G-Resources Group Limited - Merger & Acquisition 2014

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Paladin Limited, you should at once hand this Response Document to the purchaser or the transferee or to the bank, licensed securities dealer, registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

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

PALADIN LIMITED

(Incorporated in Bermuda with limited liability)

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

RESPONSE DOCUMENT RELATING TO VOLUNTARY UNCONDITIONAL CASH OFFERS BY ANGLO CHINESE CORPORATE FINANCE, LIMITED ON BEHALF OF

GOLD SEAL HOLDINGS LIMITED

TO ACQUIRE ALL THE ISSUED SHARES IN THE ISSUED SHARE CAPITAL OF PALADIN LIMITED

(OTHER THAN THOSE ALREADY OWNED AND/OR AGREED TO BE ACQUIRED BY GOLD SEAL HOLDINGS LIMITED AND/OR PARTIES ACTING IN CONCERT WITH IT)

THE BOARD RECOMMENDS REJECTING

THE OFFERS

FROM GOLD SEAL HOLDINGS LIMITED

Financial adviser to the Company

Independent financial adviser to the Independent Committee

Terms used in this cover shall have the same meanings as defined in this Response Document.

A letter from the Board is set out on pages 5 to 17 of this Response Document. A letter from the Independent Committee containing its recommendation to the Independent Shareholders in connection with the Offers are set out on pages 18 to 19 of this Response Document. A letter from Investec Capital Asia Limited, the independent financial adviser to the Independent Committee and the Independent Shareholders, containing its advice and recommendation in connection with the Offers, is set out on pages 20 to 40 of this Response Document.

17 July 2014

		Page
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		5
LETTER FROM THE INDEPENDENT COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		18
LETTER FROM INVESTEC CAPITAL ASIA LIMITED . . . . . . . . . . . . . . . . . . . . . . . . . .		20
APPENDIX I	— FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . . . . . .	I-1
APPENDIX II	— VALUATION REPORT ON THE PROPERTY INTEREST
	OF THE GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	II-1
APPENDIX III	— GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1

– i –

DEFINITIONS

In this Response Document, the following terms shall have the meanings set out below unless the context requires otherwise:

‘‘acting in concert’’ the meaning ascribed to it under the Takeovers Code ‘‘associate(s)’’ the meaning ascribed to it under the Takeovers Code
‘‘Bermuda Court’’ the Supreme Court of Bermuda
‘‘Board’’ the board of Directors
‘‘Business Day’’ a day on which the Stock Exchange is open for the transaction of business
‘‘Company’’
Paladin Limited, a company incorporated in Bermuda with limited liability, the Ordinary Shares and Preference Shares of which are listed on the Main Board of the Stock Exchange (Stock Codes: 495 for Ordinary Shares and 642 for Preference Shares)
‘‘Director(s)’’ the director(s) of the Company
‘‘Executive’’
the Executive Director of the Corporate Finance Division of the SFC or any of his delegate(s)
‘‘Five Star’’
Five Star Investment Limited, a limited company incorporated in the British Virgin Islands and a substantial shareholder of the Company
‘‘Form(s) of Acceptance and Transfer’’
the form(s) of acceptance and transfer in respect of the Offers which accompany(ies) the Offer Document
‘‘Group’’ the Company and its subsidiaries
‘‘Hong Kong’’
the Hong Kong Special Administrative Region of the People’s Republic of China
‘‘Independent Committee’’
the independent board committee established to advise the Independent Shareholders in respect of the Offers
‘‘Independent Shareholder(s)’’
holder(s) of the Ordinary Share(s) and Preference Share(s), other than the Offeror and parties acting in concert with it
‘‘Independent Third Parties’’
a party which, to the best of the knowledge, information and belief of the Board having made all reasonable enquiries, is independent of and not connected with the Company and its connected persons

– 1 –

DEFINITIONS

‘‘Last Trading Day’’
2 May 2014, being the last trading day immediately prior to the suspension of trading in the Ordinary Shares and the Preference Shares with effect from 1:00 p.m. on Friday, 2 May 2014
‘‘Latest Practicable Date’’
14 July 2014, being the latest practicable date prior to the printing of this Response Document for ascertaining certain information contained herein
‘‘Listing Rules’’ the Rules Governing the Listing of Securities on the Stock Exchange
‘‘Offer Document’’ the offer document dated 3 July 2014 issued by the Offeror in respect of the Offers in accordance with the Takeovers Code containing, among other things, detailed terms of the Offers, together with the Form(s) of Acceptance and Transfer
‘‘Offer Period’’ has the meaning ascribed to it under the Takeovers Code, being the period commencing on 12 June 2014 (the date of the announcement of the Offeror in relation to the making of the Offers) and ending on the close of the Offers
‘‘Offer Prices’’
the offer prices of HK$0.25 in cash for each Ordinary Offer Share and HK$0.29 in cash for each Preference Offer Share pursuant to the Offers
‘‘Offeror’’ Gold Seal Holdings Limited, a company incorporated in the British Virgin Islands with limited liability on 4 March 2011 and beneficially owned as to approximately 66.7% and 33.3% by Mr. Oung Da Ming and Ms. Uon Margaret, respectively
‘‘Offers’’
the voluntary unconditional cash offers made by Anglo Chinese Corporate Finance, Limited on behalf of the Offeror to acquire all the issued Ordinary Shares and Preference Shares not already owned and agreed to be acquired by the Offeror and/or parties acting in concert with it in accordance with the Takeovers Code
‘‘Ordinary Offer Share(s)’’
the 276,484,779 Ordinary Shares that are subject to the Offers
‘‘Ordinary Share(s)’’
the ordinary share(s) of par value HK$0.01 each in the issued share capital of the Company

– 2 –

DEFINITIONS

‘‘Placing’’
the placing, on a best effort basis, of an aggregate of up to 150,400,000 Placing Ordinary Shares and 51,050,000 Placing Preference Shares pursuant to the terms of the Placing Agreement
‘‘Placing Agent’’ Pinestone Securities Limited, a licensed corporation to carry out type 1 regulated activity (dealing in securities) under the SFO
‘‘Placing Agreement’’ the conditional placing agreement dated 29 April 2014 entered into between the Company and the Placing Agent in relation to the Placing
‘‘Placing Ordinary Share(s)’’
150,400,000 new Ordinary Shares to be placed under the Placing
‘‘Placing Announcement’’ the Company’s announcement dated 29 April 2014 relating to the Placing
‘‘Placing Preference Share(s)’’ 51,050,000 new Preference Shares to be placed under the Placing
‘‘Placing Shares’’
‘‘Preference Offer Share(s)’’
150,400,000 Placing Ordinary Shares and 51,050,000 Placing Preference Shares to be placed under the Placing the 68,843,529 Preference Shares that are subject to the Offers
‘‘Preference Share(s)’’
the convertible redeemable preference shares of HK$0.01 each convertible into Ordinary Shares on a 1:1 basis in the issued share capital of the Company
‘‘Preference Shareholder(s)’’
holders of Preference Shares
‘‘Relevant Period’’
the period beginning 12 December 2013 (being 6 months prior to the commencement of the Offer Period) and ending on and including the Latest Practicable Date
‘‘Response Document’’
this response document dated 17 July 2014 issued by the Company in accordance with the Takeovers Code in respect of the Offers
‘‘SFC’’
the Securities and Futures Commission of Hong Kong
‘‘SFO’’
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
‘‘Share(s)’’

the Ordinary Share(s) and Preference Share(s)

– 3 –

DEFINITIONS

‘‘Shareholder(s)’’ holder(s) of Ordinary Share(s) and/or Preference Share(s) ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited ‘‘Takeovers Code’’ the Hong Kong Code on Takeovers and Mergers ‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong ‘‘%’’ per cent

– 4 –

LETTER FROM THE BOARD

PALADIN LIMITED

(Incorporated in Bermuda with limited liability) (Stock code: 495 and 642 (Preference Shares))

Executive Directors: Mr. Law Fong (Chairman) Mr. Chen Te Kuang Mike (Chief Executive Officer) (also alternate to Mr. Zhu Pei Qing)

Non-executive Directors: Mr. Oung Shih Hua, James Ms. Lam Chi Wai Tammy

Independent non-executive Directors: Mr. Zhu Pei Qing Mr. Kwok Wai Chi Ms. Song Fang Zhou Mr. Wong Chong Wei Runrun Ms. Ng Hei Pak

Registered office: Canon’s Court 22 Victoria Street Hamilton HM 12 Bermuda

Head office and principal place of business: Suite 2304, 23rd Floor, Sun Life Tower, The Gateway, Harbour City, Kowloon, Hong Kong

17 July 2014

To the Independent Shareholders

Dear Sir or Madam,

VOLUNTARY UNCONDITIONAL CASH OFFERS BY ANGLO CHINESE CORPORATE FINANCE, LIMITED ON BEHALF OF

GOLD SEAL HOLDINGS LIMITED TO ACQUIRE ALL THE ISSUED SHARES IN THE ISSUED SHARE CAPITAL OF PALADIN LIMITED

(OTHER THAN THOSE ALREADY OWNED AND/OR AGREED TO BE ACQUIRED BY GOLD SEAL HOLDINGS LIMITED AND/OR PARTIES ACTING IN CONCERT WITH IT)

INTRODUCTION

On 12 June 2014, the Offeror announced that Anglo Chinese Corporate Finance, Limited would make a voluntary unconditional cash offer on behalf of the Offeror to acquire all the issued shares in the issued share capital of the Company (other than those already owned and/ or agreed to be acquired by the Offeror and/or parties acting in concert with it) at the offer prices of HK$0.25 in cash for each Ordinary Offer Share and HK$0.29 in cash for each Preference Offer Share.

– 5 –

LETTER FROM THE BOARD

In accordance with Rule 2.1 of the Takeovers Code, the Company is required to establish an independent committee of the Board to advise the Independent Shareholders in respect of the Offers. The Independent Committee comprising a non-executive Director, namely, Ms. Lam Chi Wai Tammy, and four independent non-executive Directors, namely, Mr. Zhu Pei Qing, Ms. Song Fang Zhou, Mr. Wong Chong Wei Runrun and Ms. Ng Hei Pak, has been formed to advise the Independent Shareholders in respect of the Offers.

Each of Mr. Oung Shih Hua, James and Mr. Kwok Wai Chi disputes the composition of the current Board of the Company and refuses to accept responsibility for documents issued by the Company in relation to the Offers, including this Response Document. On this basis, applications have been made to, and consent has been obtained from, the Executive pursuant to Rule 9.4 of the Takeovers Code to exclude Mr. Oung Shih Hua, James and Mr. Kwok Wai Chi from taking joint and several responsibility for any document, including this Response Document, issued by the Company in relation to the Offers. In addition, Mr. Oung Shih Hua, James, a non-executive Director of the Company, is a nephew of the ultimate beneficial owners of the Offeror. It was considered that Mr. Oung Shih Hua, James has an interest in the Offers. On these bases, Mr. Oung Shih Hua, James and Mr. Kwok Wai Chi are not appointed as a member of the Independent Committee.

On the circumstances that the Board composition is currently disputed by Mr. Oung Shih Wah, James and Mr. Kwok Wai Chi, Mr. Oung Shih Wah, James and Mr. Kwok Wai Chi have been invited to express their views on the Offers. As at the Latest Practicable Date, the Company does not receive any view on the Offers from each of them.

Investec Capital Asia Limited has been appointed as an independent financial adviser to advise the Independent Committee in respect of the Offers. The appointment of Investec Capital Asia Limited has been approved by the Independent Committee. The letter of advice from Investec Capital Asia Limited addressed to Independent Committee is set out in pages 20 to 40 of this Response Document.

The purpose of this Response Document is to provide you with, among other things, information relating to the Group and the Offers, the recommendation of the Board and the Independent Committee to the Independent Shareholders in respect of the Offers, and the advice of Investec Capital Asia Limited to the Independent Committee on the Offers.

You are advised to read this Response Document, the recommendation of the Board, the recommendation of the Independent Committee and the advice of Investec Capital Asia Limited carefully before taking any action in respect of the Offers.

EXECUTIVE SUMMARY

THE BOARD (EXCLUDING MR. OUNG SHIH HUA, JAMES AND MR. KWOK WAI CHI) CONCURS WITH THE OPINION OF INVESTEC CAPITAL ASIA LIMITED AND IS OF THE VIEW THAT THE TERMS OF THE OFFERS ARE UNATTRACTIVE AND NOT FAIR AND REASONABLE SO FAR AS THE INDEPENDENT SHAREHOLDERS ARE CONCERNED. The Board (excluding Mr. Oung Shih Hua, James and Mr. Kwok Wai Chi) is firmly of the view that the Offers are against the best interests of Independent Shareholders and recommends that the Independent Shareholders should REJECT the Offers.

– 6 –

LETTER FROM THE BOARD

The Offers should be REJECTED because:

The Board (excluding Mr. Oung Shih Hua, James and Mr. Kwok Wai Chi) is of the view that a motivation of the Offeror in making the Offers is to restrict the actions of the Company during the Offer Period.
The Offer Prices are unfair and unattractive and wholly undervalue the Company.
The Offers are unsolicited and do not have the support of the Board (excluding Mr. Oung Shih Hua, James and Mr. Kwok Wai Chi).
The Offeror has formulated no clear growth strategy and has not provided Shareholders with any concrete plans for the Company in the future.

Please refer to the paragraph headed ‘‘Reasons to reject the Offers’’ in this letter for the reasons of the Board (excluding Mr. Oung Shih Hua, James and Mr. Kwok Wai Chi) for its recommendation.

THE OFFERS

The terms of the Offers are set out in the Offer Document and the Form(s) of Acceptance and Transfer. You are recommended to refer to the Offer Document and the Form(s) of Acceptance and Transfer for further details.

Anglo Chinese Corporate Finance, Limited is, on behalf of the Offeror, making the Offers on the following basis:

For each Ordinary Offer Share . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.25 in cash

For each Preference Offer Share . . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.29 in cash

As at the Latest Practicable Date, the Company has 935,924,489 Ordinary Shares and 71,343,529 Preference Shares in issue.

According to the information contained in the Offer Document, the Offeror and parties acting in concert with it hold in aggregate 659,439,710 Ordinary Shares and 2,500,000 Preference Shares, representing 70.46% of the issued Ordinary Shares and 3.50% of the issued Preference Shares, respectively.

The Offers are unconditional.

According to the Offer Document, the offer price of HK$0.25 per Ordinary Offer Share and HK$0.29 per Preference Offer Share were determined with reference to the prevailing market prices of the Shares on the Stock Exchange prior to suspension of trading of the Shares on the Stock Exchange on the Last Trading Day.

Further details of the Offers including, among others, the expected timetable and the terms and procedures of acceptance of the Offers, are set out in the Offer Document and the Form(s) of Acceptance and Transfer.

– 7 –

LETTER FROM THE BOARD

COMPARISON OF VALUE

The offer price of HK$0.25 per Ordinary Offer Share represents:

. a discount of approximately 24.2% to the closing price of HK$0.330 per Ordinary Share as quoted on the Stock Exchange as at the Latest Practicable Date;
. a discount of approximately 20.6% to the closing price of HK$0.315 per Ordinary Share as quoted on the Stock Exchange on 2 May 2014, being the Last Trading Day;
. a discount of approximately 12.3% to the closing of HK$0.285 per Ordinary Share as quoted on the Stock Exchange on 30 April 2014, being last full trading date immediately prior to the suspension of trading in the Ordinary Shares with effect from 1:00 p.m. on 2 May 2014;
. a discount of approximately 16.7% to the average closing price of approximately HK$0.300 per Ordinary Share as quoted on the Stock Exchange for the five consecutive trading days immediately prior to and including the Last Trading Day;
. a discount of approximately 15.7% to the average closing price of approximately HK$0.297 per Ordinary Share as quoted on the Stock Exchange for the ten consecutive trading days immediately prior to and including the Last Trading Day; and
. a discount of approximately 16.7% to the average closing price of approximately HK$0.300 per Ordinary Share as quoted on the Stock Exchange for the thirty consecutive trading days immediately prior to and including the Last Trading Day.

The offer price of HK$0.29 per Preference Offer Share represents:

. a discount of approximately 20.5% to the closing price of HK$0.365 per Preference Share as quoted on the Stock Exchange as at the Latest Practicable Date;
. a discount of approximately 19.4% to the closing price of HK$0.36 per Preference Share as quoted on the Stock Exchange on 2 May 2014, being the Last Trading Day;
. a discount of approximately 19.4% to the closing of HK$0.36 per Preference Share as quoted on the Stock Exchange on 30 April 2014, being last full trading date immediately prior to the suspension of trading in the Preference Shares with effect from 1:00 p.m. on 2 May 2014;
. a discount of approximately 19.4% to the average closing price of approximately HK$0.36 per Preference Share as quoted on the Stock Exchange for the five consecutive trading days immediately prior to and including the Last Trading Day;
. a discount of approximately 19.9% to the average closing price of approximately HK$0.362 per Preference Share as quoted on the Stock Exchange for the ten consecutive trading days immediately prior to and including the Last Trading Day; and

– 8 –

LETTER FROM THE BOARD

. a discount of approximately 21.0% to the average closing price of approximately HK$0.367 per Preference Share as quoted on the Stock Exchange for the thirty consecutive trading days immediately prior to and including the Last Trading Day.

INFORMATION ON THE OFFEROR

According to the Offer Document, the Offeror is an investment holding company incorporated in the British Virgin Islands with limited liability. Its ultimate beneficial shareholders are Mr. Oung Da Ming who owns 66.7% of the Offeror’s issued shares, and Ms. Uon Margaret, sister of Mr. Oung Da Ming, who owns 33.3% of the Offeror’s issued shares. The directors of the Offeror are Mr. Oung Da Ming, his sister Ms. Uon Margaret and his daughter Ms. Chou Ching Chun.

Mr. Oung Shih Hua, James, who is a non-executive Director of the Company, is a nephew of Mr. Oung Da Ming and Ms. Uon Margaret and a cousin of Ms. Chou Ching Chun.

Mr. Chen Te Kuang Mike, who is an executive Director of the Company, is a nephew of Mr. Oung Da Ming and Ms. Uon Margaret and a cousin of Ms. Chou Ching Chun.

Based on the Offer Document, although Goldenfield Equities Limited is a presumed concert party of the Offeror under paragraphs (1) and (8) of the definition of acting in concert under the Takeovers Code, it is not included in the calculation of the Shares held by those acting in concert with the Offeror and others in respect of the Company due to differences of opinion with the Offeror. The directors of Goldenfield Equities Limited are Mr. Oung Da Ming and his sister, Ms. Lilian Oung. Goldenfield Equities Limited is owned as to 40% by Ms. Lilian Oung, as to 40% by her son, Mr. Chen Te Kuang Mike, and as to 20% by Mr. Oung Shih Hua, James.

As stated in the Offer Document, the Offeror intends that the Group continues its existing business of investment holding, property development and property investment and has no intention to introduce major changes to the business of the Group, including any re-deployment of fixed assets of the Company.

According to the Offer Document, the Offers will enable the Offeror and parties acting in concert with it to acquire further Shares at a discount to the prevailing market price of the Shares and subject to the level of acceptance to the Offers, the Offers may enable the Offeror and parties acting in concert with it to exercise their rights of compulsory acquisition in respect of the Shares not tendered to the Offers.

It is also stated in the Offer Document that save in connection with the Offeror’s intention regarding the Group as set out above, and the potential changes to the members of the Board as stated in the Company’s circular dated 22 May 2014 that referred to a special general meeting to be convened on 1 August 2014, the Offeror has no plan to terminate the employment of any other employees or other personnel of the Group.

– 9 –

LETTER FROM THE BOARD

reach the minimum threshold for compulsory acquisition under the relevant laws of Bermuda, the Offeror may consider exercising its right to compulsory acquire the remaining Shares in the Company in accordance with the laws of Bermuda.

The Stock Exchange has stated that if, at the close of the Offers, less than the minimum prescribed percentage applicable to the Company, being 25% of the issued Ordinary Shares and Preference Shares, are held by the public at all times, or if the Stock Exchange believes that:

. a false market exists or may exist in the trading of the Shares; or
. that there are insufficient Shares in public hands to maintain an orderly market,

it will consider exercising its discretion to suspend dealings in the Shares.

INFORMATION ON THE GROUP

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 property investment.

The financial information of the Group, as extracted from the Company’s annual reports for the three years ended 30 June 2011, 30 June 2012 and 30 June 2013 and the Company’s interim report for the six months ended 31 December 2013, are as follows:

				Six months
	Year ended	Year ended	Year ended	ended
	30 June	30 June	30 June	31 December
	2011	2012	2013	2013
	HK$’000	HK$’000	HK$’000	HK$’000
	(audited)	(audited)	(audited)	(unaudited)
Turnover	750	1,276	162,820	—
Profit/(loss) before taxation	(35,455)	(30,062)	30,919	(40,079)
Profit/(loss) for the year/
period	(35,455)	(44,855)	30,909	(40,079)
	As at	As at	As at	As at
	30 June	30 June	30 June	31 December
	2011	2012	2013	2013
	HK$’000	HK$’000	HK$’000	HK$’000
	(audited)	(audited)	(audited)	(unaudited)
Non-current assets	402,018	404,587	408,102	398,712
Current assets	828,793	938,283	830,147	748,954
Current liabilities	(1,290,528)	(1,410,318)	(1,269,438)	(1,216,183)
Non-current liabilities	(30,560)	(34,938)	(39,931)	(42,713)
Net liabilities	(90,277)	(102,386)	(71,120)	(111,230)

Further financial information about the Company is set out in Appendix I to this Response Document.

– 10 –

LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE OF THE COMPANY

Based on the information available to the Company (in particular, information contained in the Offer Document in respect of the Offeror and parties acting in concert with it), the shareholding structure of the Company as at the Latest Practicable Date is as follows:

The Offeror and parties acting in concert with it — the Offeror (Note 1) — Five Star (Note 2) — Mr. Oung Da Ming — Mr. Oung Shih Hua, James Subtotal Mr. Chen Te Kuang Mike Goldenfield Equities Limited (Note 3) Other public Shareholders Total	Number of Ordinary Shares held 93,591,179 508,848,531 50,000,000 7,000,000 659,439,710 7,000,000 29,449,000 240,035,779 935,924,489	% 10.00 54.37 5.34 0.75 70.46 0.75 3.15 25.64 100.00	Number of Preference Shares held 0 0 0 2,500,000 2,500,000 3,200,000 9,099,014 56,544,515 71,343,529	% 0.00 0.00 0.00 3.50 3.50 4.49 12.75 79.26 100.00	Total Shares held 93,591,179 508,848,531 50,000,000 9,500,000 661,939,710 10,200,000 38,548,014 296,580,294 1,007,268,018	% 9.29 50.52 4.96 0.94
						65.71 1.01 3.83 29.45
						100.00

Notes:

The Offeror (i.e. Gold Seal Holdings Limited) is owned as to 66.7% by Mr. Oung Da Ming, brother of Ms. Lilian Oung, and as to 33.3% by Ms. Uon Margaret, sister of Ms. Lilian Oung. Ms. Lilian Oung is the mother of Mr. Chen Te Kuang Mike.
Five Star is owned as to 67% by Ms. Oung Chin Liang Fung, grandmother of Mr. Oung Shih Hua, James and Mr. Chen Te Kuang Mike, and as to 33% by Ms. Lilian Oung, mother of Mr. Chen Te Kuang Mike.
Goldenfield Equities Limited is owned as to 40% by Ms. Lilian Oung, mother of Mr. Chen Te Kuang Mike, as to 40% by Mr. Chen Te Kuang Mike, and as to 20% by Mr. Oung Shih Hua, James.

RECENT BACKGROUND

On 18 March 2011, Ms. Lilian Oung, mother of Mr. Chen Te Kuang Mike suffered the first of a series of strokes, since when Ms. Lilian Oung has not worked in the Group or engaged in business of any kind. Ms. Lilian Oung is a director of a number of principal subsidiaries of the Group and was involved in day-to-day management of such subsidiaries prior to her suffering from the strokes.

Open Offer

In an announcement dated 10 April 2012, the Company announced that an open offer (the ‘‘Open Offer’’) of 214,860,596 ordinary shares was proposed by the Company for raising net proceeds of approximately of HK$33.3 million for repaying indebtedness of approximately HK$189.5 million owed by the Group to Uon Margaret, a director of a number of the Company’s principal subsidiaries. The Offeror, Gold Seal Holdings Limited (which was owned as to 66.7% by Mr. Oung Da Ming and 33.3% by Ms. Uon Margaret) acted as the underwriter

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LETTER FROM THE BOARD

of the Open Offer. Certain shareholders of the Company acted as the undertaking shareholders in the Open Offer: (i) Five Star (holding 49.86% of the then existing issued ordinary share capital of the Company and which was held by Madam Oung Chin Liang Fung and Ms. Lilian Oung); (ii) Goldenfield Equities Limited (in which Chen Te Kuang Mike held 40% of the issued shares); (iii) Mr. Oung Da Ming; (iv) Mr. Chen Te Kuang Mike; and (v) Mr. Oung Shih Hua, James. Each of such undertaking shareholders undertook, among other things, to apply for their respective assured allotments under the Open Offer in full. On 27 April 2012, a circular in relation to the Open Offer and in which Anglo Chinese Corporate Finance, Limited acted as the financial adviser of the Company was published by the Company. On 22 May 2012, the Company announced that the Open Offer had become unconditional and as the shares of the Open Offer were not fully subscribed, the shares which have not been applied for have been taken up by the Offeror. Following the completion of the Open Offer, the interest in the Company held by the Offeror was increased from 0% to 12.45%. The market capitalisation of the Company increased from approximately HK$164.5 million as at 25 April 2012, being the latest practicable date of the relevant listing document to approximately HK$194.6 million as at 24 May 2012, the first day of dealing of the Open Offer shares.

Loans from directors of certain subsidiaries of the Company in 2012

At the close of business on 29 February 2012, being the latest practicable date for the purpose of ascertaining the indebtedness of the Group prior to the printing of the circular in respect of the Open Offer, the borrowings of the Company included, among other bank loans and overdrafts, unsecured loans of approximately HK$291.4 million owed to Mr. Oung Da Ming and Uon Margaret, directors of certain subsidiaries of the Company.

Very Substantial Disposal

In an announcement dated 24 December 2013, the Company announced that Banhart Company Limited, a wholly-owned subsidiary of the Company, had entered into a provisional sale and purchase agreement with Jiangxi Copper Hong Kong Company Limited for the sale (the ‘‘VSD’’) of Unit 01, 45/F, Office Tower, Convention Plaza, No.1 Harbour Road, Wanchai, Hong Kong at a consideration of HK$336,571,275. It was announced that the Company intended to apply 50% of net proceeds from the VSD to reduce the indebtedness of the Group and the remaining 50% of the net proceeds for general working capital. Anglo Chinese Corporate Finance, Limited acted as the financial adviser of the Company in relation to the VSD. A circular in relation to the VSD was published on 14 February 2014. On 3 March 2014, the Company announced that the resolution in relation to the VSD was passed at a special general meeting held on the same day. The VSD was completed on 4 April 2014.

Loans from directors of certain subsidiaries of the Company in 2013

At the close of business on 31 December 2013, being the latest practicable date for the purpose of ascertaining the indebtedness of the Group prior to the printing of the circular in respect of the VSD, the borrowings of the Company included, among other bank loans, unsecured loans of approximately HK$227 million owed to Mr. Oung Da Ming and Uon Margaret, directors of certain subsidiaries of the Company.

– 12 –

LETTER FROM THE BOARD

Placing

In the Placing Announcement dated 29 April 2014, the Company announced that it had entered into the Placing Agreement with the Placing Agent pursuant to which the Company has conditionally agreed to place up to 150,400,000 Placing Ordinary Shares of the Company at a price of HK$0.30 per Placing Ordinary Share and 51,050,000 Placing Preference Shares of the Company at a price of HK$0.36 per Placing Preference Share, to not fewer than six independent placees. If all the Placing Shares were successfully placed, the aggregate net proceeds from the Placing would be approximately HK$60.9 million. The Company intended to utilise the net proceeds from the Placing towards repayment of outstanding bank borrowings of approximately HK$854.1 million and general working capital of the Group. The Board considered that the Placing represented a good opportunity to raise additional funds for the Company to repay its outstanding bank borrowings which in turn would enable the Group to improve its overall gearing position, reduce interest expenses and strengthen the Group’s financial position while broadening the Shareholder and capital base of the Company. The Placing was conditional upon the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Placing Shares on or before 30 May 2014. If all the Placing Shares were successfully placed, immediately after completion of the Placing, the interest of Five Star in the Company (including both Ordinary and Preference Shares) would be diluted from 50.52% to 42.10%, and the interest of the Offeror in the Company would be diluted from 9.29% to 7.74%.

On 2 May 2014, the legal adviser to Mr. Oung Da Ming and Mr. Oung Shih Hua, James filed a complaint letter with the Stock Exchange alleging, inter alia, that (a) the Placing Announcement, the Placing and the Placing Agreement were not validly and effectively authorised by the Company, (b) the Company’s application for listing of the Placing Shares had not been approved by the Board, and (c) some of the placees under the Placing were not Independent Third Parties.

On 20 May 2014, Five Star, the Offeror, Mr. Oung Shih Hua, James, Mr. Huang Weizong Martin and Mr. Kwok Wai Chi (collectively, the ‘‘Plaintiffs’’) applied to the Bermuda Court for an ex-parte injunction order (the ‘‘Injunction Order’’) against the Company, Mr. Chen Te Kuang Mike and Mr. Law Fong (collectively, the ‘‘Defendants’’), restraining the Defendants until judgment in the action or sooner order of the Bermuda Court from, inter alia, taking any steps to implement the Placing Agreement entered into by the Company and the Placing Agent in relation to the Placing. The Injunction Order was granted by the Bermuda Court on 20 May 2014 and renewed on 21 May 2014.

On 29 May 2014, upon the application of the Defendants, the Bermuda Court ordered on the same day that the Injunction Order be discharged immediately as (a) the Plaintiffs had failed to make out a serious issue to be tried, and (b) there had been material non-disclosure by the Plaintiffs in the application for the Injunction Order.

In any event, on 30 May 2014, the Placing has lapsed since the Company failed to satisfy the condition of the Placing Agreement to obtain approval from the Stock Exchange for the listing of and permission to deal in the Placing Shares by 30 May 2014 (or such other date as may be agreed between the Company and the Placing Agent) and such date was not extended.

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LETTER FROM THE BOARD

Disputed Board Composition

On 19 May 2014, a Board meeting (‘‘May 19 Board Meeting’’) was held and Board resolutions were passed to, inter alia:

(i) vacate the office of Mr. Huang Weizong Martin as an independent non-executive director of the Company;
(ii) appoint Ms. Lam Chi Wai Tammy as non-executive director of the Company; and
(iii) appoint Mr. Song Fan Zhou, Mr. Wong Chong Wei Runrun and Ms. Ng Hei Pak as independent non-executive directors of the Company.

It is disputed by Mr. Oung Shih Hua, James, Mr. Kwok Wai Chi and Mr. Huang Weizong Martin that Ms. Lam Chi Wai Tammy, Ms. Song Fang Zhou, Mr. Wong Chong Wei Runrun and Ms. Ng Hei Pak are directors of the Company. Mr. Oung Shih Hua, James, Mr. Kwok Wai Chi and Mr. Huang Weizong Martin maintain that Mr. Huang Weizong Martin is an independent non-executive Director. That is disputed by Mr. Law Fong, Mr. Chen Te Kuang Mike and Mr. Zhu Pei Qing.

Bermuda legal counsel have advised that the May 19 Board Meeting was validly held and the resolutions passed at it were validly passed.

Special General Meeting

On 5 May 2014, the Company received a requisition notice dated 2 May 2014 from the Offeror and Mr. Oung Da Ming (the ‘‘Requisitioning Shareholders’’) pursuant to which the Requisitioning Shareholders requisitioned a special general meeting to be convened to pass resolutions to (i) to remove Mr. Law Fong and Mr. Chen Te Kuang Mike and any other person or persons who may have been appointed as directors of the Company by the Board since the date of the last annual general meeting of the Company and (ii) to appoint Mr. Yuen Chi Wah and Mr. Chan Chi Ho as the directors of the Company. As a result, on 19 May 2014, the Board resolved to hold a special general meeting (the ‘‘August 1 SGM’’) for considering the proposed resolutions of the Requisitioning Shareholders on 1 August 2014 to:

(i) remove Mr. Law Fong, Mr. Chen Te Kuang Mike, Ms. Song Fang Zhou, Mr. Wong Chong Wei Runrun, Ms. Ng Hei Pak and Ms. Lam Chi Wai Tammy as directors of the Company with immediate effect;
(ii) remove any other person or persons who may have been appointed as directors of the Company by the Board since 2 May 2014 to the date of the special general meeting;
(iii) appoint Mr. Yuen Chi Wah and Mr. Chan Chi Ho as the directors of the Company with immediate effect;
(iv) re-elect Ms. Song Fang Zhou, Mr. Wong Chong Wei Runrun and Ms. Ng Hei Pak as the independent non-executive directors of the Company;
(v) re-elect Ms. Lam Chi Wai Tammy as the non-executive director of the Company.

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LETTER FROM THE BOARD

In the Injunction Order application made by the Plaintiff in Bermuda on 20 May 2014 as mentioned above, the Plaintiff also applied to the Bermuda court for an injunction order restricting the Company from taking any steps pursuant to resolutions of the May 19 Board Meeting in which Board resolutions were passed relating to, inter alia, the vacation of Mr. Huang Weizong Martin of office as director of the Company and the convening of a special general meeting in response to the Requisitioning Shareholders’ requisitions. As mentioned, the Injunction Order was granted by the Bermuda Court on 20 May 2014 and renewed on 21 May 2014 but was discharged on 29 May 2014.

On 4 June 2014, the Company received a notice dated 29 May 2014 prepared and issued by the Requisitioning Shareholders convening a special general meeting of the ordinary shareholders of the Company on 16 June 2014 (the ‘‘Requisitionists’ SGM’’), the agenda of which have been covered by that of the August 1 SGM.

On 16 June 2014, Mr. Chen Te Kuang Mike, an executive director of the Company, applied to the High Court of Hong Kong for an order to prevent the holding of the Requisitionists’ SGM for reasons including, inter alia, that the Requisitionists’ SGM was invalidly convened by the Requisitioning Shareholders. In this High Court hearing, Mr. Oung Shih Hua, James gave an undertaking to the High Court not to proceed with the Requisitionists’ SGM. In accordance with his undertaking, Mr. Oung Shih Hua, James arranged for the Requisitionists’ SGM to be formally opened and adjourned without any date being fixed for the resumption of the Requisitionists’ SGM.

RECOMMENDATION: REJECT THE OFFERS

The Board (excluding Mr. Oung Shih Hua, James and Mr. Kwok Wai Chi) wishes to draw the attention of the Independent Shareholders to the following:

The Board (excluding Mr. Oung Shih Hua, James and Mr. Kwok Wai Chi) is of the view that a motivation of the Offeror in making the Offers is to restrict the actions of the Company during the Offer Period.

Reference is made to the information set out above under the section headed ‘‘Recent Background’’. It is against this background that the Board (excluding Mr. Oung Shih Hua, James and Mr. Kwok Wai Chi) is of the view that a motivation of the Offeror in making the Offers is to restrict the actions of the Company during the Offer Period as Rule 4 of the Takeovers Code prohibits various actions during the Offer Period including issues of shares.

The Offer Prices are unfair and unattractive and wholly undervalue the Company.

As discussed in the paragraph headed ‘‘Comparison of value’’ above in this letter, the Offer Prices represent substantial discounts to the prevailing market prices of the Ordinary Shares and the Preference Shares.

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LETTER FROM THE BOARD

In addition, as disclosed in the Company’s interim report for the six months ended 31 December 2013, the Company recorded net liabilities of approximately HK$111.2 million as at 31 December 2013, which was arrived at before the revaluation of the Group’s certain property interests. As at 31 December 2013, the Group’s properties held for sales of approximately HK$710.4 million were stated at cost while the Group’s investment properties of HK$240.4 million were stated at fair value. As set out in Appendix II to this Response Document, as at 31 May 2014, the fair value of the properties of the Group was approximately HK$2,354.0 million.

Accordingly, the Board (excluding Mr. Oung Shih Hua, James and Mr. Kwok Wai Chi) considers that the Offer Prices are unfair and unattractive and wholly undervalue the Company.

The Offers are unsolicited and do not have the support of the Board (excluding Mr. Oung Shih Hua, James and Mr. Kwok Wai Chi).

The Board (excluding Mr. Oung Shih Hua, James and Mr. Kwok Wai Chi) wishes to emphasise that the Offers are UNSOLICITED and is NOT SUPPORTED by the Board (excluding Mr. Oung Shih Hua, James and Mr. Kwok Wai Chi).

4. The Offeror has formulated no clear growth strategy and has not provided Shareholders with any concrete plans for the Company in the future.

The Board (excluding Mr. Oung Shih Hua, James and Mr. Kwok Wai Chi) notes from the Offer Document that the Offeror intends that the Group continues its existing business of investment holding, property development and property investment. However, the Offeror has put forward no concrete plans or growth strategies in the Offer Document.

Based on the foregoing and having considered the terms of the Offers and the advice from Investec Capital Asia Limited, the Board (excluding Mr. Oung Shih Hua, James and Mr. Kwok Wai Chi) considers that the terms of the Offers are not fair and not reasonable so far as the Independent Shareholders are concerned. Accordingly, the Board (excluding Mr. Oung Shih Hua, James and Mr. Kwok Wai Chi) recommend, in the strongest possible terms, that the Independent Shareholders should REJECT the Offers.

Your attention is drawn to the letter from the Independent Committee set out on pages 18 to 19 of this Response Document which contains its recommendation to the Independent Shareholders in respect of the Offers and the letter from Investec Capital Asia Limited set out on pages 20 to 40 of this Response Document which contains its advice to the Independent Committee in relation to the Offers and the principal factors and reasons taken into consideration in arriving at its recommendation.

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LETTER FROM THE BOARD

ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the appendices to this Response Document.

You are also recommended to read carefully further details in respect of the Offers as set out in the Offer Document and the Form(s) of Acceptance and Transfer which contain details of the Offers before deciding whether or not to accept the Offers.

By Order of the Board Paladin Limited Law Fong Chen Te Kuang Mike Chairman & Chief Executive Officer & Executive Director Executive Director

– 17 –

LETTER FROM THE INDEPENDENT COMMITTEE

The following is the text of the letter from the Independent Committee setting out its recommendation to the Independent Shareholders in relation to the Offers.

PALADIN LIMITED

(Incorporated in Bermuda with limited liability)

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

17 July 2014

To the Independent Shareholders

Dear Sir or Madam,

VOLUNTARY UNCONDITIONAL CASH OFFERS BY ANGLO CHINESE CORPORATE FINANCE, LIMITED ON BEHALF OF

GOLD SEAL HOLDINGS LIMITED TO ACQUIRE ALL THE ISSUED SHARES IN THE ISSUED SHARE CAPITAL OF PALADIN LIMITED

(OTHER THAN THOSE ALREADY OWNED AND/OR AGREED TO BE ACQUIRED BY GOLD SEAL HOLDINGS LIMITED AND/OR PARTIES ACTING IN CONCERT WITH IT)

We refer to the Response Document dated 17 July 2014 issued by the Company in response to the Offers, of which this letter forms part. Unless the context specifies otherwise, capitalised terms used in this letter have the same meanings as defined in the Response Document.

We have been appointed by the Board as members of the Independent Committee to consider the terms of the Offers and to advise you as to whether, in our opinion, the terms of the Offers are fair and reasonable so far as your interests are concerned and to make a recommendation as to acceptance or rejection of the Offers. Investec Capital Asia Limited has been appointed as the independent financial adviser to advise us in this respect. Details of its advice and the principal factors taken into consideration in arriving at its recommendations are set out in the ‘‘Letter from Investec Capital Asia Limited’’ on pages 20 to 40 of the Response Document.

Your attention is also drawn to the letter from the Board and the additional information set out in the appendices to the Response Document.

– 18 –

LETTER FROM THE INDEPENDENT COMMITTEE

Having considered the terms of the Offers and the advice from Investec Capital Asia Limited, we are of the view that the terms of the Offers are not fair and not reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend, in the strongest possible terms, that the Independent Shareholders should REJECT the Offers.

Yours faithfully, For and on behalf of the Independent Committee of PALADIN LIMITED

Ms. Lam Chi Wai Tammy Non-executive Director

Mr. Zhu Pei Qing Ms. Song Fang Zhou Mr. Wong Chong Ms. Ng Hei Pak Wei Runrun Independent Independent Independent Independent non-executive non-executive non-executive non-executive Director Director Director Director

– 19 –

LETTER FROM INVESTEC CAPITAL ASIA LIMITED

Set out below is the full text of the letter of advice from Investec Capital Asia Limited to the Independent Committee and the Independent Shareholders which has been prepared for the purpose of inclusion in this Response Document.

==> picture [158 x 32] intentionally omitted <==

Investec Capital Asia Limited

Room 3609, 36/F, Two International Finance Centre 8 Finance Street, Central, Hong Kong 香港中環金融街8號國際金融中心二期36樓3609室 Tel/ 電話 : (852) 3187 5000 Fax/ 傳真 : (852) 2501 0171 www.investec.com

17 July 2014

To: The Independent Committee and the Independent Shareholders of Paladin Limited

Dear Sirs,

VOLUNTARY UNCONDITIONAL CASH OFFERS BY ANGLO CHINESE CORPORATE FINANCE, LIMITED ON BEHALF OF GOLD SEAL HOLDINGS LIMITED TO ACQUIRE ALL THE ISSUED SHARES IN THE ISSUED SHARE CAPITAL OF PALADIN LIMITED

(OTHER THAN THOSE ALREADY OWNED AND/OR AGREED TO BE ACQUIRED BY GOLD SEAL HOLDINGS LIMITED AND/OR PARTIES ACTING IN CONCERT WITH IT)

I. INTRODUCTION

We refer to our appointment as the independent financial adviser to the Independent Committee in relation to the terms of the Offers. Details of the Offers are set out in the letter from the Offeror (the ‘‘Letter from the Offeror’’) contained in the Offer Document dated 3 July 2014 and the letter from the Board (the ‘‘Letter from the Board’’) contained in the Response Document to the Independent Shareholders dated 17 July 2014, of which this letter forms part. This letter contains our advice to the Independent Committee and the Independent Shareholders in respect of the terms of the Offers. Unless the context otherwise requires, terms defined in the Response Document have the same meanings in this letter.

On 12 June 2014, the Offeror announced that Anglo Chinese Corporate Finance, Limited on behalf of the Offeror, would make a voluntary unconditional cash offer to acquire all the issued shares in the issued share capital of the Company (other than those already owned and/ or agreed to be acquired by the Offeror and/or parties acting in concert with it) at the Offer Prices of HK$0.25 in cash for each Ordinary Offer Share and HK$0.29 in cash for each Preference Offer Share.

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LETTER FROM INVESTEC CAPITAL ASIA LIMITED

As at the Latest Practicable Date, the Company has 935,924,489 Ordinary Shares and 71,343,529 Preference Shares in issue.

Based on the information contained in the Offer Document, the Offeror and parties acting in concert with it held in aggregate 659,439,710 Ordinary Shares and 2,500,000 Preference Shares, representing approximately 70.46% of the issued Ordinary Shares and approximately 3.50% of the issued Preference Shares, respectively.

The Offers are unconditional.

According to the Offer Document, the Offer Prices of HK$0.25 per Ordinary Offer Share and HK$0.29 per Preference Offer Share were determined with reference to the prevailing market prices of the Ordinary Shares on the Stock Exchange prior to suspension of trading of the Shares on the Stock Exchange on the Last Trading Day.

Anglo Chinese Corporate Finance, Limited is, on behalf of the Offeror, making the Offers on the following basis:

For each Ordinary Offer Share (the ‘‘Ordinary Share Offer Price’’) . . . . HK$0.25 in cash For each Preference Offer Share (the ‘‘Preference Share Offer Price’’) . . HK$0.29 in cash

II. THE INDEPENDENT COMMITTEE

The Independent Committee comprising a non-executive Director, namely, Ms. Lam Chi Wai Tammy, and four independent non-executive Directors, namely, Mr. Zhu Pei Qing, Ms. Song Fang Zhou, Mr. Wong Chong Wei Runrun and Ms. Ng Hei Pak, has been formed to advise the Independent Shareholders in respect of the Offers.

Each of Mr. Oung Shih Hua, James and Mr. Kwok Wai Chi disputes the composition of the current Board of the Company and refuses to accept responsibility for documents issued by the Company in relation to the Offers, including this Response Document. On this basis, applications have been made to, and consent has been obtained from, the Executive pursuant to Rule 9.4 of the Takeovers Code to exclude Mr. Oung Shih Hua, James and Mr. Kwok Wai Chi from taking joint and several responsibility for any document, including this Response Document, issued by the Company in relation to the Offers. In addition, Mr. Oung Shih Hua, James, a non-executive Director of the Company, is a nephew of the ultimate beneficial owners of the Offeror and is therefore considered that to have an interest in the Offers. On these bases, Mr. Oung Shih Hua, James and Mr. Kwok Wai Chi have not been appointed as members of the Independent Committee.

On the circumstances that the Board composition is currently disputed by Mr. Oung Shih Wah, James and Mr. Kwok Wai Chi, they have been invited to express their views on the Offers. As at the Latest Practicable Date, the Company has not received any view on the Offers from each of them.

– 21 –

LETTER FROM INVESTEC CAPITAL ASIA LIMITED

The Independent Committee has approved our appointment as the independent financial adviser regarding the Offers. As the independent financial adviser, our role is to provide the Independent Committee and the Independent Shareholders with an independent opinion and recommendation as to whether the terms of the Offers are fair and reasonable as far as the Independent Shareholders are concerned and whether the Independent Shareholders should, or should not accept the Offers.

Apart from the normal advisory fee payable to us in connection with our appointment as the independent financial adviser, no arrangement exists whereby we shall receive any other fees or benefits from the Company.

III. BASIS OF OUR OPINION

In formulating our advice, we have relied solely on the statements, information, opinions and representations contained in the Response Document and the information and representations provided to us by the Company and/or the Directors. We have assumed that all such statements, information, opinions and representations contained or referred to in the Response Document or otherwise provided or made or given by the Company and/or its senior management staff and/or the Directors and for which it is/they are solely responsible were true and accurate and valid at the time they were made and given and continue to be true and valid as at the Latest Practicable Date. We have assumed that all the opinions and representations made or provided by the Directors and/or the senior management staff of the Company contained in the Response Document have been reasonably made after due and careful enquiry. We have also sought and obtained confirmation from the Company and/or its senior management staff and/or the Directors that no material facts have been omitted from the information provided and referred to in the Response Document.

In formulating our opinion, we have not considered the taxation implications on the Independent Shareholders arising from acceptances or non-acceptances of the Offers as these are particular to their individual circumstances. It is emphasised that we will not accept responsibility for any tax effect on or liability of any person resulting from his or her acceptance or non-acceptance of the Offers.

We consider that we have reviewed all information and documents which are made available to us to enable us to reach an informed view and justify our reliance on the information provided so as to provide a reasonable basis for our advice. We have no reason to doubt the truthfulness, accuracy and completeness of the statements, information, opinions and representations provided to us by the Company and/or its senior management staff and/or the Directors and their respective advisers or to believe that material information has been withheld or omitted from the information provided to us or referred to in the aforesaid documents. We have not, however, carried out any independent verification of the information provided, nor have we conducted any independent investigation into the business and affairs of the Group or the Offeror.

– 22 –

LETTER FROM INVESTEC CAPITAL ASIA LIMITED

IV. PRINCIPAL FACTORS CONSIDERED

In formulating our opinion regarding the terms of the Offers, we have taken into consideration the following principal factors:

1. Background information on the Group

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

Set out below is a summary of the Group’s operating results and financial position (i) for the six months ended 31 December 2012 and 2013 extracted from the Company’s interim report for the six months ended 31 December 2013 (the ‘‘2013 Interim Report’’) and the interim report for the six months ended 31 December 2012; and (ii) for the year ended 30 June 2012 and 2013 extracted from the Company’s annual report for the year ended 30 June 2013 (the ‘‘2013 Annual Report’’):

	For the six months ended	For the six months ended	For the	year ended
	31 December		30	June
	2013	2012	2013	2012
	(Unaudited)	(Unaudited)	(Audited)	(Audited)
	HK$’000	HK$’000	HK$’000	HK$’000
Revenue	—	162,196	162,820	1,276
Cost of sales	—	(67,782)	(64,503)	—
Gross profit	—	94,414	98,317	1,276
Profit (loss) before taxation	(40,079)	71,217	30,919	(30,062)
Profit (loss) for the period/year	(40,079)	71,217	30,909	(44,855)
	As at 31	As at 31	As at 30	As at 30
	December	December	June	June
	2013	2012	2013	2012
	(Unaudited)	(Unaudited)	(Audited)	(Audited)
	HK$’000	HK$’000	HK$’000	HK$’000
Non-current asset	398,712	412,430	408,102	404,587
Current assets	748,954	845,637	830,147	938,283
Non-current liabilities	(42,713)	(37,370)	(39,931)	(34,938)
Current liabilities	(1,216,183)	(1,250,817)	(1,269,438)	(1,410,318)
Net current liabilities	(467,229)	(405,180)	(439,291)	(472,035)
Net liabilities	(111,230)	(30,120)	(71,120)	(102,386)

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LETTER FROM INVESTEC CAPITAL ASIA LIMITED

1.1 Historical financial performance of the Group

Based on the 2013 Interim Report, the Group recorded no revenue for the six months ended 31 December 2013 as compared to the revenue of approximately HK$162.2 million for the corresponding period in 2012. The Group recorded a loss of approximately HK$40.1 million for the six months ended 31 December 2013 as compared with a profit of approximately HK$71.2 million for the corresponding period in 2012. For the six months ended 31 December 2013, the loss for the period was primarily due to the absence of any revenue being recorded from the sales of properties.

According to the 2013 Annual Report, the Group’s revenue increased significantly from approximately HK$1.3 million for the year ended 30 June 2012 to approximately HK$162.8 million for the year ended 30 June 2013. The increase was mainly due to the sale of properties of approximately HK$161.5 million for the year ended 30 June 2013. During the same period, the Group recorded a profit of approximately HK$30.9 million as compared with a loss of approximately HK$44.9 million for the year ended 30 June 2012. Such turnaround was primarily due to the increase in the sale of properties.

As at 31 December 2013, the Group had total net liabilities of approximately HK$111.2 million, representing an increase of approximately 56.4% from total net liabilities of approximately HK$71.1 million as at 30 June 2013. The increase in total net liabilities was primarily due to the fact that the Group recorded a loss of approximately HK$40.1 million for six months ended 31 December 2013.

1.2 Recent development and outlook of the Group

According to the 2013 Interim Report, the Peak Road Project consists of 34 apartment units and a 3-storey private house with a gross floor area of approximately 119,000 square feet. 17 apartment units have been sold in previous years. There were no sales of apartment units of the Peak Road Project for the six months ended 31 December 2013 as the Hong Kong property market remained weak following demand suppressing policies launched by the Hong Kong Government in 2013.

In 2012 and 2013, the Hong Kong Government implemented several policy measures (the ‘‘Measures’’) designed to rein in the growth of the property market in Hong Kong, which include: (i) the introduction of special stamp duty and buyer’s stamp duty on property transactions; and (ii) lowering a maximum limit of the loanto-value ratio of mortgage loans for banks and other authorised institutions.

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LETTER FROM INVESTEC CAPITAL ASIA LIMITED

As disclosed in the circular of the Company dated 14 February 2014, the Company disposed of one of the properties (i.e. Unit 01, 45th Floor, Office Tower, Convention Plaza, No. 1, Harbour Road, Wanchai, Hong Kong, the ‘‘Convention Plaza Property’’) for a consideration of approximately HK$336.6 million with the estimated gain before taxation of approximately HK$261.2 million, which was calculated by the consideration less the net book value of the Convention Plaza Property as at 30 June 2013 and estimated related expenses. Despite the disposal of the Convention Plaza Property in March 2014, and given the Measures have been implemented to control overheating in the property market in the Hong Kong, that there is no assurance that the Group would continue to be successful in disposing any or all of its remaining properties in the near future.

In view of (i) the Hong Kong Government’s intention to maintain the Measures in the near future; and (ii) the lack of revenue recorded by the Group for the six months ended 31 December 2013, the Directors are of the view that the outlook of the Group is uncertain in the foreseeable future.

2. Valuation on the property interest of the Group

Visionary Financial Services Group (Holdings) Limited (the ‘‘Valuer’’) has been appointed to conduct the valuation on the properties of the Group. According to the valuation report on the property interest of the Group (the ‘‘Valuation Report’’) as set out in Appendix II to the Response Document, as at 31 May 2014, the market value of the properties of the Group was stated to be approximately HK$2,354.0 million. We have reviewed the Valuation Report and discussed with the Valuer the methodology and assumptions which they have adopted. We understand from the Valuer that they have considered and applied direct comparison approach to arrive at the market value of the properties. The Valuer has confirmed that the above mentioned valuation methodology is a commonly used methodology for determining the market value of such properties.

According to the 2013 Interim Report, as at 31 December 2013, the Group’s investment properties of approximately HK$240.4 million were stated at fair value and the Group’s properties held for sales of approximately HK$710.4 million were stated at cost. According to the Valuation Report, all properties of the Group (i.e. excluding the Convention Plaza Property which was disposed of in April 2014) were re-valued at approximately HK$2,354.0 million as at 31 May 2014.

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LETTER FROM INVESTEC CAPITAL ASIA LIMITED

3. Unaudited adjusted net asset value

The following sets out the adjusted unaudited consolidated net assets/liabilities of the Group (the ‘‘Unaudited Adjusted NAV’’) as at 31 December 2013, details of which are set out in Appendix I to this Response Document, by taking into account the effect of revaluation arising from the valuation of the property interest attributable to the Group as at 31 May 2014 and the disposal of the Convention Plaza Property:

Unaudited consolidated net liabilities of the Group attributable to
equity holders as at 31 December 2013
Adjustments:
— Estimated gain before tax in respect of the disposal of the
Convention Plaza Property (Note 1)
— Revaluation uplift on the Group’s property interest
based on the Valuation Report (Note 2)
Unaudited Adjusted NAV
Number of Ordinary Shares (assuming full conversion of the
Preference Shares outstanding) (Note 3)
Unaudited Adjusted NAV per Ordinary Share (assuming full
conversion of the Preference Shares outstanding) (Note 4)

HK$ million
(approximately)
(111.2)
261.2
1,403.2
1,553.2
1,007.3
HK$1.54

Notes:

(1) As extracted from the circular of the Company dated 14 February 2014. The exact amount of the gain on the disposal is subject to the revision during the course of annual auditing for the financial year ended 30 June 2014.
(2) Revaluation uplift is calculated based on the valuation as set out in the Valuation Report of the Group’s property interest as at 31 May 2014 of approximately HK$2,354.0 million as set out in Appendix II to this Response Document, adjusted by (i) the investment properties of approximately HK$240.4 million; and (ii) properties held for sales of approximately HK$710.4 million as at 31 December 2013.
(3) As at the Latest Practicable Date, there were 935,924,489 Ordinary Shares and 71,343,529 Preference Share in issue. Assuming the full conversion of the Preference Shares into the Ordinary Shares for the purpose of calculating the Unaudited Adjusted NAV per Ordinary Share , the total number of Ordinary Shares upon full conversion of the Preference Shares outstanding would be approximately 1,007,268,018 Ordinary Shares.
(4) The Unaudited Adjusted NAV per Ordinary Share is calculated based on the Unaudited Adjusted NAV of approximately HK$1,553.2 million divided by the number of Ordinary Shares (assuming full conversion of the Preference Shares) of approximately 1,007.3 million shares.

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LETTER FROM INVESTEC CAPITAL ASIA LIMITED

(5) It should be noted that the above calculations to the Unaudited Adjusted NAV are for illustrative purpose only and do not purport to represent the financial position of the Group as at 31 May 2014.

Based on the above, the Offer Prices of HK$0.25 for each Ordinary Offer Share and HK$0.29 for each Preference Offer Share pursuant to the Offers represents a discount of approximately 83.8% and 81.2% respectively to the Unaudited Adjusted NAV of HK$1.54 per Ordinary Share (assuming full conversion of the Preference Shares outstanding).

Shareholders and potential investors of the Company should note that the Unaudited Adjusted NAV is calculated based on a number of assumptions, as stated above. Furthermore, Shareholders and potential investors of the Company should also note that the actual net asset value of the Group is subject to audit and may differ materially from the Unaudited Adjusted NAV. Accordingly, Shareholders and potential investors are advised to exercise caution when dealing in the Ordinary Shares and the Preference Shares.

Further analysis is set out under paragraph headed ‘‘6.3 Comparable analysis’’ in this letter below.

Information on the Offeror and the intentions of the Offeror regarding the future of the Group
4.1 Information on the Offeror

Mr. Oung Shih Hua, James who is a non-executive Director of the Company, is a nephew of Mr. Oung Da Ming and Ms. Uon Margaret and a cousin of Ms. Chou Ching Chun.

Mr. Chen Te Kuang Mike, who is an executive Director of the Company, is a nephew of Mr. Oung Da Ming and Ms. Uon Margaret and a cousin of Ms. Chou Ching Chun.

– 27 –

LETTER FROM INVESTEC CAPITAL ASIA LIMITED

Based on the Offer Document, Goldenfield Equities Limited owns approximately 3.15% of the Ordinary Shares and approximately 12.75% of the Preference Shares. Goldenfield Equities Limited is a presumed concert party of the Offeror under paragraphs (1) and (8) of the definition of acting in concert under the Takeovers Code, but it is not included in the calculation of the Ordinary Shares held by those acting in concert with the Offeror and others in respect of the Company due to differences of opinion with the Offeror. The directors of Goldenfield Equities Limited are Mr. Oung Da Ming and his sister, Ms. Lilian Oung. Goldenfield Equities Limited is owned as to 40% by Ms. Lilian Oung, as to 40% by her son, Mr. Chen Te Kuang Mike, and as to 20% by Mr. Oung Shih Hua, James.

4.2 Intentions of the Offeror in relation to the Group

As stated in the Offer Document, the Offeror intends for the Group to continue its existing business of investment holding, property development and property investment and has no intention to introduce major changes to the business of the Group, including any re-deployment of fixed assets of the Company.

According to the Offer Document, the Offers will enable the Offeror and parties acting in concert with it to acquire further Ordinary Shares at a discount to the prevailing market price of the Ordinary Shares and subject to the level of acceptance to the Offers, the Offers may enable the Offeror and parties acting in concert with it to exercise their rights of compulsory acquisition in respect of the Ordinary Shares not tendered to the Offers.

Each of the Offeror and parties acting in concert with it will undertake to the Stock Exchange to take appropriate steps to ensure that sufficient public float exists in the Ordinary Shares. The Offeror intends to maintain the listing of the Ordinary Shares and Preference Shares on the Stock Exchange. However, if the acceptances to the Offers reach the minimum threshold for compulsory acquisition under the relevant laws of Bermuda, the Offeror intends to avail itself of powers to compulsory acquire the remaining Shares in the Company in accordance with the laws of Bermuda.

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LETTER FROM INVESTEC CAPITAL ASIA LIMITED

5. Principal terms and total consideration of the Offers

The terms of the Offers are set out in the Offer Document. You are recommended to refer to the Offer Document and the Form(s) of Acceptance and Transfer for further details.

Anglo Chinese Corporate Finance, Limited is, on behalf of the Offeror, making the Offers on the following basis:

For each Ordinary Offer Share . . . . . . . . . . . . . . . . . . . . . . . . HK$0.25 in cash For each Preference Offer Share . . . . . . . . . . . . . . . . . . . . . . . HK$0.29 in cash

As at the Latest Practicable Date, the Company has 935,924,489 Ordinary Shares and 71,343,529 Preference Shares in issue.

According to the information contained in the Offer Document, the Offeror and parties acting in concert with it hold in aggregate 659,439,710 Ordinary Shares and 2,500,000 Preference Shares, representing approximately 70.46% of the issued Ordinary Shares and approximately 3.50% of the issued Preference Shares, respectively.

The Offers are unconditional.

6. Ordinary Offer Share

Anglo Chinese Corporate Finance, Limited is, on behalf of the Offeror, making the Offers in compliance with the Takeovers Code on the following basis:

For each Ordinary Offer Share . . . . . . . . . . . . . . . . . . . . . . . . HK$0.25 in cash

The Ordinary Share Offer Price of HK$0.25 represents:

(i) a discount of approximately 20.6% to the closing price of HK$0.315 per Ordinary Share as quoted on the Stock Exchange on 2 May 2014, being the Last Trading Day;
(ii) a discount of approximately 12.3% to the closing of HK$0.285 per Ordinary Share as quoted on the Stock Exchange on 30 April 2014, being the last full trading date immediately prior to the suspension of trading in the Ordinary Shares with effect from 1:00 p.m. on 2 May 2014;

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LETTER FROM INVESTEC CAPITAL ASIA LIMITED

(iii) a discount of approximately 16.7% to the average closing price of approximately HK$0.300 per Ordinary Share as quoted on the Stock Exchange for the five consecutive trading days immediately prior to and including the Last Trading Day;
(iv) a discount of approximately 15.8% to the average closing price of approximately HK$0.297 per Ordinary Share as quoted on the Stock Exchange for the ten consecutive trading days immediately prior to and including the Last Trading Day;
(v) a discount of approximately 16.7% to the average closing price of approximately HK$0.300 per Ordinary Share as quoted on the Stock Exchange for the thirty consecutive trading days immediately prior to and including the Last Trading Day; and
(vi) a discount of approximately 24.2% to the closing price of HK$0.33 per Ordinary Share as quoted on the Stock Exchange on 14 July, 2014, being the Latest Practicable Date.
6.1 Historical share price performance of the Ordinary Shares

The chart below illustrates the closing price of the Ordinary Shares during the period from 2 May 2013 (being the first trading day of the one year period prior to the Last Trading Day) up to and including the Latest Practicable Date (the ‘‘Review Period’’)

==> picture [389 x 177] intentionally omitted <==

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

Closing price of the Ordinary Shares
(HK$)
0.45
0.40
Closing price
0.35
0.30
0.25
0.20 Ordinary Shares Offer Price
0.15
0.10
0.05 Latest Practicable Date
0
Source: Bloomberg
2/5/2013 2/6/2013 2/7/2013 2/8/2013 2/9/2013 2/10/2013 2/11/2013 2/12/2013 2/1/2014 2/2/2014 2/3/2014 2/4/2014 2/5/2014 2/6/2014 2/7/2014
----- End of picture text -----

Note: Trading in the Ordinary Shares on the Stock Exchange was suspended from 1:00 p.m., 2 May 2014 to 2 July 2014

During the Review Period, the closing price of the Ordinary Shares fluctuated between the range from HK$0.181 to HK$0.405. From 2 May 2013 to 29 November 2013, the closing price of the Ordinary Shares fluctuated between the range of HK$0.181 to HK$0.265. The closing price of the Ordinary Shares increased gradually from the lowest price of HK0.196 on 1 November 2013 to HK$0.225 on

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LETTER FROM INVESTEC CAPITAL ASIA LIMITED

24 December 2013. The closing price then increased to HK$0.385 on 27 December 2013 following the publication of an announcement dated 24 December 2013 (the ‘‘Announcement’’) in relation to the entering into the provisional sale and purchase agreement with respect to the disposal of the Convention Plaza Property at a consideration of approximately HK$336.6 million. The closing price of the Ordinary Shares fluctuated between a range of HK$0.27 to HK$0.365 during the period from 30 December 2013 to 2 May 2014. The trading in the Ordinary Shares suspended from 2 May 2014 to 2 July 2014. Following publication of the Offer Document and upon the resumption of trading in the Ordinary Shares, the closing price reached the highest price of HK$0.405 on 3 July 2014 and then the closing price of the Ordinary Shares fluctuated between a range of HK$0.325 to HK$0.375 during the period from 4 July 2014 to 14 July 2014.

As shown in the chart above, the closing prices of the Ordinary Shares were below the Ordinary Share Offer Price during the period from 15 May 2013 to 24 December 2013. Following the publication of the Announcement and up to the Latest Practicable Date, the closing prices of the Ordinary Shares were above the Ordinary Share Offer Price. During the Review Period, the highest closing price and the lowest closing price of the Ordinary Shares was HK$0.405 on 3 July 2014 and HK$0.181 on 15 and 16 October 2013, respectively and the average closing price of the Ordinary Shares during the Review Period (the ‘‘Average Ordinary Share Price’’) was approximately HK$0.25. The Ordinary Share Offer Price represents (i) a discount of approximately 38.3% to the highest closing price of the Ordinary Shares during the Review Period; (ii) a premium of approximately 38.1% to the lowest closing price of the Ordinary Shares during the Review Period; (iii) no discount/ premium to the Average Ordinary Share Price; and (iv) a discount of approximately 24.2% to the closing price of the Ordinary Share as at the Latest Practicable Date.

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LETTER FROM INVESTEC CAPITAL ASIA LIMITED

6.2 Liquidity of the Ordinary Shares

The following table sets out the monthly total trading volume, the highest, lowest and average daily number of Ordinary Shares traded in each month and the percentage of average daily trading volume of Ordinary Shares as compared to the total number of Ordinary Shares in issue during the Review Period:

				Approximately	Approximately	Approximately	Approximately
					percentage
					of average
				daily trading			volume
				to total number of
	Total trading	Average daily		Ordinary Shares
Month	volume	trading volume					in issue
	(number of		(number of				(%)
	Ordinary Shares)	Ordinary Shares)				(Note 1)
2013
May	9,339,107		444,719				0.06%
June	2,660,000		140,000				0.02%
July	5,635,000		256,136				0.03%
August	1,405,000		66,905				0.01%
September	7,985,000		399,250				0.05%
October	6,985,840		332,659				0.04%
November	4,180,000		199,048				0.03%
December	100,176,552		5,008,828				0.67%
2014
January	57,970,164		2,760,484				0.37%
February	5,149,192		271,010				0.04%
March	7,381,312		351,491				0.05%
April	1,625,328		81,266				0.01%
May	100,000 (Note 2)	100,000 (Note 2)		0.01% (Note 2)
June	(Note 2)		(Note 2)			(Note 2)
July (Up to the
Latest Practicable
Date)	41,651,483		5,206,435	0.56% (Note 3)

Source: Bloomberg

Note 1: Based on the issued Ordinary Shares as disclosed in the monthly return of the Company on movements in securities of the Company

Note 2: Trading in the Ordinary Shares on the Stock Exchange was suspended from 1:00 p.m., 2 May 2014 to 2 July 2014

Note 3: Based on (i) average daily trading volume; and (ii) the issued Ordinary Shares as at Latest Practicable Date

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LETTER FROM INVESTEC CAPITAL ASIA LIMITED

As illustrated above, during the Review Period, the average daily trading volume of the Ordinary Shares as a percentage of the total number of the Ordinary Shares in issue ranged from approximately 0.01% to 0.67%. As such, we note that the liquidity of the Ordinary Shares was generally thin during the Review Period.

6.3 Comparable analysis

In assessing the fairness and reasonableness of the Ordinary Share Offer Price, we have considered using the price-to-earnings ratio (the ‘‘P/E ratio(s)’’) and the price-to-book ratios (the ‘‘P/B ratio(s)’’) of companies listed on the Main Board of the Stock Exchange and engaging in similar businesses to those of the Group for comparison purposes.

However, based on Appendix I to this Report Document, the Group recorded no turnover and a loss of approximately HK$40.1 million for the six months ended 31 December 2013. In addition, the Group has only recorded profit in one out of three preceding financial years. Given that the Group’s principal asset is its remaining unsold units in the Peak Road Project and in the absence of any new development project at as the Latest Practicable Date, we do not consider any comparison of the Company’s P/E ratio against the P/E ratio of other property companies with existing land banks and/or ongoing projects under development to be meaningful.

The Group recorded net liabilities of approximately HK$111.2 million as at 31 December 2013. Taking into account of the valuation of the Group’s property interests as set out in the Valuation Report, the Company has arrived the Unaudited Adjusted NAV of approximately HK$1,553.2 million and an Unaudited Adjusted NAV per Ordinary Share of approximately HK$1.54 (assuming full conversion of the Preference Shares outstanding).

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LETTER FROM INVESTEC CAPITAL ASIA LIMITED

For the purpose of our comparable analysis, we have identified the following companies as relevant comparables to the Company based on the following criteria: (i) listed on the Main Board of the Stock Exchange and engaging in businesses similar to those of the Group; (ii) income generated from the sale of properties and property leasing/development/investment contributing over 90% to its total income; (iii) income mainly generated in the Hong Kong property market; and (iv) with market capitalisation of less than HK$1.0 billion. Based on the aforementioned criteria, we have identified, to the best of our knowledge, an exhaustive list of three comparable companies (the ‘‘Comparable Companies’’).

			Market	capitalisation	capitalisation
			as at the Latest
Stock			Practicable		Date	P/B ratio
code	Company name	Principal business		(HK$ million)		(approximately)
859	Henry Group	Property leasing and			787.2	0.40
	Holdings Ltd.	development, provision of
		property agency and
		consultancy services and
		securities investment
864	Wing Lee Property	Business of property			301.2	0.33
	Investments Ltd.	investment, principally, the
		leasing of completed
		commercial and residential
		properties in Hong Kong
287	Winfair Investment	Securities investments,			256.0	0.37
	Co. Ltd	property leasing and property
		development
			Maximum			0.40
			Minimum			0.33
			Average			0.37
	The Company		Share Offers:
			HK$0.25	for
			Ordinary	Offer Share/		0.16 (Note 1)
			HK$0.29	for each
			Preference Offer Share			0.19 (Note 2)

Source: The website of the Stock Exchange and the respective annual report of the listed company

Notes:

(1) The P/B ratio is calculated based on the Ordinary Share Offer Price of HK$0.25 for each Ordinary Offer Share divided by the Unaudited Adjust NAV of approximately HK$1.54 per Ordinary Share (assuming full conversion of the Preference Shares outstanding) as set out in Appendix I to this Response Document.
(2) The P/B ratio is calculated based on the Preference Share Offer Price of HK$0.29 for each Preference Offer Share divided by the Unaudited Adjust NAV of approximately HK$1.54 per Ordinary Share (assuming full conversion of the Preference Shares outstanding) as set out in Appendix I to this Response Document.

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LETTER FROM INVESTEC CAPITAL ASIA LIMITED

As shown in the above table, the historical P/B ratio of the Comparable Companies ranged from approximately 0.33 to 0.40, with an average of approximately 0.37. The P/B ratio for the Offers is calculated based the Offer Prices for each Ordinary Share and Preference Share over the Unaudited Adjusted NAV per Share (assuming full conversion of the Preference Shares outstanding), being approximately 0.16 and 0.19, respectively. This range is significantly below the lowest P/B ratio of the Comparable Companies.

6.4 Conclusion

The Ordinary Share Offer Price represents (i) a discount of approximately 20.6% to the closing price of HK$0.315 per Ordinary Share on the Last Trading Day; (ii) a discount of approximately 16.7% to the average closing price of approximately HK$0.300 per Ordinary Share as quoted on the Stock Exchange for the thirty consecutive trading days immediately prior to and including the Last Trading Day; (iii) a discount of approximately 24.2% to the closing price of the Ordinary Share as at the Latest Practicable Date. The Ordinary Share Offer Price is also equal to the Average Ordinary Share Price during the Review Period. In terms of P/B ratio calculated by reference to the Ordinary Share Offer Price of HK$0.25 and the Unaudited Adjusted NAV, the resultant P/B ratio of approximately 0.16 is below the lowest P/B ratio of the Comparable Companies and outside of the range of the P/B ratios of the Comparable Companies. Given the aforesaid discounts and, in particular, the P/B ratios under the Offers compared to the P/B ratios of the Comparable Companies, we are of the view that the Ordinary Share Offer Price is unattractive and is not fair and reasonable so far as the Independent Shareholders are concerned.

7. Preference Offer Share

Anglo Chinese Corporate Finance Limited is, on behalf of the Offeror, making the Offers in compliance with the Takeovers Code on the following basis:

For each Preference Offer Share . . . . . . . . . . . . . . . . . . . . . . . HK$0.29 in cash

The Preference Share Offer Price of HK$0.29 represents:

(i) a discount of approximately 19.4% to the closing price of HK$0.36 per Preference Share as quoted on the Stock Exchange on 2 May, 2014, being the Last Trading Day;
(ii) a discount of approximately 19.4% to the closing of HK$0.36 per Preference Share as quoted on the Stock Exchange on 30 April 2014, being the last full trading date immediately prior to the suspension of trading in the Preference Shares with effect from 1:00 p.m. on 2 May 2014;

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LETTER FROM INVESTEC CAPITAL ASIA LIMITED

(iii) a discount of approximately 19.4% to the average closing price of approximately HK$0.36 per Preference Share as quoted on the Stock Exchange for the five consecutive trading days immediately prior to and including the Last Trading Day;
(iv) a discount of approximately 19.9% to the average closing price of approximately HK$0.362 per Preference Share as quoted on the Stock Exchange for the ten consecutive trading days immediately prior to and including the Last Trading Day;
(v) a discount of approximately 21.0% to the average closing price of approximately HK$0.367 per Preference Share as quoted on the Stock Exchange for the thirty consecutive trading days immediately prior to and including the Last Trading Day; and
(vi) a discount of approximately 20.5% to the closing price of HK$0.365 per Preference Share as quoted on the Stock Exchange on 14 July, 2014, being the Latest Practicable Date;
7.1 Historical share price performance of the Preference Shares

The chart below illustrates the closing price of the Preference Shares during the Review Period:

==> picture [393 x 183] intentionally omitted <==

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

Closing price of the Preference Shares
(HK$)
0.45
0.40 Closing price
0.35
0.30
0.25 Preference Shares Offer Price
0.20
0.15
0.10
0.05 Latest Practicable Date
0
Source: Bloomberg
2/5/2013 2/6/2013 2/7/2013 2/8/2013 2/9/2013 2/10/2013 2/11/2013 2/12/2013 2/1/2014 2/2/2014 2/3/2014 2/4/2014 2/5/2014 2/6/2014 2/7/2014
----- End of picture text -----

Note: Trading in Preference Shares on the Stock Exchange was suspended from 1:00 p.m., 2 May 2014 to 2 July 2014

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LETTER FROM INVESTEC CAPITAL ASIA LIMITED

During the Review Period, the closing price of the Preference Shares fluctuated between a range of HK$0.25 to HK$0.4. From 2 May 2013 to 4 July 2013, the closing price of the Preference Shares remained at HK$0.35. The closing price decrease from HK$0.35 on 4 July 2013 to HK$0.25 on 5 July 2013. From 5 July 2013 to 16 January 2014, the closing price of the Preference Shares remained at HK$0.25. The closing price increased from HK$0.25 on 16 January 2014 to HK$0.37 on 22 January 2014 and remained at HK$0.37 until 16 April 2014. We note that the Company published the profit warning announcement on 27 January 2014. The closing price decreased slightly to HK$0.36 on 17 April 2014 and remained at HK$0.36 until the Last Trading Day. Trading in the Preference Shares was suspended from 1:00 p.m., 2 May 2014 to 2 July 2014. Following the publication of the Offer Document and upon the resumption of trading in the Preference Share, the closing price reached the highest price of HK$0.40 on 3 July 2014 and subsequently decreased to HK$0.365 on 14 July 2014.

As shown in the chart above, the closing prices of the Preference Shares were above the Preference Share Offer Price during the period from 17 January 2014 to the Latest Practicable Date. During the Review Period, the highest closing price of the Preference Shares was HK$0.40 on 3 July 2014 and the lowest closing price was HK$0.25 from 5 July 2013 to 16 January 2014. The average closing price of the Preference Shares during the Review Period (the ‘‘Average Preference Share Price’’) was approximately HK$0.30. The Preference Share Offer Price represents (i) a discount of approximately 27.5% to the highest closing price of the Preference Shares during the Review Period; (ii) a premium of approximately 16.0% to the lowest closing price of the Preference Shares during the Review Period; (iii) a discount of approximately 3.3% to the Average Preference Share Price; and (v) a discount of approximately 20.5% to the closing price of the Preference Share as at Latest Practicable Date.

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LETTER FROM INVESTEC CAPITAL ASIA LIMITED

7.2 Liquidity of the Preference Shares

The following table sets out the monthly total trading volume, the highest, lowest and average daily number of the Preference Shares traded in each month and the percentage of average daily trading volume of the Preference Shares as compared to the total number of the Preference Shares in issue during the Review Period:

			Percentage of	Percentage of
			average daily trading
			volume to total
			number of the
	Total trading	Average daily	Preference Shares
Month	volume	trading volume		in issue
	(number of	(number of		(%)
	Preference	Preference		(Note 1)
	Shares)	Shares)
2013
May	—	—		0.00%
June	—	—		0.00%
July	—	—		0.00%
August	—	—		0.00%
September	—	—		0.00%
October	10,000	476		0.00%
November	—	—		0.00%
December	—	—		0.00%
2014
January	1,373,000	65,381		0.03%
February	—	—		0.00%
March	160,000	7,619		0.00%
April	—	—		0.00%
May	— (Note 2)	— (Note 2)	0.00% (Note 2)
June	(Note 2)	(Note 2)		(Note 2)
July (Up to the
Latest Practicable
Date)	842,500	105,313	0.15% (Note 3)

Source: Bloomberg

Note 1: Based on the issued Preference Shares as disclosed in the monthly return of the Company on movements in securities of the Company

Note 2: Trading in the Preference Shares on the Stock Exchange suspended from 1:00 p.m., 2 May 2014 to 2 July 2014
Note 3: Based on (i) average daily trading volume; and (ii) the issued Preference Shares as at Latest Practicable Date

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LETTER FROM INVESTEC CAPITAL ASIA LIMITED

As illustrated above, during the Review Period, there was no trading volume from May to September, November and December 2013 and February and April 2014. In October 2013 and January, March and July 2014, the average daily trading volume of the Preference Shares as a percentage of the total number of the Preference Shares in issue ranged from approximately 0.00% to 0.15%. Based on the above, we note that the liquidity of the Preference Shares was extremely thin during the Review Period.

Despite the fact that the liquidity of the Preference Shares was low during the Review Period, we note that the Preference Share Offer Price represents (i) a discount of approximately 19.4% to the closing price of HK$0.36 per Preference Share as quoted on the Last Trading Day; (ii) a discount of approximately 21.0% to the average closing price of approximately HK$0.367 per Preference Share as quoted on the Stock Exchange for the thirty consecutive trading days immediately prior to and including the Last Trading Day; (iii) a discount of approximately 20.5% to the closing price of HK$0.365 per Preference Share on the Latest Practicable Date; and (iv) a discount of approximately 3.3% to the Average Preference Share Price. In terms of P/B ratio calculated by reference to the Preference Share Offer Price of HK$0.29 and the Unaudited Adjusted NAV, the resultant P/B ratio of approximately 0.19 is below the lowest P/B ratio of the Comparable Companies and outside of the range of the P/B ratios of the Comparable Companies. Given the aforesaid discounts and, in particular, the P/B ratios under the Offers compared to the P/B ratios of the Comparable Companies, we are of the view that the Preference Share Offer Price is unattractive and is not fair and reasonable so far as the Preference Shareholders are concerned.

V. RECOMMENDATION

Taking into consideration the above-mentioned principal factors and reasons of the Offers, being:

(i) the Offer Prices for the Ordinary Offer Shares and the Preference Offer Shares represent a discount of approximately 24.2% to closing prices of the Ordinary Share and a discount of approximately 20.5% to closing prices of the Preference Share on the Latest Practicable Date, respectively;
(ii) the Offer Prices for the Ordinary Offer Shares and the Preference Offer Shares represent a discount of approximately 20.6% to the closing prices of the Ordinary Share and a discount of approximately 19.4% to the closing prices of the Preference Share on the Last Trading Day, respectively;
(iii) the Offer Prices for the Ordinary Offer Shares and the Preference Offer Shares represent a discount of approximately 16.7% to the average closing price of approximately HK$0.300 per Ordinary Share as quoted on the Stock Exchange for the thirty consecutive trading days immediately prior to and including the Last Trading Day and a discount of approximately 21.0% to the average closing price of

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LETTER FROM INVESTEC CAPITAL ASIA LIMITED

approximately HK$0.367 per Preference Share as quoted on the Stock Exchange for the thirty consecutive trading days immediately prior to and including the Last Trading Day, respectively;

(iv) the Unaudited Adjusted NAV which was based on (a) the unaudited consolidated financial statements of the Group as at 31 December 2013; (b) the disposal of the Convention Plaza Property; and (c) the revaluation arising from the valuation of the property interests of the Group as at 31 May 2014, details of which have been set out under paragraph headed ‘‘3. Unaudited adjusted net asset value’’ in this letter; and
(v) the P/B ratio, calculated based on the Offer Prices of HK$0.25 for each Ordinary Offer Share, HK$0.29 for each Preference Offer Share and the Unaudited Adjusted NAV, of approximately 0.16 and 0.19 is below the lowest P/B ratio of the Comparable Companies and outside of the range of the P/B ratios of the Comparable Companies.

We consider that the terms of the Offers are not fair and not reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Committee to advise the Independent Shareholders to reject the Offers.

Yours faithfully,	Yours faithfully,
For and on	behalf of
Investec Capital	Asia Limited
Ambrose Lam	Jimmy Chung
Director	Director

Note: Mr. Ambrose Lam of Investec Capital Asia Limited is a responsible officer of Type 1 (dealing in securities), Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities under the SFO. He has been active in the field of corporate finance advisory for over 25 years, involved in and completed various corporate finance advisory transactions, including those involving in the real estate properties in Hong Kong.

Mr. Jimmy Chung of Investec Capital Asia Limited is a responsible officer of Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance) regulated activities under the SFO. He has been active in the field of corporate finance advisory for over 15 years, involved in and completed various corporate finance advisory transactions, including those involving in the real estate properties in Hong Kong.

– 40 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL SUMMARY

The following is a summary of (i) the audited financial results of the Group for each of the three financial years ended 30 June 2011, 2012 and 2013; and (ii) the unaudited financial results of the Group for the six months ended 31 December 2013 as extracted from the published financial statements of the Group for the relevant years/period.

Turnover Profit/(loss) before taxation Taxation Profit/(loss) for the period/ year attributable to — Shareholders of the Company — Minority interests Dividend Dividend per share Earnings/(loss) per share Basic Diluted	For the six months ended 31 December 2013 HK$’000 (unaudited) — (40,079) — (40,079) — (40,079) — HK cents — (5.33) N/A (Note)	For the 2013 HK$’000 (audited) 162,820 30,919 (10) 30,909 — 30,909 — HK cents — 4.11 3.56	year ended 30 June 2012 2011 HK$’000 HK$’000 (audited) (audited) 1,276 750 (30,062) (35,455) (14,793) — (44,855) (35,455) — — (44,855) (35,455) — — HK cents HK cents — — (8.01) (6.60) (8.01) (6.60)

Note: As disclosed in note 8 to the financial statements of the Company contained in the Company’s interim report for the six months ended 31 December 2013, the calculation of diluted loss per share for the six months ended 31 December 2013 had not been disclosed as the exercise of the Company’s outstanding convertible redeemable preference shares would reduce the loss per share for the period.

There were no qualifications in the auditors’ report on the consolidated financial statements for each of the three financial years ended 30 June 2013 as contained in the annual reports for these respective years.

– I-1 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For each of the three financial years ended 30 June 2011, 2012 and 2013 and for the six months ended 31 December 2013, the Company had no exceptional items because of size, nature or incidence other than the following:

(i) The Group recorded turnover from the sale of properties of nil, nil, approximately HK$161,500,000, and nil for each of the three financial years ended 30 June 2011, 2012 and 2013 and for the six months ended 31 December 2013, respectively.
(ii) The Group recorded gain/(loss) arising from change in fair value of investment properties of approximately HK$50,000,000, HK$(6,000,000), HK$6,000,000, HK$(7,570,000) for each of the three financial years ended 30 June 2011, 2012 and 2013 and for the six months ended 31 December 2013, respectively.
(iii) The Group recorded gain/(loss) arising from change in fair value of derivative financial instruments of approximately HK$(27,540,000), HK$52,787,000, nil and nil for each of the three financial years ended 30 June 2011, 2012 and 2013 and for the six months ended 31 December 2013, respectively.
(iv) The Group recorded provision for litigations of nil, approximately HK$21,377,000, nil and approximately HK$6,000,000 for each of the three financial years ended 30 June 2011, 2012 and 2013 and for the six months ended 31 December 2013, respectively.
(v) On 10 April 2012, the Company announced that it proposed to raise approximately HK$33.3 million, before expenses, by way of open offer. The net proceeds raised, after expenses of approximately HK$3 million, amounted to approximately HK$30.3 million.

– I-2 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. AUDITED CONSOLIDATED FINANCIAL INFORMATION OF THE GROUP

Set out below is the full text of the audited consolidated financial statements of the Company for the year ended 30 June 2013 as extracted from the annual report of the Company for the year ended 30 June 2013:

Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2013

NOTES Turnover 8 Cost of sales Gross profit Other income 9 Distribution costs Administrative expenses Gain (loss) arising from change in fair value of investment properties 16 Gain arising from change in fair value of derivatives financial instruments 28 Provision for litigations 32(b)&(c) Finance costs 11 Profit (loss) before taxation Taxation charge 12 Profit (loss) for the year 13 Other comprehensive income (expense) Items that may be subsequently reclassified to profit or loss: 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 EARNINGS (LOSS) PER SHARE 15 Basic Diluted	2013 HK$’000 162,820 (64,503) 98,317 8,854 (3,314) (50,377) 6,000 — — (28,561) 30,919 (10) 30,909 (76) 431 355 31,264 4.11 HK cents 3.56 HK cents	2012 HK$’000 1,276 — 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

– I-3 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Financial Position

At 30 June 2013

NOTES Non-current assets Investment properties 16 Property, plant and equipment 17 Available-for-sale investments 18 Deposit placed for a life insurance policy 19 Pledged bank deposits 20 Current assets Properties held for sale 21 Trade and other receivables, deposits and prepayments 22 Bank balances and cash 23 Current liabilities Other payables and accrued charges 24 Amounts due to directors of subsidiaries 25 Provision for litigations Taxation payable Bank overdrafts 26 Secured bank borrowings 27 Net current liabilities Capital and reserves Share capital 29 Reserves Non-current liabilities Convertible redeemable preference shares 30	2013 HK$’000 248,000 74,578 14,017 20,942 50,565 408,102 710,408 12,541 107,198 830,147 126,905 234,984 8,000 — 19,999 879,550 1,269,438 (439,291) (31,189) 7,520 (78,640) (71,120) 39,931 (31,189)	2012 HK$’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)

– I-4 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Changes in Equity

For the year ended 30 June 2013

Share capital HK$’000 5,372	Share premium HK$’000 2,136	Attributable to equity holders of the Company Capital reserve Other reserve Translation reserve Investment revaluation reserve HK$’000 HK$’000 HK$’000 HK$’000 (note a) (note b) 24,256 21,766 (4,976) 3,614 — — — — — — (30) 2,472 — — (30) 2,472 (6) — — — — — — — — — — — 24,250 21,766 (5,006) 6,086 — — — — — — (76) 431 — — (76) 431 (3) — — — 24,247 21,766 (5,082) 6,517	Attributable to equity holders of the Company Capital reserve Other reserve Translation reserve Investment revaluation reserve HK$’000 HK$’000 HK$’000 HK$’000 (note a) (note b) 24,256 21,766 (4,976) 3,614 — — — — — — (30) 2,472 — — (30) 2,472 (6) — — — — — — — — — — — 24,250 21,766 (5,006) 6,086 — — — — — — (76) 431 — — (76) 431 (3) — — — 24,247 21,766 (5,082) 6,517	Attributable to equity holders of the Company Capital reserve Other reserve Translation reserve Investment revaluation reserve HK$’000 HK$’000 HK$’000 HK$’000 (note a) (note b) 24,256 21,766 (4,976) 3,614 — — — — — — (30) 2,472 — — (30) 2,472 (6) — — — — — — — — — — — 24,250 21,766 (5,006) 6,086 — — — — — — (76) 431 — — (76) 431 (3) — — — 24,247 21,766 (5,082) 6,517	Attributable to equity holders of the Company Capital reserve Other reserve Translation reserve Investment revaluation reserve HK$’000 HK$’000 HK$’000 HK$’000 (note a) (note b) 24,256 21,766 (4,976) 3,614 — — — — — — (30) 2,472 — — (30) 2,472 (6) — — — — — — — — — — — 24,250 21,766 (5,006) 6,086 — — — — — — (76) 431 — — (76) 431 (3) — — — 24,247 21,766 (5,082) 6,517	Accumulated losses HK$’000 (142,445)	Total HK$’000 (90,277
— —	— —	— —	— —	— (30)	— 2,472	(44,855) —	(44,855 2,442
—	—	—	—	(30)	2,472	(44,855)	(42,413
— 2,148 —	10 31,155 (3,003)	(6) — —	— — —	— — —	— — —	— — —	4 33,303 (3,003
7,520	30,298	24,250	21,766	(5,006)	6,086	(187,300)	(102,386
— —	— —	— —	— —	— (76)	— 431	30,909 —	30,909 355
—	—	—	—	(76)	431	30,909	31,264
—	5	(3)	—	—	—	—	2
7,520	30,303	24,247	21,766	(5,082)	6,517	(156,391)	(71,120

Notes:

(a) The capital reserve represents the equity component of convertible redeemable preference shares.

(b) The other reserve represents the amount transferred from liability component of convertible redeemable preference shares upon the alteration of the terms of the existing convertible redeemable preference shares during the year ended 30 June 2008.

– I-5 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Cash Flows

For the year ended 30 June 2013

OPERATING ACTIVITIES Profit (loss) before taxation Adjustments for: Depreciation of property, plant and equipment Interest expenses Interest income (Gain) loss arising from change in fair value of investment properties Gain arising from change in fair value of derivative financial instruments Premium charged on a life insurance policy Provision for litigations Operating cash flows before movements in working capital Decrease in properties held for sale Decrease in trade and other receivables, deposits and prepayments Decrease in bills payable Decrease in other payables and accrued charges Cash from (used in) operations Tax paid NET CASH FROM (USED IN) OPERATING ACTIVITIES INVESTING ACTIVITIES Interest received Purchase of property, plant and equipment Placement of pledged bank deposits Withdrawal of pledged bank deposits Payment of deposit placed for a life insurance policy NET CASH USED IN INVESTING ACTIVITIES	2013 HK$’000 30,919 3,549 28,561 (1,042) (6,000) — 878 — 56,865 64,503 19,648 — (15,640) 125,376 (9,588) 115,788 253 (520) (199) — — (466)	2012 HK$’000 (30,062) 3,567 22,008 (683) 6,000 (52,787) 293 8,000 (43,664) — 11,435 (9,080) (15,093) (56,402) (44,615) (101,017) 370 — (280) 11,185 (21,887) (10,612)

– I-6 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

FINANCING ACTIVITIES Bank borrowings raised Repayment of bank borrowings Interest paid Repayment to a director of subsidiaries Advance from directors of subsidiaries Proceed from open offer of shares Transaction cost attributable to open offer of shares NET CASH (USED IN) FROM FINANCING ACTIVITIES NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR EFFECT OF FOREIGN EXCHANGE RATE CHANGES CASH AND CASH EQUIVALENTS AT END OF THE YEAR ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS Bank balances and cash Bank overdrafts	2013 HK$’000 15,000 (110,947) (23,566) (14,642) — — — (134,155) (18,833) 106,111 (79) 87,199 107,198 (19,999) 87,199	2012 HK$’000 255,319 (149,009) (16,454) (52,866) 189,662 33,303 (3,003) 256,952 145,323 (39,153) (59) 106,111 131,183 (25,072) 106,111

– I-7 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT

For the year ended 30 June 2013

1. GENERAL

The Company is incorporated in Bermuda with limited liability and its shares are listed on The Stock Exchange of Hong Kong Limited (the ‘‘Stock Exchange’’). Its parent company, ultimate holding company and ultimate controlling party is Five Star Investments Limited (‘‘Five Star’’), a company which is incorporated in the British Virgin Islands. The addresses of the registered office and the principal place of business of the Company are disclosed in the ‘‘Corporate Information’’ section to the annual report.

The consolidated financial statements are presented in Hong Kong dollars (‘‘HK$’’ or ‘‘HKD’’) which is the same as the functional currency of the Company.

The Company is an investment holding company. Its principal subsidiaries are engaged in investment holding, property development and property investment.

2. 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$31,189,000 and HK$439,291,000 respectively as at 30 June 2013.

Taking into account the available unutilised bank credit facility of HK$295,364,000 (2012: HK$206,741,000) as at 30 June 2013 and the estimated proceeds which can be received from future 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.

3. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (‘‘HKFRSs’’)

In the current year, the Group has applied the following amendments to HKFRSs issued by the Hong Kong Institute of Certified Public Accountants (‘‘HKICPA’’).

Amendments to HKAS 1 Presentation of items of other comprehensive income

Except as described below, the application of the amendments to HKFRSs in the current year has had no material impact on the Group’s financial performance and positions for the current and prior years and/or on the disclosures set out in these consolidated financial statements.

Amendments to HKAS 1 Presentation of items of other comprehensive income

The amendments to HKAS 1 introduce new terminology for statement of comprehensive income and income statement. Under the amendments to HKAS 1, a statement of comprehensive income is renamed as a statement of profit or loss and other comprehensive income. In addition, 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 do not change the existing option to present items of other comprehensive income either before tax or net of tax. The amendments have been applied retrospectively, and hence the presentation of items of other comprehensive income has been modified to reflect the changes.

– I-8 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

New and revised HKFRSs issued but not yet effective

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 cycle1
Amendments to HKFRS 7	Disclosures — Offsetting financial assets and financial
	liabilities1
Amendments to HKFRS 9	Mandatory effective date of HKFRS 9 and transition
and HKFRS 7	disclosures3
Amendments to HKFRS 10,	Consolidated financial statements, joint arrangements and
HKFRS 11 and HKFRS 12	disclosure of interests in other entities: Transition guidance1
HKFRS 9	Financial instruments3
HKFRS 10	Consolidated financial statements1
HKFRS 11	Joint arrangements1
HKFRS 12	Disclosures of interests in other entities1
HKFRS 13	Fair value measurements1
HKAS 19 (as revised in 2011)	Employee benefits1
HKAS 27 (as revised in 2011)	Separate financial statements1
HKAS 28 (as revised in 2011)	Investments in associates and joint ventures1
Amendments to HKAS 32	Offsetting financial assets and financial liabilities2
Amendments to HKAS 36	Recoverable amount disclosures for non-financial assets2
Amendments to HKAS 39	Novation of derivatives and continuation of hedge accounting2
HK(IFRIC*)-INT 20	Stripping costs in the production phase of a surface mine1
HK(IFRIC)-INT 21	Levies2

IFRIC represents the IFRS Interpretations Committee.
1 Effective for annual periods beginning on or after 1 January 2013. 2 Effective for annual periods beginning on or after 1 January 2014. 3 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:

. All recognised financial assets that are within the scope of HKAS 39 ‘‘Financial Instruments: Recognition and Measurement’’ are 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.
. With regard to the measurement of financial liabilities designated as at fair value through profit or loss, HKFRS 9 requires that 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 of financial liabilities attributable to changes in the

– I-9 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

financial liabilities’ 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 fair value through profit or loss was presented in profit or loss.

HKFRS 9 is effective for annual periods beginning on or after 1 January 2015, with earlier application permitted.

Based on the consolidated statement of financial position of the Group as at 30 June 2013, 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 the 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 2012) 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.

In July 2012, the amendments to HKFRS 10, HKFRS 11 and HKFRS 12 were issued to clarify certain transitional guidance on the application of these five HKFRSs for the first time.

These five standards, together with the amendments relating to the transitional guidance, are effective for annual periods beginning on or after 1 January 2013 with earlier application permitted provided that all of these standards are applied 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 threelevel 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.

– I-10 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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.

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.

4. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards issued by the HKICPA. In addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange and by the Hong Kong Companies Ordinance.

The consolidated financial statements have been prepared on the historical cost basis except for investment properties and certain financial instruments that are measured at fair values, as explained in accounting policies set out below. Historical cost is generally based on the fair value of the consideration given in exchange for goods.

Basis of consolidation

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

Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

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

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

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for properties sold and rental income and services rendered in the normal course of business.

Specifically, revenue from sale of properties in the ordinary course of business is recognised when the respective properties have been completed and delivered to the buyers. Deposits and instalments received from purchasers prior to meeting the above criteria for revenue recognition are included in the consolidated statement of financial position under current liabilities.

Rental income, including rental invoiced in advance from properties under operating leases, is recognised on a straight-line basis over the terms of the relevant leases.

– I-11 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income 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 the estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

Property, plant and equipment

Property, plant and equipment including leasehold land and buildings held for administrative purposes are stated in the consolidated statement of financial position at cost less subsequent accumulated depreciation and accumulated impairment losses, if any.

Depreciation is recognised so as to write off the cost of items of property, plant and equipment less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

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

Investment properties

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

In cases where classification between investment properties and properties held for sale in the ordinary course of business is difficult, the Group classifies the properties being actively marketed for sale as properties held for sale and other properties which are not marketed for immediate disposal as investment property held for long term capital appreciation purpose.

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

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

Properties held for sale

Properties held for sale are stated at lower of cost and net realisable value.

Financial instruments

Financial assets and financial liabilities are recognised in the consolidated statement of financial position when a group entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets or financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

– I-12 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Financial assets

The Group’s financial assets are classified into two categories including loans and receivables and available-for-sale financial assets. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Effective interest method

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

Interest income is recognised on an effective interest basis for debt instruments.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including trade and other receivables, deposit placed for a life insurance policy, pledged bank deposits, bank balances and cash) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment loss on financial assets below).

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated or not classified as financial assets at fair value through profit or loss, 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 recognised in other comprehensive income and accumulated in investment revaluation reserve, until the financial asset is disposed of or is determined to be impaired, at which time, the cumulative gain or loss previously accumulated in investment revaluation reserve is reclassified to profit or loss (see accounting policy on 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 are measured at cost less any identified impairment losses at the end of the reporting period (see accounting policy on impairment loss on financial assets below).

Impairment of financial assets

Financial assets are assessed for indicators of impairment at the end of the reporting period. Financial assets are considered to be impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been affected.

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

– I-13 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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

. significant financial difficulty of the issuer or counterparty; or
. breach of contract, such as default or delinquency in interest or principal payments; or
. it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the credit period of 120 days, observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, an impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the financial asset’s original effective interest rate.

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

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

For financial assets measured at amortised cost, if, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

For available-for-sale debt investments, impairment losses are subsequently reversed if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

Financial liabilities and equity instruments

Debt and equity instruments issued by a group entity are classified as financial liabilities or as equity in accordance with the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

– I-14 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and 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 recognised on an effective interest basis.

Convertible redeemable preference shares

Convertible redeemable preference shares are regarded as compound instruments consisting of a liability component and an equity component. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible debt without the conversion feature. The difference between the proceeds of issue of the convertible redeemable preference shares and the fair value assigned to the liability component, representing the embedded call option for the holder to convert the liability component of the convertible redeemable preference shares into equity of the Company, is included in equity (capital reserve).

In subsequent periods, the liability component of the convertible redeemable preference shares is carried at amortised cost using the effective interest method. The equity component, representing the option to convert the liability component into ordinary shares of the Company, will remain in capital reserve until the conversion option is exercised (in which case the balance stated in capital reserve will be transferred to share premium). Where the option remains unexercised at the expiry date, the balance stated in capital reserve will be released to the accumulated losses. No gain or loss is recognised in profit or loss upon conversion or expiration of the option.

Transaction costs that relate to the issue of the convertible redeemable preference shares are allocated to the liability and equity components in proportion to the allocation of the proceeds. Issue costs relating to the equity component are charged directly to equity. Issue costs relating to the liability component are included in the carrying amount of the liability portion and amortised over the period of the convertible redeemable preference shares using the effective interest method.

Financial liabilities

Financial liabilities (including other payables, amounts due to directors of subsidiaries, bank overdrafts and secured bank borrowings) are subsequently measured at amortised cost, using the effective interest method.

Derivative financial instruments

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of the reporting period. The resulting gain or loss is recognised in profit or loss immediately.

Derecognition

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.

On derecognition of a financial asset in its entirety, 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 recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

– I-15 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group derecognise financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Impairment loss

At the end of the reporting period, the Group 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. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or a cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

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

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

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

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recorded in the respective functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items 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 retranslation of monetary items, are recognised in profit or loss in the period in which they arise.

For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into the presentation currency of the Group (i.e. Hong Kong dollars) at the rate of exchange prevailing at the end of the reporting period. Income and expenses

– I-16 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

items are translated at the average exchange rates for the year. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity under the heading of translation reserve.

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

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

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

The carrying amount of deferred tax assets is reviewed at the end of 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 is realised, based on tax rate (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 Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

For the purposes of measuring deferred tax liabilities and deferred tax assets for investment properties that are measured using the fair value model in accordance with HKAS 40 ‘‘Investment property’’, such properties are presumed to be recovered through sale. Such a presumption is rebutted when the investment property is held within a business model the Group whose business objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale. If the presumption is rebutted, deferred tax liabilities and deferred tax assets for such investment properties are measured in accordance with the above general principles set out in HKAS 12 (i.e. based on the expected manner as to how the properties will be recovered).

Current and deferred tax is recognised in profit or loss, except when it relates to items that are recognised in other comprehensive income or directly in equity, in which case the deferred tax is also recognised in other comprehensive income or directly in equity respectively.

– I-17 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Leasing

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

The Group as lessor

Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of the relevant lease.

Leasehold land and building

When a lease includes both land and building elements, the Group assesses the classification of each element as a finance or an operating lease separately based on the assessment as to whether substantially all the risks and rewards incidental to ownership of each element have been transferred to the Group, unless it is clear that both elements are operating leases in which case the entire lease is classified as an operating lease. Specifically, the minimum lease payments (including any lump-sum upfront payments) are allocated between the land and the building elements in proportion to the relative fair values of the leasehold interests in the land element and building element of the lease at the inception of the lease.

When the lease payments cannot be allocated reliably between the land and building elements, the entire lease is generally classified as a finance lease and accounted for as property, plant and equipment or investment properties (as appropriate) unless it is clear that both elements are operating leases, in which case the entire lease is classified as an operating lease.

Retirement benefit scheme

Payments to defined contribution retirement benefit scheme are charged as an expense when employees have rendered service entitling them to the contributions.

5. KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, which are described in note 4, the directors of the Company are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated 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 recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

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

Impairment loss on properties held for sale

Management reviews the recoverability of the Group’s properties held for sale amounting to HK$710,408,000 (2012: HK$774,911,000) with reference to current market environment whenever events or changes in circumstances indicate that the carrying amount of the assets may exceed its net realisable value, as appropriate. Appropriate write-down for estimated irrecoverable amounts is recognised in profit or loss when the net realisable value is below cost. The estimates of net realisable value are based on the evidence available at the time the estimates are made, and the amounts of the properties held for sale are expected to realise or recover. Actual realised amount may differ from estimates.

– I-18 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Legal claims

The Group is involved in legal proceeding as disclosed in note 32. Management has evaluated and assessed the claims made against the Group based on legal advice received and information presently available. Actual result of the legal proceeding and the amount of claims may differ from estimates, resulting in a decrease or increase in loss for compensation for litigations. Details of the provision for litigations are disclosed in note 32.

6. CAPITAL RISK MANAGEMENT

The Group manages its capital to ensure that entities within the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from prior year.

The capital structure of the Group consists of net debts, which include amounts due to directors of subsidiaries, bank overdrafts and secured bank borrowings as disclosed in notes 25, 26 and 27, respectively (net of cash and cash equivalents) and equity attributable to equity holders of the Company, comprising issued share capital and reserves as disclosed in the consolidated statement of changes in equity.

The directors of the Company review the capital structure on a regular basis. As part of this review, the directors consider the cost of capital and the risks associated with each class of capital. The Group will balance its overall capital structure through new share issues as well as issue of new debts.

7. FINANCIAL INSTRUMENTS

Categories of financial instruments

Financial assets Loans and receivables (including cash and cash equivalents) — trade and other receivables — deposit placed for a life insurance policy — pledged bank deposits — bank balances and cash Available-for-sale financial assets — available-for-sale investments Financial liabilities At amortised cost — other payables — amounts due to directors of subsidiaries — bank overdrafts — secured bank borrowings — convertible redeemable preference shares	2013 HK$’000 9,112 20,942 50,565 107,198 187,817 14,017 80,232 234,984 19,999 879,550 39,931 1,254,696	2012 HK$’000 24,670 21,028 50,366 131,183
		227,247
		13,586
		75,637 249,626 25,072 975,497 34,938
		1,360,770

Financial risk management objectives and policies

The Group’s financial instruments include available-for-sale investments, trade and other receivables, deposit placed for a life insurance policy, pledged bank deposits, bank balances and cash, other payables, amounts due to directors of subsidiaries, bank overdrafts, secured bank borrowings and convertible redeemable preference shares. Details of the financial instruments are disclosed in respective

– I-19 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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. The Group’s overall strategy remains unchanged from prior year.

Market risk

Currency risk

The Group has foreign currency exposure from the handling service income which expose the Group to foreign currency risk.

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

Assets United States Dollars (‘‘USD’’) Liabilities USD	2013 HK$’000 25,537 11,490	2012 HK$’000 28,931
		14,553

The management continuously monitors the foreign exchange exposure and will consider hedging foreign currency risk should the need arise.

The Group is mainly exposed to the foreign currency risk on HKD against USD. As HKD is pegged to USD, the financial impact on exchange difference between HKD and USD is expected to be immaterial and therefore no sensitivity analysis on USD has been prepared.

Interest rate risk

The Group is exposed to cash flow interest rate risk in relation to bank balance, floating-rate bank overdrafts and bank borrowings (see notes 23, 26 and 27 for details). The management continuously monitors interest rate fluctuation and will consider further hedging interest rate risk should the need arise.

The Group is exposed to fair value interest rate risk in relation to fixed-rate pledged bank deposits and deposit placed for a life insurance policy. The directors of the Company consider the Group’s exposure of the fixed-rate pledged bank deposits to fair value interest rate risk is not significant as the interest rates are repriced every three months.

The Group’s bank balances have exposure to cash flow interest rate risk due to the fluctuation of the prevailing market interest rate on bank balances. The directors of the Company consider the Group’s exposure of the short-term bank deposits to interest rate risk is not significant as interest bearing bank balances are within short maturity period. Accordingly, no sensitivity analysis on short-term bank deposits is presented.

The Group’s exposures to interest rates on financial liabilities are detailed in the liquidity risk management section of this note. The Group’s cash flow interest rate risk is mainly concentrated on the fluctuation of Hong Kong Interbank Offered Rate (‘‘HIBOR’’), London Interbank Offered Rate (‘‘LIBOR’’) and Hong Kong dollars Prime Rate arising from the Group’s borrowings.

– I-20 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Sensitivity analysis

The sensitivity analyses below have been determined based on the exposure to interest rates for floating rate bank overdrafts and secured bank borrowings at the end of the reporting period and the stipulated changes taking place at the beginning of the year and held constant throughout the year. The analysis also assumed the amount outstanding at the end of the reporting period was outstanding for the whole year. A 50 basis points (2012: 50 basis points) increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

If interest rates on floating-rate bank overdrafts and secured bank borrowings had been 50 basis points (2012: 50 basis points) higher/lower and all other variables were held constant, the post-tax profit for the year ended 30 June 2013 would decrease/increase by approximately HK$3,756,000 (2012: post-tax loss increase/decrease by approximately HK$4,177,000). This is mainly attributable to the Group’s exposure to interest rates on floating-rate bank overdrafts and secured bank borrowings.

Other price risk

The Group’s available-for-sale investments is exposed the Group to other price risks. Details of the available-for-sale investments are set out in note 18.

Management has closely monitor the other price risk and will consider hedging the risk exposure should the need arise.

Sensitivity analysis

The sensitivity analyses below have been determined based on the exposure to other price risks at the end of the reporting period. 5% (2012: 5%) increase or decrease is used when reporting exposure to other price risk internally to key management personnel and represents management’s assessment of the reasonably possible change in price.

Price risk of available-for-sale investments

If the prices of the available-for-sale debt investment had been 5% (2012: 5%) higher/lower, investment revaluation reserve for the year ended 30 June 2013 would increase/decrease by approximately HK$701,000 (2012: increase/decrease by HK$679,000) as a result of the changes in fair value of available-for-sale investments.

Credit risk

The Group’s maximum exposure to credit risk in the event of the counterparties’ failure to perform their obligations at the end of the reporting period in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the consolidated statement of financial position. In order to minimise the credit risk, the directors of the Company continuously monitor exposure to ensure that follow-up actions and/or corrective actions are taken promptly to lower exposure or even to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group’s credit risk is significantly reduced.

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

Available-for-sale debt investments with carrying value of approximately HK$14,017,000 (2012: HK$13,586,000) was the debenture issued by The Hong Kong Golf Club. However, having consider the strong financial background of the debenture issuer, the management believes there is no significant risk.

– I-21 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Liquidity risk

As mentioned in note 2, the directors of the Company have given careful consideration to the future liquidity of the Group in light of its liquidity risk. Taking into account the available unutilised bank credit facility of HK$295,364,000 (2012: HK$206,741,000) as at 30 June 2013 and the estimated proceeds which can be received from future sales of developed properties, which were stated at cost in the consolidated statement of financial position at the end of the reporting period, the consolidated financial statements have been prepared on a going concern basis. In addition, the directors of the Company also considered (i) the history of renewal of existing bank credit facility and the good relationship between the Group and the banks; and (ii) the ability of the Group to repay existing bank borrowings in the coming twelve months, 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 the Group does not have significant exposure to liquidity risk.

The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. Specifically, bank loans with a repayment on demand clause are included in the earliest time band regardless of the probability of the banks choosing to exercise their rights. The maturity dates for other non-derivative financial liabilities are based on the agreed repayment dates.

Liquidity and interest risk tables

On demand HK$’000 80,232 234,984 19,999 879,550 —	Less than 3 months HK$’000 — — — — —	3 months to 1 year HK$’000 — — — — —	1 to 2 years HK$’000 — — — — —	2 to 5 years HK$’000 — — — — 63,813	Total undiscounted cash flows HK$’000 80,232 234,984 19,999 879,550 63,813	Total carrying amounts HK$’000 80,232 234,984 19,999 879,550 39,931
1,214,765	—	—	—	63,813	1,278,578	1,254,696
75,637 249,626 25,072 975,497 —	— — — — —	— — — — —	— — — — —	— — — — 63,814	75,637 249,626 25,072 975,497 63,814	75,637 249,626 25,072 975,497 34,938
1,325,832	—	—	—	63,814	1,389,646	1,360,770

– I-22 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the purpose of managing liquidity risk, the management reviews the expected cash flow information of the Group’s bank borrowings (excluding revolving loan) based on the scheduled repayment dates set out in the loan agreements as set out in the table below:

Weighted average interest rate Secured bank borrowings As at 30 June 2013 1.82% As at 30 June 2012 1.75%	Less than 3 months HK$’000 15,884 31,295	3 months to 1 year HK$’000 97,865 85,082	1 to 2 years HK$’000 58,621	2 to 5 years HK$’000 171,596	Over 5 years HK$’000 532,245	Total undiscounted cash flows HK$’000 876,211	Total carrying amounts HK$’000 774,550
			99,400	147,003	559,211	921,991	860,497

Fair value

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

. the fair value of club debentures classified as available-for-sale debt investments are determined with reference to market price; and
. the fair value of loans and receivables and financial liabilities (excluding derivative financial instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis.

The directors of the Company consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the consolidated financial statements approximate their fair value.

Fair value measurements recognised in the consolidated statement of financial position

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, 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 market 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).
. 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).

Available-for-sale financial assets Club debenture	Level 1 and total 2013 2012 HK$’000 HK$’000 14,017 13,586

There were no transfers between Level 1 and 2 in the current year.

– I-23 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

8. TURNOVER

Turnover represents the aggregate of the amounts received and receivable for sale of properties and leasing of investment properties during the year. An analysis of the Group’s turnover is as follows:

Sale of properties Rental income from investment properties OTHER INCOME Bank interest income Compensation received from settlement of a legal case Consultancy fee income Interest income from deposit placed for a life insurance policy Net exchange gain Rental income from properties held for sale Others	2013 HK$’000 161,500 1,320 162,820 2013 HK$’000 253 — 1,159 789 92 6,175 386 8,854	2012 HK$’000 — 1,276
		1,276
		2012 HK$’000 370 3,467 1,155 313 56 11,611 474
		17,446

9. OTHER INCOME

10. SEGMENT INFORMATION

The Group’s operating segments are property development and property investment 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 or generating rental income purposes

An operating segment of 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 that the assets, liabilities and financial results contributed by this operating segment as at 30 June 2012 were insignificant to the Group.

– I-24 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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 2013

Turnover External Segment result Other income Unallocated corporate expenses Finance costs Profit before taxation	Property development HK$’000 161,500 71,744	Property investment HK$’000 1,320 7,087	Consolidated HK$’000 162,820 78,831 2,679 (22,030) (28,561) 30,919

The accounting policies of the operating segments are the same as the Group’s accounting policies described in note 4. Segment result represents the result incurred by each segment without allocation of gain (loss) arising on changes in fair value of derivative financial instruments, 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 2012

Turnover External Segment result 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 development HK$’000 — (16,155)	Property investment HK$’000 1,276 (5,025)	Consolidated HK$’000 1,276 (21,180) 5,835 52,787 (21,377) (24,119) (22,008) (30,062)

– I-25 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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 Deposit placed for a life insurance policy Bank balances and cash Unallocated Consolidated assets Segment liabilities Property development Property investment Total segment liabilities Amounts due to directors of subsidiaries Bank overdrafts Secured bank borrowings Taxation payable Convertible redeemable preference shares Unallocated Consolidated liabilities	2013 HK$’000 783,552 248,009 — 1,031,561 14,017 50,565 20,942 107,198 13,966 1,238,249 55,515 1,885 57,400 234,984 19,999 879,550 — 39,931 77,505 1,309,369	2012 HK$’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

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, deposit placed for a life insurance policy, bank balances and cash and unallocated assets used jointly by operating and reportable segments; and
all liabilities are allocated to operating segments other than amounts due to directors of subsidiaries, bank overdraft, secured bank borrowings, taxation payable, convertible redeemable preference shares and certain unallocated corporate liabilities.

– I-26 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Other segment information

For the year ended 30 June 2013

Amounts included in the measure of segment asset or segment result: Capital additions Depreciation Gain arising on change in fair value of investment properties For the year ended 30 June 2012 Amounts included in the measure of segment asset or segment result: Depreciation Loss arising on change in fair value of investment properties	Property development HK$’000 — 3,084 — Property development HK$’000 3,099 —	Property investment HK$’000 — 110 (6,000) Property investment HK$’000 110 6,000	Unallocated HK$’000 520 355 — Unallocated HK$’000 358 —	Consolidated HK$’000 520 3,549 (6,000
				Consolidated HK$’000 3,567 6,000

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 operations and information about its non-current assets by geographical location of the assets are detailed below:

Hong Kong (Place of domicile) Hong Kong (Place of domicile)	2013 Revenue from external customers Non-current assets HK$’000 HK$’000 162,820 322,578 2012 Revenue from external customers Non-current assets HK$’000 HK$’000 1,276 319,607

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

– I-27 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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 B1 Customer C2 1 Revenue from property development segment 2 Revenue form property investment segment FINANCE COSTS Interest on bank borrowings: — wholly repayable within five years — not wholly repayable within five years Interest on bank overdrafts Interest on other payables Finance costs on convertible redeemable preference shares (note 30)	2013 HK$’000 86,500 75,000 — 2013 HK$’000 4,408 11,281 268 7,609 4,995 28,561	2012 HK$’000 — — 1,276
		2012 HK$’000 5,858 10,292 1,476 — 4,382
		22,008

11. FINANCE COSTS

12. TAXATION CHARGE

The charge comprises:

Current tax: Hong Kong Profits Tax for the year Underprovision in prior years: Hong Kong Profits Tax	2013 HK$’000 — (10) (10)	2012 HK$’000 —
		(14,793
		(14,793

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 (of which HK$4,000,000 has been paid as at 30 June 2011).

– I-28 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

During the year ended 30 June 2012, the Group submitted a proposal for settlement of the case for the years of assessment of 1997/1998 to 1999/2000 and 2004/2005 to 2005/2006. 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 in the aggregate amount of approximately HK$58,193,000. During the year ended 30 June 2012, the Group 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 was provided during year ended 30 June 2012 in respect of underprovision in prior years.

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

Profit (loss) before taxation Tax (charge) credit at Hong Kong Profits Tax rate of 16.5% (2012: 16.5%) Tax effect of income not taxable for tax purpose Tax effect of expenses not deductible for tax purpose Tax effect of unrealised intragroup profits on properties held for sale not recognised Underprovision in respect of prior years Tax effect of tax losses not recognized Utilisation of tax losses previously not recognised Tax charge for the year	2013 HK$’000 30,919 (5,102) 1,367 (2,882) 8,893 (10) (2,276) — (10)	2012 HK$’000 (30,062) 4,960 9,490 (7,571) (8,019) (14,793) — 1,140 (14,793)

– I-29 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

13. PROFIT (LOSS) FOR THE YEAR

Profit (loss) for the year has been arrived at after charging: Directors’ emoluments (note 14) Other staff costs, including retirement benefit scheme contributions Total staff costs Auditor’s remuneration Depreciation of property, plant and equipment Legal and professional fee (included in administrative expenses) (Note) and after crediting: Gross rental income from investment properties Less: Direct expenses that generated rental income during the year Less: Direct expenses not generated rental income during the year Gross rental income from properties held for sale Bank interest income Interest income from deposit placed for a life insurance policy Net exchange gain	2013 HK$’000 1,584 4,282 5,866 820 3,549 10,975 1,320 (78) (155) 1,087 6,175 253 789 92	2012 HK$’000 1,328 4,306 5,634 820 3,567 12,968 1,276 (102) (199) 975 11,611 370 313 56

Note: Legal and professional fee incurred for both years mainly represented legal fees payable to lawyers, which represented the Group to defence in court for litigation cases as set out in note 32.

– I-30 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

14. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

Particulars of the emoluments of the directors of the Company and the five highest paid individuals are as follows:

(a) Directors’ emoluments

The emoluments paid or payable to each of the seven (2012: seven) directors of the Company were as follows:

Law Fong HK$’000 128	Chen Te Kuang Mike HK$’000 320	Oung Shih Hua, James HK$’000 260	2013 Zhu Pei Qing Lu Ti Fen HK$’000 HK$’000 (Note a) 65 150	2013 Zhu Pei Qing Lu Ti Fen HK$’000 HK$’000 (Note a) 65 150	Kwok Wai Chi HK$’000 208	Huang Weizong Martin HK$’000 (Note b) —	Total HK$’000 1,131
128 —	325 —	— —	— —	— —	— —	— —	453 —
128	325	—	—	—	—	—	453
256	645	260	65	150	208	—	1,584
Law Fong HK$’000 128	Chen Te Kuang Mike HK$’000 260	Oung Shih Hua, James HK$’000 260	2012 Zhu Pei Qing Lu Ti Fen HK$’000 HK$’000 (Note a) 65 325		Kwok Wai Chi HK$’000 172	Huang Weizong Martin HK$’000 (Note b) —	Total HK$’000 1,210
118 —	— —	— —	— —	— —	— —	— —	118 —
118	—	—	—	—	—	—	118
246	260	260	65	325	172	—	1,328

(a) Ms. Lu Ti Fen resigned as the independent non-executive director and a member of the audit committee with effect from 7 December 2012.
(b) Prof. Huang Weizong, Martin was appointed as the independent non-executive director and a member of the audit committee with effect from 28 June 2012.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Mr. Chen Te Kuang Mike is also the Chief Executive of the Company and his emoluments disclosed above include those for services rendered by him as the Chief Executive.

(b) Employees’ emoluments

During the year, the five highest paid individuals of the Group included four (2012: four) directors, details of whose emoluments are set out in (a) above. The emoluments of the remaining one (2012: one) individuals are as follows:

Salaries and other benefits Retirement benefit scheme contributions	2013 HK$’000 219 11 230	2012 HK$’000 207 10
		217

The emoluments of this employee fall within the following band:

Nil to HK$1,000,000	Number of employees 2013 2012 1 1

During both years, no emoluments were paid by the Group to the five highest paid individuals, including directors, as an inducement to join or upon joining the Group or as compensation for loss in office. In addition, during both years, no director waived any emoluments.

15. EARNINGS (LOSS) PER SHARE

The calculation of the basic and diluted earnings (loss) per share attributable to the owners of the Company is based on the following data:

Earnings (loss) Earnings (loss) for the purposes of basic earnings (loss) per share Effect of dilutive potential shares: Interest on convertible redeemable preference shares (net of income tax) Earnings (loss) for the purposes of diluted earnings (loss) per share Number of shares Weighted average number of shares for the purposes of calculating basic earnings (loss) per share Effect of dilutive potential shares: Convertible redeemable preference shares Weighted average number of shares for the purpose of calculating diluted earnings (loss) per share	For the year ended 30 June 2013 2012 HK$’000 HK$’000 30,909 (44,855 4,995 — 35,904 (44,855 2013 2012 752,014,152 560,040,080 255,253,866 — 1,007,268,018 560,040,080	For the year ended 30 June 2013 2012 HK$’000 HK$’000 30,909 (44,855 4,995 — 35,904 (44,855 2013 2012 752,014,152 560,040,080 255,253,866 — 1,007,268,018 560,040,080
		(44,855
		2012 560,040,080 —
		560,040,080

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The computation of diluted loss per share for the year ended 30 June 2012 had not assumed the conversion of the Company’s outstanding convertible redeemable preference shares which would reduce the loss per share.

16. INVESTMENT PROPERTIES

FAIR VALUE At 1 July 2011 Decrease in fair value recognised in profit or loss At 30 June 2012 Increase in fair value recognised in profit or loss At 30 June 2013	HK$’000 248,000 (6,000) 242,000 6,000 248,000

The fair value of the Group’s investment properties as at 30 June 2013 and 30 June 2012 has been arrived at on the basis of a valuation carried out on that day by Messrs. Savills Valuation and Professional Services Limited, the independent qualified professional property valuers not connected with the Group. Messrs. Savills Valuation and Professional Services Limited are members of the Hong Kong Institute of Surveyors. The valuation was arrived at by reference to market evidence of transaction prices for similar properties.

The investment properties are two developed properties located at Nos.8, 10 and 12 Peak Road which are held by the Company for long-term capital appreciation. These properties are classified as investment properties and are measured using the fair value model.

All the Group’s investment properties are situated in Hong Kong with long lease. They were secured to support banking facilities granted to the Group.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

17. PROPERTY, PLANT AND EQUIPMENT

COST At 1 July 2011 and 30 June 2012 Additions At 30 June 2013 DEPRECIATION AND IMPAIRMENT At 1 July 2011 Provided for the year At 30 June 2012 Provided for the year At 30 June 2013 CARRYING VALUES At 30 June 2013 At 30 June 2012	Leasehold land and buildings HK$’000 113,079 — 113,079 35,384 2,632 38,016 2,632 40,648 72,431 75,063	Leasehold improvements HK$’000 2,022 — 2,022 694 303 997 314 1,311 711 1,025	Office equipment, furniture and fixtures HK$’000 12,923 520 13,443 10,772 632 11,404 603 12,007 1,436 1,519	Total HK$’000 128,024 520
				128,544
				46,850 3,567
				50,417 3,549
				53,966
				74,578
				77,607

Note: Owner-occupied leasehold interest in land situated in Hong Kong is included in property, plant and equipment as the allocation between the land and building elements cannot be made reliably.

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

Leasehold land and buildings Over the estimated useful lives of 50 years or the period of the lease, whichever is the shorter Leasehold improvements Over the estimated useful lives of 10 years Office equipment, furniture 15–25% and fixtures

The leasehold land and buildings of the Group are situated in Hong Kong and are held under mediumterm leases. They were secured to a bank to support credit facilities granted to the Group.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

18. AVAILABLE-FOR-SALE INVESTMENTS

Club debenture, at market value Unlisted equity investment, at cost Less: Impairment loss recognised	2013 HK$’000 14,017 15,577 (15,577) 14,017	2012 HK$’000 13,586 15,577 (15,577) 13,586

At 30 June 2013, the above unlisted investments comprised (i) 40% equity interest in the registered capital of Harbin Zheng Hua Real Estate Developing Company Limited (‘‘Zheng Hua’’), which was a company established in the People’s Republic of China (‘‘PRC’’) and engaged in property development, with zero carrying amount; and (ii) club debenture with market value of HK$14,017,000 (2012: HK$13,586,000).

The investment in Zheng Hua is not classified as an associate as, in the opinion of the directors of the Company, the Group is not able to exercise significant influence over its financial and operating policy decisions.

The unlisted equity investment is measured at cost less impairment at the end of the reporting period because the range of reasonable fair value estimates is so significant that the directors of the Company are of the opinion that the fair value of the investment cannot be measured reliably.

19. DEPOSIT PLACED FOR A LIFE INSURANCE POLICY

In March 2012, the Company’s subsidiary World Modern International Limited (‘‘World Modern’’) entered into a life insurance policy with an insurance company to insure an Executive Director. Under the policy, the beneficiary and policy holder is World Modern and the total insured sum is US$10,000,000 (approximately HK$78,000,000). World Modern is required to pay an upfront deposit of US$2,806,000 (approximately HK$21,887,000) including a premium charge at inception of the policy amounting to US$168,000 (approximately HK$1,310,000). World Modern can terminate the policy at any time and receive cash back based on the cash value of the policy at the date of withdrawal, which is determined by the upfront deposit payment of US$2,806,000 plus accumulated interest earned and minus the accumulated insurance charge and policy expense charge (‘‘Cash Value’’). In addition, if withdrawal is made between the 1st to 18th policy year, there is a specified amount of surrender charge. The insurance company will pay World Modern an interest of 4.65% per annum on the outstanding Cash Value of the policy for the first year. Commencing on the 2nd year, the interest will become 2% per annum plus a premium determined by the insurance company on an annual basis.

The deposit placed for a life insurance policy was pledged to a bank to secure general banking facilities granted to the Group.

The deposit placed for a life insurance policy is denominated in USD, a currency other than the functional currency of the respective group entity.

20. PLEDGED BANK DEPOSITS

Pledged bank deposits represent deposits pledged to banks to secure banking facilities and letter of guarantee granted to the Group. The pledged bank deposits carried interest at an average fixed interest rate of 0.02% (2012: 0.74%) per annum. The secured banking facilities consist of bank loans with scheduled repayment dates that are after one year from the end of the reporting period, the pledged bank deposits are classified as non-current assets.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

21. PROPERTIES HELD FOR SALE

At 30 June 2013 and 2012, the properties held for sale are stated at cost.

Properties held for sale represent developed properties located at Nos. 8, 10 and 12 Peak Road. The management of the Company actively markets these properties and seeks for potential buyers through property agents on a continuous basis.

Certain properties held for sale are leased to independent third parties to earn rental income of HK$6,175,000 (2012: HK$11,611,000). The directors of the Company retained the intention to sell these properties, including the benefit contributed by the tenancy agreement to potential investor. Accordingly, these properties are classified as properties held for sale as at 30 June 2013 and 30 June 2012.

The properties held for sale, except for car parks and motor-cycle parking spaces, are pledged or secured to support the credit facility granted to the Group. For details of pledged or secured assets, please refer to note 33.

22. TRADE AND OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

Receivables of service rendered in indent trading Other receivables, deposits and prepayments	2013 HK$’000 — 12,541 12,541	2012 HK$’000 6,584 25,605
		32,189

The following is an aged analysis of receivables of service rendered in indent trading, based on the invoice date which approximate revenue recognition date, at the end of the reporting periods:

Over 1 year	2013 HK$’000 —	2012 HK$’000 6,584

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.

As at 30 June 2012, the Group had a trade receivable arising from service rendered in indent trading with a carrying amount of HK$6,584,000 were past due at the reporting date for which the Group had not provided for impairment loss. The Group did 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.

Past due 91 days to 1 year	2013 HK$’000 —	2012 HK$’000 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 subsequent settlement of the customers of the Group, all of the receivables of service rendered in indent trading as at 30 June 2012 which were past due but not impaired were generally collectable.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Included in trade and other 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.

USD	2013 HK$’000 875	2012 HK$’000 7,462

23. BANK BALANCES AND CASH

The amounts comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less, at prevailing market interest rates ranging from 0.01% to 0.06% (2012: 0.01% to 0.75%) per annum.

Included in bank balances and cash are the following amounts denominated in a currency other than the functional currency of the group entities to which it relates.

USD 24. OTHER PAYABLES AND ACCRUED CHARGES Rental deposits received Sales deposits received Accruals Accrued construction costs Other payables	2013 HK$’000 3,719 2013 HK$’000 1,233 — 32,212 13,228 80,232 126,905	2012 HK$’000 441
		2012 HK$’000 2,301 7,500 32,759 24,348 75,637
		142,545

25. AMOUNTS DUE TO DIRECTORS OF SUBSIDIARIES

The amounts as at 30 June 2013 and 30 June 2012 represent amount due to Oung Da Ming and Uon Margaret, who are the directors of the Group’s major subsidiaries. The amounts are unsecured, non-interest bearing and repayable on demand.

26. BANK OVERDRAFTS

Bank overdrafts carry interest at 0.25% over Hong Kong dollars Prime Rate, i.e. 5.0% (2012: 5.5%) per annum and secured by certain apartments of the Group’s properties held for sale. The effective interest rate for bank overdrafts ranged from 5.25% to 5.75% (2012: 5.25% to 5.75%). The details of the pledged assets are set out in note 33.

– I-37 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

27. SECURED BANK BORROWINGS

Secured: Revolving loans Mortgage loans Bank loan Comprising amounts following due: On demand and within one year In more than one year but not more than two years In more than two years but not more than three years In more than three years but not more than four years In more than four years but not more than five years Over five years Less: Amounts due within one year shown under current liabilities Carrying amount of bank loans that are not repayable within one year from the end of reporting period but contain a repayment on demand clause (shown under current liabilities) Amounts shown under non-current liabilities	2013 HK$’000 105,000 763,060 11,490 879,550 206,167 47,259 47,998 48,002 46,481 483,643 879,550 (206,167) (673,383) —	2012 HK$’000 115,000 845,944 14,553 975,497 239,595 96,011 41,986 42,628 42,529 512,748 975,497 (239,595) (735,902) —

At 30 June 2013, the bank borrowings comprised:

(i) a mortgage loan with an outstanding amount of approximately HK$41,740,000 (2012: HK$43,864,000) that shall be repayable by 206 monthly installments and carries interest at a rate of 1.25% per annum over HIBOR;
(ii) a mortgage loan with an outstanding amount of approximately HK$185,758,000 (2012: HK$230,922,000) that shall be repayable by 164 monthly installments and carries interest at a rate of 1.2% per annum over HIBOR;
(iii) a revolving loan with an outstanding amount of approximately HK$35,000,000 (2012: HK$60,000,000) that carries interest at a rate of 2% per annum over HIBOR;
(iv) a mortgage loan with an outstanding amount of approximately HK$69,552,000 (2012: HK$74,841,000) that shall be repayable by 169 monthly installments and carries interest at a rate of 0.88% per annum over HIBOR;
(v) a mortgage loan with an outstanding amount of approximately HK$50,166,000 (2012: HK$53,491,000) that shall be repayable by 162 monthly installments and carries interest at a rate of 1.25% per annum over HIBOR;
(vi) a mortgage loan with an outstanding amount of approximately HK$25,020,000 (2012: HK$26,268,000) that shall be repayable by 219 monthly installments and carries interest at a rate of 0.7% per annum below the HIBOR;
(vii) a mortgage loan with an outstanding amount of approximately HK$24,205,000 (2012: HK$25,413,000) that shall be repayable by 219 monthly installments and carries interest at a rate of 0.7% per annum below the HIBOR;

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(viii) a mortgage loan with an outstanding amount of approximately HK$69,924,000 (2012: HK$79,924,000) that shall be repayable by 111 monthly installments and carries interest at a rate of 1.2% per annum over HIBOR;
(ix) a mortgage loan with an outstanding amount of approximately of HK$54,824,000 (2012: HK$57,546,000) that shall be repayable by 219 monthly installments and carries interest at a rate of 0.7% per annum below the HIBOR;
(x) a mortgage loan with an outstanding amount of approximately of HK$54,641,000 (2012: HK$58,608,000) that shall be repayable by 12 monthly installments and carries interest at a rate of 1.2% per annum below the HIBOR;
(xi) a revolving loan with an outstanding amount of HK$30,000,000 (2012: HK$15,000,000) that carries interest at a rate 2.25% (2012: 2%) per annum over HIBOR;
(xii) a mortgage loan with an outstanding amount of approximately HK$95,162,000 (2012: HK$98,818,000) that shall be repayable by 184 monthly installments and carries interest at a rate of 3% per annum over HIBOR;
(xiii) a revolving loan with an outstanding amount of approximately HK$30,000,000 (2012: HK$30,000,000) that carries interest at a rate of 3.5% per annum over HIBOR;
(xiv) a mortgage loan with an outstanding amount of approximately HK$92,068,000 (2012: HK$96,249,000) that shall be repayable by 217 monthly installments and carries interest at a rate of 1.75% per annum over HIBOR;
(xv) a revolving loan with an outstanding amount of approximately HK$10,000,000 (2012: HK$10,000,000) that carries interest at a rate of 2.25% per annum over HIBOR; and
(xvi) a bank loan with an outstanding amount of approximately HK$11,490,000 (2012: HK$14,553,000) that shall be repayable by 45 monthly installments and carries interest at a rate of 2.5% per annum over HIBOR, LIBOR or the Bank’s cost of funds, whichever is higher.

The range of effective interest rates of the Group’s bank borrowings were 0.91% to 3.61% (2012: 1% to 3.6%) per annum.

Pursuant to the loan agreement entered into between the Group and a bank, relating to a 201 months facility up to HK$260 million, a default event would arise if Five Star ceased to be the beneficial owner of at least 50.5% (in aggregate) of the issued share capital and the issued convertible redeemable preference shares of the Company.

All bank borrowings are secured by certain apartments of the Group’s properties held for sale and all of the Group’s investment properties to the banks. The details of pledged assets are disclosed in note 33.

Included in the secured bank borrowings are the following amounts denominated in a currency other than the functional currency of the group entities to which it relates.

USD	2013 HK$’000 11,490	2012 HK$’000 14,553

– I-39 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

28. DERIVATIVE FINANCIAL INSTRUMENTS

FAIR VALUE At 1 July 2011 Decrease in fair value recognised in profit or loss Adjustment arising on settlement agreement At 30 June 2012 and 30 June 2013	HK$’000 118,800 (52,787) (66,013) —

On 5 April 2006, Banhart Company Limited (‘‘Banhart’’), a subsidiary of the Company, entered into a loan agreement with Fine Chiffon Corporation Limited (‘‘Fine Chiffon’’) to obtain a non-interest bearing loan facility of HK$42,000,000. The loan is unsecured, non-interest bearing and non-revolving in nature. The loan shall be repayable on or before 6 September 2008.

In addition, Banhart also granted two options to Fine Chiffon for purchasing (i) part of the Banhart’s leasehold property at a consideration of HK$32,000,000 and (ii) 20% of the share capital of Banhart, at a consideration of HK$10,000,000, in substitution for the repayment of the outstanding non-interest bearing loan at the end of the loan period. Fine Chiffon is entitled to exercise the options at any time prior to the maturity date and the options are non-transferable.

On 6 September 2008, Fine Chiffon exercised the options. Since Banhart was still in negotiation with Fine Chiffon in relation to the timing for transferring the benefits of those assets to Fine Chiffon, a derivative was recognised at the amount expected to be settled at the transfer date, which was estimated with reference to the market price of the underlying leasehold property. Upon the exercise of the two options, the loan from Fine Chiffon of HK$42,000,000 and the fair value of the two options of HK$43,700,000 at the exercise date were derecognised and became the initial cost of the derivative financial instruments.

On 21 December 2011, Banhart entered into a settlement agreement to pay approximately HK$66,013,000 in cash to Fine Chiffon as the final settlement of the derivative financial instrument. Accordingly, the derivative financial instrument was derecognised and the fair value gain of HK$52,787,000 at the date of settlement was recognised in profit or loss during the year ended 30 June 2012. Upon the settlement, both parties released each other from all rights and claims in relation to the underlying property and the 20% of the share capital of Banhart. As at 30 June 2013, the amount of approximately HK$66,013,000 and interest of approximately HK$7,732,000 have not yet been settled and included in other payables and bearing interest at 8% per annum (2012: 8%).

The underlying property is currently occupied by the Company for own use and recognised as leasehold property and stated at cost less accumulated depreciation.

– I-40 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

29. SHARE CAPITAL

Nominal value per share HK$ Authorised: At 1 July 2011, 30 June 2012 and 30 June 2013 0.01 Issued and fully paid: At 1 July 2011 Issue of shares on conversion of convertible redeemable preference shares Open offer of shares At 30 June 2012 0.01 Issue of shares on conversion of convertible redeemable preference shares At 30 June 2013 0.01	Numbers of shares 50,000,000,000 537,141,492 10,000 214,860,596 752,012,088 4,893 752,016,981	Amount HK$’000 500,000
		5,372 — 2,148
		7,520 —
		7,520

All shares issued during both years rank pari passu in all respects with other shares in issue.

On 22 May 2012, the Company allotted 214,860,596 open offer shares of HK$0.01 each at the subscription price of HK$0.155 per open offer share on the basis of two open offer shares for every five existing ordinary shares held. The Company raised HK$30,300,000 (net of expenses) which was used to repay indebtedness owed by the Group to Uon Margaret, a director of the Company’s major subsidiaries.

30. CONVERTIBLE REDEEMABLE PREFERENCE SHARES

Authorised: At 1 July 2011, 30 June 2012 and 30 June 2013 Issued and fully paid: At 1 July 2011 Conversion of issued convertible redeemable preference shares into ordinary shares At 30 June 2012 Conversion of issued convertible redeemable preference share into ordinary shares At 30 June 2013	Number of preference shares 1,270,000,000 255,265,930 (10,000) 255,255,930 (4,893) 255,251,037	Amount of par value HK$’000 12,700
		2,552 —
		2,552 —
		2,552

The convertible redeemable preference shares with nominal value of HK$0.01 were issued at HK$0.25 per share on 24 November 2006.

– I-41 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Movement of the convertible redeemable preference shares are as follows:

At 1 July 2011 Conversion of convertible redeemable preference shares Interest charged for the year At 30 June 2012 Conversion of convertible redeemable preference shares Interest charged for the year At 30 June 2013	Liability component HK$’000 30,560 (4) 4,382 34,938 (2) 4,995 39,931	Equity component HK$’000 24,256 (6) — 24,250 (3) — 24,247	Total HK$’000 54,816 (10) 4,382 59,188 (5) 4,995 64,178

Note: As announced by the Company on 3 July 2007, the alteration of the terms of the existing convertible redeemable preference shares has been duly approved by the holders of convertible redeemable preference shares at the special general meeting held on 3 July 2007.

The principal terms of the convertible redeemable preference shares at 30 June 2012 and 2013, as altered, include the following:

(i) Cumulative dividend

The right to receive a dividend per convertible redeemable preference share is based on the dividend or any other distribution (if any) per ordinary share declared and paid by Sensors Integration Technology Limited, a wholly-owned subsidiary of the Company. Sensors Integration Technology Limited is an investment holding company with its subsidiaries principally engaged in manufacture of optical sensor systems and optical communication products.

Sensors Integration Technology Limited will declare a dividend to its shareholders only if Sensors Integration Technology Limited has received written confirmation from the Company that the Company is permitted to declare and pay a dividend in the same amount to the holders of the convertible redeemable preference shares and an undertaking to declare and pay such a dividend.

(ii) Further issues

New issues of convertible redeemable preference shares shall be permitted only if the proceeds of the issues are used solely to subscribe for the same number of ordinary shares in Sensors Integration Technology Limited and at the same price.

(iii) Early redemption at the option of the Company

The Company has the option, but not the obligation, to redeem all but not a portion of the convertible redeemable preference shares at face value if there are less than 80 million convertible redeemable preference shares in issue.

(iv) Conversion rights

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

adjustment events will arise as a result of certain changes in share capital of the Company including consolidation or sub-division of shares, capitalisation of profits or reserves, capital distribution in cash or specie or subsequent issue of securities in the Company.

Holders of the convertible redeemable preference shares are not required to pay any extra amount should they convert their convertible redeemable preference shares into ordinary shares in the Company.

(v) Redemption

A holder of the convertible redeemable preference shares may by notice in writing to the Company requires the Company to redeem all or any of the outstanding convertible redeemable preference shares, whereupon subject to the requirements of the Bermuda Companies Act. The Company shall pay to such holder a redemption amount equal to the aggregate initial subscription price of such number of convertible redeemable preference shares so redeemed together with the cumulative dividend that has accrued and payable upon the occurrence of any of the following (whichever is the earliest):

(a) 31 December 2016;
(b) any consolidation, amalgamation or merger of the Company with any other corporation;
(c) listing of the ordinary shares of the Company are revoked or withdrawn (except in connection with the simultaneous listing of the ordinary shares on such other internationally recognised stock exchange);
(d) a directors’ resolution is passed for the winding-up, insolvency, administration, reorganisation, reconstruction, dissolution or bankruptcy of the Company; or
(e) an effective resolution is passed for the winding-up, insolvency, administration, reorganisation, reconstruction, dissolution or bankruptcy of the Company or for the appointment of a liquidator, receiver, administrator, trustee or similar officer of the Company.

(vi) Priority

The convertible redeemable preference shares rank in priority to the ordinary shares in the Company as to dividends and a return of the capital paid up on the convertible redeemable preference shares. Once the capital paid up has been returned and all the accumulative dividends has been paid, the convertible redeemable preference shares are not entitled to any further payment from or distributions by the Company.

(vii) Voting

The convertible redeemable preference shares do not entitle the holders to attend or vote at meeting of the Company except on resolutions which directly affect their rights or on a winding-up of the Company or a return or repayment of capital.

(viii) Further issues

New issues of convertible redeemable preference shares has been permitted only if the proceeds of the issues are used solely to subscribe for the same number of ordinary shares in Sensors Integration Technology Limited and at the same price.

– I-43 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The net proceeds received from the issue of the convertible redeemable preference shares contain the following components that are required to be separately accounted for in accordance with HKAS 32 ‘‘Financial Instruments: Presentation’’:

(i) Debt component represents the present value of the contractually determined stream of future cash flows discounted at the rate of interest at that time by the market to instruments of comparable credit status and providing substantially the same cash flows, on the same terms, but without the conversion option.

The interest charged for the period is calculated by applying effective interest rate of 13.83% per annum of the debt component for the period since the alternation of the terms of the convertible redeemable preference shares on 3 July 2007.

(ii) Equity component represents the difference between the proceeds of issue of the convertible redeemable preference shares and the fair value assigned to the liability component.

31. DEFERRED TAXATION

The following are the deductible temporary differences not recognised by the Group in the consolidated financial statements:

Tax losses Unrealised intragroup profits on properties held for sale Accelerated tax depreciation	2013 HK$’000 434,688 423,938 583 859,209	2012 HK$’000 420,894 477,835 723
		899,452

At 30 June 2013, the Group has unused tax losses of approximately HK$434,688,000 (2012: HK$420,894,000) available for offset against future profits. No deferred tax asset has been recognised in respect of the tax losses of approximately HK$434,688,000 (2012: HK$420,894,000) due to the unpredictability of future profits streams. The unrecognised tax losses may be carried forward indefinitely.

The other deductible temporary difference of approximately HK$424,521,000 (2012: HK$478,558,000) as at 30 June 2013 had not been recognised as it was not probable that taxable profit would be available against which the other deductible temporary difference can be utilised.

32. CONTINGENT LIABILITIES

The Group had the following outstanding litigations as at 30 June 2013. Except as disclosed in (b) and (c) below, the directors of the Company are of the opinion that the estimated contingent liabilities arising from the litigations cannot be reasonably ascertained at the current stage.

(a) On 17 May 2006, Chinese Regency Limited (‘‘Chinese Regency’’) (of which the beneficial owners are independent third parties) issued a writ of summons against Holyrood Limited (‘‘Holyrood’’), a subsidiary of the Company, a total sum of amount not less than HK$5,760,000, claiming, among others, damages for breach of an agreement for sale and purchase of Flat B on the 5th Floor of Block A1 and the car parking space No. 5 located in Nos. 8, 10 and 12 Peak Road. Pursuant to the Court order, Chinese Regency filed an amended statement of claim on 24 May 2013 and Holyrood filed an amended statement of defence on 5 July 2013. The litigation is still on going and there is no further update on the case up to the date of these financial statements.
(b) On 1 June 2007, Gateway International Development Limited (‘‘Gateway’’) (of which the beneficial owners are independent third parties) issued a writ of summons against Holyrood a total sum of amount not less than HK$5,048,000, claiming, among others, damages for breach of

– I-44 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

an agreement for sale and purchase of Flat A on the 6th Floor of Block A2 and the car parking space No. 51 located in Nos. 8, 10 and 12 Peak Road, breach of the Deed of Mutual Covenant and nuisance on the development. The judgment was handed down on 1 March, 2012 against Holyrood. Holyrood was ordered to pay Gateway the sum of HK$4,967,000 plus interest. The judge has also made a costs order nisi that Holyrood shall pay the legal costs of Gateway on an indemnity basis, which is approximately HK$4,000,000. Holyrood has filed a notice of appeal on 29 March 2012 against the judgment. The appeal was heard on 25 and 26 June 2013 and the judgment has been reserved up to the date of these financial statements.

On 28 June 2012, Holyrood paid a deposit of HK$6,692,000 to the Court of Appeal, representing the aggregate of (i) the damages of $4,967,000 and (ii) interest of HK$1,725,000. The deposit was written off against the damages and interest expenses and charged to profit or loss during the year ended 30 June 2012.

The legal cost of HK$4,000,000 is charged to profit or loss during the year ended 30 June 2012.

(c) On 1 June 2007, Sun Crown Trading Limited (‘‘Sun Crown’’) (of which the beneficial owners are independent third parties) issued a writ of summons against Holyrood a total sum of amount not less than HK$5,154,000, claiming, among others, damages for breach of an agreement for sale and purchase of Flat B on the 6th Floor of Block A2 and the car parking spaces Nos. 47 and 48 located in Nos. 8, 10 and 12 Peak Road, breach of the Deed of Mutual Covenant and nuisance on the development. The judgment was handed down on 1 March, 2012 against Holyrood. Holyrood was ordered to pay Sun Crown the sum of HK$4,953,000 plus interest. The judge has also made a costs order nisi that Holyrood shall pay the legal costs of Sun Crown on an indemnity basis, which is approximately HK$4,000,000. Holyrood has filed a notice of appeal dated 29 March, 2012 against the judgment. The appeal was heard on 25 and 26 June 2013 and the judgment has been reserved up to the date of these financial statements.

On 28 June 2012, Holyrood paid a deposit of HK$6,685,000 to the Court of Appeal, representing the aggregate of (i) the damages of HK$4,953,000 and (ii) interest of HK$1,732,000. The deposit was written off against the damages and interest expenses and charged to profit or loss during the year ended 30 June 2012.

The legal cost of HK$4,000,000 is charged to profit or loss during the year ended 30 June 2012.

(d) On 18 July 2011, Century Pacific Holdings Limited (‘‘Century Pacific’’) (of which the beneficial owners are independent third parties) issued a writ of summons against Holyrood a total sum of amount not less than HK$2,360,000, claiming, among others, damages for breach of an agreement for sale and purchase of Flat B on the 3rd Floor of Block A2 and the car parking space No. 38 located in Nos. 8, 10 and 12 Peak Road, breach of the Deed of Mutual Covenant and nuisance on the development. On 24 December 2012, Holyrood filed the statement of defence and Century Pacific filed their reply on the statement of defence. The litigation is still on going and there is no further update on the case up to the date of these financial statements.

Based on the legal advice obtained by the Group, except for the damage, interest and legal cost stated in (b) and (c) above, the Board is of the opinion that the remaining cases are in early stage and the Group is unable to evaluate the likely outcome of the actions. Accordingly, no provision is considered necessary.

– I-45 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

33. PLEDGED OR SECURED ASSETS

At the end of the reporting period, the following assets of the Group were pledged or secured to support credit facilities (including letter of guarantee) granted to the Group:

Properties held for sale Investment properties Leasehold properties Deposit placed for a life insurance policy Bank deposits	2013 HK$’000 694,603 248,000 72,431 20,942 50,565 1,086,541	2012 HK$’000 759,107 242,000 75,063 21,028 50,366
		1,147,564

34. RETIREMENT BENEFIT SCHEME

With effect from 1 December 2000, the Group joined the mandatory provident fund scheme (the ‘‘MPF Scheme’’) for all the eligible employees of the Group in Hong Kong.

Under the MPF Scheme, the employees are required to contribute 5% of their monthly salaries up to a maximum of HK$1,000, which was revised to HK$1,250 with effect from 1 June 2012, and they can choose to make additional contributions. The employer’s monthly contributions are calculated at 5% of the employee’s monthly salaries up to a maximum of HK$1,000, which was revised to HK$1,250 with effect from 1 June 2012, (the ‘‘mandatory contributions’’). The employees are entitled to 100% of the employer’s mandatory contribution upon their retirement at the age of 65, death or total incapacity.

The aggregate employer’s contributions during the year ended 30 June 2013 recognised in the consolidated statement of profit or loss and other comprehensive income of the Group amounted to HK$89,000 (2012: HK$77,000).

35. RELATED PARTY TRANSACTIONS/CONNECTED TRANSACTIONS

The Group had the following transactions with parties/persons deemed to be ‘‘connected persons’’ by the Stock Exchange which are also the related parties to the Group under the definition of HKAS 24 ‘‘Related Party Disclosures’’.

(a) Chin Te Kuang Mike, a director of the Company, has provided personal guarantees in respect of the following:

Credit facilities granted to the Group	2013 HK$’000 180,000	2012 HK$’000 —

(b) Lilian Oung, a director of certain subsidiaries and also one of the shareholders of Five Star, has provided personal guarantees in respect of the following:

Credit facilities granted to the Group	2013 HK$’000 119,225	2012 HK$’000 326,681

– I-46 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(c) Uon Margaret, a director of certain subsidiaries and also one of the shareholders of Gold Seal Holdings Limited, a shareholder of the Company, has provided personal guarantees in respect of the following:

Credit facilities granted to the Group	2013 HK$’000 320,000	2012 HK$’000 320,000

(d) Details of the amounts due to directors of the subsidiaries are set out in note 25.

(e) Compensation of key management personnel

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

Directors’ emoluments Short-term employee benefits Post-employment benefits	2013 HK$’000 1,584 219 11 1,814	2012 HK$’000 1,328 207 10
		1,545

The remuneration of directors and key executives are determined by the board of directors after recommendation from the remuneration committee, having regard to the responsibilities of the directors and key executives, the operating results, individual performance and comparable market statistics.

36. OPERATING LEASE ARRANGEMENTS

At the end of the reporting period, for the Group’s investment properties and certain of the Group’s properties held for sale, the Group had contracted with tenants for the following future minimum lease payments.

The Group as lessor

Within one year In the second year	2013 HK$’000 5,914 1,360 7,274	2012 HK$’000 7,897 2,171
		10,068

Under the leases entered by the Group, the lease payments are fixed and no arrangements have been entered into for contingent rental payments. The properties held have tenants for a term of two years.

The Group as lessee

Within one year In the second year to fifth years, inclusive	2013 HK$’000 256 60 316	2012 HK$’000 324 136
		460

– I-47 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The minimum lease payments under operating lease recognised as an expense for the year is HK$428,000 (2012: HK$552,000). Operating lease payments represent rentals payable by the Group for certain of its office properties, leases are negotiated for a term of 25 months.

37. PARTICULARS OF PRINCIPAL SUBSIDIARIES

Particulars of the principal subsidiaries of the Company are as follows:

	Place of		Proportion of nominal value	Proportion of nominal value
	incorporation/		of issued share capital
	registration	Nominal value of	held by the	Company
Name of subsidiary	and operation	issued share capital	at 30 June 2012 and 2013		Principal activities
			Directly	Indirectly
Banhart	Hong Kong	Ordinary HK$9,998	—	100%	Property holding
		Non-voting deferred*
		HK$2
Alpard Limited	Hong Kong	Ordinary HK$10	—	100%	Property investment
					and holding
Bowen Hill Limited	British Virgin Islands#	US$1	—	100%	Investment holding
Gainbest Venture Limited	British Virgin Islands#	US$1	100%	—	Investment holding
Holyrood	Hong Kong	Ordinary HK$999,998	99.9%	0.1%	Property holding
		Non-voting deferred*
		HK$2
Homjade Trading Limited	British Virgin Islands/	US$1	100%	—	General trading
	Hong Kong
Paladin Leisure Limited	British Virgin Islands#	US$1	100%	—	Investment holding
Perfect Place Limited	British Virgin Islands#	US$1	100%	—	Investment holding
Petersham Limited	Hong Kong	Ordinary HK$2	—	100%	Property management
Sensors Integration	Hong Kong#	Ordinary HK$0.01	—	100%	Investment holding
Technology Limited
Six Gain Investments Limited	Hong Kong#	Ordinary HK$2	100%	—	Investment holding
Venus Forture Limited	Hong Kong	Ordinary HK$1	—	100%	Property holding
Wayguard Limited	Hong Kong	Ordinary HK$10	—	100%	Property holding
World Modern	Hong Kong	Ordinary HK$1	—	100%	Property holding

The non-voting deferred shares practically carry no rights to dividends or to receive notice of or to attend or to vote at any general meetings of the company or to participate in any distribution on winding up.
These are investment holding companies which have no specific principal place of operations.

The above lists the subsidiaries of the Company which, in the opinion of the directors of the Company, principally affected the results of the year or formed a substantial portion of the assets or liabilities of the Group. To give details of all the other subsidiaries would, in the opinion of the directors of the Company, result in particulars of excessive length.

None of the subsidiaries had issued any debt securities at 30 June 2013 or at any time during the year.

– I-48 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

38. FINANCIAL INFORMATION OF THE COMPANY

Financial information of the Company at the end of the reporting period is set out below:

Total assets Investment in subsidiaries Other receivables Bank balances Total liabilities Other payable and accrued charges Amounts due to directors of subsidiaries Amounts due to subsidiaries Convertible redeemable preference shares Net liabilities Capital and reserve Share capital Reserves (Note) Net deficiency in equity	2013 HK$’000 33,360 23 8,336 41,719 1,232 32,440 542,382 39,931 (574,266) 7,520 (581,786) (574,266)	2012 HK$’000 33,360 23 9,188
		42,571 1,177 53,667 516,921 34,938
		(564,132
		7,520 (571,652
		(564,132

Note: Movements of the Company’s reserves during the current and prior years are as follows:

At 1 July 2011 Total comprehensive income for the year Issue of shares on conversion of convertible redeemable preference shares Open offer of shares (note 29) Transaction costs attributable to open offer of shares At 30 June 2012 Total comprehensive expenses for the year Issue of shares on conversion of convertible redeemable preference shares At 30 June 2013	Share premium HK$’000 2,136 — 10 31,155 (3,003) 30,298 — 5 30,303	Capital reserve HK$’000 24,256 — (6) — — 24,250 — (3) 24,247	Other reserve HK$’000 21,766 — — — — 21,766 — — 21,766	Accumulated losses HK$’000 (710,689) 62,723 — — — (647,966) (10,136) — (658,102)	Total HK$’000 (662,531 62,723
					4 31,155 (3,003
					(571,652 (10,136
					2
					(581,786

– I-49 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. UNAUDITED INTERIM FINANCIAL INFORMATION OF THE GROUP

Set out below is the full text of the unaudited condensed consolidated financial statements of the Company for the six months ended 31 December 2013 as extracted from the interim report of the Company for the six months ended 31 December 2013:

Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the six months ended 31 December 2013

NOTES
Turnover
Cost of sales
Other income
Administrative expenses
(Loss) gain arising on change in fair value
of investment properties
10
Finance costs
5
Provision for legal costs for litigation cases 18(b)&(c)
(Loss) profit before taxation
Taxation charge
6
(Loss) profit for the period
7
Other comprehensive (expenses) income
Items that may be subsequently
reclassified to profit or loss:
Exchange difference arising on
translation of foreign operations
Fair value (loss) gain on
available-for-sale investments
Other comprehensive (expenses) income
for the period
Total comprehensive (expenses) income
for the period
(Loss) earnings per share
8
Basic

Six months ended
31 December
2013
2012
HK$’000
HK$’000
(Unaudited)
(Unaudited)
—
162,196
—
(67,782)
—
94,414
4,767
4,950
(21,617)
(20,169)
(7,570)
7,690
(9,659)
(15,668)
(6,000)
—
(40,079)
71,217
—
—
(40,079)
71,217
(14)
(65)
(17)
1,114
(31)
1,049
(40,110)
72,266
(5.33) HK cents
9.47 HK cents

– I-50 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Condensed Consolidated Statement of Financial Position

At 31 December 2013

NOTES Non-current assets Investment properties 10 Property, plant and equipment 11 Available-for-sale investments Deposit placed for a life insurance policy 12 Pledged bank deposits Current assets Properties held for sale 13 Other receivables, deposits and prepayments Bank balances and cash Current liabilities Other payables and accrued charges Amounts due to directors of subsidiaries 14 Provision for litigations Bank overdrafts Secured bank borrowings 15 Net current liabilities	31.12.2013 HK$’000 (Unaudited) 240,430 72,994 14,000 20,718 50,570 398,712 710,408 21,014 17,532 748,954 145,588 202,543 14,000 — 854,052 1,216,183 (467,229) (68,517)	30.6.2013 HK$’000 (Audited) 248,000 74,578 14,017 20,942 50,565 408,102 710,408 12,541 107,198 830,147 126,905 234,984 8,000 19,999 879,550 1,269,438 (439,291) (31,189)

– I-51 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

NOTES Capital and reserves Share capital 16 Reserves Non-current liabilities Convertible redeemable preference shares 17	31.12.2013 HK$’000 (Unaudited) 7,520 (118,750) (111,230) 42,713 (68,517)	30.6.2013 HK$’000 (Audited) 7,520 (78,640) (71,120) 39,931 (31,189)

– I-52 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Condensed Consolidated Statement of Changes in Equity For the six months ended 31 December 2013

Share capital HK$’000 7,520	Share premium HK$’000 30,298	Attributable to own Capital reserve Other reserve HK$’000 HK$’000 (Note a) (Note b) 24,250 21,766 — — — — — — (3) — 24,247 21,766 — — — — — — 24,247 21,766 24,250 21,766 — — — — — — 24,250 21,766	Attributable to own Capital reserve Other reserve HK$’000 HK$’000 (Note a) (Note b) 24,250 21,766 — — — — — — (3) — 24,247 21,766 — — — — — — 24,247 21,766 24,250 21,766 — — — — — — 24,250 21,766	ers of the Company Translation reserve Investment revaluation reserve HK$’000 HK$’000 (5,006) 6,086 — — (76) 431 (76) 431 — — (5,082) 6,517 — — (14) (17) (14) (17) (5,096) 6,500 (5,006) 6,086 — — (65) 1,114 (65) 1,114 (5,071) 7,200	ers of the Company Translation reserve Investment revaluation reserve HK$’000 HK$’000 (5,006) 6,086 — — (76) 431 (76) 431 — — (5,082) 6,517 — — (14) (17) (14) (17) (5,096) 6,500 (5,006) 6,086 — — (65) 1,114 (65) 1,114 (5,071) 7,200	Accumulated losses HK$’000 (187,300)	Total HK$’000 (102,386
— —	— —	— —	— —	— (76)	— 431	30,909 —	30,909 355
—	—	—	—	(76)	431	30,909	31,264
—	5	(3)	—	—	—	—	2
7,520	30,303	24,247	21,766	(5,082)	6,517	(156,391)	(71,120
— —	— —	— —	— —	— (14)	— (17)	(40,079) —	(40,079 (31
—	—	—	—	(14)	(17)	(40,079)	(40,110
7,520	30,303	24,247	21,766	(5,096)	6,500	(196,470)	(111,230
7,520	30,298	24,250	21,766	(5,006)	6,086	(187,300)	(102,386
— —	— —	— —	— —	— (65)	— 1,114	71,217 —	71,217 1,049
—	—	—	—	(65)	1,114	71,217	72,266
7,520	30,298	24,250	21,766	(5,071)	7,200	(116,083)	(30,120

Notes:

(a) The capital reserve represents the equity component of convertible redeemable preference shares.

(b) The other reserve represents the amount transferred from liability component of convertible redeemable preference shares upon the alteration of the terms of the existing convertible redeemable preferences shares during the year ended 30 June 2008.

– I-53 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Condensed Consolidated Statement of Cash Flows

For the six months ended 31 December 2013

Net cash (used in) from operating activities
Investing activities
Increase in pledged bank deposits
Other investing activities
Net cash used in investing activities
Financing activities
Repayment of bank borrowings
Repayment to amounts due to directors of
subsidiaries
Interest paid
Net cash used in financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Effect of foreign exchange rate changes
Cash and cash equivalents at end of the period,
represented by bank balances and cash

Six months ended
31 December
2013
2012
HK$’000
HK$’000
(Unaudited)
(Unaudited)
(4,836)
130,420
(5)
(194)
—
(287)
(5)
(481)
(25,498)
(116,266)
(32,441)
(3,096)
(6,876)
(8,436)
(64,815)
(127,798)
(69,656)
2,141
87,199
106,111
(11)
(65)
17,532
108,187

– I-54 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 31 December 2013

1. BASIS OF PREPARATION

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

2. BASIS OF PRESENTATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In preparing the condensed 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$111,230,000 and HK$467,229,000 respectively as at 31 December 2013.

Taking into account the available unutilised bank credit facility of HK$285,907,000 (30 June 2013: HK$295,364,000) as at 31 December 2013 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.

3. PRINCIPAL ACCOUNTING POLICIES

The condensed consolidated financial statements have been prepared on the historical cost basis except for certain properties and financial instruments, which are measured at fair values.

The accounting policies used in the condensed consolidated financial statements for the six months ended 31 December 2013 are same as those followed in the preparation of the Group’s annual financial statements for the year ended 30 June 2013.

In the current interim period, the Group has applied, for the first time, the following new or revised Hong Kong Financial Reporting Standards (‘‘new and revised HKFRSs’’) issued by the HKICPA that are relevant for the preparation of the Group’s condensed consolidated financial statements:

HKFRS 10	Consolidated financial statements
HKFRS 11	Joint arrangements
HKFRS 12	Disclosure of interests in other entities
Amendments to HKFRS 10,	Consolidated financial statements, joint arrangements and disclosure
HKFRS 11 and HKFRS 12	of interest in other entities: transition guidance
HKFRS 13	Fair value measurement
HKAS 19 (as revised in 2011)	Employee benefits
HKAS 28 (as revised in 2011)	Investments in associates and joint ventures
Amendments to HKFRS 7	Disclosures — offsetting financial assets and financial liabilities
Amendments to HKAS 1	Presentation of items of other comprehensive income
Amendments to HKFRSs	Annual improvements to HKFRSs 2009–2011 cycle
HK(IFRIC)-Int 20	Stripping costs in the production phase of a surface mine

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

– I-55 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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

Amendments to HKFRS 9 and Mandatory effective date of HKFRS 9 and transition disclosures[2] HKFRS 7 Amendments to HKFRS 10, Investment entities[1] HKFRS 12 and HKAS 27 HKFRS 9 Financial instruments[2] Amendments to HKAS 19 Defined benefit plans: Employee contributions[3] Amendments to HKAS 32 Offsetting financial assets and financial liabilities[1] Amendments to HKAS 36 Recoverable amount disclosures for non-financial assets[1] Amendments to HKAS 39 Novation of derivatives and continuation of hedge accounting[1] HK(IFRIC*)-INT 21 Levies[1]

IFRIC represents the IFRS Interpretations Committee.
1 Effective for annual periods beginning on or after 1 January 2014.
2 Available for application — the mandatory effective date will be determined when the outstanding phases of HKFRS 9 are finalised.
3 Effective for annual periods beginning on or after 1 July 2014.

4. SEGMENT INFORMATION

The Group’s operating and reportable segments under HKFRS 8 are property development and property investment.

The following is an analysis of the Group’s revenue and results by operating segment for the period under review:

Six months ended 31 December 2013

TURNOVER External RESULT Segment result Other income Unallocated corporate expenses Provision for litigations Finance costs Loss before taxation Taxation charge Loss for the period	Property development HK$’000 — (9,334)	Property investment HK$’000 — (7,357)	Consolidated HK$’000 — (16,691) 4,767 (12,496) (6,000) (9,659) (40,079) — (40,079)

– I-56 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Six months ended 31 December 2012

TURNOVER External RESULT Segment result Other income Unallocated corporate expenses Finance costs Profit before taxation Taxation charge Profit for the period	Property development HK$’000 161,500 85,348	Property investment HK$’000 696 8,239	Consolidated HK$’000 162,196
			93,587 4,950 (11,652 (15,668
			71,217 —
			71,217

More than 90% of the Group’s turnover for the six months ended 31 December 2013 and 2012 was attributable to the operations carried out in Hong Kong.

5. FINANCE COSTS

Interest on bank borrowings: — wholly repayable within five years — not wholly repayable within five years Interest on other borrowings Interest on bank overdrafts Interest on convertible redeemable preference shares (note 17)	Six months ended 31 December 2013 2012 HK$’000 HK$’000 754 1,320 6,123 6,867 — 4,800 — 249 2,782 2,432 9,659 15,668	Six months ended 31 December 2013 2012 HK$’000 HK$’000 754 1,320 6,123 6,867 — 4,800 — 249 2,782 2,432 9,659 15,668
		15,668

6. TAXATION CHARGE

No provision for Hong Kong Profits Tax has been made as the Company has no assessable profit in the current interim period.

No tax was payable on the profit for the prior period arising in Hong Kong since the assessable profit was wholly absorbed by tax losses brought forward.

7. (LOSS) PROFIT FOR THE PERIOD

	Six months ended	Six months ended
	31 December
	2013	2012
	HK$’000	HK$’000
(Loss) profit for the period has been arrived
at after (charging) crediting:
Depreciation	(1,585)	(1,719)
Interest income	224	715

– I-57 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

8. (LOSS) EARNINGS PER SHARE

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

(Loss) profit: (Loss) profit for the period for the purpose of calculating basic (loss) earnings per share Number of shares: Weighted average number of ordinary shares for the purposes of calculating basic (loss) earnings per share	Six months ended 31 December 2013 2012 HK$’000 HK$’000 (40,079) 71,217 Six months ended 31 December 2013 2012 752,012,188 752,012,188

The calculation of diluted loss per share for the six months period ended 31 December 2013 had not been disclosed as the exercise of the Company’s outstanding convertible redeemable preference shares would reduce the loss per share for the period.

The computation of diluted earnings per share for the six months ended 31 December 2012 did not assume the exercise of the Company’s convertible redeemable preference shares because the exercise price of the convertible redeemable preference shares was higher than the average market price for shares for the period.

9. DIVIDEND

No dividends were paid, declared or proposed during the period. The directors do not recommend the payment of an interim dividend for both periods.

10. INVESTMENT PROPERTIES

The fair value of the Group’s investment properties as at 31 December 2013 has been arrived at on the basis of a valuation carried out on that day by LCH (Asia-Pacific) Surveyors Limited (30 June 2013: Messrs. Savills Valuation and Professional Services Limited), the independent qualified professional property valuers not connected with the Group. Both LCH (Asia-Pacific) Surveyors Limited and Savills Valuation and Professional Services Limited are members of the Hong Kong Institute of Surveyors. The valuation was arrived at by reference to market evidence of transaction prices for similar properties.

The investment properties are two developed properties located at Nos. 8, 10 and 12 Peak Road which are held by the Company for long-term capital appreciation. These properties are classified as investment properties and are measured using the fair value model.

All the Group’s investment properties are situated in Hong Kong with long lease. They were secured to support banking facilities granted to the Group.

During the six months ended 31 December 2013, the loss arising on change in fair value of the investment properties of approximately HK$7,570,000 (1.7.2012 to 31.12.2012: the gain arising on change in fair value of the investment properties of approximately HK$7,690,000) has been recognised in the condensed consolidated statement of profit or loss and other comprehensive income.

– I-58 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

11. PROPERTY, PLANT AND EQUIPMENT

During the period, depreciation of approximately HK$1,585,000 (1.7.2012 to 31.12.2012: HK$1,719,000) were charged in respect of the Group’s property, plant and equipment. There is no addition of property, plant and equipment during both interim period.

Pursuant to the Company’s announcement on 24 December 2013, the Group entered into provisional sale and purchase agreement as vendor to dispose certain office premises to an independent third party at a consideration of approximately HK$336,571,000. This transaction is subject to shareholders’ approval in the special general meeting which scheduled on 3 March 2014 and expected to be completed on or before 31 March 2014.

12. DEPOSIT PLACED FOR A LIFE INSURANCE POLICY

In March 2013, the Company’s subsidiary World Modern International Limited (‘‘World Modern’’) entered into a life insurance policy with an insurance company to insure an Executive Director. Under the policy, the beneficiary and policy holder is World Modern and the total insured sum is US$10,000,000 (approximately HK$78,000,000). World Modern is required to pay an upfront deposit of US$2,806,000 (approximately HK$21,887,000) including a premium charge at inception of the policy amounting to US$168,000 (approximately HK$1,310,000). World Modern can terminate the policy at any time and receive cash back based on the cash value of the policy at the date of withdrawal, which is determined by the upfront payment of US$2,806,000 plus accumulated interest earned and minus the accumulated insurance charge and policy expense charge (‘‘Cash Value’’). In addition, if withdrawal is made between the 1st to 18th policy year, there is a specified amount of surrender charge. The insurance Company will pay World Modern an interest of 4.65% per annum on the outstanding Cash Value of the policy for the first year. Commencing on the 2nd year, the interest will become 2% per annum plus a premium determined by the insurance company.

As at 31 December 2013 and 30 June 2013, the deposit placed for a life insurance policy was pledged to a bank to secure general banking facilities granted to the Group.

13. PROPERTIES HELD FOR SALE

Carrying amount of properties held for sale	31.12.2013 HK$’000 710,408	30.6.2013 HK$’000 710,408

At 31 December 2013 and 30 June 2013, the properties held for sale are stated at cost.

14. AMOUNTS DUE TO DIRECTORS OF SUBSIDIARIES

The amounts as at 31 December 2013 and 30 June 2013 represent amounts due to Oung Da Ming and Uon Margaret, who are the directors of the Group’s major subsidiaries. The amounts are unsecured, noninterest bearing and repayable on demand.

– I-59 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

15. SECURED BANK BORROWINGS

Secured: Revolving loans Mortgage loans Bank loan Comprising amounts following due: On demand and within one year In more than one year but not more than two years In more than two years but not more than three years In more than three years but not more than four years In more than four years but not more than five years Over five years Less: Amounts due within one year shown under current liabilities Carrying amount of bank loans that are not repayable within one year from the end of reporting period but contain a repayment on demand clause (shown under current liabilities) Amounts shown under non-current liabilities	31.12.2013 HK$’000 105,000 739,095 9,957 854,052 204,098 47,570 48,318 46,830 46,866 460,370 854,052 (204,098) (649,954) —	30.6.2013 HK$’000 105,000 763,060 11,490 879,550 206,167 47,259 47,998 48,002 46,481 483,643 879,550 (206,167) (673,383) —

At 31 December 2013, the bank borrowings comprised:

(i) a mortgage loan with an outstanding amount of approximately HK$40,661,000 (30 June 2013: HK$41,740,000) that shall be repayable by 206 monthly installments and carries interest at a rate of 1.25% per annum over HIBOR;
(ii) a mortgage loan with an outstanding amount of approximately HK$179,587,000 (30 June 2013: HK$185,758,000) that shall be repayable by 164 monthly installments and carries interest at a rate of 1.2% per annum over HIBOR;
(iii) a revolving loan with an outstanding amount of approximately HK$35,000,000 (30 June 2013: HK$35,000,000) that carries interest at a rate of 2% per annum over HIBOR;
(iv) a mortgage loan with an outstanding amount of approximately HK$66,865,000 (30 June 2013: HK$69,552,000) that shall be repayable by 169 monthly installments and carries interest at a rate of 0.88% per annum over HIBOR;
(v) a mortgage loan with an outstanding amount of approximately HK$48,545,000 (30 June 2013: HK$50,166,000) that shall be repayable by 162 monthly installments and carries interest at a rate of 1.25% per annum over HIBOR;
(vi) a mortgage loan with an outstanding amount of approximately HK$24,389,000 (30 June 2013: HK$25,020,000) that shall be repayable by 219 monthly installments and carries interest at a rate of 0.7% per annum below the HIBOR;
(vii) a mortgage loan with an outstanding amount of approximately HK$23,594,000 (30 June 2013: HK$24,205,000) that shall be repayable by 219 monthly installments and carries interest at a rate of 0.7% per annum below the HIBOR;

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(viii) a mortgage loan with an outstanding amount of approximately HK$66,492,000 (30 June 2013: HK$69,924,000) that shall be repayable by 111 monthly installments and carries interest at a rate of 1.2% per annum over HIBOR;
(ix) a mortgage loan with an outstanding amount of approximately of HK$52,285,000 (30 June 2013: HK$54,824,000) that shall be repayable by 219 monthly installments and carries interest at a rate of 0.7% per annum below the HIBOR;
(x) a mortgage loan with an outstanding amount of approximately of HK$53,448,000 (30 June 2013: HK$54,641,000) that shall be repayable by 12 monthly installments and carries interest at a rate of 1.2% per annum below the HIBOR;
(xi) a revolving loan with an outstanding amount of HK$30,000,000 (30 June 2013: HK$30,000,000) that carries interest at a rate 2.25% (2012: 2%) per annum over HIBOR;
(xii) a mortgage loan with an outstanding amount of approximately HK$93,290,000 (30 June 2013: HK$95,162,000) that shall be repayable by 184 monthly installments and carries interest at a rate of 3% per annum over HIBOR;
(xiii) a revolving loan with an outstanding amount of approximately HK$30,000,000 (30 June 2013: HK$30,000,000) that carries interest at a rate of 3.5% per annum over HIBOR;
(xiv) a mortgage loan with an outstanding amount of approximately HK$89,939,000 (30 June 2013: HK$92,068,000) that shall be repayable by 217 monthly installments and carries interest at a rate of 1.75% per annum over HIBOR;
(xv) a revolving loan with an outstanding amount of approximately HK$10,000,000 (30 June 2013: HK$10,000,000) that carries interest at a rate of 2.25% per annum over HIBOR; and
(xvi) a bank loan with an outstanding amount of approximately HK$9,957,000 (30 June 2013: HK$11,490,000) that shall be repayable by 45 monthly installments and carries interest at a rate of 2.5% per annum over HIBOR, LIBOR or the Bank’s cost of funds, whichever is higher.

The range of effective interest rates of the Group’s bank borrowings were 0.92% to 3.22% per annum for the six months ended 31 December 2013 (1.7.2012 to 31.12.2012: 0.92% to 3.05%).

16. SHARE CAPITAL

Nominal value per share HK$ Authorised: At 1 July 2012, 30 June 2013 and 31 December 2013 0.01 Issued and fully paid: At 1 July 2012 0.01 Issue of shares on conversion of convertible redeemable preference shares At 30 June 2013 and 31 December 2013 0.01	Numbers of shares 50,000,000,000 752,012,088 4,893 752,016,981	Amount HK$’000 500,000
		7,520 —
		7,520

All shares issued in prior year rank pari passu in all aspects with other share in issue.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

17. CONVERTIBLE REDEEMABLE PREFERENCE SHARES

Authorised: At 1 July 2012, 30 June 2013 and 31 December 2013 Issued and fully paid: At 1 July 2012 Conversion of issued convertible redeemable preference shares into ordinary shares At 30 June 2013 and 31 December 2013	Number of preference shares 1,270,000,000 255,255,930 (4,893) 255,251,037	Amount of par value HK$’000 12,700
		2,552 —
		2,552

The convertible redeemable preference shares with nominal value of HK$0.01 were issued at HK$0.25 per share on 24 November 2006.

Movement of the convertible redeemable preference shares are as follows:

At 1 July 2012 Conversion of convertible redeemable preference shares Interest charged for the year At 30 June 2013 Interest charged for the year At 31 December 2013	Liability component HK$’000 34,938 (2) 4,995 39,931 2,782 42,713	Equity component HK$’000 24,250 (3) — 24,247 — 24,247	Total HK$’000 59,188 (5 4,995
			64,178 2,782
			66,960

Note: As announced by the Company on 3 July 2007, the alternation of the terms of the existing convertible redeemable preference shares has been duly approved by the holders of convertible redeemable preference shares at the special general meeting held on 3 July 2007. The approved alternation of the terms of the existing convertible redeemable preference shares are summarised as follows:

(i) Cumulative dividend

The right to receive a dividend per convertible redeemable preference share is based on the dividend or any other distribution (if any) per ordinary share declared and paid by Sensors Integration Technology Limited (‘‘SIT’’), a wholly-owned subsidiary of the Company. SIT is an investment holding company with its subsidiaries principally engaged in manufacture of optical sensor systems and optical communication products.

SIT will declare a dividend to its shareholders only if SIT has received written confirmation from the Company that the Company is permitted to declare and pay a dividend in the same amount to the holders of the convertible redeemable preference shares and an undertaking to declare and pay such a dividend.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(ii) Further issues

(iii) Early redemption at the option of the Company

(iv) Conversion rights

Holders of the convertible redeemable preference shares are entitled to convert all or any of their convertible redeemable preference shares into ordinary shares in the Company by paying HK$0.25 per share to the Company for entitling one ordinary share of the Company of HK$0.01 each, subject to anti-dilutive adjustment provisions which are standard terms for convertible securities of similar type. The adjustment events will arise as a result of certain changes in share capital of the Company including consolidation or sub-division of shares, capitalisation of profits or reserves, capital distribution in cash or specie or subsequent issue of securities in the Company.

(v) Redemption

(a) 31 December 2016;
(b) any consolidation, amalgamation or merger of the Company with any other corporation;
(c) listing of the ordinary shares of the Company are revoked or withdrawn (except in connection with the simultaneous listing of the ordinary shares on such other internationally recognised stock exchange);
(d) a directors’ resolution is passed for the winding-up, insolvency, administration, reorganisation, reconstruction, dissolution or bankruptcy of the Company; or
(e) an effective resolution is passed for the winding-up, insolvency, administration, reorganisation, reconstruction, dissolution or bankruptcy of the Company or for the appointment of a liquidator, receiver, administrator, trustee or similar officer of the Company.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(vi) Priority

(vii) Voting

The convertible redeemable preference shares do not entitle the holders to attend or vote at meeting of the Company except on resolutions which directly affect their rights or on a winding up of the Company or a return or repayment of capital.

(viii) Further issues

(i) Debt component represents the present value of the contractually determined stream of future cash flows discounted at the rate of interest at that time by the market to instruments of comparable credit status and providing substantially the same cash flows, on the same terms, but without the conversion option.

(ii) Equity component represents the difference between the proceeds of issue of the convertible redeemable preference shares and the fair value assigned to the liability component.

18. CONTINGENT LIABILITIES

The Group had the following outstanding litigations as at 31 December 2013. Except as disclosed in (b) and (c) below, the directors of the Company are of the opinion that the estimated contingent liabilities arising from the litigations cannot be reasonably ascertained at the current stage.

(a) On 17 May 2006, Chinese Regency Limited (‘‘Chinese Regency’’) (of which the beneficial owners are independent third parties) issued a writ of summons against Holyrood Limited (‘‘Holyrood’’), a subsidiary of the Company, claiming a total amount of not less than HK$5,760,000, claiming, among others, damages for breach of an agreement for sale and purchase of Flat B on the 5th Floor of Block A1 and the car parking space No. 5 located in Nos. 8, 10 and 12 Peak Road. On 24 May 2013, Chinese Regency filed an amended statement of claim while Holyrood filed an amended statement of defence on 5 July 2013. On 7 January 2014, Chinese Regency served its factual witness statements on Holyrood. Pursuant to the Court order, Chinese Regency and Holyrood exchanged expert reports on 21 January 2014 and a case management conference has been scheduled for 8 May 2014. The litigation is still on going and there is no further update on the case up to the date of these condensed consolidated financial statements.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) On 1 June 2007, Gateway International Development Limited (‘‘Gateway’’) (of which the beneficial owners are independent third parties) issued a writ of summons against Holyrood claiming a total amount of not less than HK$5,048,000, claiming, among other things, damages for breach of an agreement for sale and purchase of Flat A on the 6th Floor of Block A2 and the car parking space No. 51 located in Nos. 8, 10 and 12 Peak Road, breach of the Deed of Mutual Covenant and nuisance on the development. The judgment was handed down on 1 March 2012 against Holyrood. Holyrood was ordered to pay Gateway the sum of HK$4,967,000 plus interest. The judge has also made a costs order nisi that Holyrood shall pay the legal costs of Gateway, which are approximately HK$4,000,000, on an indemnity basis. Holyrood has filed a notice of appeal on 29 March 2012 against the judgment and the appeal was heard on 25 and 26 June 2013. Pursuant to the appeal judgment, the damages awarded to Gateway were reduced to approximately HK$3,258,000. On 7 November 2013, Holyrood filed a notice of motion to apply for leave to appeal against the appeal judgment to the Court of Final Appeal. The application is scheduled to be heard by the Court of Appeal on 16 April 2014.

On 28 June 2012, Holyrood paid a deposit of HK$6,692,000 to the Court of Appeal, representing the aggregate of (i) the damages of HK$4,967,000 and (ii) interest of HK$1,725,000. The deposit was written off against the damages and interest expenses and charged to profit or loss during the year ended 30 June 2012.

Holyrood charged legal cost of HK$4,000,000 to profit or loss during the year ended 30 June 2012. During the six months period ended 31 December 2013, additional legal cost of the appeal to the Court of Appeal amounted to HK$3,000,000 was charged to profit or loss.

(c) On 1 June 2007, Sun Crown Trading Limited (‘‘Sun Crown’’) (of which the beneficial owners are independent third parties) issued a writ of summons against Holyrood a total sum of not less than HK$5,154,000, claiming, among other things, damages for breach of an agreement for sale and purchase of Flat B on the 6th Floor of Block A2 and the car parking spaces Nos. 47 and 48 located in Nos. 8, 10 and 12 Peak Road, breach of the Deed of Mutual Covenant and nuisance on the development. The judgment was handed down on 1 March, 2012 against Holyrood. Holyrood was ordered to pay Sun Crown the sum of HK$4,953,000 plus interest. The judge has also made a costs order nisi that Holyrood shall pay the legal costs of Sun Crown, which are approximately HK$4,000,000, on an indemnity basis. Holyrood filed a notice of appeal on 29 March 2012 against the judgment and the appeal was heard on 25 and 26 June, 2013. Pursuant to the appeal judgment, the damages awarded to Sun Crown were reduced to approximately HK$3,260,000. On 7 November 2013, Holyrood filed a notice of motion to apply for leave to appeal against the appeal judgment to the Court of Final Appeal. The application is scheduled to be heard by the Court of Appeal on 16 April 2014.

Holyrood charged legal cost of HK$4,000,000 to profit or loss during the year ended 30 June, 2012. During the six months period ended 31 December, 2013, additional legal cost of the appeal to the Court of Appeal amounted to HK$3,000,000 was charged to profit or loss.

(d) On 18 July 2011, Century Pacific Holdings Limited (‘‘Century Pacific’’) (of which the beneficial owners are independent third parties) issued a writ of summons against Holyrood claiming a total amount of not less than HK$2,360,000, claiming, among others, damages for breach of an agreement for sale and purchase of Flat B on the 3rd Floor of Block A2 and the car parking space No. 38 located in Nos. 8, 10 and 12 Peak Road, breach of the Deed of Mutual Covenant and nuisance on the development. On 24 December 2012, Holyrood filed the statement of defence and Century Pacific filed their reply on the statement of defence on 26 February 2013. The litigation is still on going and there is no further update on the case up to the date of these condensed consolidated financial statements.

– I-65 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Based on the legal advice obtained by the Group, the Board is of the opinion that the Group has grounds to successfully contest the remaining claims and the lawsuits will not have a material adverse effect on the consolidated financial statements of the Group. Accordingly, no further provision is considered necessary.

19. PLEDGE OR SECURED ASSETS

At the end of the reporting period, the following assets of the Group were pledged or secured to support credit facilities (including letter of guarantee) granted to the Group:

Properties held for sale Investment properties Leasehold properties Deposit placed for a life insurance policy Bank deposits	31.12.2013 HK$’000 694,603 240,430 71,115 20,718 50,570 1,077,436	30.6.2013 HK$’000 694,603 248,000 72,431 20,942 50,565
		1,086,541

20. RELATED PARTY TRANSACTIONS/CONNECTED TRANSACTIONS

(a) Chen Te Kuang Mike, a director of the Company, has provided personal guarantees in respect of the following:

Credit facilities granted to the Group (b) Lilian Oung, a director of certain subsidiaries and also one of provided personal guarantees in respect of the following: Credit facilities granted to the Group	31.12.2013 30.6.2013 HK$’000 HK$’000 180,000 180,000 the shareholders of Five Star, has 31.12.2013 30.6.2013 HK$’000 HK$’000 119,225 119,225	30.6.2013 HK$’000 180,000

(c) Uon Margaret, a director of certain subsidiaries and also one of the shareholders of Gold Seal Holdings Limited (‘‘Gold Seal’’), a shareholder of the Company, has provided personal guarantees in respect of the following:

Credit facilities granted to the Group	31.12.2013 HK$’000 320,000	30.6.2013 HK$’000 320,000

(d) Details of the amounts due to directors of the subsidiaries are set out in note 14.

– I-66 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. INDEBTEDNESS

Borrowings

At the close of business on 31 May 2014, being the latest practicable date for the purpose of ascertaining the indebtedness of the Group prior to the printing of this Response Document, the Group had in aggregate outstanding borrowings of approximately HK$822.9 million of which approximately HK$752.9 million were guaranteed by the Company and secured by a charge on the Peak Road Project and bank deposits of HK$50.6 million, and the remaining balance was unguaranteed and unsecured. The borrowings of the Company comprised (i) secured bank borrowings of approximately HK$752.9 million, (ii) bank overdraft of approximately HK$54.0 million and (iii) unsecured other loans of approximately HK$16.0 million owed to Mr. Oung Da Ming, a director of certain subsidiaries of the Company.

Contingent Liabilities

As at 31 May 2014, being the latest practicable date for the purpose of ascertaining indebtedness of the Group prior to the printing of this Response Document, the Group involved in a number of litigations. Details of which are set out in paragraph headed ‘‘Material Litigation’’ at Appendix III in this Response Document. The Directors (other than Mr. Oung Shih Hua, James and Mr. Kwok Wai Chi) are of the opinion that the estimated contingent liabilities arising from the litigations cannot be reasonably ascertained.

Mortgages and Charges

As at 31 May 2014, certain assets of the Group including the Peak Road Project and bank deposits of HK$50.6 million were pledged to certain banks to secure borrowing facilities granted to the Group.

Preference Shares (liability component)

As at 31 May 2014, the liability component of the Group’s outstanding Preference Shares amounted to HK$45.2 million.

Save as aforesaid and apart from intra-group liabilities and normal trade payables, the Group did not, at the close of business on 31 May 2014, have any outstanding mortgages, charges, debentures or other loan capital, bank overdrafts, loans, debt securities or other similar indebtedness, liabilities under acceptances or acceptances credits, finance leases or hire purchase commitments, guarantees or other material contingent liabilities.

Subsequent changes of indebtedness

Subsequent to 31 May 2014, the Company issued 183,907,508 Ordinary Shares following the conversion of 183,907,508 Preference Shares. The number of outstanding Preference Shares hence reduced to 71,343,529 Preference Shares as at the Latest

– I-67 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Practicable Date. Apart from this, the Directors (other than Mr. Oung Shih Hua, James and Mr. Kwok Wai Chi) confirm that there has been no material change in the indebtedness and contingent liabilities of the Group since 31 May 2014 up to the Latest Practicable Date.

5. MATERIAL CHANGE

The Directors (other than Mr. Oung Shih Hua, James and Mr. Kwok Wai Chi) confirm that save as disclosed below, there is no material change in the financial or trading position or outlook of the Group since 30 June 2013, being the date to which the latest published audited financial statements of the Group were made up and up to and including the Latest Practicable Date:

(i) As disclosed in the announcement of the Company dated 24 December 2013 and the circular of the Company dated 14 February 2014, the Group and an independent third party entered into a provisional sale and purchase agreement on 20 December 2013 and a formal agreement for sale and purchase on 16 January 2014 for the sale of the office premises located at Unit 01, 45th floor, Office Tower, Convention Plaza No. 1 Harbour Road, Wanchai, Hong Kong at a consideration of approximately HK$336.6 million. The Company intended to apply approximately 50% of the net proceed to reduce the indebtedness of the Group including bank loans and loans from directors of the subsidiaries of the Group.

Such disposal constituted a very substantial disposal under the Listing Rules and was completed on 4 April 2014.

(ii) As disclosed in the interim report of the Company for the six months ended 31 December 2013, the Group recorded a loss for the period of approximately HK$40.1 million, as compared to a profit of approximately HK$71.2 million for the six months ended 31 December 2012, mainly due to the lack of sale of apartment unit of the property re-development project located at Nos. 8, 10 and 12 Peak Road for the six months ended 31 December 2013 as a result of the slump in residential property market in Hong Kong following the demand suppressing policies launched by the Hong Kong government in 2013.
(iii) As disclosed in the Placing Announcement of the Company dated 29 April 2014, on 29 April 2014 (after trading hours), the Company entered into the Placing Agreement with the Placing Agent, pursuant to which the Company has conditionally agreed to place, through the Placing Agent on a best efforts basis, up to 150,400,000 Placing Ordinary Shares at a price of HK$0.30 per Placing Ordinary Share and 51,050,000 Placing Preference Shares at a price of HK$0.36 per Placing Preference Share, to not fewer than six independent placees. If all the Placing Shares were successfully placed, the aggregate gross and net proceeds from the Placing would have amounted to approximately HK$63.5 million and approximately HK$60.9 million respectively. However, as disclosed in the Company’s announcement dated 19 June 2014, the Placing Agreement had lapsed and the Placing would not proceed.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(iv) As disclosed in the announcement of the Company dated 20 May 2014, at the Board meeting of the Company held on 19 May 2014, the Board resolved that the office of Mr. Huang Weizong Martin as an independent non-executive Director be vacated with immediate effect. In addition, at the Board meeting of the Company held on 19 May 2014, Ms. Lam Chi Wai Tammy was appointed as non-executive Director, Ms. Song Fang Zhou, Mr. Wong Chong Wei Runrun and Ms. Ng Hei Pak were appointed as independent non-executive Directors. However, as disclosed in the Company’s announcement dated 2 July 2014, it is disputed by Mr. Oung Shih Hua, James, Mr. Kwok Wai Chi and Mr. Huang Weizong Martin that Ms. Lam Chi Wai Tammy, Ms. Song Fang Zhou, Mr. Wong Chong Wei Runun and Ms. Ng Hei Pak are directors of the Company. In addition, Mr. Oung Shih Hua, James, Mr. Kwok Wai Chi and Mr. Huang Weizong Martin maintain that Mr. Huang Weizong Martin is an independent non-executive Director, while this is disputed by Mr. Law Fong, Mr. Chen Te Kuang Mike and Mr. Zhu Pei Qing.
(v) As disclosed in the announcement of the Company dated 21 May 2014 and the circular of the Company dated 22 May 2014, Gold Seal Holdings Limited and Mr. Oung Da Ming requisitioned for a special general meeting to be convened pursuant to section 74 of the Companies Act 1981 of Bermuda to consider, and if thought fit, pass resolutions (i) to remove Mr. Law Fong, Mr. Chen Te Kuang Mike and any other person or persons who may have been appointed as directors of the Company by the Board since the date of the last annual general meeting of the Company and (ii) to appoint Mr. Yuen Chi Wah and Mr. Chan Chi Ho as Directors. Such special general meeting will be convened on 1 August 2014.
(vi) On 12 June 2014, the Offeror announced that Anglo Chinese Corporate Finance, Limited, as the financial adviser to the Offeror, would make the Offers on behalf of the Offeror. According to the Offer Document, the Offeror and parties acting in concert with it may, subject to the level of acceptance to the Offers, exercise their rights of compulsory acquisition in respect of the Shares not tendered to the Offers.
(vii) Up to the Latest Practicable Date, 183,907,508 Preference Shares were converted into 183,907,508 Ordinary Shares.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

6. UNAUDITED ADJUSTED NET ASSETS VALUE

The valuation of property interests of the Group as at 31 May 2014 have been conducted by Visionary Financial Services Group (Holdings) Limited, an independent property valuer appointed by the Company. According to the valuation report, the capital value of the property interests attributable to the Group as at 31 May 2014 was approximately HK$2,354.0 million. Further details of the aforementioned property interests and their corresponding valuation reports prepared by Visionary Financial Services Group (Holdings) Limited are set out in Appendix II to this Response Document.

By taking into account the effect of revaluation arising from the valuation of the above property interests and the VSD, set out below is the calculation of the unaudited adjusted net assets value (‘‘Unaudited Adjusted NAV’’) of the Group as at 31 December 2013:

Unaudited net liabilities of the Group attributable to equity holders
as at 31 December 2013
Adjustments:
— Estimated gain before tax in respect of the VSD (Note 1)
— Revaluation uplift on the Group’s property interest based
on the valuation report (Note 2)
Unaudited Adjusted NAV
Number of Ordinary Shares (assuming full conversion of
the Preference Shares outstanding) (Note 3)
Unaudited Adjusted NAV per Ordinary Share (assuming full
conversion of the Preference Shares outstanding) (Note 4)

HK$ million
(approximately)
(111.2)
261.2
1,403.2
1,553.2
1,007.3
HK$1.54

Notes:

(1) As extracted from the VSD circular of the Company dated 14 February 2014. The exact amount of the gain on the disposal is subject to the revision during the course of annual auditing for the financial year ended 30 June 2014.
(2) Revaluation uplift is calculated based on the valuation as set out in the valuation report of the Group’s property interest as at 31 May 2014 of approximately HK$2,354.0 million as set out in Appendix II to this Response Document, adjusted by (i) the investment properties of approximately HK$240.4 million and properties held for sales of approximately HK$710.4 million as at 31 December 2013.
(3) As at the Latest Practicable Date, there were 935,924,489 Ordinary Shares and 71,343,529 Preference Share in issue. Assuming full conversion of the Preference Shares into the Ordinary Shares for the purpose of calculating the Unaudited Adjusted NAV per Ordinary Share, the total number of Ordinary Shares upon full conversion of the Preference Shares outstanding would be 1,007,268,018 Ordinary Shares.

– I-70 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(4) The Unaudited Adjusted NAV per Ordinary Share is calculated based on the Unaudited Adjusted NAV of approximately HK$1,553.2 million divided by the number of Ordinary Shares (assuming full conversion of the Preference Shares) of approximately 1,007.3 million shares.

It should be noted that the above calculations to the Unaudited Adjusted NAV are for illustrative purpose only and do not purport to represent the financial position of the Group as at 31 May 2014.

– I-71 –

APPENDIX II

VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

The following is the text of a letter, summary of valuations and valuation certificates prepared for the purpose of incorporation in this Response Document received from Visionary Financial Services Group (Holdings) Limited, an independent property valuer, in connection with its opinion of value of the property interests of the Company as at 31 May 2014.

17 July 2014

Visionary Financial Services Group (Holdings) Limited Room 602, 6/F Beautiful Group Tower No.77 Connaught Road Central Hong Kong Tel: (852) 3521-0573 Fax: (852) 3521-0580

The Board of Directors Paladin Limited Suite 2304, 23rd Floor Sun Life Tower The Gateway, Harbour City Tsim Sha Tsui Hong Kong

Dear Sirs

VALUATION OF VARIOUS RESIDENTIAL UNITS AND CAR PARKING SPACES OF 8–12 PEAK ROAD, HONG KONG

In accordance with your instructions for us to value the captioned Properties owned by several subsidiary companies of Paladin Limited (hereinafter referred to as the ‘‘Company’’), we confirm that we have carried out inspection, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the capital values of the Properties as at 31 May 2014 (hereinafter referred to as the ‘‘Valuation Date’’).

BASIS OF VALUATION

Our valuation is our opinion of the market value of the Property which we would define as intended to mean ‘‘the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and ’’ without compulsion .

– II-1 –

VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

APPENDIX II

The market value is the best price reasonably obtainable in the market by the seller and the most advantageous price reasonably obtainable in the market by the buyer. This estimate specifically excludes an estimated price inflated or deflated by special terms or circumstances such as atypical financing, sale and leaseback arrangements, special considerations or concessions granted by anyone associated with the sale, or any element of special value. The market value of a property is also estimated without regard to costs of sale and purchase, and without offset for any associated taxes.

VALUATION METHODOLOGY

We have valued the Properties by direct comparison approach assuming sale of the Properties with the benefit of vacant possession and subject to existing tenancies wherever appropriate, by making reference to comparable sales transactions as available to us. Appropriate adjustments and analysis have been made among the comparable properties and the subject Properties.

In valuing the property in which the Government Leases expire before 30 June 2047, we have taken into account the provisions of Annex III of the Joint Declaration of the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the People’s Republic of China (the ‘‘PRC’’) on the question of Hong Kong and the new Territories Leases (Extension) Ordinance (Chapter 150 of the Laws of Hong Kong) stipulating that such leases may be extended without premium until 30 June 2047, and that an annual rent at three per cent. of the rateable value of the property will be charged from the date of extension.

TITLE DOCUMENTS AND ENCUMBRANCES

We have caused searches to be made at the Land Registry for the Properties. However, we have not verified ownerships of the Properties or the existence of any amendments which do not appear on the copies handed to us. All documents have been used for reference only.

We have also relied on the information given by the Company relating to the Properties. We have no reason to doubt the truth and accuracy of the information provided to us which is material to the valuation.

No allowance has been made in our report for any charges, mortgages or amounts owing on the Properties nor for any expenses or taxation which may be incurred in affecting a sale. Unless otherwise stated, it is assumed that the Properties are free from encumbrances, restrictions and outgoings of an onerous nature which could affect their values.

SOURCE OF INFORMATION

We have relied to a very considerable extent on the information given by the Company. We have accepted advice given by the Company on such matters as planning approvals or statutory notices, easements, tenure, completion date of building, particulars of occupancy and floor areas. Dimensions, measurements and areas included in the valuation report are based on information provided to us and are therefore only approximations. We have not been able to carry out on-site measurements to verify the floor areas of the Properties and we have assumed that the areas shown on the documents handed to us are correct. We were also advised that no material facts have been omitted from the information provided.

– II-2 –

VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

APPENDIX II

INSPECTION AND STRUCTURAL CONDITION

We have inspected the Properties. However, no structural survey has been made, but in the course of our inspection, we did not note any serious defects. We are not, however, able to report that the Properties are free from rot, infestation or any other structural defects. No tests were carried out on any of the services. In addition, we have not carried out investigations on site to determine the suitability of the ground conditions and the services etc. Our valuation is prepared on the assumption that these aspects are satisfactory. We have not been able to carry out a land survey to verify the site boundary and the correctness or the site area of the Buildings where the subject Properties are located. We have assumed that the site area shown on the documents handed to us is correct.

Our valuation has been made on the assumption that there is no unauthorised alterations, extensions or additions have made to the subject Properties.

REMARKS

This valuation report is provided subject to the assumptions, qualifications, limitations and disclaimers detailed in this report. Reliance on this report and extension of our liability is conditional upon the reader’s acknowledgement and understanding of these statements. The Valuer has no pecuniary interest that would conflict with the proper valuation of the properties.

In valuing the Properties, we have complied with all requirements contained in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities issued by The Stock Exchange of Hong Kong Limited, the HKIS Valuation Standards published by the Hong Kong Institute of Surveyors and the International Valuation Standards published by the International Valuation Standards Council.

The Properties will be subject to profit tax of 16.5% of net profit upon disposal, save for deduction of any profit which is capital in nature. In view of the current market situation, the Company has no intention to dispose the Properties at present and the likelihood of such tax liability is remote. However, there is a possibility that such tax liability will materialize in the near future, should the market sentiment and activities improve to a certain level of which the Management of the Company deems fit.

The property inspection was carried out in early July 2014 by Mr Joseph Leung.

CURRENCY

Unless otherwise stated, all monetary amounts stated are in Hong Kong Dollars.

Our valuation certificates with summary of values are attached herewith.

Yours faithfully For and on behalf of

Visionary Financial Services Group (Holdings) Limited Joseph K P Leung MSc MRICS MHKIS RPS(GP) Director Valuation Department

Encl.

Note: Joseph K P Leung, MSc, MRICS, MHKIS, RPS (G.P.), has been a qualified valuer since 1993 and has 27 years’ experience in the valuation of properties in Hong Kong and has been involved in the valuation of properties in the People’s Republic of China and Asia Pacific regions since 1990.

– II-3 –

VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

APPENDIX II

SUMMARY OF VALUES

			Interests	Capital Value
		Capital Value in	attributable	attributable to
		Existing State as at	to the	the Company as at
No.	Property	31 May 2014	Company	31 May 2014
1	Duplex A (including bay	HK$151,430,434	100%	HK$151,430,434
	window, AHU area, private
	garden and flat roof) on
	Ground and First Floor of
	Block A2 and Car Parking
	Space No. 32,
	‘‘8–12 Peak Road’’,
	Nos. 8–12 Peak Road,
	Hong Kong
2	Flat A (including bay window,	HK$79,399,080	100%	HK$79,399,080
	AHU area and balcony) on 2nd
	Floor of Block A2 and Car
	Parking Space No. 37, ‘‘8–12
	Peak Road’’, Nos. 8–12 Peak
	Road, Hong Kong
3	Flat A (including bay window,	HK$82,134,014	100%	HK$82,134,014
	AHU area and balcony) on 3rd
	Floor of Block A2 and Car
	Parking Space No. 49, ‘‘8–12
	Peak Road’’, Nos. 8–12 Peak
	Road, Hong Kong
4	Motor Bike Car Parking Space	HK$2,500,000	100%	HK$2,500,000
	Nos. M1, M2, M3, M4 and
	M5, ‘‘8–12 Peak Road’’,
	Nos. 8–12 Peak Road,
	Hong Kong
5	Car Parking Space Nos. 9, 10,	HK$30,000,000	100%	HK$30,000,000
	15, 17, 18, 19, 24, 25, 28, 29,
	34 and 35, ‘‘8–12 Peak Road’’,
	Nos. 8–12 Peak Road,
	Hong Kong

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VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

APPENDIX II

			Interests	Capital Value
		Capital Value in	attributable	attributable to
		Existing State as at	to the	the Company as at
No.	Property	31 May 2014	Company	31 May 2014
6	Duplex A (including flat roof,	HK$166,348,983	100%	HK$166,348,983
	bay window, balcony, AHU
	area, roof, swimming pool and
	filtration plant room) on 9th
	and 10th Floor of Block A2
	and Car Parking Space No. 53,
	‘‘8–12 Peak Road’’,
	Nos. 8–12 Peak Road,
	Hong Kong
7	Duplex B (including flat roof,	HK$178,696,192	100%	HK$178,696,192
	bay window, balcony, AHU
	area, roof, swimming pool and
	filtration plant room) on 9th
	and 10th Floor of Block A2
	and Car Parking Space Nos. 30
	and 54 on the Lower Ground
	Floor, ‘‘8–12 Peak Road’’,
	Nos. 8–12 Peak Road,
	Hong Kong
8	Flat A (including bay window,	HK$90,986,032	100%	HK$90,986,032
	AHU area and balcony) on 5th
	Floor of Block A1, ‘‘8–12
	Peak Road’’, Nos. 8–12 Peak
	Road, Hong Kong
9	Flat A (including bay window,	HK$91,852,565	100%	HK$91,852,565
	AHU area and balcony) on 6th
	Floor of Block A1 and Car
	Parking Space No. 8, ‘‘8–12
	Peak Road’’, Nos. 8–12 Peak
	Road, Hong Kong
10	Flat B (including bay window,	HK$100,396,101	100%	HK$100,396,101
	AHU area and balcony) on 9th
	Floor of Block A1 and Car
	Parking Space No. 12, ‘‘8–12
	Peak Road’’, Nos. 8–12 Peak
	Road, Hong Kong

– II-5 –

VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

APPENDIX II

			Interests	Capital Value
		Capital Value in	attributable	attributable to
		Existing State as at	to the	the Company as at
No.	Property	31 May 2014	Company	31 May 2014
11	Duplex A (including bay	HK$148,113,432	100%	HK$148,113,432
	window, AHU area, private
	garden and flat roof) on
	Ground and First Floor of
	Block A1 and Car Parking
	Space No. 20, ‘‘8–12 Peak
	Road’’, Nos. 8–12 Peak Road,
	Hong Kong
12	Duplex B (including bay	HK$149,462,789	100%	HK$149,462,789
	window, AHU area, private
	garden and flat roof) on
	Ground and First Floor of
	Block A1 and Car Parking
	Space No. 21, ‘‘8–12 Peak
	Road’’, Nos. 8–12 Peak Road,
	Hong Kong
13	Flat A (including bay window,	HK$88,386,431	100%	HK$88,386,431
	AHU area and balcony) on 2nd
	Floor of Block A1 and Car
	Parking Space No. 22, ‘‘8–12
	Peak Road’’, Nos. 8–12 Peak
	Road, Hong Kong
14	Flat B (including bay window,	HK$94,760,647	100%	HK$94,760,647
	AHU area and balcony) on 2nd
	Floor of Block A1 and Car
	Parking Space No. 23, ‘‘8–12
	Peak Road’’, Nos. 8–12 Peak
	Road, Hong Kong
15	Flat B (including bay window,	HK$98,476,751	100%	HK$98,476,751
	AHU area and balcony) on 6th
	Floor of Block A1 and Car
	Parking Space No. 7, ‘‘8–12
	Peak Road’’, Nos. 8–12 Peak
	Road, Hong Kong

– II-6 –

VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

APPENDIX II

			Interests	Capital Value
		Capital Value in	attributable	attributable to
		Existing State as at	to the	the Company as at
No.	Property	31 May 2014	Company	31 May 2014
16	Flat A (including bay window,	HK$92,719,099	100%	HK$92,719,099
	AHU area and balcony) on 7th
	Floor of Block A1 and Car
	Parking Space No. 13, ‘‘8–12
	Peak Road’’, Nos. 8–12 Peak
	Road, Hong Kong
17	Flat A (including bay window,	HK$93,584,438	100%	HK$93,584,438
	AHU area and balcony) on 9th
	Floor of Block A1 and Car
	Parking Space No. 11, ‘‘8–12
	Peak Road’’, Nos. 8–12 Peak
	Road, Hong Kong
18	Flat B (including flat roof, bay	HK$95,231,131	100%	HK$95,231,131
	window, balcony, AHU area,
	roof, swimming pool and
	filtration plant room) on 10th
	Floor of Block A1 and Car
	Parking Space No. 3,
	‘‘8–12 Peak Road’’,
	Nos. 8–12 Peak Road,
	Hong Kong
19	Car Parking Space No. 1,	HK$2,500,000	100%	HK$2,500,000
	‘‘8–12 Peak Road’’,
	Nos. 8–12 Peak Road,
	Hong Kong
20	Duplex B (including bay	HK$142,737,235	100%	HK$142,737,235
	window, AHU area, private
	garden and flat roof) on
	Ground and First Floor of
	Block A2 and Car Parking
	Space No. 31,
	‘‘8–12 Peak Road’’,
	Nos. 8–12 Peak Road,
	Hong Kong

– II-7 –

VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

APPENDIX II

No. Property 21 House B and Car Parking Space No. 33, ‘‘8–12 Peak Road’’, Nos. 8–12 Peak Road, Hong Kong Grand Total:	Capital Value in Existing State as at 31 May 2014 Interests attributable to the Company HK$374,278,512 100% HK$2,353,993,868	Capital Value attributable to the Company as at 31 May 2014 HK$374,278,512
		HK$2,353,993,868

– II-8 –

VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

APPENDIX II

VALUATION CERTIFICATES

No Property Description and Tenure 1 Duplex A (including The property comprises a duplex bay window, AHU area, residential unit on the Ground and private garden and flat First Floors of Block A2 and a car roof) on Ground and parking space of 8–12 Peak Road. First Floor of Block A2 8–12 Peak Road is a high-class and Car Parking residential development comprising Space No. 32, two blocks of 10-storey apartment ‘‘8–12 Peak Road’’, buildings, a detached house and a Nos. 8–12 Peak Road, recreational centre. The development Hong Kong is completed in about 2005. 538/12,510th parts or The property has a gross and saleable shares of and in Inland floor area of about 392.70 square Lot No. 7878. metres (4,227 square feet) and 286.23 square metres (3,081 square feet) respectively. It also includes the following floor areas: Garden: 666.30 sq m (7,172 sq ft) Bay window: 0.84 sq m (9 sq ft) Flat roof: 8.64 sq m (93 sq ft)

Capital Value in Particulars of existing state as at Occupancy 31 May 2014

The property is HK$151,430,434 currently vacant. (100%)

The property is held under a Government Lease for a term of 75 years from 24th September 1934, renewable for a further term of 75 years. The annual Government Rent for the whole Inland Lot No. 7878 is HK$2,023,362.

Notes:

(a) The registered owner of the property is Alpard Limited, a 100% owned subsidiary of the Company.
(b) 8–12 Peak Road lies within an area zoned for ‘‘R(C)4’’ as per The Peak Outline Zoning Plan S/H14/11.
(c) The property is subject to the following encumbrances:
i. Occupation Permit No. HK23/2005 (OP) dated 24 March 2005.
ii. Certificate of Compliance by District Lands Office/Hong Kong East Lands Department dated 30 June 2005.
iii. Deed of Mutual Covenant incorporating Management Agreement dated 19 July 2005.
iv. Legal charge/mortgage and rental assignment in favour of CITIC Ka Wah Bank Limited dated 14 September 2007.

– II-9 –

VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

APPENDIX II

No Property

Description and Tenure

Capital Value in Particulars of existing state as at Occupancy 31 May 2014

2 Flat A (including bay window, AHU area and balcony) on 2nd Floor of Block A2 and Car Parking Space No. 37, ‘‘8–12 Peak Road’’, Nos. 8–12 Peak Road, Hong Kong
264/12,510th parts or shares of and in Inland Lot No. 7878.
The property comprises a residential unit on the Second Floor of Block A2 and a car parking space of 8–12 Peak Road. 8–12 Peak Road is a high-class residential development comprising two blocks of 10-storey apartment buildings, a detached house and a recreational centre. The development is completed in about 2005.
The property has a gross and saleable floor area of about 252.59 square metres (2,719 square feet) and 183.46 square metres (1,975 square feet) respectively. It also includes the following floor areas: Bay window: 4.91 sq m (53 sq ft) Balcony: 3.72 sq m (40 sq ft)

The property is HK$79,399,080 currently vacant. (100%)

Notes:

(a) The registered owner of the property is Alpard Limited, a 100% owned subsidiary of the Company.
(b) 8–12 Peak Road lies within an area zoned for ‘‘R(C)4’’ as per The Peak Outline Zoning Plan S/H14/11.
(c) The property is subject to the following encumbrances:
i. Occupation Permit No. HK23/2005 (OP) dated 24 March 2005.
ii. Certificate of Compliance by District Lands Office/Hong Kong East Lands Department dated 30 June 2005.
iii. Deed of Mutual Covenant incorporating Management Agreement dated 19 July 2005.
iv. Legal charge/mortgage and rental assignment in favour of CITIC Ka Wah Bank Limited dated 14 September 2007.

– II-10 –

VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

APPENDIX II

No Property Description and Tenure

Capital Value in Particulars of existing state as at Occupancy 31 May 2014

3 Flat A (including bay window, AHU area and balcony) on 3rd Floor of Block A2 and Car Parking Space No. 49, ‘‘8–12 Peak Road’’, Nos. 8–12 Peak Road, Hong Kong
268/12,510th parts or shares of and in Inland Lot No. 7878.

The property comprises a residential unit on the Third Floor of Block A2 and a car parking space of 8–12 Peak Road. 8–12 Peak Road is a high-class residential development comprising two blocks of 10-storey apartment buildings, a detached house and a recreational centre. The development is completed in about 2005.

The property has a gross and saleable floor area of about 256.97 square metres (2,766 square feet) and 187.94 square metres (2,023 square feet) respectively. It also includes the following floor areas: Bay window: 5.57 sq m (60 sq ft) Balcony: 3.72 sq m (40 sq ft)

The property is HK$82,134,014 currently vacant. (100%)

Notes:

(a) The registered owner of the property is Alpard Limited, a 100% owned subsidiary of the Company.
(b) 8–12 Peak Road lies within an area zoned for ‘‘R(C)4’’ as per The Peak Outline Zoning Plan S/H14/11.
(c) The property is subject to the following encumbrances:
i. Occupation Permit No. HK23/2005 (OP) dated 24 March 2005.
ii. Certificate of Compliance by District Lands Office/Hong Kong East Lands Department dated 30 June 2005.
iii. Deed of Mutual Covenant incorporating Management Agreement dated 19 July 2005.
iv. Mortgage and rental assignment in favour of Dah Sing Bank Limited dated 8 October 2010.

– II-11 –

VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

APPENDIX II

Capital Value in Particulars of existing state as at No Property Description and Tenure Occupancy 31 May 2014 4 Motor Bike Car Parking The property comprises five motor car The property is HK$2,500,000 Space Nos. M1, M2, parking spaces of 8–12 Peak Road. currently vacant. (100%) M3, M4 and M5, ‘‘8–12 8–12 Peak Road is a high-class Peak Road’’, Nos. 8–12 residential development comprising Peak Road, Hong Kong two blocks of 10-storey apartment buildings, a detached house and a 10/12,510th parts or recreational centre. The development shares of and in Inland is completed in about 2005. Lot No. 7878. The property is held under a Government Lease for a term of 75 years from 24th September 1934, renewable for a further term of 75 years. The annual Government Rent for the whole Inland Lot No. 7878 is HK$2,023,362.

Notes:

(a) The registered owner of the property is Alpard Limited, a 100% owned subsidiary of the Company.
(b) 8–12 Peak Road lies within an area zoned for ‘‘R(C)4’’ as per The Peak Outline Zoning Plan S/H14/11.
(c) The property is subject to the following encumbrances:
i. Occupation Permit No. HK23/2005 (OP) dated 24 March 2005.
ii. Certificate of Compliance by District Lands Office/Hong Kong East Lands Department dated 30 June 2005.
iii. Deed of Mutual Covenant incorporating Management Agreement dated 19 July 2005.

– II-12 –

VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

APPENDIX II

Capital Value in Particulars of existing state as at Description and Tenure Occupancy 31 May 2014 The property comprises 12 car The properties HK$30,000,000 parking spaces of 8–12 Peak Road. are currently (100%) 8–12 Peak Road is a high-class vacant, except residential development comprising for car parking two blocks of 10-storey apartment space nos. 17 buildings, a detached house and a (together with recreational centre. The development Flat 9B of Block is completed in about 2005. A1) and 24 (together with The property is held under a Flat 5A of Block Government Lease for a term of 75 A1) which are years from 24th September 1934, tenanted. renewable for a further term of 75 years. The annual Government Rent for the whole Inland Lot No. 7878 is HK$2,023,362.

No Property Description and Tenure

5 Car Parking Space Nos. 9, 10, 15, 17, 18, 19, 24, 25, 28, 29, 34 and 35, ‘‘8–12 Peak Road’’, Nos. 8–12 Peak Road, Hong Kong 144/12,510th parts or shares of and in Inland Lot No. 7878.

Notes:

(a) The registered owner of the property is Alpard Limited, a 100% owned subsidiary of the Company.
(b) 8–12 Peak Road lies within an area zoned for ‘‘R(C)4’’ as per The Peak Outline Zoning Plan S/H14/11.
(c) The property is subject to the following encumbrances:
i. Occupation Permit No. HK23/2005 (OP) dated 24 March 2005.
ii. Certificate of Compliance by District Lands Office/Hong Kong East Lands Department dated 30 June 2005.
iii. Deed of Mutual Covenant incorporating Management Agreement dated 19 July 2005.
(d) For the tenancy details of car parking space nos.17 and 24, please refer to Property #10 and Property #8.

– II-13 –

VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

APPENDIX II

No Property Description and Tenure

Capital Value in Particulars of existing state as at Occupancy 31 May 2014

6 Duplex A (including flat The property comprises a duplex roof, bay window, residential unit on 9th and 10th balcony, AHU area, Floors of Block A2 and a car parking roof, swimming pool space of 8–12 Peak Road. 8–12 Peak and filtration plant Road is a high-class residential room) on 9th and 10th development comprising two blocks Floor of Block A2 and of 10-storey apartment buildings, a Car Parking Space No. detached house and a recreational 53, ‘‘8–12 Peak Road’’, centre. The development is completed Nos. 8–12 Peak Road, in about 2005. Hong Kong The property has a gross and saleable
507/12,510th parts or floor area of about 463.58 square shares of and in Inland metres (4,990 square feet) and 339.19 Lot No. 7878. square metres (3,651 square feet) respectively. It also includes the following floor areas: Bay window: 4.27 sq m (46 sq ft) Balcony: 10.96 sq m (118 sq ft) Flat roof: 27.03 sq m (291 sq ft) Roof: 133.5 sq m (1,437 sq ft)

The property is HK$166,348,983 currently vacant. (100%)

Notes:

(a) The registered owner of the property is Wayguard Limited, a 100% owned subsidiary of the Company.
(b) 8–12 Peak Road lies within an area zoned for ‘‘R(C)4’’ as per The Peak Outline Zoning Plan S/H14/11.
(c) The property is subject to the following encumbrances:
i. Occupation Permit No. HK23/2005 (OP) dated 24 March 2005.
ii. Certificate of Compliance by District Lands Office/Hong Kong East Lands Department dated 30 June 2005.
iii. Deed of Mutual Covenant incorporating Management Agreement dated 19 July 2005.
iv. Mortgage in favour of DBS Bank (Hong Kong) Limited dated 21 December 2006.

– II-14 –

APPENDIX II

VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

No Property Description and Tenure

Capital Value in Particulars of existing state as at Occupancy 31 May 2014

7 Duplex B (including flat roof, bay window, balcony, AHU area, roof, swimming pool and filtration plant room) on 9th and 10th Floor of Block A2 and Car Parking Space Nos. 30 and 54 on the Lower Ground Floor, ‘‘8–12 Peak Road’’, Nos. 8–12 Peak Road, Hong Kong 555/12,510th parts or shares of and in Inland Lot No. 7878.

The property comprises a duplex residential unit on 9th and 10th Floors of Block A2 and two car parking spaces of 8–12 Peak Road. 8–12 Peak Road is a high-class residential development comprising two blocks of 10-storey apartment buildings, a detached house and a recreational centre. The development is completed in about 2005.

The property has a gross and saleable floor area of about 499.16 square metres (5,373 square feet) and 365.38 square metres (3,933 square feet) respectively. It also includes the following floor areas: Bay window: 6.5 sq m (70 sq ft) Balcony: 10.96 sq m (118 sq ft) Flat roof: 27.03 sq m (291 sq ft) Roof: 133.5 sq m (1,437 sq ft)

The property is HK$178,696,192 currently vacant. (100%)

Notes:

(a) The registered owner of the property is Wayguard Limited, a 100% owned subsidiary of the Company.
(b) 8–12 Peak Road lies within an area zoned for ‘‘R(C)4’’ as per The Peak Outline Zoning Plan S/H14/11.
(c) The property is subject to the following encumbrances:
i. Occupation Permit No. HK23/2005 (OP) dated 24 March 2005.
ii. Certificate of Compliance by District Lands Office/Hong Kong East Lands Department dated 30 June 2005.
iii. Deed of Mutual Covenant incorporating Management Agreement dated 19 July 2005.
iv. Legal charge/mortgage in favour of CITIC Ka Wah Bank Limited dated 23 October 2006.

– II-15 –

VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

APPENDIX II

Capital Value in Particulars of existing state as at Property Description and Tenure Occupancy 31 May 2014 Flat A (including bay The property comprises a residential The property is HK$90,986,032 window, AHU area and unit on the 5th Floor of Block A1 of subject to a (100%) balcony) on 5th Floor of 8–12 Peak Road. 8–12 Peak Road is a tenancy Block A1, ‘‘8–128–12–1212 Peak high-class residential development (together with Road’’,’’,, Nos. 8–12–1212 Peak comprising two blocks of 10-storey car parking Road, Hong Kong apartment buildings, a detached house space No. 24) and a recreational centre. The for a term from 276/12,510th parts or development is completed in about 22 December shares of and in Inland 2005. 2012 to 21 Lot No. 7878. December 2014 The property has a gross and saleable and the monthly floor area of about 276.85 square rent is metres (2,980 square feet) and 202.25 HK$100,000 square metres (2,177 square feet) inclusive of respectively. It also includes the management following floor areas: Bay window: fees and 5.39 sq m (58 sq ft) Balcony: Government 13.01 sq m (140 sq ft) Rent but exclusive of The property is held under a Government Government Lease for a term of 75 Rates.

No Property

8 Flat A (including bay window, AHU area and balcony) on 5th Floor of Block A1, ‘‘8–128–12–1212 Peak Road’’,’’,, Nos. 8–12–1212 Peak Road, Hong Kong

Notes:

(a) The registered owner of the property is Wayguard Limited, a 100% owned subsidiary of the Company.
(b) 8–12 Peak Road lies within an area zoned for ‘‘R(C)4’’ as per The Peak Outline Zoning Plan S/H14/11.
(c) The property is subject to the following encumbrances:
i. Occupation Permit No. HK23/2005 (OP) dated 24 March 2005.
ii. Certificate of Compliance by District Lands Office/Hong Kong East Lands Department dated 30 June 2005.
iii. Deed of Mutual Covenant incorporating Management Agreement dated 19 July 2005.
iv. Legal charge/mortgage in favour of CITIC Ka Wah Bank Limited dated 23 October 2006.

– II-16 –

VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

APPENDIX II

No Property Description and Tenure

Capital Value in Particulars of existing state as at Occupancy 31 May 2014

9 Flat A (including bay window, AHU area and balcony) on 6th Floor of Block A1 and Car Parking Space No. 8, ‘‘8–12 Peak Road’’, Nos. 8–12 Peak Road, Hong Kong 288/12,510th parts or shares of and in Inland Lot No. 7878.
The property comprises a residential unit on the 6th Floor of Block A1 and a car parking space of 8–12 Peak Road. 8–12 Peak Road is a high-class residential development comprising two blocks of 10-storey apartment buildings, a detached house and a recreational centre. The development is completed in about 2005.
The property has a gross and saleable floor area of about 276.85 square metres (2,980 square feet) and 202.25 square metres (2,177 square feet) respectively. It also includes the following floor areas: Bay window: 5.39 sq m (58 sq ft) Balcony: 13.01 sq m (140 sq ft)

The property is HK$91,852,565 currently vacant. (100%)

Notes:

(a) The registered owner of the flat is Wayguard Limited, a 100% owned subsidiary of the Company whereas the owner of the car parking space is World Modern International Limited, a 100% owned subsidiary of the Company.
(b) 8–12 Peak Road lies within an area zoned for ‘‘R(C)4’’ as per The Peak Outline Zoning Plan S/H14/11.
(c) The property is subject to the following encumbrances:
i. Occupation Permit No. HK23/2005 (OP) dated 24 March 2005.
ii. Certificate of Compliance by District Lands Office/Hong Kong East Lands Department dated 30 June 2005.
iii. Deed of Mutual Covenant incorporating Management Agreement dated 19 July 2005.
iv. Mortgage in favour of Public Bank (Hong Kong) Limited dated 17 August 2006 (for the residential unit only).

– II-17 –

VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

APPENDIX II

				Capital Value in
			Particulars of	existing state as at
No	Property	Description and Tenure	Occupancy	31 May 2014
10	Flat B (including bay	The property comprises a residential	The property is	HK$100,396,101
	window, AHU area and	unit on the 9th Floor of Block A1 and	subject to a	(100%)
	balcony) on 9th Floor of	a car parking space of 8–12 Peak	tenancy
	Block A1 and Car	Road. 8–12 Peak Road is a high-class	(together with 2
	Parking Space No. 12,	residential development comprising	car parking
	‘‘8–12 Peak Road’’,	two blocks of 10-storey apartment	spaces nos. 1
	Nos. 8–12 Peak Road,	buildings, a detached house and a	and 17) at a
	Hong Kong	recreational centre. The development	monthly rent of
		is completed in about 2005.	HK$170,000
	305/12,510th parts or		from 15 March
	shares of and in Inland	The property has a gross and saleable	2014 to 14
	Lot No. 7878.	floor area of about 293.66 square	March 2016
		metres (3,161 square feet) and 214.98	inclusive of
		square metres (2,314 square feet)	Government
		respectively. It also includes the	Rates,
		following floor areas: Bay window:	Management
		3.9 sq m (42 sq ft) Balcony:	Fees and
		13.01 sq m (140 sq ft)	Government
			rent. Car parking
		The property is held under a	space no.12 is
		Government Lease for a term of 75	vacant.

Notes:

(a) The registered owner of the flat is Wayguard Limited, a 100% owned subsidiary of the Company whereas the owner of the car parking space is World Modern International Limited, a 100% owned subsidiary of the Company.
(b) 8–12 Peak Road lies within an area zoned for ‘‘R(C)4’’ as per The Peak Outline Zoning Plan S/H14/11.
(c) The property is subject to the following encumbrances:
i. Occupation Permit No. HK23/2005 (OP) dated 24 March 2005.
ii. Certificate of Compliance by District Lands Office/Hong Kong East Lands Department dated 30 June 2005.
iii. Deed of Mutual Covenant incorporating Management Agreement dated 19 July 2005.
iv. Legal charge/mortgage in favour of CITIC Ka Wah Bank Limited dated 11 September 2006.

– II-18 –

VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

APPENDIX II

No Property Description and Tenure

Capital Value in Particulars of existing state as at Occupancy 31 May 2014

11 Duplex A (including bay window, AHU area, private garden and flat roof) on Ground and First Floor of Block A1 and Car Parking Space No. 20, ‘‘8–12 Peak Road’’, Nos. 8–12 Peak Road, Hong Kong
508/12,510th parts or shares of and in Inland Lot No. 7878.

The property comprises a duplex residential unit on the Ground and First Floors of Block A1 and a car parking space of 8–12 Peak Road. 8–12 Peak Road is a high-class residential development comprising two blocks of 10-storey apartment buildings, a detached house and a recreational centre. The development is completed in about 2005.

The property has a gross and saleable floor area of about 424.56 square metres (4,570 square feet) and 309.74 square metres (3,334 square feet) respectively. It also includes the following floor areas: Garden: 352.29 sq m (3,792 sq ft) Bay window: 0.84 sq m (9 sq ft) Flat roof: 10.96 sq m (118 sq ft)

The property is HK$148,113,432 currently vacant. (100%)

Notes:

(a) The registered owner of the property is World Modern International Limited, a 100% owned subsidiary of the Company.
(b) 8–12 Peak Road lies within an area zoned for ‘‘R(C)4’’ as per The Peak Outline Zoning Plan S/H14/11.
(c) The property is subject to the following encumbrances:
i. Occupation Permit No. HK23/2005 (OP) dated 24 March 2005.
ii. Certificate of Compliance by District Lands Office/Hong Kong East Lands Department dated 30 June 2005.
iii. Deed of Mutual Covenant incorporating Management Agreement dated 19 July 2005.
iv. Legal charges in favour of Wing Lung Bank Limited dated 7 June 2006 and 24 July 2007.

– II-19 –

APPENDIX II

VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

No Property Description and Tenure

Capital Value in Particulars of existing state as at Occupancy 31 May 2014

12 Duplex B (including bay window, AHU area, private garden and flat roof) on Ground and First Floor of Block A1 and Car Parking Space No. 21, ‘‘8–12 Peak Road’’, Nos. 8–12 Peak Road, Hong Kong
The property comprises a duplex residential unit on the Ground and First Floors of Block A1 and a car parking space of 8–12 Peak Road. 8–12 Peak Road is a high-class residential development comprising two blocks of 10-storey apartment buildings, a detached house and a recreational centre. The development is completed in about 2005.

The property is HK$149,462,789 currently vacant. (100%)

510/12,510th parts or shares of and in Inland The property has a gross and saleable Lot No. 7878. floor area of about 435.34 square metres (4,686 square feet) and 317.63 square metres (3,419 square feet) respectively. It also includes the following floor areas: Garden/Roof: 304.81 sq m (3,281 sq ft) Bay window: 0.84 sq m (9 sq ft) Flat roof: 10.96 sq m (118 sq ft)

Notes:

(a) The registered owner of the property is World Modern International Limited, a 100% owned subsidiary of the Company.
(b) 8–12 Peak Road lies within an area zoned for ‘‘R(C)4’’ as per The Peak Outline Zoning Plan S/H14/11.
(c) The property is subject to the following encumbrances:
i. Occupation Permit No. HK23/2005 (OP) dated 24 March 2005.
ii. Certificate of Compliance by District Lands Office/Hong Kong East Lands Department dated 30 June 2005.
iii. Deed of Mutual Covenant incorporating Management Agreement dated 19 July 2005.
iv. Mortgage and rental assignment in favour of Hang Seng Bank Limited dated 11 July 2007.

– II-20 –

APPENDIX II

VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

No Property Description and Tenure

Capital Value in Particulars of existing state as at Occupancy 31 May 2014

13 Flat A (including bay window, AHU area and balcony) on 2nd Floor of Block A1 and Car Parking Space No. 22, ‘‘8–12 Peak Road’’, Nos. 8–12 Peak Road, Hong Kong 288/12,510th parts or shares of and in Inland Lot No. 7878.
The property comprises a residential unit on the 2nd Floor of Block A1 and a car parking space of 8–12 Peak Road. 8–12 Peak Road is a high-class residential development comprising two blocks of 10-storey apartment buildings, a detached house and a recreational centre. The development is completed in about 2005.
The property has a gross and saleable floor area of about 276.85 square metres (2,980 square feet) and 202.25 square metres (2,177 square feet) respectively. It also includes the following floor areas: Bay window: 5.39 sq m (58 sq ft) Balcony: 13.01 sq m (140 sq ft)

The property is HK$88,386,431 currently vacant. (100%)

Notes:

(a) The registered owner of the property is World Modern International Limited, a 100% owned subsidiary of the Company.
(b) 8–12 Peak Road lies within an area zoned for ‘‘R(C)4’’ as per The Peak Outline Zoning Plan S/H14/11.
(c) The property is subject to the following encumbrances:
i. Occupation Permit No. HK23/2005 (OP) dated 24 March 2005.
ii. Certificate of Compliance by District Lands Office/Hong Kong East Lands Department dated 30 June 2005.
iii. Deed of Mutual Covenant incorporating Management Agreement dated 19 July 2005.
iv. Legal charges in favour of Wing Lung Bank Limited dated 7 June 2006 and 24 July 2007.

– II-21 –

APPENDIX II

VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

No Property Description and Tenure

Capital Value in Particulars of existing state as at Occupancy 31 May 2014

14 Flat B (including bay window, AHU area and balcony) on 2nd Floor of Block A1 and Car Parking Space No. 23, ‘‘8–12 Peak Road’’, Nos. 8–12 Peak Road, Hong Kong 308/12,510th parts or shares of and in Inland Lot No. 7878.
The property comprises a residential unit on the 2nd Floor of Block A1 and a car parking space of 8–12 Peak Road. 8–12 Peak Road is a high-class residential development comprising two blocks of 10-storey apartment buildings, a detached house and a recreational centre. The development is completed in about 2005.
The property has a gross and saleable floor area of about 296.73 square metres (3,194 square feet) and 216.83 square metres (2,334 square feet) respectively. It also includes the following floor areas: Bay window: 6.13 sq m (66 sq ft) Balcony: 13.01 sq m (140 sq ft)

The property is HK$94,760,647 currently vacant. (100%)

Notes:

(a) The registered owner of the property is World Modern International Limited, a 100% owned subsidiary of the Company.
(b) 8–12 Peak Road lies within an area zoned for ‘‘R(C)4’’ as per The Peak Outline Zoning Plan S/H14/11.
(c) The property is subject to the following encumbrances:
i. Occupation Permit No. HK23/2005 (OP) dated 24 March 2005.
ii. Certificate of Compliance by District Lands Office/Hong Kong East Lands Department dated 30 June 2005.
iii. Deed of Mutual Covenant incorporating Management Agreement dated 19 July 2005.
iv. Legal charges in favour of Wing Lung Bank Limited dated 7 June 2006 and 24 July 2007.

– II-22 –

VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

APPENDIX II

No Property Description and Tenure

Capital Value in Particulars of existing state as at Occupancy 31 May 2014

15 Flat B (including bay window, AHU area and balcony) on 6th Floor of Block A1 and Car Parking Space No. 7, ‘‘8–12 Peak Road’’, Nos. 8–12 Peak Road, Hong Kong 308/12,510th parts or shares of and in Inland Lot No. 7878.
The property comprises a residential unit on the 6th Floor of Block A1 and a car parking space of 8–12 Peak Road. 8–12 Peak Road is a high-class residential development comprising two blocks of 10-storey apartment buildings, a detached house and a recreational centre. The development is completed in about 2005. The property has a gross and saleable floor area of about 296.73 square metres (3,194 square feet) and 216.83 square metres (2,334 square feet) respectively. It also includes the following floor areas: Bay window: 6.13 sq m (66 sq ft) Balcony: 13.01 sq m (140 sq ft)

The property is HK$98,476,751 currently vacant. (100%)

Notes:

(a) The registered owner of the flat is World Modern International Limited, a 100% owned subsidiary of the Company whereas the registered owner of the car parking space is Wayguard Limited, a 100% owned subsidiary of the Company.
(b) 8–12 Peak Road lies within an area zoned for ‘‘R(C)4’’ as per The Peak Outline Zoning Plan S/H14/11.
(c) The property is subject to the following encumbrances:
i. Occupation Permit No. HK23/2005 (OP) dated 24 March 2005.
ii. Certificate of Compliance by District Lands Office/Hong Kong East Lands Department dated 30 June 2005.
iii. Deed of Mutual Covenant incorporating Management Agreement dated 19 July 2005.
iv. Legal charges in favour of Wing Lung Bank Limited dated 7 June 2006 and 24 July 2007 (for the domestic unit only).
v. Mortgage in favour of Public Bank (Hong Kong) Limited dated 17 August 2006 (for the car parking space only).

– II-23 –

VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

APPENDIX II

No Property Description and Tenure

Capital Value in Particulars of existing state as at Occupancy 31 May 2014

16 Flat A (including bay window, AHU area and balcony) on 7th Floor of Block A1 and Car Parking Space No. 13, ‘‘8–12 Peak Road’’, Nos. 8–12 Peak Road, Hong Kong 288/12,510th parts or shares of and in Inland Lot No. 7878.

The property comprises a residential unit on the 7th Floor of Block A1 and a car parking space of 8–12 Peak Road. 8–12 Peak Road is a high-class residential development comprising two blocks of 10-storey apartment buildings, a detached house and a recreational centre. The development is completed in about 2005. The property has a gross and saleable floor area of about 276.85 square metres (2,980 square feet) and 202.25 square metres (2,177 square feet) respectively. It also includes the following floor areas: Bay window:5.39 sq m (58 sq ft) Balcony: 13.01 sq m (140 sq ft)

The property is HK$92,719,099 currently vacant. (100%)

Notes:

(a) The registered owner of the property is World Modern International Limited, a 100% owned subsidiary of the Company.
(b) 8–12 Peak Road lies within an area zoned for ‘‘R(C)4’’ as per The Peak Outline Zoning Plan S/H14/11.
(c) The property is subject to the following encumbrances:
i. Occupation Permit No. HK23/2005 (OP) dated 24 March 2005.
ii. Certificate of Compliance by District Lands Office/Hong Kong East Lands Department dated 30 June 2005.
iii. Deed of Mutual Covenant incorporating Management Agreement dated 19 July 2005.
iv. Legal charges in favour of Wing Lung Bank Limited dated 7 June 2006 and 24 July 2007.

– II-24 –

VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

APPENDIX II

No Property Description and Tenure

Capital Value in Particulars of existing state as at Occupancy 31 May 2014

17 Flat A (including bay window, AHU area and balcony) on 9th Floor of Block A1 and Car Parking Space No. 11, ‘‘8–12 Peak Road’’, Nos. 8–12 Peak Road, Hong Kong 288/12,510th parts or shares of and in Inland Lot No. 7878.
The property comprises a residential unit on the 9th Floor of Block A1 and a car parking space of 8–12 Peak Road. 8–12 Peak Road is a high-class residential development comprising two blocks of 10-storey apartment buildings, a detached house and a recreational centre. The development is completed in about 2005. The property has a gross and saleable floor area of about 273.78 square metres (2,947 square feet) and 200.39 square metres (2,157 square feet) respectively. It also includes the following floor areas: Bay window: 3.16 sq m (34 sq ft) Balcony: 13.01 sq m (140 sq ft)

The property is HK$93,584,438 currently vacant. (100%)

Notes:

(a) The registered owner of the property is World Modern International Limited, a 100% owned subsidiary of the Company.
(b) 8–12 Peak Road lies within an area zoned for ‘‘R(C)4’’ as per The Peak Outline Zoning Plan S/H14/11.
(c) The property is subject to the following encumbrances:
i. Occupation Permit No. HK23/2005 (OP) dated 24 March 2005.
ii. Certificate of Compliance by District Lands Office/Hong Kong East Lands Department dated 30 June 2005.
iii. Deed of Mutual Covenant incorporating Management Agreement dated 19 July 2005.
iv. Legal charges in favour of Wing Lung Bank Limited dated 7 June 2006 and 24 July 2007.

– II-25 –

APPENDIX II

VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

No Property

Description and Tenure

Capital Value in Particulars of existing state as at Occupancy 31 May 2014

18 Flat B (including flat roof, bay window, balcony, AHU area, roof, swimming pool and filtration plant room) on 10th Floor of Block A1 and Car Parking Space No. 3, ‘‘8–12 Peak Road’’, Nos. 8–12 Peak Road, Hong Kong 301/12,510th parts or shares of and in Inland Lot No. 7878.

The property comprises a residential unit on the 10th Floor of Block A1 and a car parking space of 8–12 Peak Road. 8–12 Peak Road is a high-class residential development comprising two blocks of 10-storey apartment buildings, a detached house and a recreational centre. The development is completed in about 2005.

The property has a gross and saleable floor area of about 255.95 square metres (2,755 square feet) and 187.48 square metres (2,018 square feet) respectively. It also includes the following floor areas: Bay window: 2.97 sq m (32 sq ft) Balcony: 13.01 sq m (140 sq ft) Flat Roof: 32.05 sq m (345 sq ft) Garden/Roof: 139.07 sq m (1,497 sq ft)

The property is HK$95,231,131 currently vacant. (100%)

Notes:

(a) The registered owner of the property is World Modern International Limited, a 100% owned subsidiary of the Company.
(b) 8–12 Peak Road lies within an area zoned for ‘‘R(C)4’’ as per The Peak Outline Zoning Plan S/H14/11.
(c) The property is subject to the following encumbrances:
i. Occupation Permit No. HK23/2005 (OP) dated 24 March 2005.
ii. Certificate of Compliance by District Lands Office/Hong Kong East Lands Department dated 30 June 2005.
iii. Deed of Mutual Covenant incorporating Management Agreement dated 19 July 2005.
iv. Mortgage and rental assignment in favour of Hang Seng Bank Limited dated 11 July 2007.

– II-26 –

VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

APPENDIX II

Capital Value in Particulars of existing state as at No Property Description and Tenure Occupancy 31 May 2014 19 Car Parking Space No. The property comprises one car The property is HK$2,500,000 1, ‘‘8–12 Peak Road’’, parking space of 8–12 Peak Road. subject to a (100%) Nos. 8–12 Peak Road, 8–12 Peak Road is a high-class tenancy Hong Kong residential development comprising (together with two blocks of 10-storey apartment Flat 9B of Block 12/12,510th parts or buildings, a detached house and a A1) at a shares of and in Inland recreational centre. The development monthly rent of Lot No. 7878. is completed in about 2005. HK$170,000 from 15th March The property is held under a 2014 to 14th Government Lease for a term of 75 March 2016 years from 24th September 1934, inclusive of renewable for a further term of 75 Government years. The annual Government Rent Rates, for the whole Inland Lot No. 7878 is Management HK$2,023,362. Fees and Government rent.

Notes:

(a) The registered owner of the property is World Modern International Limited, a 100% owned subsidiary of the Company.
(b) 8–12 Peak Road lies within an area zoned for ‘‘R(C)4’’ as per The Peak Outline Zoning Plan S/H14/11.
(c) The property is subject to the following encumbrances:
i. Occupation Permit No. HK23/2005 (OP) dated 24 March 2005.
ii. Certificate of Compliance by District Lands Office/Hong Kong East Lands Department dated 30 June 2005.
iii. Deed of Mutual Covenant incorporating Management Agreement dated 19 July 2005.

– II-27 –

APPENDIX II

VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

No Property Description and Tenure

Capital Value in Particulars of existing state as at Occupancy 31 May 2014

20 Duplex B (including bay The property comprises a duplex window, AHU area, residential unit on the Ground and private garden and flat First Floors of Block A2 and a car roof) on Ground and parking space of 8–12 Peak Road. First Floor of Block A2 8–12 Peak Road is a high-class and Car Parking Space residential development comprising No. 31, ‘‘8–12 Peak two blocks of 10-storey apartment Road’’, Nos. 8–12 Peak buildings, a detached house and a Road, Hong Kong recreational centre. The development is completed in about 2005.
504/12,510th parts or shares of and in Inland The property has a gross and saleable Lot No. 7878. floor area of about 392.98 square metres (4,230 square feet) and 286.60 square metres (3,085 square feet) respectively. It also includes the following floor areas: Garden/Roof: 459.68 sq m (4,948 sq ft) Bay window: 0.84 sq m (9 sq ft) Flat roof: 8.64 sq m (93 sq ft)

The property is HK$142,737,235 currently vacant. (100%)

Notes:

(a) The registered owner of the property is Venus Fortune Limited, a 100% owned subsidiary of the Company.
(b) 8–12 Peak Road lies within an area zoned for ‘‘R(C)4’’ as per The Peak Outline Zoning Plan S/H14/11.
(c) The property is subject to the following encumbrances:
i. Occupation Permit No. HK23/2005 (OP) dated 24 March 2005.
ii. Certificate of Compliance by District Lands Office/Hong Kong East Lands Department dated 30 June 2005.
iii. Deed of Mutual Covenant incorporating Management Agreement dated 19 July 2005.
iv. Mortgage and rental assignment in favour of The Bank of East Asia Limited dated 9 September 2010.

– II-28 –

VALUATION REPORT ON THE PROPERTY INTEREST OF THE GROUP

APPENDIX II

No Property Description and Tenure

Capital Value in Particulars of existing state as at Occupancy 31 May 2014

House B and Car The property comprises a detached Parking Space No. 33, house and a car parking space of ‘‘8–128–12–1212 Peak Road’’,’’,, 8–12 Peak Road. 8–12 Peak Road is a Nos. 8–12–1212 Peak Road, high-class residential development Hong Kong comprising two blocks of 10-storey apartment buildings, a detached house
1,074/12,510th parts or and a recreational centre. The shares of and in Inland development is completed in about Lot No. 7878. 2005.
21 House B and Car Parking Space No. 33, ‘‘8–128–12–1212 Peak Road’’,’’,, Nos. 8–12–1212 Peak Road, Hong Kong

The property is HK$374,278,512 currently vacant. (100%)

The property has a gross and saleable floor area of about 643.87 square metres (6,931 square feet) and 445.50 square metres (4,795 square feet) respectively. It also includes the following floor areas: Garden & Yard: 808.8 sq m (8,706 sq ft) Top roof: 175.3 sq m (1,887 sq ft) Flat roof: 15.2 sq m (164 sq ft)

Notes:

(a) The registered owner of the property is Venus Fortune Limited, a 100% owned subsidiary of the Company.
(b) 8–12 Peak Road lies within an area zoned for ‘‘R(C)4’’ as per The Peak Outline Zoning Plan S/H14/11.
(c) The property is subject to the following encumbrances:
i. Occupation Permit No. HK23/2005 (OP) dated 24 March 2005.
ii. Certificate of Compliance by District Lands Office/Hong Kong East Lands Department dated 30 June 2005.
iii. Deed of Mutual Covenant incorporating Management Agreement dated 19 July 2005.
iv. Mortgage and rental assignment in favour of Hang Seng Bank Limited dated 10 February 2012.

– II-29 –

GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

The Directors (other than Mr. Oung Shih Hua, James and Mr. Kwok Chi Wai) jointly and severally accept full responsibility for the accuracy of the information (other than information relating to the Offeror and parties acting in concert with it, the terms of the Offers and the intention of the Offeror regarding the Group) contained in this Response Document and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in this Response Document have been arrived at after due and careful consideration and there are no other facts not contained in this Response Document the omission of which would make any statement in this Response Document misleading. As regards the information in this Response Document relating to the Offeror and parties acting in concert with it, the terms of the Offers and the intention of the Offeror regarding the Group that has been compiled or summarised from the Offer Document, the Directors’ responsibility is limited to the correctness and fairness of the reproduction or presentation of such information but accept no further responsibility in respect of such information.

It is disputed by Mr. Oung Shih Hua, James, Mr. Kwok Wai Chi and Mr. Huang Weizong Martin that Ms. Lam Chi Wai Tammy, Ms. Song Fang Zhou, Mr. Wong Chong Wei Runun and Ms. Ng Hei Pak are directors of the Company.

Mr. Oung Shih Hua, James, Mr. Kwok Wai Chi and Mr. Huang Weizong Martin maintain that Mr. Huang Weizong Martin is an independent non-executive Director. That is disputed by Mr. Law Fong, Mr. Chen Te Kuang Mike and Mr. Zhu Pei Qing.

2. SHARE CAPITAL

As at the Latest Practicable Date, the authorised and issued share capital of the Company were as follows:

		HK$
Authorised:
50,000,000,000	Ordinary Shares of HK$0.01 each	500,000,000.00
1,270,000,000	Preference Shares of HK$0.01 each	12,700,000.00
Issued and fully paid or credited as fully paid:
935,924,489	Ordinary Shares of HK$0.01 each	9,359,244.89
71,343,529	Preference Shares of HK$0.01 each	713,435.29

– III-1 –

GENERAL INFORMATION

APPENDIX III

The Preference Shares rank in priority to the Ordinary Shares as to dividends and a return of the capital paid up on the Preference Shares. Once the capital paid up has been returned and all cumulated dividends paid, the Preference Shares are not entitled to any further payments from or distributions by the Company. The Preference Shares do not entitle the Preference Shareholders to attend or vote at meetings of the Company except on resolutions which directly affect their rights or on a winding up of the Company or a return or repayment of capital. The right to receive a dividend per Preference Share is based on the dividend or any other distribution (if any) per ordinary share declared and paid by Sensors Integration Technology Limited, a wholly-owned subsidiary of the Company. Preference Shareholders are entitled to convert all or any of their Preference Shares into Ordinary Shares on a 1:1 basis. The redemption date of the Preference Shares is 31 December 2016, subject to early redemption at the option of the Company.

All Ordinary Shares in issue rank pari passu in all respects with each other including rights to dividends, voting and return of capital.

Since 30 June 2013, being the end of the last financial year of the Company, and up to the Latest Practicable Date, the Company has issued 183,907,508 Ordinary Shares and nil Preference Shares.

Other than the 71,343,529 Preference Shares which are convertible into Ordinary Shares on a 1:1 basis, at as the Latest Practicable Date, the Company did not have any options, warrants or other securities that carry conversion rights affecting the Ordinary Shares of the Company.

3. DISCLOSURE OF INTERESTS

(a) Interest of the Company in the Offeror

As at the Latest Practicable Date, the Company did not have any interest in the shareholdings in the Offeror.

(b) Interest of the Directors in the Offeror

As at the Latest Practicable Date, none of the Directors had any interest in the shareholdings in the Offeror.

(c) Directors’ interests in the shareholdings in the Company

As at the Latest Practicable Date, the interests and short positions of the Directors in the Shares and underlying Shares of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept by the Company under Section 352 of the SFO or as otherwise notified to the Company

– III-2 –

GENERAL INFORMATION

APPENDIX III

and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of the Listed Issuers (the ‘‘Model Code’’) were as follows:

Ordinary Shares of HK$0.01 each of the Company (long position):

Name of Director Capacity Chen Te Kuang Mike Beneficial owner Held by a controlled corporation (Note) Oung Shih Hua, James Beneficial owner	Number of issued Ordinary Shares held 7,000,000 29,449,000 36,449,000 7,000,000	Percentage of issued Ordinary Shares held 0.75% 3.15%
		3.89% 0.75%

Note: These shares are held by Goldenfield Equities Limited, a company in which Chen Te Kuang Mike has 40% beneficial interest.

Preference Shares of HK$0.01 each of the Company (long position):

Name of Director Capacity Chen Te Kuang Mike Beneficial owner Held by a controlled corporation (Note) Oung Shih Hua, James Beneficial owner	Number of issued Preference Shares held 3,200,000 9,099,014 12,299,014 2,500,000	Percentage of issued Preference Shares held 4.49% 12.75%
		17.24% 3.50%

Note: These shares are held by Goldenfield Equities Limited, a company in which Chen Te Kuang Mike has 40% beneficial interest.

Save as disclosed above and so far as the Company is aware, as at the Latest Practicable Date, none of the Directors or chief executives of the Company had any interests or short positions in the Shares or underlying Shares of the Company or its associated corporations (within the meaning of Part XV of the SFO) which had been recorded in the register kept by the Company pursuant to Section 352 of the SFO or otherwise notified to the Company and the Stock Exchange pursuant to the Model Code, or are required to be disclosed in this Response Document pursuant to the requirement of the Takeovers Code.

– III-3 –

GENERAL INFORMATION

APPENDIX III

(d) Other interest in the Company

As at the Latest Practicable Date,

(i) no subsidiary or associate of the Company, or any pension fund of the Company or of any subsidiary of the Company, owned or controlled any shareholdings in the Company;
(ii) none of the advisers named under the section headed ‘‘Experts and Consents’’ or any adviser to the Company as specified in class (2) of the definition of associate under the Takeovers Code owned or controlled any shareholdings in the Company;
(iii) there was no arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code between any person and the Company or any person who is an associate of the Company by virtue of classes (1), (2), (3) or (4) of the definition of associates under the Takeovers Code;
(iv) no shareholdings in the Company were managed on discretionary basis by fund managers connected with the Company;
(v) Mr. Chen Te Kuang Mike, an executive Director, intended, in respect of his own beneficial shareholdings in the Company, to REJECT THE OFFERS;
(vi) the beneficial shareholdings in which Mr. Oung Shih Hua, James, a nonexecutive Director is not subject to the Offers because, according to the Offer Document, Mr. Oung Shih Hua, James is a party acting in concert with the Offeror; and
(vii) neither the Company nor any of the Directors had borrowed or lent any shareholdings in the Company.

4. DEALINGS IN SHARES OF THE COMPANY

During the Relevant Period,

(i) the Company had not dealt for value in any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Offeror;
(ii) none of the Directors had dealt for value in any relevant securities (as define in Note 4 to Rule 22 of the Takeovers Code) of the Company;
(iii) the Directors had not dealt for value in any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Offeror;

– III-4 –

GENERAL INFORMATION

APPENDIX III

(iv) none of the subsidiaries of the Company, nor pension fund of the Company or any of the Company’s subsidiaries, nor any advisers to the Company as specified in class (2) of the definition of ‘‘associate’’ under the Takeovers Code, had dealt for value in any Shares or convertible securities, warrants, options or derivatives in respect of any Shares;
(v) no person who had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with the Company or with any person who was an associate of the Company by virtue of classes (1), (2), (3) and (4) of the definition of ‘‘associate’’ under the Takeovers Code had dealt for value in any Shares or convertible securities, warrants, options or derivatives in respect of any Shares; and
(vi) no fund managers connected with the Company who managed funds on a discretionary basis had dealt for value in any Shares or any other convertible securities, warrants, options or derivatives in respect of any Shares.

5. OTHER DISCLOSURES

As at the Latest Practicable Date,

(a) no benefit (other than statutory compensations) was or would be given to any Director as compensations for loss of office or otherwise in connection with the Offers;
(b) no agreement or arrangement existed between any Director and any other person which was conditional on or dependent upon the outcome of the Offers or otherwise connected with the Offers; and
(c) no material contracts had been entered into by the Offeror in which any Director has a material personal interest.

6. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any service contracts with the Company or any of its subsidiaries or associated companies in force which (i) (including both continuous and fixed term contracts) have been entered into or amended within the Relevant Period; (ii) are continuous contracts with a notice period of 12 months or more; or (iii) are fixed term contracts with term more than 12 months to run irrespective of the notice period.

– III-5 –

GENERAL INFORMATION

APPENDIX III

7. MATERIAL LITIGATION

Save as disclosed below, as at the Latest Practicable Date, there was no material litigation to which the Group was, or might become, a party:

(a) On 17 May 2006, Chinese Regency Limited (‘‘Chinese Regency’’) (of which the beneficial owners are Independent Third Parties) issued a writ of summons against Holyrood Limited (‘‘Holyrood’’), a subsidiary of the Company, claiming a total amount of not less than HK$5,760,000, claiming, among others, damages for breach of an agreement for sale and purchase of Flat B on the 5th Floor of Block A1 and the car parking space No. 5 located in Nos. 8, 10 and 12 Peak Road. On 24 May 2013, Chinese Regency filed an amended statement of claim while Holyrood filed an amended statement of defence on 5 July 2013. On 7 January 2014, Chinese Regency served its factual witness statements on Holyrood. Pursuant to the Court order, Chinese Regency and Holyrood exchanged expert reports on 21 January 2014. On 11 February 2014, Holyrood served its factual witness statements on Chinese Regency. A case management conference has been scheduled for 5 September 2014. The litigation is still on going and there is no further update on the case up to the Latest Practicable Date.
(b) On 1 June 2007, Gateway International Development Limited (‘‘Gateway’’) (of which the beneficial owners are Independent Third Parties) issued a writ of summons against Holyrood claiming a total amount of not less than HK$5,048,000, claiming, among other things, damages for breach of an agreement for sale and purchase of Flat A on the 6th Floor of Block A2 and the car parking space No. 51 located in Nos. 8, 10 and 12 Peak Road, breach of the Deed of Mutual Covenant and nuisance on the development. The judgment was handed down on 1 March 2012 against Holyrood. Holyrood was ordered to pay Gateway the sum of HK$4,967,000 plus interest. The judge has also made a costs order nisi that Holyrood shall pay the legal costs of Gateway, which are approximately HK$4,000,000, on an indemnity basis. Holyrood has filed a notice of appeal on 29 March 2012 against the judgment and the appeal was heard on 25 and 26 June 2013. Pursuant to the appeal judgment, the damages awarded to Gateway were reduced to approximately HK$3,258,000. On 7 November 2013, Holyrood filed a notice of motion to apply for leave to appeal against the appeal judgment to the Court of Final Appeal. The application was dismissed by the Court of Appeal on 16 April 2014.

On 13 May 2014, Holyrood filed an appeal for leave to appeal to the Court of Final Appeal and the application is scheduled to be heard by the Appeal Committee of the Court of Final Appeal on 6 October 2014.

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GENERAL INFORMATION

APPENDIX III

(c) On 1 June 2007, Sun Crown Trading Limited (‘‘Sun Crown’’) (of which the beneficial owners are Independent Third Parties) issued a writ of summons against Holyrood a total sum of not less than HK$5,154,000, claiming, among other things, damages for breach of an agreement for sale and purchase of Flat B on the 6th Floor of Block A2 and the car parking spaces Nos. 47 and 48 located in Nos. 8, 10 and 12 Peak Road, breach of the Deed of Mutual Covenant and nuisance on the development. The judgment was handed down on 1 March 2012 against Holyrood. Holyrood was ordered to pay Sun Crown the sum of HK$4,953,000 plus interest. The judge has also made a costs order nisi that Holyrood shall pay the legal costs of Sun Crown, which are approximately HK$4,000,000, on an indemnity basis. Holyrood filed a notice of appeal on 29 March 2012 against the judgment and the appeal was heard on 25 and 26 June 2013. Pursuant to the appeal judgment, the damages awarded to Sun Crown were reduced to approximately HK$3,260,000. On 7 November 2013, Holyrood filed a notice of motion to apply for leave to appeal against the appeal judgment to the Court of Final Appeal. The application was dismissed by the Court of Appeal on 16 April 2014.

(d) On 18 July 2011, Century Pacific Holdings Limited (‘‘Century Pacific’’) (of which the beneficial owners are Independent Third Parties) issued a writ of summons against Holyrood claiming a total amount of not less than HK$2,360,000, claiming, among others, damages for breach of an agreement for sale and purchase of Flat B on the 3rd Floor of Block A2 and the car parking space No. 38 located in Nos. 8, 10 and 12 Peak Road, breach of the Deed of Mutual Covenant and nuisance on the development. On 24 December 2012, Holyrood filed the statement of defence and Century Pacific filed their reply on the statement of defence on 26 February 2013. The litigation is still on going and there is no further update on the case up to the Latest Practicable Date.

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GENERAL INFORMATION

APPENDIX III

(e) Reference is made to the Injunction Order application made to the Bermuda Court as disclosed in the section headed ‘‘Recent Background’’ in the Letter from the Board. As disclosed, on 20 May 2014, the Plaintiffs applied to the Bermuda Court for the Injunction Order against the Defendants, restraining the Defendants until judgment in the action or sooner order of the Bermuda Court from, inter alia, (a) taking any steps to implement the Placing Agreement entered into by the Company and the Placing Agent in relation to the Placing, and (b) taking any steps pursuant to or under the authority of any and all resolutions of the Board passed at the May 19 Board Meeting. The Injunction Order was granted by the Bermuda Court on that day and was renewed on 21 May 2014.

On 27 May 2014, the Defendants applied to the Bermuda Court for the discharge of the Injunction Order (the ‘‘Discharge Application’’).

The Discharge Application was heard by the Bermuda Court on 29 May 2014. After the hearing, the Bermuda Court ordered that (a) the Injunction Order be discharged immediately, and (b) the Plaintiffs pay costs to the Defendants (to be taxed if not agreed) in respect of the Discharge Application.

This litigation is ongoing. The Injunction Order was discharged but the Offeror has not withdrawn its claim. A defence was served on behalf of the Defendants on 4 July 2014.

8. MATERIAL CONTRACTS

Save as disclosed below, the Group had not entered into any material contracts (not being contracts entered into in the ordinary course of business carried on or intended to be carried on by the Group) within the two years before the commencement of the Offer Period up to and including the Latest Practicable Date:

(a) On 20 December 2013, Banhart Company Limited, a wholly-owned subsidiary of the Company, entered into a provisional sale and purchase agreement with Jiangxi Copper Hong Kong Company Limited for the disposal of the office premises located at Unit 01, 45th floor, Office Tower, Convention Plaza No. 1 Harbour Road, Wanchai, Hong Kong. The consideration was HK$336,571,275. The transaction completed on 4 April 2014.
(b) On 29 April 2014, the Company entered into the Placing Agreement with the Placing Agent, pursuant to which the Company conditionally agreed to place up to 150,400,000 Placing Ordinary Shares of the Company at a price of HK$0.30 per Placing Ordinary Share and 51,050,000 Placing Preference Shares of the Company at a price of HK$0.36 per Placing Preference Share, to not fewer than six independent placees. The Placing was conditional upon the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Placing Shares on or before 30 May 2014. However, the Placing lapsed on 30 May 2014 since the Company failed to satisfy the condition of the Placing Agreement to obtain approval

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GENERAL INFORMATION

APPENDIX III

from the Stock Exchange for the listing of and permission to deal in the Placing Shares by 30 May 2014 (or such other date as may be agreed between the Company and the Placing Agent) and such date was not extended.

9. EXPERTS AND CONSENTS

The following are the qualifications of the experts whose letters and reports are contained in this Response Document:

Name Qualification

Investec Capital Asia Limited a corporation licensed to conduct Type 1 (dealing in securities), Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities under the SFO

Visionary Financial Services an independent valuer Group (Holdings) Limited

Each of Investec Capital Asia Limited and Visionary Financial Services Group (Holdings) Limited has given and has not withdrawn their respective written consents to the issue of this Response Document with the inclusion herein of their respective letters and/or report and references to their respective names in the form and context in which they are included.

10. MISCELLANEOUS

The English text of this Response Document shall prevail over the Chinese text in the case of inconsistency.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at 12/F, Dominion Centre, 43–59 Queen’s Road East, Hong Kong during normal business hours on any Business Day from the date of this Response Document for so long as the Offers remain open for acceptance and will also be available on the website of the SFC (http://www.sfc.hk) and the website of the Company (http://www.aplushk.com/clients/00495paladin/):

(a) the bye-laws of the Company;
(b) the annual reports of the Company for each of the two years ended 30 June 2012 and 2013;
(c) the interim report of the Company for the six months ended 31 December 2013;
(d) a copy of the letter from the Board as set out in this Response Document;
(e) a copy of the letter from the Independent Committee as set out in this Response Document;

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GENERAL INFORMATION

APPENDIX III

(f) a copy of the letter from Investec Capital Asia Limited as set out in this Response Document;
(g) a copy of the letter, valuation certificate and valuation report as set out in Appendix II to this Response Document;
(h) the written consents as referred to in the section headed ‘‘Experts and Consents’’ in this Response Document;
(i) the material contracts referred to in the paragraph headed ‘‘Material contracts’’ under this section;
(j) this Response Document.

– III-10 –

AI assistant

G-Resources Group Limited — Merger & Acquisition 2014

49648_rns_2014-07-16_08ce4a9d-9537-4eb7-9bed-27d2d110f60d.pdf

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

PALADIN LIMITED

GOLD SEAL HOLDINGS LIMITED

THE BOARD RECOMMENDS REJECTING

THE OFFERS

FROM GOLD SEAL HOLDINGS LIMITED

CONTENTS

DEFINITIONS

DEFINITIONS

PALADIN LIMITED

INTRODUCTION

EXECUTIVE SUMMARY

THE OFFERS

COMPARISON OF VALUE

INFORMATION ON THE OFFEROR

INFORMATION ON THE GROUP

SHAREHOLDING STRUCTURE OF THE COMPANY

RECENT BACKGROUND

Open Offer

LETTER FROM THE BOARD

Loans from directors of certain subsidiaries of the Company in 2012

Very Substantial Disposal

Loans from directors of certain subsidiaries of the Company in 2013

Placing

Disputed Board Composition

Special General Meeting

RECOMMENDATION: REJECT THE OFFERS

4. The Offeror has formulated no clear growth strategy and has not provided Shareholders with any concrete plans for the Company in the future.

ADDITIONAL INFORMATION

PALADIN LIMITED

VOLUNTARY UNCONDITIONAL CASH OFFERS BY ANGLO CHINESE CORPORATE FINANCE, LIMITED ON BEHALF OF

GOLD SEAL HOLDINGS LIMITED TO ACQUIRE ALL THE ISSUED SHARES IN THE ISSUED SHARE CAPITAL OF PALADIN LIMITED

(OTHER THAN THOSE ALREADY OWNED AND/OR AGREED TO BE ACQUIRED BY GOLD SEAL HOLDINGS LIMITED AND/OR PARTIES ACTING IN CONCERT WITH IT)

Yours faithfully, For and on behalf of the Independent Committee of PALADIN LIMITED

Investec Capital Asia Limited

VOLUNTARY UNCONDITIONAL CASH OFFERS BY ANGLO CHINESE CORPORATE FINANCE, LIMITED ON BEHALF OF GOLD SEAL HOLDINGS LIMITED TO ACQUIRE ALL THE ISSUED SHARES IN THE ISSUED SHARE CAPITAL OF PALADIN LIMITED

(OTHER THAN THOSE ALREADY OWNED AND/OR AGREED TO BE ACQUIRED BY GOLD SEAL HOLDINGS LIMITED AND/OR PARTIES ACTING IN CONCERT WITH IT)

I. INTRODUCTION

II. THE INDEPENDENT COMMITTEE

III. BASIS OF OUR OPINION

IV. PRINCIPAL FACTORS CONSIDERED

1. Background information on the Group

1.1 Historical financial performance of the Group

1.2 Recent development and outlook of the Group

LETTER FROM INVESTEC CAPITAL ASIA LIMITED

2. Valuation on the property interest of the Group

3. Unaudited adjusted net asset value

4.2 Intentions of the Offeror in relation to the Group

5. Principal terms and total consideration of the Offers

6. Ordinary Offer Share

LETTER FROM INVESTEC CAPITAL ASIA LIMITED

6.2 Liquidity of the Ordinary Shares

6.3 Comparable analysis

6.4 Conclusion

7. Preference Offer Share

7.2 Liquidity of the Preference Shares

V. RECOMMENDATION

1. FINANCIAL SUMMARY

2. AUDITED CONSOLIDATED FINANCIAL INFORMATION OF THE GROUP

Consolidated Statement of Financial Position

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT

1. GENERAL

2. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

3. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (‘‘HKFRSs’’)

Amendments to HKAS 1 Presentation of items of other comprehensive income

New and revised HKFRSs issued but not yet effective

HKFRS 9 Financial instruments

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

HKFRS 13 Fair value measurement

4. SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidation

Revenue recognition

Property, plant and equipment

Investment properties

Properties held for sale

G-Resources Group Limited Merger & Acquisition 2014