limited (the “Company”) is pleased to announce the audited consolidated results of the Company and its subsidiaries (hereinafter collectively referred to as the “Group”) for the year ended 30 June 2012 together with comparative figures for the previous year as follows:

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the Year ended 30 June 2012

Notes Turnover 3 Other income Administrative expenses Research and development costs (Loss) gain arising from change in fair value of investment properties Gain (loss) arising from change in fair value of derivative financial instruments Provision for litigations Finance costs 4 Loss before taxation Taxation charge 5 Loss for the year Other comprehensive income (expense) Exchange differences arising on translation Fair value gain on available-for-sale investments Other comprehensive income for the year Total comprehensive expenses for the year LOSS PER SHARE 6 Basic Diluted	2012 *HK$’000* 1,276 17,446 (52,186) – (6,000) 52,787 (21,377) (22,008) (30,062) (14,793) (44,855) (30) 2,472 2,442 (42,413) (8.01) HK cents (8.01) HK cents	2011 HK$’000 750 17,717 (52,643) (3,603) 50,000 (27,540) – (20,136) (35,455) – (35,455) (1,059) 1,614 555 (34,900) (6.60) HK cents (6.60) HK cents

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 30 June 2012

Notes Non-current assets Investment properties Property, plant and equipment Available-for-sale investments Deposits for acquisition of property, plant and equipment Deposit placed for a life insurance policy Pledged bank deposits Current assets Properties held for sale Trade and other receivables, deposits and prepayments 8 Tax reserve certificates Bank balances and cash Current liabilities Bills payable 9 Other payables and accrued charges Amounts due to directors of subsidiaries Provision for litigations Taxation payable Bank overdrafts Secured bank borrowings Derivative financial instruments Net current liabilities Capital and reserves Share capital Reserves Non-current liabilities Convertible redeemable preference shares	2012 *HK$’000* 242,000 77,607 13,586 – 21,028 50,366 404,587 774,911 32,189 – 131,183 938,283 – 142,545 249,626 8,000 9,578 25,072 975,497 – 1,410,318 (472,035) (67,448) 7,520 (109,906) (102,386) 34,938 (67,448)	2011 HK$’000 248,000 81,174 11,114 459 – 61,271 402,018 774,911 36,161 4,000 13,721 828,793 9,080 90,941 106,246 – 43,400 52,874 869,187 118,800 1,290,528 (461,735) (59,717) 5,372 (95,649) (90,277) 30,560 (59,717)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For The Year ended 30 June 2012

1. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

In preparing the consolidated financial statements, the directors of the Company have given careful consideration to the future liquidity of the Group in light of the net liabilities and net current liabilities of the Group amounting to approximately HK$102,386,000 and HK$472,035,000 respectively as at 30 June 2012.

Taking into account the available unutilised bank credit facility of HK$206,741,000 (2011: HK$245,563,000) as at 30 June 2012 and the estimated proceeds from sales of developed properties, the directors of the Company are satisfied that the Group will be able to meet in full its financial obligations as they fall due for the foreseeable future and accordingly, the consolidated financial statements have been prepared on a going concern basis.

2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”)

In the current year, the Group has applied the following new and revised HKFRSs issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

Amendments to HKFRSs	Improvements to HKFRSs issued in 2010
HKAS 24 (as revised in 2009)	Related party disclosures
Amendments to HKFRS 7	Disclosures – Transfers of financial assets
Amendment to HK(IFRIC*)	Prepayments of a minimum funding requirement
– INT 14

IFRIC represents the IFRS Interpretations Committee.

The application of the above new or revised HKFRSs in the current year has had no material effect on the amounts reported in these consolidated financial statements and/or disclosures set out in these consolidated financial statements.

The Group has not early applied the following new or revised HKFRSs that have been issued but are not yet effective:

Amendments to HKFRSs	Annual improvements to HKFRSs 2009 – 2011 cycle2
Amendments to HKFRS 7	Disclosures – Offsetting financial assets and financial
	liabilities2
Amendments to HKFRS 9	Mandatory effective date of HKFRS 9 and transition
and HKFRS 7	disclosures4
Amendments to HKFRS 10,	Consolidated financial statements, joint arrangements
HKFRS 11 and HKFRS 12	and disclosure of interests in other entities: Transition
	guidance2
HKFRS 9	Financial instruments4
HKFRS 10	Consolidated financial statements2
HKFRS 11	Joint arrangements2

HKFRS 12 Disclosures of interests in other entities[2] HKFRS 13 Fair value measurements[2] Amendments to HKAS 1 Presentation of items of other comprehensive income[1] HKAS 19 (as revised in 2011) Employee benefits[2] HKAS 27 (as revised in 2011) Separate financial statements[2] HKAS 28 (as revised in 2011) Investments in associates and joint ventures[2] Amendments to HKAS 32 Offsetting financial assets and financial liabilities[3] HK(IFRIC) – INT 20 Stripping costs in the production phase of a surface mine[2]

1 Effective for annual periods beginning on or after 1 July 2012. 2 Effective for annual periods beginning on or after 1 January 2013. 3 Effective for annual periods beginning on or after 1 January 2014. 4 Effective for annual periods beginning on or after 1 January 2015.

HKFRS 9 Financial instruments

HKFRS 9 issued in 2009 introduces new requirements for the classification and measurement of financial assets. HKFRS 9 amended in 2010 includes the requirements for the classification and measurement of financial liabilities and for derecognition.

Key requirements of HKFRS 9 are described as follows:

HKFRS 9 requires all recognised financial assets that are within the scope of HKAS 39 “Financial Instruments: Recognition and Measurement” to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent reporting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.
The most significant effect of HKFRS 9 regarding the classification and measurement of financial liabilities relates to the presentation of changes in the fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically, under HKFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Under HKAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss is presented in profit or loss.

Based on the consolidated statement of financial position of the Group as at 30 June 2012, the directors of the Company anticipate that the adoption of HKFRS 9 in the future may have significant impact on the classification and measurement of amounts reported in respect of the Groups’ available-for-sale equity investments, but do not expect the application of HKFRS 9 will have material effect on the financial liabilities and other financial assets of the Group.

New and revised standards on consolidation, joint arrangements, associates and disclosures

In June 2011, a package of five standards on consolidation, joint arrangements, associates and disclosures was issued, including HKFRS 10, HKFRS 11, HKFRS 12, HKAS 27 (as revised in 2011) and HKAS 28 (as revised in 2011).

Key requirements of these five standards are described below.

HKFRS 10 replaces the parts of HKAS 27 “Consolidated and separate financial statements” that deal with consolidated financial statements and HK (SIC) – INT 12 “Consolidation – Special purpose entities”. HKFRS 10 includes a new definition of control that contains three elements: (a) power over an investee, (b) exposure, or rights, to variable returns from its involvement with the investee, and (c) the ability to use its power over the investee to affect the amount of the investor’s returns. Extensive guidance has been added in HKFRS 10 to deal with complex scenarios.

HKFRS 12 is a disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the disclosure requirements in HKFRS 12 are more extensive than those in the current standards.

These five standards are effective for annual periods beginning on or after 1 January 2013. Earlier application is permitted provided that all of these five standards are applied early at the same time.

The directors of the Company anticipate that these five standards will be adopted in the Group’s consolidated financial statements for the annual period beginning 1 July 2013 and the application of these five standards will have no material impact on the results and financial position of the Group. However, the application of HKFRS 12 may result in more extensive disclosures in the consolidated financial statements.

HKFRS 13 Fair value measurement

HKFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The Standard defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The scope of HKFRS 13 is broad; it applies to both financial instrument items and non-financial instrument items for which other HKFRSs require or permit fair value measurements and disclosures about fair value measurements, except in specified circumstances. In general, the disclosure requirements in HKFRS 13 are more extensive than those in the current standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only under HKFRS 7 “Financial instruments: Disclosures” will be extended by HKFRS 13 to cover all assets and liabilities within its scope.

HKFRS 13 is effective for annual periods beginning on or after 1 January 2013, with earlier application permitted.

The directors of the Company anticipates that HKFRS 13 will be adopted in the Group’s consolidated financial statements for the annual period beginning 1 July 2013 and that the application of the new Standard may affect the amounts reported in the consolidated financial statements and result in more extensive disclosures in the consolidated financial statements.

Amendments to HKAS 1 Presentation of items of other comprehensive income

The amendments to HKAS 1 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to HKAS 1 require additional disclosures to be made in the other comprehensive income section such that items of other comprehensive income are grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that may be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis.

The amendments to HKAS 1 are effective for annual periods beginning on or after 1 July 2012. The presentation of items of other comprehensive income will be modified accordingly when the amendments are applied in the future accounting periods.

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

3. SEGMENT INFORMATION

The Group’s operating segments are property development, property investment and indent trading of merchandise for the purposes of resources allocation and assessment of performance.

The segment information reported externally was analysed on the basis of their products and services provided by the Group’s operating divisions which is consistent with the internal information that are regularly reviewed by the chairman of the board of directors, the chief operating decision maker (“CODM”), for the purposes of resource allocation and assessment of performance. These operating decisions also reflect the basis of organisation in the Group.

Principal activities of the operating and reportable segments are as follows:

Property development Properties construction and redevelopment for sale purpose Property investment Completed investment properties held for capital appreciation purpose

An operating segment regarding the indent trading of merchandise (representing provision of agency services in transactions of indent trading) was ceased during the year ended 30 June 2012. However, no discontinued operation was shown separately in the consolidated financial statements since the directors of the Company considered the assets, liabilities and financial results contributed by this operating segment for the year ended 30 June 2012 and 2011 were insignificant to the Group.

Segment revenue and results

The following is an analysis of the Group’s revenue and results by reportable operating segment:

For the year ended 30 June 2012

Property development *HK$’000* Turnover External – Segment result (27,766) Other income Gain arising on changes in fair value of derivative financial instruments Provision for litigations Unallocated corporate expenses Finance costs Loss before taxation	Property investment Consolidated *HK$’000* *HK$’000* 1,276 1,276 (5,025) (32,791) 17,446 52,787 (21,377) (24,119) (22,008) (30,062)

The accounting policies of the operating segments are the same as the Group’s accounting policies. Segment result represents the result incurred by each segment without allocation of gain (loss) arising on changes in fair value of derivative financial instruments, research and development costs, provision for litigations, corporate income and expenses, finance costs and taxation. This is the measure reported to the chairman of board of directors, the Group’s CODM, for the purposes of resource allocation and performance assessment.

For the year ended 30 June 2011

Property development HK$’000 Turnover External – Segment result (15,153) Other income Loss arising on changes in fair value of derivative financial instruments Research and development costs Unallocated corporate expenses Finance costs Loss before taxation	Property investment HK$’000 – 49,710	Indent trading of merchandise Consolidated HK$’000 HK$’000 750 750 (315) 34,242 17,717 (27,540) (3,603) (36,135) (20,136) (35,455)

Segment assets and liabilities

The following is an analysis of the Group’s assets and liabilities by operating segment:

Segment assets Property development Property investment Indent trading of merchandise Total segment assets Available-for-sale investments Pledged bank deposits Tax reserve certificates Deposit placed for a life insurance policy Bank balances and cash Unallocated Consolidated assets Segment liabilities Property development Property investment Indent trading of merchandise Total segment liabilities Amounts due to directors of subsidiaries Bank overdrafts Secured bank borrowings Derivative financial instruments Taxation payable Convertible redeemable preference shares Unallocated Consolidated liabilities	2012 *HK$’000* 851,139 242,119 6,584 1,099,842 13,586 50,366 – 21,028 131,183 26,865 1,342,870 83,789 1,859 – 85,648 249,626 25,072 975,497 – 9,578 34,938 64,897 1,445,256	2011 HK$’000 854,696 248,229 13,168
		1,116,093 11,114 61,271 4,000 – 13,721 24,612
		1,230,811

		78,199 2,337 9,450
		89,986 106,246 52,874 869,187 118,800 43,400 30,560 10,035
		1,321,088

For the purposes of monitoring segment performances and allocating resources between segments:

all assets are allocated to operating segments other than available-for-sale investments, pledged bank deposits, tax reserve certificates, deposit placed for a life insurance policy and bank balances and cash; and
all liabilities are allocated to operating segments other than amounts due to directors of subsidiaries, bank overdraft, secured bank borrowings, derivative financial instruments, taxation payable and convertible redeemable preference shares.

Other segment information

For the year ended 30 June 2012

Property development *HK$’000* Amounts included in the measure of segment asset or segment result: Depreciation 3,099 For the year ended 30 June 2011 Property development HK$’000 Amounts included in the measure of segment asset or segment result: Capital additions – Depreciation 3,088	Property investment Unallocated Consolidated *HK$’000* *HK$’000* *HK$’000* 110 358 3,567 Property investment Unallocated Consolidated HK$’000 HK$’000 HK$’000 – 70 70 110 261 3,459

Other entity-wide information

The Group’s operations are located in Hong Kong.

The Group’s revenue from external customers based on the location of customers and information about its non-current assets by geographical location of the assets are detailed below:

	2012
	Revenue
	from external	Non-current
	customers	assets
	*HK$’000*	*HK$’000*
Hong Kong (Place of domicile)	1,276	319,607

Hong Kong (Place of domicile) People’s Republic of China	2011 Revenue from external Non-current customers assets HK$’000 HK$’000 – 329,633 750 – 750 329,633	2011 Revenue from external Non-current customers assets HK$’000 HK$’000 – 329,633 750 – 750 329,633
		329,633

Note: Non-current assets excluded financial instruments and deposit placed for a life insurance policy.

Information about major customers

Revenue from customers of the corresponding years contributing over 10% of the total sales of the Group are as follows:

Customer A1 Customer B2 1Revenue from property investment 2Revenue from indent trading of merchandise FINANCE COSTS Interest on bank borrowings: – wholly repayable within five years – not wholly repayable within five years Interest on bank overdrafts Finance costs on convertible redeemable preference shares	2012 *HK$’000* 1,276 – 2012 *HK$’000* 5,858 10,292 1,476 4,382 22,008	2011 HK$’000 – 750

		2011 HK$’000 5,442 9,250 1,621 3,823
		20,136

4. FINANCE COSTS

5. TAXATION CHARGE

The charge comprises:

Current tax: Hong Kong Profits Tax for the year Underprovision in prior years: Hong Kong Profits Tax Tax charge attributable to the Company and its subsidiaries	2012 *HK$’000* – (14,793) (14,793)	2011 HK$’000 –
		–
		–

In August 2007, January 2009 and February 2010, a subsidiary of the Company received the Assessment Demanding Final Tax (the “Assessments”) for the years of assessment 2006/2007, 2007/2008 and 2008/2009 from the Hong Kong Inland Revenue Department (“IRD”) respectively. By issuing the Assessments, the IRD disagreed the basis adopted by this subsidiary for computation of Hong Kong Profits Tax liability. In addition, the IRD disagreed the tax losses brought forward and certain items claimed by this subsidiary for the years of assessment from 1997/1998 to 1999/2000 and 2004/2005 to 2005/2006 with aggregated amount of approximately HK$279,990,000.

The Group has lodged objections against the Assessments received from IRD in September 2007 and March 2010 respectively. The IRD has agreed to holdover the tax in dispute of approximately HK$109,277,000 unconditionally and HK$26,877,000 on condition that the tax reserve certificate is purchased on instalment basis (in which HK$4,000,000 has been paid as at 30 June 2011).

During the current year, the Group submitted a proposal for settlement of the case for the years of assessment of 1997/1998 to 2010/2011. The IRD accepted the proposal and issued the revised statement of loss for the years of assessment from 1997/1998 to 2006/2007 and the Revised Assessment Demanding Final Tax (the “Revised Assessment”) for the years of assessment, 2007/2008 and 2008/2009 accordingly. According to the Revised Assessment, the tax liability of this subsidiary is fixed with aggregate amount of approximately HK$58,193,000. During the current year, the Group has made tax payment of approximately HK$44,615,000, and also utilised the tax reserve certificates of HK$4,000,000 to settle part of the total tax liability of this subsidiary. With the tax provision of HK$43,400,000 made in prior year, an additional amount of income tax of HK$14,793,000 is made in the current year in respect of under provision in prior years.

Taxation for the year can be reconciled to loss per the consolidated statement of comprehensive income as follows:

	2012	2011
	*HK$’000*	HK$’000
Loss before taxation	(30,062)	(35,455)

Tax credit at Hong Kong Profits Tax rate of 16.5%
(2011: 16.5%)	4,960	5,850
Tax effect of income not taxable for tax purpose	9,490	8,473
Tax effect of expenses not deductible for tax purpose	(7,571)	(8,579)
Utilisation of tax losses previously not recognised	1,140	–
Tax effect of unrealised intragroup profits on properties
held for sale not recognised	(8,019)	–
Underprovision in respect of prior years	(14,793)	–
Tax effect of tax losses not recognised	–	(5,744)
Tax charge for the year	(14,793)	–

LOSS PER SHARE
The calculation of the basic and diluted loss per share attributable to the owners of the Company is
based on the following data:
	For the year ended 30 June
	2012	2011
	*HK$’000*	HK$’000
Loss
Loss for the purposes of basic and diluted loss per share	(44,855)	(35,455)

	2012	2011
Number of shares
Weighted average number of shares for the purposes
of calculating basic and diluted loss per share	560,040,080	537,134,862

6. LOSS PER SHARE

The weighted average number of shares has not been retrospective adjusted for the open offer since the exercise price of the open offer is higher than the market price on the date of open offer.

The calculation of diluted loss per share for the years ended 30 June 2012 and 30 June 2011 has not assumed the conversion of the Company’s outstanding convertible redeemable preference shares which would reduce the loss per share.

7. DEPRECIATION

Depreciation of property, plant and equipment for the year amounted to HK$3,567,000 (2011: HK$3,459,000).

8. TRADE AND OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

Receivables of service rendered in indent trading Other receivables, deposits and prepayments	2012 *HK$’000* 6,584 25,605 32,189	2011 HK$’000 13,168 22,993
		36,161

The following is an aged analysis of receivables of service rendered in indent trading at the end of the reporting periods:

0 to 60 days 61 to 120 days 121 days to 1 year Over 1 year	2012 *HK$’000* – – – 6,584 6,584	2011 HK$’000 1,475 11,693 – –
		13,168

The Group allows a credit period of 120 days to its customers. Before accepting any new customer, the Group will internally assess the credit quality of the potential customer and defines appropriate credit limits.

Included in the Group’s receivables of service rendered in indent trading are debtors with a carrying amount of HK$6,584,000 (2011: HK$nil) which are past due at the reporting date for which the Group has not provided for impairment loss. The Group does not hold any collateral over these balances.

The following is an aged analysis of receivables of service rendered in indent trading which are past due but not yet impaired at the end of the reporting periods.

					2012	2011
					*HK$’000*	HK$’000
Past due	91	days to	1	year	6,584	–

The Groups’ management closely monitors the credit quality of receivables of service rendered in indent trading and considers the receivables that are neither past due nor impaired to be of a good credit quality. Based on the payment pattern of the customers of the Group, all of the receivables of service rendered in indent trading as at 30 June 2012 and 2011 which are past due but not impaired are generally collectable.

Included in trade receivables, deposits and prepayments are the following receivables denominated in a currency other than the functional currency of the group entities to which it relates.

	2012	2011
	*HK$’000*	HK$’000
USD	7,462	13,168

9. BILLS PAYABLE

At 30 June 2011, the bills payable was aged within 60 days and dominated in USD.

DIVIDEND

The Directors of the Company do not recommend the payment of final dividend (2011: nil).

CLOSURE OF REGISTER OF MEMBERS

The Register of Members of the Company will be closed from 5 December 2012 to 7 December 2012, both days inclusive, during which period no transfer of shares will be effected in order to identify those Shareholders who will be entitled to attend the Annual General Meeting.

MANAGEMENT DISCUSSION AND ANALYSIS

The principal activities of the Group are re-development of a property project at Nos. 8, 10 and 12 Peak Road (the “Peak Road Project”) and investment holding.

BUSINESS REVIEW AND PROSPECT

Re-development

The Peak Road Project located at Nos. 8, 10 and 12 Peak Road, Hong Kong consists of 34 apartment units and a 3-storey private house and the gross floor area is approximately 119,000 square feet. 15 apartment units have been sold in previous years. During the year, the Group did not sell any property. However, as the property market has shown signs of rebound recently, the Group will focus on selling of the remaining units in the coming year.

The returns from the Peak Road Project will significantly improve the Group’s financial position.

Property investment

The income generated from the property investment was approximately HK$1 million for the current year.

Research and development

Sensors Integration Technology Limited, a wholly-owned subsidiary of the Group has planned to conduct research and development of digital camera, camcorder, surveillance, video capturing and processing technology. The plan is on early stage and did not generate any revenue to the Group at this moment.

Repayment of Loan

In 2006, Banhart Company Limited (“Banhart”), a subsidiary of the Group entered into a loan agreement (the “Loan Agreement”) with Fine Chiffon Corporation Limited (“Fine Chiffon”) for Banhart to obtain a non-interest bearing loan facility of approximately HK$42 million. As part of the transaction, Banhart also has granted two options to Fine Chiffon for purchasing (i) part of Paladin’s leasehold property at a consideration of approximately HK$32 million (the “Property”) and (ii) 20% of the share capital of Banhart (the “Shares”), at a consideration of approximately HK$10 million, in substitution for the repayment of the outstanding non-interest bearing loan at the end of the loan period.

As announced by the Group on 21 December 2011, Banhart and Fine Chiffon have entered into a settlement agreement under which amongst other things Banhart agreed to pay approximately HK$66 million in cash of which includes repayment of the outstanding debt plus notional compound interest thereon at the rate of 8% per annum (subject to adjustment depending on the exact date of payment) to Fine Chiffon in full and final settlement of any and all rights and claims of Fine Chiffon, and the parties released each other from all rights and claims, in relation to the Property, the Shares and the Loan Agreement.

The transaction will settle a long-outstanding liability of Paladin, reduce its gearing and terminate options which effectively restricted Paladin’s ability to deal with a core asset.

Insurance arrangement

As announced by the Group on 1 March 2012, the Group acquired, through a whollyowned subsidiary, a form of insurance on the life of Chen Te Kuang Mike (“Mr. Chen”), one of the directors. The policy holder is the subsidiary, and the sole beneficiary of the policy is that subsidiary. Mr. Chen is not a beneficiary. The insurance is a variant of traditional whole life and endowment plans and the ultimate value of the policy cannot be determined at the outset.

The Group has paid a premium of approximately HK$22 million funded in part by a bank facility of approximately HK$15 million made available to the Group to finance the taking out of the policy and in part by cash resources of the Group.

The insurance element of the policy is essentially “key man insurance”. Mr. Chen is the Chief Executive Officer of the Group and is perceived by the board as key to the rejuvenation and growth of the Group. The purpose of taking out the insurance is to compensate the Group for the potential loss of income, growth and other benefits that it may suffer on the death of Mr. Chen and as such it is of benefit to the Group

The policy also contains an investment element and the bulk of the premium will be accounted for as a “deposit”. The Group can withdraw the deposit at any time but if it does so will incur surrender charges. The Group intends to hold the policy for six years.

Open offer

On 10 April 2012, the Group announced to raise approximately HK$33 million by way of Open Offer of ordinary shares on the basis of assured allotments of two open offer shares for every five ordinary shares at a subscription price of HK$0.155 per open offer share. The net proceeds were used to repay indebtedness owed by the Group to Uon Margaret, a director of the Group’s major subsidiaries. Dealings in the open offer shares commenced on 24 May 2012.

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

As at 30 June 2012, net current liabilities of the Group were approximately HK$472 million. The current ratio was 0.67. The pledged bank deposits, bank balances and cash were approximately HK$182 million.

As at 30 June 2012, the Group has outstanding liabilities of approximately HK$1,410 million comprising (i) secured bank borrowings and bank overdrafts of approximately HK$1,001 million, (ii) amount due to directors of subsidiaries of approximately HK$250 million, (iii) taxation payable of approximately HK$9 million, and (iv) other payables of approximately HK$150 million. The bank borrowings are on floating interest rates basis.

The majority of the Group’s assets and borrowings are denominated either in Hong Kong dollars or US dollars thereby avoiding exposure to undesirable exchange rate fluctuations. In view of the stability of the exchange rate of HK dollars and US dollars, the directors consider that the Group has no significant exposure to exchange fluctuation and does not pledge against foreign exchange risk.

The Group’s bank loans were secured by investment properties, deposit placed for a life insurance policy, leasehold properties, bank deposits and properties held for sales of approximately HK$1,148 million.

The Directors consider that it is not meaningful to publish a gearing ratio of the Group until such time the Group is in a positive shareholders’ equity position.

SIGNIFICANT INVESTMENTS, ACQUISITIONS AND DISPOSALS

During the year ended 30 June 2012, the Group had no material acquisitions and disposals of subsidiaries.

As at 30 June 2012, the Group had no material investment.

EMPLOYEES AND REMUNERATION POLICIES

As at 30 June 2012, the Group employed total of 32 employees. They were remunerated according to market conditions.

CONTINGENT LIABILITIES

As at 30 June 2012, there were contingent liabilities in respect of certain legal proceedings against certain subsidiaries of the Company. The aggregate of amount of claims was approximately HK$21 million, full provision has been made in the consolidated financial statements.

PURCHASE, SALE AND REDEMPTION OF SHARES

During the year, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed shares.

REVIEW OF FINAL RESULTS

The Audit Committee has reviewed the annual results of the Group for the year ended 30 June 2012.

CORPORATE GOVERNANCE

During the year ended 30 June 2012, the Company has complied with the Code Provisions of the Code on Corporate Governance Practices, which was revised and renamed as Corporate Governance Code on 1 April 2012, contained in Appendix 14 to the Listing Rules for the period from 1 July 2011 to 31 March 2012 and of the Corporate Governance Code for the period from 1 April 2012 to 30 June 2012, except for the non-executive director and four independent non-executive directors are not appointed for a specific term but are subject to retirement by rotation and re-election at the annual general meeting of the Company in accordance with the provisions of the bye-laws of the Company.

The Company will review the current bye-laws as and when it becomes appropriate in the future.

PUBLICATION OF ANNUAL RESULTS AND ANNUAL REPORT

The annual results announcement is available for viewing on the website of the Stock Exchange and on the website of the Company at http://www.capitalfp.com.hk/eng/index. jsp?co=495&ppage=rlinks. The annual report of the Company will be despatched to the shareholders of the Company in due course.

By Order of the Board Law Fong Chairman

Hong Kong, 26 September 2012

As at the date of this announcement, the executive directors of the Company are Mr. LAW Fong and Mr. CHEN Te Kuang Mike, the non-executive director is Mr. OUNG Shih Hua James and the independent non-executive directors are Mr. ZHU Pei Qing, Ms. LU Ti Fen, Mr. KWOK Wai Chi and Prof. HUANG Weizong Martin.